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BANQUE BEMO SAL
Table of Contents
1. MISSION STATEMENT 42. 2010 FINANCIAL HIGHLIGHTS 63. CHAIRMAN’S MESSAGE 104. MANAGING DIRECTOR’S LETTER 125. PROFILE AND ORGANIZATION 16
Ownership Structure 17Shareholders 17Board of Directors, Senior Management, Management 18
Organization Chart 24Committees 26
6. BEMO GROUP STRUCTURE 30
Bemo Securitization sal – BSEC 31Bemo Europe-Banque Privee 32Banque Bemo Saudi Fransi – Syria 34Bemo Oddo Investment Firm Ltd-Dubai 35
7. MANAGEMENT ANALYSIS 36
Inflation and Growth,2011 a Challenging year” 37By Dr.Salim Chahine,PH.D Associate Professor of Finance
Corporate Governance Guidelines 38Risk Management 38Internal Audit 53Anti - Money Laundering 54
Human Resources 56Code of Deontology 58Business Lines and 2010 Business Review 59
Private Banking 59Personal Banking 60Banking in Syria 60Corporate Banking 61Centralized Business Support Center 63Corporate Social Responsibility 63Analysis of Financial Results and Position 64
8. INDEPENDENT AUDITORS’ REPORT 769. CONSOLIDATED FINANCIAL STATEMENTS 7810. BANQUE BEMO NETWORK 17011. BEMO GROUP NETWORK 17212. CORRESPONDENT BANKING AND FINANCIAL INSTITUTIONS 174
‘
Mission Statement
Banque Bemo Annual Report | Page 5
LIVE OUR VALUES WHILE
ACHIEVING HIGH RETURN ON EQUITY
AND OFFERING OUR CUSTOMERS
OUTSTANDING QUALITY
“ “
2010 Financial Highlights
Banque Bemo Annual Report | Page 7
Evolution of Total Assets
2002
2003
2004
2005
2006
2007
2008
2009
2010
706
,735
802
,071
951
,561
998
,748
1,0
68,6
87
1,1
96,0
27
1,3
71,3
94
1,8
32,7
71
1,8
23,9
47
LBP million
Evolution of Total Loans
2002
2003
2004
2005
2006
2007
2008
2009
2010
186
,202
211
,684
262
,005
297
,765
353
,129
479
,886
543
,228
630
,582
714
,323
LBP million
Evolution of Total Deposits
557
,535
627
,354
703
,252
781
,392
842
,292
939
,572
1,0
78,8
11 1
,455
,767
1,5
26,2
19
2002
2003
2004
2005
2006
2007
2008
2009
2010
LBP million
59,
614
62,
108
65,
001
71,
548
108
,356
110
,462
115,
938
129
,588
132,
331
2002
2003
2004
2005
2006
2007
2008
2009
2010
LBP million
Evolution of Shareholders’ Equity
Evolution of Net Profit
2002
2003
2004
2005
2006
2007
2008
2009
2010
LBP million
4,1
59
4,9
85
5,9
35 7
,744
10,
576
11,
702
11,
030
11,
729
12,
588
Evolution of Earnings per Share
2002
2003
2004
2005
2006
2007
2008
2009
2010
LBP
263
.56
315
.88
378
.60
495
.61
672
.22
596
.01
549
.01
591
.31
650
.47
Sources of Income
2002
2003
2004
2005
2006
2007
2008
2009
2010
30.5
0%
41.6
7%
42.4
2%
46.3
5%
55.1
0%
45.9
5%
43.5
1%
52.5
0%
54.1
9%
69.5
0%
58.3
3%
57.5
8%
53.6
5%
44.9
0%
54.0
5%
56.4
9%
47.5
0%
45.8
1%
Commissions and other Financial Revenues Net Interest
Sources of Interest Income
2002
2003
2004
2005
2006
2007
2008
2009
2010
14.0
3%
19.9
2%
18.2
9%
13.6
5%
13.8
2%
13.3
5%
21.3
2%
30.2
6%
32.5
%
36.0
6%
30.0
6%
28.0
1%
30.3
8%
36.8
9%
35.8
7%
22.4
9%
10.37
%
7.0%
49.9
0%
50.0
2%
53.7
0%
55.9
7%
49.2
9%
50.7
8%
56.1
9%
59.3
6%
60.6
%
Securities Banks Advances
Banque Bemo Annual Report | Page 9
Evolution of Solvancy ratio
2002
2003
2004
2005
2006
2007
2008
2009
2010
17.9
1%
12.0
9%
16.8
6%
17.3
9%
23.0
2%
17.6
3%
14.5
6%
20.2
7%
17.5
6%
Break down of Customers Loans
2002
2003
2004
2005
2006
2007
2008
2009
2010
3.68
%
1.84
%
1.89
%
0.51
%
0.23
%
0.11
%
0.07
%
0.06
%
0.05
%
85.2
1%
88.3
4%
91.1
8%
92.4
9%
95.9
3%
97.9
5%
97.9
1%
98.4
1%
98.3
5%
11.1
1%
9.82
%
6.93
%
7.00
%
3.84
%
1.94
%
2.02
%
1.53
%
1.60
%
Doubtful Loans Advances & Loans Commercial & Discounted Bills
Evolution of Share Price
2002
2003
2004
2005
2006
2007
2008
2009
2010
USD
3.50
3.50
3.50
3.45
4.00
4.04
4.83
4.90
5.50
Break down of Total Assets 2010
Other Assets | 3.35%
Cash & Banks | 34.30%Secutrities (Including T.Bills) | 21.25%Loans & Advances | 39.16%Acceptances | 1.93%
Chairman’s Message
Banque Bemo Annual Report | Page 11
Dr. Riad ObegiChairman
Dear Shareholders,
I am pleased to report that 2010 was a positive year despite the Financial Crisis and its impact on the
Banking sector worldwide and in Lebanon.
Throughout the year we capitalized on the achievements and continued our ongoing improvement
processes that were built during the previous years under the wise guidance of our Honorary Chairman,
Mr. Henry Obegi.
On July 2010, a strategic plan was set according to the global strategy and vision of Banque Bemo
“ to be the reference in Private and Corporate Banking in Lebanon and Syria“. It aims to provide our
customers with outstanding quality services while ensuring our shareholders an acceptable return on
equities and a growth of their goodwill. It also commits to Banque Bemo’s values which are the
cornerstone of our culture.
In that respect, and as part of its commitment to its development and to support its expansion, Banque
Bemo’s Capital has been increased by LBP 46 billion to become LBP 62.2 billion.
As we look to the year ahead, we realize that 2011 will be challenging given the precarious political
situations in some neighboring countries, but I am confident that with our new strategy and the support
of our stakeholders coupled with great aspirations and seasoned leadership, Banque Bemo is well
positioned for the future and we are sure that success will meet our expectations.
Riad B. ObegiChairman
Managing Director’s Letter
Banque Bemo Annual Report | Page 13
Dear Shareholders,
The pressures of the global economic crisis and the regional political stalemate continue to weigh on the
local economy. Nevertheless, and despite the intense rivalry among financial institutions, Banque BEMO
delivered a satisfactory performance for the year ending December 31, 2010. For the twelve months
under review, the Bank achieved after tax profits of LBP 12.6 billion compared with LBP 11.7 billion in
2009. Furthermore, the Bank maintained its market share, consolidated on its brand and contained
delinquency with the objective of maintaining a prudent and conservative approach with respect to our
shareholders investments and our clients interest. Every effort has been made to maintain a sound and
stable balance sheet.
The Bank’s results were achieved against a background of strict adherence to the objectives set by the
Board including consolidation and re-engineering of our module as a foundation for the future. For this
purpose, our chairman Mr. Riad Obegi reaffirmed the Bank’s vision in the Board meeting dated 15th
October 2010 “To be the reference in Private and Corporate Banking in Lebanon and Syria” with a
continuation of the “Relationship Management” business model. Within this framework our mission
statement that complements this vision and addresses the common expectations of our stakeholders was stated
to mean “live our values while achieving high return on equity and offering our customers outstanding
quality”. Armored by long established heritage of the Obegi family and professional all seasonned
bankers along with high regards for its values namely “conservatism, professionalism, family spirit and
honesty” the Bank is making a difference in its true Banking approach and services.
The whole set of empirical strategies applied turn around governance and mindset and this is how the
organizational, marketing, investment and financial strategies were and are drafted. The Board of
Directors has the full oversight and did set corporate governance guidelines to ensure that the risk
Mr. Samih H. SaadehManaging Director
profile of the Bank is in line with its risk capacity and risk appetite levels. Our business objectives and
obligations towards our clients and staff dictate policies for a focused business and a personalized
approach. Our road map is governed by our relationships business model whereby honesty and
professionalism lead to earn the trust of our clients. Accordingly our risk profile remains within
boundaries set to address the conservative but professional profile of all our shareholders and clients.
To solidify our operations and improve our risk culture the internal controls were further strengthened
through the establishment of a fully dedicated “Board Risk Committee” in line with best risk practices.
Simultaneously, the Risk Management Department was enlarged and centralized to address under its
umbrella the various types of risk namely credit, market and operational risks. Moreover, a Compliance
Department was established not to mention the various other departments contributing to a sound and
efficient internal control environment which is in place and in line with all prerogatives set by the
regulatory authorities.
As for the detailed performance achievements and milestones during the year 2010, this was another
year of success for the BEMO Group whereby our synergy with our subsidiary BSEC and affiliate BBSF and
sister offices namely BEMO Europe were cemented and started to take shape in a long way that would
lead to additional success.
We were also able to consolidate on our brand setting as a “Private and Corporate Bank” by addressing
our clients’ needs and adding new products and services constantly. In 2010 another building block was
added in the shareholders’ commitment to enhance the equity base of the Bank by the increase in
capital of LBP 46 billion in order to serve better our expansion and solvency requirements and confirms
our shareholders commitment for a solid capital base and financial posture.
Financial highlights for the year 2010 were as follows:
Our asset quality, continued to maintain one of the lowest ratios in terms of non performing loans to total
loans within the Lebanese Banking Sector remaining at a low of 0.06% for the past 3 years.
Total Loans 630,582 714,323Total Assets 1,832,771 1,823,947Total Deposits 1,455,767 1,526,219Total Capital Funds 129,588 132,331
In LBP billion 2009 2010
Banque Bemo Annual Report | Page 15
Lastly, we must recognize the hard work and dedication of the Management and Staff. Despite the
challenges, our employees continue to demonstrate their commitment, contributing to the bank’s
ongoing success and the brand we enjoy. We also wish to acknowledge our Honorary Chairman Mr. Henry
Obegi and Chairman Dr. Riad Obegi and the whole Board Members ongoing leadership and
prudent counsel, which has proven invaluable in navigating the organization through this challenging period.
Finally, we extend our appreciation to our stakeholders for their trust and we look forward to building a
“Private and Corporate” Bank that serves best the interest of our shareholders and clients.
Our aim is to build a clear line of sight between the Board vision, our clients needs and our strategic actions.
Sincerely yours,
Samih H. SaadehManaging Director
Profile & Organization
Banque Bemo Annual Report | Page 17
Banque Bemo sal is a Lebanese joint-stock companyestablished in 1994 as BEMO-Banque EuropéennePour le Moyen- Orient sal registered in the BeirutCommercial Registry under N 17837 and on theBanque du Liban’s list of banks under N 93. It hasbeen listed on the Beirut Stock Exchange since1999 under N 1111.
The Capital of Banque Bemo sal at 2010 year endwas equivalent to LBP 16.2 billion ( USD 10.7million) consisting of 16,000,000 shares of commonstock and 200,000 preferred shares . Out of thetotal 16,200,000 shares at December 31,2010,5,400,000 shares were publicly held and listed onthe Beirut Stock Exchange (BSE)
Further to the decision taken during theExtraordinary General Assembly Meeting held inJanuary 2011, Banque Bemo’s Capital increased inApril 2011 from LBP 16.2 billion to become LBP62.2 billion (USD 41.3 million) consisting of62,000,000 shares of common stock (“Ordinaryshares“) and 200,000 preferred shares .
Banque Bemo Profile
Sharikat Al Istismarat Al Oropia Lil Shark Al Aousat (Holding) sal Lebanon 9,714,075 60.71%Banque Saudi Fransi Saudi Arabia 1,600,000 10.00%Mr. Maroun Antanos Semaan Lebanon 1,454,689 9.09%Sheikh Issam Mohamad Kheiri Kabbani Saudi Arabia 471,667 2.95%Mr. Samih Halim Saadeh Lebanon 220,852 1.38%Mr. Henry Yordan Obegi Lebanon 9,500 0.06%Mr. Pierre Georges Khoury Lebanon 9,500 0.06%Mr. Georges Bechara Obegi Lebanon 9,500 0.06%Dr. Ara Ohannes Hrechdakian Lebanon 5,000 0.03%Sheikh Hassan Isam Mohamad Kabbani Saudi Arabia 5,000 0.03%Dr. Riad Bechara Obegi Lebanon 5,000 0.03%Mr. Jean Victor Hajjar Lebanon 5,000 0.03%Emir Karim Samir Abillama Lebanon 5,000 0.03%Mr.Antoine Youssef Mansour Wakim Lebanon 5,000 0.03%Other Shareholders - 2,480,217 15.50%Total Common Shares 16,000,000 100.00%Preferred Shares (Par Value Representation) 200,000Total 16,200,000
SHAREHOLDERS (31.12.2010) Country of Origin Shares in Capital
Number of Shares %
Ownership Stucture
Board of Directors, Senior Management, Management
Mr. Henry Y. OBEGI Honorary Chairman Dr. Riad B. OBEGI Chairman - General Manager Sharikat Al Istismarat Al Oropia Lil Sharek Al Aousat (Holding) sal Member Banque Saudi Fransi (Represented by MemberSheikh Ibrahim AL ISSA)Dr. Ara Ohannes HRECHDAKIAN MemberMr. Jean V. HAJJAR Member & Advisor to the ChairmanMr. Antoine Y. MANSOUR WAKIM MemberSheikh Hassan Isam M. KABBANI Member Mr. Samih H. SAADEH Managing Director - General ManagerMr. Georges B. OBEGI Member Emir Karim S. ABILLAMA Member
BOARD OF DIRECTORS (31.12.2010)
Dr.Nasri A. DIAB Me Adel J. MACARON
Legal Advisors
Deloitte & Touche Fiduciaire du Moyen Orient
Auditors
Dr. Riad B. Obegi Chairman - General ManagerMr. Samih H. Saadeh Managing Director - General ManagerMr. Nabil A. Hchaime Assistant General Manager - Banking in Syria Mr. Georges Y. Matloub Assistant General Manager - Corporate Banking Mr. Joseph H. Raffoul Assistant General Manager - Personal Banking ,Operations & FIsMr. Jean M. Rebeiz Assistant General Manager - Corporate Business Support
Senior Management
Mr. Joseph BAKHOS Chief Operating OfficerMr. Antoine CHAMANDI Chief Financial OfficerMs. Claudine FEGHALY Director- Organization & Enterprise Program ManagementMr. Gaby FRANGIEH Chief Risk OfficerMs. Lina GHANTOUS Director- Corporate BankingMr. Rebel HANNA Director- Personal Banking & Financial InstitutionsMr. Wassim KHODR Director- Treasury & Capital MarketsMr. Farid MESHAKA Director- ControllerMr. Antoine MISKAWI Director- Banking in SyriaMr. Kamal NADER Director- Corporate BankingMs. Hala NASR Director- Human Resources ManagementMr. Talal SHAYKHA Director- Corporate BankingMs. Myrna SOUFAN Chief Audit ExecutiveMs. Claude TABET Director- Communication & QualityMs. Annie TCHOUBOUKJIAN Compliance OfficerMr. Sami ZIADE Director- Private Banking
Management (31.12.2010)
Mr. Henry Yordan Obegi Honorary Chairman
Date of BirthBorn in 1926
NationalityLebanese
ExperienceMr. Henry Obegi’s professional experience spans over 65 years covering arange of positions in the commercial, industrial and banking sectors. Starting in 1945 with Maison Yordan Obegi, Mr. Henry Obegi actedbetween 1955 and 1986 as Chairman and General Manager of SociétéArabo-Allemande Yordan Obegi sal and held several positions in thebanking sector where he was Co-Founder and Board Member of CreditLibanais sal (1961 - 1985), Chairman and General Manager of Banque deL’Europe Meridionale (Brussels) (1973 - 1984), and assumed the presidency of European Arab Bank AG (Frankfurt) from 1978 until 1985.In addition to the above, Mr. Henry Obegi is the Chairman and GeneralManager of Obegi Group Holding sal and Henkel Lebanon sal and BoardMember of Unifert Holding sal.
BOARD OF DIRECTORS MEMBERS
Banque Bemo Annual Report | Page 19
Dr. Riad Bechara Obegi Chairman - General Manager
Date of BirthBorn in 1958
NationalityLebanese
EducationDr. Riad Obegi holds a Masters degree in Business Administration fromUniversité Paris IX Dauphine, a Masters degree from IEP– Paris, and a PHDdegree in Economics from Université Lyon Lumière.
ExperienceDr. Obegi is the Chairman of Banque de L’Europe Meridionale (Paris,Luxembourg) and is currently the Chairman of Banque Bemo Saudi FransiSA– Syria.In addition, Dr. Obegi holds several leading positions within the Obegigroup of companies, including Obegi Group Holding sal (Board Member).
Mr. Jean Victor Hajjar Member & Advisor to the Chairman
Date of BirthBorn in 1930
NationalityLebanese
ExperienceMr. Jean Hajjar started his professional career at BNCI-Aleppo-Syria,followed by the position of Assistant Manager at Banca Di Roma inAleppo and Manager at Société des Banques Reunies. He then held theposition of Deputy General Manager at Credit Libanais sal up until 1985.In 1986 Mr. Hajjar joined Banque de L’Europe Meridionale in Paris,Brussels and Luxembourg where he acted as General Manager.From 1994 to 2001, Mr. Hajjar acted as General Manager of Banque Bemosal – Lebanon.
Dr. Ara Ohannes Hrechdakian Member
Date of BirthBorn in 1924
NationalityLebanese
EducationPHD In Economics and political sciences– HiedelbergUniversity/Germany
ExperienceIn 1948 Dr. Ara Hrechdakian started his professional career as a founderand General Manager of ARA & Co established in Lebanon and Syriaacting as exclusive representatives and distributors of many Europeanbig companies in many fields.
Dr. Hrechdakian founded in 1962 S.L.I.D sal based in Lebanon for thetrade of cosmetics and chemicals, where he acted as CEO until 2010.
Dr Hrechdakian held several leading positions acting as founder and BoardMember and sometimes as CEO in several holdings in Europe and Lebanonsuch as Fertitrust and EMIC in Luxembourg,Western Chemicals in Belgiumand Hoechst Middle East Sal, Hostapharma SARL, Unifert sal, Unifertholding sal, Uniterminals sal, UNILEC sal, Societe des Entrepots Industriels& Commerciaux SARL , Societe Anonyme de Frigos & Entrepots sal.
Banque Bemo Annual Report | Page 21
Sheikh Ibrahim bin Mohamed Al Issa Member representing Banque Saudi Fransi
Date of BirthBorn in 1951
NationalitySaudi
EducationBachelors in Business Administration, Chapman University, California,USA (1974)
ExperienceCEO & Managing Director of several private companies in the field ofGeneral Contracting, Trading and Manufacturing Industries, Trourism,Advertisement.
Chairman and Board Member of several companies:
Chairman of Taiba Holding Company.Board Member of Banque Saudi Fransi.Board Member of Savola Group.Board Member of Yanbu Cement Company.Board Member of Al Maraie Company.
Mr. Samih Halim Saadeh Member
Date of BirthBorn in 1952
NationalityLebanese
EducationMr. Samih Saadeh holds a Masters Degree of Business Administrationfrom the American University of Beirut and a degree in law from theLebanese University. Also he acted as an appointed lecturer at LebaneseAmerican University (finance related courses) , the Association of Banksin Lebanon and at the Center for Banking Studies. Active member withinthe Lebanese Association of Banks Specialized Committees.
ExperienceMr. Saadeh is an Executive Board Member at Banque Bemo. His experience started with American Express Bank Ltd New York and Beirutfollowed by ABN Amro Bank – Beirut, whereby he managed and leadmany departments starting from Corporate and Financial Institutions atAmerican Express Bank to Corporate and Private Banking at ABN AMROBank. Throughout these years he developed a comprehensive knowledge in banking various services especially corporate finance andother investment banking related products and amassed an extensiveexperience in corporate lending financial structuring, strategic planningand leadership.Joined Banque Bemo in January 2003.Mr. Saadeh is currently the Managing Director of Banque Bemo SAL. Heacts as the head of various specialized committees of the Bank and he isalso a Member of the Board of Directors of Bemo Securitization (BSEC).
Sheikh Hassan Isam Mohamad Kabbani Member
Date of BirthBorn in 1966
NationalitySaudi
EducationPepperdine University, U.C.L.A
ExperienceSheikh Kabbani started his professional career in 1992 when he joinedthe BMC & UNITECH Company as their Business Development Manager. In1998, he was appointed as the Director of Administration and CreditControl of the IKK Group of Companies, a leading business group of SaudiArabia which encompasses many companies in the MENA Region.
He was assigned in 1999 the post of Vice Chairman of the IKK Group ofcompanies, and was promoted in October 2010 to that of ActingChairman, a position that he continues to hold in the present, involvingthe management of all aspects related to this business group, in and outof Saudi Arabia.
Sheikh Hassan Isam Kabbani sits on the Board of many companies of theIKK Groups, and on that of the Saudi United Cooperative Insurance (Walaa).He is a member of the American Businessmen of Jeddah and of the Cercled’Affaires Français de Jeddah.
Emir Karim Samir Abillamaa Member
Date of BirthBorn in 1966
NationalityLebanese
EducationEmir Karim Abillama holds a Bachelor of Science degree in MechanicalEngineering from Boston University, USA, a Master of Engineering degreein Industrial Engineering from Ecole Polytechnique in Montreal, Canadaand an MBA degree from INSEAD in Fontainebleau, France.
ExperienceSince 1993, Emir Abillama holds the position of Managing Director ofMitsulift and Equipment sal. and is currently member of the Board ofDirectors of Mitsulift and Equipment sal., Mitsulift Mediterranean Ltd, Cyliftand Equipment Ltd., Mitsulift Hellas SA, Mitsulift and Equipment Syria Ltd,and founding member of 22 oC. Emir Karim Abillama is also Chairman ofMitsulift Levant (Offshore) sal and Mitsulift Africa (Offshore) S.A.L.
Banque Bemo Annual Report | Page 23
Mr. Antoine Mansour Wakim Member
Date of BirthBorn in 1945
NationalityLebanese
EducationActuary studies in University of Lausanne, Switzerland (1967)AMP from INSEAD (1978)
ExperienceFormer Chairman and CEO of Allianz SNA. Mr. A. Wakim developed the business of SNA in the Arab world, Established in 1978“ la Marocaine - viein Morocco” , Maghrebia - Tunisia 1976, Jordan Eagle- Jordan1977, AllianzEgypt 2005, Allianz Saudi Arabia 2005 and Allianz Takaful in Bahrein2008.
Currently, Mr. A. Wakim is a Board member Of Allianz SNA,Hotel Dieu deFrance, of the Board Governors of the American Hospital of Paris. Memberof the Swiss Association of Actuaries (SAA) and the InternationalAssociation of Actuaries (IAA) since 1969
Mr. A. Wakim served as University lecturer for over 10 years in various universities in Lebanon, Board member of the National Social SecurityFund in Lebanon, former member of the advisory board of the BusinessSchool at AUB, member of the advisory Board of the family Business institute at LAU.
Mr. Georges Bechara Obegi Member
Date of BirthBorn in 1965
NationalityLebanese
EducationMr. Georges Obegi holds a degree in Economics from Université PARIS IXDauphine, a degree in Business Administration from Ecole des HautesEtudes Commerciales (HEC Paris) and an MBA from INSEAD(Fontainebleau).
ExperienceMr. Obegi holds several leading positions within the Obegi group ofcompanies, including Obegi Consumer Products Holding (Chairman –CEO), Unifert Holding (Chairman– CEO), and Obegi Chemicals Group(Board Member).
Organization Chart
Banque Bemo Annual Report | Page 25
Bank’s Internal Committees Members Chairperson
CommitteesAs at 31.12.2010
Audit Committee Jean HAJJAR - Board Member Jean HAJJAR& Advisor to the ChairmanHassan KABBANI - Board MemberAntoine WAKIM - Board MemberConstantin HADDAD - MemberSamih SAADEH - Board Member& Managing Director (Non Member)
Myrna Soufan - Chief Audit Executive (Non Member)
Credit Committee Henry OBEGI - Honorary Chairman Riad OBEGIRiad OBEGI - Chairman of the BoardJean HAJJAR - Board Member & Advisor to the ChairmanGeorges OBEGI - Board MemberKarim ABILLAMA - Board MemberSamih SAADEH - Board Member & Managing Director
Nominations, Henry OBEGI - Honorary Chairman Henry OBEGIRemunerations & Corporate Riad OBEGI - Chairman of the BoardGovernance Committee Jean HAJJAR - Board Member
& Advisor to the ChairmanGeorges OBEGI - Board MemberKarim ABILLAMA - Board MemberSamih SAADEH - Board Member & Managing Director
Risk Management Committee Riad OBEGI - Chairman of the Board Antoine WAKIMJean HAJJAR - Board Member & Advisor to the Chairman Antoine WAKIM - Board MemberIbrahim El Issa - Board Member
Gaby Frangieh - Chief Risk Officer (Non Member)
Assets & Liabilities Committee Jean HAJJAR-Board Member & Samih SAADEH(ALCO) Advisor to the Chairman
Samih SAADEH - Board Member & Managing Director Joseph RAFFOUL - AGM Personal Banking,Operations & FIsGhassan KTEILY - Consultant Antoine CHAMANDI - Chief Financial OfficerGaby FRANGIEH - Chief Risk Officer Rebel HANNA - Director Personal Banking & FIsWassim KHODR - Director Treasury & Capital Markets Talal SHAYKHA - Director Corporate Banking
Farid MESHAKA - Director Controller( Non Member)
Board Committees
Committees requested by Regulators
Members Chairperson
Banque Bemo Annual Report | Page 27
Banks’ Internal Committees Members Chairperson
BDL 110 Steering Committee Jean HAJJAR - Board Member Nabil HCHAIME& Advisor to the ChairmanNabil HCHAIME - AGM Banking in Syria Antoine CHAMANDI - Chief Financial OfficerGaby FRANGIEH - Chief Risk Officer
Samih SAADEH - Board Member & Managing Director (Non Member)Myrna SOUFAN - Chief Audit Executive ( Non Member)Farid MESHAKA - Director Controller ( Non Member)
Anti -Money Laundering Jean HAJJAR - Board Member Samih SAADEHCommittee & Advisor to the Chairman
Samih SAADEH - Board Member & Managing DirectorNabil HCHAIME - AGM Banking in SyriaJoseph RAFFOUL - AGM Personal Banking,Operations & Fin.InstitutionsGaby FRANGIEH - Chief Risk OfficerWassim KHODR - Director Treasury & Capital Markets Annie TCHOUBOUKJIAN - Compliance Officer
Zeina MOUAWAD - Anti Money Laundering Officer (Non Member)
Credit Committee Jean HAJJAR - Board Member Samih SAADEH& Advisor to the ChairmanSamih SAADEH - Board Member & Managing Director Nabil HCHAIME - AGM Banking in SyriaGeorges MATLOUB - AGM Corporate Banking Joseph RAFFOUL - AGM Personal Banking,Operations & FIs
Executive Committee/ Riad OBEGI - Chairman of the Board Riad OBEGIStrategy Committee Jean HAJJAR - Board Member
& Advisor to the Chairman Samih SAADEH - Board Member & Managing DirectorNabil HCHAIME - AGM Banking in SyriaGeorges MATLOUB - AGM Corporate Banking Jean REBEIZ - AGM Corporate Business Support Joseph RAFFOUL- AGM Personal Banking, Operations & FIsClaude TABET - Director Communication & QualityGaby FRANGIEH - Chief Risk Officer
Committees Not requested by Regulators
IT Security Committee Jean REBEIZ - AGM Corporate Business Support Jean REBEIZClaudine FEGHALY- Director Organization & EPMHenri HAYEK- IT ManagerEmile KHOURY- IT Security OfficerSerge GHAWITIAN- Systems & Network Administrator
Nada ASSAKER- Senior Business Analyst (Non Member)Maya DEBS- Senior Business Analyst (Non Member)
Real Estate Investments, Jean HAJJAR- Board Member Jean HAJJARPurchase & Renting & Advisor to the ChairmanCommittee Samih SAADEH- Board Member
& Managing Director Georges MATLOUB- AGM Corporate BankingJoseph RAFFOUL- AGM Personal Banking,Operations & Fin.Institutions
Farid MESHAKA-Director Controller (Non Member)
Asset Management Gaby FRANGIEH - Chief Risk Officer Wassim KHODRCommittee Wassim KHODR - Director Treasury
& Capital MarketsGhassan KTEILY - ConsultantJoseph MIKHAEL - Senior Financial Advisor
Business Continuity Planning Gaby FRANGIEH - Chief Risk Officer Talal SHAYKHACommittee Rebel HANNA - Director Personal Banking
& Financial InstitutionsWassim KHODR - Director Treasury & Capital MarketsAntoine MISKAWY - Director Banking in SyriaHala NASR- Director Human Resources Management Talal SHAYKHA - Director Corporate BankingSami ZIADE - Director Private BankingHenri HAYEK - IT ManagerMona KHAYAT - Trade Finance Manager
Collection Committee Jean HAJJAR - Board Member Jean HAJJAR& Advisor to the Chairman Nabil HCHAIME - AGM Banking in SyriaGeorges MATLOUB - AGM Corporate BankingJoseph RAFFOUL - AGM Personal Banking,operations & FIsAnnie TCHOUBOUKJIAN - Compliance Officer
Bank’s Internal Committees Members Chairperson
Banque Bemo Annual Report | Page 29
Operational Risk Assessment Joseph RAFFOUL - AGM Personal Banking , Joseph RAFFOULCommittee Operations & FIs
Gaby FRANGIEH - Chief Risk Officer Rebel HANNA - Director Personal Banking & Financial InstitutionsHala NASR - Director Human Resources Management Henri HAYEK - IT ManagerEmile KHOURY - IT Security OfficerSamar OUEIDAT - Treasury & Securities Support Manager
Sales & Marketing Committee Riad OBEGI - Chairman of the Board Riad OBEGISamih SAADEH - Board Member & Managing DirectorRebel HANNA - Director Personal Banking & Financial InstitutionsAntoine MISKAWY - Director Banking in Syria Talal SHAYKHA - Director Corporate BankingSami ZIADE - Director Private BankingAbdallah DOUMIT - Personal Banking ManagerNada DAGHFAL - Market Research ManagerSelim EL CHAMI - Director Investment Banking Group BSEC
Synergy Committee Riad OBEGI - Chairman of the Board Riad OBEGIClaudine FEGHALY - Director Organization & EPMFarid MESHAKA - Director ControllerClaude NAKHLE - Directeur Adjoint Controle de gestion,comptabilite et informatique- Bemo Europe
Samih SAADEH - Board Member (Non Member)& Managing Director (Non Member)Hans HRECHDAKIAN Administrateur et Directeur General Delegue (Non Member)- Bemo Europe
Talent Management Jean HAJJAR - Board Member Georges OBEGICommittee & Advisor to the Chairman
Georges OBEGI - Board MemberSamih SAADEH - Board Member & Managing DirectorNabil HCHAIME - AGM Banking in Syria Georges MATLOUB - AGM Corporate BankingJean REBEIZ - AGM Corporate Business Support Joseph RAFFOUL - AGM Personal Banking,Operations & FIsHala NASR - Director Human Resources Management
Members ChairpersonBanks’ Internal Committees
Bemo Group Structure
Banque Bemo Annual Report | Page 31
Bemo Securitization sal - BSEC
Bemo Securitization SAL (BSEC) is a specialized
investment banking entity. The business activity is
set to provide financing solutions to middle market
companies in the local and MENA countries, with
the main focus on Lebanon and Syria. BSEC enjoys
an image of know-how and professionalism as well
as a solid track-record, in diversified business
sectors such as, automotives, industry, retail and
real estate.
In line with growing market needs, BSEC offers a
broad range of services to clients with sophisticated
funding requirements. These services cover 3 main
areas of finance:
(i) the debt and structured finance (securitization
and asset based financing, syndications and
structured lending, bonds and Sukuk issuance, and
project finance),
(ii) the M&A (buy-side/sell-side, joint-ventures,
LBO) and Capital Raising,
(iii) the Administration and agency services,
(calculation and paying agency, fund administration
agency).
BSEC success is driven by a strong belief in a set of
values and principles: a commitment to its region
and an investment in knowledge. These values
have always been and continue to be reflected in
the company’s activities and business conduct.
BSEC is regulated by the Central Bank of Lebanon
and the Banking Control Commission. BSEC edge
has been underlined by numerous international
industry awards.
BSEC Head Office is located at:
3rd Floor, Two Park Avenue Building, Park AvenueBeirut Central District, Minet El Hosn
Beirut, LebanonTel: +961 1 997998Fax: +961 1 994801
www.bsec-sa.com
BEMO EUROPE - BANQUE PRIVEE | Main Activities:
. Wealth Management, Financial Estate Planning, Family Office Services
. Asset Allocation. Portfolio Advisory and Management, Cash Management
. Credit and Loan Accounts (Lombard, property, personal)
. Treasury, Foreign Exchange and Capital Market operations
In addition, the Luxembourg branch offers:
Fiduciary operations, Wealth structuring, domiciliation and management
France:63 Avenue Marceau, 75116 Paris, France Tel: +33 1 44 43 49 49Fax: +33 1 47 23 94 19
www.bemo.fr
BEMO EUROPE - BANQUE PRIVEE ‘
‘
(Fully owned by EMIC Holding – Luxembourg)
BEMO Europe was founded in 1976 as a commercialand a retail bank. It subsequently developed itsEuropean activities, specializing in Private Bankingand Wealth Management. Its present Head Office isin Paris, with a full branch in Luxembourg.
The Bank is regulated by the French BankingCommission (BDF), the Financial Market Authority(AMF), and the Commission de Surveillance duSecteur Financier (CSSF) for the LuxembourgBranch.
With the skills of a highly qualified team of professionals and bankers, it provides customizedsolutions in Wealth and Portfolio Management.The Bank prides itself for the personalized relationship management approach it offers its clients,within a range of quality products and services.
Luxembourg: 16 Boulevard RoyalL2449 Luxembourg,Tel: +352 226 3211Fax: +352 226 533
Products and Services are divided into 4 categories:
BANQUE BEMO SAUDI FRANSI SA - SYRIA
BBSF is the trading name for Banque Bemo SaudiFransi-SA, a bank recognized for its internationalstandards with Syrian roots and for being the firstto have operations in Syria. It is a private joint stockcompany established on the 4th of January 2004and registered in the Commercial Register of
Damascus under Law 13901.Since October 2009 the shares of BBSF are listed onthe Damascus Securities Exchange (DSE)BBSF’s capital amounted to SYP 3.705 billion as atDecember 2010 with the ownership structure asfollows:
Banque Bemo Saudi Fransi offers a full range of banking products and services through its widespreadnetwork of 37 branches and offices across Syria as of December 2010.
BANK ACCOUNTSCurrent & Savings AccountsSight & Fixed Term Deposits in the major currencies
FINANCIAL SERVICESCash Deposits & WithdrawalsInternal and External TransfersForeign ExchangeCollections of chequesBills Domiciliation & Issuance of Certificates
RETAIL BANKING Loans (Personal, Car, Housing, Commercial, MedicalEquipment)Cards (Debit, Prepaid, Cards provided by outsidetransfers in USD and Euro)
Salaries DomiciliationOnline Banking Services
COMMERCIAL BANKING AND TRADE FINANCEBuilding on its network of InternationalCorrespondents and on the expertise of itsManagement team, Banque Bemo Saudi Fransiprovides its clientele with quality services such as:Sight and Term Letters of CreditLetters of Guarantees (advance payment, bidbonds, performance bonds)Foreign credit investigationsRemittances and Collections of documentsShort and Medium Term loansDiscount of commercial papersAcceptances
Banque Bemo Saudi Fransi’s goal is to satisfy customers’ expectations by motivating its workforce, creatingtop value for its shareholders, ensuring error free operations for its customers and constantly extendingthe range of products and services throughout the country and in particular with the Syrian Diaspora.
The Bank’s Head Office is located at 29 Ayyar St. Salhia, P.O.Box 31117 Damascus Tel: +963 11 231 77 78,Fax: +963 11 231 87 78, www.bbsfbank.com
Banque Saudi Fransi (BSF) Saudi Arabia 27%Banque Bemo Sal Lebanon 22%Obegi Family Syria 6.37%Other shareholders Syria 44.63%
SHAREHOLDERS Country of Origin Shares in Capital
Banque Bemo Annual Report | Page 35
Bemo Oddo Investment Firm Ltd - Dubai
Bemo Oddo Investment Firm Ltd operates as a
financial intermediary since 2007 in the DIFC in
Dubai. Bemo Oddo Investment Firm Ltd is the
exclusive representative office of Oddo & Cie in the
MENA / GCC.
Oddo & Cie is an independent leading financial
partnership in France with more than 100 years of
history; it is one of the top ten in France in this new
model of partnership: Oddo & Cie is owned at 50%
by the Oddo family and related, 30% by the
management and 20% by the Allianz Insurance
Group. The company is active in investment
banking (brokerage and corporate banking) and
capital management (asset management and
custody/account services). Oddo & Cie manages
assets of more than Euro 21 billion as at June 2010.
Bemo Oddo’s main interest is to promote Oddo &
Cie.’s expertise in Asset Management and Security
Brokerage / Research to top institutional investors
in the MENA / GCC: mainly investment authorities,
pension funds, banks, insurance companies,
financial Institutions, and family offices.
Oddo Asset Management’s flagship product is the
SMIDCAP Europe with about EURO 2.7 billion in
AUM, and Solid track-record with regular alpha
generation capacity. Assets are managed through
open funds and dedicated mandates. This strategy
is highly rated and researched by several global
consultants and institutions including Cambridge
associates and Mercer.
BEMO ODDO INVESTMENT FIRM LTD
Gate Village, Bldg 1, Level 1, Unit 109, DIFC
PO. Box 506671 Dubai, UAE
Tel: +971 4 323 0565
Fax: +971 4 323 0585
www.oddo.eu
Management Analysis
Banque Bemo Annual Report | Page 37
In 2010, the world economy engaged into a slow but solid recovery. Monetary and fiscal policies
adopted in several developed countries have succeeded to improve growth prospects, and spared us from
a much deeper and long-lasting recession. Developing countries have benefited from international and
domestic financial flows to expand their internal markets and lead global recovery. The overall improving
conditions in 2010 supported the increase of several stock markets in both developed and developing
countries (e.g., Dow Jones +11.02%, or Buenos Aires +51.83%). Yet, unresolved imbalances remain and
the global recovery is still exposed to significant risks.
While experiencing a weak economic recovery, several high income countries are struggled with high
public debt, and high unemployment rates (USA, Euro Countries, etc.). They are no longer able to pursue
their social policies. Low interest rates have unfortunately failed to fully support economic growth in
developed countries, and benefited to middle-income emerging countries with better growth prospects.
The later attracted private capital flows seeking profitable investment opportunities. However, emerging
economies are suffering from inflationary pressures related to the abundance of capital and the increase
in demand. This results in higher interest rates which increase prices of both real and financial assets, and
are likely to slow down economic growth.
During the last years, the overall increase in the cost of living and changes in climate conditions have
intensified social inequalities and geopolitical instabilities in several countries. These tensions should
continue to disrupt the supply of raw materials, e.g. oil, alimentary products, and other commodities, and
to maintain the current inflationary pressure, which could adversely affect world economic growth potential.
2011 will be for investors another challenging year where country risk should take a bigger place in
investment decision-making!
Salim Chahine, Ph.D.Associate Professor of Finance
MBA Program DirectorThe Olayan School of BusinessAmerican University of Beirut
Inflation and Growth | 2011 a challenging year
Corporate Governance Guidelines
Risk Management | Overview
Risk Management
Risk is an integral part of Banque BEMO’s businesses.
Management of that risk is therefore critical to the
Bank’s continuing profitability. Strong independent
prudential management has been a key the bank’ssuccess over many years. Where risk is assumed it
is within a calculated and controlled framework.
The main risks faced by the Bank are market risk,
equity risk, credit risk, liquidity risk, and
operational risk. Responsibility for these risks lies
with the individual businesses giving rise to them.
It is the responsibility of Risk Management Division
(RMD) to ensure appropriate assessment and
management of these risks within the bank.
To strengthen its risk management capabilities,
Banque Bemo SAL centralized the management of
risks in August 2010 within one unit that fully
remained independent of business promotion
units. Under the bank’s risk management system,
this unit analyzes and evaluates the Bank’s risk
exposures and reports regularly to the Board of
Directors and various committees, thereby enabling
Senior Management to participate in the risk
management process.
In addition and in line with international standards
and best practices, a Board Risk Committee was
established composed mostly of non-executive
directors and responsible for:
. Review and oversight of the risk profile of theBank and its subsidiaries within the context ofthe Board determined risk appetite
. Making recommendations to the Board concerningthe Group’s risk appetite and particular risks orrisk management practices of concern to theCommittee
. Reviewing management’s plans for mitigationof the material risks faced by the variousbusiness units of the bank
. Oversight of the implementation and review ofrisk management and internal compliance andcontrol systems throughout the bank
. Promotion of awareness of a risk based cultureand the achievement of a balance between riskminimization and reward for accepted risks
Board of Directors COMMITTEES INVOLVED
Board Risk Committee
Credit Committee
Assets & Liabilities Management Committee
Business Continuity Planning Committee
Operational Risk Assessment Committee
Risk Management (Credit, Market, Operational)
(Credit Administration)
Chairman
Managing Director
Banque Bemo Annual Report | Page 39
Risk Management | Basel II Capital Adequacy Ratio
The risk management principles followed by Banque
Bemo SAL are as follows:
Independence - RMD is independent of all otherareas of the Bank, reporting directly to theManaging Director. RMD recommendation isrequired for all material risk acceptance decisions.RMD identifies, quantifies and assesses all risksand sets prudential limits.
.
Centralized prudential management - With thenew centralization, RMD’s responsibility currentlyis covering risks from a Bank-wide perspectiveensuring a consistent approach across all areas.
.
Approval of all new business activities - In linewith regulatory directives, other activities of theBank such as new businesses or activities, offeringof new products or entering new markets needthe prior ratification of the RMD.
.
Continuous assessment and frequent monitoring -RMD continually reviews changes in risks broughtabout by both external developments and internalcircumstances. Monitoring is done daily whilemaintaining close ties with commercial divisions toensure that, should any limit breaches occur, thelatter are immediately addressed, and escalatedas necessary.
.
In April 2006, the Central Bank of Lebanon issued acircular (BDL Circular No 104) requiring banks inLebanon to report their capital requirements according to the Basel II guidelines. Basel II is aninternational Accord developed by the BaselCommittee on Banking Supervision to establish aglobal standard for how banks and other financialinstitutions measure and recognize risk. It allowedsetting of a more risk-sensitive framework for theassessment of risks and calculation of minimum capital requirements.
The Central Bank’s Basel II framework describes thefollowing three pillars to be mutually reinforcingand applicable progressively while ensuring a capital base which corresponds to the overall riskprofile of the bank:
Pillar 1-Minimum Capital Requirements: calculationof minimum capital requirements and the capitalratio based on charges for credit, market and operational risk resulting from the bank’s operations;
Pillar 2-Supervisory Review Process: stresses theimportance of bank management developing an
internal capital adequacy assessment process(ICAAP) and setting targets for capital that are commensurate with the bank’s particular risk profile and control environment. A framework is setfor assessment of risks not covered under Pillar 1and the sufficiency of capital to cover these risks aswell as Pillar 1 requirements for current and futureactivities of the bank is analyzed.
Pillar 3-Market discipline: its aim is mainly to bolster market discipline through enhanced disclosureby banks. Effective disclosure is essential to ensurethat market participants can better understandbanks’ risk profiles and the adequacy of their capital positions. Disclosure requirements and recommendations in several areas, including theway a bank calculates its capital adequacy and itsrisk assessment methods are set out.
The approaches adopted by the Bank for measuringminimum capital requirements for various Pillar 1risks as well as an update on Pillar 2 requirementsare discussed in the following sections. A detailedoverview on the nature of exposures is also indicated.
The Bank is subject to the capital adequacy requirements and guidelines as defined by the Central Bank
of Lebanon which are based on the guidelines of the Basel Committee on Banking Supervision
Risk Management | Scope of Application
The name of the top corporate entity in the group,
to which these regulations apply, is Banque Bemo
SAL. The consolidated financial statements are
prepared in accordance with the International
Financial Reporting Standards (IFRS). The following
entities of the group are fully consolidated with the
results of Banque Bemo SAL for regulatory purposes:
1. BEMO Securitization SAL: This entity is 96%
owned by the Bank. It is regulated by the Central
Bank of Lebanon and Banking Control Commission
and undertakes securitization transactions locally
and structured finance deals.
2. Ferticed Limited Holding (Luxembourg): This
entity is 100% owned by the Bank and is mainly
involved in providing insurance services.
3. Depository and Custody Company SAL: This entity
is 100% owned by the Bank and undertakes
depository and custody of securities activities.
Investments in the following entities associated
with the group are deducted from consolidated
capital (50% from Tier 1 and 50% from Tier 2) for
regulatory purposes:
1. Banque Bemo Saudi Fransi (BBSF): BBSF is
incorporated in Syria as a commercial bank. The
Bank owns 22% of the ordinary share capital of
BBSF.
2. BEMO Oddo Investment Firm Ltd- Dubai: BEMO
Oddo is incorporated in Dubai as a financial institution.
The Bank owns 25% of the ordinary share capital of
BEMO Oddo.
There are no other group entities for regulatory
purposes that are neither consolidated nor deducted
(i.e. where the investment is risk weighted). There
are no restrictions, or other major impediments, on
transfer of funds or regulatory capital within the
group.
Risk Management | Capital Structure
The capital is represented by 16,000,000 nominative shares authorized and fully paid with a par value of
LBP1,000 per share and divided as follows:
Listed Shares: 5,400,000
Unlisted Shares: 10,600,000
The Bank has not issued any capital instruments of innovative, complex or hybrid nature. The information
provided below has not been subject to an external audit
A-Core Capital - Tier 1Eligible paid-up share capital 16,080 16,291Perpetual, Non-Cumulative Preferred Shares 30,150 30,150Cash Contribution to Capital 29,105 29,105Eligible Reserves 31,965 29,219Retained Earnings 13,697 10,037Less: Treasury Shares (1,547) (1,059)Less: Intangible assets (831) (976)Less: Significant minority investments (50% deduction) (17,272.5) (14,791)Total Tier 1 101,346.5 97,976
Components of Capital (in LBP million) 2010 2009
Banque Bemo Annual Report | Page 41
Risk Management | Capital Adequacy
The approaches adopted by the Bank for measuringminimum capital requirements under Pillar 1 of theBasel Accord are described in the following sections. It is to be noted that since issuance ofCircular No 104 in April 2006 by the Central Bank of
Lebanon, the Banking Control Commission requestedfrom banks to conduct Quantitative Impact Studies(QIS) to assess the impact of implementation ofBasel II requirements. Up until this date, 8 quantitative studies were conducted.
Risk Management | Credit Risk
Pursuant to the Central Bank requirements, theBank has adopted the “Standardized Approach” formeasuring minimum capital requirement for creditrisk. Under this approach, exposures are spread intoportfolio segments based on the type of counterparty. The major portfolios defined as perCentral Bank directives (BDL Basic Circular No 115)are sovereigns, banks, corporate, SME, CommercialReal Estate, Other retail (including securities lending), residential, equity, and others. Dependingon the ratings assigned by qualified external creditrating agencies, a counterparty risk weight rangingfrom 0% to 150% is set for each portfolio segment.After application of specific provisions (if any) and/ or acceptable credit risk mitigations, initial
funded and non-funded exposures are multipliedby the specified risk weight of the counterparty toarrive at the corresponding Risk Weighted Asset(RWA).
Using product type specified Credit ConversionFactors (CCFs), off-balance sheet exposures areadjusted before determining the RWAs. As forderivatives, the latter are considered at their CreditEquivalent Amount before determining RWAs.
Minimum capital for Credit Risk is calculated as 8%multiplied by the aggregated mitigant adjustedRWAs for the Bank’s exposures.
Risk Management | Market Risk
The “Standard Measurement Approach” is used bythe Bank to calculate the regulatory capital requirements relating to market risk (coveringinterest rate risk in the trading book, equity pricerisk, foreign exchange risk and commodity price
risk). As indicated by the Basel Committee, theresulting measure of capital charge is multiplied by12.5 (reciprocal of 8%) to provide a comparablerisk weighted exposure number for market risks.
B-Supplementary Capital – Tier 2Subordinated Bonds 48,240 56,379Unrealized gain on AFS Portfolio 11 1,730Less: Significant minority investments (50% deduction) (17,272.5) (14,791)
TOTAL Tier 2 30,978.5 43,318
Total Eligible Capital (A+B) 132,325 141,294
Components of Capital 2010 2009
Risk Management | Operational Risk
Risk Management | Internal Capital Adequacy Assessment Process (ICAAP)
The Bank presently uses the “Basic IndicatorApproach” for calculation of regulatory capitalrequirements in terms of operational risk. Thisapproach applies a beta coefficient of 15% to theaverage gross income of the Bank for the preceding three financial years. Similarly to market
risk capital charge, the resulting measure of capitalcharge for operational risk is multiplied by 12.5(reciprocal of 8%) to provide a comparable riskweighted exposure number for operational risks.
An ICAAP document shall be finalized in June 2011prepared in line with the Banking ControlCommission requirements including detailedassessment of the risks not covered by Pillar 1 suchas liquidity, concentration, interest rate risk in thebanking book, and shall be integrated within the
capital planning process of the bank.
The Capital Adequacy measurement after application of corresponding risk weights and mitigants based on the aforementioned approachesis detailed in the following table:
The decline in 2010 is mainly due to the reductionin Eligible Capital (namely amortization of Tier 2instruments held) and an increase in risk weightedassets. It is worth noting that a capital increase of
LBP 46 billion has been approved by the GeneralAssembly in the last quarter of 2010 of which LBP 30billion form cash injection which will resultin an enhancement of the capital adequacy ratio.
Credit Risk – Standardized Approach 1,129,162 94% 1,078,745 94.3%
Sovereign Risk 426,291 37.8% 436,780 40.5%
Banks Risk 89,232 7.9% 107,439 10%
Public Sector Entities 2 2
Loans to Corporate Clients 334,765 29.6% 267,287 24.8%
Loans to SMEs 128,013 11.3% 114,999 10.6%
Other Retail Loans 24,319 2.2% 28,061 2.6%
Residential Loans 4,507 0.4% 3,292 0.3%
Commercial Real Estate Loans 80,129 7.1% 65,538 6.1%
Securitization 7,678 0.7% 7,654 0.7%
Non-Performing Loans 1,066 0.1% 1,648 0.2%
Other Assets 33,160 2.9% 46,045 4.2%
Market Risk – Standard Measurement Approach 8,013 0.7% 7,825 0.7%
Interest Rate Risk (Trading Book) 5,550 5,787
Equity Price Risk (Trading Book) 550 975
FX Risk 1,912 1,063
Commodities Risk (Not applicable) - -
Operational Risk – Basic Indicator Approach 57,331 4.8% 57,356 5.0%
Total Risk Weighted Assets 1,194,506 1,143,926
Total Capital Ratio 11.08% 12.35%
Tier 1 Capital Ratio 8.48% 8.56%
Capital Adequacy
2010 2009
Amount in LBP Million Share Amount in LBP Million Share
Banque Bemo Annual Report | Page 43
Risk Management | Risk Management Structure
As indicated, the management of risks for the Bankis centralized under the Risk Management Division.Through approved policies directly emanating fromthe business strategy of the Bank, management of
risks is conducted in a proactive approach withdirect interactions and presentation of matters tothe Managing Director and Board Risk Committee.
a) Credit Risk
For measuring minimum capital requirements forcredit risk using the Standardized Approach underBasel II, the Bank initiated the implementation in2010 of a dedicated capital measurement systemsupplied by the Core System provider and enablingautomated and real time measurement of exposures in detail along with proper calculation ofrisk weights, credit conversion factors and allocation of eligible credit risk mitigations.
Since 2005, the Bank uses an internal ratingmethodology for classification of counterparty riskand in the management of the underlying exposures appropriately. Significant exposures arequarterly reported to the Board of Directors. TheBank also follows the supervisory guidelines forasset classification, particularly those relating topast due and non-performing loans.
The Bank uses external credit ratings as publishedfrom Standard & Poors, Moody’s and Fitch for the
purpose of determining counterparty risk weights.These ratings are mainly applicable to the sovereigns,banks, and financial institutions/investmentsassets classes. A majority of the Corporate, SME andRetail clients is Lebanese i.e. not externally ratedand hence falling in the 100% risk weight category.
The Bank uses a wide range of collaterals in theprocess of managing its counterparty risks. Withrespect to credit risk mitigation, the applicablefinancial collateral is restricted to pledge of cashmargins, deposits held with the Bank and acceptable credit deposits held in cover of debitbalances under acceptable netting arrangements. Abreakup of gross credit risk exposures i.e. exposures after offsetting provisions but beforeapplication of credit risk mitigations (includingnon-funded exposures and after applying credit conversion factors) is presented below with therespective risk weights:
Sovereign Risk o.w. 671,077 672,635
Placements in LBP with Banque du Liban 0% 89,347 60,180
Placements in FC with Banque du Liban 100% 341,458 375,173
Placements in FC with other Central Banks 0% 6,198 -
Placements in FC with other Central Banks 20% - 7,275
Lebanese Treasury Bills in LBP 0% 148,334 161,343
Lebanese Eurobonds in FC 100% 84,833 60,132
Other government bills 0% 907 8,532
Banks Risk o.w. 289,096 386,728
Long and short term placements 20% 217,191 337,865
Long and short term placements 50% 52,223 17,993
Risk WeightBuckets 20092010
Assets Segments(in LBP million)
Long and short term placements 100% 19,684 30,870
Public Sector Entities 1,032 876
Public Sector Entities in LBP 0% 1,032 876
Public Sector Entities in FC 100% 2 -
Loan Portfolio Risk o.w. 809,493 728,908
Loans to Corporate Clients 20% 1,801 4,600
Loans to Corporate Clients 50% 3,212 2,552
Loans to Corporate Clients 100% 436,577 390,672
Loans to SME Clients 100% 179,570 151,610
Loans to Other Retail 100% 44,397 60,059
Residential Loans 35% 14,494 9,405
Claims secured by Commercial Real Estate 100% 118,226 98,157
Securitization 75% 10,237 10,205
Non-performing 100% 1,066 1,648
Other Assets o.w. 59,170 74,756
Other Assets (Cash, Regularization Accounts) 0% 8,828 7,436
Other Assets (Checks Purchased) 20% 21,231 26,294
Other Assets (Receivables) 50% 394 479
Other Assets (Fixed, HTM Investments, Assets
acquired in satisfaction of loans) 100% 28,717 40,547
Assets Segments(in LBP million)
Risk WeightBuckets 20092010
Risk Management | Credit Risk Management
Credit risk management is fundamental to thebank’s business. Such risk arises from lending, trading and other activities undertaken by theBank. Outlined below is the approach that the Bankhas taken to provide credit risk management oversight and control.
Oversight of the Bank’s credit risk is the responsibilityof the Risk Management Division. Since 2004, and subject to ongoing review, theBoard has approved a credit risk policy highlighting the target markets and credit riskacceptance criteria.
A delegated credit approval authority limit structure, approved by the Board of Directors, is inplace, whereby all credit extensions are approved.Prior to submission of any credit facility to the latter authorities, a technical review and a secondindependent opinion to assess the quality of theanalysis and the risks entailed is conducted by the
Risk Management Division. This includes a detailedreview of the purpose of the requested facility, thesource of repayment, the business risks that couldinhibit repayment (nature of the business/industry,competitiveness, operating efficiency, management),and the financial analysis of the borrower (financialstatement analysis and cash flow analysis, projection,“debt capacity” review and other financial risks).The technical review produces an evaluation reportwith comments and recommendations.Notwithstanding the amount of the credit requested,the approval process follows the same internal procedure which includes, after the review by therisk management department, the review andmajority approval by the Credit Committee. Approvalsare tiered based on transaction amount, line ofbusiness, aggregate credit facilities to the relatedcustomer group and loan classification. Beyond certain exposure thresholds, approval from theBoard Credit Committee is required.
Banque Bemo Annual Report | Page 45
Risk Management | Credit Concentration
The Bank seeks to be broadly represented in thegrowing sectors of the major markets it operatesin. Selectively, limits are set on specific industry orproduct segments in order to avoid over-concentrationin lending to those segments.Prudential limits have also been placed on exposures to single customer groups and on cross-border country exposure.
The bank has laid down a set of internal rules ondiversification, taking into account the level of core
capital funds and the level of risk it is willing totake. These rules are designed to safeguard itsresults from the impact of external events beyondthe bank’s control. The bank’s credit risk exposuresare a direct reflection of the bank’s business objectives and strategic focus whereby Corporateclients continue to constitute the largest portionwithin the Loan Portfolio.
By strictly abiding to the prerogatives set withinthe credit risk policy, the bank has been able tomaintain a satisfactory non-performing loans tototal loans ratio ranking amongst the top 5 banks in
the Lebanese banking sector during the past 5years. The table below highlights the breakdown ofthe Loan Portfolio excluding related parties by Riskgrading:
The above table indicates that by 31/12/2010around 86% (92% in 2009) of loans were classifiedas performing while 13% were classified as watch(7.6% in 2009). The main reason is the decision toreclassify an industry (Exposure of LL 41.7 bln)where the global financial crisis had an adverse
impact. As the impact was well tolerated by theplayers within this sector, a potential upgrading ofthe current rating to performing is to be implemented in 2011 noting that out of theamount under watch category, around LBP 21.86 blnis covered by earmarked pledged cash collateral.
Regular Loans 614,450 574,070Watch Loans 94,520 47,648Gross substandard loans (SLs) 1,399 2,030
o.w. net substandard loans 675 1,267o.w. unrealized interest 724 762
Gross doubtful and bad loans (DLs) 3,340 3,181Net doubtful and bad loans 390 379Loan loss reserves (inc.Unr.Interest) 2,950 2,802
Gross SLs & DLs 4,739 5,211Gross loans 713,709 626,929Total Loan loss reserves 3,674 3,564Gross DLs & SL to gross loans 0.66% 0.83%Loan loss reserves to gross DLs & SLs 77.5% 68.4%Watch Loans to gross loans 13.2% 7.6%Net DLs and Net SLs to Core Capital 1.05% 1.67%
in LBP Million 2010 2009
Breakdown by Counterparty type
Regular Retail Customers 9.9% 11.8%out of which Residential Loans 17.7% 13.1%Regular Corporate Customers 89.9% 87.8%out of which:- Corporate 76.2% 76.9%- SME (Others) 23.8% 23.1%Classified Customers 0.15% 0.26%Accrued Interest Receivable 0.08% 0.09%Total 100% 100%
Classification 2010 2009
Services 54,829 8% 52,271 8%Consumer Goods Trading 391,523 55% 318,921 51%Real Estate Development 79,828 11% 79,338 12%Manufacturing 107,633 15% 109,507 17%Financial Services 6,163 1% 7,027 1%Private Individuals 73,789 10% 63,431 10%Other 558 0% 87 0%Total 714,323 100% 630,582 100%
Economic Sector(in LBP Million) Amount Share % Amount Share %
Cash Collateral 183,213 25% 190,089 30%Bank Guarantees 305 0% 1,084 0%Pledged Portfolio 8,500 1% 10,860 2%Mortgage 52,778 7% 55,260 9%Personal Guarantees 266,042 38% 212,927 33%Facilities granted on Clean Basis 203,485 28% 170,962 27%Total 714,323 100% 641,182 100%
(in LBP millions) Amount Share % Amount Share %
With respect to breakdown by industry, Tradingindustries (mostly wholesale trading) continued torepresent the largest sector the bank is exposed tofollowed by Manufacturing Industries and Real
Estate Development (including contractors). Thetable below highlights the comparative breakdowns:
Exposure under the Real Estate Sector is adequatelycovered by assignments on sales effected, mortgages on properties held, and earmarked
pledged deposits representing 35% of total exposure. Concentrations above a certain threshold are closelymonitored and reported to the Board of Directors.
2010 2009
2010 2009
Risk Management | Collateralization of Loans
A significant proportion of the Bank’s loans areguaranteed. The types of security include cash collateral, mortgage over land and other property,bank guarantees, securities (i.e. Treasury Bills, debt
and equity securities) and personal guarantees. Thetable below shows the coverage types as of31/12/2010:
Banque Bemo Annual Report | Page 47
The above table shows that 25% of the existingexposure under funded facilities is duly covered bycash collateral. The bulk of these pledged depositsare held in the same currency similar to their corresponding exposure. In the cases where theexposure differs from the currency of the collateral,the amount of the latter is usually maintained at ahigher level where a certain margin is applied toaccount for any possible currency fluctuation.
Where mortgage cover is obtained against facilities,the underlying property is estimated by the Bank’sindependent appraiser prior to approving the extension, noting that it is the Bank’s policy to obtainmortgage cover representing 120% of the requestedfacility amount, and that the properties held undermortgage are all in prime locations in Beirut andMount Lebanon areas.
With regards to the exposures covered by personalguarantees and granted on clean basis, the latter areextended after a thorough analysis is conducted onthe soundness of the financial parameters and cashflows of the borrowers in the case of corporate lending and on the morality and financial means ofindividuals
Top 20 related group exposures (one-obligor)
While taking into consideration the present strategyoutlined by the Board of Directors indicating that target markets should be focused solely onCorporate and Private Banking, the table belowshows that the top 20 interconnected group exposures (consisting of around 100 clients) constitute around 43% of the total gross fundedexposures and are 3.2 times Tier 1 Equity.
When taking into account the existing pledgeddeposits and after netting the latter from the grossfunded exposures, the overall exposure to Tier 1Equity drops to 2.17 times. Most important to note isthe fact that the latter group exposures and although
interconnected are involved in diversified industriesthus reducing the risk of relying on one sector andmitigating the overall concentration risks. Moreover,the above is in line with the bank’s strategy to befocused on Corporate Banking.
A country risk framework is in place, covering theassessment and rating of countries, country reviewfrequency, as well as the maximum cross-bordercountry limit that can be granted to any one countrybased on its risk rating. Limits are allocated into
maturity time-bands and vary according to the risksof the country concerned and the political and economic outlook.
Largest 2 groups 92,562,868 12% 91% 82,022,214 12% 84%
Largest 5 groups 157,876,899 21% 156% 141,106,280 21% 144%
Largest 10 groups 242,265,337 32% 239% 213,719,412 32% 218%
Largest 20 groups 327,959,302 43% 323% 297,160,688 45% 303%
Figuresin LBP
FundedExposure
% of TotalPortfolio
% of Tier 1Equity
% of TotalPortfolio
% of Tier 1Equity
FundedExposure
31-Dec-2010 31-Dec-2009
Risk Management | Cross Border Credit Risk
Continuous and regular follow up is conducted onthe overall risk profile of banks with which the bankmaintains accounts. This is usually conductedthrough regular and at least weekly review of ratingactions undertook by major credit rating agencies aswell as a thorough financial risk assessment. The
Bank has maintained since its establishment veryclose and mutually beneficial relationships withprime banking correspondents. The table belowhighlights the present ratings of cross border counterparty banks where the bank is maintainingplacements:
As indicated in the table above, the bulk of placements with foreign banks are maintained withprime financial and multinational financial institutions enjoying a satisfactory credit rating. On aweekly basis, monitoring of rating actions by majorcredit rating agencies is conducted while keeping an
eye on the impact of developments on the globaleconomic conditions. The portion of placementsmaintained with un-rated financial institutions islargely held with custodian institutions and locallyoperating banks where no rating is assigned.
* Not rated mainly covers local Lebanese commercial banks
Risk Management | Counterparty (Bank) Risk
Stress testing and scenario analysis are used toensure that the Bank’s internal capital assessmentconsiders the impact of extreme but plausible scenarios on its credit risk profile and capital position(i.e. macroeconomic and microeconomic default scenarios). They provide an insight into the potentialimpact of significant adverse events on the Bank andhow these could be mitigated. The Bank’s targetcapital levels are set taking into account its riskappetite and its risk profile under future expectedand stressed economic scenarios. Based on the latest international regulatory directives published(mainly the Committee of European BankingSupervisors -CEBS), a credit risk stress test was conducted based on June 30, 2010 exposures.Several scenarios were assumed covering mainly thefollowing:. occurrence of a local/international economic
downturn resulting in an increase in credit risks
weighted assets and impacting level of eligiblecapital.
. downgrading a portion of watch clients to doubtfulcategories requiring potential additional provisioning and thus impacting level of eligible capital.
. assuming a severe economic downturn impacts one specific sector within the bank’s Loan portfolio.
Additional scenario and sensitivity analyses wereconducted, and the results show that the Bank’sequity can sustain any potential adverse impactresulting from the aforementioned and the capitaladequacy ratio, although reduced, shall remainabove the minimum regulatory ratio of 8%.
b) Market Risk Market risk is the exposure to adverse changes inthe value of the bank’s trading portfolios as a result
Risk Management | Credit Risk Stress Testing
AAA to AA 4%AA- to A+ 71%A to A- 21%BBB+ to BBB 0%Not Rated* 4%Total 100%
Rating Bracket % of Total Balances
Banque Bemo Annual Report | Page 49
The Bank is exposed to interest rate risk as a resultof mismatches in interest rate repricing of assets andliabilities and off-statement of financial positionitems that mature or reprice in a given period.
a) GAP Analysis: As per Basel II, the change in economic value of a
bank’s banking book balance sheet when subjectedto a 200 bps standardized shock should be below thesum of twenty percent of Tier1 and Tier 2 capital.For Banque BEMO, the interest rate sensitivity position based on contractual re-pricing arrangementsfor 2010 and 2009 are shown in the table below(Impact for one year only):
Risk Management | Interest Rate Risk in the banking book
of changes in market prices or volatility. The Bank isexposed to the following risks in each of the majormarkets in which it trades:. foreign exchange markets: changes in spot and
forward exchange rates and the volatility of exchange rates;
. interest rate markets: changes in the level, shapeand volatility of yield curves, the basis between different interest rate securities and derivatives and credit margins;
. equities markets: changes in the price and volatilityof individual equities, equity baskets and equity indices;
RMD measures exposures in all markets for eachdealing desk and for markets in aggregate. Limitsare sets for all exposures in all markets. Limits areset for individual markets and trading areas, and forthe Bank as a whole. ALCO approves and maintainsmonthly monitoring on all exposures while continuously being abreast of all developments inthe market and trends.
For the measurement of minimum capital requirement for market risks under Pillar 1, the Bankuses the Standard Measurement Approach as per thetable below:
Traded Interest Rate Risk 444 69% 463 74%Traded Equity Price Risk 44 7% 78 12%Foreign Exchange Risk 153 24% 85 14%Commodity Price Risk - - - -Total Capital Charge for Market Risks 641 626MRWA ( X 12.5) 8,012.5 7,825Share of Market RWA out of Total RWA 0.67% 0.7%
Amounts in LBP millions 2010 2009
Total Assets 963,640 251,251 59,472 52,159 Total Liabilities 1,314,591 171,093 44,058 40,776 TOTAL (350,951) 80,158 15,414 11,383 Term Position 1,070 (2,635) (77) - GAP (349,881) 77,523 15,337 11,383 Cumulative GAP (349,881) (272,358) (257,021) (245,638)Earnings at Risk (292) (908) (1,928) (3,685)
31/12/2010 (in LBP millions)(Based on BCCL Number 250)
< 1 M 1 to 3 M 3 to 6 M 6 to 12 M
Total Assets 890,734 322,899 82,282 56,735 Total Liabilities 1,329,026 206,157 27,889 26,105TOTAL (438,292) 116,742 54,393 30,630 Term Position 139 773 47 - GAP (438,153) 117,515 54,440 30,630 Cumulative GAP (438,153) (320,638) (266,198) (235,568)Earnings at Risk (365) (1,068) (1,996) (3,533)
31/12/2009 (in LBP millions)(Based on BCCL Number 250)
< 1 M 1 to 3 M 3 to 6 M 6 to 12 M
Currency Change in Basis Points EAR/NII (LBP or USD) EAR/Total NII LBP + 100 -45.05% -6.45%USD + 50 -1.25% -1.07%
Sensitivity of Net Interest Income
The effect of a 200 basis point change in interestrates upwards or downwards on the earnings of thebank for the 2010 fiscal year is LBP 3.685 billion(LBP 3.533 billion in 2009). This is mainly due tothe Lebanese currency mismatch in repricingwhereby the majority of liabilities are repricedwithin one month while LBP assets are repriced inperiods exceeding one month. It is worth notingthat this is in line with the market practice andmainly resulting from the lack of alternative
placements in LBP with similar repricing periods asliabilities.
b) Sensitivity of Interest Income and Shareholders’Equity:The 2 tables below shows the Sensitivity of InterestIncome and Shareholders’ Equity to reasonably possible parallel changes in interest rates, all othervariables being held constant.
This change is calculated over a one year periodand shows that an increase in LBP rates by 100 b.p.will negatively affect the net interest income in LBPby 46%. On the other hand, an increase of 50 b.p.in USD rates will negatively affect the net interest
income in USD by 1.25%. Overall and on a consolidated simultaneous impact from the above2 scenarios of rates increases (in LBP and USD), thetotal net interest income will be negatively impactedby 7.52% which is considered acceptable.
Table1: Sensitivity of Interest Income:
2010
CurrencyLBP -6.20%USD -3.88%
Sensitivity of Equity [GAP/(Tier 1+Tier 2)]
Table2: Sensitivity of Shareholders’ Equity:
2010
CurrencyLBP -4.50%USD -3.97%
Sensitivity of Equity [GAP/(Tier 1+Tier 2)]2009
Currency Change in Basis Points EAR/NII (LBP or USD) EAR/Total NII LBP +100 -40.20% -5.80%USD + 50 -1.42% -1.21%
Sensitivity of Net Interest Income2009
Banque Bemo Annual Report | Page 51
2010 maturity gap… … … … … … … 399,950 (801,805) 21,482 313,690 142,007 57,0072010 cumulative maturity gap… … 399,950 (401,855) (380,373) (66,683) 75,324 132,3312009 maturity gap… … … … … … … 379,362 (769,034) 111,111 278,740 80,641 48,7692009 cumulative maturity gap… … 379,362 (389,672) (278,561) 179 80,820 129,589
From 1 monthto 3 months
From 3monthsto 1 year
From 1 year to 3 years
From 3 yearsto 5 years
Over 5 years
In LBP millions
The sensitivity of equity is calculated by evaluatingthe impact of repricing gaps between assets andmultiplied by their corresponding weighting coefficients as defined by Basel Committee underthe Modified Duration approach. The result above
shows that around 10% of the bank’s equity is atrisk should a rate rise occur. The above does nottake into account the impact of the cash injectionin the amount of LBP 30billion out of the new capital increase amounting to LBP 46 billion.
Risk Management | Sensitivity of Net Interest Income to reasonable changes in interest rates:
The liquidity position of the Bank is monitored bythe Bank's ALCO, which aims at minimizing risk,while ensuring the best use of funds in the prevailingeconomic conditions. It is the policy of the Bank tomaintain liquidity at a high level; this policy isexpected to prevail so long as the current economicweakness continues in the Lebanese Republic andthe surrounding region. The Bank’s managementstrives to maintain a satisfactory liquidity level atthe Bank in line with approved policy guidelinesand regulatory requirements. The Management’s
efforts with regards to the maturities of fundingsources and uses are reflected in the Bank’s satisfactory liquidity position. Similar to other banksin the sector, the Bank had negative maturity gapsconcentrated in maturities of up to 3 months, whilethe maturity gaps were positive for maturities ofmore than 3 months. The table below summarizesthe maturity profile of the Bank’s assets and liabilities and the related maturity gaps for 2009and 2010:
The basis of the remaining period at the relevantbalance sheet date is mainly determinant of thecontractual maturities of assets and liabilities nottaking into consideration the effective maturities ofmany of the Bank’s liabilities indicated by the trackrecord of deposit retention at the Bank and subsequentcontinuous availability of liquid funds. The Bank’sforeign currency placements maintained with international banks carry a maturity of threemonths or less. Moreover, the Bank’s loans and
advances portfolio is mainly of a short-term nature.
Net liquid assets to deposits reached 60.47% whiletotal loans to deposits stood at 46.80% in 2010.The latter calculations exclude the impact of thepledged deposits held in cover of facilities granted.Upon inclusion, the net liquid assets to depositsratio would reach 70% and the ratio of total loansto deposits would reach 39.61%.
Risk Management | Liquidity
Accounts withno maturity
c) Operational Risk
The objectives of the Operational Risk unit withinthe Risk Management Division are mainly to developand maintain a common understanding of operational risks within the bank.
The main functions are centered on the following:-Identifying, monitoring and managing the bank’scurrent and potential operational risk exposures.. Improving ongoing internal control through
reduction of probability and potential impact oflosses
. Ensuring that there is a clear understanding of responsibility and accountability in managing and mitigating operational risks
. Maintaining an operational loss database
. Improving the risk and control awareness acrossthe bank
The main processes for managing operational riskare an ongoing monitoring through self-assessment and the documenting and registeringof incidents and quality deficiencies.The analysis of operational risk-related events,potential risk indicators and other early-warning signals are in focus when developing the processes.The mitigating techniques consist of business continuity plans together with crisis managementpreparedness in addition to maintaining adequateinsurance covers. The Bank currently uses the BasicIndicator Approach for assessment of minimumcapital requirement for Operational Risk underPillar 1 of the Accord.
Average Gross Income (2008-2010) 30,576Beta Coefficient 15%Operational Risk Capital Charge 4,587Operational Risk Weighted Assets 57,331Share of Total Risk Weighted Assets 4.79%
2010in LBP millions
Average Gross Income (2007-2009) 30,590Beta Coefficient 15%Operational Risk Capital Charge 4,589Operational Risk Weighted Assets 57,356Share of Total Risk Weighted Assets 4.97%
2009in LBP millions
Banque Bemo Annual Report | Page 53
Internal Audit | Department ’s role
Sound risk mitigation practice is at the heart ofBank’s added value. The role of the Internal Auditdepartment is to provide reasonable assurance onexisting controls, by testing them within a professional framework, where efficiency assessmentand improvements are systematically sought. Inthat respect, Internal Audit strikes the right balancebetween providing assurance about controls andefficiency (thus the enhancement of shareholders’value).
The department’s assessment of efficiency of
controls is organized within a risk based approach,where the resources are allocated based on riskexposure, while ensuring a comprehensive reviewof all the Bank’s activities within a 2 years cycle.The department’s contribution actually spans overthree axes:
. Improvement of internal control systems
. Improvement of Risk Management systems
. Improvement of Corporate Governance practices
throughout the bank
Internal Audit | Infrastructure
The Audit department relies on the Teammate software for the organization of its mission: it is astate of the art framework which allows for systematic and efficient conduct of audit missions.The department’s human resources represents acombination of expertise and skills of qualifiedstaff, many of which enjoy due certification andmore than 10 years of experience in banking andare regularly trained on the latest audit techniquesand banking activities. During 2010, the department conducted an overhaul of its risk universe to update and match itto the current situation of the Bank’s activities. Therisks related to existing controls have been clarified; a typology and hierarchy of identifiedrisks has also been completed.
The Internal Audit activity is also backed by areporting line that guarantees full independence
from the Bank’s executive management (the internalaudit department reports to the Board of Directors,through its Audit committee, composed by prominent independent Board Members). TheAudit Committee and Internal Audit departmentalso have a clear scope of activity through a fully documented audit charters, policies and procedures.
The above structure ensures that the Bank’sInternal Audit Department is in a position to identifyand evaluate the underlying reasons behind issuesinstead of limiting the remedy to treating theirsymptoms. The department’s risk focused approachhelps in identifying and highlighting critical risksand exposures before they unwind into problems.Furthermore, Internal Audit’s independence fromoperations fosters diversity in problem solvingapproaches, thus favoring setting up “out of thebox” propositions to enhance the Bank’s controls.
Internal Audit | 2010 activity
During year 2010, the department modified thebalance in its Internal Audit coverage whereincreased attention was aimed to risk, risk management and governance versus controlsassessment. The activity focused on 4 main fields:
. Review of the distribution and quality andintegrity of the information generated to manage the Bank’s activities, which is deemedessential for sound management practice.
. Review of the Bank’s activities, amongst
which the Treasury and Financial Markets activity (proprietary and client’s trading)
. An assessment of the processes and services involving the Bank and its stakeholders,
. A review of the Bank’s Subsidiary entities’ activities
At the outcome of the above assessments, theInternal Audit’s overall opinion is that existingcontrols and Risk Mitigation systems provide asound framework for the Bank’s activities.
Internal Audit
Anti - Money Laundering | Risk Local Regulators
The bank is subject to and complies with the AMLregulations of both the Lebanese and the Cypriotauthorities, namely basic circular 83 of 2001 of theCentral Bank of Lebanon and the Guidance Notes of1996 of the Central Bank of Cyprus and their subsequent amendments.
The Bank therefore committed to full compliancewith all AML laws and regulations, FATF recommendations and international standards ofBasel Committee regarding “Know Your Customer” procedures.
Anti - Money Laundering | Committee
The Bank has established an Anti-MoneyLaundering Committee. The Committee meets on quarterly basis in order to
ensure proper application of AML procedure,reporting of suspicious transactions to SIC andMOKAS and KYC form.
Anti - Money Laundering | Money Laundering Reporting Officers
The Money Laundering Reporting unit consists ofCentral Money Laundering Reporting Officer, andAssistant Money Laundering Reporting Officer forboth Beirut and Cyprus reporting directly toCompliance Officer of the newly establishedCompliance unit.
Branches MLROS are appointed in each branch andare responsible for adherence with DDML procedures and control of operations.
Anti - Money Laundering | Policies and Procedures
The Bank has written policies, procedures, andtools of controls in order to ensure that it complieswith the AML obligations in existing legislations
and regulations. The procedures are subject toannual review or amended when necessary.
Anti - Money Laundering | People Involved
All the staff members are involved without any exclusion.
Anti - Money Laundering
Banque Bemo Annual Report | Page 55
Anti - Money Laundering | Record keeping
Records concerning customer identification anddetails of transactions are retained in hard copy orany electronic form for at least 10 years for use of
evidence in any possible investigation into moneylaundering.
Anti - Money Laundering | Training & Awareness
All staff members attend general training coveringboth the awareness of DDML and money launderingfighting methods.
Staff members are regularly updated with anti-money laundering policies and procedures toprevent the Bank being used in criminal activities.
Anti - Money Laundering | Independent Audit and Compliance review function
The Bank’s internal and external auditors conductprograms of audits and compliance testing of theBank’s policies and operational procedures to AML.
The Bank is subject to regular compliance visitsfrom the local regulators in order to assess the levelof monitoring and abidance to the regulations.
Anti - Money Laundering | Correspondent banks
The Bank’s main correspondents are all primename International Banks. In addition, the Bank’sinternal policies ensure that we do not offerpayable- through accounts, or conduct business
with shell banks; hence recommendations 7 and 18of the FATF 40 recommendations in relation to cross-border correspondent banking are strictlyapplied.
Anti - Money Laundering | Customer due diligence /know your customer policy/ Monitoring
Compliance is conducted by the Money launderingreporting officer at the head office in Beirut on allnewly opened accounts on which both the CentralBank of Lebanon and Cyprus regulations are strictly applied.
Ongoing monitoring is an essential aspect of theKYC rules. Necessary automated tools are availablein that respect.
Our Human Resources motto
Putting People First
Banque Bemo’s Human Resources team is a
cooperative group of professionals dedicated to
creating partnerships by supporting all programs and
departments. We are committed to create new
processes and provide our employees with a healthy,
stable and positive work environment allowing for
equal opportunity in learning and personal growth.
As well, we aim at supporting our colleagues in
accomplishing their individual objectives enabling to
achieve the global objectives and strategy of our
Bank.
Our employees are provided with the same concern,
respect and caring attitude within the organization
that is reflected externally with every customer.
As strategic partners, we aim at optimizing the financial
results of our Bank through customer satisfaction, by
enhancing and creating new processes and focusing
on the learning and growth of our employees. During 2010, HR Management used various recruitment means and was successful in closing theopen vacancies with the best suitable candidates.Banque Bemo strives to fill in vacant positionsthrough internal recruitment to promote staff mobilityand provide growth opportunities
During the year:> Newly recruited staff reached 28 staff representing13% of our workforce out of which two personsjoined the Bank at managerial level> Internal transfer of 12 staff took place representing6% of our workforce At year end, our total FTE stood at 223.
Furthermore, a performance appraisal process fornew recruits was launched in 2010 to ensure smoothintegration process and to evaluate the results oftheir work.
76%
24%
70%
30%
Workforce Educational Level
University Graduate
Others
Age Distribution
Less than 45 yrs
Above 45 yrs
Average Age: 37 years
Human Resources Management
Banque Bemo Annual Report | Page 57
The main objective of our ongoing CareerDevelopment program is to ensure that we have thebest quality and professionals and to retain them. Inthis respect career development interviews wereconducted and job rotations programs were implemented for selected staff as per their needsanalysis
An effective succession planning for key positions isapproved by our Talent Management Committeeensuring first and second successors for every keyposition and highest quality of business
The new Job Grading system was finalized and implemented in January 2010. It was done in linewith the collective labor agreement recommendations
and guidelines based on competencies management.Several presentations were conducted to staff members to explain the process
In our continuous effort to develop the skills andknowledge of our staff members and provide themwith the needed competencies to better performtheir job, the training program was developed basedon Competencies Management approach.
The training program for the year was focused on the
following:
> Technical skills for most of our staff> Selling, Negotiation and Communication skills for
most of our relationship managers> Leadership skills for our managers
As champions of ethical behavior, five training sessions on “Values & Code of Deontology” were conducted during 2010 to our entire workforce. Itaims to ensure that a common understanding on ourcode of deontology is spread across the Bank’s work-force. As well it provides our staff with a sense ofidentity and it generates within them a commitmentto the beliefs and values of our Bank
Since transparency is a core principal of our HRManagement, the Employee Handbook was updatedduring 2010 and posted on our “online proceduressite” accessible to all staff. As well the compensation & Benefits procedure wasupdated to cope with the changes occurred duringthe year.
Indoor training with internal speakers 13 97Indoor training with external speakers 6 134Outdoor trainings 39 778Total 58 1009
No of topics No of hours
Number of staff who participated to above training program is 219.
Family SpiritProfessionalismConservatism
Honesty
Our Values
“ “
Deontology and Ethics have become synonymous
with Banque Bemo name since all business is
conducted in an honest, legal, and ethical manner
in order to provide state-of-the-art services within
Banque Bemo vision and quest for excellence.
The deontology principles are intended to be
applied and abided by Banque Bemo staff members
in their day-to-day behavior for the conduct of all
aspects of business activities of the Bank. They are
communicated to all employees through the Code
of Professional Ethics, Code of Conduct and the
Employee Handbook.
The Bank’s most important assets are its employees
who are at the heart of the organization. Therefore,
they are expected to act in accordance with the
highest standards of personal and professional
conduct, associated at all times with ethical
business practices.
A yearly report is submitted to the Board of
Directors by the Managing Director, monitoring the
level of understanding and abidance of the Code of
Professional Ethics by the staff members.
Living Banque Bemo’s core values of Family Spirit,
Professionalism, Conservatism and Honesty by each
employee is always reiterated by the Managing
Director at every occasion. These values constitute
a solid framework for a sustainable success.
Code of Deontology
All business must be conducted in an honest, legal, and ethical manner
“ “
Banque Bemo Annual Report | Page 59
Business Lines & 2010 Business Review
Being a forward-thinking institution, Banque Bemo
remains one of the key pioneers in providing its
clientele, their families and businesses, distinctive
Wealth Management services.
Through its Private Banking, Banque Bemo accentuates
the manner in which its team of financial advisors
conducts relationships with the Bank’s clients, while
enduring the principles of Professionalism,
Transparency, Fairness, and Ethics most importantly.
Private Bankers at Banque Bemo adopt a flexible
client-driven approach that does not impose
standard solutions.
We aim first at deeply understanding the clients’Wealth Management needs so as to earn their trust
over the long term.
We employ our new thinking and our expertise to
evaluate the client's investment objectives and
provide them with customized solutions that will
fulfill their financial requirements over time.
Banque Bemo Private Banking adopts a balanced
approach between business effectiveness and
efficiency while maintaining our keen promises to
our clients by creating a win-win scenario for both
the clients and the Bank.
We strive to make efficient use of customer profiling
and business processes in order to deliver added value
services that result in our customers’ satisfaction.
Within the framework of customer focus and
pro-activity, we implement strategic directions to
every customer interaction whereby we secure right
size delivery; we focus on the client’s current state of
mind to target additional opportunities while also
applying prevailing views by gathering information
from customers to improve processes and better
monitor their concerns and expectations.
We also consider times of economic downturns, during
which we will employ a balance between near-term
economics and long-term competitive positioning, in
order to maintain and strengthen our clients’ satisfaction.
Bemo Private Banking tenders a vast range of services
from Wealth Growth and Management, to Wealth
Protection, to succession and heritage related issues.
Besides solutions drawn from the available products
in the market, Banque Bemo Private Banking
professionals develop bespoke investment
strategies that match with clients’ risk appetite and
act in their best interests at all times.
Furthermore, Banque Bemo Private Banking
coordinates with specialists in matters pertaining to
asset allocation and optimization as well as wealth
structuring and the planning of the generational
transmission of the family estate.
Accordingly, Banque Bemo Private Banking
introduced Bemo Family Office, through which it
aims at protecting, growing and monitoring clients’family wealth. While maintaining full confidentiality,
Bemo Family Office provides its esteemed clients
with succession and wealth planning advice in addition
to trust and fiduciary services.
Private Banking
The Personal Banking is always keen to provide the
appropriate support to the Private Banking and
Corporate Banking Divisions.
During the year 2010, the Personal Banking Division
made a large move to be aligned with the General
Strategy of the Bank and the Vision defined by the
Board.
After reshaping its structure by creating the Market
Research Unit and the Help and Support Desk, the
Personal Banking Division created two new services
to be offered to HNWI:
> Concierge Service
> Consolidation of Accounts
These two services are designed to provide to our
clients real personalized, structured and tailor made
solutions to their respective situations. In addition,
the Personal Banking has put in place the necessary
action plan to launch the Bemo Community Card
which allows our clients to Spend and Earn Money in
the same time.
Through our network of branches designed and
equipped with a state of the art concept, and
through our Human Capital of qualified Relationship
Managers and staff, the Personal Banking Division
initiated an aggressive approach to stay closer to our
clients and be proactive in addressing their Financial
and Banking needs.
The ultimate goal is to provide Distinguished and
Innovative services with a Unique Flavour, to be the
Reference Bank for our HNWI and Corporate clients.
Our mission is to transact when others can’t.
Personal Banking
Established since the year 2000, the BSD (Banking
in Syria Division) has been catering for the Syrian
clientele’s banking needs with the authentic
Banque BEMO expertise through its longtime
established Damascus office.
The office is located in Damascus main free zone
area, and applies to the General Organization for
Free Zones license, specifically created for the free
zones operations , all over Syria.
With a bond that has been cherished throughout
the years, Banque BEMO has been constantly
present and active in the Syrian market , performing
diversified banking services to serve the Syrian
local and emigrated clientele , transcending the
borders of the Syrian soil to a worldwide range of
activities.
Banking in Syria (BSD)
Banque Bemo Annual Report | Page 61
Corporate lending always constituted the mainbusiness and profit engine for Banque Bemo. Whilethe lending policy is built on two major pillars –conservatism and risk awareness, aggressiveness isour tactic to grow and expand in a confident andprudent manner.
Despite the high competition of rivals, we wereable to translate our efforts through penetration ofnew economical and geographical sectors andwidening our base of prime clients.
Accordingly, in 2010, good growth ratios wereachieved in all directions as shown in the belowtables/graphs, and at the same time substandardand doubtful amounts were the lowest in the sec-tor. This proved the success of the hard businesscombination of conservatism and aggressiveness.
Advances: The year 2010 witnessed a remarkablegrowth in aggregate corporate loan portfolio, whichgrew from USD 351.5 million to USD 401.4 million,i.e. a 14.20% growth rate within the context of adynamic corporate banking policy addressinglending opportunities within a constantly changingenvironment and conditions, locally, regionally,and worldwide.
Letters of credit: volume opened during 2010reached USD 79.8 million. Although percentage ofgrowth is not large, we consider it a good achievementas most large and prime corporate customers aretrying to replace letters of credit with other cheaperimportation tools.
Corporate Banking
2006
2007
2008
2009
2010
in 000's usd
218.
469 27
3.75
4
308.
821
351.
574 40
1.44
3
2006
2007
2008
2009
2010
in 000's usd
54.4
51
81.9
74
98.2
00
79.2
99
79.8
55
Deposits: cross-selling is always a target for corporate division. In 2010, we achieved 13.3%increase in corporate deposits, from USD 240 million in 2009 to USD 271.683 thd in 2010. Thisachievement was mainly the result of our efficientchannels of distribution and excellent renderedservices.
Lending quality: The conservative policy andawareness are well manifested in figures related to2010 substandard and doubtful corporate loans,which amount to less than 1% (0.09%) of gross
corporate loans and 0.16% after provisionedamounts.
2006
2007
2008
2009
2010
in 000's usd
126.
115 16
3.73
6
191.
830
240.
684 27
1.68
3Total corporate loans (including acceptances) 273,754 308,821 351,574 401,443
Substandard loans 1,867 1,379 1,189 927Interest in suspense 317 378 445 480Net substandard loans 1,550 1001 744 447
Doubtful loans 2,980 3,018 2,709 2,794Not provisioned amount 370 203 197 218Provisioned amounts 2,610 2,815 2,512 2,576Provisions on capital 1,578 1,550 1,481 1,491Provisions on interest 1,032 1,265 1,031 1085
Total substandard & doubtful loans 4,847 4,397 3,898 3,721Total substandard & doubtful loans to total loans 1.77% 1.42% 1.10% 0.09%Net substandard & doubtful loans 1,920 1,204 941 665Net substandard & doubtful loans to total loans 0.70% 0.38% 0.27% 0.16%Net substandard loans to total loans 0.57% 0.32% 0.21% 0.11%Net doubtful loans to total loans 0.14% 0.065% 0.056% 0.054%
2007 2008 2009 2010Substandard & Doubtful Corporate Loans (USD Thousand)
Banque Bemo Annual Report | Page 63
Centralized Business Support Center
Corporate Social Responsability
The Centralized Business Support Center(Operations) represents 18% of the Bank’s manpower, is considered one of the Bank’s corner-stones and plays a crucial role in fulfilling theclients’ demands and in alignment with the Bank’svision.The Operations Department is composed by the following Departments:
- Central Back Offices (Incoming/OutgoingTransfers, Bills, Cards Management, CustomerSupport Desk, Checks Collection and Clearing Units)
- Foreign Exchange, Money Markets and FinancialMarkets Back Offices
- Trade Finance
- Legal Affairs
To cope with the Bank’s ambitions and high standards of quality, a qualified and dedicatedteam, built from experienced and knowledgeablehuman force who invest their expertise and talentsto serve the Bank’s business lines and its clients inall their requirements, offering them adequate,prompt, secure and proper services to meet theirexpectations.
In addition to their professional skills, BanqueBemo sal Management placed at the disposal ofthe Operations team members advanced IT solutions to ensure an exceptional customer service, within the shortest time frame and errorfree transactions.
The Operations Department has been rewarded byseveral Correspondent Banks, for the year 2010 andthroughout the previous years, in recognition oftheir high quality performance.
In its continuous effort to support cultural, socialand sports activities, Banque Bemo sal sponsoredfor the 5th year in a row the cultural activities ofthe “ Centre Sportif, Culturel et Social” of CollegeNotre Dame de Jamhour where the Center coveredthrough conferences, courses and events differenttopics and fields ranging between Movies,Psychology, Literature, Arts and Creations, CulinaryArts, Photography and many others.Banque Bemo contributed for the second consecutiveyear in supporting the “70th Local and 1st ArabFriendship Tennis Tournament” which was organized by the Brummana Sports Club atBrummana High School aiming to promote thissport among the young generation.In its commitment to “live The Bank values”,Banque Bemo encourages spreading the “FamilySpirit” amongst staff members through participationin cultural and sports events and the Managementsupport to its Football team activitiesIn 2010 the participation of Banque Bemo to BeirutMarathon, under the slogan “For a Smoke Free
Lebanon” in collaboration and partnership withTobacco Free Initiative (TFI) was to increase awareness of Tobacco’s negative impacts on Healthamong the youth. Banque BEMO supported TFI allyear long in its activities aspiring for a healthy andtobacco free society.
Emphasized efforts were deployed to fight againstCommunity’s threats, supporting NGO’s actions inthe Health and Educational fields. “Corporate SocialResponsibility” awareness was enhanced amongststaff members through participation to seminars.
The year end gathering took place as it becomes aBanque Bemo tradition where Board of Directors,Management, staff members, shareholders andfriends celebrated the achievements of 2010 andshared whishes for the coming 2011 and in thisoccasion Banque Bemo staff members expressedtheir gratitude towards the wise guidance of theHonorary Chairman Mr Henry Obegi during all theseyears.
Analysis of Financial Results and Position
Banque Bemo performance during 2010 was as
expected, the volume of operations and the results
generated were appreciated by the Senior
Management and the Board of Directors.
Considering the overall pressures the financial
institutions were facing, Banque Bemo sal has
maintained its position between its peers and was
able to achieve a moderate growth in the different
items of its balance sheet.
The following section has been prepared by the
Bank’s Management using for comparison purposes
the audited consolidated financial statements of the
Bank as at December 31, 2008, 2009 and 2010.
The Bank’s consolidated financial statements have
been prepared in accordance with standards issued
or adopted by the International Accounting
Standards Board and interpretations issued by the
International Financial Reporting Interpretations
Committee and general accounting plan for banks in
Lebanon and the regulations of the Central Bank and
the Banking Control Commission, and include the
results of the Bank and its consolidated subsidiaries
BEMO Securitization SAL, Ferticed Limited Holding
and Depository & Custody Company S.A.L. Where
appropriate in the context, references to the Bank
include the Bank and such consolidated subsidiaries.
The Bank maintains its accounts in Lebanese Pounds.
Accordingly, U.S. Dollar amounts stated in this
section have been translated from Lebanese Pounds
at the rate of exchange prevailing at the relevant
balance sheet date, in the case of balance sheet
data, and at the average rate of exchange for the
relevant period, in the case of income statement
data, and are provided for convenience only. In each
case, the relevant rate for both balance sheet data
and income statement data was LBP 1,507.5 per
USD 1.00, as, throughout the periods covered, the
Central Bank has maintained its policy of pegging
the value of the Lebanese Pound to the U.S. Dollar at
a fixed rate of LBP 1507.5 per USD 1.00. Banking
sector information has been derived from Central
Bank statistics, Bankdata Financial Services WLL and
the Bank's internal sources.
Unless otherwise stated, reference in this section to
the Bank’s customer deposits and loans and
advances (other than such references in the audited
consolidated financial statements of the Bank and its
consolidated subsidiaries included elsewhere herein)
shall be deemed to include deposits of, loans and
advances to, related parties.
Overview
Banque Bemo Annual Report | Page 65
Cash, compulsory reserve and Central Banks 211,896 382,083 80.32% 347,975 -8.93%
Deposits with banks and financial institutions 259,090 366,585 41.49% 273,607 -25.36%
Loans to banks 5,339 570 -89.32% 4,014 604.21%
Loans and advances to customers 543,228 630,582 16.08% 714,323 13.28%
Investment securities 250,966 361,972 44.23% 387,600 7.08%
Bank acceptances 45,870 32,712 -28.69% 35,285 7.86%
Other assets and investment in associates 55,005 58,267 5.93% 61,143 4.93%
Total Assets 1,371,394 1,832,771 33.64% 1,823,947 -0.48%
Customer Deposits 1,078,811 1,455,767 34.94% 1,526,219 4.84%
Engagement by acceptances 45,870 32,712 -28.69% 35,285 7.86%
Deposits from banks and institutions 94,917 139,285 46.74% 52,524 -62.29%
Subordinated Bonds 22,680 62,635 176.17% 62,355 -0.45%
Other Liabilities 13,178 12,784 -2.98% 15,234 19.15%
Total Liabilities 1,255,456 1,703,183 35.66% 1,691,617 -0.68%
Minority interest 61 -84 - -40
Total Shareholders’ Equity 115,938 129,588 11.77% 132,330 2.11%
Total Liabilities & Equity 1,371,394 1,832,771 33.64% 1,823,947 -0.48%
Net Income for the year 11,030 11,729 6.34% 12,588 7.32%
Return on Average Assets (ROAA) 0.86% 0.73% 0.68%
Return on Average Equity (ROAE) 9.74% 9.55% 9.61%
Audited Audited2008in LBP Millions 2009 2009-08 2010
Variation2010-09Variation
Analysis of Financial Position / Major Balance Sheet Items
The Bank’s main sources of funds in 2010 remained
its Customers’ Deposits, which consisted of 83.7%
of funding sources growing from 79.4% in 2009.
Tier I and Tier II equity accounted for 10.67% of
total sources of funds (10.49% in 2009) while the
share of deposits from banks and financial
institutions dropped from 7.6% in 2009 to 2.88% in
2010.
With respect to the uses of funds, the bank
maintained its conservative approach in terms of
maintaining a high asset quality and satisfactory
liquidity. Loans and advances to customers
captured 39.16% of total uses of funds in 2010
(compared to 34.41 in 2009). As for immediate
liquidity, the share of deposits with banks and
financial institutions and placements with Central
Banks remained at a satisfactory level of 34.08%,
increasing from 40.85% in 2009.
Total AssetsTotal Assets of LBP 1,823,947 million (US$ 1,210
million) as at December 31, 2010 as compared to
LBP 1,832,771 million (US$ 1,215.77 million) in
2009. Loans to customers reached LBP 714,323
million (US$ 473.85 million) as at December 31,
2010 as compared to LBP 630,582 million (US$
418.30 million) in 2009 reflecting a year-on-year
increase of 13.28%.
Deposits with banks and financial institutions and
cash compulsory reserve and Central Banks together
represented 34.08% of total assets in 2010. The
Bank maintains a major portion of its assets in
deposits with foreign banks for the purpose of
securing its correspondent banking needs that are
directly related to the documentary credit and
other trade related facilities as well as maintaining
a high liquidity. Careful consideration and thorough
financial risk assessment is applied when selecting
correspondent banks; only financially solid names
having a sound risk profile and with limited impact
from the financial crisis are selected not to mention
the historical relationship maintained.
Evolution of Main Balance Sheet ItemsBanque Bemo SAL has been able to maintain a
sustained performance since its establishment.
Ongoing well contemplated growth based on a
conservative approach allowed the bank to position
itself amongst the top achievers within its peer
group and the banking sector as a whole.
Cash, compulsory reserve and Central Banks 382,083 20.85% 347,975 19.08%Deposits with banks and financial institutions 366,585 20.00% 273,607 15.00%Loans to banks 570 0.03% 4,014 0.22%Loans and advances to customers 630,582 34.41% 714,323 39.16%Investment securities 361,972 19.75% 387,600 21.25%Other assets and investment in associates 90,979 4.96% 96,428 5.29%Total Uses of Funds 1,832,771 100.00% 1,823,947 100.00%
2009Uses of Funds | in LBP Millions % 2010 %
Customer Deposits 1,455,767 79.43% 1,526,219 83.68%Equity (including subordinated bonds) 192,222 10.49% 194,685 10.67%Other Liabilities 45,497 2.48% 50,519 2.77%Deposits from banks and financial institutions 139,285 7.60% 52,524 2.88%Total Sources of Funds 1,832,771 100.00% 1,823,947 100.00%
2009Sources of Funds | in LBP Millions % 2010 %
Banque Bemo Annual Report | Page 67
The Bank maintained its satisfactory rankings as compared to its peer group – BETA Group*:
* BETA Group as defined by Bilanbanques – Bank Data Publication including local banks with deposits between USD 500 million and USD 2 billion –BETA Group presently includes 10 banks – 2010 figures not yet published
**Ranking by doubtful & substandard loans to gross loans: prime ranking indicates lowest ratio amongst peer group and the banking sector as a whole.
1. Net interest income after provisions/Interest revenues2. Net income/(Cash & Central Bank; Lebanese government securities; deposits with other institutions; loans and advances to customers)3. Net income/(Total Assets less: fixed assets; Regularization accounts)4. Net income /Total Assets5. Net income/Average total assets6. Net income/Total Shareholders ̓equity7. Net Income/Average Shareholders ̓equity8. Salaries and general operating expenses/Net financial revenues9. Total Salaries and related expenses/Total operating expenses (excluding depreciation and losses on investment properties)10. Central Bank of Lebanon BIS capital adequacy ratio (Basel I Calculations)11. Shareholdersʼ Equity/Total Assets12. Net Loans/Customers ̓deposits13. Net Loans/Total Assets14. Net liquid assets/Customers ̓deposits; net liquid assets include cash; deposits at Central Bank and other institutions; investments on securities maturing within one year15. Net liquid assets/ Total Assets16. Doubtful loans/ Gross loans17. Doubtful Loans/Shareholders ̓Equity
Asset and Liability Management Interest earning assets to total assets 92.64% 93.11% 90.13%Interest bearing liabilities to total liabilities 93.49% 93.65% 96.63%
Profitability and EfficiencyNet interest margin 1 29.47% 27.14% 26.36%Return on interest earning assets 2 0.88% 0.67% 0.77%Return on earning assets 3 0.84% 0.66% 0.70%
Return on Assets 4 0.82% 0.64% 0.69%Return on Average Assets (ROAA) 5 0.87% 0.73% 0.69%Return on Equity 6 10.75% 9.95% 10.51%Return on Average Equity (ROAE) 7 11.05% 9.55% 10.61%
Cost-to-income 8 65.85% 66.88% 66.93%Staff expenses to total operating expenses 9 60.95% 55.06% 61.66%
Capital Adequacy, Liquidity and SolvencyBIS Capital Adequacy Ratio 10 14.56% 20.27% 17.56%Equity to assets 11 8.43% 7.07% 7.26%Loans to deposits 12 50.35% 43.32% 46.80%Loans to total assets 13 39.58% 34.41% 39.16%Net liquid assets to deposits 14 58.12% 66.72% 60.21%Net liquid assets to total assets 15 45.69% 53.00% 50.38%Doubtful loans to gross loans 16 0.75% 0.46% 0.47%Loan loss provisions to doubtful loans 89.39% 89.95% 88.31%Loan loss provisions to gross loans 0.67% 0.24% 0.41%Net doubtful loans to equity 17 0.33% 0.29% 0.33%
20092008Selected Financial Ratios and Statistics 2010
Ranking by total assets 6 6 5Ranking by total loans and advances 5 6 5Ranking by shareholders’ equity 3 4 5Ranking by total LC Openings of the year 1 3 3Ranking by Equity to Assets ratio 1 3 7Ranking by doubtful & substandard loans to gross loans 1** 1** 1**Ranking by loan loss provisions to doubtful loans 2 2 2
200920082007Banque Bemo SAL Rankings
The Bank’s doubtful and bad loans amounted to
LBP 3,339 million (US$ 2.21 million) as at
December 31, 2010 compared to LBP 3,181 million
(US$ 2.11 million) as at December 31, 2009 reflecting
an increase of 4.97%. Unrealized interest and
provisions on doubtful and bad debts reached LBP
2,949 million (US$ 1.96 million) as at December
31, 2010 as compared to LBP 2,801 million
(US$ 1.86 million) as at December 31, 2009 reflecting
an increase of 5.28%. Substandard Loans, net of
unrealized interest, reached LBP 676 million (US$
0.45 million) as at December 31, 2010 as compared
to LBP 1,267 million (US$ 0.84 million) at the end
of 2009, reflecting a year-on-year decrease of
46.65%.
Loan PortfolioThe Bank’s loans and advances to customersreached LBP 714,323 million (US$ 473.85 million)as at December 31, 2010 as compared to LBP630,582 million (US$ 418.30 million) in 2009reflecting a year-on-year increase of 13.28%. Loans
and advances to related parties (as defined byArticle 152 of the Code of Money and Credit) wereequivalent to LBP 3,748million (US$ 2.49 million)as at December 31, 2010 as compared to LBP 6,671million (US$ 4.42 million) in 2009.
Analysis of the Loan Portfolio by type of Borrower and Loan Classification including related parties
Regular Loans 540,416 628,294 16.26% 712,718 13.44%
Substandard Loans 2,571 2,030 -21.04% 1,400 -31.03%
Doubtful Loans 2,771 2,360 -14.83% 2,258 -4.32%
Bad Loans 825 821 -0.48% 1,081 31.67%
Accrued Interest receivable 577 641 11.09% 539 -15.91%
Total gross loans 547,160 634,146 15.90% 719,996 13.54%
Unrealized Interest on Substandard Loans -718 -763 -6.27% -724 -5.11%
Unrealized Interest on Doubtful Loans -1,378 -1,085 -21.26% -1,121 3.31%
Unrealized Interest on Bad Loans -195 -204 4.62% -319 56.37%
Provision Allowance on Doubtful Loans -1,013 -896 -11.55% -747 -11.55%
Provision Allowance on Bad Loans -628 -616 -1.91% -762 -23.7%
Total net loans 543,228 630,582 16.08% 714,323 13.28%
Unrealized interest /substandard loans (%) 27.92 37.58 51.71
Unrealized interest & Prov/ doubtful and bad loans (%) 89.40 88.05 88.32
Net Doubtful & Bad Loans / Total loans (%) 0.07 0.06 0.05
Audited Audited2008in LBP Millions 2009 2009/08 2010
Variation2010/09Variation
Banque Bemo Annual Report | Page 69
The main concentration in terms of geographic area
remains Lebanon. Through its well spread and
strategically located branches, the bank efficiently
caters for the needs of its client base. Within the
Middle East and Africa Region, Syria captures the
main territory in view of the historical ties with
prime corporate clients based in Damascus, Aleppo
and other Syrian regions. The bank is continuously
building its image and awareness in the market
through selective positioning within the targeted
niche market of Private and Corporate clients.
Analysis of the Loan Portfolio by Currency
Analysis of the Loan Portfolio by Geographic Area
The Bank’s loan portfolio is characterized by a high
level of dollarization matching the currency
composition of the sources of funds. However, as at
December 31, 2010 and 2009 98.8% of total loans
were denominated in foreign currencies.
Loans and advances to customers 7,421 530,039 47,049 538 38,864Loans and advances to related parties - 6,614 56 - -Total Loans 7,421 536,653 47,105 538 38,864
LBP (million)
US$ (million)
Euro (million)
GBP (million)
Other (million)Bank’s loan portfolio
December 31, 2009 (C/V in LBP)
Loans and advances to customers 8,907 585,151 43,772 509 72,236Loans and advances to related parties - 3,728 20 - -Total Loans 8,907 588,879 43,792 509 72,236
LBP (million)
US$ (million)
Euro (million)
GBP (million)
Other (million)Bank’s loan portfolio
December 31, 2010 (C/V in LBP)
Lebanon 567,934 90.07% 645,268 90.33%Middle East and Africa 62,134 9.85% 66,655 9.33%North America - 0.00% 42 0.01%Europe 124 0.02% 2,358 0.33%Other 390 0.06% - 0.00%Total 630,582 100.00% 714,323 100.00%
2009(LBP million)
Geographical area Share 2010(LBP million)
Share
Investment Securities PortfolioThe Bank’s portfolio consists of both fixed and variable income and is classified into two categories:
Available for sale and Held to maturity.
Available for saleQuoted equity securities 10,967 4.46% 14,390 4.02% 8,030 2.09%Unquoted equity securities 647 0.26% 647 0.18% 644 0.17%Lebanese treasury bills 119,811 48.68% 158,306 44.22% 145,879 38.01%Foreign treasury bills 8,070 2.25% 505 0.13%Lebanese government bonds 39,609 16.10% 58,863 16.44% 83,307 21.70%Cert. of deposit issued by Central Bank 10,890 4.40% 34,856 9.74% 65,151 16.97%Corporate Bonds 13,996 5.69% 37,834 10.57% 36,406 9.49%Accrued interest 4,018 1.63% 5,879 1.64% 6,176 1.61%Subtotal 199,938 81.22% 318,845 89.06% 346,098 90.17%Held to maturityForeign treasury bills 2,259 0.92% 399 0.11% 391 0.10%Lebanese government bonds 2,047 0.83% - -Cert. of deposit issued by Central Bank 27,256 11.07% 29,241 8.17% 29,241 7.62%Corporate Bonds 13,478 5.48% 8,410 2.35% 7,017 1.83%Accrued interest 1,154 0.48% 1,119 0.31% 1,061 0.28%Subtotal 46,194 18.78% 39,169 10.94% 37,710 9.83%Total investment portfolio securities 246,132 100.00% 358,014 100.00% 383,808 100.00%
2009in LBP Millions Share2008 Share 2010 Share
Analysis of the Loan Portfolio by Counterparty type
Regular retail customer 74,856 70,651 -5.62% 11.87% 9.89%- Mortgage loans. 9,694 12,387 27.78% 1.54% 1.73%- Personal loans 7,575 8,800 16.17% 1.20% 1.23%- Credit cards - - - - -- Overdrafts 18,994 16,460 -13.34% 3.01% 2.30%- Other 38,593 33,004 -14.48% 6.12% 4.62%
Regular corporate customers 553,438 642,049 16.01% 87.77% 89.88%- Corporate 427,071 490,233 14.79% 67.73% 68.63%- Small and medium enterprises 126,367 151,816 20.14% 20.04% 21.25%
Classified retail customers 147 - - 0.02% -- Substandard 147 - - 0.02% -- Doubtful - - - - -- Bad - - - - -
Classified corporate customers 1,500 1,065 -29.00% 0.24% 0.15%- Substandard 1,121 675 -39.79% 0.18% 0.09%- Doubtful 378 390 3.17% 0.06% 0.05%- Bad 1 - - -
Accrued interest receivable 641 558 -12.95% 0.10% 0.08%Total 630,582 714,323 13.28% 100% 100%
Carrying amount net of unrealizedinterest and impairment allowance
Share of Total Loans
Share of Total Loansin LBP Millions Variation
Counterparty type 2009 2010 2010/09 2009 2010
Banque Bemo Annual Report | Page 71
Customers’ Deposits in Lebanese Pounds accounted
for only 12.5% of total deposits as of December 31,
2009, have increased to read 14.2% in 2010. On
the other hand, foreign currency deposits accounted
of 87.5% of total deposits in 2009 have decreased
by 1.7% to read 85.8% as of December 31, 2010 in
accordance with the year-to-year increase of the
total deposits by 4.84%. Such an allocation,
coupled with the relatively lower interest rates on
foreign currency deposits resulted in an acceptable
average cost of funds in line with the industry. The
average cost of funds during the last 3 years was as
follows:
Customers’ DepositsThe Bank’s customers’ deposits were equivalent to
LBP 1,526,219 million (US$ 1,012.4 million) as at
December 31, 2010 compared to 1,455,767 million
(US$ 965.7 million) as at December 31, 2009,
reflecting a year-on-year increase of 4.84%.
Currency Composition and Cost of FundsIn 2009 and 2010, the Bank’s Customers’ Deposits
represented respectively 85.5% and 90.2% of total
liabilities. Time Deposits represent the largest
portion of the Bank’s deposits, owing to the
private/selective banking nature of the operations.
Customers’ Accounts at amortized cost 182,623 1,044,358 173,938 43,807 11,041Total Customers’ Deposits in LBP (million) 1,455,767
Customers’ Accounts at amortized cost 216,774 1,117,331 138,469 44,503 9,142Total Customers’ Deposits in LBP (million) 1,526,219
LBP US$ Euro GBP Others
December 31, 2009 (C/V in LBP million)
LBP US$ Euro GBP Others
December 31, 2010 (C/V in LBP million)
2010 6.20 2.902009 7.36 3.412008 7.21 4.06
Average Rate LBP (%)Year Average rate FCY (%)
Interest income increased by 1.76% to LBP 74,081
million (US$ 49.14 million) in 2010 as compared to
LBP 72,799 million (US$ 48.29 million) in 2009. In
addition, interest expense increased by 2.85% to
LBP 54,552 million (US$ 36.18 million) in 2010 as
compared to LBP 53,040 million (US$ 35.18
million) in 2009. As a result, net interest income
received by the Bank for 2010 increased by 6.97%
as compared to 2009.
Interest and Similar Income
From loans and advances to customers 38,840 42,832 11.43% 44,622 4.18%From deposits with banks, financial institutions and Central Bank 15,563 7,552 -51.47% 5,154 -31.75%From investment securities (Available for Sale & Held until Maturity) 14,752 22,030 49.34% 24,068 9.25%Other 446 385 -13.68% 237 -38.44%Total 69,201 72,799 5.20% 74,081 1.76%
Audited Audited2008in LBP Millions 2009 2009-08 2010
Variation2010-09Variation
Interest income 69,201 72,799 5.20% 74,081 1.76%Interest expense 46,421 53,040 14.26% 54,552 2.85%Net interest income (after provisions) 20,375 18,061 -11.36% 19,319 6.97%Other fee based income 7,480 7,359 -1.62% 7,606 3.35%Gain on exchange and other operating income* 9,685 14,483 49.54% 15,705 8.43%Salaries 13,931 14,693 5.47% 16,173 10.07%General operating expenses 8,717 9,291 6.58% 10,054 8.21%Other expenses (including tax expenses) 3,862 4,189 8.47% 3,815 -8.95%Minority interest 200 144 -28% 98 -31.94%Net Income 11,030 11,729 6.35% 12,686 8.16%
* Includes gains/loss on securities and exchange transactions
Audited Audited2008in LBP Millions 2009 2009-08 2010
Variation2010-09Variation
As indicated in the table below, most of the Bank
performance indicators maintained their positive
trend. After the sharp interest rate declination in
2009, the net interest income (after provisions)
recorded a 6.97% Increase compared to 2009
reaching LBP 19,3 bln. Other fee base income have
also increased by 3.35% compared to 2009 to reach
LBP 7.6 bln. Also, gain on exchange and other
operating income compensated increased by
8.43% from LBP 14.5 bln to LBP 15.7 bln.
Consequently, covering the increase in salaries and
operating expenses and generating additional net
income reaching LBP 12.7 bln increasing by 8.16%
as compared to LBP 11.7 bln in 2009.
Net Interest
Analysis of Performance Indicators
Banque Bemo Annual Report | Page 73
Interest and Similar ChargesThe following table sets forth a breakdown of the
Bank’s interests and similar charges for the years
ending December 31, 2008, 2009 and 2010:
This increase of 1.76% in interest received was
primarily due to the following:
- An increase in the interest received from loans
and advances to customers which reached LBP
44,622 million (US$ 29.60 million) in 2010 and
constituted 60.23% of total interest and similar
income as compared to LBP 42,832 million (US$
28.41 million) and 58.84% in 2009. This increase
was mainly due to the growth witnessed in
average loans and advances to customers.
- An increase in the interest received from
investment securities which reached LBP 24,068
million (US$ 15.96million) in 2010 and constituted
32.48% of total interest and similar income as
compared to LBP 22,030 million (US$ 14.61
million) and 30.26% in 2009.
The Interest received from deposits with banks,
financial institutions and Central Bank reached LBP
5,154 million (US$ 3.42 million) in 2010 and
constituted 6.95% of total interest and similar
income as compared to LBP 7,552 million (US$ 5.01
million) and 10.37% in 2009 reflecting a year-on-
year decrease of 31.75%. The decrease is mainly
related to the large reduction in international
reference rates (Fed Funds, LIBOR) as central banks
around the world lowered their index rates to face
the economic pressures of the international
financial crisis.
Interest and similar charges reached LBP 54,553
million (US$ 36.19 million) in 2010 as compared to
LBP 53,040 million (US$ 35.18 million) in 2009
reflecting a year-on-year increase of 2.85%. The
increase is mainly due to the augmentation
witnessed in interest paid on customers’ deposits
which rose from LBP 47,725 million (US$ 31.66
million) in 2009 to LBP 49,262 million (US$ 32.68
million) in 2010 constituting 90.30% of total interest
and similar charges compared to and 89.98% in
2009. However, a remarkable increase in interest
paid on subordinated bonds which scored LBP
4,242 million (US$ 2.81 million) in 2010 as
compared to LBP 3,318 million (US$ 2.20 million) in
2009 reflecting a year-on-year increase of 27.85%.
On the other hand, interest paid on Banks and
financial institutions decreased by 54.79% to read
LBP 585 million (US$ 0.39mln) in 2010 compared
to LBP 1,294 million (US$ 0.86 million) in 2009.
Banks and financial institutions 2,145 1,294 -39.67% 585 -54.79%Customers’ deposits 41,357 47,725 15.40% 49,262 3.22%Subordinated bonds 1,551 3,318 113.93% 4,242 27.85%Cash contribution to capital 1,368 703 -48.61% 464 -34.00%Total 46,421 53,040 14.26% 54,553 2.85%
Audited Audited2008in LBP Millions 2009 2009-08 2010
Variation2010-09Variation
Subordinated bonds 22,680,316 62,634,641 62,355,223
Equity
Share capital 16,000,000 16,000,000 16,000,000
Treasury shares -597,085 -1,059,111 -1,547,330
Preferred shares 30,150,000 30,150,000 30,150,000
Shareholders’ cash contribution to capital 29,104,984 29,104,984 29,104,984
Reserves 26,492,043 29,870,723 32,235,272
Retained earnings 8,428,452 10,272,701 13,718,210
Cumulative change in fair value of investment securities -4,931,717 3,460,701 22,937
Income for the year 11,229,947 11,872,286 12,686,412
Equity attributable to the Group 115,876,624 129,672,284 132,370,485
Minority interest 61,000 -84,030 -39,982
Total Equity 115,937,624 129,588,254 132,330,503
Tier I and Tier II Equity 138,617,940 192,222,895 194,685,726
20092008In LBP thousands 2010
As at December 31, 2010, the bank’s consolidated
shareholder’s equity (including Tier I & Tier II)
reached LBP 194.68 billion (US$ 129.14 million)
increasing by 1.3% from 2009. It is worth mentioning
that in March 2011 the bank enjoyed a capital
increase of LBP 46 billion of which LBP 16 billion
were allocated from reserves and retained earnings
and LBP 30 billion from fresh cash injection.
Capitalization
Interest Sensitive Assets and LiabilitiesThe Bank maintains a satisfactory level of interest
sensitive funds on both sides of its balance sheet.
The table below shows the composition of assets
and liabilities as at December 31, 2009 and 2010:
The major components of interest earning assets
are cash held at the Central Bank, Lebanese T-Bills,
bonds and financial instruments with fixed income,
deposits at other banks and financial institutions,
and loans and advances to customers. As to interest
bearing liabilities, customer deposits and
engagements constitute the largest component.
Interest earning assets to total assets… … 93.11% 90.13%Interest bearing liabilities to total liabilities 93.65% 96.63%
2009In percentage 2010
Unrealized gain/(loss) on Lebanese Treasury Bills 3,099,951 2,527,821
Unrealized gain/(loss) on Lebanese Government Bonds -428,376 -3,319,295
Unrealized gain/(loss) on Foreign Treasury Bills 93,631 -9,359
Unrealized gain/(loss) on Certificates of Deposits
issued by BDL 640,792 1,366,875
Unrealized gain/(loss) on Corporate Bonds -58,006 -324,919
Unrealized gain/(loss) on Equity securities 112,709 -218,186
Total 3,460,701 22,937
2009in LBP thousand 2010
- In accordance with banking laws and regulations,
subordinated bonds are considered as Tier II capital
for the purposes of computation of the Risk Based
Capital Ratio, to be decreased by 20% on a yearly
basis.
- Preferred Shares: Issued on June 1, 2006, the
preferred shares are callable five years from
issuance date on June 1, 2011.
The positive impact of the revaluation of available-
for-sale investment securities was mainly driven
from the following financial instruments:
Common Equity* 99,522,284 51.75 102,220,485 52.49
Preferred Equity 30,150,000 15.68 30,150,000 15.49
Subordinated Bonds 62,634,641 32.57 62,355,223 32.02
Total 192,306,925 100 194,725,708 100
2009Balance % Balance %in LBP Thousand
2010
The decline in the revaluation of the above
financial instruments was mainly due to the drop in
prices of the Lebanese Government bonds
reflecting the country's economic instability which
was mirrored by a lower appetite for such
instruments.
Distribution by nature
* Including net income
Banque Bemo Annual Report | Page 75
Independent Auditors’ Report
Banque Bemo Annual Report | Page 77
CONSOLIDATED FINANCIAL STATEMENTS
BANQUE BEMO S.A.L.
CONSOLIDATED FINANCIAL STATEMENTSAND AUDITORS’ REPORT
YEAR ENDED DECEMBER 31, 2010
TABLE OF CONTENTS
Consolidated Financial Statements:
Consolidated Statement of Financial Position 80
Consolidated Income Statement 82
Consolidated Statement of Comprehensive Income 83
Consolidated Statement of Changes in Equity 84
Consolidated Statement of Cash Flows 86
Notes to the Consolidated Financial Statements 88-
BANQUE BEMO S.A.L.CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Cash and Central Banks 5 347,974,878 382,083,230
Deposits with banks and financial institutions 6 273,606,963 366,584,801
Trading assets 7 3,791,378 3,957,840
Loans to banks 8 4,014,194 570,233
Loans and advances to customers 9 710,574,798 623,911,235
Loans and advances to related parties 10 3,748,215 6,670,738
Available-for-sale investment securities 11 346,098,471 318,845,288
Held-to-maturity investment securities 11 37,709,882 39,169,297
Customers' liability under acceptances 12 35,284,637 32,711,940
Investments in associates 13 34,545,320 29,776,737
Assets acquired in satisfaction of loans 14 2,831,019 10,053,946
Property and equipment 15 18,475,116 12,236,519
Intangible assets 16 831,285 975,862
Other assets 17 4,460,924 5,223,719
Total Assets 1,823,947,080 1,832,771,385
FINANCIAL INSTRUMENTS WITH OFF-BALANCE
SHEET RISK: 40
Documentary and commercial letters of credit 91,062,319 90,385,113
Guarantees and standby letters of credit 60,425,485 74,553,480
Forward contracts 166,227,418 177,698,608
FIDUCIARY DEPOSITS AND ASSETS UNDER
MANAGEMENT 41 12,528,198 13,595,868
2010 | LBP’000Notes
December 31,
ASSETS
2009 | LBP’000
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
Banque Bemo Annual Report | Page 81
Deposits and borrowings from banks 18 52,523,732 139,284,967
Customers' accounts at amortized cost 19 1,501,704,182 1,443,805,427
Related parties' accounts at amortized cost 20 24,514,571 11,961,482
Acceptance liability 12 35,284,637 32,711,940
Other liabilities 21 9,997,918 7,286,224
Provisions 22 5,236,314 5,498,450
1,629,261,354 1,640,548,490
Subordinated bonds 23 62,355,223 62,634,641
Total liabilities 1,691,616,577 1,703,183,131
Share capital 24 16,000,000 16,000,000
Treasury shares 24 (1,547,330) (1,059,111)
Preferred shares 25 30,150,000 30,150,000
Shareholders’ cash contribution to capital 26 29,104,984 29,104,984
Reserves 27 32,235,272 29,870,723
Retained earnings 13,718,210 10,272,701
Cumulative change in fair value of investment
securities 28 22,937 3,460,701
Profit for the year 30 12,686,412 11,872,286
Equity attributable to the Group 132,370,485 129,672,284
Non-controlling interest 29 (39,982) (84,030)
Total equity 132,330,503 129,588,254
Total Liabilities and Equity 1,823,947,080 1,832,771,385
2010 | LBP’000Notes
December 31,
LIABILITIES
2009 | LBP’000
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
EQUITY
BANQUE BEMO S.A.L.CONSOLIDATED INCOME STATEMENT
Interest income 32 74,081,456 72,798,683Interest expense 33 (54,552,516) (53,040,128)Net interest income 19,528,940 19,758,555
Fee and commission income 34 8,380,348 8,171,216Fee and commission expense 35 (774,416) (812,230)Net fee and commission income 7,605,932 7,358,986
Net interest and other gains/(losses) on trading portfolio 36 326,747 432,336Gain on exchange 2,574,658 2,782,954Other operating income 37 12,803,365 11,267,444Net financial revenues 42,839,642 41,600,275
Allowance for impairment ofloans and advances 9 & 17 (265,859) (1,205,303)Write-back of impairment loss on loans and advances 9 56,411 346,221Collections on written-off loans - 50,707Allowance for impairment ofinvestment securities (net) 11 - (889,425)Net financial revenues after net impairment charge 42,630,194 39,902,475
Staff costs 38 (16,172,913) (14,692,897)Administrative expenses (10,054,364) (9,291,363)Depreciation and amortization 15 & 16 (2,376,041) (2,338,225)Provision/(write-back of provision) for contingencies 22 71,786 (362,620)Other expenses (28,531,532) (26,685,105)
Profit before income tax 14,098,662 13,217,370Income tax expense 21 (1,510,582) (1,488,678)Profit for the year 30 12,588,080 11,728,692
Attributable to:Equity holders of the Group 12,686,412 11,872,286Non-controlling interest (98,332) (143,594)
12,588,080 11,728,692Basic and diluted earnings per share (LBP) 39 650/47 591/31
2010 | LBP’000Notes
Year Ended | December 31,
2009 | LBP’000
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
Banque Bemo Annual Report | Page 83
BANQUE BEMO S.A.L.CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit for the year 12,588,080 11,728,692
Other comprehensive income ("OCI"):
Net (loss)/gain on available-for-sale securities (4,558,130) 7,672,109
Net gain on available-for-sale securities recycled
to profit and loss 638,045 1,507,673
Deferred tax relating to components of OCI 482,321 (787,364)
Net other comprehensive (loss)/income for the year (3,437,764) 8,392,418
Total comprehensive income for the year 9,150,316 20,121,110
Attributable to:
Equity holders of the Group 9,248,648 20,264,704
Non-controlling interest (98,332) (143,594)
9,150,316 20,121,110
2010 | LBP’000
Year Ended | December 31,
2009 | LBP’000
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
BANQUE BEMO S.A.L.CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balances at January 1, 2009 16,000,000 (597,085) 30,150,000 29,104,984 5,920,750 7,631,500
Total comprehensive income - - - - - -
Allocation of income of the year 2008 - - - - 945,259 1,984,375
Dividends paid -- Note 31 - - - - - -
Acquisition of treasury shares - (462,026) - - - -
Other movement - - - - - -
Non-Controlling interest - - - - - -
Balances at December 31, 2009 16,000,000 (1,059,111) 30,150,000 29,104,984 6,866,009 9,615,875
Total comprehensive income - - - - - -
Allocation of income of the year 2009 - - - - 457,793 2,306,732
Dividends paid -- Note 31 - - - - - -
Acquisition of treasury shares - (488,219) - - - -
Transfer of assets acquired
in satisfaction of debts
to property and equipment - Note 14 - - - - - -
Other movement - - - - - -
Non-controlling interest - - - - - -
Balances at December 31, 2010 16,000,000 (1,547,330) 30,150,000 29,104,984 7,323,802 11,922,607
CapitalTreasuryShares
PreferredShares
LegalReserve
Reservefor General
BankingRisk
Shareholders’Cash
Contributionto Capital
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
EQUITY ATTRIBUTABLE TO THE GROUP | LBP’000
Banque Bemo Annual Report | Page 85
OtherReserves
Reserve for Assets Acquired in
Satisfaction ofDebts
RetainedEarnings
CumulativeChange in Fair
Value ofInvestmentSecurities
Income of the year Total
Non-Controlling
interest Total
LBP’000
12,718,363 221,430 8,428,452 (4,931,717) 11,229,947 115,876,624 61,000 115,937,624
- - - 8,392,418 11,872,286 20,264,704 (143,594) 20,121,110
- 449,046 7,851,267 - (11,229,947) - - -
- - (5,963,358) - - (5,963,358) - (5,963,358)
- - - - - (462,026) - (462,026)
- - (43,660) - - (43,660) - (43,660)
- - - - - - (1,436) (1,436)
12,718,363 670,476 10,272,701 3,460,701 11,872,286 129,672,284 (84,030) 129,588,254
- - - (3,437,764) 12,686,412 9,248,648 (98,332) 9,150,316
- 455,694 8,652,067 - (11,872,286) - - -
- - (5,929,021) - - (5,929,021) - (5,929,021)
- - - - - (488,219) - (488,219)
- (855,670) 855,670 - - - - -
- - (133,207) - - (133,207) - (133,207)
- - - - - - 142,380 142,380
12,718,363 270,500 13,718,210 22,937 12,686,412 132,370,485 (39,982) 132,330,503
2010 | LBP’000Notes
Year Ended | December 31,
2009 | LBP’000
Cash flows from operating activities:
Profit before tax 14,098,662 13,217,370
Adjustments to reconcile profit to net cash
provided by/(used in) operating activities:
Depreciation and amortization 15 & 16 2,376,041 2,338,225
Provision for credit losses (net) 9 82,155 451,553
Provision for loss on foreign currency position 88,054 6,000
Allowance for impairment of
investment securities 11 - 889,425
Provision for receivables from
securitization operations 17 113,063 753,750
Provision for other receivables 17 14,230 -
Non-controlling interest 142,380 (1,436)
Provision for end-of-service indemnities (net) 22 492,573 577,541
(Write-back of provision)/provision
for contingencies 22 (71,786) 362,620
Unrealized gain on trading securities 36 (21,863) (101,283)
Equity income from investment in associates 13 (4,768,583) (4,781,458)
Loss from sale of property and equipment 7,911 9,167
Settlement of end-of-service indemnity 22 (33,594) (295,677)
Decrease/(increase) in deposits with
banks and financial institutions 63,300,043 (89,675,678)
Increase in loans and advances (90,811,280) (82,520,469)
Assets acquired in satisfaction of loans 43 - (368,747)
Net decrease/(increase) in other assets 2,095,937 (130,256)
Increase in customers’ and related parties’ deposits at amortized cost 83,538,612 375,852,720
Increase in non-interest earning compulsory reserve (1,654,035) (10,233,658)
Increase in due to banks and financial institutions 11,788,659 2,993,659
Net increase/(decrease) in other liabilities 2,189,903 (405,927)
Income tax paid (1,317,255) (2,134,703)
Others (including effect of exchange rate changes) (2,882) 4,251
Net cash provided by operating activities 81,646,945 206,806,989
BANQUE BEMO S.A.L.CONSOLIDATED STATEMENT OF CASH FLOWS
Banque Bemo Annual Report | Page 87
Cash flows from investing activities:
Securities 43 (30,504,323) (103,306,263)
Treasury shares (488,219) (462,026)
Property and equipment (1,065,708) (2,352,092)
Proceeds from sale of property and equipment 2,714 107,786
Dividends received from associates - 1,080,293
Intangible assets (192,051) 1,745
Net cash used in investing activities (32,247,587) (104,930,557)
Cash flows from financing activities:
Dividends paid (5,929,021) (5,963,358)
Subordinated bonds (279,418) 39,954,325
Net cash (used in)/provided by financing activities (6,208,439) 33,990,967
Effect of exchange rates changes on cash
and cash equivalents - Beginning of year (2,685,741) 135,343
Net increase in cash and cash equivalents 40,505,178 136,002,742
Cash and cash equivalents - Beginning of year 162,162,540 26,159,798
Cash and cash equivalents - End of year 43 202,667,718 162,162,540
THE ACCOMPANYING NOTES 1 TO 48 FORM AN INTEGRAL PART OF THE CONSOLIDATEDFINANCIAL STATEMENTS
2010 | LBP’000Notes
Year Ended | December 31,
2009 | LBP’000
BANQUE BEMO S.A.L.
NOTES TO THECONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2010
1. GENERAL INFORMATION
Banque Bemo S.A.L. is a Lebanese joint-stock
company listed on the Beirut Stock Exchange and
registered in the Commercial Register under
Number 17837 and on the list of banks published
by the Central Bank of Lebanon under Number 93.
The Bank's headquarters are located in Beirut.
The Bank provides a full range of commercial,
corporate and private banking activities through a
network of 9 branches in Lebanon in addition to a
branch in Limassol, Cyprus.
2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)
2.1 Standards and Interpretations effective for the current period with no effect on the financial statements
The following new and revised standards,
interpretations have been adopted in the current
period with no material impact on the disclosures
and amounts reported for the current and prior
years but may affect the accounting for future
transactions or arrangements:
Amendments to IFRS 2 Share-based Payment –Group Cash-settled Share-based PaymentTransactions.
The amendments clarify the scope of IFRS 2, aswell as the accounting for group cash-settledshare-based payment transactions in the separate (or individual) financial statements of anentity receiving the goods or services when anothergroup entity or shareholder has the obligation tosettle the award.
Banque Bemo Annual Report | Page 89
IFRS 3 (revised) Business Combinations and consequential amendments to IAS 27 (revised)Consolidated and Separate Financial Statements,IAS 28 (revised) Investments in Associates and IAS31 (revised) Interests in Joint Ventures.
IFRS 3 (revised) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interest either at fair value or at thenon-controlling interest’s share of recognized identifiable net assets of the acquiree. Contingentconsideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognized against the cost ofacquisition only to the extent that they arise fromnew information obtained within the measurementperiod about the fair value at the date of acquisition.All other subsequent adjustments to contingentconsideration classified as an asset or a liability arerecognized in profit or loss. All acquisition-relatedcosts are expensed. IAS 27 (revised in 2008)requires that transactions with non-controllinginterests to be recognized within equity, with noimpact on goodwill or profit or loss.
Amendments to IAS 39 Financial Instruments:Recognition and Measurement – Eligible HedgedItems
IFRS 3 (revised) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interest either at fair value or at thenon-controlling interest’s
The amendments provide clarification on twoaspects of hedge accounting: identifying inflationas a hedged risk or portion, and hedging withoptions.
IFRIC 17 Distributions of Non-cash Assets to Owners The Interpretation provides guidance on the appropriate accounting treatment when an entitydistributes assets other than cash as dividends toits shareholders.
IFRIC 18 Transfers of Assets from Customers The Interpretation addresses the accounting byrecipients for transfers of property, plant and equipment from “customers” and concludes thatwhen the item of property, plant and equipmenttransferred meets the definition of an asset from theperspective of the recipient, the recipient shouldrecognise the asset at its fair value on the date ofthe transfer, with the credit being recognised as revenue in accordance with IAS 18 Revenue recognition.
Improvements to IFRSs issued in 2009 (those thatare mandatory for the first time for the financialyear beginning January 1, 2010)
• Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Disclosures of non-current assets (or disposal groups) classified as held for sale or discontinuedoperations.
• Amendments to IFRS 8 Operating Segments - Disclosure of information about segment assets.
• Amendments to IAS 1 Presentation of Financial Statements- Current/non-current classification of convertible instruments.
• Amendments to IAS 7 Statement of Cash Flows- Classification of expenditures on unrecognizedassets.
• Amendments to IAS 17 Leases – Classification of leases of land and buildings.
• Amendments to IAS 36 Impairment of Assets –Unit of accounting for goodwill impairment test.
• Amendments to IAS 38 Intangible Assets – Additional consequential amendments arising from revised IFRS 3. Measuring the fair value ofan intangible asset acquired in a business combination.
• Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Treating loan prepayment penalties as closely related embedded derivatives. Scope exemption for business combination contracts. Cash flow hedge accounting.
• IFRIC 9 Reassessment of Embedded Derivatives -Scope of IFRIC 9 and revised IFRS 3.
• IFRIC 16 Hedges of a Net Investment in a Foreign Operation - Amendment to the restrictionon the entity that can hold hedging instruments.
Banque Bemo Annual Report | Page 91
• Amendments to IFRS 1 Limited Exemption fromComparative IFRS 7 Disclosures for First-time Adopters.
July 1, 2010
• Amendments to IFRS 7 Disclosures – Transfersof Financial Assets increase the disclosure requirements for transactions involving transfersof financial assets. These amendments areintended to provide greater transparencyaround risk exposures of transactions when afinancial asset is transferred but the transferorretains some level of continuing exposure in theasset. The amendments also require disclosureswhere transfers of financial assets are not evenlydistributed throughout the period. Currently, theGroup has not entered into such transactions.
July 1, 2011
IFRS 9 Financial Instruments issued inNovember 2009 and amended in October 2010introduces new requirements for the classificationand measurement of financial assets and financialliabilities and for derecognition. IFRS 9 requiresall recognized financial assets that are within thescope of IAS 39 to be subsequently measured atamortized cost or fair value. Specifically, debtinvestments that are held within a businessmodel whose objective is to collect the contractualcash flows, and that have contractual cash flowsthat are solely payments of principal and interest on the principal outstanding are generallymeasured at amortized cost. All other debtinvestments and equity investments are measured at their fair values. At initial recognition, an entity may make an irrevocableelection to present in other comprehensiveincome subsequent changes in the fair value ofan investment in an equity instrument that is
Early adoption decided by the Group effectiveJanuary 1, 2011
Effective for Annual Periods Beginning on or After
2.2 Standards and Interpretations in issue but not yet effective
The Group has not applied the following new standards, amendments and interpretations that have been
issued but not yet effective:
•
not held for trading. The gain or loss that is presented in other comprehensive incomeincludes any related foreign exchange component.Dividends on such investments are recognized inprofit or loss in accordance with IAS 18 Revenueunless the dividend clearly represents a recoveryof part of the cost of the investment. Amountspresented in other comprehensive income shallnot be subsequently transferred to profit or loss.However, the entity may transfer the cumulativegain or loss within equity
The most significant effect of IFRS 9 regarding theclassification and measurement of financial liabilitiesrelates to the accounting for changes in fair valueof a financial liability (designated as at fair valuethrough profit or loss) attributable to changes inthe credit risk of the issuer. Specifically, under IFRS9, for financial liabilities that are designated as atfair value through profit or loss, the amount ofchange in the fair value of the financial liabilitythat is attributable to changes in the credit risk ofthe issuer is recognized in other comprehensiveincome, unless the recognition of the effects ofchanges in the liability’s credit risk in other comprehensive income would create or enlargean accounting mismatch in profit or loss. Changesin fair value attributable to a financial liability’scredit risk are not subsequently reclassified toprofit or loss.
IFRS 9 will be early adopted in the Group’s consolidated financial statements for the annualperiod beginning January 1, 2011 and its applica-tion will have an impact on amounts reported inrespect of the Group’s financial assets as summa-rized under section 2.3 below.
Early adoption decided by the Group effectiveJanuary 1, 2011
• IAS 24 Related Party Disclosures (as revised in2009) modifies the definition of a related partyand simplifies disclosures for government-relatedentities. The disclosure exemptions introduced inIAS 24 (as revised in 2009) do not affect the Groupbecause it is not a government-related entity.However, disclosures regarding related partytransactions and balances in these financial statements may be affected when the revisedversion of the Standard is applied in futureaccounting periods because some counterpartiesthat did not previously meet the definition of arelated party may come within the scope of theStandard.
January 1, 2011
Banque Bemo Annual Report | Page 93
• The amendments to IAS 32 titled Classification ofRights Issues address the classification of certainrights issues denominated in a foreign currency aseither an equity instrument or as a financial liability.To date, the Group has not entered into anyarrangements that would fall within the scope ofthe amendments.
February 1, 2010
• Amendment to IFRIC 14 - Prepayments of aMinimum Funding Requirement. The amendmentscorrect an unintended consequence of IFRIC 14IAS 19 – The Limit on a Defined Benefit Asset,Minimum Funding Requirements and theirInteraction.
January 1, 2011
• Improvements to IFRSs issued in 2010 -Amendments to: IFRS 3; IFRS 7; IAS1; IAS 27;IAS34; IFRIC 13.
Most of the amendments are effective for annualperiods beginning on or after January 1, 2011
• IFRIC 19 Extinguishing Financial Liabilities withEquity Instruments provides guidance regardingthe accounting for the extinguishment of a financialliability by the issue of equity instruments. In particular equity instruments issued under sucharrangements will be measured at their fairvalue, and any difference between the carryingamount of the financial liability extinguished andthe fair value of equity instruments issued will be recognized in profit or loss. To date, the Group hasnot entered into transactions of this nature.
July 1, 2010
2.3 Impact of the adoption of IFRS 9 effective January 1, 2011 on the amounts reported
As discussed in section 2.2 above, IFRS 9 will be
adopted in the Group’s consolidated financial
statements for the annual period beginning January
1, 2011. Management’s preliminary assessment of
the impact of the application of IFRS 9 is summarized
as follows:
• In accordance with the provisions of IFRS 9,
adoption by the Group in 2011 will be applied
retrospectively and comparative amounts will not
be restated as permitted by IFRS 9.
• Effective January 1, 2011 the Group’s
available-for-sale financial assets under IAS 39 will
be classified as financial assets at fair value through
profit or loss, financial assets at fair value through
other comprehensive income, and financial assets
at amortized cost. Accordingly it is expected that
the cumulative fair value gains in relation to these
available-for-sale financial assets amounting to
LBP22.94million will be reclassified to retained
earnings to the extent of LBP884.48million (loss)
and the remaining amount (along with the
cumulative deferred tax charge) amounting to
LBP907.42million (gain) will be offset against
those financial assets which will be classified as
amortized cost.
• Effective January 1, 2011 part of the Group’sfinancial assets classified as amortized cost (loans
& receivable and held-to-maturity) under IAS 39
will be classified as financial assets at fair value
through profit or loss. Accordingly, related change
in fair value amounting to LBP130.46million (gain)
will be booked as an adjustment to retained
earnings as at January 1, 2011 net of tax effect.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Statement of Compliance
The consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB).
B. Basis of Preparation and Measurement
The consolidated financial statements have been
prepared on the historical cost basis except for the
following:
• Financial assets and liabilities at fair value
through profit and loss which are measured at
fair value.
• Available-for-sale financial assets which are
measured at fair value.
• Derivative financial instruments which are
measured at fair value.
Assets and liabilities are grouped according to their
nature and are presented in an approximate order
that reflects their relative liquidity.
The principal accounting policies adopted are set
out below:
C. Basis of Consolidation
The consolidated financial statements of Banque
Bemo S.A.L. Group incorporate the financial
statements of the Banque Bemo S.A.L. (the “Bank”)and enterprises controlled by the Bank (its sub-
sidiaries). Control is achieved when, among other
things, the Bank has the power to govern the
financial and operating policies of an entity so as to
obtain benefits from its activities.
Banque Bemo Annual Report | Page 95
D. Business Combinations
Acquisitions of subsidiaries are accounted for using
the purchase method. The cost of the business
combination is measured as the aggregate of the
fair values (at the date of exchange) of assets
given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for
control of the acquiree, plus any costs directly
attributable to the business combination. The
acquiree’s identifiable assets, liabilities and
contingent liabilities that meet the conditions for
recognition under IFRS 3 Business Combinations are
recognized at their fair values at the acquisition
date, except for non-current assets (or disposal
groups) that are classified as held for sale in
accordance with IFRS 5. Non-current Assets Held
for Sale and Discontinued Operations, which are
recognized and measured at fair value less costs to
sell.
Goodwill arising on acquisition is recognized as an
asset and initially measured at cost, being the
excess of the cost of the business combination over
the Group’s interest in the net fair value of the
identifiable assets, liabilities and contingent
liabilities recognized. If, after reassessment, the
Group’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and
contingent liabilities exceeds the cost of the
business combination, the excess is recognized
immediately in profit or loss.
The consolidated subsidiaries consist of:
Where necessary, adjustments are made to the
financial statements of the subsidiaries to bring
their accounting policies into line with those used
by other entities of the Group.
All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.
Non-controlling interest in the net assets (excluding
goodwill) of consolidated subsidiaries are identified
separately from the Group’s equity therein.
Non-controlling interest consist of the amount of
those interests at the date of the original business
combination and the minority’s share of changes in
equity since the date of the combination.
Subsequent to acquisition, the carrying amount of
non-controlling interest is the amount of those
interests at initial recognition plus the non-controlling
interest share of subsequent changes. Total
comprehensive income is attributable to non-
controlling interests even if this results in the non-
controlling interests having a deficit balances.
Bemo Securitization S.A.L. Lebanon 1998 96.00 Securitization & Structured Finance
Ferticed Limited Holding Luxembourg 1995 100.00 Holding Company
Depository & Custody CompanyS.A.L. Lebanon 2007 100.00 Depository and custody
of securities
Country ofIncorporation
Date ofAcquisition orIncorporation
Percentage ofOwnership
%Business Activities
Company
E. Foreign Currencies
The consolidated financial statements are presentedin Lebanese Pound (“LBP”) which is the Group’sreporting currency. However, the primary currencyof the economic environment in which the Groupoperates (functional currency) is the U.S. Dollar(“USD”).
In preparing the financial statements of the individualentities, transactions in foreign currencies arerecorded at the rates of exchange prevailing at thedates of the transactions. At each statement offinancial position date, monetary items denominatedin foreign currencies are retranslated at the ratesprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value wasdetermined. Non-monetary items that are measuredin terms of historical cost in a foreign currency arenot retranslated.
Exchange differences are recognized in profit or lossin the period in which they arise except forexchange differences on transactions entered intoin order to hedge certain foreign currency risks, andexchange differences on monetary items receivablefrom or payable to a foreign operation for whichsettlement is neither planned nor likely to occur,
which form part of the net investment in a foreignoperation, and which are recognized in the foreigncurrency translation reserve and recognized in profitor loss on disposal of the net investment.
For the purpose of presenting consolidated financialstatements, the assets and liabilities of the Group’sforeign operations are expressed in LebanesePounds using exchange rates prevailing at thestatement of financial position date. Income andexpense items are translated at the averageexchange rates for the period. Exchange differencesarising, if any, are recorded in other comprehensiveincome and accumulated under equity classified asin the Group’s foreign currency translation reserve.Such exchange differences are recognized in profitor loss in the period in which the foreign operationis disposed of.
Cash flows provided by and used in foreign currenciesunder various activities, as included in the statementof cash flows, are converted into Lebanese Poundsat year-end exchange rates, except for cash andcash equivalents at the beginning of the yearwhich is converted at the prior year closingexchange rates and the effect of currency fluctuation,if any, is disclosed separately.
F. Financial assets and Liabilities
The Group initially recognizes loans and advances,deposits, debt securities issued and subordinatedliabilities on the date that they are originated. Allother financial assets and liabilities are initially recognized on the trade date at which the Groupbecomes a party to the contractual provisions ofthe instrument.
A financial asset (or a part of a financial asset, or apart of a group of similar financial assets) is derecognized, when the contractual rights to thecash flows from the financial asset expire.
In instances where the Group is assessed to havetransferred a financial asset, the asset is
derecognized if the Group has transferred substantiallyall the risks and rewards of ownership. Where theGroup has neither transferred nor retained substantially all the risks and rewards of ownership,the financial asset is derecognized only if the Grouphas not retained control of the financial asset. TheGroup recognizes separately as assets or liabilitiesany rights and obligations created or retained inthe process.
A financial liability (or a part of a financial liability)can only be derecognized when it is extinguished,that is when the obligation specified in the contractis either discharged, cancelled or expires.
Recognition and Derecognition
Banque Bemo Annual Report | Page 97
Financial assets and liabilities are set off and thenet amount is presented in the balance sheetwhen, and only when, the Group has a legal right
to set off the amounts or intends either to settle ona net basis or to realize the asset and settle the liability simultaneously.
Offsetting
The fair values of financial assets and financial liabilities are determined as follows:
• the fair value of financial assets and financialliabilities with standard terms and conditions andtraded on active liquid markets are determinedwith reference to quoted market prices;
• the fair value of other financial assets andfinancial liabilities (excluding derivative instruments)are determined in accordance with generally
accepted pricing models based on discounted cashflow analysis using prices from observable currentmarket transactions; and
• the fair value of derivative instruments, arecalculated using quoted prices. Where such pricesare not available, use is made of discounted cashflow analysis using the applicable yield curve forthe duration of the instruments for non-optionalderivatives, and option pricing models for optionalderivatives.
Fair Value Measurement
Financial assets, other than those at fair value
through profit or loss, are assessed for indicators of
impairment at each reporting date. Financial
assets are impaired where there is objective
evidence that as a result of one or more observable
loss events including significant or prolonged
decline in fair value beyond one business cycle that
occurred after the initial recognition of the financial
asset or group of financial assets, the estimated
future cash flows of the investment have been
impacted.
For financial assets carried at amortized cost, the
amount of the impairment loss or specific provision
for credit losses on non-performing loans and
advances to customers, is the difference between
the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original
effective interest rate, taking into consideration, the
liquidating value of any security on hand for non-
performing loans and advances to customers.
In addition to specific provision for credit losses on
non-performing loans and advances to customers,
provision for collective impairment is made on a
portfolio basis for credit losses where there is
objective evidence that unidentified losses exist at
the reporting date. This provision is estimated
based on various factors including credit ratings
allocated to a borrower or group of borrowers, the
current economic conditions, the experience the
Group has had in dealing with a borrower or group of
borrowers and available historical default information
The carrying amount of the financial asset is
reduced by the impairment loss directly through
the use of an allowance account. When a loan or
advance to a customer is uncollectible, it is written
off against the provision account. Changes in the
carrying amount of the provision account are
recognized in the income statement.
With the exception of available-for-sale equity
Impairment of Financial Assets
instruments, if, in a subsequent period, the amount
of the impairment loss decreases and the decrease
can be related objectively to an event occurring
after the impairment was recognized, the previously
recognized impairment loss is reversed through the
income statement to the extent that the carrying
amount of the investment at the date the
impairment is reversed does not exceed what the
amortized cost would have been had the impairment
not been recognized.
In respect of available-for-sale equity securities,
any increase in fair value subsequent to an
impairment loss is recognized directly in other
comprehensive income.
G. Investment Securities
Investment securities are initially measured at fairvalue plus incremental direct transaction costs, andsubsequently accounted for depending on their
classification as either held-to-maturity or available-for-sale.
Held-to-maturity investments are non-derivativeassets with fixed or determinable payments andfixed maturity that the Group has the positiveintent and ability to hold to maturity, and which arenot designated at fair value through profit or loss oravailable-for-sale.
Held-to-maturity investments are carried at amortizedcost using the straight line method where results
approximate those resulting from the effectiveinterest method, less any impairment loss. Anysale or reclassification of a significant amount ofheld-to-maturity investments not close to theirmaturity would result in the reclassification of allheld-to-maturity investments as available-for-sale,and prevent the Group from classifying investmentsecurities as held-to-maturity for the current andthe following two financial years.
Held-to-Maturity Investment Securities
Available-for-sale (“AFS”) investments are non
derivative investments that are not designated as
another category of financial assets. Unquoted
equity securities whose fair value cannot be
reliably measured are carried at cost. Fair value is
determined in the manner described in Note 3(F).
Gains and losses arising from changes in fair value
are recognized directly in other comprehensive
income and accumulated in “cumulative change in
fair value of investment securities” with the exception
of impairment losses, interest and foreign
exchange gains and losses on monetary assets,
which are recognized directly in profit or loss. Where
the investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously
accumulated in the “cumulative change in fair value
of investment securities” is reclassified to profit or
loss for the period.
The fair value of available-for-sale monetary assets
denominated in a foreign currency is determined in
that foreign currency and translated at the spot rate
at the statement of financial position date. The
change in fair value attributable to translation
differences that result from a change in amortized
cost of the asset is recognized in the income
statement, and other changes are recognized in
other comprehensive income.
Available-for-Sale Investment Securities
Banque Bemo Annual Report | Page 99
H. Trading Assets
A financial asset is classified as held for trading if:
• it has been acquired principally for the purposeof selling in the near future; or
• it is a part of an identified portfolio of financialinstruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
Financial assets held-for trading are stated at fairvalue, with any resultant gain or loss recognized inprofit or loss. Fair value is determined in the mannerdescribed in note 3(F).
Subsequent to their initial recognition, tradingsecurities are not reclassified except when theymeet the qualifying conditions of IAS 39 amendments on fair value.
I. Loans and Advances
Loans and advances are non-derivative financialassets with fixed or determinable payments thatare not quoted in an active market. Loans andadvances are disclosed at amortized cost net ofunearned interest and after provision for credit
losses where applicable. Bad and doubtful debtsare carried on a cash basis because of doubts andthe probability of non-collection of principal and/orinterest.
j. Derivative Financial Instruments
Derivatives are initially recognized at fair value atthe date a derivative contract is entered into andare subsequently remeasured to their fair value ateach statement of financial position date. Theresulting gain or loss is recognized in profit or lossimmediately unless the derivative is designatedand effective as a hedging instrument, in whichevent the timing of the recognition in profit or loss
depends on the nature of the hedge relationship.The Group designates certain derivatives as eitherhedges of the fair value of recognized assets or liabilities or firm commitments (fair value hedges),hedges of highly probable forecast transactions orhedges of foreign currency risk of firm commitments(cash flow hedges), or hedges of net investmentsin foreign operations
Debt securities exchanged against securities with
longer maturities, with similar risks, and issued by
the same issuer, are not derecognized from financial
assets because they do not meet the conditions for
derecognition. Premiums and discounts derived
from the exchange of said securities are deferred to
be amortized as a yield enhancement on a time
proportionate basis, over the period of the extended
maturities.
Exchange of Debt Securities
The change in fair value on available-for-sale debt
securities reclassified to held-to-maturity is
segregated from the change in fair value of
available-for-sale debt securities under equity and
is amortized over the remaining term to maturity of
the debt security as a yield adjustment.
Derivatives embedded in other financial instruments
or other host contracts are treated as separate
derivatives when their risks and characteristics are
not closely related to those of the host contracts
and the host contracts are not measured at fair
value with changes in fair value recognized in profit
or loss.
Embedded derivatives
The Group designates certain hedging instruments,
which include derivatives, embedded derivatives
and non-derivatives in respect of foreign currency
risk, as either fair value hedges, cash flow hedges,
or hedges of net investments in foreign operations.
Hedges of foreign exchange risk on firm
commitments are accounted for as cash flow
hedges.
At the inception of the hedge relationship, the entity
documents the relationship between the hedging
instrument and the hedged item, along with its risk
management objectives and its strategy for
undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on
an ongoing basis, the Group documents whether
the hedging instrument that is used in a hedging
relationship is highly effective in offsetting changes
in fair values or cash flows of the hedged item.
Hedge accounting
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in profit or loss immediately, together
with any changes in the fair value of the hedged
item that are attributable to the hedged risk. The
change in the fair value of the hedging instrument
and the change in the hedged item attributable to
the hedged risk are recognized in the line of the
income statement relating to the hedged item.
Hedge accounting is discontinued when the Group
revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting.
The adjustment to the carrying amount of the
hedged item arising from the hedged risk is
amortized to profit or loss from that date.
Fair Value Hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges are deferred in other comprehensive
income. The gain or loss relating to the ineffective
portion is recognized immediately in profit or loss.
Amounts previously recognized in other
comprehensive income and accumulated in equity
are reclassified to profit or loss in the periods when
the hedged item is recognized in profit or loss in
the same line of the income statement as the
recognized hedged item. However, when the
forecast transaction that is hedged results in the
recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in
equity are transferred from equity and included in
the initial measurement of the cost of the asset or
liability.
Hedge accounting is discontinued when the Group
revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or
Cash Flow Hedge:
Banque Bemo Annual Report | Page 101
Hedges of net investments in foreign operations
are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating
to the effective portion of the hedge is recognized
in other comprehensive income in the foreign
currency translation reserve. The gain or loss relating
to the ineffective portion is recognized immediately
in the income statement.
Gains and losses deferred in the foreign currency
translation reserve are recognized in the income
statement on disposal of the foreign operation.
Hedges of Net Investments in Foreign Operations
exercised, or no longer qualifies for hedge accounting.
Any cumulative gain or loss deferred in equity at
that time remains in equity and is recognized when
the forecast transaction is ultimately recognized in
profit or loss. When a forecast transaction is no
longer expected to occur, the cumulative gain or
loss that was deferred in equity is recognized
immediately in profit or loss.
k. Investments in Associates
An associate is an entity over which the Group hassignificant influence and that is neither a subsidiarynor an interest in a joint venture. Significant influenceis the power to participate in the financial andoperating policy decisions of the investee but is notcontrol or joint control over those policies.
The results and assets and liabilities of associatesare incorporated in these financial statementsusing the equity method of accounting, exceptwhen the investment is classified as held for sale,in which case it is accounted for in accordance withIFRS 5 Non-current Assets Held for Sale andDiscontinued Operations. Under the equitymethod, investments in associates are carried inthe consolidated statement of financial position at cost as adjusted for post-acquisition changes in theGroup’s share of the net assets of the associate,less any impairment in the value of individualinvestments. Losses of an associate in excess ofthe Group’s interest in that associate (whichincludes any long-term interests that, in substance,form part of the Group’s net investment in the
associate) are not recognized, unless the Group hasincurred legal or constructive obligations or madepayments on behalf of the associate.
Any excess of the cost of acquisition over theGroup’s share of the net fair value of the identifiableassets, liabilities and contingent liabilities of theassociate recognized at the date of acquisition isrecognized as goodwill. The goodwill is includedwithin the carrying amount of the investment andis assessed for impairment as part of the investment.Any excess of the Group’s share of the net fair valueof the identifiable assets, liabilities and contingentliabilities over the cost of acquisition, afterreassessment, is recognized immediately in theincome statement.
Where a group entity transacts with an associate ofthe Group, profits and losses are eliminated to theextent of the Group’s interest in the relevant associate.
L. Property and Equipment
Property and equipment are stated at historicalcost, less accumulated depreciation and impairmentloss, if any.
Depreciation of property and equipment, other
than land and advance payments on capital expenditures is calculated systematically using thestraight-line method over the estimated usefullives of the related assets using the following annual rates:
N. Assets acquired in satisfaction of loans
Non-financial assets acquired in satisfaction ofloans are reported separately in the statement offinancial position as their acquisition is regulatedby the local banking authorities and do not meetthe definition of investment properties nor the definition of non-current assets held for sale. Theseassets are recorded at the lower of their fair value
and the carrying amount of the loan at the date ofexchange and are subsequently carried at cost lessany impairment loss. Assets acquired in satisfactionof loans are subject to a regulatory reserve appropriated from profit for the year in case theseassets are not liquidated within 2 years from acquisition.
M. Intangible Assets
Intangible assets consisting of computer softwareare amortized over a period of 3 to 5 years and are
subject to impairment testing.
Leasehold improvements are depreciated over theshorter of the lease term and their useful lives estimated at five years.
The gain or loss arising on the disposal or retirement
of an item of property and equipment is determined as the difference between the salesproceeds and the carrying amount of the asset andis recognized in the income statement.
Property 2.5Furniture and fixtures 7.5 to 8Equipment 10 to 12Computer hardware 20Installations 15 to 20Vehicles 12 to 20
Rate | %
Banque Bemo Annual Report | Page 103
O. Impairment of Tangible and Intangible Assets
At each statement of financial position date, thecarrying amounts of tangible and intangible assetsare reviewed to determine whether there is anyindication that these assets have suffered animpairment loss. If any such indication exists, therecoverable amount of the asset is estimated inorder to determine the extent of the impairmentloss, if any.
Intangible assets with indefinite useful lives aretested for impairment at each reporting date andwhenever there is an indication that the asset maybe impaired.
Recoverable amount is defined as the higher of:
- Fair value that reflects market conditions at thestatement of financial position date less cost to sell,if any. To determine fair value of properties, theBank adopts the market comparability approach asindicated later in this note.
- Value in use assessed as the present value ofestimated future cash flows expected to arise fromthe continuing use of asset and from its disposal atthe end of its useful life, only for applicable assetswith cash generation units, as applicable.
Where an impairment loss subsequently reverses,the carrying amount of the asset is increased to therevised estimate of its recoverable amount, but sothat the increased carrying amount does notexceed the carrying amount that would have beendetermined had no impairment loss been recognized for the asset in prior years. A reversalof an impairment loss is recognized immediately inprofit or loss, unless the relevant asset is carried ata revalued amount, in which case the reversal ofthe impairment loss is treated as a revaluationincrease.
The fair value of the Group’s owned properties andof properties acquired in satisfaction of debts, is theestimated market value, as determined by real estateappraisers on the basis of market comparability; thatis, by comparing with similar transactions in thesame geographical area and on the basis of theexpected value of a current sale between a willingbuyer and a willing seller, that is, other than in aforced or liquidation sale and after applying a haircut percentage.
The impairment loss is recognized in the incomestatement.
P. Financial Liabilities and Equity Instruments Issued by the Bank
Debt and equity instruments are classified as eitherfinancial liabilities or as equity in accordance with
the substance of the contractual arrangement
Classification as debt or equity
An equity instrument is any contract that evidencesa residual interest in the assets of an entity afterdeducting all of its liabilities. Equity instruments
are recorded at the proceeds received, net of directissue costs.
Equity instruments
Q. Employees' Benefits
Obligations for contributions to defined employees’ benefits are recognized as an expense on a currentbasis.
Financial guarantees contracts are contracts thatrequire the Group to make specified payments toreimburse the holder for a loss it incurs because aspecified debtor fails to make payment when duein accordance with the terms of a debt instrument.These contracts can have various judicial forms (guar-antees, letters of credit, credit-insurance contracts).
Financial guarantee contract liabilities are measuredinitially at their fair values and are subsequentlymeasured at the higher of:
• the amount of the obligation under the contract,as determined in accordance with IAS 37Provisions, Contingent Liabilities and ContingentAssets; and
• the amount initially recognized less, whereappropriate, cumulative amortization recognized inaccordance with the revenue recognition policiesset out above.
Financial guarantee contract liabilities
Other financial liabilities, including borrowings, areinitially measured at fair value, net of transactioncosts.
Other financial liabilities are subsequently measuredat amortized cost with interest expense recognizedon an effective yield basis
Other financial liabilities
The provision for staff termination indemnities is
based on the liability that would arise if the
employment of all the staff were terminated at the
statement of financial position date. This provision
is calculated in accordance with the directives of
the Lebanese Social Security Fund and Labor laws
based on the number of years of service multiplied
by the monthly average of the last 12 months
remunerations and less contributions paid to the
Lebanese Social Security National Fund and interest
accrued by the Fund.
Employees' End-of-Service Indemnities: (Under the Lebanese Jurisdiction)
Obligations in respect of defined benefit pension
plans is calculated separately for each plan by
estimating the amount of future benefit that
employees have earned in return for their service
in the current and prior periods; that benefit is
discounted to determine its present value, and any
unrecognized past service costs and the fair value
of any plan assets are deducted.
Defined benefit plans: (Under Other Jurisdictions)
Banque Bemo Annual Report | Page 105
R. Provisions
Provisions are recognized when the Group has apresent obligation (legal or constructive) as a resultof a past event, it is probable that an outflow ofresources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligationat the statement of financial position date.
The amount recognized as a provision is the bestestimate of the consideration required to settle thepresent obligation at the balance sheet date, takinginto account the risks and uncertainties surroundingthe obligation. Where a provision is measuredusing the cash flows estimated to settle the presentobligation, its carrying amount is the present valueof those cash flows.
S. Revenue and Expense Recognition:
Interest income and expense are recognized on anaccrual basis, taking account of the principal outstanding and the rate applicable, except fornon-performing loans and advances for whichinterest income is only recognized upon realization.Interest income and expense include the amortizationof discounts or premiums.
Interest income and expense presented in theincome statement include:
- Interest on financial assets and liabilities at amortized cost.
- Interest on available-for-sale investment securities.
- Fair value changes in qualifying derivatives and related hedged items when interest rate risk is the hedged risk.
Net trading income presented in the income statement includes:
- Interest income and expense on the trading portfolio.
- Dividend income on the trading equities.- Realized and unrealized gains and losses on
the trading portfolio assets.
Fees and commission income and expense that areintegral to the effective interest rate on a financialasset or liability (i.e. commissions and fees earnedon the loan book) are included under interestincome and expense.
Other fees and commission income are recognizedas the related services are performed.
Dividend income is recognized when the right toreceive payment is established.
Where the outcome of a securitization contract canbe estimated reliably, revenue and costs are recognized by reference to the stage of completionof the contract activity at the balance sheet date.This is normally measured by the proportion thatcontract costs incurred for work performed to datebear to the estimated total contract costs, exceptwhere this would not be representative of thestage of completion.
Where the outcome of a contract cannot be estimated reliably, contract revenue is recognizedto the extent of contract costs incurred that it isprobable will be recoverable. Contract costs are recognized as expenses in the period in which theyare incurred. When it is probable that total contractcosts will exceed total contract revenue, the expectedloss is recognized as an expense immediately
T. Treasury Shares
Treasury shares are stated at cost. Any gainor loss on sale is reflected as an adjustment
to retained earnings.
U. Fiduciary Deposits
All fiduciary deposits are held on a non-discre-tionary basis and related risks and rewards belong
to the account holders. Accordingly, they arereflected as off-balance sheet accounts.
V. Income Tax
Income tax expense is the sum of the tax currentlypayable and deferred tax. Income tax is determinedand provided for in accordance with the tax prevailinglaws.
Income tax is recognized in the income statementexcept to the extent that it relates to items recognized in other comprehensive income (OCI),in which case it is recognized in OCI
Current tax payable is calculated based on taxable
profit for the period. Taxable profit differs from
profit as reported in the income statement because
it excludes items of income or expense that are
taxable or deductible in other years and it further
excludes items that are never taxable or deductible,
(other than temporary timing differences). The
Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively
enacted by the statement of financial position date.
Debt securities invested by Group entities operating
in Lebanon are subject to withheld tax by the
issuer, and deducted at year end from the corporate
tax liability not eligible for deferred tax benefit,
and therefore, accounted for as prepayment on
corporate income tax and reflected as a part of
income tax provision.
Current Tax
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying
amounts of assets and liabilities in the financial
statements and the corresponding tax bases used
in the computation of taxable profit, and is
accounted for using the balance sheet liability
method. Deferred tax liabilities are generally
recognized for all taxable temporary differences
and deferred tax assets are recognized to the
extent that it is probable that taxable profits will be
available against which deductible temporary
differences can be utilized. Such assets and liabilities
are not recognized if the temporary difference arises
from goodwill or from the initial recognition (other
than in a business combination) of other assets and
liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that
sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred Tax
Banque Bemo Annual Report | Page 107
W. Earnings Per Share
The computation of basic earnings per share isbased on the weighted average number of outstanding shares during the year. This weightedaverage during the year and for all years presented,
is adjusted for events that have changed the number of ordinary shares outstanding without acorresponding change in resources.
X. Cash and Cash Equivalents
Cash and cash equivalents comprise balances withmaturities of a period of three months including:
cash and balances with the Central Banks, deposits
with banks and financial institutions, and depositsdue to banks and financial institutions.
A. Critical accounting judgments in applying the Group’s accounting policies
The Group’s accounting policies provide scope forinvestment securities to be designated on inceptioninto different categories in certain circumstancesbased on specific conditions. In classifying investment
securities as held-to-maturity, the Group has determined that it has both the positive intent andability to hold these assets until their maturity asrequired by in accounting policy under Note 3.
In the application of the Group’s accounting policies, which are described in note 3, the directorsare required to make judgments, estimates andassumptions about the carrying amounts of assetsand liabilities that are not readily apparent fromother sources. The estimates and associatedassumptions are based on historical experience andother factors that are considered to be relevant.Actual results may differ from these estimates.
The estimates and underlying assumptions arereviewed on an ongoing basis. Revisions toaccounting estimates are recognized in the periodin which the estimate is revised if the revisionaffects only that period or in the period of the revision and future periods if the revision affectsboth current and future periods.
(i) Classification of Financial Assets:
Deferred tax is charged or credited in the income
statement, except when it relates to items charged
or credited directly to other comprehensive income,
in which case the deferred tax is also dealt within
other comprehensive income.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current
tax assets against current tax liabilities and when
they relate to income taxes levied by the same
taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
B. Key Sources of Estimation Uncertainty
The following are the key assumptions concerningthe future, and other key sources of estimationuncertainty at the statement of financial position
date, that have a significant risk of causing a materialadjustment to the carrying amounts of assets andliabilities within the next financial year.
The Group reviews its loan portfolio to assessimpairment on a regular basis. In determiningwhether an impairment loss should be recorded,the Group makes judgments as to whether there isany observable data indicating that there is ameasurable decrease in the estimated future cashflows from a portfolio of loans. This evidence mayinclude observable data indicating that there hasbeen an adverse change in the payment status ofthe debtors of the Group, or national or local economic conditions that correlate with defaults on
assets in the Group. Management uses judgmentand estimates based on historical loss experiencefor assets with credit risk characteristics and objective evidence of impairment similar to thosein the portfolio when estimating its cash flows. Themethodology and assumptions used for estimatingboth the amount and the timing of future cashflows are reviewed regularly to reduce any differences between loss estimates and actual lossexperience.
(i) Impairment losses on loans and advances
The determination of fair value for financial assets
for which there is no observable market price
requires the use of valuation techniques as
described in Note 3F. For financial instruments that
trade infrequently and have little price transparency,
fair value is less objective, and requires varying
degrees of judgment depending on liquidity,
concentration, uncertainly of market factors, pricing
assumptions and other risks affecting the specific
instrument.
Where available, management has used market
indicators in its mark to model approach for the
valuation of the Lebanese government debt securities
and Central Bank of Lebanon certificates of deposit
at fair value. The IFRS fair value hierarchy allocates
the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities, and
the lowest priority to unobservable inputs. The fair
value hierarchy used in the determination of fair
value consists of three levels of input data for
determining the fair value of an asset or liability.
Level 1- quoted prices for identical items in active,
liquid and visible markets such as stock exchanges,
Level 2- observable information for similar items in
active or inactive markets,
Level 3- unobservable inputs used in situations
where markets either do not exist or are illiquid.
Unobservable inputs are used to measure fair value
to the extent that observable inputs are not
available, thereby allowing for situations in which
there is little, if any, market activity for the asset or
liability at the measurement date. However, the
fair value measurement objective should remain
the same; that is, an exit price from the perspective
of a market participant that holds the asset or owes
the liability. Unobservable inputs are developed
based on the best information available in the
circumstances, which may include the reporting
entity's own data. Where practical, the discount
rate used in the mark to model approach included
observable data collected from market participants,
(ii) Determining Fair Values
Banque Bemo Annual Report | Page 109
including risk free interest rates and credit default
swap rates for pricing of credit risk (both own and
counter party), and a liquidity risk factor which is
added to the applied discount rate. Changes in
assumptions about any of these factors could affect
the reported fair value of the Lebanese
Government debt securities and Central Bank of
Lebanon certificates of deposit.
The Group exercises judgment to consider impairment
on the available-for-sale equity investments. This
includes determination of a significant or prolonged
decline in the fair value below its cost. In making
this judgment, the Group evaluates among other
factors, the normal volatility in share price.
In addition, the Group considers impairment to be
appropriate when there is evidence of deterioration
in the financial health of the investee, industry and
sector performance, changes in technology, and
operational and financing cash flows.
(iii) Impairment of available for-sale equity investments
5. CASH AND CENTRAL BANKS
Cash on hand 7,740,077 5,445,399Current accounts with Central Bank of Lebanon (of which compulsory reserves LBP29.49billion in 2010 and LBP27.76billion in 2009) 38,077,815 32,712,757Current accounts with other Central Banks 6,195,924 7,273,020Term placements with Central Bank of Lebanon 294,874,616 333,054,525Blocked accounts with Central Bank of Lebanon 541,989 2,981,842Accrued interest receivable 544,457 615,687
347,974,878 382,083,230
2010 | LBP’000
December 31,
2009 | LBP’000
Compulsory deposits with Central Banks are not
available for use in the Group’s day-to-day operations
and are reflected at amortized cost.
Cash compulsory reserves with the Central Bank of
Lebanon represent non-interest earning deposits in
Lebanese Pounds computed on the basis of 25%
and 15% of the average weekly sight and term
customers’ deposits in Lebanese Pounds in accordance
with the local banking regulations.
Term placements with the Central Bank of Lebanon
include an amount of LBP175billion as at December
31, 2010 (LBP168billion as at December 31, 2009)
representing the equivalent in foreign currencies of
amounts deposited in accordance with local banking
regulations which require banks to maintain interest
earning placements in foreign currency to the
extent of 15% of customers’ deposits in foreign
currencies, certificates of deposit and loans
acquired from non-resident financial institutions.
Term placements with Central Bank of Lebanon
earn fixed or floating interest rates and carry the
following maturities:
1st quarter 2011 28,800,816 1.5532nd quarter 2011 6,030,000 1.1003rd quarter 2011 2,261,250 0.791Year 2012 102,189,670 0.968Year 2013 28,623,660 1.016Year 2014 80,802,020 1.282Year 2015 46,167,200 1.557
294,874,616
Counter Value of Amount in LBP |
LBP’000MATURITY
Average Interest Rate |
%
December 31, 2010F/Cy Base Accounts
1st quarter 2010 82,776,875 1.0642nd quarter 2010 45,561,550 1.0853rd quarter 2010 32,107,350 1.021Year 2011 12,813,750 1.832Year 2012 92,711,250 0.876Year 2013 2,261,250 1.162Year 2014 64,822,500 1.160
333,054,525
Counter Value of Amount in LBP |
LBP’000
Average Interest Rate |
%
December 31, 2009F/Cy Base Accounts
MATURITY
Banque Bemo Annual Report | Page 111
Deposits with banks and financial institutionsinclude deposits in the amount of LBP4.41billionsubject to right of setoff by the related correspondentsagainst trade finance and other facilities at 2010year end (LBP3.74billion against trade finance andother facilities as at December 31, 2009).
Margin accounts and pledged deposits are blockedagainst trade finance and treasury transactions andbanking facilities (Refer to Note 44).
Term placements and pledged deposits bear thefollowing maturities:
6. DEPOSITS WITH BANKS AND FINANCIAL INSTITUTIONS
Checks in course of collection 21,231,456 26,294,086Current accounts 44,468,759 137,978,135Current accounts - related parties 1,759,661 4,977,303Term placements 160,005,496 162,822,231Term placements - related parties 8,145,499 1,418,037Pledged deposits - related parties 8,216,754 8,165,003Margin accounts 29,725,831 24,712,108Accrued interest receivable 53,507 217,898
273,606,963 366,584,801
2010 | LBP’000
December 31,
2009 | LBP’000
1st quarter 2011 154,980,535 0.3682nd quarter 2011 21,387,214 0.809
176,367,749
Counter Value of Amount in LBP |
LBP’000
Average Interest Rate |
%
December 31, 2010Balances in F/Cy
MATURITY
1st quarter 2010 136,574,918 0.4102nd quarter 2010 26,765,919 0.7193rd quarter 2010 7,537,500 1.3004th quarter 2010 1,526,934 1.220
172,405,271
Counter Value of Amount in LBP |
LBP’000
Average Interest Rate |
%
December 31, 2009Balances in F/Cy
MATURITY
Accrued interest receivable is segregated as follows:
Current accounts - - 13,455 7,578Term placements 29,935 23,158 180,583 154Pledged deposits 414 - 206 15,922
30,349 23,158 194,244 23,654
Non-RelatedParties |LBP’000
RelatedParties |LBP’000
Non-RelatedParties |LBP’000
RelatedParties |LBP’000
December 31, 2010 December 31, 2009
The change in fair value on trading securities in theamount of LBP22million is recorded under “Netinterest income and other gains/(losses) on trading
portfolio” in the consolidated income statement forthe year ended December 31, 2010 (LBP101millionfor the year 2009) (Note 36).
Regular Retail Customers:
-Mortgage loans 12,386,898 - - 12,386,898 9,693,772 - - 9,693,772
-Personal loans 8,800,132 - - 8,800,132 6,818,558 - - 6,818,558
-Overdrafts 16,459,822 - - 16,459,822 18,994,146 - - 18,994,146
-Other 32,379,624 - - 32,379,624 38,592,524 - - 38,592,524
Regular Corporate Customers:
-Corporate 487,127,224 - - 487,127,224 421,251,750 - - 421,251,750
-Small and medium
enterprises 151,816,371 - - 151,816,371 126,367,439 - - 126,367,439
Classified Retail Customers:
-Substandard - - - - 237,219 (90,712) - 146,507
-Bad 262,083 (103,239) (158,844) - 283,105 (72,499) (210,606) -
Unr
ealiz
edIn
tere
st |
LBP’
000
Impa
irmen
tA
llow
ance
|LB
P’00
0
Carr
ying
Am
ount
|LB
P’00
0
Gro
ss A
mou
ntN
et o
f U
near
ned
Inte
rest
|LB
P’00
0
Unr
ealiz
edIn
tere
st |
LBP’
000
Impa
irmen
tA
llow
ance
|LB
P’00
0
Carr
ying
Am
ount
|LB
P’00
0
Gro
ss A
mou
ntN
et o
f U
near
ned
Inte
rest
|LB
P’00
0
December 31, 2010 December 31, 2009
7. TRADING ASSETS
Loans to banks are reflected at amortized cost andrepresent letters of credit and acceptances discounted by customers and maturing in the year
2011 (in the year 2010 for balances outstanding asat December 31, 2009).
8. LOANS TO BANKS
Loans and advances to customers are reflected at amortized cost and consist of the following:
9. LOANS AND ADVANCES TO CUSTOMERS
Equity securities - Quoted 3,791,378 3,957,8403,791,378 3,957,840
C/V of F/Cy |LBP’000
C/V of F/Cy |LBP’000
December 31,
2010 2009
Banque Bemo Annual Report | Page 113
The movement of substandard loans with relatedunrealized interest during 2010 and 2009 is
summarized as follows:
Classified Corporate Customers:
-Rescheduled 151,683 (45,062) (106,621) - 249,953 (63,428) (180,323) 6,202
-Substandard 1,399,774 (724,527) - 675,247 1,792,851 (671,491) - 1,121,360
-Doubtful 2,106,775 (1,075,625) (640,760) 390,390 2,110,369 (1,021,170) (716,975) 372,224
-Bad 818,968 (215,606) (603,362) - 538,110 (131,584) (405,213) 1,313
Accrued interest receivable 539,090 - - 539,090 545,440 - - 545,440
714,248,444 (2,164,059) (1,509,587) 710,574,798 627,475,236 (2,050,884) (1,513,117) 623,911,235
Unr
ealiz
edIn
tere
st |
LBP’
000
Impa
irmen
tA
llow
ance
|LB
P’00
0
Carr
ying
Am
ount
|LB
P’00
0
Gro
ss A
mou
ntN
et o
f U
near
ned
Inte
rest
|LB
P’00
0
Unr
ealiz
edIn
tere
st |
LBP’
000
Impa
irmen
tA
llow
ance
|LB
P’00
0
Carr
ying
Am
ount
|LB
P’00
0
Gro
ss A
mou
ntN
et o
f U
near
ned
Inte
rest
|LB
P’00
0
December 31, 2010 December 31, 2009
Balance January 1 2,030,070 (762,203) 1,267,867Withdrawals on loans 24,700 - 24,700Additions to unrealized interest 172,311 (172,311) -Settlements (753,077) - (753,077)Write-back of unrealized interest - 135,757 135,757Write-off (62,910) 62,910 -Effect of exchange rate changes (11,320) 11,320 -Balance December 31 1,399,774 (724,527) 675,247
Substandard Loans |LBP’000
Unrealized Interest |LBP’000
Net Book Value |LBP’000
2010
Balance January 1 2,570,812 (717,624) 1,853,188Withdrawals on loans 34,553 - 34,553Additions to unrealized interest 343,454 (343,454) -Settlements (720,735) - (720,735)Write-back of unrealized interest - 104,473 104,473Write-off (198,014) 198,014 -Effect of exchange rate changes - (3,612) (3,612)Balance December 31 2,030,070 (762,203) 1,267,867
Substandard Loans |LBP’000
Unrealized Interest |LBP’000
Net Book Value |LBP’000
2009
Balance January 1 3,181,537 (1,288,681) (1,513,117) 379,739 3,595,963 (1,572,966) (1,641,524) 381,473
New doubtful loans 234,001 - - 234,001 22,526 - - 22,526
Withdrawals on existing
doubtful loans 15,945 - - 15,945 345,309 - - 345,309
Settlement of loans (258,113) - - (258,113) (546,448) - - (546,448)
Additions to unrealized
interest and allowance
for impairment 307,008 (307,008) (138,566) (138,566) 351,244 (351,244) (451,553) (451,553)
Write-back - 101,085 56,411 157,496 - 280,862 346,221 627,083
Write-off (91,193) 17,171 74,022 - (594,316) 359,577 234,739 -
Effect of exchange rate
changes (49,676) 37,901 11,663 (112) 7,259 (4,910) (1,000) 1,349
Balance December 31 3,339,509 (1,439,532) (1,509,587) 390,390 3,181,537 (1,288,681) (1,513,117) 379,739
Unr
ealiz
edIn
tere
st |
LBP’
000
Allo
wan
ce f
orIm
pairm
ent
|LB
P’00
0
Net
Boo
kVa
lue
|LB
P’00
0
Resc
hedu
led
and
Dou
btfu
l and
B
ad L
oans
|LB
P’00
0
Unr
ealiz
edIn
tere
st |
LBP’
000
Allo
wan
ce f
orIm
pairm
ent
|LB
P’00
0
Net
Boo
kVa
lue
|LB
P’00
0
Resc
hedu
led
and
Dou
btfu
l and
B
ad L
oans
|LB
P’00
0
2010 2009
Regular retail loans 624,274 755,925Large enterprises 3,105,591 5,819,225Accrued interest receivable 18,350 95,588
3,748,215 6,670,738
2010 |LBP’000
2009 |LBP’000
December 31,
Quoted equity securities - 8,029,973 8,029,973 - - -
Unquoted equity securities 615,120 29,212 644,332 - - -
Lebanese treasury bills 145,879,214 - 145,879,214 - - -
Foreign treasury bills - 504,500 504,500 - 390,576 390,576
Lebanese government bonds - 83,307,304 83,307,304 - - -
Certificates of deposit issued by
the Central Bank of Lebanon 49,823,495 15,327,205 65,150,700 5,000,000 24,240,600 29,240,600
Corporate bonds - 36,406,114 36,406,114 - 7,016,868 7,016,868
196,317,829 143,604,308 339,922,137 5,000,000 31,648,044 36,648,044
Accrued interest receivable 3,614,160 2,562,174 6,176,334 243,613 818,225 1,061,838
199,931,989 146,166,482 346,098,471 5,243,613 32,466,269 37,709,882
LBP |LBP’000
C/V of F/Cy |LBP’000
Total |LBP’000
LBP |LBP’000
C/V of F/Cy |LBP’000
Total |LBP’000
December 31, 2010
Available-for-Sale Held-to-Maturity
Loans and advances to related parties are partially secured (Refer to Note 42).
The movement of doubtful, bad and rescheduledloans and related unrealized interest and allowance
for impairment during 2010 and 2009 is summa-rized as follows:
10. LOANS AND ADVANCES TO RELATED PARTIES
11. INVESTMENT SECURITIES
Banque Bemo Annual Report | Page 115
December 31, 2010
LBP Base Accounts F/Cy Base Accounts
Available-for-sale securities and related cumulative change in fair value, impairment allowance andaccrued interest are distributed between Lebanese Pounds and foreign currencies as follows:
Quoted equity securities - 14,389,870 14,389,870 - - -
Unquoted equity securities 615,120 31,589 646,709 - - -
Lebanese treasury bills 158,306,031 - 158,306,031 - - -
Foreign treasury bills - 8,070,477 8,070,477 - 399,199 399,199
Lebanese government bonds - 58,863,889 58,863,889 - - -
Certificates of deposit issued by
the Central Bank of Lebanon 21,401,960 13,454,136 34,856,096 5,000,000 24,240,600 29,240,600
Corporate bonds - 37,833,596 37,833,596 - 8,410,301 8,410,301
180,323,111 132,643,557 312,966,668 5,000,000 33,050,100 38,050,100
Accrued interest receivable 3,744,102 2,134,518 5,878,620 243,613 875,584 1,119,197
184,067,213 134,778,075 318,845,288 5,243,613 33,925,684 39,169,297
LBP |LBP’000
C/V of F/Cy |LBP’000
Total |LBP’000
LBP |LBP’000
C/V of F/Cy |LBP’000
Total |LBP’000
December 31, 2009
Available-for-Sale Held-to-Maturity
Quoted equity securities - - - - 8,207,143 8,029,973 (177,179) -
Unquoted equity
securities at cost 615,120 615,120 - - 29,212 29,212 - -
Lebanese treasury bills 142,905,307 145,879,214 2,973,907 2,454,700 - - - -
Foreign treasury bills - - - - 514,930 504,500 (10,430) 3,256
Lebanese Government bonds - - - - 87,102,768 83,307,304 (3,795,464) 1,525,990
Certificates of deposit issued by
Central Bank of Lebanon 48,264,243 49,823,495 1,559,252 1,159,460 15,278,369 15,327,205 48,836 252,506
Corporate bonds - - - - 36,724,684 36,406,114 (318,571) 780,422
191,784,670 196,317,829 4,533,159 3,614,160 147,857,106 143,604,308 (4,252,798) 2,562,174
Fair
Valu
e |
LBP’
000
Cum
ulat
ive
Chan
ge in
Fai
rVa
lue
|LB
P’00
0
Acc
rued
Inte
rest
Rece
ivab
le |
LBP’
000
Am
ortiz
ed C
ost
|LB
P’00
0
Fair
Valu
e |
LBP’
000
Cum
ulat
ive
Chan
ge in
Fai
rVa
lue
|LB
P’00
0
Acc
rued
Inte
rest
Rece
ivab
le |
LBP’
000
Am
ortiz
ed C
ost
|LB
P’00
0
A. Available-for-sale investment securities
December 31, 2009
LBP Base Accounts F/Cy Base Accounts
Quoted equity securities - - - - 14,113,655 14,389,870 276,215 -
Unquoted equity
securities at cost 615,120 615,120 - - 31,589 31,589 - -
Lebanese treasury bills 154,659,030 158,306,031 3,647,001 3,037,233 - - - -
Foreign treasury bills - - - - 7,976,846 8,070,477 93,631 45,034
Lebanese Government bonds - - - - 59,392,160 58,863,889 (528,271) 1,268,094
Certificates of deposit issued
by Central Bank of Lebanon 20,808,597 21,401,960 593,363 706,869 13,293,627 13,454,136 160,509 221,100
Corporate bonds - - - - 37,875,595 37,833,596 (41,999) 600,290
176,082,747 180,323,111 4,240,364 3,744,102 132,683,472 132,643,557 (39,915) 2,134,518
Fair
Valu
e |
LBP’
000
Cum
ulat
ive
Chan
ge in
Fai
rVa
lue
|LB
P’00
0
Acc
rued
Inte
rest
Rece
ivab
le |
LBP’
000
Am
ortiz
ed C
ost
|LB
P’00
0
Fair
Valu
e |
LBP’
000
Cum
ulat
ive
Chan
ge in
Fai
rVa
lue
|LB
P’00
0
Acc
rued
Inte
rest
Rece
ivab
le |
LBP’
000
Am
ortiz
ed C
ost
|LB
P’00
0
December 31, 2010 December 31, 2009LBP Base Accounts LBP Base Accounts
Lebanese treasury bills:
- Up to one year 38,900,000 39,033,647 39,783,369 8.650 35,000,000 35,247,287 35,340,035 8.827
- 1 year to 3 years 67,000,000 68,550,750 70,739,896 8.509 15,800,000 117,711,743 121,260,252 9.014
- 3 years to 5 years 19,582,000 20,309,691 20,625,097 7.600 1,700,000 1,700,000 1,705,744 8.225
- Beyond 5 years 15,000,000 15,011,219 14,730,852 8.044 - - - -
140,482,000 142,905,307 145,879,214 152,500,000 154,659,030 158,306,031
Certificates of deposit issued by Central Bank of Lebanon:
- 1 year to 3 years 15,000,000 16,108,859 16,734,919 10.069 - - - -
- 3 years to 5 years 21,000,000 21,425,792 22,609,868 8.131 20,000,000 20,808,597 21,401,960 9.684
- Beyond 5 years 10,000,000 10,729,592 10,478,708 7.997 - - - -
46,000,000 48,264,243 49,823,495 20,000,000 20,808,597 21,401,960
186,482,000 191,169,550 195,702,709 172,500,000 175,467,627 179,707,991
Amortized Cost |
LBP’000Fair Value |
LBP’000Yield |
%
Nominal Value |LBP’000
Amortized Cost |
LBP’000Fair Value |
LBP’000Yield |
%
Nominal Value |LBP’000
The change in fair value (gain) as at December 31,
2010 in the amount of LBP280million (LBP4.20
billion (gain) for 2009) is recorded in other
comprehensive income and accumulated in equity
net of deferred tax liability in the amount of
LBP257million (deferred tax liability in the amount
of LBP739 million in 2009).
The remaining periods to maturity of available-for-
sale debt securities, denominated in Lebanese
Pounds excluding accrued interest, is as follows:
CONTRACTUALMATURITY
Banque Bemo Annual Report | Page 117
The remaining periods to maturity of available-for-saledebt securities, denominated in foreign currencies
excluding accrued interest, is as follows:
Lebanese Government bonds:- Up to one year 7,688,250 7,826,011 7,729,872 7.599- 1 year to 3 years 50,680,643 54,357,113 52,301,932 7.910- 3 years to 5 years 7,989,750 9,067,895 8,431,131 7.594- 5 years to 10 years 11,306,250 12,664,894 11,762,043 7.312- Beyond 10 years 3,186,855 3,186,855 3,082,326 6.307
80,851,748 87,102,768 83,307,304Certificates of deposit issued byCentral Bank of Lebanon:- 3 years to 5 years 13,567,500 15,278,369 15,327,205 8.852
13,567,500 15,278,369 15,327,205Corporate bonds:- Up to one year 7,878,579 6,880,533 6,873,422 6.220- 1 year to 3 years 11,937,525 12,033,680 12,086,252 4.548- 3 years to 5 years 1,884,375 1,862,864 1,849,513 3.566- 5 years to 10 years 15,127,763 15,088,332 15,041,835 6.747- Beyond 10 years 859,275 859,275 555,092 10.062
37,687,517 36,724,684 36,406,114Foreign treasury bills:- 1 year to 3 years 75,375 83,492 80,199 5.169- 5 years to 10 years 452,250 431,438 424,301 2.798
527,625 514,930 504,500132,634,390 139,620,751 135,545,123
Lebanese Government bonds:- Up to one year 5,196,165 5,138,065 5,139,662 6.877- 1 year to 3 years 18,301,992 18,383,481 18,349,058 7.403- 3 years to 5 years 11,957,113 12,848,189 12,355,180 8.067- 5 years to 10 years 18,415,243 18,728,338 18,822,278 7.226- Beyond 10 years 3,972,263 4,294,087 4,197,711 7.522
57,842,776 59,392,160 58,863,889Certificates of deposit issued byCentral Bank of Lebanon:- 5 years to 10 years 12,060,000 13,293,627 13,454,136 8.964
12,060,000 13,293,627 13,454,136Corporate bonds:- Up to one year 1,098,199 1,114,675 780,730 9.235- 1 year to 3 years 22,168,963 21,577,762 21,825,987 5.163- 3 years to 5 years 5,325,820 5,169,904 5,149,241 4.937- 5 years to 10 years 10,077,638 10,013,254 10,077,638 7.294
38,670,620 37,875,595 37,833,596Foreign treasury bills:- 1 year to 3 years 3,391,875 3,388,460 3,372,654 1.613- 3 years to 5 years 3,015,000 3,075,778 3,186,554 5.220- 5 years to 10 years 1,507,500 1,512,608 1,511,269 3.986
7,914,375 7,976,846 8,070,477116,487,771 118,538,228 118,222,098
December 31, 2010 | F/Cy Base Accounts
December 31, 2009 | F/Cy Base Accounts
Amortized Cost |LBP’000
Fair Value |LBP’000
Yield |%
Nominal Value |LBP’000MATURITY
Amortized Cost |LBP’000
Fair Value |LBP’000
Yield |%
Nominal Value |LBP’000MATURITY
The movement of available-for-sale investment
securities, denominated in Lebanese Pounds
excluding accrued interest is summarized as fol-
lows:
Balance January 1, 2010 615,120 158,306,031 21,401,960 180,323,111
Additions - 87,982,000 26,000,000 113,982,000
Sale - (74,000,000) - (74,000,000)
Redemption - (26,000,000) - (26,000,000)
Net variation in premium - 290,019 1,455,646 1,745,665
Net change in unearned interest - (25,742) - (25,742)
Unrealized gain/(loss) from
change in fair value - (673,094) 965,889 292,795
Balance December 31, 2010 615,120 145,879,214 49,823,495 196,317,829
2010
LebaneseTreasury Bills |
LBP’000
Certificates ofdeposit issued bythe Central Bank
of Lebanon |LBP’000
Total |LBP’000
UnquotedEquity Securities |
LBP’000
Balance January 1, 2009 615,120 119,811,302 - 120,426,422
Additions - 105,600,000 20,000,000 125,600,000
Sale - (40,000,000) - (40,000,000)
Redemption - (31,000,000) - (31,000,000)
Net variation in premium - 879,219 808,597 1,687,816
Net change in unearned interest - 120,946 - 120,946
Unrealized gain/(loss)
from change in fair value - 2,894,564 593,363 3,487,927
Balance December 31, 2009 615,120 158,306,031 21,401,960 180,323,111
2009
LebaneseTreasury Bills |
LBP’000
Certificates ofdeposit issued by
the Central Bank ofLebanon |LBP’000
Total |LBP’000
UnquotedEquity Securities |
LBP’000
Banque Bemo Annual Report | Page 119
The movement of available-for-sale investment
securities, denominated in Foreign Currencies
excluding accrued interest, is summarized as
follows:
The movement of allowance for impairment on available-for-sale investment securities is summarized as
follows:
Balance January 1, 2010 14,389,870 31,589 8,070,477 58,863,889 13,454,136 37,833,596 132,643,557
Additions 1,256,753 - 431,438 71,392,185 12,060,000 32,730,521 117,870,897
Sale (7,193,444) - (7,839,000) (48,383,213) (10,552,500) (32,689,202) (106,657,359)
Net variation in premium 30,179 - (54,354) 4,701,636 477,243 (78,239) 5,076,465
Unrealized gain/(loss)
from change in fair value (453,385) - (104,061) (3,267,193) (111,674) (276,572) (4,212,885)
Effect of exchange rates changes - (2,377) - - - (1,113,990) (1,116,367)
Balance December 31, 2010 8,029,973 29,212 504,500 83,307,304 15,327,205 36,406,114 143,604,308
2010
Unq
uote
d Eq
uity
Secu
ritie
s |
C/V
LBP’
000
Fore
ign
Trea
sury
Bill
s|C/
V LB
P’00
0
Leba
nese
Gov
ernm
ent
Bond
s |
C/V
LBP’
000
Cert
ifica
tes
ofDe
posit
Issu
ed b
yCe
ntra
l Ban
k of
Leba
non
|C/
V LB
P’00
0
Quo
ted
Equ
itySe
curit
ies
|C/
V LB
P’00
0
Tota
l |C/
V LB
P’00
0
Corp
orat
e Bo
nds
|C/
V LB
P’00
0
Balance January 1, 2009 10,966,749 31,252 - 39,609,257 10,890,180 13,995,508 75,492,946
Additions 2,389,653 - 8,755,259 117,412,914 7,537,500 32,868,125 168,963,451
Reclassification
between categories - - - 4,522,500 (4,522,500) - -
Sale (941,564) - (767,883) (104,900,126) (1,507,500) (10,725,634) (118,842,707)
Net variation in premium 30,176 - (10,530) 1,381,832 721,006 (182,457) 1,940,027
Unrealized gain/(loss)
from change in fair value 1,920,264 - 93,631 810,773 335,450 2,531,736 5,691,854
Effect of exchange
rates changes 24,592 337 - 26,739 - 235,743 287,411
Impairment losses - - - - - (889,425) (889,425)
Balance December 31, 2009 14,389,870 31,589 8,070,477 58,863,889 13,454,136 37,833,596 132,643,557
2009
Unq
uote
d Eq
uity
Secu
ritie
s |
C/V
LBP’
000
Fore
ign
Trea
sury
Bill
s|C/
V LB
P’00
0
Leba
nese
Gov
ernm
ent
Bond
s |
C/V
LBP’
000
Cert
ifica
tes
ofDe
posit
Issu
ed b
yCe
ntra
l Ban
k of
Leba
non
|C/
V LB
P’00
0
Quo
ted
Equ
itySe
curit
ies
|C/
V LB
P’00
0
Tota
l |C/
V LB
P’00
0
Corp
orat
e Bo
nds
|C/
V LB
P’00
0
Balance beginning of the year 2,035,125 1,145,700Charge for the year - 1,206,000Write-back - (316,575)Balance end of the year 2,035,125 2,035,125
2010 |LBP’000
2009 |LBP’000
Accrued interest receivable on available-for-sale investment securities is distributed as follows:
Held-to-maturity investment securities are distributed between Lebanese Pounds and foreign currencies
as follows:
Lebanese treasury bills 2,454,700 3,037,233Foreign treasury bills 3,256 45,034Lebanese government bonds 1,525,990 1,268,094Certificates of deposit issued by the Central Bank of Lebanon 1,411,966 927,969Corporate bonds 780,422 600,290
6,176,334 5,878,620
2010 |LBP’000
2009 |LBP’000
B. Held-to-maturity investment securities
Foreign treasury bills - - - 390,576 8,695 400,995Certificates of deposit issued bythe Central Bank of Lebanon 5,000,000 243,613 5,539,394 24,240,600 721,598 25,450,254Corporate bonds - - - 7,016,868 87,932 7,212,874
5,000,000 243,613 5,539,394 31,648,044 818,225 33,064,123
AmortizedCost |
LBP’000
Accrued InterestReceivable |
LBP’000Fair Value |LBP’000
AmortizedCost |
LBP’000
Accrued InterestReceivable |
LBP’000Fair Value |LBP’000
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
Foreign treasury bills - - - 399,199 8,637 401,372Certificates of deposit issued by the Central Bank of Lebanon 5,000,000 243,613 5,345,015 24,240,600 721,598 25,366,971Corporate bonds - - - 8,410,301 145,349 8,519,147
5,000,000 243,613 5,345,015 33,050,100 875,584 34,287,490
AmortizedCost |
LBP’000
Accrued InterestReceivable |
LBP’000Fair Value |LBP’000
AmortizedCost |
LBP’000
Accrued InterestReceivable |
LBP’000Fair Value |LBP’000
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
Banque Bemo Annual Report | Page 121
The movement of held-to-maturity securities
during the years 2010 and 2009 denominated in
Foreign Currencies, excluding accrued interest, is as
follows:
Held-to-maturity investments denominated in
Lebanese Pounds are segregated over remaining
period to maturity as follows:
Balance, January 1, 2009 2,259,485 2,047,087 27,255,600 13,478,507 45,040,679
Additions 401,372 - - 4,171,817 4,573,189
Redemptions (2,260,690) (2,047,087) (3,015,000) (9,337,376) (16,660,153)
Effect of discount/premium
amortization (968) - - 762 (206)
Effect of exchange rate changes - - - 96,591 96,591
Balance, December 31, 2009 399,199 - 24,240,600 8,410,301 33,050,100
Redemptions - - - (1,194,620) (1,194,620)
Effect of discount/premium
amortization (8,623) - - (89,299) (97,922)
Effect of exchange rate changes - - - (109,514) (109,514)
Balance, December 31, 2010 390,576 - 24,240,600 7,016,868 31,648,044
ForeignTreasury Bills |
LBP’000
LebaneseGovernment
Bonds |LBP’000
CorporateBonds |LBP’000
TOTAL |LBP’000
Certificates ofdeposit issued bythe Central Bank
of Lebanon |LBP’000
Certificates of deposit issued byCentral Bank of Lebanon:- 3 years to 5 years 5,000,000 5,000,000 5,539,394 10.250
5,000,000 5,000,000 5,539,394
Redemption Value |LBP’000
Net Carrying Value |LBP’000
Fair Value |LBP’000
Yield |%
December 31, 2010
Certificates of deposit issued byCentral Bank of Lebanon:- 3 years to 5 years 5,000,000 5,000,000 5,345,015 10.250
5,000,000 5,000,000 5,345,015
Redemption Value |LBP’000
Net Carrying Value |LBP’000
Fair Value |LBP’000
Yield |%
December 31, 2009
MATURITY
MATURITY
Held-to-maturity investments denominated in foreign currencies are segregated over remaining
period to maturity as follows:
Acceptances represent documentary credits which
the Group has committed to settle on behalf of its
customers against commitments by those
customers (acceptances). The commitments resulting
from these acceptances are stated as a liability in
the balance sheet for the same amount.
December 31, 2010 December 31, 2009
Foreign treasury bills:
- 1 year to 3 years 376,875 390,576 400,995 5.307 376,875 399,199 401,372 5.192
376,875 390,576 400,995 376,875 399,199 401,372
Certificates of deposit issued by Central Bank of Lebanon:
- 1 year to 3 years 24,240,600 24,240,600 25,450,254 9.000 - - - -
- 3 years to 5 years - - - - 24,240,600 24,240,600 25,366,971 9.000
24,240,600 24,240,600 25,450,254 24,240,600 24,240,600 25,366,971
Corporate bonds:
- Up to one year 603,000 614,994 619,522 6.336 1,194,620 1,184,204 1,176,701 5.674
- 1 year to 3 years 6,273,086 6,401,874 6,593,352 6.038 5,851,093 6,020,743 6,144,888 6.188
- 3 years to 5 years - - - - 1,130,625 1,205,354 1,197,558 4.885
6,876,086 7,016,868 7,212,874 8,176,338 8,410,301 8,519,147
31,493,561 31,648,044 33,064,123 32,793,813 33,050,100 34,287,490
NetCarryingValue |LBP’000
Fair Value |LBP’000
Yield |%
Redemption Value |LBP’000
NetCarryingValue |LBP’000
Fair Value |LBP’000
Yield |%
Redemption Value |LBP’000
CONTRACTUALMATURITY
12. CUSTOMERS’ LIABILITY UNDER ACCEPTANCES
Investments in associates, which are unlisted, are as follows:
13. INVESTMENTS IN ASSOCIATES
Banque Bemo Saudi Fransi S.A Syria 22 34,082,238 29,416,050BEMO Oddo Investment Firm Ltd. UAE 25 463,082 360,687
34,545,320 29,776,737
Country ofIncorporation
Interest Held |%
Carrying Value |LBP’000
Carrying Value |LBP’000
December 31, 2010 2009
Banque Bemo Annual Report | Page 123
The movement of investments in associates is as follows:
The investment in Banque Bemo Saudi Fransi represents a 22% equity stake in the bank's capital,which was initially subscribed into in 2003.
The Group accounted for its share in the net incomeof the associate bank for the year ended December31, 2010, in the amount of LBP4.67billion(USD3.09million) recorded under “Other operatingincome” in the accompanying consolidated incomestatement (Note 37) (its share in the net incomefor the year ended December 31, 2009 amountedto LBP4.73billion (USD3.14million).
During 2008, the Group acquired a 25% equitystake in BEMO Oddo Investment Firm Ltd., (“BEMO
Oddo”) a financial institution incorporated in theDubai International Financial Centre (DIFC) in theUnited Arab Emirates whose capital amounted toUSD2,000,000 for an amount of USD500,000.
The Group accounted for its share in the net gain ofthe associate for the year ended December 31,2010 in the amount of LBP102million (USD 68thousand) recorded under “Other operatingincome” in the accompanying consolidated incomestatement (Note 37) (its share in net gain for theyear ended December 31, 2009 amounted toLBP54million (USD36thousand)).
Assets acquired in satisfaction of loans have been
acquired through enforcement of security over
loans and advances.
The movement of assets acquired in satisfaction of
loans during 2010 and 2009 was as follows:
14. ASSETS ACQUIRED IN SATISFACTION OF LOANS
Real Estate
Balance, January 1, 29,776,737 26,118,697Share in net profit of associates (Note 37) 4,768,583 4,781,458Dividends received - (1,080,293)Other - (43,125)Balance, December 31 , 34,545,320 29,776,737
LBP’000 LBP’000
2010 2009
Balance, January 1, 10,053,946 9,685,199Real estate registration fees - 368,747Transfer to property and equipment (Note 15) (7,222,927) -Balance, December 31 2,831,019 10,053,946
2010 |LBP’000
2009 |LBP’000
The movement of reserve for assets acquired in satisfaction of debts during 2010 and 2009 was as follows:
On June 15, 2010, the Central Council of the CentralBank of Lebanon approved in its decision number4/20/10, the Bank’s transfer of plot number 1560,located in Achrafieh, whose book value amountedto LBP7.22billion to property and equipment. Thisplot will be used by the Bank to complement itspremises located on the adjacent plot number 444in Achrafieh. As a result, the Group reversed the
reserve for assets acquired in satisfaction of debtsin the amount of LBP856million to retained earnings.
As at December 31, 2010 and 2009, the fair valueof assets acquired in satisfaction of debts exceededtheir net carrying amount.
The additions to property and equipment during2010, relate mainly to the renovation of the branchin Chtaura (mainly to the opening of a new branch
in Rabieh, as well as refurbishments of theheadquarters located in Achrafieh during 2009).
Balance as at January 1, 2009 221,430Allocation from 2008 income 449,046Balance as at December 31, 2009 670,476Allocation from 2009 income 455,694Reversed to retained earnings (855,670)Balance as at December 31, 2010 270,500
LBP’000
Gross amount:
Balance January 1, 2009 - 5,600,788 2,076,322 4,689,694 572,618 7,546,112 829,435 21,314,969
Additions - - 124,577 273,655 312,802 1,296,144 50,608 2,057,786
Disposal - - (18,511) (22,638) (218,246) (12,552) (8,291) (280,238)
Transfers between categories - - 11,407 - - 809,738 (821,145) -
Transfer to intangible assets - - - - - - - -
Balance December 31, 2009 - 5,600,788 2,193,795 4,940,711 667,174 9,639,442 50,607 23,092,517
Additions - - 49,098 290,808 - 20,892 753,299 1,114,097
Disposals - - (16,085) (264,503) - (4,973) (50,608) (336,169)
Transfer from assets acquired
in satisfaction of
debts (Note 14) 7,222,927 - - - - - - 7,222,927
Balance December 31, 2010 7,222,927 5,600,788 2,226,808 4,967,016 667,174 9,655,361 753,298 31,093,372
Accumulated depreciation:
Balance January 1, 2009 - 499,898 1,096,157 2,771,722 171,719 4,435,868 - 8,975,364
Additions - 143,772 158,391 477,579 106,754 1,121,175 - 2,007,671
Write-off on disposal - - (7,296) (13,978) (102,602) (3,161) - (127,037)
Balance December 31, 2009 - 643,670 1,247,252 3,235,323 175,871 5,553,882 - 10,855,998
Additions - 143,770 161,698 480,239 122,587 1,132,627 - 2,040,921
Write-off on disposal - - (14,031) (261,067) - (3,565) - (278,663)
Balance December 31, 2010 - 787,440 1,394,919 3,454,495 298,458 6,682,944 - 12,618,256
Carrying amount:
December 31, 2010 7,222,927 4,813,348 831,889 1,512,521 368,716 2,972,417 753,298 18,475,116
December 31, 2009 - 4,957,118 946,543 1,705,388 491,303 4,085,560 50,607 12,236,519
Build
ings
|LB
P’00
0
Furn
iture
|LB
P’00
0
Com
pute
rEq
uipm
ents
|LB
P’00
0
Vehi
cles
|LB
P’00
0
Land
|LB
P’00
0
Adv
ance
s on
Capi
tal
Expe
nditu
re |
LBP’
000
Tota
l |LB
P’00
0
Inst
alla
tion
&Im
prov
emen
t |
LBP’
000
15. PROPERTY AND EQUIPMENT
Banque Bemo Annual Report | Page 125
Cost:Balance, January 1, 2009 2,219,925Acquisitions 326,966Balance, December 31, 2009 2,546,891Acquisitions 190,046Balance, December 31, 2010 2,736,937
Amortization:Balance, January 1, 2009 1,242,318Amortization for the year 330,554Write-off (1,843)Balance, December 31, 2009 1,571,029Amortization for the year 335,120Write-off (497)Balance, December 31, 2010 1,905,652
Carrying amounts:December 31, 2010 831,285December 31, 2009 975,862
LBP’000
This caption consists of purchased software summarized as follows:
16. INTANGIBLE ASSETS
17. OTHER ASSETS
Purchased Software
Positive change on forward exchange contracts - 959,833Exchange difference on fixed exchange position 231,654 231,654Stamps 63,616 63,198Deferred charges 84,807 106,600Receivables from securitization operations 34,613 561,070Receivable from an associate bank and financial institution 147,753 101,387Accrued income 13,325 98,106Prepayments 707,478 629,347Sundry accounts receivable 3,177,678 2,472,524
4,460,924 5,223,719
LBP’000LBP’000
December 31,
20092010
The movement of deferred charges is as follows
During 2010, a provision for doubtful receivables of
LBP113million was set up against receivables from
securitization operations and recorded under
“Allowance for impairment of loans and advances”
in the consolidated income statement (LBP754million
in 2009). Furthermore, a provision for doubtful
receivables of LBP14.2million was set up during
2010 against receivables from the National Social
Security Fund recorded under “Allowance for
impairment of loans and advances” in the
consolidated income statement.
Receivable from an associate bank and financial
institution includes a receivable in the amount of
LBP147million (USD97,811) from an associate bank
as at December 31, 2010 representing charges paid
by the Group on behalf of Bank Bemo Saudi Fransi
S.A. (LBP97million (USD64,048) in 2009).
It also includes a receivable in the amount of LBP
303 thousand (USD200) from an associate financial
institution as at December 31, 2010 representing
expenses paid by the Group on behalf of BEMO
Oddo Investment Firm Ltd. (LBP4.8million
(USD3,207) in 2009).
Deposits and borrowings from banks and financial
institutions are reflected at amortized cost and
consist of the following:
Balance, January 1, 2009 149,247Amortization (42,647)Balance, December 31, 2009 106,600Amortization (21,793)Balance, December 31, 2010 84,807
LBP’000
Deferred Expenses
Current deposits of banks
and financial institutions 932 17,828,468 17,829,400 - 91,759,823 91,759,823
Current deposits - related
parties - 7,752,354 7,752,354 777 16,460,291 16,461,068
Money market deposits - 4,681,532 4,681,532 - 3,188,768 3,188,768
Money market deposits –
related parties - 12,166,362 12,166,362 - 10,552,500 10,552,500
Other short-term borrowings 10,050,000 - 10,050,000 17,300,000 - 17,300,000
Accrued interest payable 19,112 24,972 44,084 6,435 16,373 22,808
10,070,044 42,453,688 52,523,732 17,307,212 121,977,755 139,284,967
LBP | LBP’000
C/V of F/Cy | LBP’000
Total | LBP’000
LBP | LBP’000
C/V of F/Cy | LBP’000
Total | LBP’000
December 31, 2009December 31, 2010
18. DEPOSITS AND BORROWINGS FROM BANKS AND FINANCIAL INSTITUTIONS
Banque Bemo Annual Report | Page 127
The maturities of money market deposits are as follows:
First quarter 2011 16,395,644 0.800Second quarter 2011 452,250 1.455
16,847,894
F/Cy Base Accounts | LBP’000 Average Interest Rate | %
December 31, 2010
MATURITY
The maturities of other short-term borrowings are as follows:
Fourth quarter 2011 10,050,000 6.310 - -10,050,000 -
LBP Base Accounts |LBP’000
Average Interest Rate |
%
Average Interest Rate |
%
December 31, 2010
MATURITY
First quarter 2010 13,133,764 0.454Second quarter 2010 607,504 1.468
13,741,268
F/Cy Base Accounts | LBP’000
F/Cy Base Accounts | LBP’000
Accrued interest payable is distributed as follows:
Non-related parties 24,972 6,435Related parties 19,112 16,373
44,084 22,808
December 31,
2010 2009
LBP’000 LBP’000
First quarter 2010 17,300,000 3.974 - -17,300,000 -
LBP Base Accounts |LBP’000
Average Interest Rate |
%
Average Interest Rate |
%
December 31, 2009
MATURITYF/Cy Base Accounts | LBP’000
Average Interest Rate | %
December 31, 2009
MATURITY
19. CUSTOMERS’ ACCOUNTS AT AMORTIZED COST
Deposits from customers:- Current and demand deposits 21,647,505 298,084,369 319,731,874- Term deposits 174,139,828 777,044,773 951,184,601- Collateral against loans and advances 13,695,525 203,863,112 217,558,637Margins and other accounts:- Margins for irrevocable import letters of credit - 7,208,625 7,208,625- Margins on letters of guarantee 835,995 2,506,153 3,342,148- Other margins 50,250 140,951 191,201Accrued interest payable 739,866 1,747,230 2,487,096Total 211,108,969 1,290,595,213 1,501,704,182
LBP | LBP’000
Counter Value in LBP of F/Cy | LBP’000
Total | LBP’000
December 31, 2010
Deposits from customers:- Current and demand deposits 19,880,216 286,316,567 306,196,783- Term deposits 150,252,589 746,405,113 896,657,702- Collateral against loans and advances 8,343,925 217,405,254 225,749,179Margins and other accounts:- Margins for irrevocable import letters of credit - 7,483,391 7,483,391- Margins on letters of guarantee 1,468,062 2,886,010 4,354,072- Other margins 258,525 155,752 414,277Accrued interest payable 1,124,474 1,825,549 2,950,023Total 181,327,791 1,262,477,636 1,443,805,427
LBP | LBP’000
Counter Value in LBP of F/Cy | LBP’000
Total | LBP’000
December 31, 2009
- Less than LBP200million 140,474,062 9.35 4,493- From LBP200million to LBP1.5billion 500,142,439 33.30 936- Over LBP1.5billion 861,087,681 57.35 213
1,501,704,182 100.00 5,642
Total Deposits | LBP’000
% to Total Deposits | %
No. of Customers
December 31, 2010
- Less than LBP200million 137,081,220 9.49 4,367- From LBP200million to LBP1.5billion 484,703,720 33.57 906- Over LBP1.5billion 822,020,487 56.94 198
1,443,805,427 100.00 5,471
Total Deposits | LBP’000
% to Total Deposits | %
No. of Customers
December 31, 2009
Deposits from customers at amortized cost are allocated by brackets of deposits as follows:
Banque Bemo Annual Report | Page 129
20. RELATED PARTIES’ ACCOUNTS AT AMORTIZED COST
2010 206,849,033 6.20 1,238,383,424 2.90 49,261,8022009 139,491,801 7.36 1,088,690,370 3.41 47,724,6182008 56,393,625 7.21 883,192,803 4.06 41,357,282
Average Balance of Deposits |
LBP’000
AverageInterest Rate |
%
Average Balance of Deposits |
LBP’000
AverageInterest Rate |
%
Cost of Funds | LBP’000
LBP Base Accounts F/Cy Base Accounts
Current and demand deposits 3,502,580 3,502,580 9,924,350 9,924,350 13,426,930Term deposits 2,147,922 2,147,922 8,916,517 8,916,517 11,064,439Margins on letters of guarantee 12,000 12,000 - - 12,000Accrued interest payable 2,537 2,537 8,665 8,665 11,202
5,665,039 5,665,039 18,849,532 18,849,532 24,514,571
InterestBearing | LBP’000
Total | LBP’000
InterestBearing | LBP’000
Total | LBP’000
Grand Total |
LBP’000
LBP
December 31, 2010
Counter Value in LBP of F/Cy
Customers' deposits at amortized cost included coded
number deposit accounts (secret account) stated at
LBP2.09billion as of December 31, 2010
(LBP2.19billion for 2009). These accounts were
opened at the Group under the provisions of Article 3
of the Banking Secrecy Law dated September 3, 1956.
Under the provisions of this Article, the Group's man-
agement, in the normal course of business, cannot
reveal the identities of these depositors to third par-
ties, including its independent public accountants.
Time deposits at amortized cost as at December 31,
2010 include fiduciary deposits received from a
non-resident related bank in the amount of
LBP42.70billion (USD28,329,641) (LBP78.39billion for
2009).
The average balances of deposits at amortized cost,
including related party deposits, and related cost of
funds over the last 3 years were as follows:
Current and demand
deposits 60,600 119,274 179,874 1,246,381 1,246,381 1,426,255
Term deposits 1,099,718 - 1,099,718 6,580,910 6,580,910 7,680,628
Collateral against loans
and advances - - - 2,758,800 2,758,800 2,758,800
Margins on letters of
guarantee 12,000 - 12,000 - - 12,000
Accrued interest payable 3,610 - 3,610 80,189 80,189 83,799
1,175,928 119,274 1,295,202 10,666,280 10,666,280 11,961,482
InterestBearing | LBP’000
Non-InterestBearing | LBP’000
Total | LBP’000
InterestBearing | LBP’000
Total | LBP’000
Grand Total |
LBP’000
LBP
December 31, 2009
Counter Value in LBP of F/Cy
Deposits from related parties at amortized cost are allocated by brackets of deposits as follows:
- Less than LBP500million 2,361,238 9.63- From LBP500million to LBP1.5billion 1,557,672 6.35- Over LBP1.5billion 20,595,661 84.02
24,514,571 100.00
Total Deposits | LBP’000 % to Total Deposits | %
December 31, 2010
- Less than LBP500million 1,124,035 9.40- From LBP500million to LBP1.5billion 1,647,683 13.77- Over LBP1.5billion 9,189,764 76.83
11,961,482 100.00
Total Deposits | LBP’000 % to Total Deposits | %
December 31, 2009
Current tax liability 250,375 522,880Deferred tax liability - Note 28 257,424 739,748Deferred tax on gain from investment in associates - Note 13 501,838 393,809Tax on salaries 362,106 322,666Tax on interest paid to customers accounts 229,933 192,879Other taxes payable 1,013,495 922,763Due to the National Social Security Fund 242,858 244,345Checks and incoming payment orders in course of settlement 355,565 657,753Accrued expenses 2,367,511 1,743,651Negative change on forward exchange contracts 1,641,994 -Sundry accounts payable 2,334,115 909,481Unearned income 23,313 3,111Accrued interest payable on cash contribution to capital - Note 26 417,391 633,138
9,997,918 7,286,224
LBP’000 LBP’000
December 31,
2010 2009
21. OTHER LIABILITIES
Banque Bemo Annual Report | Page 131
22. PROVISIONS
The Social Security declarations for the years ended
December 31, 2009 and 2010 for the
abovementioned subsidiary were reviewed during
the year 2010 by the National Social Security Fund;
accordingly, additional contributions were due in the
amount of LBP628thousand which were fully settled
at year-end 2010.
Sundry accounts payable include an amount of
LBP21.68million representing an advance payment
from minority shareholders, who are related parties,
on the capital increase of Bemo Securitization S.A.L.
(a subsidiary).
The determination of income tax of the Bank is
presented as follows:
Income before income tax (before elimination ofinter-company transactions) 6,415,331 3,715,951Add: Non-deductible expenses/losses 3,170,401 6,253,942Less:- Non-taxable revenues/gains (685,820) (1,485,122)- Income of Cyprus branch and subsidiaries (1,721,381) (121,858)Taxable income for the year 7,178,531 8,362,913Enacted tax rate in Lebanon (subject to 15%) 15% 15%
1,076,780 1,254,437Add: Income tax provision - branches and subsidiaries 433,802 234,241
1,510,582 1,488,678Less: Tax paid during the year in the form of withholding tax (904,584) (825,347)Less: Cyprus income tax paid during the year (412,671) (173,778)
193,327 489,553Brought forward balance from non-resident branch 52,431 29,242Exchange difference on brought forward balance 4,617 4,085Current tax liability 250,375 522,880
2010 2009
LBP’000 LBP’000
LBP’000 LBP’000
December 31,
2010 2009
Provision for staff end-of-service indemnity 2,653,784 2,212,838Provision for contingencies 2,208,822 2,999,958Provision for loss on foreign currency position 373,708 285,654
5,236,314 5,498,450
The movement of provision for staff end-of-service indemnity is as follows:
Balance, January 1, 2,212,838 1,929,779Additions 509,522 781,570Settlements (33,594) (295,677)Write-back (16,949) (204,029)Exchange difference (18,033) 1,195Balance, December 31, 2,653,784 2,212,838
2010 2009
LBP’000 LBP’000
The movement of the provision for contingencies was as follows:
This caption consists of the following:
Subordinated bonds in the amount of USD15million
approved by the exceptional General Assembly
meeting held on May 17, 2004 and issued during
July 2004, have matured on July 26, 2009. These
bonds earned interest at an annual rate of 6.5% net
of 5% tax on interest.
The exceptional General Assembly approved in its
meeting held on March 10, 2009 the issuance of
subordinated bonds in the amount of
USD40,000,000 divided into 4,000 bonds of
USD10,000 nominal value each. These bonds were
issued on May 30, 2009 and mature on June 30,
2014. The bonds are subject to an annual interest
of 7% payable on December 31 and June 30 of
each year.
The Group maintains enough liquid funds within its
liquidity to redeem these bonds at maturity.
In this connection, interest expense on bonds for
the year 2010 amounting to LBP4.24billion is
recorded in the consolidated income statement
(LBP3.31 billion for 2009).
Balance, January 1, 2,999,958 2,113,892Additions 3,468 788,627Write-back (75,254) (426,007)Reclassification (to)/from other liabilities (719,350) 523,446Balance, December 31, 2,208,822 2,999,958
2010December 31,
2009
LBP’000 LBP’000
Subordinated bonds 60,227,376 60,206,120Accrued interest payable 2,127,847 2,428,521
62,355,223 62,634,641
2010December 31,
2009
LBP’000 LBP’000
23. SUBORDINATED BONDS
Banque Bemo Annual Report | Page 133
In accordance with banking laws and regulations,
subordinated bonds are considered as Tier II capital
for the purposes of computation of Risk Based
Capital Ratio, to be decreased by 20% on a yearly
basis.
The capital is represented by 16,000,000 nomina-
tive shares authorized and fully paid with a par
value of LBP1,000 per share and divided as follows:
- Listed Shares: 5,600,000
- Unlisted Shares: 10,400,000
The movement of ordinary and preferred treasury
shares during 2010 and 2009 was as follows:
The Extraordinary General Assembly approved in its
meeting held on January 31, 2011, the increase of
share capital from LBP16billion to LBP62billion
thereby raising the share capital by LBP46billion
through the issuance of 46,000,000 ordinary shares
with a par value of LBP1,000 per share against a
transfer of LBP16billion from retained earnings,
free reserves, and legal reserve and the remaining
balance to be subscribed into in cash.
24. SHARE CAPITAL
On June 1, 2006, the Group issued preferred shares
in the amount of USD20million (LBP30billion) on
the basis of 200,000 shares at USD100.
The preferred shares are callable five years from
the issuance date on June 1, 2011 and bear
interest on a non-cumulative basis at an annual
rate of 8%.
25. PREFERRED SHARES
Balance - January 1 283,795 1,059,111 215,335 597,085Acquisition/disposal, net 77,200 488,219 68,460 462,026Balance - December 31 360,995 1,547,330 283,795 1,059,111
2010 2009
# of Shares Amount | LBP’000 # of Shares Amount | LBP’000
This caption represents capital injection of
USD19,306,789 made by shareholders, in the form
of shareholders’ cash contribution to capital, each to
the extent of his/her shareholding in the Bank’s
equity. Effective July 2002, the cash contribution is
subject to an interest rate of Libor + 1%.
This sort of equity instrument consists of
non-refundable capital injection which could be
converted into share capital and it has the
advantage of being booked and maintained in
foreign currencies which allows for hedging against
national currency fluctuation.
Interest on shareholders’ cash contribution is
payable yearly from the Bank’s unrestricted net
profits after receiving the approval of the Banking
Control Commission. In this connection, the related
interest expense amounted to LBP464million for
the year ended December 31, 2010 (LBP703million
for 2009). Accrued interest payable of
LBP417million and LBP633million net of the related
withheld tax, is recorded under “Other Liabilities” as
at December 31, 2010 and 2009, respectively,
(Note 21).
26. SHAREHOLDERS’ CASH CONTRIBUTION TO CAPITAL
Reserves consist of the following as at December 31, 2010 and 2009:
In accordance with the requirements of the
Lebanese Money and Credit Law, the Group trans-
fers since its inception 10% of its net income to the
legal reserve account. This reserve is not available for
distribution.
The reserve for general banking risks is constituted
according to local banking regulations from income
on the basis of a minimum of 2 per mil and a
maximum of 3 per mil of the total risk weighted
assets, off-balance sheet risk and global exchange
position as defined for the computation of the
solvency ratio at year-end. This reserve is constitut-
ed in Lebanese Pounds and in foreign currencies to
the extent of LBP1.6billion and LBP10.32billion,
respectively, in proportion to the composition of
the Group’s total risk weighted assets and off-
balance sheet items. This reserve is not available
for distribution.
27. RESERVES
Legal reserve 7,323,802 6,866,009Reserve for general banking risks 11,922,607 9,615,875Reserve for assets acquired in satisfaction of debts - Note 14 270,500 670,476Other reserves 12,718,363 12,718,363
32,235,272 29,870,723
2010December 31,
2009
LBP’000 LBP’000
Banque Bemo Annual Report | Page 135
The cumulative change in fair value of investment securities consists of the following:
28. CUMULATIVE CHANGE IN FAIR VALUE OF INVESTMENT SECURITIES
Unrealized gain/(loss) on
Lebanese treasury bills 2,973,907 (446,086) 2,527,821 3,647,001 (547,050) 3,099,951
Unrealized gain/(loss)
Lebanese Government
bonds (3,795,464) 476,169 (3,319,295) (528,271) 99,895 (428,376)
Unrealized gain /(loss) from
foreign treasury bills (10,430) 1,071 (9,359) 93,631 - 93,631
Unrealized gain/(loss)
certificates of deposit
issued by Central Bank
of Lebanon 1,608,088 (241,213) 1,366,875 753,872 (113,080) 640,792
Unrealized gain/(loss) on
corporate bonds (318,570) (6,348) (324,919) (41,999) (16,007) (58,006)
Unrealized gain/(loss) on
equity securities (177,170) (41,017) (218,186) 276,215 (163,506) 112,709
280,361 (257,424) 22,937 4,200,449 (739,748) 3,460,701
December 31, 2010 December 31, 2009
CumulativeChange in inFair Value |
LBP’000
DeferredTaxes |LBP’000
Net |LBP’000
CumulativeChange in Fair Value |
LBP’000
DeferredTaxes |LBP’000
Net |LBP’000
The movement of the cumulative change in fair value of available-for-sale investment securities during
2010 is as follows:
Balance - January 1, 2010 3,460,701Unrealized gain/(loss) during 2010 on:-Treasury bills (673,094)- Lebanese government bonds (3,660,952)- Foreign treasury bills (200,909)- Certificates of deposit issued by Central Bank of Lebanon 854,216- Corporate bonds (365,481)- Equity securities (526,510)Gain not realized upon redemption, reversed 14,597Gain recycled to income statement 638,045Change in deferred tax 482,324Balance - December 31, 2010 22,937
Group’s Share | LBP’000
The movement of the cumulative change in fair value of available-for-sale investment securities during
2009 is as follows:
Balance - January 1, 2009 (4,931,717)Unrealized gain/(loss) during 2009 on:- Treasury bills 3,398,456- Lebanese government bonds 241,627- Foreign treasury bills 93,631- Certificates of deposit issued by Central Bank of Lebanon 928,812- Corporate bonds 1,004,781- Equity securities 1,979,174Gain not realized upon redemption, reversed 25,628Gain recycled to income statement 1,507,673Change in deferred tax (787,364)Balance - December 31, 2009 3,460,701
Group’s Share | LBP’000
29. NON-CONTROLLING INTEREST
Capital 80,030 294,021Reserves and retained earnings (21,680) (234,457)(Loss)/profit for the year (98,332) (143,594)
(39,982) (84,030)
2010December 31,
2009
LBP’000 LBP’000
The consolidated profit for the year is allocated as follows between the Bank and its subsidiaries:
30. PROFIT FOR THE YEAR
Income of the Bank 15,042,337 - 15,042,337Income of subsidiaries:Bemo Securitization S.A.L. (2,375,465) (98,977) (2,474,442)Depository and Custody Co. S.A.L. 19,540 645 20,185Total 12,686,412 (98,332) 12,588,080
Year Ended | December 31, 2010
Bank’s Share |LBP’000
Total | LBP’000Non-Controlling Interest |LBP’000
Banque Bemo Annual Report | Page 137
Income of the Bank 12,277,432 - 12,277,432Income of subsidiaries:Bemo Securitization S.A.L. (398,672) (143,315) (541,987)Depository and Custody Co. S.A.L. (6,474) (279) (6,753)Total 11,872,286 (143,594) 11,728,692
Year Ended | December 31, 2009
Bank’s Share |LBP’000
Total | LBP’000
Non-Controlling Interest |LBP’000
The following dividends were declared and paid by the Group:
31. DIVIDENDS PAID
LBP225 and LBP225 per ordinary share paid by the Bank in 2010 and 2009 respectively 3,517,021 3,551,358USD8 per preferred share paid by the Bank in 2010 and 2009 2,412,000 2,412,000
5,929,021 5,963,358
2010 2009
LBP’000 LBP’000
Interest income on the Group’s trading portfolio is included under “net interest and other gains/(losses)
on trading portfolio” (Note 36).
32. INTEREST INCOME
Interest income from:Term deposits with Central Banks 3,976,588 4,729,001Deposits with banks and financial institutions 1,035,056 2,639,486Deposits with related party banks and financial institutions 142,586 183,206Available-for-sale investment securities 19,850,791 18,728,162Held-to-maturity investment securities 4,217,823 3,302,012Loans and advances to customers 44,312,170 42,814,323Loans and advances to related parties 309,600 17,158Interest realized on impaired loans and advances toCustomers - Note 9 236,842 385,335
74,081,456 72,798,683
2010Year Ended | December 31,
2009
LBP’000 LBP’000
This caption consists of the following:
33. INTEREST EXPENSE
Interest expense on:Deposits and borrowings from banks and financial institutions 333,632 1,137,604Deposits and borrowings from related party banks andfinancial institutions 251,058 156,058Customers’ accounts at amortized cost 49,162,128 47,348,516Related parties’ accounts at amortized cost 99,674 376,102Subordinated bonds - Note 23 4,242,256 3,318,361Shareholders’ cash contribution to capital - Note 26 463,768 703,487
54,552,516 53,040,128
2010Year Ended | December 31,
2009
LBP’000 LBP’000
34. FEE AND COMMISSION INCOME
Commission on documentary credits 1,786,440 1,717,601Commission on letters of guarantee 801,343 936,216Service fees on customers’ transactions 5,228,492 5,110,273Other 564,073 407,126
8,380,348 8,171,216
2010Year Ended | December 31,
2009
LBP’000 LBP’000
This caption consists of the following:
35. FEE AND COMMISSION EXPENSE
Commission on transactions with banks 469,535 505,423Commission on transactions with related party banks 41,564 33,337Other 263,317 273,470
774,416 812,230
2010Year Ended | December 31,
2009
LBP’000 LBP’000
This caption consists of the following:
36. NET INTEREST AND OTHER GAINS / (LOSSES) ON TRADING PORTFOLIO
Dividends received on equity securities 304,122 368,319Change in fair value of trading portfolio (net) - Note 7 21,863 101,283Loss on sale of trading assets - (52,190)Gain on sale of trading assets 762 14,924
326,747 432,336
2010Year Ended | December 31,
2009
LBP’000 LBP’000
Banque Bemo Annual Report | Page 139
This caption consists of the following:
37. OTHER OPERATING INCOME
Gain on sale of available-for-sale securities:- Equities 334,695 1,099,333- Lebanese Government bonds 2,556,442 1,979,777- Corporate bonds 687,021 628- Lebanese treasury bills 1,638,570 533,525- Foreign treasury bills 235,310 13,174- Certificates of deposit issued by Central Bank of Lebanon 450,050 120,443Dividends on available-for-sale securities 215,285 204,380Share in profits of associates - Note 13 4,768,583 4,781,458Revenues from securitization operations 652,936 1,308,435Other 1,264,473 1,226,291
12,803,365 11,267,444
2010Year Ended | December 31,
2009
LBP’000 LBP’000
This caption consists of the following:
38. STAFF COSTS
The computation of the basic earnings per share is
based on the Group’s net income before non-
recurring income, net of dividends paid to preferred
shares holders, and the weighted average number of
outstanding shares during each year, net of treasury
shares held by the Group.
The weighted average number of shares to
compute basic earnings per share is 15,644,314
shares in 2010 (15,756,078 shares in 2009).
39. EARNINGS PER SHARE
Salaries and related charges 14,103,061 12,623,872Social Security contributions 1,577,279 1,491,484Provision for end-of-service indemnities (net) 492,573 577,541
16,172,913 14,692,897
2010Year Ended | December 31,
2009
LBP’000 LBP’000
The guarantees and standby letters of credit and
the documentary and commercial letters of credit
represent financial instruments with contractual
amounts representing credit risk. The guarantees
and standby letters of credit represent irrevocable
assurances that the Group will make payments in
the event that a customer cannot meet its obligations
to third parties and are not different from loans and
advances on the balance sheet. However,
documentary and commercial letters of credit,
which represent written undertakings by the Group
on behalf of a customer authorizing a third party to
draw drafts on the Group up to a stipulated amount
under specific terms and conditions, are collateralized
by the underlying shipments documents of goods
to which they relate and, therefore, have
significantly less risks.
40. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
In the ordinary course of its activities, the Group
conducts transactions with related parties including
shareholders, directors, subsidiaries and associates.
Balances with related parties excluding accrued
interest consist of the following:
41. FIDUCIARY DEPOSITS AND ASSETS UNDER MANAGEMENT
42. BALANCES / TRANSACTIONS WITH RELATED PARTIES
Fiduciary deposits invested in certificates ofdeposit issued by the Central Bank of Lebanon 2,965,479 2,965,479Fiduciary deposits from related parties invested in loansgranted to related party companies 6,633,000 7,499,813Shares in trust 2,929,719 2,928,323Funds under trust - 202,253
12,528,198 13,595,868
2010December 31,
2009
Resident Customer |LBP’000
Resident Customer |LBP’000
Shareholders, directors and other key managementpersonnel and close family members:Direct facilities and credit balances:- Secured loans and advances 362,422 540,178- Unsecured loans and advances 245,248 734,004- Deposits 9,087,674 9,774,690
2010December 31,
2009
LBP’000 LBP’000
Banque Bemo Annual Report | Page 141
Interest rates charged on balances outstanding are
the same as applicable rates that would be charged
in an arm’s length transaction. Secured loans and
advances are covered by real estate mortgages to
the extent of LBP372.82million and by pledged
deposits of the respective borrowers to the extent
of LBP2.4billion.
The remunerations of executive management
amounted to LBP1.93billion during 2010
(LBP1.74billion 2009) in addition to incentives
linked to performance.
Associated companies:Direct facilities and credit balances:- Secured loans and advances 2,407,349 5,046,068- Unsecured loans and advances 714,846 254,900- Deposits 15,415,695 2,102,993
Indirect facilities:- Letters of guarantee 172,814 346,610
2010December 31,
2009
LBP’000 LBP’000
Cash and cash equivalents for the purpose of the cash flows statement consist of the following:
43. CASH AND CASH EQUIVALENTS
Cash 7,740,077 5,445,399 5,765,672Current accounts with Central Banks 5,501,301 2,867,374 1,232,111Time deposits with Central Banks 7,499,820 15,075,000 14,196,880Checks for collection and current accountswith banks and financial institutions 67,459,872 169,249,533 74,181,773Time deposits with banks and financialinstitutions 150,234,441 103,842,150 23,724,943Current deposits from banks (23,601,432) (106,464,416) (46,529,081)Time deposits from banks (12,166,361) (27,852,500) (46,412,500)
202,667,718 162,162,540 26,159,798
2010
December 31,
2009 2008
LBP’000 LBP’000LBP’000
Time deposits with and from Central Banks and
banks and financial institutions represent
inter-bank placements and borrowings with an
original term of 90 days or less.
The following operating, investing and financing
activities that represent non-cash items were
excluded from the cash flow statement:
(a) Decrease in the fair value of available-for-sale
securities in the amount of LBP3.92billlion during
2010 (increase in the amount of LBP9.18billion in
2009).
(b) Decrease in deferred tax liability under “Other
liabilities” in the amount of LBP482million during
2010 (increase in deferred tax liability under “Other
liabilities” in the amount of LBP787million in
2009).
(c) Transfer of assets acquired in satisfaction of
debts to property and equipment in the amount of
LBP7.22billion during the year ended December 31,
2010.
The carrying values of financial assets given as collateral are as follows:
44. COLLATERAL GIVEN
Deposits with banks and financial institutions:Union Bank of Switzerland 8,702,979 Forward contracts 143,123,134
Options and swaps transactions 44,590,981Deutsche Bank 7,455,352 Acceptances less than one year 1,536,860Commerzbank 13,567,500 Forward contracts 2,203,559
Acceptances less than one year 5,309,15629,725,831
Pledged deposits with related parties:Bemo Paris 8,216,754 Letters of credit and letters of
guarantee NIL37,942,585
December 31, 2010
Pledged Amount |LBP’000
Nature of FacilityAmount ofFacility | LBP’000
Pledged Amount |LBP’000
Nature of FacilityAmount ofFacility | LBP’000
Deposits with banks and financial institutions:Union Bank of Switzerland 5,223,263 Forward contracts 139,898,696
Options and swaps transactions 128,662,762Deutsche Bank 7,428,845 Acceptances less than one year 4,886,267Commerzbank 12,060,000 Forward contracts 8,860,216
Acceptances less than one year 140,95124,712,108
Pledged deposits with related parties:Bemo Paris 8,165,003 Letters of credit and letters of
guarantees NIL8,165,003
32,877,111
December 31, 2009
Banque Bemo Annual Report | Page 143
The Group manages its capital to comply with thecapital adequacy requirements set by the CentralBank of Lebanon, the Group’s lead regulator.
Central Bank of Lebanon requires each bank orbanking group to hold a minimum level of regulatory capital of LBP10billion for the headoffice and LBP500million for each local branch andLBP1.5billion for each branch abroad. Furthermore,the minimum capital adequacy ratio set by the regulator is 8% (Basel II Ratio).
The Group’s capital is split as follows:
Tier I capital: Comprises share capital, after deduction of treasury shares, shareholders’ cashcontribution to capital, non-cumulative perpetualpreferred shares, share premium, reserves fromappropriation of profits, retained earnings (exclusive of current year’s net profit) and minorityinterest. Goodwill and unfavorable change in fairvalue of available-for-sale securities are deductedfrom Tier I Capital.
Tier II capital: Comprises qualifying subordinatedliabilities, collective impairment allowance, cumulative favorable change in fair value of available-for-sale securities and revaluation surplusof owned properties.
Investments in associates are deducted from Tier Iand Tier II capital.
Furthermore, various limits are applied to the elements of capital base: Qualifying Tier II capitalcannot exceed Tier I capital and qualifying shortterm subordinated loan capital may not exceed50% of Tier I capital.
The Group has complied with imposed capitalrequirements throughout the period.
The Group’s risk based capital ratio according to BasleII as of December 31, 2010 and 2009, is as follows:
45. CAPITAL MANAGEMENT
Risk-weighted assets 1,194,506 1,143,926Credit risk 1,129,162 1,078,745Market risk 8,013 7,825Operational risk 57,331 57,356
Tier I capital (including net income less proposed dividends and Reserves for assets acquired in satisfaction of loans) 101,346 97,976Tier II capital 30,979 43,318Total capital 132,325 141,294
Capital adequacy ratio - Tier I 8.48% 8.56%Capital adequacy ratio - Tier I and Tier II 11.08% 12.35%
2010December 31,
2009
LBP million LBP million
The Group’s capital strategy is based on the following
constraints:
> Comply with regulatory ratios, on individual and
consolidated basis, primarily in respect of the
Capital Adequacy Ratio under Basle II.
> Ensure a high Return on Equity for the common
shareholders.
> Dividends payout policy is consistent to provide
shareholders with acceptable dividend yield.
The Group’s total equity funding consists of the
following:
Consequently, the allocation of equity among different categories of equity components is as follows:
Equity allotted to common shares 102,220,485 99,522,284 2,698,201 2.71Preferred shares 30,150,000 30,150,000 - -Subordinated bonds 62,355,223 62,634,641 (279,418) 0.45Total equity 194,725,708 192,306,925 2,418,783
2010Balances | December 31, Variation
2009 Amount
LBP’000 LBP’000 LBP’000 %
Common shareholders’ equity 52.49 51.75Preferred shares 15.49 15.68Subordinated debts 32.02 32.57Total equity 100.00 100.00
2010December 31,
As % of Total Equity
2009
% %
The Group has exposure to the following risks
arising from financial instruments:
- Credit risk
- Liquidity risk
- Market risk
The Board of Directors has overall responsibility for
the establishment and oversight of the Group’s risk
management framework. The Board has estab-
lished a credit and market risk management
department and various committees to develop
and monitor the Group’s risk management policies
and their implementation.
The Group’s risk management policies are estab-
lished to identify and analyze the risks faced by the
Group, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits.
Regular review of risk management policies and
systems to reflect changes in market conditions,
products and services offered is the responsibility
of the various committees and the Board of
Directors. The Group, through its management
standards and procedures, aims to develop a
disciplined control environment, in which employees
understand their roles and obligations
46. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Banque Bemo Annual Report | Page 145
Credit risk is the risk of financial loss to the Group if
a counterparty to a financial instrument fails to
discharge an obligation. Financial assets that are
mainly exposed to credit risk are deposits with
banks, loans and advances and investment securities.
Credit risk also arises from off-balance sheet finan-
cial instruments such as letters of credit and letters
of guarantee.
Concentration of credit risk arises when a number
of counterparties are engaged in similar business
activities, or activities in the same geographic
region, or have similar economic features that
would cause their ability to meet contractual
obligations to be similarly affected by changes in
economic, political or other conditions.
Concentrations of credit risk indicate the relative
sensitivity of the Group’s performance affecting a
particular industry or geographical location.
The Group manages credit risk by developing poli-
cies and procedures that are regularly reviewed to
ensure continuous effective credit risk manage-
ment in light of changes in business strategy.
Credit risk management policies and practices define
lending limits, credit approval authorization matrices,
and risk identification and monitoring systems. The
Group applies an internal rating system that takes
into account criteria related to the borrower (e.g.
nature of the activity, financial performance and
structure, credit history, cash flows, projected
financials and management) and to the credit quality
(e.g. purpose, amount, tenor, collateral presented
as a second way out). The Group also sets lending
limits to a single obligor or a related group of obligors.
A. CREDIT RISK
(1) Management of credit risk
(a) Loans and advances
The Group assesses the probability of default of
individual counterparties using internal rating tools.
The Group’s rating scale reflects the range of
default probabilities defined for each rating class as
explained below:
> Special Mention /Vulnerable: Loans and
advances rated Watch List are loans that are not
impaired but for which the Group determines that
they require special monitoring.
> Past due but not impaired: Loans past due but
not impaired are loans where contractual interest
or principal are past due but the Group’s management
believes that impairment is not appropriate on the
basis of the level of collateral available and the
stage of collection of amounts owed to the Group.
> Substandard loans: Substandard loans are
loans that are inadequately protected by current
sound worth and paying capacity of the obligor or
by any collateral pledged in favor of the group.
(2) Measurement of credit risk
Exposures where an indication of the possibility
that the Group will sustain a loss if certain
irregularities and deficiencies are not addressed
exists are classified under this category.
> Doubtful loans: Doubtful loans have, in
addition to the weaknesses existing in substandard
loans, characteristics indicating that current existing
facts and figures make the collection in full highly
improbable. The probability of loss is high but
certain reasonable and specific pending factors
which if addressed could strengthen the probability
of collection, result in the deferral of the exposure
as an estimated loss until a more exact status is
determined.
> Loss: Loans classified as loss are considered as
uncollectible and of such minimal value that their
classification as assets is not warranted. This does
not mean that the loan is absolutely unrecoverable
or has no salvage value. However, the amount of
loss is difficult to measure and the Group does not
wish to defer the writing of the loan even partial
recovery might occur in the future. Loans are
charged off in the period in which they are deemed
uncollectible and therefore classified as loss.
The Group establishes an allowance for impairment
that represents its estimate of incurred losses in its
loan portfolio. The main component of its allowance
are specific loss component that relate to individually
significant exposures, and a minor part of a
collective loan loss allowance established for retail
and Small and Medium Enterprises (SME's) where
there is objective evidence that unidentified losses
exist at the reporting date. This provision is
estimated based on various factors including the
current economic conditions, the experience the
Group has had in dealing with a borrower or group of
borrowers and available historical default information.
Collateral:
The Group mainly employs collateral to mitigate
credit risk. The principal collateral types for loans
and advances are:
- Pledged deposits
- Mortgages over real estate properties (land,
commercial and residential properties)
- Bank guarantees
- Financial instruments (equities and debt securities)
- Business other assets (such as inventories and
accounts receivable)
(3) Risk mitigation policies
(a) Exposure to credit risk and concentration by
counterparty
The tables below reflect the Group’s exposure to
credit risk by counterparty segregated between the
categories of financial assets:
(4) Financial assets with credit risk exposure and related concentrations
Banque Bemo Annual Report | Page 147
(a.1) Deposits with central banks (excluding cash on hand):
(a.2) Deposits with banks and financial institutions (excluding accrued interest):
Less than LBP15billion 1 544,056 1.65 6,202,619 2.02Over LBP15billion 1 32,576,515 98.35 300,911,611 97.98
2 33,120,571 100.00 307,114,230 100.00
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
No. of Counter |Parties
Total Amount |LBP’000
% to TotalDeposits |
%
Total Amount |LBP’000
% to TotalDeposits |
%BRACKET
Less than LBP15billion 1 2,981,995 9.08 7,280,228 2.11Over LBP15billion 1 29,845,383 90.92 336,530,225 97.89
2 32,827,378 100.00 343,810,453 100.00
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
No. of Counter |Parties
Total Amount |LBP’000
% to TotalDeposits |
%
Total Amount |LBP’000
% to TotalDeposits |
%BRACKET
Less than LBP5billion 1,521,548 100.00 32,333,181 11.89From LBP5billion to LBP15billion - - 113,691,391 41.79Over LBP15billion - - 126,007,336 46.32
1,521,548 100.00 272,031,908 100.00
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
Total Amount |LBP’000
% to TotalDeposits |
%
Total Amount |LBP’000
% to TotalDeposits |
%BRACKET
Less than LBP5billion 460,990 37.60 30,715,755 8.41From LBP5billion to LBP15billion - - 98,041,009 26.85From LBP15billion to LBP30billion 765,024 62.40 161,647,880 44.27Over LBP30billion - - 74,736,245 20.47
1,226,014 100.00 365,140,889 100.00
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
Total Amount |LBP’000
% to TotalDeposits |
%
Total Amount |LBP’000
% to TotalDeposits |
%BRACKET
(a.3) Loans and advances to customers (excluding accrued interest and unearned interest):
Less than LBP500million 1,024 2,190,970 24.59 57,614,284 8.21From LBP500million to LBP5billion 201 6,659,666 74.73 335,596,995 47.83Over LBP5billion 28 60,601 0.68 308,384,165 43.96
1,253 8,911,237 100.00 701,595,444 100.00
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
No. of Counter |Parties
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
Less than LBP500million 1,044 1,557,639 20.98 56,442,257 9.15From LBP500million to LBP5billion 169 5,849,186 78.79 267,968,124 43.47Over LBP5billion 26 17,008 0.23 291,977,692 47.38
1,239 7,423,833 100.00 616,388,073 100.00
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
No. of Counter |Parties
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
(a.4) Loans and advances to related parties:
Less than LBP500million 132 100.00 624,186 16.65From LBP500million to LBP1.5billion - - 698,199 18.63Over LBP1.5billion - - 2,425,698 64.72
132 100.00 3,748,083 100.00
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
Less than LBP500million 148 33.03 1,010,677 15.37From LBP500million to LBP1.5billion 300 66.97 3,354,912 50.30Over LBP1.5billion - - 2,304,701 34.33
448 100.00 6,670,290 100.00
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
Banque Bemo Annual Report | Page 149
(a.5) Available-for-sale investment securities:
Less than LBP15billion 615,120 0.31 69,514,462 47.56 46From LBP15billion toLBP50billion - - 15,579,714 10.66 1Over LBP50billion 199,316,869 99.69 61,072,306 41.78 1
199,931,989 100.00 146,166,482 100.00 48
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
No. of CounterParties |
Total Amount |LBP’000
% to Total |%
Total Amount |LBP’000
% to Total | %BRACKET
Less than LBP15billion 615,120 0.33 60,970,880 45.24 53From LBP15billion toLBP50billion 22,108,829 12.01 73,807,195 54.76 3Over LBP50billion 161,343,264 87.66 - - 1
184,067,213 100.00 134,778,075 100.00 57
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
No. of CounterParties |
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to TotalDeposits |
%BRACKET
(a.6) Held-to-maturity investment securities:
Less than LBP5billion - - 7,504,071 23.11 13Over LBP5billion 5,243,613 100.00 24,962,198 76.89 1
5,243,613 100.00 32,466,269 100.00 14
LBP Base Accounts
December 31, 2010
F/Cy Base Accounts
No. of CounterParties|
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
Less than LBP5billion - - 8,963,491 26.42 12Over LBP5billion 5,243,613 100.00 24,962,193 73.58 1
5,243,613 100.00 33,925,684 100.00 13
LBP Base Accounts
December 31, 2009
F/Cy Base Accounts
No. of CounterParties |
Total Amount |LBP’000
% to Total | %
Total Amount |LBP’000
% to Total | %BRACKET
Below are the details of the Group’s exposure to credit risk with respect to loans and advances to
customers:
Regular accounts 709,312,388 - 709,312,388 193,787,905 85,251,783 19,258,328 - 298,298,016
Past due regular loans and
advances but not impaired:
Between 30-60 days 79,561 - 79,561 - - - - -
Between 60-90 days 40,340 - 40,340 - - - - -
Between 90-180 days 47,357 - 47,357 - - - - -
Beyond 180 days 29,515 - 29,515 - - - - -
Impaired:
Substandard 675,247 - 675,247 - 1,703,475 220,218 - 1,923,693
Doubtful and bad loans 1,793,356 (1,402,966) 390,390 - 972,338 - - 972,338
Rescheduled 106,621 (106,621) - - 67,837 - - 67,837
712,084,385 (1,509,587) 710,574,798 193,787,905 87,995,433 19,478,546 - 301,261,884
Fair Value of Collateral Held
December 31, 2010
Allo
wan
ce f
orIm
pairm
ent
|LB
P’00
0
Net
Exp
osur
e |
LBP’
000
Pled
ged
Fund
s |
LBP’
000
Prop
erty
|
LBP’
000
Gro
ss L
oans
Net
of U
nrea
lized
Inte
rest
|
LBP’
000
Deb
t Se
curit
ies
|LB
P’00
0
Tota
l |LB
P’00
0
Equi
ties
|LB
P’00
0
Regular accounts 621,582,039 - 621,582,039 198,684,869 77,196,981 24,946,618 300,828,468
Past due regular loans and
advances but not impaired:
Between 30-60 days 86,206 - 86,206 - - - -
Between 60-90 days 68,299 - 68,299 - - - -
Between 90-180 days 192,305 - 192,305 - - - -
Beyond 180 days 334,780 - 334,780 - - - -
Impaired:
Substandard 1,267,867 - 1,267,867 467,251 5,472,225 285,294 6,224,770
Doubtful and bad loans 1,706,331 (1,332,794) 373,537 - 904,500 - 904,500
Rescheduled 186,525 (180,323) 6,202 - 67,838 - 67,838
625,424,352 (1,513,117) 623,911,235 199,152,120 83,641,544 25,231,912 308,025,576
Fair Value of Collateral Held
December 31, 2009
Allo
wan
ce f
orIm
pairm
ent
|LB
P’00
0
Net
Exp
osur
e |
LBP’
000
Pled
ged
Fund
s |
LBP’
000
Prop
erty
|
LBP’
000
Gro
ss L
oans
Net
of U
nrea
lized
Inte
rest
|
LBP’
000
Tota
l |LB
P’00
0
Deb
t Se
curit
ites
|LB
P’00
0
Banque Bemo Annual Report | Page 151
Balance sheet Exposure:Cash and central banks 347,974,878 - - - - - - - 347,974,878Deposits with banks and financialinstitutions - 273,606,963 - - - - - - 273,606,963Trading assets - 3,791,378 - - - - - - 3,791,378Loans to banks - 4,014,194 - - - - - - 4,014,194Loans and advances to customers - 6,163,271 79,828,360 106,918,462 389,115,504 54,828,693 73,181,420 539,088 710,574,798Loans and advances to related parties - - - 714,838 2,407,349 8 607,670 18,350 3,748,215Available-for-sale investmentsecurities 300,237,632 26,986,496 3,017,231 1,961,372 10,236,741 3,658,999 - - 346,098,471Held-to-maturity investmentsecurities 30,605,079 5,788,337 - 1,316,466 - - - - 37,709,882Customers' liability under acceptances - - - 11,444,964 23,729,966 109,707 - - 35,284,637Other assets - - - - - - - 3,360,044 3,360,044
678,817,589 320,350,639 82,845,591 122,356,102 425,489,560 58,597,407 73,789,090 3,917,4821,766,163,460Off-Balance sheet Risks:Documentary and commercial letters of credit - - 549,837 21,817,481 68,623,241 71,760 - - 91,062,319Guarantees and standby letters of credit 1,962,845 6,573,826 16,053,173 16,355,601 14,698,048 2,968,361 1,813,631 - 60,425,485Forward Contracts - 152,781,871 - 1,360,256 2,216,241 - 9,869,050 - 166,227,418
December 31, 2010
Fina
ncia
l Se
rvic
es |
LBP’
000
Real
Est
ate
Dev
elop
men
t |
LBP’
000
Man
ufac
turin
g |
LBP’
000
Cons
umer
Goo
dsTr
aidi
ng
|LB
P’00
0
Sove
reig
n |
LBP’
000
Priv
ate
Indi
vidu
als
|LB
P’00
0
Oth
er |
LBP’
000
Tota
l |LB
P’00
0
Serv
ices
|LB
P’00
0
Balance sheet Exposure:Cash and central banks 382,083,230 - - - - - - - 382,083,230Deposits with banks and financialinstitutions - 366,584,801 - - - - - - 366,584,801Trading assets - 3,949,196 - 8,644 - - - - 3,957,840Loans to banks - 570,233 - - - - - - 570,233Loans and advances to customers - 7,026,988 76,490,429 109,506,458 316,615,597 52,027,444 62,157,238 87,081 623,911,235Loans and advances to related parties - - 2,848,044 - 2,304,702 243,810 1,274,182 - 6,670,738Available-for-sale investmentsecurities 265,383,455 30,679,857 3,717,959 6,346,081 10,203,885 2,514,051 - - 318,845,288Held-to-maturity investmentsecurities 30,613,641 7,116,455 - 1,439,201 - - - - 39,169,297Customers' liability underacceptances - - 35,331 8,595,566 24,081,043 - - - 32,711,940Other assets - - - - - - - 3,134,981 3,134,981
678,080,326 415,927,530 83,091,763 125,895,950 353,205,227 54,785,305 63,431,420 3,222,062 1,777,639,583Off-Balance sheet Risks:Documentary and commercial letters of credit - - - 21,926,767 68,458,346 - - - 90,385,113Guarantees and standby letters of credit - 25,423,088 16,715,956 13,733,326 14,602,619 2,842,756 1,235,735 - 74,553,480Forward Contracts - 158,864,821 - 112,143 8,905,142 - 9,816,502 - 177,698,608
December 31, 2009
Fina
ncia
l Se
rvic
es |
LBP’
000
Real
Est
ate
Dev
elop
men
t |
LBP’
000
Man
ufac
turin
g |
LBP’
000
Cons
umer
Goo
dsTr
aidi
ng
|LB
P’00
0
Sove
reig
n |
LBP’
000
Priv
ate
Indi
vidu
als
|LB
P’00
0
Oth
er |
LBP’
000
Tota
l |LB
P’00
0
Serv
ices
|LB
P’00
0
(b) Concentration of financial assets by industry or sector:
Cash and Central Banks 341,770,385 - - 6,204,493 - 347,974,878Deposits with banks and financial institutions 32,489,379 20,133,379 35,595,790 184,683,423 704,992 273,606,963Trading assets 3,791,378 - - - - 3,791,378Loans to banks 4,014,194 - - - - 4,014,194Loans and advances to customers 641,536,440 66,655,123 41,759 2,341,476 - 710,574,798Loans and advances to related parties 3,731,611 - - 16,604 - 3,748,215Available for saleinvestment securities 317,229,507 4,875,369 11,614,764 12,378,831 - 346,098,471Held-to-maturity investment securities 31,777,485 399,270 3,885,304 1,647,823 - 37,709,882Customers' liability under acceptances 14,883,784 20,400,853 - - - 35,284,637Investments in associates - 34,545,320 - - - 34,545,320Assets acquired in satisfaction of loans 2,831,019 - - - - 2,831,019Property and equipment 17,844,411 - - 630,705 - 18,475,116Intangible assets 803,733 - - 27,552 - 831,285Other assets 4,371,510 76,089 - 13,325 - 4,460,924Total Assets 1,417,074,836 147,085,403 51,137,617 207,944,232 704,992 1,823,947,080
FINANCIAL INSTRUMENTSWITH OFF-BALANCE SHEET RISK:Documentary and commercial letters of credit 35,092,875 54,523,318 - 1,446,126 - 91,062,319Guarantees and standby letters of credit 48,313,827 11,668,505 1,130 442,023 - 60,425,485Forward contracts 16,859,716 609,397 - 148,758,305 - 166,227,418
LIABILITIESDeposits and borrowings from banks 18,319,238 22,990,768 2,907,889 6,325,514 1,980,323 52,523,732Customers' accounts at amortized cost 1,062,989,175 321,823,907 11,863,653 92,803,025 12,224,422 1,501,704,182Related parties' accounts at amortized cost 24,497,649 - - 16,922 - 24,514,571Customers' acceptance liability - 4,190,530 566,792 13,041,511 17,485,804 35,284,637Other liabilities 8,927,908 660,125 - 409,885 - 9,997,918Provisions 2,990,559 1,976,333 - 269,422 - 5,236,314Subordinated bonds 62,355,223 - - - - 62,355,223Total liabilities 1,180,079,752 351,641,663 15,338,334 112,866,279 31,690,549 1,691,616,577
December 31, 2010
Middle Eastand Africa |
LBP’000North America |
LBP’000Europe |LBP’000
Other |LBP’000
Lebanon |LBP’000
Total |LBP’000
(c) Concentration of assets and liabilities by geographical area:
ASSETS
Banque Bemo Annual Report | Page 153
Cash and central banks 374,806,898 - - 7,276,332 - 382,083,230Deposits with banks andfinancial institutions 36,518,756 22,203,425 43,563,250 260,427,002 3,872,368 366,584,801Trading assets 3,957,840 - - - - 3,957,840Loans to banks 570,233 - - - - 570,233Loans and advances to customers 561,292,306 62,134,399 - 94,410 390,120 623,911,235Loans and advances to related Parties 6,641,924 - - 28,814 - 6,670,738Available for sale investment securities 274,475,587 7,773,678 23,214,787 13,131,858 249,378 318,845,288Held-to-maturity investment securities 31,768,859 407,835 5,236,741 1,755,862 - 39,169,297Customers' liability underacceptances 12,905,967 19,805,973 - - - 32,711,940Investments in associates - 29,776,737 - - - 29,776,737Assets acquired in satisfaction of loans 10,053,946 - - - - 10,053,946Property and equipment 11,648,830 - - 587,689 - 12,236,519Intangible assets 961,654 - - 14,208 - 975,862Other assets 5,036,257 - - 187,462 - 5,223,719Total Assets 1,330,639,057 142,102,047 72,014,778 283,503,637 4,511,866 1,832,771,385
FINANCIAL INSTRUMENTSWITH OFF-BALANCE SHEET RISK:Documentary and commercial letters of credit 35,147,014 53,650,077 - 1,588,022 - 90,38 5,113Guarantees and standby letters of credit 58,398,919 14,772,766 1,131 1,380,664 - 74,553,480Forward contracts 18,051,740 4,355,484 - 155,291,384 - 177,698,608
LIABILITIESDeposits and borrowings from banks 25,665,860 27,976,195 4,320,564 81,322,348 - 139,284,967Customers' accounts atamortized cost 996,671,918 292,658,356 7,503,460 125,210,169 21,761,524 1,443,805,427Related parties' accounts at amortized cost 11,961,482 - - - - 11,961,482Acceptance liability 370,812 3,736,851 201,402 11,957,081 16,445,794 32,711,940Other liabilities 6,251,291 575,368 - 459,565 - 7,286,224Provisions 3,278,625 1,976,333 - 243,492 - 5,498,450Subordinated bonds 62,634,641 - - - - 62,634,641Total liabilities 1,106,834,629 326,923,103 12,025,426 219,192,655 38,207,318 1,703,183,131
December 31, 2009
Middle Eastand Africa |
LBP’000North America |
LBP’000Europe |LBP’000
Other |LBP’000
Lebanon |LBP’000
Total |LBP’000
ASSETS
Liquidity risk is the risk that the Group will be
unable to meet its net funding requirements.
Liquidity risk can be caused by market disruptions
or credit downgrades, which may cause certain
sources of funding to dry up immediately.
Liquidity risk is the Group’s ability to ensure the
availability of funding to meet commitments, both
on-balance and off-balance sheet commitments, at
a reasonable cost on time. The management of
liquidity should not lead to threats to the Group’s
solvency.
Liquidity risk arises when in case of crisis, refinanc-
ing may only be raised at higher market rates
(funding risk), or assets may only be liquidated at
a discount to market rates (market liquidity risk).
Liquidity risk is also caused by mismatches in the
maturities of assets and liabilities (uses and sources
of funds).
Residual contractual maturities of financial assets and liabilities:
The tables below show the Group’s assets and liabilities in Lebanese Pounds base accounts segregated
by maturity:
B. LIQUIDITY RISK
(1) Management of Liquidity risk
Cash and Central Banks 35,428,348 541,988 - - - - 35,970,336
Deposits with banks
and financial institutions 1,524,939 - - - - - 1,524,939
Loans and advances to customers 8,842,139 8,100 34,263 22,595 - - 8,907,097
Loans and advances to related parties 132 - - - - - 132
Available for sale investment securities 651,167 2,075,404 38,299,380 89,484,753 44,099,117 25,322,169 199,931,990
Held-to-maturity investment securities - - - - 5,243,613 - 5,243,613
Property and equipment 17,769,484 - - - - - 17,769,484
Intangible assets 803,733 - - - - - 803,733
Other assets 1,559,028 - - - - - 1,559,028
Total Assets 66,578,970 2,625,492 38,333,643 89,507,348 49,342,730 25,322,169 271,710,352
LIABILITIESDeposits and borrowings from banks 931 10,069,112 - - - - 10,070,043
Customers' accounts at
amortized cost 22,534,668 170,225,310 14,552,324 3,796,666 - - 211,108,968
Related parties' accounts at
amortized cost 3,514,581 2,150,459 - - - - 5,665,040
Other liabilities 5,159,966 - - - - - 5,159,966
Provisions 2,983,024 - - - - - 2,983,024
Total Liabilities 34,193,170 182,444,881 14,552,324 3,796,666 - - 234,987,041
Maturity Gap 32,385,800 (179,819,389) 23,781,319 85,710,682 49,342,730 25,322,169 36,723,311
LBP Base Accounts
December 31, 2010
Up to 3Months |LBP’000
3 Months to 1 year |LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
Accounts with NoMaturity |LBP’000
Total |LBP’000
5 to 10 Years |
LBP’000
ASSETS
Banque Bemo Annual Report | Page 155
The tables below show the Group’s assets and liabilities in Foreign Currencies base accounts segregated by
maturity:
Cash and Central Banks 17,129,926 28,800,816 8,291,250 130,813,330 126,969,220 - - 312,004,542
Deposits with banks
and financial institutions 83,519,947 182,326,913 6,235,164 - - - - 272,082,024
Trading assets 3,791,378 - - - - - - 3,791,378
Loans to banks 4,014,194 - - - - - - 4,014,194
Loans and advances
to customers 561,037,971 118,725,519 20,795,966 804,126 304,119 - - 701,667,701
Loans and advances to
related parties 624,185 698,200 2,425,698 - - - - 3,748,083
Available for sale
investment securities 3,141,299 604,147 18,099,078 64,894,089 27,746,035 26,037,885 5,643,948 146,166,481
Held-to-maturity investment
securities - 247,508 458,495 31,760,266 - - - 32,466,269
Customers' liability under
acceptances - 28,050,264 7,234,373 - - - - 35,284,637
Investments in associates 34,545,320 - - - - - - 34,545,320
Assets acquired in satisfaction
of loans 2,831,019 - - - - - - 2,831,019
Property and equipment 705,632 - - - - - - 705,632
Intangible assets 27,552 - - - - - - 27,552
Other assets 2,886,030 - 13,325 - - - 2,541 2,901,896
Total Assets 714,254,453 359,453,367 63,553,349 228,271,811 155,019,374 26,037,885 5,646,489 1,552,236,728
LIABILITIESDeposits and borrowings
from banks 25,414,425 16,564,130 475,134 - - - - 42,453,689
Customers' accounts at
amortized cost 304,630,607 927,899,595 58,065,012 - - - - 1,290,595,214
Related parties' accounts
at amortized cost 9,924,349 8,925,182 - - - - - 18,849,531
Liability under acceptances - 28,050,264 7,234,373 - - - - 35,284,637
Other liabilities 4,467,321 - 78,176 292,455 - - - 4,837,952
Provisions 2,253,290 - - - - - - 2,253,290
Subordinated bonds - - - - 62,355,223 - - 62,355,223
Total Liabilities 346,689,992 981,439,171 65,852,695 292,455 62,355,223 - - 1,456,629,536
Maturity Gap 367,564,461 (621,985,804) (2,299,346) 227,979,356 92,664,151 26,037,885 5,646,489 95,607,192
F/Cy Base Accounts
December 31, 2010
Up to 3Months |LBP’000
3 Months to 1 year |LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
Accounts with NoMaturity |LBP’000
Total |LBP’000
5 to 10 Years |
LBP’000
Over 10 Years |
LBP’000
ASSETS
Cash and Central Banks 31,546,860 2,981,842 - - - 34,528,702
Deposits with banks and
financial institutions 1,227,983 - - - - 1,227,983
Loans and advances to customers 7,305,064 89,015 26,880 - - 7,420,959
Loans and advances to related parties 447 - - - - 447
Available-for sale investment securities 615,120 5,007,276 30,930,051 123,658,781 23,855,981 184,067,209
Held-to-maturity investment securities - - - - 5,243,613 5,243,613
Property and equipment 11,598,226 - - - - 11,598,226
Intangible assets 961,654 - - - - 961,654
Other assets 2,470,212 - - - - 2,470,212
Total Assets 55,725,566 8,078,133 30,956,931 123,658,781 29,099,594 247,519,005
LIABILITIESDeposits and borrowings from banks 777 17,306,435 - - - 17,307,212
Customers' accounts at amortized cost 19,881,030 153,909,022 6,354,066 1,183,677 - 181,327,795
Related parties' accounts at amortized cost 179,873 1,115,329 - - - 1,295,202
Other liabilities 3,786,552 - - - - 3,786,552
Provisions 3,271,088 - - - - 3,271,088
Total Liabilities 27,119,320 172,330,786 6,354,066 1,183,677 - 206,987,849
Maturity Gap 28,606,246 (164,252,653) 24,602,865 122,475,104 29,099,594 40,531,156
LBP Base Accounts
December 31, 2009
Up to 3Months |LBP’000
3 Months to 1 year |LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
Accounts with NoMaturity |LBP’000
Total |LBP’000
ASSETS
Cash, and Central Banks 14,500,003 82,776,875 77,668,900 105,525,000 67,083,750 - - 347,554,528
Deposits with banks and
financial institutions 181,000,204 148,526,262 35,830,352 - - - - 365,356,818
Trading assets 3,957,840 - - - - - - 3,957,840
Loans to banks 570,233 - - - - - - 570,233
Loans and advances
to customers 492,813,885 108,754,966 14,022,504 883,667 15,254 - - 616,490,276
Loans and advances
to related parties 1,076,331 241,219 5,352,741 - - - - 6,670,291
Available-for-sale
investment securities 14,421,463 5,269,809 1,797,052 43,611,759 20,909,104 44,510,004 4,258,888 134,778,079
Held-to-maturity
investment securities - 1,332,494 - 6,425,642 26,167,548 - - 33,925,684
Customers' liability under
acceptances - 27,369,598 5,342,342 - - - - 32,711,940
Investments in associates 29,776,737 - - - - - - 29,776,737
Assets acquired in satisfaction
of loans 10,053,946 - - - - - - 10,053,946
F/Cy Base Accounts
December 31, 2009
Up to 3Months |LBP’000
3 Months to 1 year |LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
Accounts with NoMaturity |LBP’000
5 to 10 Years |
LBP’000
Over 10 Years |
LBP’000
ASSETS
Total |LBP’000
Banque Bemo Annual Report | Page 157
Property and equipment 638,293 - - - - - - 638,293
Intangible assets 14,208 - - - - - - 14,208
Other assets 2,753,507 - - - - - - 2,753,507
Total Assets 751,576,650 374,271,223 140,013,891 156,446,068 114,175,656 44,510,004 4,258,888 1,585,252,380
LIABILITIES
Deposits and borrowings
from banks 107,805,148 13,466,172 706,435 - - - - 121,977,755
Customers' accounts at
amortized cost 286,317,221 931,628,454 44,531,957 - - - - 1,262,477,632
Related parties' accounts
at amortized cost 1,246,382 6,588,243 2,831,655 - - - - 10,666,280
Liability under acceptances - 27,369,598 5,342,342 - - - - 32,711,940
Other liabilities 3,224,866 - 93,791 181,015 - - - 3,499,672
Provisions 2,227,362 - - - - - - 2,227,362
Subordinated bonds - - - - 62,634,641 - - 62,634,641
Total Liabilities 400,820,979 979,052,467 53,506,180 181,015 62,634,641 - - 1,496,195,282
Maturity Gap 350,755,671 (604,781,244) 86,507,711 156,265,053 51,541,015 44,510,004 4,258,888 89,057,098
Concentration of Liabilities by counterparty:
Information regarding the concentration of liabilities by counterparty is disclosed under the
respective notes to the financial statements.
The market risk is the risk that the fair value or future
cash flows of a financial instrument will be affected
because of changes in market prices such as
interest rate, equity prices, foreign exchange and
credit spreads.
Market risks include interest rate risk and exchange
risk.
The Group has established an Assets and Liabilities
Management Committee (ALCO) to manage market
risks. ALCO’s primary objective is to maximize
interest income spread and trading income while
maintaining market risks at an appropriate level
through regular management and measurement of
these risks.
The Group has developed policies and procedures
to manage market risks and ensure compliance
with regulatory requirements and limits in addition
to internal risk strategies and limits.
C. MARKET RISKS
1. Management of market risks:
Foreign exchange risk is the risk that changes in
foreign currency rates will affect the Group’s
income or the value of its holdings of financial
instruments. The objective of foreign currency risk
management is to manage and control foreign cur-
rency risk exposure within acceptable parameters
while optimizing the return on risk.
Foreign exchange exposure arises from normal
banking activities, primarily from the receipt of
deposits and the placement of funds. Future open
positions in any currency are managed by means of
forward foreign exchange contracts. It is the policy
of the Group that it will, at all times, adhere to the
limits laid down by the Central Bank as referred to
below. It is not the Group’s intention to take open
positions on its own account (proprietary trading)
but rather to maintain square or near square
positions in all currencies.
The treasury department is responsible for monitor-
ing the compliance with the regulatory ratios set by
the Regulatory Authorities. ALCO is supported by
the finance department by reports of any breach of
these ratios.
Below is the carrying value of assets and liabilities
segregated by major currencies to reflect the
Group’s exposure to foreign currency exchange risk
at year end:
2. Foreign exchange risk:
Cash and Central Banks 35,970,336 241,105,897 70,522,098 320,369 56,178 347,974,878
Deposits with banks and
financial institutions 1,524,939 228,008,020 16,761,996 6,750,042 20,561,966 273,606,963
Trading assets - 3,791,378 - - - 3,791,378
Loans to banks - 4,014,194 - - - 4,014,194
Loans and advances to customers 8,907,097 585,151,040 43,771,535 508,983 72,236,143 710,574,798
Loans and advances to related parties 132 3,727,675 20,408 - - 3,748,215
Available for sale investment securities 199,931,990 132,008,330 14,158,151 - - 346,098,471
Held-to-maturity investment securities 5,243,613 31,072,301 1,393,968 - - 37,709,882
Customers' liability under acceptances - 26,655,518 4,285,425 - 4,343,694 35,284,637
Investments in associates - 34,545,320 - - - 34,545,320
Assets acquired in satisfaction of loans - 2,831,019 - - - 2,831,019
Property and equipment 17,769,484 630,708 74,924 - - 18,475,116
Intangible assets 803,733 27,552 - - - 831,285
Other assets 1,559,028 2,711,395 190,501 - - 4,460,924
Total Assets 271,710,352 1,296,280,347 151,179,006 7,579,394 97,197,981 1,823,947,080
LIABILITIESDeposits and borrowings from banks 10,070,043 38,390,138 1,508,356 663,197 1,891,998 52,523,732
Customers' accounts at amortized cost 211,108,968 1,100,112,111 137,339,155 44,001,827 9,142,121 1,501,704,182
Related parties' accounts at amortized cost 5,665,040 17,218,633 1,130,007 500,890 1 24,514,571
Acceptance Liability - 26,655,518 4,285,425 - 4,343,694 35,284,637
December 31, 2010
US$C/V in LBP |
LBP’000
EuroC/V in LBP |
LBP’000
GBPC/V in LBP |
LBP’000
OtherCurrenciesC/V in LBP |
LBP’000
LBP |LBP’000 Total |
LBP’000
ASSETS
Banque Bemo Annual Report | Page 159
Other liabilities 5,159,966 (46,315,064) 6,636,306 (37,525,885) 83,684,586 11,639,909
Provisions 2,983,024 1,983,870 269,420 - - 5,236,314
Subordinated Bonds - 62,355,223 - - - 62,355,223
Total Liabilities 234,987,041 1,200,400,429 151,168,669 7,640,029 99,062,400 1,693,258,568
Currencies to be delivered - (87,606,665) (16,968,852) (42,550,193) (21,347,418) (168,473,128)
Currencies to be received - 38,224,640 21,866,318 5,002,685 105,021,476 170,115,119
- (49,382,025) 4,897,466 (37,547,508) 83,674,058 1,641,991
Net on-balance sheet financial position 36,723,311 46,497,893 4,907,803 (37,608,143) 81,809,639 132,330,503
Cash and Central Banks 34,528,702 262,824,185 84,436,598 89,084 204,661 382,083,230
Deposits with banks and
financial institutions 1,227,983 220,990,465 51,369,045 42,130,231 50,867,077 366,584,801
Trading assets - 3,957,840 - - - 3,957,840
Loans to banks - 570,233 - - - 570,233
Loans and advances to customers 7,420,959 530,038,966 47,049,355 538,427 38,863,528 623,911,235
Loans and advances to related parties 447 6,614,032 56,259 - - 6,670,738
Available-for-sale investment securities 184,067,209 121,801,843 11,463,863 1,512,373 - 318,845,288
Held-to-maturity investment securities 5,243,613 31,144,524 1,545,440 1,235,720 - 39,169,297
Customers' liability under acceptances - 24,832,178 7,526,437 115,474 237,851 32,711,940
Investments in associates - 29,776,737 - - - 29,776,737
Assets acquired in satisfaction of loans - 10,053,946 - - - 10,053,946
Property and equipment 11,598,226 638,293 - - - 12,236,519
Intangible assets 961,654 14,208 - - - 975,862
Other assets 2,470,212 95,060,215 (19,724,183) (525,856) (71,096,836) 6,183,552
Total Assets 247,519,005 1,338,317,665 183,722,814 45,095,453 19,076,281 1,833,731,218
LIABILITIESDeposits and borrowings from banks 17,307,212 111,264,714 1,814,496 1,167,886 7,730,659 139,284,967
Customers' accounts at amortized cost 181,327,795 1,035,042,767 172,604,841 43,789,467 11,040,557 1,443,805,427
Related parties' accounts at amortized cost 1,295,202 9,315,104 1,333,778 17,398 - 11,961,482
Liability under acceptances - 24,832,178 7,526,437 115,474 237,851 32,711,940
Other liabilities 3,786,552 3,251,638 220,484 24,944 2,606 7,286,224
Provisions 3,271,088 1,983,870 243,492 - - 5,498,450
Subordinated bonds - 62,634,641 - - - 62,634,641
Total Liabilities 206,987,849 1,248,324,912 183,743,528 45,115,169 19,011,673 1,703,183,131
Currencies to be delivered - (130,540,727) (14,942,692) (12,033,348) (24,313,221) (181,829,988)
Currencies to be received - 37,884,108 35,045,187 12,543,509 95,397,351 180,870,155
- (92,656,619) 20,102,495 510,161 71,084,130 (959,833)
Net on-balance sheet exchange position 40,531,156 (2,663,866) 20,081,781 490,445 71,148,738 129,588,254
December 31, 2009
US$C/V in LBP |
LBP’000
EuroC/V in LBP |
LBP’000
GBPC/V in LBP |
LBP’000
OtherCurrenciesC/V in LBP |
LBP’000
LBP |LBP’000 Total |
LBP’000
ASSETS
Interest rate risk arises when there is a mismatchbetween positions, which are subject to interestrate adjustment within a specified period. TheGroup’s lending, funding and investment activitiesgive rise to interest rate risk. The immediateimpact of variation in interest rate is on the Group’snet interest income, while a long term impact is onGroup’s net worth since the economic value ofGroup’s assets, liabilities and off-balance sheet
exposures are affected.
Interest rate risk is the risk that changes in interestrates will affect the Group’s income or the value ofits holdings of financial instruments. The objectiveof interest rate risk management is to manage and control interest rate risk exposure within acceptableparameters while optimizing the return on risk.
Below is a summary of the Group’s interest rate gapposition on assets and liabilities reflected at carryingamounts at year end segregated between floating
and fixed interest rate earning or bearing andbetween Lebanese Pound base accounts:
3. Interest rate risk
Cash and Central Banks 35,970,336 - - - - - - - 35,970,336
Deposits with banks and
financial institutions 1,062,079 462,860 462,860 - - - - - 1,524,939
Loans and advances
to customers 12,876 8,837,363 8,837,363 34,263 22,595 - - 56,858 8,907,097
Loans and advances
to related parties - 132 132 - - - - - 132
Available for sale
investment securities 4,265,328 2,024,194 2,024,194 37,723,128 87,474,815 43,234,966 25,209,559 193,642,468 199,931,990
Held-to-maturity
investment securities 243,613 - - - - 5,000,000 - 5,000,000 5,243,613
Property and equipment 17,769,484 - - - - - - - 17,769,484
Intangible assets 803,733 - - - - - - - 803,733
Other assets 1,559,028 - - - - - - - 1,559,028
Total Assets 61,686,477 11,324,549 11,324,549 37,757,391 87,497,410 48,234,966 25,209,559 198,699,326 271,710,352
LIABILITIESDeposits and borrowings
from banks 19,111 10,050,932 10,050,932 - - - - - 10,070,043
Customers' accounts
at amortized cost 739,865 192,286,223 192,286,223 14,332,960 3,749,920 - - 18,082,880 211,108,968
Related parties' accounts
at amortized cost 2,538 5,662,502 5,662,502 - - - - - 5,665,040
Other liabilities 5,159,966 - - - - - - - 5,159,966
Provisions 2,983,024 - - - - - - - 2,983,024
Total Liabilities 8,904,504 207,999,657 207,999,657 14,332,960 3,749,920 - - 18,082,880 234,987,041
Interest rate gap position 52,781,973 (196,675,108) (196,675,108) 23,424,431 83,747,490 48,234,966 25,209,559 180,616,446 36,723,311
Lebanese Pounds Base Accounts
December 31, 2010
Floating Interest Rate Fixed Interest Rate
Up
to T
hree
Mon
ths
|LB
P’00
0
Tota
l |LB
P’00
0
Ove
r 3
Mon
ths
to 1
yea
r |
LBP’
000
Non
-Int
eres
tBe
arni
ng
|LB
P’00
0
Tota
l |LB
P’00
0
Gra
nd T
otal
|LB
P’00
0
1 to
3
Year
s |
LBP’
000
3 to
5
Year
s |
LBP’
000
5 to
10
Year
s |
LBP’
000
ASSETS
Banque Bemo Annual Report | Page 161
Cash and Central Banks 34,528,702 - - - - - - 34,528,702
Deposits with banks and
financial institutions 766,993 460,990 460,990 - - - - 1,227,983
Loans and advances to customers 2 7,420,957 7,420,957 - - - - 7,420,959
Loans and advances to related parties - 447 447 - - - - 447
Available-for-sale investment securities 4,359,218 4,961,021 4,961,021 30,379,016 121,260,252 23,107,702 174,746,970 184,067,209
Held-to-maturity investment securities 243,613 - - - - 5,000,000 5,000,000 5,243,613
Property and equipment 11,598,226 - - - - - - 11,598,226
Intangible assets 961,654 - - - - - - 961,654
Other assets 2,470,212 - - - - - - 2,470,212
Total Assets 54,928,620 12,843,415 12,843,415 30,379,016 121,260,252 28,107,702 179,746,970 247,519,005
LIABILITIES
Deposits and borrowings from banks 6,435 17,300,777 17,300,777 - - - - 17,307,212
Customers' accounts at amortized cost 1,124,478 171,006,302 171,006,302 8,035,050 1,161,965 - 9,197,015 181,327,795
Related parties' accounts
at amortized cost 122,883 1,172,319 1,172,319 - - - - 1,295,202
Other liabilities 3,786,552 - - - - - - 3,786,552
Provisions 3,271,088 - - - - - - 3,271,088
Total Liabilities 8,311,436 189,479,398 189,479,398 8,035,050 1,161,965 - 9,197,015 206,987,849
Interest rate gap position 46,617,184 (176,635,983) (176,635,983) 22,343,966 120,098,287 28,107,702 170,549,955 40,531,156
Up
to T
hree
Mon
ths
|LB
P’00
0
Tota
l |LB
P’00
0
Ove
r 3
Mon
ths
to 1
yea
r |
LBP’
000
Non
-Int
eres
tEa
ring
|LB
P’00
0
Tota
l |LB
P’00
0
Gra
nd T
otal
|LB
P’00
0
1 to
3
Year
s |
LBP’
000
3 to
5
Year
s |
LBP’
000
ASSETS
Lebanese Pounds Base Accounts
December 31, 2009
Floating Interest Rate Fixed Interest Rate
Below is a summary of the Group’s interest rate gap
position on assets and liabilities reflected at carrying
amounts at year end segregated between floating
and fixed interest rate earning or bearing and
between Foreign Currencies base accounts:
The effect of a 200 basis point change in interest rates upwards or downwards on the earnings of the Group
for the subsequent fiscal year is LBP3.68billion increase/decrease.
Cash and Central Banks 5,439,467 40,491,275 - - 40,491,275
Deposits with banks
and financial institutions 21,885,906 226,538,925 2,261,250 - 228,800,175
Trading assets 3,791,378 - - - -
Loans to banks 4,014,194 - - - -
Loans and advances to customers 1,511,466 678,384,619 - 321,130 678,705,749
Loans and advances to related parties 18,349 1,322,385 - - 1,322,385
Available for sale investment securities 4,660,658 604,147 - - 604,147
Held-to-maturity investment securities 727,220 247,505 - - 247,505
Customers' liability under acceptances 35,284,637 - - - -
Investments in associates 34,545,320 - - - -
Assets acquired in satisfaction of loans 2,831,019 - - - -
Property and equipment 705,632 - - - -
Intangible assets 27,552 - - - -
Other assets 2,901,896 - - - -
Total Assets 118,344,694 947,588,856 2,261,250 321,130 950,171,236
LIABILITIES
Deposits and borrowings from banks 2,171,701 37,568,488 2,261,250 - 39,829,738
Customers' accounts at amortized cost 1,384,633 1,231,236,634 - - 1,231,236,634
Related parties' accounts at amortized cost 1,458 18,848,073 - - 18,848,073
Liability under acceptances 35,284,637 - - - -
Other liabilities 4,837,952 - - - -
Provisions 2,253,290 - - - -
Subordinated Loans 2,127,847 - - - -
Total Liabilities 48,061,518 1,287,653,195 2,261,250 - 1,289,914,445
Interest rate gap position 70,283,176 (340,064,339) - 321,130 (339,743,209)
December 31, 2010
Foreign Currency Base Accounts
Floating Interest Rate
Up to ThreeMonths |LBP’000
3 months to 1year |
LBP’000Total |
LBP’000
Non-InterestBearing |LBP’000
1 to 3 Years |
LBP’000
ASSETS
Banque Bemo Annual Report | Page 163
Foreign Currency Base Accounts
December 31, 2010
Fixed Interest Rate
8,291,250 130,813,330 126,969,220 - - 266,073,800 312,004,542
21,395,943 - - - - 21,395,943 272,082,024
- - - - - - 3,791,378
- - - - - - 4,014,194
19,511,385 1,634,982 304,119 - - 21,450,486 701,667,701
2,407,349 - - - - 2,407,349 3,748,083
17,979,797 64,468,363 27,330,922 25,505,106 5,617,488 140,901,676 146,166,481
458,495 31,033,049 - - - 31,491,544 32,466,269
- - - - - - 35,284,637
- - - - - - 34,545,320
- - - - - - 2,831,019
- - - - - - 705,632
- - - - - - 27,552
- - - - - - 2,901,896
70,044,219 227,949,724 154,604,261 25,505,106 5,617,488 483,720,798 1,552,236,728
452,250 - - - - 452,250 42,453,689
57,973,947 - - - - 57,973,947 1,290,595,214
- - - - - - 18,849,531
- - - - - - 35,284,637
- - - - - - 4,837,952
- - - - - - 2,253,290
- - 60,227,376 - - 60,227,376 62,355,223
58,426,197 - 60,227,376 - - 118,653,573 1,456,629,536
11,618,022 227,949,724 94,376,885 25,505,106 5,617,488 365,067,225 95,607,192
Over 3 MonthsLess than 1 year |
LBP’000Total |
LBP’000Grand Total |
LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
5 to 10 Years |
LBP’000Over 10 years |
LBP’000
Cash and Central Banks 4,511,954 92,764,924 77,668,900 105,525,000 67,083,750
Deposits with banks and financial institutions 26,128,094 303,398,371 - - -
Trading assets 3,957,840 - - - -
Loans to banks 570,233 - - - -
Loans and advances to customers 523,381 601,034,785 - 573,122 -
Loans and advances to related parties 95,587 1,481,150 - - -
Available for sale investment securities 16,555,982 5,165,219 - - -
Held-to-maturity investment securities 875,588 1,184,204 - - -
Customers' liability under acceptances 32,711,940 - - - -
Investments in associates 29,776,737 - - - -
Assets acquired in satisfaction of loans 10,053,946 - - - -
Property and equipment 638,293 - - - -
Intangible assets 14,208 - - - -
Other assets 2,753,507 - - - -
Total Assets 129,167,290 1,005,028,653 77,668,900 106,098,122 67,083,750
LIABILITIES
Deposits and borrowings from banks 16,373 121,353,877 - - -
Customers' accounts at amortized cost 6,016,522 1,209,021,659 - - -
Related parties' accounts at amortized cost 661 7,833,964 - - -
Liability under acceptances 32,711,940 - - - -
Other liabilities 3,499,672 - - - -
Provisions 2,227,362 - - - -
Subordinated bonds - - - - -
Total Liabilities 44,472,530 1,338,209,500 - - -
Interest rate gap position 84,694,760 (333,180,847) 77,668,900 106,098,122 67,083,750
December 31, 2009
Foreign Currency Base Accounts
Floating Interest Rate
Up to ThreeMonths |LBP’000
3 months to 1year |
LBP’0003 to 5 Years |
LBP’000
Non-Interest Earning |LBP’000
1 to 3 Years |
LBP’000
ASSETS
Below is a summary of the Group’s interest rate gap
position on assets and liabilities reflected at carrying
amounts at year end segregated between floating
and fixed interest rate earning or bearing and
between Foreign Currencies base accounts:
Banque Bemo Annual Report | Page 165
Foreign Currency Base Accounts
December 31, 2009
Fixed Interest Rate
343,042,574 - - - - - - 347,554,528
303,398,371 35,830,353 - - - - 35,830,353 365,356,818
- - - - - - - 3,957,840
- - - - - - - 570,233
601,607,907 14,069,213 274,757 15,018 - - 14,358,988 616,490,276
1,481,150 5,093,554 - - - - 5,093,554 6,670,291
5,165,219 755,323 43,547,522 20,691,002 43,865,321 4,197,710 113,056,878 134,778,079
1,184,204 - 6,419,938 25,445,954 - - 31,865,892 33,925,684
- - - - - - - 32,711,940
- - - - - - - 29,776,737
- - - - - - - 10,053,946
- - - - - - - 638,293
- - - - - - - 14,208
- - - - - - - 2,753,507
1,255,879,425 55,748,443 50,242,217 46,151,974 43,865,321 4,197,710 200,205,665 1,585,252,380
121,353,877 607,505 - - - - 607,505 121,977,755
1,209,021,659 47,439,451 - - - - 47,439,451 1,262,477,632
7,833,964 2,831,655 - - - - 2,831,655 10,666,280
- - - - - - - 32,711,940
- - - - - - - 3,499,672
- - - - - - - 2,227,362
- - - 62,634,641 - - 62,634,641 62,634,641
1,338,209,500 50,878,611 - 62,634,641 - - 113,513,252 1,496,195,282
(82,330,075) 4,869,832 50,242,217 (16,482,667) 43,865,321 4,197,710 86,692,413 89,057,098
Over 3 MonthsLess than 1 year |
LBP’000Total |
LBP’000Total |
LBP’000Grand Total |
LBP’000
1 to 3 Years |
LBP’000
3 to 5 Years |
LBP’000
5 to 10 Years |
LBP’000Over 10 years |
LBP’000
The summary of the Group’s classification of each class of financial assets and liabilities covered by IAS
39, and their fair values are as follows:
47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Cash and Central Banks - - - 347,974,878 - 347,974,878 347,974,878
Deposits with banks
and financial institutions - - - 273,606,963 - 273,606,963 273,606,963
Trading assets 3,791,378 - - - - 3,791,378 3,791,378
Loans to banks - - - 4,014,194 - 4,014,194 4,014,194
Loans and advances to customers - - - 710,574,798 - 710,574,798 710,574,798
Loans and advances to related parties - - - 3,748,215 - 3,748,215 3,748,215
Available for sale investment securities - 346,098,471 - - - 346,098,471 346,098,471
Held-to-maturity investment securities - - 37,709,882 - - 37,709,882 39,665,355
Customers’ liability under acceptances - - - - 35,284,637 35,284,637 35,284,637
Other assets - - - 3,360,044 - 3,360,044 3,360,044
Total 3,791,378 346,098,471 37,709,882 1,343,279,092 35,284,637 1,766,163,460 1,768,118,933
FINANCIAL LIABILITIES
Deposits and borrowings from banks - - - - 52,523,732 52,523,732 52,523,732
Customers' accounts at amortized cost - - - - 1,501,704,182 1,501,704,182 1,501,704,182
Related parties' accounts at amortized cost - - - - 24,514,571 24,514,571 24,514,571
Acceptance liability - - - - 35,284,637 35,284,637 35,284,637
Subordinated bonds - - - - 62,355,223 62,355,223 63,217,192
Total - - - - 1,676,382,345 1,676,382,345 1,677,244,314
December 31, 2010
Available-for-Sale |LBP’000
Held-to-Maturity |LBP’000
Loans &Receivables |
LBP’000
Other atAmortized
Cost |LBP’000
TradingAssets |LBP’000
TotalCarryingValue |LBP’000
Total FairValue |LBP’000
FINANCIAL ASSETS
Banque Bemo Annual Report | Page 167
Cash and Central Banks - - - 382,083,230 - 382,083,230 382,083,230
Deposits with banks
and financial institutions - - - 366,584,801 - 366,584,801 366,584,801
Trading assets 3,957,840 - - - - 3,957,840 3,957,840
Loans to banks - - - 570,233 - 570,233 570,233
Loans and advances to customers - - - 623,911,235 - 623,911,235 623,911,235
Loans and advances to related parties - - - 6,670,738 - 6,670,738 6,670,738
Available for sale investment securities - 318,845,288 - - - 318,845,288 318,845,288
Held-to-maturity investment securities - - 39,169,297 - - 39,169,297 40,751,702
Customers’ liability under acceptances - - - - 32,711,940 32,711,940 32,711,940
Other assets - - - 3,134,981 - 3,134,981 3,134,981
Total 3,957,840 318,845,288 39,169,297 1,382,955,218 32,711,940 1,777,639,583 1,779,221,988
FINANCIAL LIABILITIES
Deposits and borrowings from banks - - - - 139,284,967 139,284,967 139,284,967
Customers' accounts at amortized cost - - - - 1,443,805,427 1,443,805,427 1,443,805,427
Related parties' accounts at amortized cost - - - - 11,961,482 11,961,482 11,961,482
Acceptance liability - - - - 32,711,940 32,711,940 32,711,940
Subordinated bonds - - - - 62,634,641 62,634,641 63,813,581
Total - - - - 1,690,398,457 1,690,398,457 1,691,577,397
December 31, 2009
Available-for-Sale |LBP’000
Held-to-Maturity |LBP’000
Loans &Receivables |
LBP’000
Other atAmortized
Cost |LBP’000
TradingAssets |LBP’000
TotalCarryingValue |LBP’000
Total FairValue |LBP’000
FINANCIAL ASSETS
The fair value of current deposits (including non-
interest earning compulsory deposits with Central
Banks), and overnight deposits is their carrying
amount. The estimated fair value of fixed interest
earning deposits with maturities or interest reset
dates beyond one year from the balance sheet date
is based on the discounted cash flows using prevailing
money-market interest rates for debts with similar
credit risk and remaining maturity.
The basis for the determination of the estimated fair
values with respect to financial instruments carried at
amortized cost and for which quoted market prices
are not available is summarized as follows:
(a). DEPOSITS WITH CENTRAL BANK AND FINANCIAL INSTITUTIONS:
The estimated fair value of loans and advances to
customers is based on the discounted amount of
expected future cash flows determined at current
market rates.
(b). LOANS AND ADVANCES TO CUSTOMERS AND TO BANKS:
The estimated fair value of held-to-maturity
investment securities is based on current yield curve
appropriate for the remaining period to maturity.
(c). HELD-TO-MATURITY INVESTMENT SECURITIES:
The fair value of deposits with current maturity or no
stated maturity is their carrying amount. The estimated
fair value on other deposits is based on the discounted
cash flows using interest rates for new deposits with
similar remaining maturity.
(d). DEPOSITS AND BORROWINGS FROM BANKS AND CUSTOMERS’ DEPOSITS:
The estimated fair value of other borrowings and
certificates of deposits is the discounted cash flow
based on a current yield curve appropriate for the
remaining period to maturity.
(e). OTHER BORROWINGS AND CERTIFICATES OF DEPOSIT:
The following table shows an analysis of financial instruments at fair value by level of the fair value hierarchy:
(f). FAIR VALUE HIERARCHY:
Trading assets:
Quoted equity securities 3,791,378 - - 3,791,378
3,791,378 - - 3,791,378
Available for sale investment
securities:
Quoted equity securities 8,029,973 - - 8,029,973
Lebanese treasury bills - 145,879,214 - 145,879,214
Foreign treasury bills 504,500 - - 504,500
Lebanese government bonds - - 83,307,304 83,307,304
Certificates of deposit issued by
the Central Bank of Lebanon - - 65,150,700 65,150,700
Corporate bonds 36,406,114 - - 36,406,114
44,940,587 145,879,214 148,458,004 339,277,805
Unquoted equity securities
– at cost - - - 644,332
44,940,587 145,879,214 148,458,004 339,922,137
48,731,965 145,879,214 148,458,004 343,713,515
December 31, 2010
Level 2 |LBP’000
Level 3 |LBP’000
Toal |LBP’000
Level 1 |LBP’000
FINANCIAL ASSETS
Banque Bemo Annual Report | Page 169
Trading assets:
Quoted equity securities 3,957,840 - - 3,957,840
3,957,840 - - 3,957,840
Available-for-sale investment
securities:
Quoted equity securities 14,389,870 - - 14,389,870
Lebanese treasury bills - 158,306,031 - 158,306,031
Foreign treasury bills 8,070,477 - - 8,070,477
Lebanese government bonds - - 58,863,889 58,863,889
Certificates of deposit issued by
the Central Bank of Lebanon - - 34,856,096 34,856,096
Corporate bonds 37,833,596 - - 37,833,596
60,293,943 158,306,031 93,719,985 312,319,959
Unquoted equity securities
- at cost - - - 646,709
60,293,943 158,306,031 93,719,985 312,966,668
64,251,783 158,306,031 93,719,985 316,924,508
December 31, 2009
Level 2 |LBP’000
Level 3 |LBP’000
Toal |LBP’000
Level 1 |LBP’000
FINANCIAL ASSETS
The financial statements for the year ended
December 31, 2010 were approved by the Board of
Directors in its meeting held on April 15, 2011.
48. APPROVAL OF THE FINANCIAL STATEMENTS
Banque Bemo Network
Banque Bemo Annual Report | Page 171
Banque Bemo salRCB 17837List of Banks N 93 – BSE N 1111Capital LBP 16,200,000,000*
Head Office: Elias Sarkis Ave, Bemo Bldg, Ashrafieh
Tel: 01-200 505 / 01-203 240 /01-203 176
Fax: 01-217 860
P.O.Box: 16-6353 Beirut- Lebanon
* On April 2011 Capital Increased by LPB 46 Billion to reach LBP 62.2 Billion, out of which LBP 30 Billion from cash injection
General Management:Beirut Central District, Riad El Solh Square,
Esseily Bldg, Block A, 7th Floor
Tel: 01-992 600
Fax: 01-983 368
Swift: EUMOLBBE
P.O.Box: 11-7048 Beirut, Lebanon
Branches:
Ashrafieh: Elias Sarkis Ave, Bemo Bldg, Ashrafieh Tel: 01-200 505 / 01-203 240 | Fax: 01-217 860 ATM Machine”
Riad El Solh: Beirut Central District, Riad El Solh Square, Esseily Bldg, Bloc A, 7th Floor Tel: 01-992 600 | Fax: 01-983 368
Dora: Dora Hwy, Tashdjian Banking Center Tel: 01-257 771/4 | Fax: 01-257 775 ATM Machine”
Kantari: Fakhreddine Street, Tager Bldg, Tel & Fax: 01-373 314/5 “ATM Machine”
Zouk: Zouk Mikael Hwy, Vega Center, 1st Floor Tel & Fax: 09-211 182
Chtaura: Jdita Main Road, Khalil Akl Center, Tel: 08-544 725-8 | Fax: 08-544 729 ATM Machine
Verdun: Ramlet El Baida, Saeb Salam Ave. Al Iwan Bldg Tel: 01-799 420-2 | Fax: 01-799 427 “ATM Machine”
Sin El Fil: 93, Charles De Gaulle Ave, Debahy Center Tel: 01-513 990-3 | Fax: 01-513 997 “ATM Machine”
Rabieh: Rabieh Main Road, Lahlouh Center Tel: 04-408 910 | Fax: 04-408 919 “ATM Machine
Branch Abroad:
Cyprus: Limassol - Doma Court, 227 Makarios III Ave P.O.Box: 56232-3305 Limassol-Cyprus Tel: + 357 25-583628 / 587640 Fax: 357 25-588611 Swift: EUMOCY2I
Bemo Group Network
Banque Bemo Annual Report | Page 173
SUBSIDIARY
Bemo Securitization SA ( BSEC)3rd Floor, Two Park Avenue Building, Park AvenueBeirut Central District, Minet El HosnBeirut, LebanonTel: +961 1 997998Fax: +961 1 994801Website: www.bsec-sa.com
ASSOCIATE BANK
Banque Bemo Saudi Fransi SA – SyriaHead OfficeDamascus – 29 Ayyar Street Salhia P.O.Box: 31117 Damascus, Syria Tel: +963 11 231 7778Fax: +963 11 231 8778Website: www.bbsfbank.com
SISTER BANK
Bemo Europe – Banque PrivéeParis63 Avenue Marceau, 75116 Paris, France Tel: +33 1 44 43 49 49Fax: +33 1 47 23 94 19Website: www.bemo.fr
Luxembourg 16 Royal Boulevard – L 2449 Luxembourg Tel: +352 22 63211Fax: +352 22 6533
ASSOCIATE INVESTMENT FIRM
Bemo Oddo Investment Firm Ltd-Dubai Gate Village,Building 1Level 1, Unit 109DIFCP.O.Box: 506671Dubai, UAETel : + 971 4 323 0565Fax: + 971 4 323 0585Website: www.oddo.eu
Correspondent Banking &Financial Institutions
Banque Bemo Annual Report | Page 175
Country City Correspondent
Australia Sydney JP Morgan Chase Bank NA
Belgium Brussels Deutsche Bank AG
Canada Montreal National Bank of Canada
China Hong Kong Bank of China
Denmark Copenhagen Nordea Bank Danmark
Finland Helsinki Nordea Bank Finland
France Paris Banque de L'Europe Meridionale
Germany Frankfurt Deutsche Bank AG
Commerzbank AG
Italy Milan Intesa Sanpaolo SPA
Japan Tokyo Deutsche Bank
Korea Seoul Deutsche Bank AG
Commerzbank AG
KSA Riyadh Banque Saudi Fransi
Norway Oslo Nordea Bank Norge
Spain Madrid Banco Sabadell S.A.
Sweden Stockholm Nordea Bank AB Sweden
Switzerland Zurich UBS AG
Syria Damascus Banque Bemo Saudi Fransi
Taiwan Taipei Deutsche Bank
UAE Dubai Standard Chartered Bank
Al Mashreq Bank
UK London Deutsche Bank AG
USA New York JP Morgan Chase Bank NA
Bank of New York Mellon
The Financial Institutions Department is in regularinteraction with the different Correspondent Banksand Financial Institutions at arm’s-length basis withloyalty and transparency.Having established very good relationships withInternational Banks with a wide network spreadover different Countries and Regions, the FinancialInstitutions Department succeeded in creating a solidand reliable base allowing to cater for the differentCorporate and Private Clients needs, be it in Trade
Finance or in Payment Orders and Transfers or anyother transactions that require Correspondentsinvolvement.Our professional approach allows us to build up tailored structures in Trade Finance in cooperationwith Prime Name Correspondents to address ourCorporate Clients’ specific requirements.Such set up has proven to be a mutually profitablerelation as well as a clear mutual recognition duringall times and under all circumstances.