Amid domestic political turbulence and global market volatility, the Lebanese banking sector has managed to decouple from many of its regional – and certainly western – banking peers. Over the past year, Bank Audi has reaped the benefits of Lebanon’s well-managed and conservative financial system, buttressed by a flood of deposits and its perceived safe-haven status for investors.
In September, Fitch re-affirmed the bank’s B credit rating, citing its safe haven status and strong franchise. The bank also benefits from strong risk management with just 2.7% of its loan book classified as impaired. The financial institution is the largest Lebanese bank by assets and operates in seven markets in the Middle East and North Africa region.
Bank Audi also has a loan-to-deposit ratio that most banks would die for, at 32.6% in the second quarter of this year. Against this backdrop, Bank Audi has ramped up its lending over the past year – with a 22.4% year-on-year jump in loan disbursements in June. The bet paid off, with Bank Audi reporting a net profit increase of 22% in the first half of 2010, reaching $155.3 million versus $126.3 million in the same period last year.
Bank Audi’s performance also mirrors the fortunes of Blom Bank and Byblos Bank. Thanks to its beefier insurance and private banking capabilities, Bank Audi has outperformed in generating income from fee and commissions, which include investment advice, trust and custody fees and commission on sales of insurance products. In the first half of this year, Bank Audi generated a total non-interest income of $194.2 million.
In a banking system where the big players typically park a third of customer deposits denominated in Lebanese pounds in either the central bank or government, Bank Audi deserves recognition for generating healthy profit from fees and commissions.