Banking Group Annual Report 15 20 CONTENTS Credit Libanais’ Identity 04 Macroeconomic Operating Environment 34 Statement of the Chairman General Manager 06 Financial Highlights 10 Core Banking Activities 46 Facts and Figures 12 Retail Banking Activities 47 International and Local Awards 14 Marketing and Business Development 50 CL Group Medium-Term Strategy 15 Electronic Banking 53 Corporate Governance 18 Corporate Banking 55 Foreign Entities 57 Affiliated Companies 59 Treasury, Global Markets, Asset Management and Private Banking 63 Investment Banking (CLIB) 65 Banking Information Technologies 69 Human Resources 71 Control Functions 76 Internal Audit 77 Compliance and AML/CFT 81 Consumer Protection 85 Risk Management and Strategy 87 Corporate Responsibility 110 Corporate Responsibility and CL Strategy 111 Corporate Responsibility and Corporate Governance 113 Corporate Responsibility and People Capital Optimization 114 Corporate Responsibility and Customer Experience 117 Corporate Responsibility and the Communities 119 Corporate Responsibility and Responsible Financing 120 15 Corporate Responsibility and the Environment 122 Financial Results 128 CL Group Financial Results 129 CLIB Financial Results 206 CLA Financial Results 218 Branch Network and Correspondent Banks 228 Head Office and Branch Network 229 CL Branches in Lebanon 230 CL Worldwide 233 Correspondent Banks Network 234 236 ANNUAL REPORT 20 CL Milestones Credit Libanais’ Identity Credit Libanais’ Business Principles We deliver superior customer service. We gain customer Vision satisfaction with service that exceeds customers’ We Serve expectations. Credit Libanais’ purpose is to enhance We are action-oriented and encourage personal initiative. shareholder, customer and employee value. Can Do and Will Do are basic attitudes of all employees. We Act We increase productivity each year. Ethics and Profit per employee are key measures for Bank performance. We Perform Core Values We embrace change. We continuously seek better solutions Credit Libanais’ core values are customer to problems for the customer and the Bank. We Improve focus, innovation, teamwork, ethics and integrity as well as reward for performance. We function as a team. Cooperation among individuals and units is fundamental in delivering the whole Bank to the We Cooperate customers. Mission We are open. We encourage continual dialogue across all units and levels. We Communicate Credit Libanais is the preferred bank in Lebanon for customers and employees. We emphasize delegation. Acceptance of personal accountability permeates our corporate culture. We Empower Credit Libanais is primarily a retail bank and We continuously upgrade our skills. Commitment to self- serves selected corporate customers. development and training are the cornerstones of our We Build competitive advantage. We value each other’s ideas. We treat colleagues fairly, sincerely and courteously regardless of differences in We Respect background. 04 Annual Report 2015 Credit Libanais Group 05 Also, net interest income stood at USD 151.78 million, with net fees and commission income expanding to USD 36.64 million, increasing net financial revenues to USD 194.27 million. These results were recorded across CL Group network comprising 73 branches in Lebanon, Cyprus, Bahrain and Iraq, as well as a representative office in Montreal, Canada and a subsidiary bank in Senegal. As a matter of fact, Credit International SA. (CISA) is the only Lebanese bank currently present in the West African Monetary Union (“WAMU”) which inaugurated its first branch in Dakar in 2011 and opened its second branch in 2015. In addition, with the role of compliance in banks and financial institutions jumping to the front seat, Credit Libanais Group continues to be compliant with all international best practice standards including Statement of the Basel II and III frameworks as well as the local regulatory requirements. Moreover, the latest version of a turnkey application for the Foreign Account Tax Compliance Act (FATCA) was successfully deployed CHAIRMAN GENERAL MANAGER across the Group entities, to further strengthen the compliance function. Also the Bank continuously conducts extensive training programs to familiarize all staff with the constantly evolving new procedures and ensure proper implementation. In 2015, Lebanon continued to show resilience in the face of the multitude of challenges and adverse In line with the newly issued BDL circular 134, a Consumer Protection Unit was established to ensure conditions arising from geopolitical conflicts, the large Syrian refugee inflows, the prolonged presidential that customers are consistently dealt with in a fair, equitable and transparent manner. Independent from void and the sluggish overall local macroeconomic performance. the operations execution, the newly established Unit is entrusted with applying said-mission across CL banking Group entities by spreading financial awareness among customers and employees, particularly In the banking sector, Lebanese banks’ success story continued despite the local and regional those who deal directly with consumers and fostering the culture of a suitable relationship with stalemate, posting a healthy annual increase of 5.86% in their balance sheet to $185.99 billion as at end customers through training, capacity building and enhancement of professional experience. of December 2015, a rise of 4.95% in customer deposits to $154.95 billion, and some 6.53% growth in the On the corporate banking level, we have further spread the preventive risk mitigation best practices loans’ portfolio to $54.22 billion. The sector remained highly liquid in the year 2015, enjoying a primary and boosted our lending portfolio quality. In parallel, Credit Libanais Group benefits from Banque Du liquidity ratio of 78.22%. In parallel, the deposit dollarization rate in the banking sector fell to 64.88% at Liban (BDL) stimulus packages to spur lending activities and revitalize various sectors of the economy. year-end 2015, compared to 65.71% a year before, proving once again the ever-existing confidence in the Moreover, various financial partnerships with international finance bodies such as the IFC, BEI, and ATFP Lebanese Pound despite the prevailing political and security tensions. allow for supporting customers’ financing needs through long-term loans at affordable conditions. In these difficult local and regional operating conjunctures, Credit Libanais Group maintained a sound On the retail banking level, we continued to focus on the yield management strategy, while moving activity growth and continued to achieve solid results, with major indicators reporting healthy increases forward in our digital journey, striving to remain flexible and dynamic enough to move through the in 2015: consolidated assets reached USD 9.9 billion, revealing a y-o-y increase of 8.44%, customer fast changes and provide a value-added customer experience across all touchpoints and channels of communication. Our e-outreach encompasses 10,000 electronic point-of-sale, 24/7 secure online banking deposits neared USD 8.41 billion, posting a y-o-y increase of 8.62%, customer loans reached USD 2,97 services and, a sophisticated customer service center, 96 ATMs, CL e-bank applications, to name but a billion, demonstrating a y-o-y increase of 3.94%, loans-to-deposits ratio firmed at 35.31%, pre-tax return few. on average equity (ROaE) stood at 11.18%, pre-tax return on average assets (ROaA) reached 0.81%, while net profits amounted to USD 66.61 million. The Bank also plays a major role in financial inclusion through various SME and Micro SME schemes developed to stimulate growth in the economy and create jobs. No matter what the size of the business Furthermore, CL Group preserved strong asset quality metrics in its lending portfolio, as non-performing is, our team of Account Managers is dedicated to provide advisory services and tailor facilities according loans (NPL) ratio remained at comfortable levels in 2015, well below the average reported by peers. to the needs of the customers. The Bank also enjoys robust capitalization profile while maintaining a healthy balance sheet growth, as Our partnerships with international and local institutions (BDL, ESFD, Kafalat, Arab Fund, VITAS...) allow us to support these needs with competitive rates that are affordable to sustain the growth of our solvency ratios were among the strongest in the sector with the Bank’s Capital Adequacy Ratio reaching customers. With the growing environmental challenges, the Retail Commercial Lending is increasing its 15.47% at year-end 2015 and shareholders’ equity (including profits of the year) nearing USD 836 million. focus on financing long term energy efficiency projects through various BDL sponsored schemes. In this Similarly to most banks in the Lebanese banking sector, Group CL enjoys sound liquidity ratio of 78.95%. perspective, SME outstanding facilities achieved a y-o-y growth of 10%. 06 Annual Report 2015 Credit Libanais Group 07 In 2015, CL reaffirmed its leading role in supporting stability in the lives of Lebanese families, by extending various affordable housing loans schemes, which recorded a growth in the performing portfolio of over 32%, while the military housing schemes registered a growth in performing portfolio of 23%. Furthermore, CL signed a protocol of cooperation with the Beirut Bar Association to provide competitive housing loans at preferential interest rates to registered lawyers. The results of the past year were clearly supported