By nature of its business, banking is closely related to saving and investing. The Lebanese banking industry has recorded rapid growth along with tough competition. The valuable regulations that the Central Bank of Lebanon has imposed reflected positively on the development of the banking industry.
The Islamic banking industry got affected by the compliance with the Shariaa but the conventional banking was impacted by digital transformation. Though the banking industry is still struggling to move forward due to the challenges and uncertainties of the unstable political situation threatening the entire region during the last few years, the long term potential of the banking industry in Lebanon is very promising.
However, banks need to avoid losses that will reflect negatively on the banks’ capital and on the shareholders’ profits. Bankers should focus on achieving profitable growth through raising customer base and offering innovative products and conducting promotional campaigns.
The potential for cyber risk has been increasing with greater interconnectedness in the banking ecosystem, rapid adoption of new technologies, and continued reliance on legacy infrastructure designed for a different age.
BLOM Bank (Banque du Liban et D’Outre Mer; ( بنك لبنان والمهجر) is a Lebanese bank established in 1951 and has been repeatedly selected as the Best Bank in Lebanon by several financial institutions such as Euromoney and The Banker. Its business operations are based on a universal banking model that includes: Commercial Banking, Corporate Banking, Private Banking, Investment Banking, Asset Management, Retail Banking, Islamic Banking, Brokerage Services, and Insurance Products and Services. The strive through initiatives and innovation to provide banking services on a genuine basis to meet the ambitions of stakeholders: clients, employees and shareholders
BLOM BANK started operating in 1951 in Beirut. Its establishment coincided with a booming period in the banking sector in Lebanon. By 1953, BLOM BANK started expanding and opened a branch in Jeddah, KSA. As the Lebanese Civil War broke out, BLOM BANK’s operations abroad increased to cater for the need of the Lebanese diaspora. Today, BLOM BANK is present in 12 countries across the world. On the leadership level, Dr. Naaman Azhari became the General Manager of the Bank in 1962 and Chairman of the Board and General Manager in 1971. In 2008, Dr. Naaman Azhari was appointed Chairman of BLOM BANK GROUP while his son, Saad Naaman Azhari, became Chairman of the Board and General Manager of BLOM BANK and also serves as Vice-President of the Association of Banks in Lebanon.
It changed its name to BLOM Bank in 2000. It acquired the Lebanese subsidiary of HSBC Bank Middle East, to be approved by the Banque du Liban.
As of 2016, it was “Lebanon’s First-largest bank by market capitalization.
BLOM BANK is currently present in the following 12 countries: Lebanon, Jordan, UAE, France, UK, Switzerland, Romania, Cyprus, Egypt, Qatar, Iraq, and Saudi Arabia. It conducts its worldwide operations through a network of banking and financial units, either directly or through its subsidiaries.
Saad N. Azhari is the Chairman of the Board and General Manager of BLOM BANK S.A.L.; Chairman and General Manager of BLOMINVEST BANK S.A.L.;
Chairman of BLOM BANK SWITZER LAND S.A.; Chairman of BLOM BANK EGYPT S.A.E.; Chairman of BLOM BANK QATAR L.L.C.; Board Member of BLOMINVEST SAU DI ARABIA; Board Member of BLOM DEVELOPMENT BANK S.A.L.; Member of the Board Risk Management Committee of BLOM BANK S.A.L.; Member of the Board Consulting, Strategy and Corporate Governance Committee of BLOM BANK S.A.L. acting also for BLOMINVEST BANK S.A.L.; Board Member of Banorabe SA , SPF; Member of the Board Risk Management Committee of BLOMINVEST BANK S.A.L.; Member of the Board Compliance Committee of BLOMINVEST BANK S.A.L.; Member of the Board Compliance Committee of BLOM BANK S.A.L.
Saad Naaman Azhari, born in 1961, is the Chairman and General Manager of BLOM BANK S.A.L. since 2008, and prior to that, between 2001 and 2007, he was the Vice-Chairman and General Manager of BLOM BANK S.A.L. Saad Azhari also assumes several functions on the Board of Directors of BLOM BANK Group’s entities. He is, in addition, the Vice President of the Association of Banks in Lebanon since 2001.
He joined BLOM BANK SWITZERLAND S.A. in 1991, was appointed its General Manager in 1997 and its Chairman in 2001.
He worked from 1986 to 1991 at PBZ (Privatbank), an affiliate of UBS Group, in Zurich-Switzerland where he was promoted to run, from Zurich, the Bank’s operations in the Middle East and in its Hong Kong office.
Saad Azhari obtained a Master Degree in Computer Engineering, and afterwards a Master Degree in Business Administration (MBA), from the University of Michigan-Ann Arbor in the United States of America.
Saad Azhari has 29 years’ banking and regulatory experience, primarily in the Kingdom of Saudi Arabia. He was appointed BLOM BANK Chairman in 2001.
With his extensive experience in the banking market, and his strong knowledge of the banking industry, Saad Azhari is the ideal person to lead BLOM BANK. He broadened his knowledge throughout his long outstanding career in the banking industry and he gained valuable knowledge and various executive positions.
In a wide-ranging cover interview, Saad Naaman Azhari speaks exclusively to BUSINESS LIFE reporter on banking, economy and the growth and challenges of BLOM BANK.
BL: How can countries manage debt levels, so they don’t stifle economic growth?
Saad N. Azhari: There are two cases in this regard. In the first case, if the country runs a primary surplus (equal to the budget deficit minus interest payments on the debt), then the deficit problem arises from high interest payments, and it can be reduced by improving debt management and the lowering of interest rates. In the second case, if the country runs a primary deficit, as Lebanon is now, then reducing the deficit requires drastic reductions in current expenditures and increasing tax revenues and collections.
Also, a sufficient condition for lowering the debt to GDP ratio is having the growth rate of GDP higher than the interest rate.
BL: How do banks help countries invest in their people and prepare for an increasingly complex future?
Saad N. Azhari: Banks, or at least banks in Lebanon, are helping in four ways. First, by lending the government to finance expenditures on education. Second, by providing subsidized loans to university students. Third, by undertaking CSR activities in support of education, like BLOM’s adoption of SDG 4 “Quality Education”. Fourth, by investing in the knowledge economy, like the Lebanese banks’ investments in BDL‘s Directive 331 start-ups – investments that have reached close to $400 million so far.
BL: And above all – what will it take to promote economic growth and help lift people out of poverty everywhere in the world?
Saad N. Azhari: There are three essential investments in this respect. First, investment in education and human capital. Second, investment in technology and physical capital. Third, and perhaps most important, investment in good institutions and governance. The third is particularity relevant to Lebanon.
BL: If technology is helping raise aspirations and changing the nature of work, what are people going to do? How will they support their families? How will they reach their ambitions in an increasingly complex world?
Saad N. Azhari: Since recorded history, the role of technology has been in net terms very positive. Though it might displace labor in the short term, it will create more job opportunities in the medium- to long -term. In addition, over time people will learn to adjust their life patterns to the new technologies and derive considerable benefits from most of them.
BL: What is your opinion on mitigating cyber risk?
Saad N. Azhari: Cyber risk is the small price that we pay to be digitally prepared and agile. It can be minimized through multiple-layer defences and through cooperation and concerted efforts by all banks partaking in the new technologies, at the local and global levels.
BL: What are your comments on mmodernizing Monetary Policy Frameworks?
Saad N. Azhari: I think the current monetary policy framework in Lebanon, which is following a fixed exchange rate regime as the intermediate target, has served the country rather well. It has controlled inflation, protected people’s wealth, and stimulated capital flows and financial development. It is important to keep in mind in this respect that a country’s competitiveness is determined not by its exchange rate but by its productivity.
BL: Do you suggest that Central Bank of Lebanon or the market should go through a cycle of mergers and acquisitions?
Saad N. Azhari: BDL’s policy is favorable to mergers and acquisitions (M&A) as long as it is not among big banks. And the market is actually doing that. We saw in the past few years some decent M&A activities involving big and medium banks with small banks that had reduced the number of commercial banks in Lebanon from more than 60 to 49.
BL: What are the current and the future challenges of BLOM BANK?
Saad N. Azhari: Current challenges deal with the unstable economic and political conditions in Lebanon, the higher – and somehow unjustified – taxes on Lebanese banks, the ever-increasing rules and regulations and how to optimally comply with them, and the tough competition in local and regional markets. Future challenges involve transforming the Bank to a bank with solid digital capabilities and maintaining the Bank as the leading regional bank in Lebanon.
BL: If we were to rate BLOM BANK, in which rank would it be?
Saad N. Azhari: Frankly, I am not in a fair position to rank the Bank. It is better to leave it to specialized and reputable regional and international institutions. The majority have consistently ranked BLOM Bank as the number one bank in Lebanon, in addition to being ranked first in several banking activities ranging from retail banking and trade finance to asset management and internet banking.
BL: What are your objectives for the year 2019?
Saad N. Azhari: We have at least three objectives for 2019. First, building on the prospects of a new government formation and its adoption of an economic revitalization program, we hope to increase and refine our activities and products in Lebanon. Second, we intend to strengthen our operations outside Lebanon, especially in the Gulf and Egypt, where in case of the latter we will be opening 4 new branches to a total of 44. Third, we aim to continue with our digital transformation, offering new and innovative services towards that end.
BL: How do you see the impact of the current oil prices on the banking industry, on BLOM BANK and Lebanon?
Saad N. Azhari: Higher oil prices are a double-edged sword. On the one hand, it increases remittances and capital flows. On the other hand, it increases inflation and hurts aggregate demand and budget deficits. However, I would say that its impact in net terms is positive, especially if the rise in oil prices is moderate.
BL: How do you see the impact of ebanking on customers?
Saad N. Azhari: It is very good, especially among the youth and millennials. It gives them a safe, easy to access, and a cheap way to do their banking business, in addition to the traditional, personalized channels. We at BLOM Bank, as I mentioned earlier, are trying to expand and deepen this e-banking channel as part of our digital transformation process.
BL: What are the FinTech opportunities and challenges for the Lebanese banking industry?
Saad N. Azhari: They are emerging. Fintech is still in its early stage in Lebanon – and the region as a whole – confined to settling payments mostly. Like elsewhere, Lebanese banks are coopting and absorbing Fintech facilities, and working on adjusting their electronic platforms accordingly. Banks are also in line with the new regulations that are needed for safe and effective Fintech operations.
BL: How BLOM BANK is continuing to build its digital banking platform and how will this digital platform help the bank and its esteemed customers?
Saad N. Azhari: We have a new special unit at the bank that is in charge with our digital transformation; and our IT Department is always updating its systems to that purpose. We target our retail customers, especially millennials where we have designed a new product for them called NEXT; we also target our corporate clients through eBLOM Corporate that allows corporations to handle all their banking operations in an easy and safe way. That is in addition to new digital services to all of our clients, like the recent BLOMPAY that enables them to pay all of their bills through their smart phones.
BL: What are the recommended strategies to further accelerate BLOM BANK’s growth in 2019?
Saad N. Azhari: As I said, we aim to achieve at least the three objectives that I have identified earlier. The way to go about achieving them is by following our strategy of conservative yet innovative banking, by relying on our talented staff and world-class services, and by seizing on synergetic and cross-selling opportunities among our clients in different banking units. Interesting to note also that the Bank will be resorting to shoring up its resources through funding agreements with international institutions – such as IFC and EBRD – to enhance its activities in areas like trade finance and SME lending.
BL: Where does BLOM BANK stand today locally and internationally?
Saad N. Azhari: We are one of the two largest banks in Lebanon with 74 branches. We are also present in 12 countries: Lebanon, Egypt, Jordan, Iraq, Qatar, UAE, KSA, France, England, Switzerland, Cyprus, and Romania. We have 226 branches worldwide; and our outside lending activities constitute 38% of our total lending. We are also among the leading regional banks in the Arab world.
BL: A stronger focus on existing policies is likely to pay off greater dividends in terms of productivity and BLOM’s growth, do you agree and how?
Saad N. Azhari: Existing policies have done well for BLOM Bank. For instance, amid a year characterized by political and economic instability, at end September 2018 net profit increased to $382.95 million, up by 7.29% on the same period last year. This level of net profit implied the highest rates of profitability among listed banks, with the rate of return on average assets reaching 1.5% and the rate of return on average common stocks 16.48%. Also, the Bank attained a solid financial position, with CAR reaching 18.5% and primary liquidity 80.5%.
That is not to say that the Bank’s existing policies are immune to change. They can change whenever the bank’s grand strategy of controlling risk and cost and maintaining good asset quality, capital adequacy, and primary liquidity dictate that.
BL: What are the necessary steps to push forward the Association of Banks in Lebanon? What are the necessary steps to push forward Lebanon’s economy?
Saad N. Azhari: ABL has served very well over the years the interests of the banking sector and the Lebanese economy. And it is always in the process of changing its procedures and activities to achieve these purposes. An indication of that is the recent hiring by ABL of the consulting company McKenzie and Co to advise ABL on new strategies and policies so as to make its role more effective.
As to the Lebanese economy, what can push it forward are structural reforms that give priority to reforming the public and real sectors in mainly three areas: reforms to government finances involving rationalizing expenditures, improving tax collection, and restructuring the public pension system; reforms to the governance of public enterprises – especially EDL -- including the resort to privatization and PPP; and reforms to the investment and competitiveness climate to improve the productivity of the economy.
BL: What are your views on the pressure exerted on Lebanese banks to curtail the country’s banking secrecy laws?
Saad N. Azhari: The nature of banking secrecy laws, including in Lebanon, has changed notably in the past 10 years. And this change, from a position where the law was sacred to a position where it is functional, has been actually to the better since it made sure that the activities of the banks remain clean and their reputations sound.
BL: Now that Syria’s war is almost over, will BLOM’s subsidiary Bank in Syria activate its exposure there?
Saad N. Azhari: The Syrian crisis is not totally over, so it is premature to discuss the return of the Bank to Syria. But there is no doubt that, once the crisis is over and Syria is back in the fold of the international community, the Bank will be there to resume its operations and partake in the country’s revival.
BL: According to the Ministry of Finance (MoF), Lebanon’s gross public debt reached $83.84B by Q3 2018. What is your opinion on the Lebanese deficit? What is the solution?
Saad N. Azhari: No doubt, Lebanese deficits and debt are extremely high, in excess of 10% of GDP for the former and 150% of GDP for the latter. There is an urgent need to reduce them to sustainable levels, primarily through the three reforms mentioned earlier. And these reforms, by the way, are largely easy to implement and should garner political consensus. They are also essential preconditions to receive the $11 billion in loans and grants promised in the “Cedre” conference.
