Overview

Introduction
Introduction
Founded in 1830, the Bank was incorporated in its present form in 1962 as a private joint stock company with limited liability (société anonyme libanaise) with a duration of 99 years. The Bank is registered on the Beirut Commercial Registry under number 11347 and on the Lebanese List of Banks under number 56.

The initial shareholders of the Bank were members of the Audi family, together with certain Kuwaiti investors. Since 1983, the shareholder base has expanded and currently is comprised of more than 1,500 holders of Common Shares and Global Depositary Receipts (representing Common Shares). The Global Depositary Receipts evidencing the Common Shares are listed on both the Beirut Stock Exchange and the London Stock Exchange and the Bank’s Common Shares are listed on the Beirut Stock Exchange.

The Bank’s head office and registered address is Bank Audi Plaza, Omar Daouk Street, Bab Idriss, Beirut 2021 8102, P.O. Box: 11-2560, Beirut, Lebanon.

The Bank is a regional Bank. It operates principally in Lebanon, the MENA region and, Turkey, offering a full range of products and services that principally cover commercial and corporate banking, retail and personal banking and private banking, as well as ancillary activities such as Capital Market activities and factoring. As at end-September 2018, the Bank ranked first among Lebanese banks in terms of total assets (LL 68,929 billion), shareholders’ equity (LL 5,771 billion), customers’ deposits (LL 46,553 billion), loans and advances (LL 20,621 billion) and net profits in the first nine months of 2018 (LL 618 billion). In addition to its historic presence in Lebanon, Switzerland and France, the Group currently operates in Jordan, Egypt, Saudi Arabia, Qatar, Abu Dhabi (through a representative office), Monaco, Turkey and Iraq.

As at end-September 2018, the Bank had one of the largest branch networks in Lebanon, with 86 branches (82 operating) covering the Greater Beirut area and other strategic regions in Lebanon, as well as, through its foreign subsidiaries, a network of 113 branches in the MENAT region (outside of Lebanon), including 14 branches in Jordan, 46 in Egypt and 46 branches in Turkey. The Bank has two subsidiaries in Lebanon, two subsidiaries in Europe, as well as an asset management company in Monaco, four subsidiaries in the MENA region outside Lebanon and a subsidiary in Turkey.

Since 2005, the Bank has undertaken significant regional expansion and has the fourth largest coverage among the top 15 Arab banking institutions in the MENA region with operations in 10 countries, excluding Lebanon, through a network of branches and subsidiaries developed mainly through green-field operations. As a result of this regional expansion, an increasing percentage of the Bank’s assets are contributed by its operations outside Lebanon. Management intends to continue to seek growth opportunities both in Lebanon and abroad over the medium term.

As at end-September 2018, the Bank and its consolidated subsidiaries had 6,275 employees, including 3,275 persons employed in Lebanon, 1,073 persons employed at Odea Bank in Turkey and 1,411 persons employed at Bank Audi Egypt.
Principal Business Activities
Principal Business Activities

Corporate & Commercial Banking

The Bank has a strong commercial and corporate banking franchise with a diversified loan portfolio covering corporate clients in Lebanon, Turkey, the MENA region, Africa and Europe. Credit facilities are booked/managed at the levels of its headquarters in Lebanon and its subsidiaries in Turkey, Egypt, Jordan, Saudi Arabia, Qatar, France, Switzerland and Iraq. The Bank offers a wide range of traditional banking products and services to SMEs, as well as to larger corporate clients. These products and services generate both interest and fee-based income, with a focus on granting working capital and other loan products, providing services in areas such as collection, trade finance, performance bonds, guarantees, letters of credit and cash management, advising on international trade, providing correspondent banking and financial consulting services and preparing feasibility studies across a broad spectrum of industry sectors. As at end-September 2018, the Bank had a consolidated corporate loan portfolio of LBP 14,579 million (USD 9,671 billion), and the largest corporate loan portfolio among Lebanese banks.


Retail Banking

The banking landscape is evolving rapidly. Technology and connectivity have become an essential part of everyone’s daily life. Over the past years, alternative channels (Online, Mobile, ATMs, ITMs, etc.) and migration of transactional banking to cost-effective channels played an important role. In the next few years, there will be more automation, new digital customer acquisition and servicing models, alongside more intelligent banking products based on advanced analytics and customer behavior.
Bank Audi’s digital transformation journey began several years ago; by introducing NOVO, touchscreens, video banking services and many other self-service channels. We are at the forefront of this digital transformation and continuously focus on delivering new innovations and advanced digital banking solutions. For the coming period, there are different verticals we are focusing on such as advanced analytics, integrated payments, remote advisory and servicing, Artificial Intelligence (AI), and smart servicing models.

As at end September 2018, the bank offered more than 150 retail products and services to more than 1 million retail clients across the countries of presence of Bank Audi. The product ranges include conventional checking and savings accounts, fixed-term deposits, loans and residential mortgages, SME lending, credit cards, bank insurance products, as well as a host of innovative retail products developed in association with leading partners across the region. Customers are being served through an omni-channel network of more than 490 advanced self-service machines (ITM, ATM and Novo), digital channels (online and mobile), and through more than 180 branches.
When consolidated in USD, the Group Retail portfolio stands at USD 2.93 billion as at end of September 2018.

Private Banking

Bank Audi Private Bank is the wealth management arm of Audi Group. It operates through three main booking centers based in Switzerland, Lebanon and Saudi Arabia, with offices in Monaco, Qatar, Jordan and the United Arab Emirates. Deep-rooted in the Middle East and North Africa (MENA) region, Bank Audi Private Bank’s leading position sets its apart from its peers and is of significant value for clients seeking investment knowledge and expertise in the region.
The Private Bank has a committed and long-standing history of serving its ever-growing client base since 1976, the year Banque Audi (Suisse) sa was established in Switzerland.
The Bank adopted the Group’s corporate governance and values which have been and will remain a cornerstone of its expansion and modernization. It recognizes the importance of sound Corporate Governance for business success and has therefore established a set of guidelines to increase its long-term value.
Bank Audi Private Bank offers a full and diversified range of services to high net worth clients, with full access to major markets worldwide and global investment products, including discretionary portfolio management, investment advisory, trade execution in all asset classes, Lombard credit, and other private banking services such as estate planning, fiduciary deposits, safe custody and credit cards.
As at end-June 2018, on a consolidated basis, the Bank had assets under management, custody accounts and fiduciary deposits of LL 16,375 billion (USD 10,863 million)


Investment Banking & Capital Markets

The Bank offers capital markets and investment banking products and services, while leveraging its regional presence to further develop its securities trading and brokerage platform, consolidating the business towards increased intra-group synergies.
Since 1996, the Bank has developed a substantial capital markets franchise. In Lebanon, the Bank is a market maker on the Beirut Stock Exchange with a 18% market share of trading volumes by value, as at December 29, 2017. The Bank also has a significant share of the Government Eurobond and Treasury Bills markets, with an annual trading volume exceeding U.S.$9 billion in 2017. Within MENA, the bank is active in the equities market, with a particular focus on Saudi Arabia and Egypt, and has a presence in the regions’ fixed income markets. The Institutional Coverage desk, established in 2012, continues to develop new and existing relationships with global non-bank financial institutions in order to cater to international appetite for higher yielding instruments. This activity is reinforced by the Bank’s extensive regional macro, sector and markets research coverage business.
In line with the Bank’s expansion strategy capital markets has extended client and product coverage to offer corporate clients more sophisticated FX hedging products to mitigate their currency and interest rate exposures.
In September 2018, on a consolidated basis, the Bank’s investment banking and capital markets activities generated total income of LL 504 billion (U.S.$ 334 million) as compared to LL 490 billion (U.S.$ 325 million) in September 2017.


Competitive Strengths

As a result of the Bank’s restructuring and expansion program, which has been on-going since 2005, the Bank has significantly reinforced its presence in Lebanon, throughout the MENA region and in Turkey, as well as diversified the range of its products and services to cover all the activities traditionally carried out by a universal bank. In particular, the Bank believes that it benefits from:
  • a strong franchise in commercial banking activities, with a diversified loan portfolio, including borrowers comprising leading enterprises in Lebanon, as well as a number of leading corporates from the MENA region and Turkey;
  • a strong franchise in retail banking, with a full range of retail products and services offered in the countries in which the Bank has retail banking operations;
  • a leading position in private banking, servicing the needs of high net-worth individuals through its subsidiaries in Switzerland, Monaco, Lebanon, Qatar and Saudi Arabia and its representative office in the United Arab Emirates;
  • a leading position in domestic and regional capital markets activities;
Strategy
Within the context of continuing tough politico-security conditions that the MENAT is passing through and their adverse spillover effects on the operating environment of the countries of presence of the Group, Management adopted a consolidation mode in its 3 main geographic pillars: Lebanon, Turkey and Egypt. This policy revolved around favouring in priority asset quality, revenues, cost efficiency and profitability enhancements over balance sheet growth while continuing to develop its Private Banking activities.

The main objectives of this strategy, broken down over the main development pillars of the Group, are as follows:
  • Lebanon – to further reinforce and consolidate the Bank’s leading position in the local market while implementing cross-selling tools and rigorous cost control to better earnings generation
  • Egypt – to continue to build a resilient and well-regarded franchise in Egypt.
  • Turkey – to establish a well-fenced banking platform for Odea Bank, while focusing on improving asset quality, efficiency and profitability.
  • Private Banking – to leverage the Group’s expertise in Private Banking by reinforcing synergies across entities in Europe, the Near East and the GCC, sustaining the growth momentum and deploying a risk management and control/compliance framework.
In executing this strategy, the Group will be focusing on its core competencies while enhancing synergies across entities, enforcing prudent risk and disciplined cost management policies, and upholding best-in-class compliance practices.

Anticipating a sustained, albeit measured growth in assets in the coming years, the expected benefits of this direction is to allow the Group to sustain double-digit growth in recurrent net profits due to economies of scale and productivity gains without incurring significant additional risk-weighted assets, thus reinforcing the Group’s financial flexibility. This strategy would also translate in an improved risk profile across entities, while further consolidating and strengthening the Group’s leadership in its home market, Lebanon, and its market positioning in Turkey and Egypt, and realising the Private Banking business line objectives. In fine, the Group would be looking to improve its competitive regional positioning and to access higher visibility.

On the business level, in achieving those targets, Bank Audi aims at becoming a privileged partner to customers in main countries of presence, through ensuring a wide and diversified array of banking products and services that takes into account technological advancements and the global development of the profession.

Despite the short-term uncertainties related to current political and security developments, Management still believes that banking and economic growth potential in Lebanon, Egypt and Turkey present the Bank with potential opportunities. As regional uncertainties alleviate, the Group is expected to resume its growth and expansion strategy.
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