Bank Audi Consolidated Activity Highlights as at End-September 2014.

Beirut, 23 Oct 2014

US$ 39.9 billion of assets, growing by 10.2% relative to end-December 2013
US$ 33.9 billion of customers’ deposits, growing by 9.1% relative to end-December 2013
US$ 15.9 billion of loans to customers, growing by 8.2% relative to end-December 2013
US$ 3.1 billion of shareholders’ equity, after completing a capital increase of US$ 300 million in September 2014
US$ 280 million of net profits in the first nine months of 2014, growing by 7.1% relative to the corresponding period of 2013

Over the first nine months of 2014, Lebanon’s economic performance was modest, as confirmed by most real sector indicators, with overall activity somehow in line with the 1.8% real GDP growth recent forecast by the IMF for the year. Monetary and financial sectors continue to show resilience, with a further reinforcement of the Central Bank’s reserves, a net increase in financial inflows towards the domestic economy, and a sufficient growth in banking sector deposits and loans to the private sector. Indeed, driven by a 10.9% rise in gross financial inflows over the first eight months of 2014 relative to last year’s corresponding period, the banking sector reported an annual rise in deposits of 7.7% year-on-year in August and a 9.2% annual increase in loans over the same period.

In parallel, the performance of the MENA region is mixed in 2014. The region as a whole is expected to grow by 2.6% this year according to the IMF, but this average masks a big difference between the high-income and developing countries of MENA. Activity in the Gulf Cooperation Council (GCC) economies accelerated slightly in 2014, driven by higher oil production and government spending. Economic activity in the region’s oil importers has remained lackluster given deep-rooted inefficiencies in economic structures, regional conflicts, and continued sociopolitical pressures, though exports are picking up with higher demand from trading partners. In Turkey, the other country of presence of Bank Audi, a resilient economic performance is being reported in the backdrop of persisting volatility, with a 3.0% real GDP growth recently forecasted by the IMF, although slightly lower than the previous year’s growth performance.

Within this context, Bank Audi achieved in the first nine months of 2014 a good performance in line with its strategic plan, while continuing to diversify its sources of activity and profitability and to reinforce the Bank’s financial standing. Consolidated net profits rose to US$ 280 million over the period growing by 7.1% relative to the net profits of the first nine months of 2013, after the allocation of US$ 71 million of net loan loss provision charges, reinforcing the Bank’s asset quality. In parallel, consolidated assets of Bank Audi reached US$ 39.9 billion at end-September 2014, reporting a growth of 10.2% relative to end-December 2013 sourced principally from the main pillar growth markets Lebanon, Egypt and Turkey.

In details:

• The Bank’s consolidated assets increased in the first nine months of 2014 by US$ 3.7 billion, from US$ 36.2 billion at end-December 2013 to US$ 39.9 billion at end-September 2014, reaching US$ 50.2 billion when accounting for fiduciary deposits, security accounts and assets under management. The consolidated assets growth stems to the extent of 67% from entities outside Lebanon in particular Egypt and Turkey, both sustaining a dynamic growth. As such, the contribution of entities abroad to consolidated assets reached 45% at end-September 2014, of which 31% are booked in investment grade countries.


• Asset growth was primarily driven by consolidated customers’ deposits which reached US$ 33.9 billion at end-September 2014, increasing by US$ 2.8 billion, equivalent to a growth by 9.1% over the first nine months of 2014, mainly driven by Odea Bank, the Turkish subsidiary, and by Bank Audi Lebanon, Bank Audi Egypt and the Jordan network.


• Consolidated shareholders’ equity rose to US$ 3.1 billion at end-September 2014 after completing, in spite of the tough regional environment, a capital increase of US$ 300 million in September 2014, primarily through rights offering of common shares to existing shareholders in the amount of US$ 240 million, as well as the subscription by the International Finance Corporation, a member of the World Bank Group, to new common shares in the amount of US$ 60 million. This transaction showed the confidence of existing and new shareholders in the Group’s performance and direction while contributing to extend the Bank’s financial flexibility as the Basel III capital adequacy ratio hovered at 13.5% at end-September 2014, as compared to an 11.5% regulatory minimum requirement.


• Within the context of continued growth of the loan portfolio, reporting an increase by 8.2% in the first nine months of 2014, Bank Audi sustained the good quality of this portfolio with the ratio of gross doubtful loans to gross loans reaching 2.8% at end-September 2014, the same level as at end-December 2013, while the coverage of those loans by specific loan loss reserves rose to 71.2% and to 100% when including collective provisions. Accordingly, the ratio of net doubtful loans to gross loans improved from 1.0% at end-December 2013 to 0.8% at end-September 2014.


• Consolidated primary liquidity placed with central banks and foreign banks achieved a record high level, reaching US$ 15.5 billion, the equivalent of 45.6% of customers’ deposits, a high level when compared to regional and global averages.


• In the first nine months of 2014, Bank Audi’s net earnings after provisions and taxes reached US$ 280 million as compared to US$ 261 million in the corresponding period of 2013, which represents a 7.1% growth year-on-year. This performance stems from a sustainment of profitability levels in all entities within the context of Odea Bank reporting positive net profits after provisions and taxes starting the month of May 2014, well ahead of set timing, building up exponentially growing net profits in accordance with the Bank’s targets for its Turkish subsidiary.


• Based on such results, the Bank’s profitability ratios were reinforced with the return on average assets achieving 1% and the return on average common equity 15.2%. In parallel, the Bank’s common book value per share stood at US$ 6.28. Subsequently, and based on a common share price of US$ 6 at the closing of 14/10/2014, the Bank’s common shares was trading at 1x September 2014 book value, reflecting very low multiples relative to regional peer banks multiples.

The Bank’s financial scope and standing, as well as its coverage of the Europe, MENA and Turkey corridors, promote it as an active partner and a privileged intermediary at the service of customers through the provision of a wide and diversified array of products and services covering Retail, Commercial, Corporate and Private Banking at large.

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