Activity Highlights as at End September 2010.

Beirut, 20 Oct 2010
The Lebanese economy continued to display outstanding economic performance in the first nine months of 2010 as mirrored by the different real sector indicators, which lead to an upward revision of real GDP growth forecast for 2010 to 8.0% by the IMF. While capital inflows towards Lebanon contracted by 8% this year from their peak of 2009 leading to a moderate but still sound deposit growth of US$7 billion over the first eight months of 2010, the real economy benefited from a significant vigorous lending activity on behalf of Lebanese banks that saw their lending portfolio growing year-to-date by US$ 4.9 billion, or 50% more than full-year 2009.

The regional economy partly recovered this year, as reported by the 4.1% real growth forecasted by the IMF for 2010, against 2.0% in 2009. The strength of the recent economic recovery was largely underpinned by the rebound in oil prices from their trough in 2009 and by expansionary policies undertaken in most of the countries of the region. But within the context of weakened inflows from advanced countries that continue to observe sluggish conditions, banking activity growth in the MENA region contracted again this year, with deposit growth over the first eight months of 2010 accounting for almost a third of its level over last year’s corresponding period.

This conducive environment benefited to Bank Audi sal - Audi Saradar Group, as revealed by the following activity highlights:

  • The Bank reinforced its position as the largest bank in Lebanon and among the top 20 Arab banking groups, with consolidated assets reaching US$ 28 billion.
  • Consolidated deposits reached US$ 24.2 billion, growing by US$ 1,257 million over the first nine months of 2010, a very favourable performance when compared to the stagnation reported in the deposit base of a large number of regional banks. During the first six months of 2010, the growth in Bank Audi’s customer deposits represented 7.4% of total deposit growth in the MENA region. Over the last 18 months, Bank Audi ranked third in terms of deposit growth among Arab banks with US$ 6.6 billion of additional deposits.
  • The contribution of regional entities to consolidated assets and earnings reached 26% after an average of only 3 years of activity. Shareholders’ equity amounted to US$ 2.4 billion, representing 25% of the consolidated shareholders’ equity in the Lebanese banking sector and translating into a capital adequacy ratio as per Basel II of 11.9%, a level well exceeding the minimum requirement (8%).
  • Risk profile continues to improve with net doubtful loans representing 0.82% of gross loans within the context of a coverage ratio on those loans of 73.4%, which reaches 119% when accounting for real collaterals. In addition to specific provisions, collective provisions reached US$ 59 million, the equivalent of 0.73% of consolidated net loans.
  • Primary liquidity placed with central banks and banks reached US$12 billion, representing 49.7% of customers’ deposits, one of the highest liquidity levels in the region.
  • Interest margin was reinforced as a result of the new top management policy anchored over improving operating conditions rather than growth within the context of persisting low international US reference rates. This translated into a steady rise in the bank’s interest margin throughout 2010, from 1.65% in the first quarter to 1.75% in the second quarter and 1.89% in the third quarter of the year. This despite the fact that the bank is the most sensitive to the decline in yield on primary liquidity, given its largest FC primary liquidity in the banking sector, within the context of its largest deposit base in foreign currency.
  • Overall efficiency strengthened as a result of tight control over operating conditions. Consequently, the cost to income ratio improved by 1.2%, moving from 48.2 % in the first half of 2009 to 47% in the first nine months of 2010.
  • Earning power gained strength, as net earnings reached US$ 253.4 million in the first nine months of 2010, 19.1% higher than in the corresponding 2009 period.
  • Return on average common equity reached 15.6%, a level in line with regional, emerging and global markets’ averages.
The strong first nine months of 2010 results represent a solid proof of the Bank’s capacity to maintain steady growth in activity and earning indicators. Such results confirm the ability of the Group to pursue its regional expansion strategy and rank among the top 10 regional Arab banking groups.

The wide franchise and strong financial standing that the Bank enjoys makes it a distinguished partner at the service of Lebanese and Arab customers that have increasing needs and demand for Retail, Commercial, Corporate and Private Banking services in which Bank Audi has a leading providing role.

Bank Audi finalized the acquisition of Dresdner Bank Monaco on September 2nd, 2010, within the aim of supporting its ambitious private banking development plan in the coming years. Furthermore, the bank entered into an agreement to acquire Arabeya Online on July 29th, 2010, subject to the final approval of regulatory authorities, within the objective of expanding and diversifying its retail banking activities in Egypt and the region, towards brokerage activities in the Middle East at large.

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