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Peace of Mind AMEDA 11TH MEETING, BEIRUT April 2010 Brief Introduction to BLOM Bank The Development of the Custody Industry Asset Management from Lebanon & MIDCLEAR 1 Leading Banking Group In Lebanon One of the oldest Bank , Largest and most profitable Universal banking model Active in Corporate, Retail, Trade Finance, Private Banking, Investment Banking, Brokerage, Asset Management, Islamic Banking and Insurance. Well positioned to capture regional growth Present in KSA & Qatar (2009), Abu Dhabi (Rep. Office 2008), Egypt (2005), Jordan (2004), Syria (2004) and UAE (Dubai & Sharjah since 1976). Wide presence in Europe Present in France, UK, Switzerland, Cyprus and Romania Highest “Credit” Ratings - The highest national score rating Aa1.Lb from Moody’s - Rated by Capital Intelligence, a Middle East specialized rating agency, BBB-, which is the highest financial strength rating in Lebanon 2 High Growth, Expanding Overseas Total Deposits Growth of Total Net Lending ($ in millions) ($ in millions) CAGR: 16.4% CAGR: 22.1% 17,968 6,215 7,686 9,033 10,161 11,731 13,737 15,108 3,481 2,772 996 2002 2003 2004 2005 2006 2007 2008 2009 2002 Branch International Expansion 1,376 1,411 1,670 2003 2004 2005 2009 55 47 28 2005 58 58 64 59 67 UAE 2.3% Syria 5.3% Lebanon 2007 2008 2006 2007 2008 2009 Egypt 6.0% KSA (1.4%) Qatar (0.7%) Jordan 2.4% 37 2006 1,986 Breakdown of Net Income No. of Branches 52 4,021 2009 Lebanon 80.3% Europe 5.8% Foreign Countries BLOM Bank strategy is based on the expansion in the region and the diversification of its services to become a leading regional bank while continuing to ensure Peace of Mind to its customers and stakeholders. 3 Wide Diversification in Business Lines and Geographies Corporate Trade Finance Retail Private Banking Investment Banking Brokerage Islamic Banking Insurance Asset Mgmt Research Lebanon 2006 2008 Syria 2007 2009 2006 Egypt 2006 2006 2009 Jordan 2004 UAE Saudi Arabia 2010 Qatar Europe 2010 2010 2010 : available business lines Breakdown of Operating Income Breakdown of Operating Income 2008 Investment & Private Banking 8.7% Retail Banking 10.9% Corporate & Commercial Banking 25.5% 2009 Insurance 3.1% Liquidity* 51.8% Investment & Private Banking 12.3% Retail Banking 12.5% Insurance 3.1% Liquidity* 48.6% Corporate & Commercial Banking 23.5% * Liquidity represents Treasury Bills, CD’s, Bonds and deposits with banks. 4 Long Track Record of Consistent Profitability BLOM has successfully delivered consistent annual net income growth BLOM Net Income ($ in millions) CAGR: 19.6% 180.3 205 251.6 293.2 2007 2008 2009 136.8 83.6 88.3 91.2 2002 2003 2004 2005 2006 Source :Company Data 5 Substantial and Growing Fee Income Ratio of Fee Income to Operating Income Fee Income % of operating income 30.27% 145 115 79 75 2005 2006 20.70% 21.67% 23.50% 22.62% 2006 2007 2008 93 49 38 40 2002 2003 2004 2007 2008 2009 2003 2004 2005 2009 Source: Company Data Source: Company Data Fee Income Breakdown by Type Fee Income Breakdown by Region 2009 2009 Insurance 5.7% Europe 13.2% UAE 3.6% Corporate & Commercial Banking 39.2% Lebanon 56.8% Egypt 16.2% Syria 7.8% Source: Company Data 25.14% 23.78% Jordan 2.4% Investment & Private Banking 46.0% Source: Company Data Retail 9.1% 6 The development of the Custody Industry Clearing The securities market represents a large and growing part Services of financial Markets. Lebanon Custody as an industry originated with investors needing to keep security certificates in a safe place. In step with the growth of sophisticated financial markets, The custody industry evolved into a complex industry no longer characterised by physical safekeeping but by a range of information and banking services The development of the Custody Industry Custodian Banks, Central Securities Depositary, International CSD Custodian Banks provide services related to settlement and Asset Servicing ; it involves acting as an information intermediary, communicating between issuers and securities holders. They have developed economies of scale to service their customers. When acting in multiple markets they are called global custodian. At the urging of national authorities and central banks, some markets set up CSD to immobilise securities certificates. Advances in technology enabled markets to dematerialise. Central Registrar as 1st service. Now highly diverse services are proposed by CSD, they are the cornerstone of any efficient settlement system, and supervised by national central banks and security market authorities to prevent systemic risk. They are required to avoid credit risk and abide by good governance. EUROCLEAR & CLEARSTREAM have a different business model than CSD since they have been founded as for profit ventures by commercial banks . They combine CSD functions and banking services The development of the Custody Industry Custody in the electronic age & Cross Border Custody Services Investors continue to use custodian for several reasons: Ineligibility, Intermediation solution, functions are different in terms of risk profile, the need to cope with non standardised activities with much lower level of automation, and the need to to engage in activities considered as high value added. Specialised reporting and additional banking services Single market custodian Multi direct custodians Global Custodians Most CSD cover also securities deposited with other CSD with a secondary listing. They offer a custody service in securities outside their own markets either by appointing a multi single direct custodian bank as sub-custodian, or by opening an account in other CSD which may or may not involve the same membership rules that apply to MKT participants. The development of the Custody Industry Demand for Custody Services : Investors & Intermediaries Private Banking & Wealth Management customers Corporations Investment firms Institutional investors Brokers Global Custodians Asset Managers Medium to small sized Banks Issuers The development of the Custody Industry Challenges for the Custody Industry Diversity and increasing complexity of Assets Competition from CSD in Banking Services Regional challenges specific to the maturity of the industry Asset Management from Lebanon & MIDCLEAR First Lebanese Fund using a Global Custodian Bank then shifting to MIDCLEAR for Administration First Lebanese Fund investing in Jordan in cooperation with MIDCLEAR and a Local Custodian Bank First Bahraini Fund investing in Lebanon and local Custodian outsourcing its custody and administrative activities with MIDCLEAR First Lebanese Fund investing in EGYPT and appointing MIDCLEAR as Custodian and administrative Agent