Modest deposit growth expected in 2012

Fair value for Audi share at $7.5, Byblos share at $1.75, Blom share at $11: FFA equity research

Lebanese banks will likely see an improved, though still challenging, operating environment in 2012, FFA Private Bank said in a report.

In its equity research on Lebanon’s three top banks, Bank Audi, Blom Bank, and Byblos Bank, FFA expected the local private banking sector to continue witnessing moderate deposit growth in 2012, yet at an accelerated pace compared to the previous year.

According to FFA, investor concerns on regional operations and local political uncertainty have negatively impacted share price performance, leading Bank Audi, Blom Bank, and Byblos Bank to trade closer to their book values.

FFA rated Bank Audi shares at Marketweight with a fair value of $7.5 per share (share price closed at $6 at last closing). It rated Byblos Bank shares at Marketweight with a fair value of $1.75 per share ($1.7 at last closing). FFA rated Blom Bank shares at Overweight with a fair value of $11 per share ($7.65 at last closing).

FFA maintained the growth of Bank Audi key balance sheet indicators roughly unchanged for 2012. It expected the bank's assets, deposits, and loans to grow by six percent, six percent, and seven percent respectively. Consequently the loans-to-deposits ratio was maintained at almost 35 percent for 2012.
FFA expected net profits (group share) to grow by 11 percent in 2012.

Bank Audi’s Board of Directors proposed a distribution of dividends for the year 2011 of $0.40 per share, equal to last year’s amount. Bank Audi’s net earnings grew by four percent y-o-y in 2011. In Syria, Bank Audi’s assets shrunk by 43 percent totaling $1.2 billion. Net profits in Syria amounted to $2.4 million, down 84 percent from 2010. In Egypt, the bank’s assets grew by ten percent to $3 billion.Net profits amounted to $0.3 million during 2011.

FFA expected Byblos Bank to grow its assets, deposits, and loans by eight percent in 2012 with a loans-to-deposits ratio expected to be maintained at 31.3 percent. FFA expected profits (group share) to grow by ten percent in 2012.
Byblos Bank’s Board of Directors proposed a distribution of dividends for the year 2011 of LL200 per share, equal to last year’s amount. Byblos Bank’s net earnings in 2011 totaled $179.7 million, slightly up from $177.7 million in 2010. The assets of Byblos Bank Syria dropped by ten percent during 2011 to $856 million. Profits were down 30 percent to $3.5 million in 2011.

FFA expected Blom Bank to grow its assets, deposits, and loans by eight percent, six percent, and eight percent in 2012 respectively. It expected the bank’s loans-to-deposits ratio to be at 28 percent. FFA expected Blom Bank’s net profits (group share) to grow by ten percent in 2012.

Blom Bank declared net profits of $331.5 million in 2011 compared to $330.6 million in 2010. Blom Bank Syria saw a 40 percent drop in assets to $1,226 million. Net profits in Blom Syria were down by 20 percent year-on-year in 2011, to $14.7 million. In Egypt, Blom Bank’s assets grew by seven percent totaling $1.4 billion at the end of 2011. Net profits amounted to $9.5 million during 2011, up by 50 percent y-o-y.

Reported by Hanadi Chami