In a report on Middle East and African banks dated February 2001, Nomura Securities maintained its “Hold” recommendation for the shares of Byblos Bank and its “Sell” recommendation on Banque Audi’s stock. The report indicated that the year 2000 was “very tough” for Lebanese banks but that Byblos emerged from it with a “fair amount of credit”.
It said the bank’s net interest income rose despite lower rates on treasury bills and loss provisioning was kept high at 1.38 percent of average loans. Non-performing loans (NPL) rose slightly by 2.44 percent to $140 million and the bank increased its loan-loss provisions by 25 percent to $124 million. As a result, the net NPL ratio was substantially reduced from 3.8 percent in 1999 to 1.4 percent last year.
Nomura recommended Byblos as the only local stock to hold in case of exposure to the Lebanese banking sector, but warned that the overall market remains risky in the current economic climate. The lack of any clear signs of economic recovery in Lebanon led Nomura to reduce its profit estimate for Byblos from $54 million to $50.4 million in 2001 and from $55 million to $49.75 million in 2002.
Nomura estimated that Audi boosted its loan loss provision heavily in 2000, adding that the
bank’s net NPL position is equivalent to 14 percent of its capital base compared to 5 percent for Byblos but that the bank is likely to close this gap in 2001. It noted that Audi’s GDR now stands at its lowest price level since its offering five years ago, which may trigger the bank to increase its treasury position and undertake another stock buyback program.
According to Nomura, Banque Audi managed to shed the remnants of its “family bank” image and is the best known Lebanese bank internationally due to its geographically widespread network of branches and representative offices. It forecast Audi’s profits at $36.9 million for 2001.
Societe des Ciments Libanais SAL (SCL), Lebanon’s largest cement producer and one of its biggest industrial firms, posted a net loss of $9 million last year compared to losses of $19 million in 1999 and announced plans to layoff 150 workers to reduce expenses. The layoffs would reduce the firm’s total workforce to 350 compared to 700 back in 1997, and would result in savings of about $3.5 million in salaries and benefits. SCL’s General Manager Dominique Drouap said management is discussing with fired workers the amount of their end-of-service benefits, adding that cost cutting measures will allow the company to break even or even make a small profit at the end of the year.
The cement industry has been severely hit by the recession and by the slowdown in the construction sector. According to SCL, total cement production in Lebanon fell to 2.6 million tons last year from 4 million tons three years ago. Mr. Drouap revealed that SCL’s annual production fell to 1.2 million tons last year from 2 million tons in 1997. Another problem facing SCL is how to reschedule the loans it obtained from international creditors. The firm borrowed $100 million in the mid-1990s to finance a $165 million furnace. SCL is 51 percent owned by Swiss-based Holderbank Group and its shares are traded on the Beirut stock exchange. — ( Lebanon Invest )
© 2001 Mena Report (www.menareport.com)
