CAIRO: Having recently acquired Misr Romanian Bank, executives from Lebanon s BLOM Bank visited Cairo this week and outlined their strategy for Egypt.
BLOM is Lebanon s largest bank with total assets of $11.2 billion. It has branches in Jordan, Cyprus and Syria and and with its acquisition of Misr Romanian Bank, also in Egypt and Romania. The bank also has a presence, through its subsidiaries, in the United Kingdom, France, Switzerland and the United Arab Emirates.
In Egypt, the bank will apply its universal banking strategy, under which it will offer a comprehensive range of commercial banking products. This strategy, which the bank also follows in Lebanon, Jordan and Syria, was chosen based on Egypt s proximity to Lebanon and the common language and culture.
It s the same language and culture, explains BLOM Chairman Saad Azhari. And we believe that our products, which are already in Arabic and already accepted in Lebanon, can be easily described in the countries near Lebanon.
In other countries, the bank focuses on niche markets such as trade finance and private banking. We are successful in those countries with a niche market because there is a sizable Lebanese and Arab community, says Azhari. There are also a lot of high net worth individuals who are not resident in some of those countries but like to have their money in Geneva, London or France.
On the corporate front, BLOM intends to focus on specific customers in Egypt. The current status in corporate [banking] is that we have some relationships which we want to keep, says BLOM Vice Chairman and Managing Director Elias Aractingi. The future plan is to selectively target the relationships where we can add value.
The bank may also draw on the capital of its head office to pursue large corporate clients. We can involve BLOM Beirut selectively where the financing needs of the customer exceed our ability to lend, says Aractingi.
The bank currently has virtually no retail presence in Egypt. BLOM plans to aggressively target retail customers by introducing products and services similar to the ones it provides its customers in Lebanon.
We re planning to build the retail infrastructure and market it aggressively, Aractingi explains. We think we can do very well, because we have a proven retail portfolio which has worked very well in Lebanon and was exported very successfully to Jordan.
BLOM took several accounting measures last year to redress the financial condition of its new Egyptian subsidiary. Misr Romanian Bank had a substantial provisioning gap due to bad debt, overvalued asset, taxes and end of service indemnities. The first thing we did was to declare a huge loss to cover all the provisions that we thought we would need in 2005, so that we can start fresh in 2006, says Aractingi.
The loss was supported by a $50 million subordinated loan from its headquarters in Beirut.
The bank also brought in a number of experienced staff from Beirut who were charged with implementing organizational changes.
Going forward, the bank will overhaul its risk management processes. The immediate next steps in terms of credit, Aractingi explains, is to put in a new credit analysis process, reorganize the credit and follow-up functions at the bank, work on the bad debt collection and initiate corporate marketing and risk management functions.
BLOM Egypt currently has eight branches employing 380 individuals and managing approximately $500 million in deposits. The bank will reorganize its branches to reduce the number of staff in each branch. We re going to make the branches smaller, leaner and better service, says Aractingi.
Meanwhile, the bank plans to make use of its excess staff by doubling its branches. We re going to open eight new branches in 2006 without a major increase in staff, says Aractingi.
BLOM s expansion to Egypt is a result of the surplus of funds in Lebanon s financial system over and above the economy s capacity to put those funds to use. Lebanese banks are outgrowing the local economy, said Azhari.
Aggregate deposits in Lebanon are more than twice the country s annual output, with a ratio of deposits to gross domestic product of 263 percent – the highest in the world. There are plenty of deposits in Lebanon, Azhari explains, and banks have limited potential to invest those deposits in the Lebanese economy.