BLOMINVEST BANK S.A.L.
Economic Research Department
“The Lebanon Brief” can be accessed via Internet at the following web address: http://www.blom.com.lb
The Lebanon Brief 8 October – 13 October, 2001
EQUITY MARKET 12/10/01 423.15 566,333 $386,661
5/10/01 424.68 317,072 $555,971
% Change (0.36%) 78.61% (30.45%)
†22 January 1996 = 1000 BLOM STOCK INDEX Six-Month Evolution 550
Hi 534.71 500
450
400
Lo 395.60
10/10/01
03/10/01
26/09/01
19/09/01
12/09/01
05/09/01
29/08/01
22/08/01
15/08/01
08/08/01
01/08/01
25/07/01
18/07/01
11/07/01
04/07/01
27/06/01
20/06/01
13/06/01
06/06/01
30/05/01
23/05/01
16/05/01
09/05/01
350 02/05/01
Financial Markets
Stock Market BLOM Stock Index † Total Volume Traded Total Value Traded
Although volume on the Beirut bourse was impressive with 566,333 shares traded, the BLOM Stock Index barely moved, slipping 0.36% on the week to close at 423.15 after levelling for three consecutive days. Ciments Libanais accounted for more than 90% of total shares traded. Of course, incentives for entering the market are somewhat thin as listed firms are limited in their range of activities and have all been affected, in varying degrees, by the recession. Add to that the regional concerns over wider military escalations, then the appeal of western markets for local investors becomes more apparent. Banking Sector
Mkt
12/10/01
5/10/01
% Change
BLOM (GDR) Audi (C) Audi (GDR) Byblos (A) Byblos (B) Byblos (C) Bank of Beirut (C) BLC (C) BLC (GDR) Fransabank (A) Fransabank (B) BEMO (C)
LSE BSE LSE OTC OTC BSE BSE BSE Lux OTC OTC BSE
$17.900 $13.500 $9.400 $1.250 $1.250 $1.063 $7.563 $10.000 $1.125 $3.000 $3.250 $3.625
$17.650 $13.500 $10.000 $1.250 $1.250 $1.250 $7.563 $10.000 $1.125 $3.000 $3.250 $3.625
1.42% 0.00% (6.00%) 0.00% 0.00% (14.96%) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Bank of Beirut was the first bank to announce its 9-month results on Friday, showing flat profits of $14m compared to the same period last year. The results did not have any effect on the bank’s stock price, which traded almost daily at an unchanged $7.563. Byblos “C” ended the week down 14.96% to $1.063 after trading 18,525 shares on Thursday. The soon to be released third-quarter results of other listed banks are not expected to have any marked effect on their respective share prices. Banks' GDRs ended mixed on the week, with Audi down 6% to $9.4, BLOM up 1.42% to $17.9 and BLC remaining unmoved at its record-low of $1.125.
BLOMINVEST Bank S.A.L.
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The Lebanon Brief 8 October – 13 October, 2001
Real Estate
Mkt
12/10/01
5/10/01
% Change
Solidere (A) Solidere (B) Solidere (GDR)
BSE BSE LSE
$4.375 $4.875 $4.025
$4.375 $4.875 $3.825
0.00% 0.00% 5.23%
Manufacturing Sector
Mkt
12/10/01
5/10/01
% Change
Ciments Libanais Ciments Blancs (B) Ciments Blancs (N) Eternit* Uniceramic (A) Uniceramic (C)
BSE BSE BSE BSE BSE BSE
$0.406 $1.844 $2.250 ----$1.313 $2.188
$0.375 $1.844 $2.250 ----$1.313 $2.188
8.27% 0.00% 0.00% ----0.00% 0.00%
* Trade on Eternit was suspended on January 21st, 1999 until further notice.
Ciments Libanais was the only traded industrial stock with 513,658 shares changing hands with an 8.27% price increase even though the company posted a first-half loss (see Corporate News). Mkt
12/10/01
5/10/01
% Change
Funds Lebanon Holdings
BSE
$4.500
$4.500
0.00%
Retail Sector RYMCO Bou Khalil ABC
BSE BSE OTC
$2.188 $1.688 $32.000
$2.188 $1.688 $32.000
0.00% 0.00% 0.00%
Tourism Sector Casino Du Liban SGHL
OTC OTC
$155.000 $5.375
$155.000 $5.375
0.00% 0.00%
BLOMINVEST Bank S.A.L.
Financial Markets
A general lack of activity characterised Solidere’s stock this week, as both classes accounted for only 5.7% of total volume in three trading sessions. Solidere "A" closed unchanged at $4.375 while "B" remained steady at $4.875. Trading for both share classes should remain within the current $4-$5 range in the absence of any pricestimulating news on the horizon. Solidere’s GDR did see a mild bounce-back at the end of the week, climbing 5.23% to $4.025 from what some opportunistic buyers may have thought were oversold levels.
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The Lebanon Brief 8 October – 13 October, 2001
Financial Markets
FOREIGN EXCHANGE MARKET Foreign Exchange Market LP / Dollar Dollar / Euro DM / Dollar Yen / Dollar French Franc / Dollar Swiss Franc / Dollar Dollar / Sterling
12/10/01 1507.50 0.9110 2.1472 121.22 7.1962 1.6266 1.4520
5/10/01 1,507.50 0.9189 2.1288 120.50 7.1347 1.6161 1.4826
% Change 0.00% 0.86% 0.86% 0.60% 0.86% 0.65% 2.06%
Calm continued to reign on the local foreign exchange market, seemingly unaffected by the possibility of instability in the region, as the US continues its campaign against international terror. The Central Bank ceased for the second consecutive week its market intervention, as demand for US dollars remained scarce. The Lebanese pound prevailed at the upper-end of the Central Bank’s intervention band in interbank trading, unchanged from last week at LP1,513.75-LP1,514.25.
MONEY MARKET Money Market Rates Interbank Average‡ BDL 45-day CD BDL 60-day CD BDL 182-day CD BDL 364-day CD
12/10/01 7.63% 9.50% 10.25% 11.50% 11.90%
5/10/01 8.54% 9.50% 10.25% 11.50% 11.90%
b.p. Change -91 0 0 0 0
Treasury Yields 3-M TB yield 6-M TB yield 12-M TB yield 24-M TB yield
12/10/01 11.18% 12.12% 13.43% 14.14%
5/10/01 11.18% 12.12% 13.43% 14.14%
b.p. Change 0 0 0 0
‡day-to-day rate
Nominal TB subscriptions surged 48% to LP1.21tn ($802.5m) on October 4 following BDL's swap operations that allowed the replacement of short-term bills with 2-year papers at higher yields. The value of TBs maturing on October 4 reached LP424.29bn ($281.5m), the highest level in several weeks, while surplus of nominal subscriptions jumped to LP785.46bn ($521.03m). The secondary market witnessed considerable demand as banks enjoyed adequate LP liquidity. The 24-M TB remained the main attraction for this week as it represented 93.18% of purchases compared to 96.7% a week earlier. The 3-M and the 6-M TBs saw their combined share of total subscriptions almost stabilise at 4.83%, while 12-M TB accounted for only 1.98% of the total, up 83 b.p. from the previous auction. The result of the Central Bank’s fulfilment of most of the TBs' bids, left certificates of deposit, previously a favoured destination for banks’ excess local currency funds, with no sale registered whatsoever.
BLOMINVEST Bank S.A.L.
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The Lebanon Brief 8 October – 13 October, 2001
EUROBOND MARKET Reuters Lebanese Government Bond Index Reuters Bond Index
12/10/01 130.28
5/10/01 130.00
% Change 0.22%
Lebanese Government Eurobonds in USD 12/10/01 100.000 101.500 95.000 99.000 101.000 98.000 100.000 100.500 93.250 98.500 98.250 101.000
2003-8.625% 2003-9.125% 2003-L+2% 2004-8.500% 2004-9.500% 2005-8.750% 2005-9.375% 2006-9.875% 2007-8.625% 2008-10.125% 2009-10.25% 2016-11.625%
Weekly Change % 0.75% 0.50% 0.00% 0.00% 2.00% (0.50%) 1.00% 0.75% (0.80%) 0.00% (0.25%) 0.00%
Yield 8.56% 8.27% 9.53% 8.94% 9.12% 9.37% 9.35% 9.73% 10.17% 10.43% 10.58% 11.48%
Lebanese Government Eurobonds in Other Currencies Maturity-Coupon
12/10/01
2002-6.500% (DM) 2004-7.250% (Euro) 2006-8.875% (Euro)
98.750 97.500 99.500
Weekly Change % (0.25%) 0.50% 0.50%
Yield 8.30% 8.41% 9.00%
Demand for Lebanese Eurobonds eased off this week with the majority of prices remaining firm due to a lack of new sellers in the market. This partly reflects the fact that demand is usually generated from local participants, which often hold their papers until maturity. In addition, foreign investors are likely to maintain cautious approach vis-à-vis Lebanese sovereign papers given the current global environment. Prices of traded bonds ended mixed this week with the average yield standing at around 9.5%, while the yield on 10-year US Treasury paper reached 4.67%. Lebanese Corporate Eurobonds Issuer
MaturityCoupon
12/10/01
Weekly Change %
Yield
BoB Mediterranee Libano-Francaise Byblos Bank Credit Libanais Mediterranee Fransabank Credit Libanais BoB Méditerranée Mediterranée Mediterranée BLOM Ciments Libanais Audi Audi Offer prices are stated
2001-8.000% 2002-9.250% 2002-8.875% 2002-8.750% 2002-8.250% 2002–8.750% 2002-8.000% 2003-7.360% 2003-8.000% 2003-8.625% 2004-9.250% 2005-9.500% 2005-9.000% 2006-10.000% 2007-8.500% 2010-10.75%
100.500 101.250 101.375 100.875 100.625 101.250 100.500 96.500 97.500 100.000 100.500 99.375 100.000 101.000 101.000 103.000
0.00% 0.00% 0.00% 0.00% 0.00% 0.25% (0.50%) 0.00% 0.00% 0.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.69% 6.64% 6.53% 7.26% 7.29% 7.27% 7.48% 9.70% 9.62% 8.62% 9.24% 9.71% 9.98% 9.72% 8.28% 10.21%
BLOMINVEST Bank S.A.L.
Financial Markets
Maturity-Coupon
4
The Lebanon Brief 8 October – 13 October, 2001
Lebanon’s gross public debt reached $27.50bn in August, up 2.1% from a revised $26.93bn in July, and constituting a 10% increase since the beginning of the year. Gross domestic debt dropped 1.7% since January to $18.43bn, while external debt edged up 10.9% to $9.06bn, of which $7.04bn consists of eurobonds. On a year-to-year basis, net domestic debt (after deducting public sector deposits) increased 6.4% from $15.83bn in August 2000, while external debt grew by 54.1% from $5.88bn. Gross Public Debt $27,000 Millions
Economic Statistics
Public Debt Up 2.1% in August 2001
$24,000
$26,925
$27,497
Jul. '01
Aug. '01
$23,800
$21,000 $18,000 $15,000 Aug. '00
Banks' Assets Rise 0.8% in August 2001 The main features of banks’ consolidated balance sheet for August 2001 are:
Assets Deposits LP FC Loans LP FC Dollarisation (Deposits)
Aug. ’01 ($m) 47,221 39,342 10,287 29,055 16,233 2,062 14,171 73.85%
Jul. ’01 ($m) 46,855 38,959 10,941 28,019 16,155 2,010 14,145 71.92%
% Change 0.78% 0.98% (5.98%) 3.70% 0.48% 2.59% 0.18% 193b.p
Aug. ’00 ($m) 43,370 36,356 13,348 23,008 15,642 1,871 13,771 63.29%
Commercial banks' consolidated balance sheet reached $47.22bn at the end of August 2001, up 0.78% from the previous month and reflecting an 8.9% increase from August of last year. Total deposits rose 8.2% year-to-year, boosted mainly by a $6.05bn surge in FC deposits. The higher dollarisation rate of 73.85%, up 10.56% year-toyear, resulted from a higher growth rate in FC deposits of 26.28% compared to a drop of 22.93% in LP deposits. Loans in LP grew by 10.21% from the previous year compared to a moderate 2.90% increase in FC loans. The ratio of loans to deposits as at end-August 2001 dropped by 21 b.p. to 41.26%. The ratio of FC loans to FC deposits was up 10.9% on a yearly basis to 46.29%, while that of LP loans to LP deposits increased 6.02% to 20.04% over the same period. The restricted growth in the loans portfolio is again the outcome of conservative bank lending policies, with doubtful debts reaching around 19% in June 2001 compared to 17.5% at the end of last year.
BLOMINVEST Bank S.A.L.
5
The Lebanon Brief 8 October – 13 October, 2001
Customs Duties Up 18% in September
Customs Duties
Millions
$130
122
$120 $110
106
103
$100 $90 $80 Sep. '00
Aug. '01
Sep. '01
Airport Activity up in the First 9 Months of 2001 Figures released on activity at Beirut International Airport (BIA) show that the number of airlines using BIA reached 23,631 in the first 9 months of 2001, up by around 4.19 % from the same period last year. Additionally, the number of passengers increased by 7.56% to about 2.01m while cargo handling increased by 3.16% to reach 43,559 tons. BIA Activity Airplanes Passengers Cargo (tons)
Jan-Sep '01
Jan- Sep '00
% Change
23,631 2,005,937 43,559
22,681 1,865,023 42,226
4.19% 7.56% 3.16%
BLOMINVEST Bank S.A.L.
Economic Statistics
Revenue from customs duties reached $121.6m in September, up 18.1% from the previous month and 14.6% higher than August of last year. Customs revenues for the first nine months of 2001 totalled $819.3m, an increase of 42.1% compared to projected figures. The accumulated drop in customs receipts amounted to $139m compared to an estimated $225m following the recent cuts in duties introduced since November 2000.
6
The Lebanon Brief 8 October – 13 October, 2001
Weekly Developments
Francophone Summit Delayed One Year Culture Minister Ghassan Salameh announced officially this week that the Francophone Summit originally scheduled to be held this month in Beirut would be postponed until October 2002 due to the “evolving international situation”. Lebanon was anticipating the Summit to draw around 10,000 visitors as well as to yield major economic benefits in tourism and investment. Hotel owners are demanding compensation for the incurred losses from the cancellation of approximately 30,000 hotel nights.
CPT Confirms Telecom and Cellular Law Parliament’s Committee for Post and Telecommunications (CPT) approved this week both the Telecommunication and Cellular draft laws. The former allows the creation of a state-owned operator, LibanTelecom, by merging fixed-line Ogero with other departments within the telecom ministry. It is to mention that Article 50 was amended in this Law in order to preserve the rights of around 5,000 employees. The Cellular Law allows the government to grant two cellular licenses to private operators.
S&P Publishes Global Financial System Stress 2001 Standard & Poor's released its annual report on Global Financial System Stress in which it identified 15 financial systems, including Lebanon, that are either experiencing financial stress or are showing an increased potential for future problems. S&P calculated the potential level of gross problematic assets (GPAs) in a given system as an indicator of financial stress. Systems with GPAs levels of 5%-15% were considered to be the strongest while those with GPAs reaching 35%-70% the weakest. S&P based its estimates on data analysis and discussions with regulators and banks. Lebanese banks were assigned potential GPAs of 25%-40% due to their exposure to the "high economic risk of operating in a fragile environment" along with their significant holdings of Lebanese sovereign debt. S&P indicated that the government’s fiscal difficulties have resulted into higher credit risks in the bank's portfolios, both directly due to their holdings of government paper (60% of outstanding TBs) and indirectly through higher interest rates for private sector borrowers. The agency concluded that banks in general cannot avoid the adverse consequences of operating in systems with low-rated sovereigns.
BLOMINVEST Bank S.A.L.
7
The Lebanon Brief 8 October – 13 October, 2001
BoB Releases Nine-Months Results
SCL Posts Half-Year Loss Société des Ciments Libanais S.A.L., the country’s largest cement producer and industrial firm, posted a $2.4m loss for the first-half of 2001compared to losses of $8.9m in the same period last year. Sales were up 16.33% from half year 2000 to $36.45m, while cost of goods sold stood at $26.71m. SCL posted sales of $73.9m in 2000, down from $77.6m in 1999. The company dismissed 167 employees this year in an attempt to reduce heavy losses incurred over the last three years. It is worth mentioning that SCL borrowed more than $100m in the mid-90s to finance a fully automated $165m furnace, and is currently facing the problem of rescheduling the loans obtained from international creditors.
NSSF Profits Drops in First Half of 2001 The National Social Security Fund’s (NSSF) financial performance regressed in the first half of 2001 compared to the same period last year. Financial results for family allowances, end-of-service payments, and maternity and sickness benefits dropped by 86.85%, before including interest revenue and by 38.50% after including interest. The decline comes after companies’ obligations to the family allowances and maternity and sickness funds were reduced earlier this year from 15% each to 6% and 9% respectively. It is to mention that NSSF’s revenues reached LP485.7bn ($322.2m) in the first 6 month of 2001 compared to LP581bn ($385.4m) for the same period in 2000, while expenses increased by 2.87% to LP319.3bn ($211.8m) as of June 30, 2001. Finally, net income (including interest receipts) declined by 38.50%, reaching LP166.4bn ($110.4m) in the first- half of the current year compared to LP270.6bn ($179.5m) in the first- half of last year.
ING Bank N.V. to Cease Operations in Lebanon Dutch financial institution ING Bank decided to terminate business in the country due to the political situation in the Middle East. The management of ING is looking to transfer its clients to a large bank and to redeploy its staff to other banks. It is to mention that ING Group is present in more than 65 countries around the world. Its total assets in Lebanon reached $75.6m, while total customer deposits amounted to $40.1m in 2000.
Group Méditerranée to Acquire ABB
Corporate News
Bank of Beirut SAL released this week its unaudited balance sheet and income statement showing $14m in profits during the first nine months of the year, unchanged from the same period in 2000. The bank’s total assets as of September 30, 2001 reached $1.98bn, up 2.59% year-toyear, while loans and advances to customers dropped by 2.48% to $488.93m from $501.36m as of September 30, 2000. The bank’s customer deposits registered a 2.74% annual increase to $1.50bn.
Allied Business Bank (ABB) has agreed in principle to sell 90% of its shares to Groupe Méditerranée, owner of 99% of Banque de la Méditerranée. The acquisition needs to be certified by the Central Bank. If approved, Groupe Méditerranée will buy ABB through a soft loan granted by BDL. It is to mention that ABB has 14 branches and its assets amount to approximately $200m.
BLOMINVEST Bank S.A.L.
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The Lebanon Brief 8 October – 13 October, 2001
First Online Travel Agency in Lebanon UFLYONLINE.com, the first online travel agency in Lebanon, was launched recently. The agency offers a large selection of travel rates from Lebanon to more than 2,000 destinations around the world. Emphasis is put on the booking engine and users interface.
AROPE Launches Online Gallery
Corporate News
AROPE Insurance launched a virtual art gallery, “Start-Up Talents”, catering to fresh talents around the country. This gallery allows artists the opportunity to exhibit their work in graphic arts, photography, sculpture, literature, music and video art at no cost. A jury of prominent critics will evaluate artists. Individuals can also see the exhibit and vote for their favourite pieces, allowing each artist additional exposure.
BLOMINVEST Bank S.A.L.
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The Lebanon Brief 8 October – 13 October, 2001
BLOMINVEST Bank S.A.L. Rachid Karameh Street – Verdun P.O.Box: 11-1540 Riad El Solh Beirut 11072080 BLOM Bldg. - 2nd Floor Tel: 961 1 743 300, 738 938 Fax: 961 1 738 916 e-mail:
[email protected]
This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken on the basis of information contained herein are solely the responsibility of the recipient.
BLOMINVEST Bank S.A.L.
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