Saad Azhari mentioned, “We are expanding our operations in places where we are [already] present.”
“I came back from Jordan, where we opened our 13th branch, and in two months we will open the 14th branch. In Egypt also, we are expanding our branch network.
“We also have good growth activity in the Gulf, including in Dubai, Qatar and Saudi Arabia. We recently opened a branch in Baghdad and in few weeks [we will open a branch] in Irbil.
“We hope that once the situation has stabilized, we will be able to expand, because this country has a lot of future potential.”
Azhari said that BLOM was keen to expand in the Arab Gulf region, noting that the bank had branches in Dubai and Sharjah and a representative office in Abu Dhabi.
BLOM currently has an investment banking license in Saudi Arabia, but not a commercial license. “When the regulations permit, we hope to expand our presence in the Gulf states,” he said.
“I am looking forward to expanding business in other Arab countries when we feel that there is a possibility to grow.”
Azhari said the situation in Syria had affected directly and indirectly the performance of Lebanon’s banking sector, because many local lenders had a presence in Syria.
“There is no longer considerable increase in net income [in Lebanon],” he said.
“Banks also increased their provisions for non-performing loans in light of the situation in Syria. Lebanese banks have managed to absorb the shock in Syria and have succeeded in maintaining reasonable profits.”
Azhari admitted that the profits in Syria had almost disappeared in 2011, 2012 and 2013 due to the war. However, he emphasized that BLOM compensated this loss in other countries in which the bank had a presence.
“In our case, we had good growth and profits in Jordan, Egypt and Saudi Arabia,” he said. This year, BLOM saw a 50 percent increase in profits in Egypt and 30 percent profit growth in Jordan.
But Azhari made it clear than any possible acquisition deal of a bank in Lebanon should meet certain strict criteria.
“Growth for the purpose of growth is not our strategy,” he said. “If we find something that will improve our return on equity and not affect negatively the quality of our assets, we will consider acquisition.”
Azhari believes that BLOM will maintain the same growth in deposits, assets and profits at the end of the year. BLOM recorded a net profit of $269 million in the first nine months of this year, an increase of 2.7 percent compared to the same period of last year.
Azhari also commented on the government’s fiscal policy.
“The Lebanese government is still our biggest customer and the finance of the government is very important,” he said.
“We have seen since 2011 an increase in debt-to-GDP ratio, although the ratio fell in 2008 and 2009, thanks to the growth achieved in the country during that time.
“It is very important for the government to lower debt-to-GDP and this can be done through structural reforms and improving tax collection. The increase in spending has led to a higher deficit.”
Asked if the Lebanese banks would continue to invest in Lebanese sovereign bonds, he said that banks had liquidity that could be partly used for such purposes.
“We will continue to renew the maturing bonds, but not increase the level of financing of the state,” he said. “This will put pressure on the government not to increase the deficit. Any increase in spending should be matched by an increase in revenues.”
Azhari considered the proposal to tax the sovereign securities of the commercial banks as a form of double taxation, adding that this type of tax was not welcomed by all international institutions.
“For us, increasing the salaries for the civil servants is beneficial, but at the same time we don’t want the government to increase the deficit,” he said.
“We are not against increasing taxes, but we objected to double taxation, which could lead to higher interest rates.”
Azhari said that if the banks were taxed on their interest income and were taxed again on the return on government securities, this effectively was double taxation.
“This will lead to a higher interest rate,” he said. “This means that there will be higher rates on the housing loans of consumers.
“It will be an extra burden and not a solution. This is not a burden on the banks but a burden on the economy.”
Azhari, who attended the IMF and World Bank conference in Washington this month, expressed satisfaction about his talks with the US officials and American banks.
He also mentioned, “The U.S. financial authorities were very happy with the efforts of the Lebanese banks to abide by all international rules and regulations.”
In his speech in Washington on the 12th of this month, Azhari, who is also the vice president of the Association of Banks in Lebanon, said ABL was prudent to take the relationship with correspondent banks very seriously, making sure that it was conducted with the highest professional standards.
He added, “We also believe that such comprehensive regard for these rules and regulations preserves the interest of all involved – both Lebanese and foreign correspondent banks – and sets our relationship on a steady, confident and rewarding path.”
Azhari added that the trip to Washington had affirmed the bank’s commitment to clean, safe, transparent and reliable banking.
“U.S. officials even told us they wish some countries have the same level of compliance with regulations and rules as Lebanon,” he said.