Bank Audi Consolidated Activity Highlights as at End-September 2015

21 Oct 2015

US$ 42.4 billion of assets, of which 48% from entities outside Lebanon and 32% booked in investment grade countries
US$ 35.8 billion of customers’ deposits, of which 45% from entities outside Lebanon
US$ 17.0 billion of loans to customers, of which 65% from entities outside Lebanon
US$ 3.2 billion of shareholders’ equity, of which 88% of core common shareholders’ equity
US$ 304 million of net profits in the first nine months of 2015, growing by 8.7% relative to the corresponding period of 2014, of which 46% from entities outside Lebanon

In Lebanon, the domestic economy continued to show growing sluggishness amid significant regional spillover effects and intensifying domestic political bickering. The result was a further weakness in the real sector, as most real sector indicators show a net contraction in the first nine months of the year relative to last year’s corresponding period. The monetary and financial sectors continue yet to be relatively insulated from the adverse macro environment. As a matter of fact, bank deposits reported a moderate growth of US$ 5.2 billion in the first eight months of 2015, almost similar to last year’s corresponding period within the context of continued capital inflows to the country reporting a monthly average of US$ 1 billion over the first eight months of the year.

In the MENA region where Bank Audi has a wide presence, the domestic economy was somehow adversely affected by weakening oil prices. Growth in the MENA region is projected by the IMF to slowdown from 2.6% in 2014 to 2.3% in 2015. The main two countries of presence in the broad region are Egypt and Turkey with the former expected to grow by 4.2% in 2015 and the latter expected to grow by 3.0% in the same year, according to the latest estimates recently released by the IMF. While both countries are facing tough challenges related to their domestic and external environments resulting in considerable exchange rate drifts, their financial sectors are continuing to grow steadily amidst favorable financial soundness indicators on the overall.

Within this environment, Bank Audi achieved a relatively good performance in the first nine months of 2015, as consolidated net profits grew by 8.7% relative to the corresponding period of 2014, reaching US$ 304 million, of which 54% from Lebanese entities and 46% from entities outside Lebanon. This performance was realized after the allocation of US$ 98 million of net loan loss provisions charges, reinforcing the Bank’s assets quality and resilience in the face of adverse evolutions in a number of countries of presence of the Group. In parallel, consolidated assets of Bank Audi increased to US$ 42.4 billion at end-September 2015, growing by 1% relative to end-December 2014 and by 5% after adjusting to the negative impact of the depreciation of both the Egyptian pound and the Turkish Lira. The contribution of entities outside Lebanon to consolidated assets reached 48% while the share of assets booked in investment grade countries reached 32%. This performance is in line with the Group’s strategic plan through sustained diversification of the sources of assets and profits and the reinforcement of the Bank’s financial standing.

In details:

• Consolidated assets of Bank Audi reached US$ 42.4 billion at end-September 2015 and US$ 51.9 billion when accounting for fiduciary deposits, security accounts and assets under management, sustaining the Bank’s leading positioning in main countries of presence, particularly in Lebanon, Turkey and Egypt and its privileged positioning among the leading Arab banking groups. When adjusting to the depreciation of the exchange rates of both the Turkish lira and the Egyptian pound relative to the US dollar of respectively 31% and 9.5% over the first nine months of 2015, consolidated assets of Bank Audi would have increased by US$ 2 billion over the same period (as compared to a nominal increase of US$ 398 million), representing a good performance relative to large regional Arab banking groups. The increase in assets stems in particular from entities operating in Egypt and in Turkey that sustained a growth dynamic despite the accumulation of challenging conditions, reporting an assets growth by 22.6% in Egypt and 11.8% in Turkey.

• In parallel, consolidated customers’ deposits reached US$ 35.8 billion at end-September 2015, of which 45% from entities outside Lebanon. Based on the actual exchange rate of the Egyptian pound and the Turkish Lira, consolidated deposits sustained the same level as at end-December 2014. When adjusting to a constant exchange rate for both currencies as at end-December 2014, consolidated deposits would have achieved an increase by US$ 1.4 billion, stemming principally from entities in Egypt, Turkey and Europe within the context of a stable deposits base in Lebanese entities.

• Consolidated shareholders’ equity reached US$ 3.2 billion at end-September 2015, of which 88% of core common equity. This translated into the reinforcement of the Bank’s capital adequacy ratio as per Basel III, reaching 13%, as compared to a 12% regulatory minimum requirement. When including the additional surplus from the revaluation of fixed assets booked in accordance with BDL Intermediary Circular No. 44 which still awaits regulatory approvals and which is accounted for as Tier two capital, Bank Audi’s capital adequacy ratio would reach 13.5% at the same date.

• Consolidated loans reached US$ 17 billion at end-September 2015, of which 65% from entities outside Lebanon. Based on the actual exchange rates of the Egyptian pound and the Turkish Lira, consolidated loans decreased by US$ 156 million relative to end-December 2014. When adjusting to a constant exchange rate for both currencies as at end-December 2014, consolidated loans would have grown by 4.5%, a level in line with the average net loan growth of regional banks over the first eight months of 2015. This increase was met with an allocation of US$ 98 million of consolidated net loan loss provision charges to reinforce the Group’s loan quality. Within the context of a persisting challenging environment domestically and regionally, the ratio of gross doubtful loans to gross loans reported 3.2% at end-September 2015, while the coverage of those loans by specific loan loss reserves rose to 71.3%. Accordingly, the ratio of net doubtful loans to gross loans sustained its level as at end-December 2014 reaching 0.9% at end-September 2015. Still, the ratio of gross doubtful loans to gross loans of Bank Audi remains low when compared to the sector averages in Lebanon (3.6%), the MENA region (3.9%), the emerging markets (7.2%) and the world (6.6%).

• Consolidated primary liquidity placed with central banks and foreign banks continued to increase, reaching US$ 16.6 billion at end-September 2015, the equivalent of 46.4% of customers’ deposits, a high level when compared to regional and global averages.

• Bank Audi’s net earnings after provisions and taxes amounted to US$ 304 million in the first nine months of 2015, as compared to US$ 280 million in the corresponding period of 2014, growing by 8.7% year-on-year. This performance is mostly attributed to the exponential growth of profits in Odea Bank (Turkey) and Bank Audi (Egypt) within the context of a relative stagnation of profits of Lebanese entities. The increase in net profits stems from a US$ 73.2 million increase in total revenues, corresponding to a growth of 7.7% within a tight control on general operating expenses which growth reported 2.9%, i.e. an increase of US$ 15.2 million. This translated in an improvement in overall efficiency, with the cost to income ratio decreasing by 2.5%, from 55.8% in the first nine months of 2014 to 53.3% in the first nine months of 2015.

• Based on such results, the Bank’s return on average assets ratio improved from 0.9% in 2014 to 1% in the first nine months of 2015, while the return on average common equity reached 13.8% (as compared to 13.6% in 2014), despite the full impact of the US$ 300 million common equity increase at end-September 2014. In parallel, the Bank’s common book value per share stood at US$ 6.87.

The results of the first nine months of 2015 confirm once again once again the Group’s ability to maintain favorable growth in activity and net earnings and to further reinforce its financial standing despite the persisting challenging environment, allowing the Bank to cover all costs related to activity development and growth and to allocate the required provisions to cover risks arising from the current regional conditions. This performance also reinforced the Group’s leading positioning in the domestic market and among leading Arab banking groups. The Group’s extensive geographical coverage enables it to connect customers with available opportunities at large.


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