Bank Audi Consolidated Activity Highlights at End-March 2013

Beirut, 18 Apr 2013
Significant activity growth at Odea Bank A.Ş., the Turkish banking subsidiary
US$ 3.6 billion of customers’ deposits and US$ 4.3 billion of total assets as at 31/03/2013

  • • US$ 33.3 billion of assets
  • • US$ 28.7 billion of customers' deposits
  • • US$ 2.7 billion of shareholders' equity
  • • US$ 85.5 million of net earnings in the first quarter of 2013
In the first quarter of 2013, the Lebanese economy continued to report a net activity slowdown amidst the sluggishness of private investment and the relative resilience of private consumption, as witnessed by most real sector indicators. The slowdown of the real economy was coupled with a contraction of inflows towards the home economy leading to lower growth in banking aggregates at large. Bank deposits grew by US$ 1.2 billion over the first two months of 2013, against US$ 1.7 billion over last year’s corresponding period. Bank loans likewise grew by a mere US$ 0.5 billion over the first two months, almost half their growth over last year’s corresponding period. Banks’ operating conditions continue to be tough, characterized by pressures on interest margins and fee income, in addition to considerable provisioning requirements, exerting further pressures on banks’ bottom lines.

On the other hand, the performance of the regional economy continues to suffer from the adverse effects of the regional turmoil. Economies are witnessing tepid growth and the moderate recovery expected in 2013 is still subject to heightened downside risks, with ongoing political transitions heavily weighing on economic activity. At the banking sectors’ levels, operating conditions continue to be tough, especially in the countries in transition and where Bank Audi has presence. This is partly offset by the Turkish market, the new regional market of presence of Bank Audi, which is witnessing a strong growth in banking aggregates and favorable operating conditions at large, providing favorable prospects for the Group’s outlook.

Within this context, Bank Audi sal - Audi Saradar Group recorded a growth in its consolidated assets by 6.3% in the first 3 months of 2013, i.e. the equivalent of US$ 2 billion, further strengthening the Group’s competitive position in domestic and regional markets. Net earnings reached US$ 85.5 million in the first quarter of 2013, registering a 9.5% decline relative to the corresponding 2012 period, reflecting mainly the initial launching stages of the Turkish banking subsidiary, following an organic growth strategy and aiming at becoming an active player in the Turkish banking sector.

In details:
  • Consolidated assets rose by US$ 2 billion during the first quarter of 2013 to reach US$ 33.3 billion at end-March 2013 and US$ 41.9 billion when accounting for fiduciary deposits, security accounts and assets under management. The consolidated asset growth stems in particular from the Turkish banking subsidiary which recorded remarkable growth over five months, building US$ 4.3 billion of assets, US$ 3.6 billion of customers’ deposits and US$ 2.1 billion of loans. This achievement comes within the context of a relatively limited growth in Lebanon translating in an increase in the contribution of entities abroad to consolidated assets from 32.4% at end-December 2012 to 36.3% at end-March 2013, in line with Management’s objective to reach a more balanced distribution of assets and profits over the different entities in Lebanon and abroad.
  • The growth in assets was in particular owed to customers’ deposits which grew by US$ 1.9 billion in the first quarter of 2013, i.e. the equivalent of 7.2%, to reach US$ 28.7 billion at end-March 2013. This increase mostly stems from the Turkish banking subsidiary, totally offsetting negative contributions from the Syrian and Egyptian entities to the increase in consolidated deposits as a result of the still prevailing unfavorable economic conditions within the context of deteriorating exchange rates in both countries.
  • Consolidated shareholders’ equity reached US$ 2.7 billion, accounting for 8.1% of the Bank’s consolidated assets, and translating into a Basel III capital adequacy ratio of around 11%, versus a 10% minimum regulatory requirement.
  • The rise in customers’ deposits was matched by a growth at the level of consolidated net loans which moved from US$ 10.4 billion at end-December 2012 to US$ 11.6 billion at end-March 2013, i.e. an increase by US$ 1.2 billion or 11.1%, translating in a further improvement in the loan-to-deposit ratio to 40.3%.
  • Primary liquidity placed with central banks and foreign banks reached US$ 13.6 billion, representing 47.3% of customers’ deposits, one of the most elevated liquidity levels in the region.
  • Despite the cloudy regional conditions, particularly in Syria, gross doubtful loans continued to account for 2.7% of gross loans, while the coverage of doubtful loans by loan loss provisions reached 71% at end-March 2013 excluding real guarantees. The net doubtful loans to gross loans ratio reached 0.78% at the same date. In parallel, the Bank’s Management allocated net loan loss provision charges of US$ 14 million during the first quarter of 2013, bringing total collective provisions to US$ 105 million, the equivalent of 0.9% of the consolidated net loans portfolio.
  • During the first quarter of 2013, Bank Audi sal - Audi Saradar Group’s net earnings reached US$ 85.5 million, against US$ 94.5 million in the first quarter of 2012, decreasing by 9.5% mainly due to the initial launching stages of the Turkish banking subsidiary, following an organic growth strategy and aiming at becoming an active player in the Turkish banking sector. When adjusting the Group’s net earnings to Odea Bank’s results, Bank Audi would have recorded a net earnings growth of 5.9% despite challenging domestic and regional operating conditions, reflecting the Group’s earnings’ flexibility.
  • Based on such results, the Bank’s return on average assets reported 1.1% and the return on average common equity reached 14.2%. In parallel, earnings per common share amounted to US$ 0.92, while the book value per share stood at US$ 6.37. Subsequently, and based on a common share price of US$ 6.43 at the closing of 08/04/2013, the Bank’s common shares were trading at 7x Q1 2013 earnings and 1x book.

The Bank’s results in the first quarter of 2013 fairly reflect the rationale behind strategic decisions and orientations of the Group, and which rest on pursuing its expansion while reinforcing its financial standing and leading positioning in the Near East region and Turkey. The financial scope the Bank enjoys and its strong financial standing make it a distinguished partner at the service of customers by ensuring a wide and diversified array of products and services covering Retail, Commercial, Corporate and Private Banking across which Bank Audi retains a privileged position.

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