In its latest report covering the Lebanese banking sector, HSBC changed its valuation methodology by applying the Distributable Profit Model based on varying the cost of equity along the forecasting horizon in light of falling US interest rates, resulting in improved target prices.
The report maintained BLOM Bank S.A.L.’s GDR recommendation as a “buy” and described BLOM as the “safest bank in Lebanon”, given its conservative lending to high-quality corporate clients and potential to expand further into retail, private and investment banking.
The bank was also described as showing “high levels of liquidity and the largest percentage of loans extended outside Lebanon, thus reducing country risk.” In addition, HSBC gave Banque Audi S.A.L.’s GDR a “buy” recommendation, explaining that the bank’s non-interest income performance “brought operating income above expectations, but provisions and taxes resulted in lower than expected net profit growth.”
Banque Audi was seen as being positioned to become the largest retail bank in the country given that it possesses the largest branch network and significant “IT advantage” in Lebanon. The report also assessed Byblos Bank S.A.L., describing the bank as being one of the most aggressive and pioneering players with its main focus on retail banking and small and medium enterprise segments. HSBC adjusted its valuation to reflect international exposure, thus upgrading the bank’s C” share from a “sell” to a “hold” recommendation.
HSBC stressed the need for internationalization and rationalization for potential growth and the reduction of the country risk. According to the report, the economy needs to demonstrate that it can sustain in the longer-run adequate growth rate and exchange rate regime. — ( Banque du Liban et d'Outre-Mer Sal )
© 2001 Mena Report (www.menareport.com)
