LebaNoN Weekly RepoRt - BankMed

LebaNoN Weekly RepoRt
IN tHIS ISSUe
eCoNoMy
Lebanon ranks 8th in the MeNa and 85th worldwide in global prosperity
Trade deficit reaches $12.7 billion in the first nine months of 2012
Construction area records 14% annual decline in the first nine months of 2012
bANkING & FINANCe
Central bank’s assets reach $77.4 billion in the second half of october 2012
byblos bank reports 4.7% y-o-y drop in net profits in the first nine months of 2012
bank of beirut records 3.6% y-o-y increase in net profits in the first nine months of 2012
Moody’s keeps Lebanese banks on negative outlook
Deposits in foreign currencies expanded by $154 million during the week of october 12 – 18
bUSINeSS
bankMed launches mobile banking
Geely International records high sales performance in the third quarter of 2012
Market and economic Research Division
Mazen Soueid | Stephanie Ghanem | Ziad Hariri | Dalia Sayess
November 2, 2012

LebaNoN Weekly RepoRt
eCoNoMy
lebANoN RANkS 8tH IN tHe MeNA ANd 85tH WoRldWIde IN GlobAl pRoSpeRIty
according to the Legatum Institute’s 2012 global prosperity index (GPI), Lebanon ranked 85th amongst
142 countries worldwide; down from 82nd last year and 84th in 2010. This classifies Lebanon among
the lower middle ranking countries. The index measures global prosperity based on eight categories:
economy, entrepreneurship & opportunity, governance, education, health, safety & security, personal
freedom, and social capital; i.e. based on both wealth and wellbeing. Lebanon scored best on the
education sub-index on which it ranked 63rd globally; reflecting good opportunity for children to learn,
satisfaction in the quality of education, and a strong girls-to-boys enrollment ratio. The economy subindex
also performed well, advancing Lebanon to 63rd place globally; reflecting a higher confidence
in financial institutions and a 5-year GDP per capita growth rate (5.7%) which exceeded the global
average (2.7%). Lebanon scored worst on the social capital sub-index on which it ranked 120th
amongst the 142 countries measured in the survey. Social capital measures the level of social cohesion,
reciprocity, and trust in a society. In Lebanon, the percentage of the population that feel they can rely on
friends and family for support is 73%, lower than the global average of 81%. In fact, in every country in
the region this percentage is far below the average performance of european countries (89%), and all
but seven countries in the region (namely Kuwait, Israel, Jordan, Uae, Saudi arabia, Morocco, & algeria)
have lower levels than the global average.
In parallel, Lebanon came in 8th place amongst 16 countries in the MeNa region on the overall GPI.
The country came after Tunisia and Jordan, and it surpassed Turkey, algeria, and Iran. on the level of the
region, the report praised the MeNa countries’ performance in the entrepreneurship & opportunity subindex
over the last three years, which can be attributed, in part, to increasing levels of communications
technology such as mobile banking, as well as a decrease in business start-up costs.
Global Prosperity Index 2012
Country MENA Rank /16 World Rank /142
UAE 1 29
Kuwait 2 38
Israel 3 40
Saudi Arabia 4 52
Lebanon sub-indices rankings
Morocco 5 73 Rank /142
Jordan 6 77 Education 63
Tunisia 7 78 Economy 63
Lebanon 8 85 Entrepreneurship&Opportunity 74
Turkey 9 89 Safety&Security 85
Algeria 10 100 Health 86
Iran 11 102 Governance 107
Egypt 12 106 Personal Freedom 114
Syria 13 113 Social Capital 120
Sudan 14 125
Iraq 15 131
Yemen 16 134
Source: Legatum Institute, BankMed Research
November 2, 2012

tRAde deFICIt ReACHeS $12.7 bIllIoN IN tHe FIRSt NINe MoNtHS oF 2012
Lebanon’s foreign trade deficit reached $12.7 billion in the first nine months of 2012, a widening of
13.4% y-o-y when compared to $11.2 billion in the same period of last year. This is attributed to a yearly
3.1% increase in exports reaching $3.3 billion in the aforementioned period of 2012, which was offset
by a yearly rise of 11.1% in imports coming into the country, whose value reached $16 billion in the
same period. The value of re-exports declined by an annual 57% in Jan-Sept of 2012, reaching $200
million, while that of transits dropped by 19.2% annually to reach $248 million. It is worth noting that
in September 2012 alone, and on a month-on-month basis, Lebanese exports rose by 39% from the
value recorded in august 2012, while imports declined by 8.6% in the same period.
In terms of country of origin, imports from the USa accounted for the largest share -of 13%- of
Lebanon’s total imports in the first three quarters of 2012, with value of $2.1 billion, followed by Italy
and China (8% each), then France (7%). Imports of mineral products topped the list of Lebanese imports
accounting for 29% of the total, followed by machinery & mechanical appliances (10%), then products
of the chemical and pearls, precious or semi-precious stones (8% each). as for country of destination,
South africa took the largest share of exports from Lebanon, over the same period, accounting for 20%
of the total ($664 million), followed by Switzerland with a 12% share ($388 million), and Saudi arabia
with an 8% share ($272 million). Pearls, precious or semiprecious stones topped Lebanese exports
accounting for 40% of the total, followed by machinery & mechanical appliances (11%), and base
metals & articles of base metals (10%).
Total customs revenues totaled $1.16 billion (or LbP 1,754 billion) in the first three quarters of 2012, a
2.8% rise when compared with the same period last year. as for total VaT revenues, they reached $1.11
billion (or LbP 1,679) in the same aforementioned period of 2012, remaining almost stable compared
with the first three quarters of 2011.
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
-14.0
-9.2
-9.5
Source: Lebanese Customs, BankMed Research
Trade Balance
first three quarters of the year
(USD billions)
-10.2
2008 2009 2010 2011 2012
-11.2
-12.7
November 2, 2012

CoNStRUCtIoN AReA ReCoRdS 14% ANNUAl deClINe IN tHe FIRSt NINe MoNtHS oF 2012
Figures released by the orders of engineers of beirut and Tripoli revealed that construction activity so far
in 2012 has decreased, indicating a lower appetite for investments when compared with the previous
year. The construction area authorized by permits in the first nine months of 2012 decreased by 13.5%
y-o-y to reach 10.8 million square meters (sqm), from 12.5 million sqm recorded in the same period of
2011. The number of authorized permits reached 13,574 in the same aforementioned period of 2012,
recording a 5% annual drop from the 14,277 permits registered in the first nine months of last year. In
the month of September 2012 alone, the construction area authorized by permits reached 1.09 million
sqm, having declined y-o-y from 1.22 million sqm registered in September of last year.
With respect to geographical distribution, Mount Lebanon captured the largest share of construction
activity, taking 46% of the total number of permits issued in the first three quarters of 2012. South
Lebanon accounted for around 15% of permits, followed by North Lebanon (13%), Nabatieh (11%),
bekaa (10%), and beirut (5%).
8.34
Construction Area Authorized by Permits and Annual Change
9.4%
9.12
44.2%
13.16
Source: Orders of Engineers of Beirut and Tripoli, BankMed Research
-5.2%
12.47
-13.5%
2008 2009 2010 2011 2012
10.79
Construction Area (million sqm) YoY % change
November 2, 2012

ANkING & FINANCe
CeNtRAl bANk’S ASSetS ReACH $77.4 bIllIoN IN tHe SeCoNd HAlF oF oCtobeR 2012
banque du Liban (bDL)’s bi-monthly balance sheet as of end-october 2012 reported total assets of
$77.4 billion, having increased by 10.1% since the beginning of the year ($70.3 billion), and by 8%
compared to end-october 2011 ($71.6 billion).
Gold stood at $15.9 billion as of end-october 2012. Foreign assets increased by 10% on a y-o-y basis
to reach $35.1 billion in the same period. Loans to the public sector declined by a yearly 60% to reach
$36 million as of end-october 2012, while loans to the local financial sector increased by 16% to reach
$1.6 billion in the same period. on the liabilities side, bDL reported an increase of 14% y-o-y in financial
sector deposits to reach $54.3 billion as of end-october 2012, accounting for 70.2% of total liabilities,
along with a 12% drop in public sector deposits amounting to $5.8 billion.
9.64
Source: Banque du Liban, BankMed Research
Gold Reserves at BdL and annual % change
28.0%
12.34
28.8%
15.90 15.86
Oct-09 Oct-10 Oct-11 Oct-12
-0.3%
Gold Reserves (USD billions) YoY % change
November 2, 2012

ybloS bANk RepoRtS 4.7% y-o-y dRop IN Net pRoFItS IN tHe FIRSt NINe MoNtHS oF
2012
byblos bank declared net profits of $122.6 million in the first nine months of 2012, down by 4.7% from
$128.7 million in the same period last year. Net interest income reached $191.2 million up to September
2012, down 11% year-on-year; while net fees and commission income remained almost stable at $75.3
million. as a result, net operating income decreased by 1% y-o-y to $318 million. also, the bank’s costto-income
ratio was 49.8% as of end-September 2012.
Total assets reached $16.9 billion in the first three quarters of 2012, compared to $16.6 billion at end-
2011 (+1.8%), while customer loans reached $4.1 billion, up 3% from end-2011. The bank allocated
provisions for credit losses of $40.1 million that included $13.9 million in collective provisions. Net
non-performing loans reached 1.7% of net loans and were covered up to 98.6% by specific provisions
and reserved interest.
The bank’s customers deposits reached $13.4 billion up to September of 2012, up from $12.8 billion at
end-2011 (+4.7%). The primary liquidity, representing dues from Central banks and banks, totaled $9.2
billion and was equivalent to 68.7% of total deposits at the end of September 2012. also, the bank’s
capital adequacy ratio (CaR) reached 13%, in compliance with basel III requirements. The shareholders’
equity amounted to $1.6 billion in the same aforementioned period of 2012, down by $47 million
(around 3%) from end-2011.
(billion USD) Sep-12 Dec-11 % change
Total Assets 16.90 16.60 1.8%
Total Deposits 13.35 12.82 4.2%
Total Equity 1.60 1.65 -2.9%
Net Profits (million USD)
*Up to September 2011
122.64 128.72* -4.7%
Source: Company Data, BankMed Research
Source: Company Data, BankMed Research
Byblos Bank Financials
November 2, 2012

LebaNoN Weekly RepoRt
bANk oF beIRUt ReCoRdS 3.6% y-o-y INCReASe IN Net pRoFItS IN tHe FIRSt NINe MoNtHS
oF 2012
bank of beirut’s net profits reached $79 million in the first nine months of 2012, up by 3.6% from
$76.2 million in the first nine months of 2011. Net interest income reached $124.2 million in the same
aforementioned period of 2012, up by 40% y-o-y; while net fees and commission income increased by
17% to $56.4 million. as a result, net operating income increased by 15% y-o-y to $207 million.
Total assets reached $10.2 billion in the first nine months of 2012, compared to $9.7 billion at end-2011
(+5.1%); while customer loans reached $3.42 billion, up 4% from end-2011. on the liabilities side,
total deposits climbed 17.5% from year-end 2011 to $8 billion and accounted for 78% of the bank’s
consolidated liabilities, while shareholders’ equity advanced 3% to $1.08 billion.
48.9
3.1%
50.4
50.7%
76.0
2008 2009 2010 2011 2012
Source: Company Data, BankMed Research
Bank of Beirut: Net Profits
as of end-September of each year
0.3%
76.2
3.6%
79.0
Net Profits (million USD) YoY % change
November 2, 2012

Moody’S keepS lebANeSe bANkS oN NeGAtIve oUtlook
Moody’s Investors Service maintained its negative outlook for Lebanon’s banking system. The agency
attributed this decision to the expectations of weak economic growth and business sentiment in both
2012 and 2013, an acceleration in the formation of problem-loans related to lending in the domestic
market and in countries undergoing political transition or economic slowdown, and declining net
profitability, particularly in 2013, primarily resulting from higher provisioning needs and subdued feegeneration.
The agency considered that the operating environment for banks will remain challenging over the 12-
18 month outlook period and will continue to put pressure on asset quality and performance. Moody’s
expected problem-loan formation to accelerate, with non-performing loans (NPLs) rising above 6.5%
of gross loans (compared to 4% at year-end 2011). additionally, Lebanese banks’ high exposure to the
country’s sovereign risk will remain a major source of credit risk over the outlook period, linking the
banking system’s health directly to the b1-rated sovereign credit risk.
In parallel, Moody’s expected the banks’ profitability to weaken over the coming 18 months owing
to higher credit costs, lower fee income generation, and lower contribution from many banks’ Syrian
operations. The rating agency estimated that, as problem-loans mount, increases in credit charges
to maintain current provisioning coverage will likely erode approximately a quarter of rated banks’
aggregate pre-provision income, whilst fee and commission income will ease due to lower business
volumes. accordingly, Moody’s expects low returns on equity and weak profitability to remain features
of the system over the outlook period.
However, the agency said that these negative considerations are partly mitigated by the system’s sizeable
liquidity cushions, a stable deposit-based funding structure, and the banks’ crisis-tested management
teams. Moody’s also added that the banks’ deposits account for over 80% of total liabilities, and remain
supported by strong inflows of remittances, estimated at around 20% of GDP on an annual basis.
Banking System Outlook
in Selected Countries
As of 1 October 2012
Saudi Arabia Stable
Kuwait Stable
Oman Stable
Qatar Stable
Turkey Stable
Lebanon Negative
Cyprus Negative
Bahrain Negative
Egypt Negative
United Arab Emirates Negative
Source: Moody's Investors Service, BankMed Research
Source: Moody’s Investors Service, BankMed Research
November 2, 2012

depoSItS IN FoReIGN CURReNCIeS expANded by $154 MIllIoN dURING tHe Week oF
oCtobeR 12 – 18
on the monetary front, the overall money supply “M4” slightly increased- by 0.2%- during the week of
12 – 18 oct, 2012 to around $108.5 billion; while the non-banking sector treasury bills portfolio went
up by $65 million over the preceding week.
Lebanese Pound denominated deposits and currency in circulation “M1” came in 2.7%- or $115
million- lower during the aforementioned week to around $4.1 billion; mainly due to decreases in
money in circulation and demand deposits by $80 million and $35 million, respectively. on the other
hand, local currency term deposits “M2” slightly decreased by 0.1% during the week, and registered a
twelve-month increase of 13.9%, to stand at $43.1 billion.
as such, private sector term and saving deposits denominated in LbP (M2 - M1) rose by $87 million
during the week to $39 billion, while deposits denominated in foreign currencies (M3 - M2) went up by
$154 million during the week to $60.1 billion.
(billion USD)
Money Supply
Week of 12 - 18 October 2012
11-Oct-12 18-Oct-12
Absolute change
over week
M1 4.183 4.068 -0.115
M2 43.109 43.081 -0.029
M3 103.032 103.158 0.126
M4 108.311 108.502 0.191
M2-M1 38.926 39.013 0.087
M3-M2 59.923 60.077 0.154
Source: BDL, BankMed Research
M1 = Currency in Circulation + Demand Deposits in LBP
M2 = M1 + Other deposits in LBP
M3 = M2 + Deposits in FX
M4 = M3 + TBs held by non banking system including accrued interests
November 2, 2012

USINeSS
bANkMed lAUNCHeS MobIle bANkING
bankMed launched the “MedMobile” application that allows customers to manage their accounts
in a convenient and secure manner from their smart phones. This application provides access to a
brief on personal accounts as well as loan and card balances. MedMobile offers many benefits to its
users, including the ability to manage scheduled and recurring transfers, setup beneficiaries to perform
transfers, access card services requests, redeem the earned MedPoints or MedMiles, order a checkbook
or statement of account, update the card billing address, and locate the nearest bankMed branch or
aTM with a site map, among several other benefits. The MedMobile application was developed by
Innova, the IT Services subsidiary of Turkey’s telecom operator Turk Telecom.
Geely INteRNAtIoNAl ReCoRdS HIGH SAleS peRFoRMANCe IN tHe tHIRd qUARteR oF
2012
Geely International, a Chinese private automotive company, represented by Rasamny automotive
Industries (RaI) in Lebanon, recorded a significant sales performance in the third quarter of 2012,
selling 143 cars in less than three months. This performance asserted Geely’s position as a leader among
other Chinese car distributors in the Lebanese market; with a focus on convenience and safety. RaI
became the sole agent of Geely in Lebanon in June 2012, and has opened five Geely showrooms, in Jal
el Dib, aley, Jbeil, Tripoli and anjar, with an after-sale service center located in Jdeideh. Two additional
showrooms will be in operation by March 2013.
entering the automobile industry in 1997, Geely International is one of the few private automotive
companies in China, considered among the country’s top business organizations. The company also
owns Volvo Car Corporation, which has the reputation of being one of the safest cars in the world. It
is worth noting that in the first three quarters in 2012, the sale of Chinese cars in Lebanon recorded a
72% year-on-year increase, way higher than the increase in the sales of Korean cars (+15%), european
cars (+3%), or Japanese cars (+2%).
November 2, 2012
Weekly Report disclaimer
This material has been prepared on basis of publicly available information and personal analysis. It is not intended to be used as a research tool nor as a basis
or reference for any decision or use. Neither the information provided nor any opinion expressed therein, constitutes a solicitation, personal recommendation or
advice. bankMed, sal gives no representation or warranty of accuracy or completeness, whether expressly or implicitly and accepts no liability, direct or indirect,
in connection with this material, for any reason whatsoever.