annual report 2009 - fransabank...consolidated financial highlights 20052006 2007 2008 2009 19.34%...
TRANSCRIPT
Annual Report 2009
Statement of the Deputy Chairman and the Chief Executive Officer
Corporate Governance
Historical Milestones
Management Report
Financial Statements
Group Network
6
10
26
30
60
148
1FransabankAnnual Report 2009
Contents
Consolidated Financial Highlights
In Million USD
Customers’ creditor accounts
Loans and advances to customers (Net)
Net profit for the financial year
Shareholders' equity
Total assets
Solvency ratio as per Basel I requirements(net profit included after distribution of dividends)
Solvency ratio as per Basel II requirements(net profit excluded)
Number of local branches
Staff number
Exchange rate USD/LBP
31.12.05
4,125.17
797.76
46.30
408.15
4,979.16
24.96%
60
1,169
1,507.5
prog.06/05 31.12.06
4,312.34
856.34
54.51
449.25
5,228.39
25.57%
61
1,214
1,507.5
+43%
+67%
+12%
+15%
+38%
prog.07/06 31.12.07
6,173.21
1,430.32
60.83
517.75
7,228.98
17.89%
103
1,777
1,507.5
+16%
+20%
+45%
+46%
+17%
prog.08/07 31.12.08
7,149.64
1,715.55
88.33
756.55
8,454.52
27.93%
10.22%
103
1,957
1,507.5
+26%
+35%
+18%
+42%
+28%
prog.09/08
+5%
+7%
+18%
+10%
+5%
(c/v Millions USD) Total Assets
20060
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 20092005
4,97
9.16
5,22
8.39
7,22
8.98
8,45
4.52
10,8
12.6
2
(c/v Millions USD) Customers’ Creditor Accounts
2006 2007 2008 20092005
4,12
5.17
4,31
2.34
6,17
3.21 7,14
9.64
9,01
3.02
0
2,000
4,000
6,000
8,000
10,000
(c/v Millions USD) Loans & Advances to Customers (Net)
2006 2007 2008 20092005
797.
76
856.
34
1,43
0.32 1,
715.
55
2,30
8.95
0
500
1,000
1,500
2,000
2,500
31.12.09
9,013.02
2,308.95
104.22
1,074.27
10,812.62
29.98%
11.85%
104
2,475
1,507.5
FransabankAnnual Report 2009
2
Consolidated Financial Highlights
2006 2007 2008 20092005
19.3
4%
19.8
6% 23.1
7% 24%
25.6
2%
(c/v Millions USD) Shareholders’ Equity
2006 2007 2008 20092005
408.
15
449.
25
517.
75
756.
55
1,07
4.27
0
200
400
600
800
1000
1200
0
5
10
15
20
25
30
(c/v Millions USD) Net Profit to the Financial Year
2006 2007 2008 20092005
46.3
0
54.5
1
60.8
3
88.3
3 104.
22
0
20
40
60
80
100
120
(c/v Millions USD) Net Interest Income
2006 2007 2008 20092005
104.
36
117.
81
128.
03
192.
50
209.
61
0
50
100
150
200
250
(c/v Millions USD) Net Fee & Commission Income
2006 2007 2008 20092005
13.4
3 16.5
3
20.9
0
28.0
2
34.2
8
0
5
10
15
20
25
30
35
Loans & Advances to Customersto Customers’ Creditor Accounts
3FransabankAnnual Report 2009
Over the past few years, Fransabank Group hasexperienced an unprecedented level of growth anddevelopment across the universal entities of the Group.The Group progress has been enabled from the efficientunfolding of the Group’s strategic plans which startedback in the eighties and evolved hence forth as neededto cater for the growing business dynamics and asaligned with the emerging business environment.
Fransabank Group reported an outstanding performancein 2009. It was the only Lebanese bank to advance itsrank within the Alpha Group of banks, thus moving fromthe fifth rank to the fourth rank in terms of total assetsand customers’ deposits and maintained its fourth rankin terms of net profits. It also ranked fifth in terms ofloans and advances to customers and shareholders'equity, while asserting once again the first rank in termsof local branches network. The audited consolidatedactivity for the year 2009 show USD 10.81 billion intotal assets, rising by 27.9% relative to end of 2008;USD 9.01 billion in total customers’ deposits, rising by26.0%; USD 2.31 billion in total loans and advances tocustomers, rising by 34.6%. Our shareholders’ equitygrew by 42.0% to USD 1.07 billion during this period. Inaddition, our net profitability has expanded by 18% toUSD 104.22 million in 2009.
Our business expansion strategy at Fransabank Group inthe year 2009 revolved around maintaining ourinternational expansion strategy and consolidating ourpresence in the regional and international markets inwhich we are present. Fransabank Group, in addition toLebanon, is currently present in eight countries: Syria,Algeria, Libya and Sudan in the MENA region, Franceand Belarus in Europe and Cuba in the Americas. Themajor developments registered through the year 2009involved the increase of the capital of FransabankEl Djazaïr from USD 41.4 million to USD 138 million inorder to meet the new requirements of the Central Bankof Algeria; as well as the inauguration of a new branch inOran in Algeria. In addition, Fransabank Syria launchedits operations in January 2009, and operates now
through five branches, two branches in Damascus, twobranches in Aleppo and another one in Homs.Fransabank expansion strategy in Syria envisions a rapidlocal geographic growth in major cities such as Lattakia,Tartus and Hama in addition to other districts in Syria. Asfor the local expansion strategy, it revolved arounddeveloping and increasing our organic growth either byenriching our overall geographic expansion in theLebanese territories and by expanding our businessactivities.
The dynamism of our Group’s growth is supported bythe continuous development and implementation of thelatest information technology to foster exceptionalservice delivery to our clients and timely productdevelopment to pro-act to our clients increasingbusiness wants and needs. This is coupled by ouraccentuated commitment to embracing strict corporategovernance techniques and practices and accurateimplementation and monitoring of advanced andcomprehensive risk management standards from bothperceptive, policies and procedures that we have.
We as well continued to allocate significant investment inour people’s development by providing them withquality and well targeted training to advance theirknowledge and sharpen their skills. In addition, wecontinuously upgraded their aptitude and consolidatedtheir attitude to exceed the expectations of our clientsand achieved our business objectives in an ascendingand an efficient manner.
However and in today's world of banking, we believe thattrue success is not only defined by operationalachievement, but by the elevation and progression ofthe society in which our Bank operates as well. Throughour years of operations, we established our ideals andour goals on a promise that our efforts would have apositive and far reaching impact on our clients, our com-munities and our country. We are very proud of what wehave contributed to date. We would like to reaffirmour dedication to our community at large, every day, via
Statement of the Deputy Chairman and the Chief Executive Officer
FransabankAnnual Report 2009
6
• Adnan Kassar (Appointed Minister of State as of November 2009)Chairman
• Adel KassarDeputy Chairman
an even more proactive continuation of our corporatesocial responsibility agenda.
For the year 2010, we will continue to be alert to anyinitiative and important opportunity that falls within ourbusiness strategy and achieves our business objectives.We will continue to target promising regional andinternational markets namely in Africa and the Arabworld - where we can bring added value where weoperate and build up on the synergies linking ourdifferent entities, the Lebanese business communitiesestablished in these countries, as well as the localoperators and international investors operating in thesecountries.
Our achievements are our best testimonial for a Groupwith drive and momentum. Thanks for our shareholdersfor their support to our Group’s mission and our growthstrategy. Thanks to our staff for their commitment toexcellence, their loyalty and their diligence. Together weare confident of our ability and capability to continue togrow, to further advance our leading position in Lebanonand to further increase our development role in theeconomy of Lebanon and the economies of the othercountries which we are thankful and appreciative forhosting our subsidiaries and associate.
Adel Kassar
7FransabankAnnual Report 2009
The Corporate Governance framework at Fransabankensures a fair treatment of shareholders and guarantees theavailability of timely and precise information in allmaterial issues, as well as it assures the accountability of theBoard of Directors to its shareholders.
Fransabank has always been committed to the highest levelof transparency, integrity and ethics, which became thecornerstone of its culture and how it conducts its business. It has also developed a Corporate GovernanceStructure through the creation of the CorporateGovernance Committee, Risk Management Committee andAudit Committee.
Currently, Fransabank is complying with CorporateGovernance best practices.
Governance StructureFransabank’s Governance Structure is comprised of theShareholders’ General Assembly, the Board of Directors,the Chairman, Deputy Chairman, Senior Management, theCorporate Governance Committee, the Risk ManagementCommittee, the Audit Committee, the External Auditor andthe support functions.
Governance FrameworkFransabank is governed by a Board of Directors consistingof ten members elected by the General Assembly ofShareholders for a term of three years. The responsibility ofthe Board is to ensure the right direction towards thedefined strategy, supervision of senior management, andadequate control of the Bank, with an ultimate goal ofincreasing long-term value.
Composition and Election of the Board ofDirectorsThe board members are elected by the Shareholders’General Assembly whereby every shareholder has the rightto vote. Moreover, shareholders who hold their shares formore than two years shall have the right of double voting right according to Article 117 of the LebaneseCode of Commerce.
The Shareholders’ General Assembly elected Dr. WalidNaja, who was nominated by the Board of Directors, as anindependent board member starting May 2009. Moreover, Dr. Naja was appointed the chairman of the CorporateGovernance and Risk Management Committees as well asa member of the Audit Committee.
Fransabank Board of Directors is composed of thefollowing 10 members:
Chairman • H.E. Mr. Adnan Kassar
Deputy Chairman • Mr. Adel Kassar
Members • Sheikh Fahd Mazyad Al-Rajaan Representing the Public Institution for Social Security - Kuwait
• Sheikh Mohamad Abdel Kader Al-Fadl
• H.E. Mr. Nehmé Tohmé
• Mr. Henri Guillemin
• Mr. Rafic Charafeddine
• Mrs. Magda Rizk
• Attorney Walid Daouk
• Dr. Walid Naja
Board MeetingsDuring 2009, the Board of Directors has met on fouroccasions. Some of the major issues discussed duringthese meetings were:
• Specifying the budget and identifying objectives of year 2009
• Appointing a Chief Risk Officer
• Reconsidering the formation of specialised committees
• Increasing the capital of Fransabank OJSC and Fransabank El Djazaïr
• Approving the issuance of preferred shares
• Approving a subordinated loan from PROPARCO
• Discussing Chief Risk Officer’s risk report
Corporate GovernanceCorporate Governance Framework
FransabankAnnual Report 2009
10
Board CommitteesIn carrying out its duties, the Board is supported by theCorporate Governance Committee, the Risk ManagementCommittee, and the Audit Committee.
Corporate Governance Committee
The Corporate Governance Committee is chaired by anindependent non-executive director and composed of threeother members. The committee members meet at leastquarterly.
The responsibility of the Corporate Governance Committeeis to shape the Corporate Governance practices in line withbest practices and Fransabank Corporate GovernanceGuidelines as well as to assist the Board in maintaining aneffective governance framework, an optimal Boardcomposition and an effective Board structure.
During 2009, the Corporate Governance Committeeheld four meetings whereby it discussed mainly theorganisational chart of Fransabank, the projectscompleted in Corporate Governance and those to becompleted in the upcoming year.
Risk Management Committee
The Risk Management Committee is chaired by anindependent non-executive director, and comprises twoother members. The committee meets at least quarterly.
The committee’s responsibilities are to assist the Board ofDirectors in fulfilling its oversight responsibilities,identifying all aspects of the risk profile of the Bank vis-à-visits risk appetite and risk tolerance, monitoring all aspects ofthe risks inherent in the Bank’s activities and assessingthe Bank’s risk management and control practices.
During 2009, the Risk Management Committee held fivemeetings whereby it discussed many issues related to theprocess of monitoring the activities of Fransabanksubsidiaries, the roles and responsibilities of the Board ofDirectors, Risk Management Committee, SeniorManagement and Internal Audit in risk management as wellas the Loss Incident Report on operational risk.
Audit Committee
The Audit Committee is composed of four members; threeof them are non-executive members of the Board ofDirectors.
The Audit Committee is established to assist the Board ofDirectors in its oversight responsibilities with respect toaudit and compliance with Central Bank of Lebanon andBanking Control Commission and the implementation ofaccounting standards related to financial reporting. Thecommittee meets at least quarterly and when necessary.
Moreover, the Committee assists the Board of Directors infulfilling its tasks and supervisory role, particularly in regardto internal control regulations and procedures, supervisionof the Internal Audit’s activities, appointment of externalauditors and follow up on their activities along with otherresponsibilities.
During 2009, the Audit Committee held four meetings.
Corporate GovernanceCorporate Governance Framework
11FransabankAnnual Report 2009
Corporate Governance
Main Holders of Common Shares
(1) Percent of total share capital consisting of 21,000,000 Common Shares as at May 31, 2010
(2) Crédit Agricole SA also owned, through its specialized subsidiary, Prédica SA, 20% of the share capital of Bancassurance SAL, a subsidiary of the Bank.
(3) Deutsche Investitions Und Entwicklungsgesellschaft mbh DEG is one of Germany’s top development and investment banks. DEG is owned by Kreditanstaltfür Wiederaufbau KfW, which, in turn, is owned by the German Government. As at May 31, 2010, DEG also owned 12.50% of the share capital of the Bank’ssubsidiary, Lebanese Leasing Company SAL.
(4) Each with less than 2%
Main Holders of Common Shares as at May 31, 2010 Percent (1)
Adnan Kassar
Adel Kassar
Crédit Agricole SA (2)
Deutsche Investitions Und Entwicklungsgesellschaft mbh (DEG) (3)
AL-FADL Holdings Limited
The Public Institution for Social Security – Kuwait
Others (4)
TOTAL SHAREHOLDING
36.25
36.23
6.00
5.00
2.70
2.00
11.82
100.00
FransabankAnnual Report 2009
12
H.E. Mr. Adnan KassarChairman General Manager
Mr. Adnan Kassar is the Chairman of the Board of Directors and General Manager of FransabankSAL and a member of the Board of Directors of BLC Bank SAL and Fransabank (France) SA as well.He is a Lebanese national, born in 1930. He has a degree in law from Université Saint-Joseph,Beirut and has thirty years of experience in banking. He is former Minister of Economy and Tradein Lebanon, former Chairman of the International Chamber of Commerce and former President ofBeirut Chamber of Commerce, Industry and Agriculture and Head of the Lebanese EconomicOrganizations. He is also the actual President of the General Union of Chambers of Commerce,Industry and Agriculture of the Arab Countries. He was appointed Minister of State asof November 2009.
Mr. Adel Kassar is the Deputy Chairman of the Board of Directors of Fransabank SAL and theChairman of the Board of Directors of Fransabank Syria SA. He is also the Chairman of the Boardof Directors of Fransabank (France) SA and the Chairman of the Board of Directors and GeneralManager of Bancassurance SAL and Lebanese Leasing Company SAL, which are Fransabanksubsidiaries and a member of the Board of Directors of BLC Bank SAL. Mr. Kassar is a Lebanesenational, born in 1932. He has a degree in Lebanese and French law from Université Saint-Joseph,Beirut and has thirty years of experience in banking. He is a former Chairman of the Association ofBanks in Lebanon and is the Honorary Consul General of the Republic of Hungary in Lebanon.
Corporate Governance
Biographies of Board Members
Mr. Adel KassarDeputy ChairmanGeneral Manager
Sheikh Fahd Mazyad Al-Rajaan is a Kuwaiti national, born in 1948. He is the General Manager ofthe Public Institution for Social Security - Kuwait. Sheikh Al-Rajaan is also Chairman and/or amember of the Boards of Directors of various financial institutions, including banks, mainly inKuwait, Bahrain, London and New York.
Sheikh Fahd Mazyad Al-Rajaan DirectorRepresenting The Public Institution for Social Security - Kuwait
13FransabankAnnual Report 2009
Mr. Rafic CharafeddineDirector
Mr. Rafic Charafeddine is a Lebanese national, born in 1939. He is a businessman, and hasparticipations in various companies. He deals into construction projects and real estateinvestments.
Corporate Governance
Biographies of Board Members
Sheikh Mohamad Abdel Kader Al-Fadl Director
Sheikh Mohamad Abdel Kader Al-Fadl is a Saudi national businessman, born in 1954. He hasa degree in economic sciences and marketing. He is a member of Jeddah Chamber ofCommerce and Industry since 1996 and a Board member of public companies in SaudiArabia. He is the Chairman of Gulf One Bank, Bahrain and the Honorary Consul of Cyprus inKingdom of Saudi Arabia.
Mr. Nehmé Tohmé is a Lebanese national born in 1939. He is an engineer, member of the LebaneseParliament and ex-Minister. He is also Chairman and member of the Board of Directors of variouscompanies, and a well–known businessman. He has significant ownership interests in variouscompanies operating in numerous business sectors in Lebanon and abroad.
H.E. Mr. Nehmé Tohmé Director
Mr. Henri Guillemin is a French national born in 1947. He has a degree in economic sciences andpolitical studies. Mr. Guillemin is the Managing Director of Crédit Agricole Egypt SAE, Cairo, and amember of the Board of Directors of Crédit Agricole, Egypt.
Mr. Henri Guillemin Director
FransabankAnnual Report 2009
14
Mrs. Magda Rizk Director
Mrs. Magda Rizk is a Lebanese national, born in 1957. She has a law degree fromUniversité Saint-Joseph, Beirut and is a substantial property owner in Lebanon. She is alsomember of the Audit Committee.
Attorney Walid Daouk Director
Attorney Walid Daouk is a Lebanese national, born in 1958. He has a degree in Lebanese andFrench law and is a member of the Board of Directors of various companies, banks and financialinstitutions in Lebanon and abroad including Fransabank (France), Fransabank El Djazaïr, BLC Bankand the Lebanese Leasing Company SAL. He is the Government Commissioner at the Beirut StockExchange and the Chairman of the Audit Committee and member of the Corporate Governanceand Risk Management Committees.
Dr. Walid NajaDirector
Dr. Walid Naja is a Lebanese national, born in 1941. Educated at AUB and YALE University. He holdsgraduate degrees in Economics and International Relations. He is a former Chairman of BDL'sBanking Control Commission, served as Economic Counselor at the Lebanese Embassy inWashington D.C., and as General Manager of the Beirut Chamber of Commerce, Industry andAgriculture. He is the Chairman of the Risk Management and Corporate Governance Committeesand member of the Audit Committee.
Corporate Governance
Biographies of Board Members
15FransabankAnnual Report 2009
Corporate GovernanceCommittee
Executive Committee
AML Compliance
Support FunctionsSupport Functions S&DLines of Business
Control Functions
• Regional Managers
• Retail Products & Services
• Local & Overseas Credit Cards
• Retail Risk
• E-Banking
• • IT Project Mgt.IT Project Mgt. & & QualityQuality Assurance Assurance
• • SoftwareSoftware DevelopmentDevelopment
• • EnterpriseEnterprise Systems Mgt.Systems Mgt.
• • NetworkNetwork ServicesServices
• • Servers/Servers/ Desktops &Desktops & Data Mgt.Data Mgt.
• • Internet &Internet & E-BankingE-Banking Services Services
• • GeneralGeneral ServicesServices
• • EngineeringEngineering
• • MaintenanceMaintenance Infrastructure & Infrastructure & Security Security
• • ProcurementProcurement
• • FinanceFinance
• • Trade FinanceTrade Finance
• • Transfers &Transfers & PaymentsPayments
• • Treasury B.O.Treasury B.O.
• • CollectionCollection Cleaning &Cleaning & DomiciliationDomiciliation
• • LegalLegal AdvisoryAdvisory
• • JudicialJudicial
• • Relations withRelations with AuthoritiesAuthorities & Auditors& Auditors
• • SecretariatSecretariat of BODs &of BODs & Shareholders’Shareholders’ MeetingsMeetings
• • OrganizationalOrganizational ProjectsProjects
• • DocumentationDocumentation
• • OperationalOperational SupportSupport
• • ProductsProducts QualityQuality AssuranceAssurance
• • Advertising &Advertising & CommunicationCommunication
• • MarketingMarketing ResearchResearch
• • FinancialFinancial ControlControl
• • AccountingAccounting
• • CreditCredit InformationInformation
• • CreditCredit Reporting &Reporting & DocumentationDocumentation
• • CreditCredit Monitoring &Monitoring & ClassificationClassification
• • Compensation &Compensation & Benefits Benefits
• • Planning,Planning, Staffing &Staffing & EmployeeEmployee RelationsRelations
• • Training &Training & DevelopmentDevelopment
• Correspondent Banking Relations
• Relations with Foreign Partners & Non-Banks International Fls
• Overseas Private Clientele
• Overseas Affiliations & Representative Offices
• Corporate Banking
• SMEs
• Special Credits
• Treasury
• Capital Markets
Information Information &CommunicationCommunication
TechnologyTechnologyAdministrationAdministration Branch
Management Retail Banking International CorporateBanking & SMEs
Treasury &Capital Markets Loan Recovery Real EstateCentralCentral
OperationsOperations LegalLegal OrganizationOrganizationCreditCredit
Administration &Administration &InformationInformation
HumanHumanResourcesResources
Marketing &Marketing &CorporateCorporate
CommunicationsCommunications
FinancialFinancialControl &Control &
AccountingAccounting
Policies &Policies &ProceduresProcedures
CreditAppraisal
InformationSecurity
Boardof Directors
Chairman &Deputy Chairman
GeneralManagement
Strategy &Development
Inspection
• Branch Audit
Internal Audit
• Financial Audit
• International Audit
• Internal Control Audit
• IT Audit
Risk Management
• Credit Risk
• Operational Risk
• Market Risk
• Basel II Implementation
Corporate Governance
Organization Chart - Fransabank SAL
FransabankAnnual Report 2009
16
AMLCommittee
Advisors
AML ComplianceAML Compliance
Support Functions S&DS&DLines of BusinessLines of Business
Control FunctionsControl Functions
• Regional• Regional ManagersManagers
• • Retail Products &Retail Products & ServicesServices
• Local & Overseas• Local & Overseas Credit CardsCredit Cards
• Retail Risk• Retail Risk
• E-Banking• E-Banking
• IT Project Mgt. & Quality Assurance
• Software Development
• Enterprise Systems Mgt.
• Network Services
• Servers/ Desktops & Data Mgt.
• Internet & E-Banking Services
• General Services
• Engineering
• Maintenance Infrastructure & Security
• Procurement
• Finance
• Trade Finance
• Transfers & Payments
• Treasury B.O.
• Collection Cleaning & Domiciliation
• Legal Advisory
• Judicial
• Relations with Authorities & Auditors
• Secretariat of BODs & Shareholders’ Meetings
• Organizational Projects
• Documentation
• Operational Support
• Products Quality Assurance
• Advertising & Communication
• Marketing Research
• Financial Control
• Accounting
• Credit Information
• Credit Reporting & Documentation
• Credit Monitoring & Classification
• Compensation & Benefits
• Planning, Staffing & Employee Relations
• Training & Development
• Correspondent• Correspondent Banking RelationsBanking Relations
• Relations with• Relations with Foreign PartnersForeign Partners & Non-Banks& Non-Banks International FlsInternational Fls
• Overseas Private• Overseas Private ClienteleClientele
• Overseas• Overseas Affiliations &Affiliations & RepresentativeRepresentative OfficesOffices
• Corporate• Corporate BankingBanking
• SMEs• SMEs
• Special Credits• Special Credits
• Treasury• Treasury
• Capital Markets• Capital Markets
Information &Communication
TechnologyAdministration BranchBranch
ManagementManagement Retail BankingRetail Banking InternationalInternational CorporateCorporateBanking & SMEsBanking & SMEs
Treasury &Treasury &Capital MarketsCapital Markets Loan RecoveryLoan Recovery Real EstateReal EstateCentral
Operations Legal OrganizationCredit
Administration &Information
HumanResources
Marketing &Corporate
Communications
FinancialControl &
Accounting
Policies &Procedures
CreditCreditAppraisalAppraisal
InformationInformationSecuritySecurity
Strategy &Strategy &DevelopmentDevelopment
AuditCommittee
InspectionInspection
• Branch • Branch AuditAudit
Internal AuditInternal Audit
• Financial • Financial AuditAudit
• • InternationalInternational AuditAudit
• • Internal ControlInternal Control AuditAudit
• IT • IT AuditAudit
Risk ManagementRisk Management
Risk ManagementCommittee
• • Credit RiskCredit Risk
• Operational Risk• Operational Risk
• • Market RiskMarket Risk
• • Basel II ImplementationBasel II Implementation
Corporate Governance
Organization Chart - Fransabank SAL
17FransabankAnnual Report 2009
Banks in Lebanon
Companies in Lebanon
68,576%
BLC Bank SALFransaInvest Bank SAL
Bank of Beirut andArab Countries SAL
40%
Bancassurance SAL
• Crédit Agricole Assurances (Groupe Crédit Agricole-France) France
29%
• Banque Libano-Française SAL Lebanon
31%
87.5%
• DEG Germany
12.5%
99.88%
Lebanese LeasingCompany SAL
Sogefon SAL
100%
6.25%
37.054%
99.7%
Fransabank InsuranceServices Co SAL
Switch & ElectronicServices SAL
Express SARL
99.7% 96.70%
Fransabank SAL
Corporate Governance
Group Chart
FransabankAnnual Report 2009
18
Banks Abroad
Representative Offices
68% 48% 60% 20% 80%
Fransabank El-DjazaïrSPA Algiers
• Group CMA-CGM (Franco-Lebanese)
25%
• Maghreb Truck Cie SPA Algeria
7%
• Other Private Investors
52%
• Financière Océor (Groupe Caisse d’Epargne) France
40%
• Aref Investment Group & 3 of its affiliates & associates - Kuwait
49.24%
• Al Wazzan Group Kuwait
12.50%
• Al Alami Group Egypt
6.25%
• Boubian Group Kuwait
11.67%
• Fransa Holding SAL Lebanon
19.93%
Fransabank Syria SADamascus
Fransabank (France) SAParis
United Capital BankKhartoum
Fransabank OJSCBelarus
Cuba
Libya
Corporate Governance
Group Chart
19FransabankAnnual Report 2009
Corporate Governance
Committees
• Executive Committee
• Corporate Governance Committee
• Audit Committee
• Risk Management Committee
• Management Committee
• Credit Committees
• Assets & Liabilities Committee
• Banking Technology & IT Security Committee
• Anti-Money Laundering Committee
• Human Resources Committee
• Organization Committee
• Marketing & Communications Committee
Mr. Adnan KassarChairman & General Manager
& / or
Mr. Adel KassarDeputy Chairman & General Manager
Mr. Nadim KassarGeneral Manager
Mr. Mansour BteishGeneral Manager
Mr. Nabil KassarGeneral Secretary
Dr. Joe SarrouhExecutive Advisor to the Chairman
FransabankAnnual Report 2009
20
General Management
• Mr. Nadim Kassar General Manager
• Mr. Mansour Bteish General Manager
• Mr. Nabil Kassar Secretary General
Advisor to the Chairman
• Dr. Joe Sarrouh Executive Advisor to the Chairman
Senior Management
• Dr. Nicolas Khairallah Deputy General Manager, Director of Human Resources Division
• Mr. Philippe El Hajj Deputy General Manager, Head of Retail Banking Division
• Mr. Nadim Moujaes Deputy General Manager, Head of Strategy & Development Department
• Mr. Ahmad El Radi Chief Risk Officer, Head of Risk Management Division
Advisors
• Mr. Wajdi Abi Chacra Advisor, Legal Department
• Mr. Fawzi Moussa Advisor, Corporate Banking
Corporate Governance
Management
21FransabankAnnual Report 2009
Management
• Mr. Charbel Aouad Central Manager, Head of Central Operations Division
• Dr. Mohamad Daher Central Manager, Head of Credit Administration & Information Division
• Miss. Mona Khoury Central Manager, Head of International Division
• Mr. Nabih Saddy Central Manager, Head of Financial Control & Accounting Department
• Mr. Nabil Tannous Central Manager, Head of Treasury & Capital Markets Department
• Mr. Antoine Younes Central Manager, Head of Credit Appraisal Department
• Mr. Antoine Asmar Central Manager, Business Development Consultant, Corporate Banking
• Mr. Zouheir Chouraiki Principal Manager, Director of Internal Audit Division
• Mr. Gerard Malhame Principal Manager, Head of Corporate Banking Department
• Mrs. Samia Abou Ezze Manager, Head of Information Technology & Communication Department
• Mr. Khalil Assaf Manager, Head of LGs & Special Credits Department
• Mr. Zakaria El Khatib Manager, Head of Inspection Department
• Mrs. Dania Kassar Manager, Head of Marketing & Corporate Communications Department
• Mr. Pierre Posbic Manager, Head of Organization Department
• Mr. Antoine Zarifeh Manager, Head of SMEs Department
• Mrs. Magida Kasbani Deputy Manager, Head of Administration Department
Corporate Governance
Management
FransabankAnnual Report 2009
22
• Mr. Joseph Akiki Manager, Head of Branch Management Department
• Mr. Francis Abi Nakhoul Regional Manager, Mount Lebanon
• Mr. Amine Abou Mhaya Regional Manager, Bekaa
• Mr. Ajwad Halabi Regional Manager, Aley & Chouf
• Mr. Talal Hamadi Regional Manager, South
• Dr. Khodr Heloui Regional Manager, North
• Mrs. Najwa Sandid Regional Manager, Beirut & Suburbs
• Mr. Farouk Chreif Deputy Regional Manager, Bekaa A
• Mr. Mounir Daoud Deputy Regional Manager, Bekaa B
Corporate Governance
Management
23FransabankAnnual Report 2009
Fransabank was first established in Beirut as a full branch of one of the major French banksthen, “Crédit Foncier d’Algérie et de Tunisie (C.F.A.T)”.
Fransabank is registered n° 1 on the list of banks operating in Lebanon indicating that it is theoldest bank in the country.
C.F.A.T. changed its name to become “Société Centrale de Banque”.
“Société Centrale de Banque” in Beirut was acquired by “Banque Française pour le Moyen-Orient SAL” (B.F.M.O.), a Lebanese company whose shares were predominantly owned byBanque Indosuez Group.
Banque Indosuez (now Crédit Agricole SA, one of the Bank’s continuing principal share-holders) was also the major shareholders of Banque Sabbag SAL, a local bank established in1950 by a Lebanese family engaged in banking since 1881. Banque Indosuez merged thesetwo banks under the name of “Banque Sabbag et Française pour le Moyen-Orient SAL”.
Banque Indosuez sold its shares in Fransabank to a financial group headed by Messrs Adnan& Adel Kassar.
The Bank’s denomination was changed to Fransabank SAL.
Fransabank SAL concluded a cooperation agreement with “Crédit Agricole – France SA”aiming at establishing closer business relations between the two banks. It led at first to thejoint creation in Paris of “Fransabank (France) SA”, and to the participation of “Crédit Agricole- France” in the shareholding of Fransabank SAL.
Fransabank acquired the Assets & Liabilities of Chase Manhattan Bank’s branches in Beirut,which had ceased its activities in Lebanon in view of the situation prevailing at that time.
Fransabank SAL acquired ‘‘Banque Tohmé SAL’’.
Deutsche Investitions Und Entwicklungsgesellschaft mbh “D.E.G” (German Investment andDevelopment Company), an organization that is part of the development cooperationorganization of the Federal Republic of Germany, acquired of 5% of the Bank’s share capital.
A private placement of shares took place, pursuant to which 5% of the Bank’s shares weresold to Lebanese, Arab and foreign investors.
“The Public Institution for Social Security – Kuwait” acquired 2% of the Bank’s share capital.
Fransabank acquired ‘‘Universal Bank SAL’’.
1921
Historical Milestones
1963
1971
1978
1980
1984
1985
1993
1995
1997
1998
FransabankAnnual Report 2009
26
Fransabank opened its branch in the Damascus free zone in Syria.
Fransa Invest Bank (FIB), investment banking subsidiary of Fransabank SAL, started itsoperations.
Fransabank acquired ‘‘United Bank of Saudi & Lebanon SAL’’.
Fransabank acquired all the shares of ‘‘Banque de la Békaa SAL’’.The Bank subsequently sold Banque de la Békaa SAL in 2007.
Fransabank became one of the major shareholders (37.054%) of Bank of Beirut & the ArabCountries SAL (BBAC).
Fransabank was the first Lebanese bank to enter the Algerian market with the opening of itsnew subsidiary Fransabank El Djazaïr SPA.
Fransabank launched its operations in Sudan through an associate bank, United Capital Bank.
Fransabank acquired BLC Bank SAL along with its two subsidiaries, BLC Bank Services SALand BLC Finance SAL.
Fransabank concurrently purchased 34% of the share capital of Fransabank (France) SA heldby Crédit Agricole SA (bringing its participation in the share capital to 100%), and sold 40%of the share capital of Fransabank (France) SA to Financière Océor, a subsidiary of GroupeCaisse d’Epargne (France), following which the Bank’s participation in the share capital ofFransabank (France) SA became 60%.
Fransabank entered the Libyan market by establishing a representative office in Tripoli.
With a view to accommodate the Group’s growth and expansion; the Bank issued Tier 1, noncumulative, convertible, callable preferred shares for USD 100 million. The issue wasoversubscribed as the target amount was initially set at USD 60 to USD 80 million, while totalsubscriptions exceeded USD 100 million.
Fransabank acquired Fransabank OJSC, formerly known as Golden Taler Bank.
Fransabank El Djazaïr capital was increased to c/v of USD 138 million.
Fransabank became operational in Syria through its subsidiary, Fransabank Syria SA.
Historical Milestones
2001
2002
2003
2005
2006
2007
2008
2009
27FransabankAnnual Report 2009
Management ReportLebanon’s Economic Performance in 2009
The Lebanese economy achieved impressive growth forthe past three years whereas real GDP reached a growthof 7.6% in the year 2007, 9.3% in the year 2008, 9% inthe year 2009 and with an expected growth between 7%to 8% in the year 2010 as per IMF estimates. Thisgrowth was accentuated by the country resilience in theface of the economic, financial and political shockswhich have resulted by the still persisting global financialcrisis. The real sector's performance was better, asindicated by enhanced indicators of the leading sectors.The public finances have improved with lower deficitratio, higher primary surplus, and slowing public debtgrowth. The monetary situation has continued its stability,accompanied by a growing banking sector andincreased liquidity. The balance of payments achieved alarge surplus supported by surging capital inflows. Themacro economy is posed to continue its growth in 2010as political conditions remain favorable, and economicconditions continue to be good.
The real sector activity has improved in 2009 as comparedto 2008, which is clearly reflected in the evolution of itsmajor indicators. The growth in industrial exports value(+26%), property sales (+8.2%), Cement deliveries(+19.2%), tourists (+38.9%), passengers at the HIA(+22%), ships at the Beirut Port (+16.5%), clearedchecks (+7.4%) and Customs receipt (+65.1%).
The public finances improved year-on-year, with a lowerfiscal deficit ratio, slowdown in public debt growth, andhigher primary surplus. The fiscal deficit has increasedby 1.3% from 2008, to reach an amount of USD 2.96 billionin 2009, whereas the overall government revenues haveincreased by 20.8%, to reach USD 8.43 billion, after theimprovement in tax revenues that increased by 24.9%from 2008. Total government expenditures increased by14.8% from 2008, to reach an amount of USD 11.39 billionin 2009 and the gross public debt increased by 8.7%from 2008, to reach an amount of USD 51.1 billion in
(USD, Billion)
Public Finance's Indicators
Public revenues
Public expenditures
Deficit
Gross public indebtedness
Net public debt
Monetary Situation Indicators
USD/LBP exchange rate
CB gross foreign assets
Money supply M3
Price index (Inflation rate)
Banking Sector's Indicators
Total assets
Total deposits
Total capital
Total credits to private sector
Foreign Sector's Indicators
Exports
Imports
Trade deficit
Capital inflows
Balance of payments
Lebanon’s Major Economic Indicators
2009
8.43
11.39
2.96
51.1
44.1
1,507.5
28.3
81.04
3.4%
115.12
95.8
19.32
28.4
3.5
16.3
12.8
20.66
7.9
2008
6.98
9.93
2.92
47
41.49
1,507.5
19.7
67.08
10.74%
94.13
77.8
16.33
25.1
3.49
16.09
12.6
16.37
3.46
Variation
20.8%
14.7%
1.3%
8.7%
6.3%
0.0%
43.7%
20.81%
-7.3%
22.3%
23.1%
18.3%
13.1%
0.29%
1.3%
1.6%
26.21%
128.4%
Sources: Ministry of Finance, Central Bank of Lebanon, Association of Banks of Lebanon & Higher Customs Council
FransabankAnnual Report 2009
30
Management ReportLebanon’s Economic Performance in 2009
2009. Local currency gross debt reached USD 29.84 billionin 2009, up by 15.3% from 2008, while foreign debtreached an amount of USD 21.26 billion in 2009, anincrease by 0.5% from 2008. Net public debt (afterexcluding the public sector deposits at commercialbanks and the central bank from gross public debt)reached an amount of USD 44.1 billion in 2009, with anincrease of 6.3% from 2008.
The monetary situation has continued its stability owingto better economic conditions and the prevailingmonetary stabilization policy of the Central Bank. TheUSD/LBP exchange rate showed a firm stability with anunchanged rate of USD/LBP at 1,507.5 and the LebaneseCentral Bank gross foreign assets increased by 43.7%,strengthening the prevailing monetary stabilizationpolicy. The growth in Money Supply M3, fromUSD 67.08 billion in 2008 to USD 81.04 billion in 2009,demonstrated a higher liquidity. The Consumer PriceIndex (CPI) reached 3.4% in 2009, a significant dropcompared to 10.74% in 2008. This decrease in CPI wasmainly due to the decline in commodity pricesworldwide, and a better local economic stability. TheCentral Bank's gold reserves increased to USD 10.79 billionin 2009, an increase of 25% from 2008, the deposits ofthe financial sector rose by 34% from 2008, reaching avalue of USD 37.78 billion.
The banking sector has continued its impressive growthin 2009 relative to the previous year, and the activity ofthe BSE has improved. The Lebanese banking sectorhas continued its outstanding performance in 2009, witha high rate of growth in all of its components. Totalassets grew by 22.3% in 2009 from a year earlier;reaching USD 115.12 billion, compared to USD 94.13 billionin 2008, the total deposits grew by 23.1%, to reachUSD 95.8 billion, with an average monthly increase ofbetween USD 1.5 to USD 2 billion. Total credits to theprivate sector grew by 13.1% in 2009 to reachUSD 28.4 billion, compared to USD 25.1 billion in2008 and total capital, on the other hand, and reachedUSD 19.32 billion, an increase of 18.3% over 2008.
The balance of payments recorded a substantial surplusdue to growing capital inflows, while trade conditionswere little changed from 2008. Exports and Importscontinue to show a solid activity in 2009 with a totalamount of USD 19.8 billion. Exports increased toUSD 3.5 billion in 2009, from USD 3.49 billion in 2008and imports also increased to USD 16.3 billion from
USD 16.09 billion in 2008. As a result, the trade deficitwas at USD 12.8 billion as compared to USD 12.6 billionin 2008. Capital inflows to Lebanon amounted toUSD 20.66 billion in 2009, an increase of 26.21% from2008 and this is due to non-residents deposits inflow aswell as foreign direct investment and cash transfers totourists visiting Lebanon. The balance of paymentsregistered a surplus of USD 7.9 billion in 2009, ascompared to USD 3.46 billion in 2008, a 128.4%increase over the year, due to the rise in foreign assetsinto the country's banking system. The cumulativesurplus in the balance of payments in 2009 was drivenby the increase in the Central Bank’s net foreign assets,a result it indicates a heavy inflow of capital into thecountry from the recovering tourism activity and thereturn of Lebanese expatriates to their home country forthe Summer season.
31FransabankAnnual Report 2009
Overview Despite the global financial and economic crisis trends thatcontinued to persist in 2009, Fransabank Group hasachieved in this year a significant growth. The Group’s netincome amounted to LBP 157.12 billion (USD 104.22 million)in 2009 compared to LBP 133.16 billion (USD 88.33 million)in 2008, an increase of 17.99%. The Return on AverageAssets stood at 1.08% and the Return on Average CommonEquity at 12.03%.
Resolutions of Fransabank SAL Ordinary GeneralAssembly The Ordinary General Assembly of Fransabank SALshareholders held on 30 April 2010:
• Approved the accounts and the Balance Sheet ofFransabank SAL as at end December 2009
• Acquitted Fransabank SAL Board of Directors for theirmanagement of the business activities of the fiscalyear 2009
• Decided to allocate out of Fransabank SAL net profit(LBP 94,922,840 thousands) as follows:
• 10% to legal reserve (LBP 9,492,284 thousands),
• LBP 12,900,000 thousands to reserve for general bankingrisks
• LBP 4,790,465 thousands to reserve for assets acquiredin settlement of bad loans,
• LBP 1,443,000 thousands to special reserve for nonproductive loans,
• Decided to distribute dividends on common shares forLBP 21 billion (LBP 1,000/share) and dividends onpreferred shares for the c/v LBP 12,813,750 thousands,representing respectively 31.67% and 19.33% of theBank’s 2009 distributable profits.
• Decided to allocate the remaining balance, i.e.LBP 32,483,341 thousands to the Free Reserves.
1. NET INCOMEFransabank’s net income, in 2009, amounted toLBP 94.92 billion (USD 62.97 million) compared toLBP 90.91 billion (USD 60.30 million) in 2008, an increase of4.42%. This has translated in 2009 in a Return on AverageAssets of 0.90% and a Return on Average Equity of 9.41%.
The Group’s net income in 2009 amounted toLBP 157.12 billion (USD 104.22 million) compared toLBP 133.16 billion (USD 88.33 million) in 2008, an increaseof 17.99%. This has translated in 2009 in a Return onAverage Assets of 1.08%. In 2009, the Group has booked inline with IFRS unrealized profits on available for sale securitiesfor LBP 304,396,470 thousands (USD 201,921 thousands)against LBP 36,968,563 thousands (USD 24,523 thousands)in 2008. This has placed the ROACE at 12.03%. Excludingthis booking the ROACE would have stand at 14.03% .
1.1 Net Interest IncomeIn 2009, the Group’s net interest income amounted toLBP 315.99 billion (USD 209.61 million) compared toLBP 290.20 billion (USD 192.50 million) in 2008, anincrease of 8.89%.
In 2009, interest received amounted to LBP 887.94 billion(USD 589.02 million) compared to LBP 805.09 billion(USD 534.05 million) in 2008, an increase of 10.29%.Interest received from investment securities, loans andadvances to customers and from loans to banks &placements with banks, represents 67.17%, 26.52% and6.31% respectively, compared to 59.27%, 24.68% and16.05% respectively in 2008.
LBP’000 2009 2008
From loans and advances to customers 235,451,607
From investment securities 596,472,567
From loans to banks and placements with banks 56,017,527
TOTAL 887,941,701
198,706,538
477,185,432
129,193,959
805,085,929
Breakdown of Interest Received
In 2009, the monthly average Interest Earning Assetsreached LBP 12,066.99 billion (USD 8,004.64 million)compared to LBP 9,937.92 billion (USD 6,592.32 million)in 2008 (+ 21.42%). This growth is due to the increaseof investment securities (+ LBP 1,334.33 billion or c/v
USD 885.13 million), of loans and advances to customers(+ LBP 526.59 billion or c/v USD 349.31 million) and ofthe loans to Banks and financial institutions andplacements with Banks and financial institutions(+ LBP 268.15 billion or c/v USD 177.88 million).
Management Report
Results of Operations
FransabankAnnual Report 2009
32
In 2009, the interest paid amounted to LBP 571.95 billion(USD 379.41 million) compared to LBP 514.88 billion(USD 341.55 million) in 2008 (+11.08%). In 2009,
the largest single component of interest paid belongs tocustomers’ deposits, which represented 95.33% of thetotal compared to 94.06% in 2008.
The monthly average Interest Bearing Liabilities reachedLBP 12,119.64 billion (USD 8,039.56 million) in 2009against LBP 10,306.73 billion (USD 6,836.97 million) in 2008
(+ 17.59%). This growth can largely be attributed to the18.53% increase in the customers creditor accounts whichamounted to LBP 1,798.44 billion (USD 1,193.00 million).
1.2 Net Fees and Commissions IncomeIn 2009, net fees and commissions income reachedLBP 51.68 billion (USD 34.28 million), compared toLBP 42.23 billion (USD 28.02 million) in 2008 (+22.37%).
In 2009, fees and commissions received reachedLBP 74.75 billion (USD 49.59 million), compared toLBP 62.51 billion (USD 41.46 million) in 2008 (+19.59%).
In 2009, fees and commissions received comprise mainlycommissions on documentary LCs and LGs, fees oncustomers’ transactions as well as Asset management
fees, which represented 22.95%, 73.39% and 3.59%respectively compared to 23.96%, 73.76% and 2.13% in2008.
In 2009, fees and commissions paid reached LBP 23.07 billion(USD 15.31 million), compared to 20.27 billion(USD 13.45 million) in 2008 (+13.81%).
In 2009, fees and commissions paid comprise fees oncustomers’ transactions and commissions on transactionswith banks, which represented 88.77% and 11.23%respectively compared to 88.73% and 11.27% in 2008.
LBP’000 2009 2008
Investment securities 6,467,260,419
Banks and financial institutions 2,778,152,699
Loans and advances to customers 2,821,574,347
TOTAL 12,066,987,465
5,132,936,842
2,510,003,648
2,294,982,137
9,937,922,627
Average Interest Earning Assets
LBP’000 2009 2008
On deposits and loans from banks (25,540,138)
On deposits from customers at amortized cost (545,216,479)
On cash contributions to Share Capital and on subordinated loans (1,197,972)
TOTAL (571,954,589)
(29,365,556)
(484,321,398)
(1,197,972)
(514,884,926)
Breakdown of Interest Paid
LBP’000 2009 2008
Soft loans 318,811,712
Banks and financial institutions 278,092,112
Customers’ deposits at amortized cost 11,505,618,991
Cash contributions to Share Capital 17,113,885
TOTAL 12,119,636,700
399,580,943
182,859,463
9,707,177,166
17,113,885
10,306,731,457
Average Interest Bearing Liabilities
Management Report
Results of Operations
33FransabankAnnual Report 2009
1.3 Income from Trading PortfolioIn 2009, income from trading portfolio reachedLBP 17.26 billion (USD 11.45 million) compared toLBP 1.45 billion (USD 0.96 million) in 2008.
In 2009, income from trading portfolio comprises interestreceived, dividends received, change in fair value andgain on sale of trading securities, which represented30.81%, 6.09%, 63.07% and 0.03% compared to 372.55%,70.85%, (362.78%) and 19.38% in 2008 respectively.
1.4 Net Interest on Financial InstrumentsDesignated at Fair ValueThe net interest on financial instruments designated atfair value represents the interest paid on the structuredproducts issued by Fransabank, namely 3x3 GEM I, 3x3GEM II, I & I, Winners 9 and Easy Times. In 2009, theinterest expense (coupons) paid on those instrumentsamounted to LBP 9.86 billion (USD 6.54 million), comparedto LBP 9.19 billion (USD 6.10 million) in 2008 (+7.22%).
1.5 Foreign Exchange GainIn 2009, foreign exchange gain reached LBP 10.40 billion(USD 6.90 million) compared to LBP 9.02 billion(USD 5.98 million) in 2008 (+15.28%).
1.6 Net Other Operating IncomeIn 2009, other operating income reached LBP 36.19 billion(USD 24.00 million) compared to LBP 53.07 billion(USD 35.21 million) in 2008.
Other operating income comprises profit on sale ofavailable for sale securities, dividends received oninvestment securities, gain on sale of subsidiaries anddivesting part of equity interest in an associate, share inprofit of associates , gain on sale of assets acquired insatisfaction of loans and on disposal of properties &equipments and other income, which represented9.47%, 15.78%, 0.04%, 20.94%, 37.45% and 16.32% in2009 compared to 1.91%, 10.92%, 51.57%, 11.81%,12.52% and 11.27% in 2008 respectively.
LBP’000 2009 2008
Fee and commission received 74,751,952
Commissions on documentary LCs and LGs 17,152,758
Service fees on customers’ transactions 54,863,946
Commissions on transactions with banks 53,919
Asset management fees 2,681,329
Fee and commission paid (23,072,609)
Commissions on transactions with banks (2,592,168)
Other commissions paid (including those on customers’ transactions) (20,480,441)
NET FEE AND COMMISSION INCOME 51,679,343
62,505,489
14,976,558
46,101,100
94,967
1,332,864
(20,272,251)
(2,284,720)
(17,987,531)
42,233,238
Breakdown of Net Fee and Commission Income
LBP’000 2009 2008
Interest income on trading securities 5,318,688
Dividends received on trading securities 1,050,973
Change in fair value of trading portfolio (net) 10,889,336
Gain on sale of trading assets 5,691
INCOME FROM TRADING PORTFOLIO 17,264,688
5,394,092
1,025,871
(5,252,641)
280,560
1,447,882
Breakdown of Income from Trading Portfolio
Management Report
Results of Operations
FransabankAnnual Report 2009
34
1.7 Net Allocation to Provisions for Loans &Advances to CustomersIn 2009, the Group’s net allocation to provisions for loansand advances to customers resulted in a recovery ofprovisions for LBP 6.86 billion (USD 4.55 million) comparedto net allocation to provisions for LBP 7.39 billion(USD 4.90 million) in 2008: (i) the allowance forimpairment of customers’ loans and advances amountedto LBP 5.03 billion (USD 3.34 million) compared
to LBP 29.17 billion (USD 19.35 million) in 2008, (ii) the baddebts expense amounted to LBP 1.22 billion (USD 0.81 million)in 2009, compared to LBP 3.27 billion (USD 2.17 million) in2008, (iii) write-back of impairment loss on loans andadvances reached LBP 12.36 billion (USD 8.20 million) in2009, against LBP 18.80 billion (USD 12.47 million) in 2008,(iv) write-back of discount on loan portfolio purchasedreached LBP 0.75 billion (USD 0.50 million) in 2009 againstLBP 6.25 billion (USD 4.15 million) in 2008.
1.8 General ExpensesIn 2009, the Group’s general expenses comprising staffcosts, administrative expenses, depreciation, provisionsfor impairment of assets and amortization of deferredcharges, reached LBP 236.93 billion (USD 157.17 million)compared to LBP 214.05 billion (USD 141.99 million)in 2008, an increase of 10.69%. This is due to the increasein (i) salaries and related charges which amountedto LBP 136.80 billion (USD 90.75 million) in 2009 comparedto LBP 117.29 billion (USD 77.80 million) in 2008(+ 16.64%), (ii) administrative expenses which amountedto LBP 70.04 billion (USD 46.46 million) in 2009 comparedto LBP 67.41 billion (USD 44.72 million) in 2008 (+ 3.90%),(iii) depreciation and amortization of assets whichamounted to LBP 16.60 billion (USD 11.01 million) in 2009
compared to LBP 14.27 billion (USD 9.47 million) in 2008(+ 16.34%), (iv) the decrease in the provisions for chargeswhich amounted to LBP 0.34 billion (USD 0.23 million) in2009 compared to LBP 1.93 billion (USD 1.28 million) in 2008(- 82.23%) and (v) the amortization of deferred chargeswhich amounted to LBP 13.15 billion (USD 8.72 million)in 2009 same as in 2008. The amortization of deferredcharges is related to the impairment of the lossesresulting from the Bank’s acquisition of Universal BankSAL in 1999 and United Bank of Saudia & Lebanon SAL in2002. This amortization is covered by the net incomederived from interest on Treasury bills acquired throughthe Soft loans granted to the Bank by the Central Bankof Lebanon after the acquisition of those Banks.
LBP’000 2009 2008
Gain on sale of available for sale 3,425,253
Dividends received on sale of available for sale and held to maturity securities 5,710,871
Gain from sale of subsidiaries -
Gain from disposal of part of equity interest in an associate 14,100
Share in profit of associates 7,579,190
Gain on sale of assets acquired in satisfaction of loans and 13,550,134on disposal of properties & equipments
Other 5,906,016
OTHER OPERATING INCOME 36,185,564
1,015,442
5,795,642
27,370,728
-
6,268,558
6,642,871
5,981,153
53,074,394
Breakdown of Other Operating Income
LBP’000 2009 2008
Allowance for impairment of loans and advances (5,034,456)
Write-back of impairment loss on loans and advances 12,360,892
Bad debts expense (1,214,349)
Write-back of discount on loan portfolio purchased 751,765
TOTAL 6,863,852
(29,168,841)
18,796,626
(3,264,825)
6,248,077
(7,388,963)
Net Allocation to Provisions for Loans & Advances to Customers
Management Report
Results of Operations
35FransabankAnnual Report 2009
1.9 Income Tax and Deferred TaxesThe Group’s income tax for the financial year 2009 amountedto LBP 28.69 billion (USD 19.03 million), comparedto LBP 26.67 billion (USD 17.69 million) for the financial year2008. Deferred tax on associates and subsidiaries’ profits forthe financial year 2009 amounted to LBP 5.79 billion(USD 3.84 million), compared to LBP 5.52 billion(USD 3.66 million) for the financial year 2008.
2. TOTAL BALANCE SHEETAs at 31 December 2009, the Group’s Total Balance Sheetamounted to LBP 16,300.03 billion (USD 10,812.62 million)compared to LBP 12,745.20 billion (USD 8,454.52 million) asat year-end 2008, an increase of 27.89%. At year-end 2009,the Group advanced its ranking within the Lebanese bankingsector rankings in terms of Total Balance Sheet to the 4th
rank from 5th as at end 2008, with a market share of 8.47%.
2.1 Funding SourcesAs at December 31, 2009, funding sources amounted toLBP 14,330.49 billion (USD 9,506.13 million) comparedto LBP 11,319.53 billion (USD 7,508.81 million) as at yearend 2008, reflecting a year-on-year increase of 26.60%.
Like all other Lebanese commercial banks, the Bank relieson customers’ creditor accounts as its principal source offunding. Customers’ creditor accounts constituted 83.36%of total assets and 94.81% of funding sources as atDecember 31, 2009, as compared to 84.57% and 95.22%,respectively, as at December 31, 2008. Other fundingsources include, long-term credit lines provided byinternational banks and financial institutions, deposits ofbanks and financial institutions and soft loans from Banquedu Liban related to banks acquisitions eligible under themerger and acquisition Lebanese laws.
LBP’000 2009 2008
Staff costs (136,801,983)
Administrative expenses (70,040,742)
Provisions for charges (342,929)
Depreciation and amortization of assets (16,602,965)
Amortization of deferred charges (13,145,885)
GENERAL EXPENSES (236,934,504)
(117,289,142)
(67,411,353)
(1,929,960)
(14,271,414)
(13,146,836)
(214,048,705)
Breakdown of General Expenses
2009 2008LBP’000
Soft loans from Banque du Liban
Long-term borrowings
Banks and financial institutions
Customers’ creditor accounts
TOTAL
Amount
319,203,094
65,436,611
156,805,260
10,778,087,239
11,319,532,204
%
2.82%
0.58%
1.38%
95.22%
100%
Amount
319,209,718
93,610,373
330,547,147
13,587,124,218
14,330,491,456
%
2.23%
0.65%
2.31%
94.81%
100%
2009 2008LBP’000
Lebanese Pounds
U.S. Dollars
Euros
Other foreign currencies
TOTAL
Amount
4,319,974,202
6,173,504,494
650,065,376
175,988,132
11,319,532,204
%
38.17%
54.54%
5.74%
1.55%
100%
Funding Sources by Currency as at December 31,
Amount
5,698,474,964
7,114,522,393
984,763,340
532,730,759
14,330,491,456
%
39.76%
49.65%
6.87%
3.72%
100%
Management Report
Results of Operations
Breakdown of Funding Sources as at December 31,
FransabankAnnual Report 2009
36
As at December 31, 2009, 60.24% of the Bank’smajor funding sources were denominated in foreign
currencies, as compared to 61.83% as at December 31,2008.
Customers’ Creditor AccountsAs at year end 2009, the Group’s customers’ creditoraccounts amounted to LBP 13,587.12 bi l l ion(USD 9,013.02 mil l ion). An increase of 26.06% overthe 31 December 2008 level of LBP 10,778.09 billion(USD 7,149.64 million).
This increase was mainly due to the growth in termdeposits (+ LBP 1,350.53 billion or c/v USD 895.87 million)and in time saving accounts (+ LBP 1,063.41 billion orc/v USD 705.41 million).
As at 31.12.09, the customers’ creditor accounts represent83.36% of the Group’s Total Assets.
At year end 2009, the Group advanced its rankingwithin the Lebanese banking sector in terms of customers’creditor accounts to the 4th rank from 5th rank as at end2008, with a market share of 8.63%.
2009 2008
LBP’000
Short-term funding (less than 1 year)
Medium-term funding (between 1 & 3 years)
Long-term funding (more than 3 years)
TOTAL
Amount
10,800,967,647
426,564,637
91,999,920
11,319,532,204
%
95.42%
3.77%
0.81%
100%
Funding Sources by Maturity as at December 31,
Amount
14,067,376,940
185,826,779
77,287,737
14,330,491,456
%
98.16%
1.30%
0.54%
100%
LBP’000 2009 2008
Customers' creditor accounts at amortized cost 13,349,904,125
Demand and sight saving accounts 1,203,465,550
Time saving accounts 8,126,420,412
Term deposits 3,198,314,285
Blocked accounts 33,412,853
Margins and collateral accounts 561,833,047
Related parties accounts 226,457,978
Customers' creditor accounts designated at fair value through profit or loss 160,192,439
Accrued interest 77,027,654
TOTAL CUSTOMERS CREDITOR ACCOUNTS 13,587,124,218
Lebanese Pound
Foreign currencies
10,557,438,548
979,404,689
7,063,012,620
1,847,786,457
21,678,479
436,930,991
208,625,312
161,652,174
58,996,517
10,778,087,239
36.85%
63.15%
Breakdown of Customers Creditor Accounts by Type as at December, 31
Management Report
Results of Operations
39.26%
60.74%
37FransabankAnnual Report 2009
LBP’000
TOTAL
Breakdown of Customers Creditor Accounts by Amount as at December 31, 2009
Amount
1,084,596,386
676,886,148
796,891,007
843,200,533
733,010,059
504,859,987
694,355,267
5,333,799,387
%
20.33%
12.69%
14.94%
15.81%
13.74%
9.47%
13.02%
% cum.
20.33%
33.02%
47.96%
63.77%
77.51%
86.98%
100%
LBP
100%
Amount
960,754,871
587,314,221
713,123,885
1,062,031,469
1,087,946,776
1,097,092,121
2,745,061,488
8,253,324,831
%
11.64%
7.12%
8.64%
12.87%
13.18%
13.29%
33.26%
% cum.
11.64%
18.76%
27.40%
40.27%
53.45%
66.74%
100%
FCs
100%
Amount
2,045,351,257
1,264,200,369
1,510,014,892
1,905,232,002
1,820,956,835
1,601,952,108
3,439,416,755
13,587,124,218
%
15.05%
9.31%
11.11%
14.02%
13.40%
11.79%
25.32%
% cum.
15.05%
24.36%
35.47%
49.49%
62.89%
74.68%
100%
Total
100%
LBP’000
TOTAL
Number of accounts
Average per account
Weighted average period
Breakdown of Customers Creditor Accounts by Initial Maturity as at December 31, 2009
Amount
1,854,497,276
2,490,103,862
826,340,035
89,451,056
21,759,159
10,847,004
40,800,995
5,333,799,387
%
34.77%
46.69%
15.49%
1.68%
0.41%
0.20%
0.76%
% cum.
34.77%
81.46%
96.95%
98.63%
99.04%
99.24%
100%
LBP
100%
Amount
2,811,343,365
3,502,923,245
1,668,845,773
125,386,029
42,640,388
65,959,372
36,226,659
8,253,324,831
%
34.06%
42.44%
20.22%
1.52%
0.52%
0.80%
0.44%
% cum.
34.06%
76.50%
96.72%
98.24%
98.76%
99.56%
100%
FCs
100%
Amount
4,665,840,641
5,993,027,107
2,495,185,808
214,837,085
64,399,547
76,806,376
77,027,654
13,587,124,218
%
34.34%
44.11%
18.36%
1.58%
0.47%
0.57%
0.57%
% cum.
34.34%
78.45%
96.81%
98.39%
98.86%
99.43%
100%
Total
100%
Shareholders’ EquityShareholders’ equity as at December 31, 2009 stood atLBP 1,619.47 billion (USD 1,074.27 million) compared toLBP 1,140.50 billion (USD 756.55 million) as at December31, 2008, reflecting a year-on-year increase of 42.00%.This year-on-year increase resulted mainly from the2009 net income, and the increase of the positivecumulative change in fair value of investment securitiesfrom LBP 36.97 billion (USD 24.52 million) as at 2008to LBP 304.40 billion (USD 201.92 million) as at 2009.
2.2 Uses of FundsThe Bank uses of its funds to comply with CentralBanks regulatory reserve requirements, liquid shortterm placements with international banks and financialinstitutions, loans and advances to customers andinvestment in securities portfolio.
192,139
27,760
90 days
197,186
41,856
110 days
389,325
34.899
102 days
P ≤ 1 month
1 month < P ≤ 3 months
3 months < P ≤ 12 months
1 year < P ≤ 3 years
3 years < P ≤ 5 years
P > 5 years
Accrued interest
Management Report
Results of Operations
FransabankAnnual Report 2009
38
A < 50 million
50 million ≤ A < 100 million
100 million ≤ A < 200 million
200 million ≤ A < 500 million
500 million ≤ A < 1.5 billion
1.5 billion ≤ A < 5 billion
A ≥ 5 billion
2009 2008
LBP’000
Cash
Compulsory reserves and Central Banks
Banks and financial institutions
Securities portfolio
Loans and advances to customers
TOTAL
Amount
80,781,336
2,586,369,483
984,160,404
5,853,393,026
2,586,188,278
12,090,892,527
%
0.67%
21.39%
8.14%
48.41%
21.39%
100%
Amount
81,336,245
2,571,560,823
1,557,969,522
7,866,941,515
3,480,742,204
15,558,550,309
%
0.52%
16.53%
10.02%
50.56%
22.37%
100%
As at 31 December 2009, 50.56% of the funds wereinvested in securities compared to 48.41% as at 31December 2008. Cash, placements with Central Banksand banks & financial institutions constituted 27.07% of
the funds as at 31 December 2009, against 30.20% as at31 December 2008. Loans and advances represented22.37% of the funds as at 31 December 2009 comingfrom 21.39% as at 31 December 2008.
2009 2008
LBP’000
Lebanese Pounds
U.S. Dollars
Euros
Other foreign currencies
TOTAL
Amount
4,751,850,221
6,356,680,066
693,051,729
289,310,511
12,090,892,527
%
39.30%
52.58%
5.73%
2.39%
100%
Uses of Funds by Currency as at December 31,
Amount
6,705,038,855
6,994,057,178
1,051,219,724
808,234,552
15,558,550,309
%
43.10%
44.95%
6.76%
5.19%
100%
2009 2008
LBP’000
Short-term (less than 1 year)
Medium-term (between 1 and 3 years)
Long-term (more than 3 years)
TOTAL
Amount
5,842,527,223
2,394,919,017
3,853,446,287
12,090,892,527
%
48.32%
19.81%
31.87%
100%
Uses of Funds by Maturity as at December 31,
Amount
7,361,620,126
3,204,392,816
4,992,537,367
15,558,550,309
%
47.31%
20.60%
32.09%
100%
Cash, Central Banks, Banks and Financial InstitutionsAs at 31 December 2009, Cash, Central Banks and banks& financial institutions amounted to LBP 4,210.87 billion(USD 2,793.28 million) and constituted 25.83% of total assets
compared to LBP 3,651.31 billion (USD 2,422.10 million) and28.65% as at year end 2008, reflecting a year-on-yearincrease of 15.32%.
Management Report
Results of Operations
Breakdown of Uses of Funds as at December 31,
39FransabankAnnual Report 2009
2009 2008
LBP’000Cash on hand Compulsory reserves and Central BanksCompulsory reserves with Central BanksObligatory placements Current accounts with Central Banks Free placements with Central Banks Accrued interest Banks and financial institutionsCurrent accounts with banks Term placements with banks Pledged deposits Purchased checks for collection Loans to banksAccrued interest
TOTAL
Amount80,781,336
2,586,369,483419,578,246966,151,40082,531,006
895,165,440222,943,391984,160,40461,873,301
836,407,1054,045,837
10,545,21868,754,9692,533,974
3,651,311,223
%2.21%
70.84%11.49%26.46%2.26%
24.52%6.11%
26.95%1.69%
22.91%0.11%0.29%1.88%0.07%
100%
As at December 31,
Amount81,336,245
2,571,560,823563,381,680
1,121,457,005187,390,239697,151,180
2,180,7191,557,969,522
113,249,9661,370,492,670
-12,458,02158,492,4443,276,421
4,210,866,590
%1.93%
61.07%13.38%26.63%4.45%
16.56%0.05%
37.00%2.69%
32.55%-
0.29%1.39%0.08%
100%
Securities PortfolioAs at 31 December 2009, the Group’s securities portfolio,which consists of both fixed and variable income securities,amounted to LBP 7,866.94 billion (USD 5,218.54 million)
compared to LBP 5,853.39 billion (USD 3,882.85 million) asat year end 2008, an increase of 34.40%. Securities portfolioconstituted 48.26% of total assets as at December 31, 2009against 45.93% as at December 31, 2008.
2009 2008
LBP’000Held for trading securities Available for sale investment securitiesHeld to maturity investment securities
TOTAL
Amount85,539,871
4,005,987,2961,761,865,859
5,853,393,026
%1.46%
68.44%30.10%
100%
Breakdown of Securities Portfolio by Classification as at December 31,
Amount95,821,389
6,359,346,3121,411,773,814
7,866,941,515
%1.22%
80.84%17.94%
100%
2009 2008
LBP’000Equities with variable incomeLebanese Treasury billsLebanese Government bondsBanks EurobondsCertificates of deposit issued by Central Bank of LebanonCertificates of deposit issued by commercial banksMutual fundsBanks and corporate bondsAsset-backed securitiesAccrued interest
TOTAL
Lebanese PoundForeign currencies
Amount174,046,983
1,780,851,3301,649,095,096
-2,055,197,949
62,508,352-
358,785-
131,334,531
5,853,393,026
%2.97%
30.43%28.17%
-35.11%1.07%
-0.01%
-2.24%
100%
Breakdown of Securities Portfolio by Type as at December 31,
Amount193,403,925
1,732,277,2511,808,623,056
26,826,1603,853,989,209
76,167,980365,579
30,564,3132,224,392
142,499,650
7,866,941,515
%2.46%
22.02%22.99%0.34%
48.99%0.97%
-0.39%0.03%1.81%
100%
64.03%35.97%
56.45%43.55%
Management Report
Results of Operations
FransabankAnnual Report 2009
40
Loans and Advances to CustomersAs at 31.12.09, the Group’s loans and advances tocustomers, net of provisions and unrealized interest fornon-performing loans and discount on loan book,amounted to LBP 3,480.74 billion (USD 2,308.95 million)against LBP 2,586.19 billion (USD 1,715.55 million) as at31.12.08. An increase of 34.59%.
At year end 2009, the Group advanced its ranking withinthe Lebanese banking sector in terms of net loans andadvances to customers to the 5th rank from 6th rank as atend 2008, with a market share of 6.83%.
LBP’000 2009 2008
Short termCommercial loans & other current debtor accounts 1,949,191,171Medium & long termOther loans to customers 1,216,382,314Consumer loans
Housing loans
IFC housing loans
EPH housing loans
Housing loans to army personnel
Education loans
Loans subsidized by the Government
KAFALAT guaranteed loans
Car loan
Loans to enterprises
Other loans
Loans and advances to related parties 170,111,276Sub-standard debts 42,099,182Doubtful debts 984,935,097Accrued interest 7,519,379
TOTAL 4,370,238,419
LessUnrealized interest for sub-standard debts (14,668,362)Provisions and unrealized interest for doubtful and bad debts (859,567,394)Discount on loan book (10,035,093)Collective provisions (5,225,366)
NET LOANS AND ADVANCES TO CUSTOMERS 3,480,742,204
Lebanese PoundForeign currencies
1,516,478,759
763,151,475166,708,890
45,335,785
860,171
129,086,104
29,497,981
-
67,777,072
53,074,231
144,501,669
80,587,403
45,722,169
154,402,12835,070,851
1,001,274,0764,955,411
3,475,332,700
(14,663,161)(863,825,302)(10,655,959)
-
2,586,188,278
15.74%84.26%
Breakdown of Customers Creditor Accounts by Type as at December 31,
240,891,170
87,177,275
426,478
189,306,332
37,924,821
1,502,970
77,222,349
67,284,651
245,186,488
204,234,091
65,225,689
Management Report
Results of Operations
19.06%80.94%
41FransabankAnnual Report 2009
LBP’000 2009 2008
Regular, watch and unclassified accounts
Restructured
Un-restructured
Doubtful & bad debts
Restructured
Un-restructured
Sub-standard accounts
Restructured
Un-restructured
Purchased loan book
Accrued interest
TOTAL LOANS AND ADVANCES TO CUSTOMERS
Less provisions, discount and unrealized interest for non performing debts
Provisions for doubtful and bad debts
Provisions for restructured doubtful and bad debts
Provisions for un-restructured doubtful and bad debts
Discount on loan book
Discount on restructured loan book
Discount on un-restructured loan book
Collective provisions
Collective provisions for doubtful and bad debts
Collective provisions for un-classified debts
Unrealized interest for doubtful and bad debts
Unrealized interest for restructured doubtful and bad debts
Unrealized interest for un-restructured doubtful and bad debts
Unrealized interest for sub-standard accounts
Unrealized interest for restructured sub-standard accounts
Unrealized interest for un-restructured sub-standard
NET LOANS AND ADVANCES TO CUSTOMERS
2,434,032,362
25,200,812
2,408,831,550
996,712,051
19,694,013
977,018,038
35,070,851
6,301,588
28,769,263
4,562,025
4,955,411
3,475,332,700
(889,144,422)
(251,774,234)
(6,113,275)
(245,660,959)
(10,655,959)
(664,160)
(9,991,799)
(9,887,949)
(9,887,949)
-
(602,163,119)
(5,321,021)
(596,842,098)
(14,663,161)
(696,839)
(13,966,322)
2,586,188,278
Asset Quality as at December 31,
3,335,684,761
23,013,389
3,312,671,372
981,257,223
15,471,433
965,785,790
42,099,182
8,803,779
33,295,403
3,677,874
7,519,379
4,370,238,419
(889,496,215)
(223,944,541)
(6,472,987)
(217,471,554)
(10,035,093)
(433,807)
(9,601,286)
(10,585,992)
(5,360,626)
(5,225,366)
(630,262,227)
(4,158,503)
(626,103,724)
(14,668,362)
(1,140,534)
(13,527,828)
3,480,742,204
LBP’000 2009 2008
Doubtful debts and purchased loans (net) to Total loans and advances to customers (net)
Doubtful debts and purchased loans (net) to Shareholders’ equity
Sub-standard accounts (net) to Total loans and advances to customers (net)
Provisions, discount and unrealized interest to Doubtful debts and purchased loans
Unrealized interest for sub-standard accounts to Sub-standard accounts
4.90%
11.12%
0.79%
87.34%
41.81%
3.31%
7.12%
0.79%
88.29%
34.84%
Asset Quality Ratios as at December 31,
Management Report
Results of Operations
FransabankAnnual Report 2009
42
As at end December 2009, the Group’s doubtfuldebts, net of provisions, discount and unrealizedinterest, amounted to LBP 115.33 billion (USD 76.51 million)compared to LBP 126.79 billion (USD 84.11 million)as at 31.12.08, thus a decrease of 9.04%.
As at end December 2009, the provisions, discountand unrealized interest for doubtful debts amountedto LBP 869.60 billion (USD 576.85 million) against
LBP 874.48 billion (USD 580.09 million) at end 2008.This places the coverage ratio in 2009 at 88.29%compared to 87.34% in 2008.
As at end December 2009, the Group’s sub-standardaccounts, net of unrealized interest, amounted toLBP 27.43 billion (USD 18.20 million) compared toLBP 20.41 billion (USD 13.54 million) at end 2008.
LBP’000
TOTAL
Breakdown of Gross Loans and Advances to Customers by Amount as at December 31, 2009
Amount
287,639,770
132,504,642
106,615,236
68,699,615
60,337,372
107,719,901
324,794,638
1,088,311,174
%
26.43%
12.18%
9.80%
6.31%
5.54%
9.90%
29.84%
% cum.
26.43%
38.61%
48.41%
54.72%
60.26%
70.16%
100%
LBP
100%
Amount
385,551,718
101,524,169
128,345,446
237,540,524
460,705,861
796,995,911
1,171,263,616
3,281,927,245
%
11.75%
3.09%
3.91%
7.24%
14.04%
24.28%
35.69%
% cum.
11.75%
14.84%
18.75%
25.99%
40.03%
64.31%
100%
FCs
100%
Amount
673,191,488
234,028,811
234,960,682
306,240,139
521,043,233
904,715,812
1,496,058,254
4,370,238,419
%
15.40%
5.36%
5.38%
7.01%
11.92%
20.70%
34.23%
% cum.
15.40%
20.76%
26.14%
33.15%
45.07%
65.77%
100%
Total
100%
3. CAPITAL ADEQUACY RATIOThe Group’s capital adequacy ratio is 11.85% as atDecember 31, 2009, as compared to 10.22% as atDecember 31, 2008. The capital adequacy ratio iscalculated according to Banque du Liban guidelines,which are in line with the recommendations of theCommittee on Banking Regulations and Supervisory
Practices of the Bank for International Settlements (the BaselII Accord). On a stand alone basis, Fransabank’s capitaladequacy ratio was 13.50% as at December 31, 2009, ascompared to 11.45% as at December 31, 2008. Thestatutory minimum capital adequacy ratio required byBanque du Liban is 8%.
Management Report
Results of Operations
Agriculture
Trade & Services
Retail Miscellaneous
Industry Construction
47%
8%
18%
3%
5%
19%
31.12.2008
Agriculture
Trade & Services
Retail Miscellaneous
Industry Construction
46%
16%
9%
2%
21%
6%
31.12.2009
Breakdown of Loans and Advances to Customers by Economic Sector
43FransabankAnnual Report 2009
A < 50 million
50 million ≤ A < 100 million
100 million ≤ A < 200 million
200 million ≤ A < 500 million
500 million ≤ A < 1.5 billion
1.5 billion ≤ A < 5 billion
A ≥ 5 billion
Management Report
Bank’s Description
Risk ManagementFransabank is pursuing an ambitious corporate strategyto achieve its objectives in an effective and efficientmanner, which involves growth in local and selectiveregional and international promising markets, and buildingnew business activities. In this regard, it has set a riskstrategy commensurate with Fransabank’s risk appetiteand risk tolerance.
The diversity of Fransabank business operations in variousgeographical locations requires identification,measurement, aggregation, and effective managementof risks and efficient allocation of capital to derive anoptimal risk / return ratio.
Fransabank risks are managed in a structured, systematic,and transparent manner through the risk policy thatincludes comprehensive risk management, riskmeasurement and monitoring processes.
Fransabank Board of Directors is ultimately responsiblefor providing overall risk management direction andoversight, for approving the overall risk tolerance, andoverseeing that the Group is adequately and effectivelycontrolled and managed. The risk management functionis organised by risk categories, mainly, credit,operational, and market risks, which are managed in acoordinated manner within the organisation. Moreover,the risk management function is independent of thebusiness line divisions.
The Board of Directors, the Risk ManagementCommittee, the Senior Management, and the InternalAudit Department are key members in the riskmanagement process. The Risk ManagementCommittee, the Audit Committee, and the Group ChiefRisk Officer, support the Board of Directors in managingthe Group’s risks.
Fransabank’s Group Chief Risk Officer monitors andcontrols all the major risk exposures and concentrationsacross the bank. He has the responsibility to assist theBoard of Directors and Senior Management in developingFransabank Group’s risk strategy; to provide the Boardof Directors, the Chairman, and Risk ManagementCommittee with periodic reports highlighting the risksfaced by the Group; to conduct stress test on differentrisks modules for various scenarios in a systematic andcontinuous manner; and to review and evaluate riskmanagement reports developed by Fransabank’s subsidiaries.
Fransabank has established an appropriate structure forrisk management functions evidenced by its RiskManagement Division, which includes four departments:Basel II Implementation, Credit Risk, Market Risk andOperational Risk Departments, and defined a sound riskmanagement process to identify, measure, monitor, andreport credit, market and operational risks that it faces.The Risk Management Division assumes its responsibilityin reporting to the Board Risk Management Committeethrough periodic reports about Fransabank Group riskprofile.
In this context, it has developed an action plan toimplement Basel II in line with Fransabank’s strategyand risk profile, the Central Bank of Lebanon, theBanking Control Commission and Basel II requirements.
Currently, the Bank complies with Basel II Pillar Irequirements which are related to the calculation of theCapital Adequacy Ratio in conformity with the BankingControl Commission memos. Pillars II and III of Basel II,are related to the qualitative requirements such as RiskManagement Policy and Procedures, CorporateGovernance Guidelines, Internal Capital AdequacyAssessment Process (ICAAP) and Market Discipline, andare in the implementation process. The RiskManagement Division has initiated several projects inthat regard, aimed at establishing the structures andbusiness practices essential for Fransabank’s compliancewith the three pillars of Basel II:
The Credit Risk Management Department (CRMD)followed-up on the credit granting process through anin-depth review of all files to be submitted to the Bank’scredit committee. Additionally, it developed stress-testreports measuring the probable impact of hypotheticalscenarios; said stress-tests were intended to informabout the potential changes on the Bank’s capitaladequacy ratio should these scenarios materialize.Further to that, the CRMD provided periodic reports, tothe Board Risk Management Committee, on significantexposures arising from risk concentrations (i.e. byregion, geographic area, country, bank, collateral type,classification, product, facility type, currency, economicsector…). Finally and with the intention of reportingeconomic sector concentration, sub-economic sectorswere regrouped to other co-related sub-sectors in orderto accurately assess Fransabank’s resilience to anycrisis that may hit a specific co-related industry orsector.
FransabankAnnual Report 2009
44
Management Report
Bank’s Description
The Market Risk Management Department (MRMD)promoted a risk management culture among the relateddepartments and divisions at Fransabank throughreports addressed to ALCO and Senior Managementconcerning analysis of interest rate risk in the bankingbook and trading book at the portfolio level, in additionto investment reports which tackled interest rate andliquidity risks on individual investment opportunities,carried out by the bank and assessed their impact oncapital adequacy ratio. Furthermore, the MRMDdisclosed its main findings in a comprehensive reportpresented to the Board Risk Management Committeeand issued on a quarterly basis.
The Operational Risk Management Department (ORMD)is promoting a risk culture on a group-wide basis,starting by the Risk and Control Self-Assessment projectimplemented in several processes. In parallel, theORMD is actively participating in Fransabank’s systemsimplementation process through the gaps andrecommendations it provides. In addition, and throughits review of the policies and procedures, the ORMDpromotes the soundness of the bank’s internal controlenvironment. Enhancements were made to the riskidentification process of the operational risk frameworkthroughout 2009, particularly the issuing of an updatedRisk and Control Self Assessment (RCSA) Frameworkenforcing accountability of business owners. With afocus on proactive identification and mitigation ofoperational risks and incidents, the ORMD has also beenworking on the identification of Key Risk Indicators(KRIs) in order to track risk exposures in the newbanking systems currently implemented at the bank.
The Basel II Implementation Department is monitoringthe Basel II Action Plan and assisting in its implementation.Periodic reports related to Fransabank SAL and itssubsidiaries, including the capital management process,the allocation of capital charge to each risk category, andthe stress tests conducted for various scenarios andtheir effect on the capital adequacy ratio, were providedto the Board Risk Management Committee. Moreover,assessment visits were undertaken to Fransabanksubsidiaries in order to follow up on their risk managementprocess and Basel II implementation.
AML Compliance In order to prevent Fransabank and its subsidiaries andassociated companies from being exposed to criminal
activities that could lead to money laundering operations orbeing used for terrorist financing, senior managementstressed that Fransabank entities and structures, mustbe in compliance with all AML / CFT relevant local andinternational laws and regulations.
AML Compliance Departments were established in allFransabank Group entities with a primary goal to designand structure an effective AML program. The AMLprogram adopted by Fransabank different entities isencompassing the following four key elements:
1- Development of internal procedures and controls2- Establishing of AML Compliance Departments3- An ongoing training programs4- An independent audit function to test programs
During 2009, Fransabank implemented an automatedflexible and effective filtering system which allows theAML department's staff members to carry out theirscreening procedure activities on all the Bank'scustomers and all concerned parties reflected on swiftmessages. The AML compliance departments in allentities start the development of the best AML / CFTcontrol strategy by adopting the risk-based methodologywhich leads to an effective risk assessment of high riskareas, products, and services. In addition, internaltraining sessions were designed, structured anddelivered to branches employees and concerneddepartments to assist and support them in exploringrecent trends and requirements. The AML department'sstaff members and the Branch AML Officers, in turn,attended training sessions locally and abroad to discoverthe latest trends in the AML / CFT field and to interactpersonally with experts to garner their knowledge infighting financial crimes.
International Presence Fransabank Group, in addition to Lebanon, is currentlypresent in eight countries: France, Algeria, Syria andBelarus as subsidiary banks, Sudan as an associatebank, as well as in Libya and Cuba as representativeoffices.
Fransabank Group’s business expansion strategy in theyear 2009 revolved around maintaining its internationalexpansion strategy and consolidating its presence in theregional and international markets in which it is present.This network of subsidiaries and associate banks, as
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well as representative offices has broaden the Bank’sactivity ground and the synergies which are being createdbetween the various entities. The existing Lebanesebusiness communities in each of those countries next tothe local operators no doubt constitute a prime sourceof business to the Group.
A glimpse on the present characteristics of each of theunits abroad reveals the following:
The Syrian subsidiary, Fransabank Syria launched itsoperations in January 2009 and has quickly moved toopen two branches in Damascus and two branches inAleppo and one in Homs and it is expected that threemore branches to be added during 2010. As for theAlgerian subsidiary, Fransabank El Djazaïr, the Bank’sshareholders’ equity was increased from USD 44 millionto USD 142.25 million. A new branch was inaugurated inOran and another branch in Constantine is underway.
Our French subsidiary, Fransabank (France) has continuedto play the role of a platform vis-à-vis the other Group’sentities and has benefited from its internationalexpansion to increase its level of activity in newcountries. This has translated into healthy results forthe year which have almost doubled compared to theprevious year thus enabling this subsidiary to furtherstrengthen its shareholders’ equity.
Fransabank SAL, the mother company of ourBelarussian subsidiary, Fransabank OJSC (Belarus), hastotally subscribed in the increase in the Bank’s capital byapproximately USD 13 million during this first full year ofoperation, and has totally subscribed a USD 12 millionsubordinated loan. Shareholders’ equity now stands atUSD 29.2 million. Fransabank OJSC (Belarus) operatesthrough its headquarters and 21 exchange offices inMinsk and one branch in Gomel.
Our associate bank in Sudan, United Capital Bank totalassets has increased by 47.2% during 2009 and its netprofits were maintained roughly at the same level as inthe previous year even though the economy haswitnessed a slowdown due to the slump in oil prices
The end result of the exercise described above was thatit allowed the subsidiaries and associate abroad tocontribute to the Group’s total assets at a level ofapproximately 8.2% in a relatively short period of time,bearing in mind that our strategy is to bring this figure
up to 20% by the end of 2010 and 30% by 2012.
• Fransabank (France) SA
The year 2009 witnessed a significant decline in theinternational business environment and a slowdown inthe commercial transactions, in addition to a considerablefall in the prices of raw materials. All this combined hadimpacted the clients’ business activity of Fransabank(France).
However, the distinguished relationship of Fransabank(France) with its customers and the constant support ofits two shareholders jointly made Fransabank (France)achieve excellent results, thus registering a net profitafter tax of Euro 1.27 million, an increase of 94% ascompared to the previous year and in line with theforecasts of the business plan.
In the year 2009, Groupe Caisse d’Epargne and BanqueFédérale des Banques Populaires merged to formGroupe BPCE, the second largest banking group inFrance. Financière Océor, a subsidiary of Groupe BPCE,acquired 40% of the share capital of Fransabank(France). The affiliation to a renowned shareholderallowed Fransabank (France) to have access to potentialcustomers which were otherwise inaccessible, and topursue the bank’s policy of diversification in line with itslongtime strategy.
In this respect, and based on its ambitious internationalexpansion strategy, Fransabank Group aims at growingthe business activities of its French subsidiary and topenetrate new markets. This was the case when theGroup strongly established and developed itself in theAlgerian market through Fransabank El Djazaïr, andbrought many business opportunities to the Paris basedentity of the Group.
At the end of the year 2009, Fransabank (France)benefited from its excellent financial achievements tostrengthen its own shareholders’ equity by 6.7%reaching a total of Euro 23.97 million.
• Fransabank El Djazaïr SPA
After three full fiscal years of activities, Fransabank El Djazaïrcontinued to register a steady and harmonious growthin 2009, despite the turmoil on the international financiallevel affecting, within limits, the overall environmentof business and investment in Algeria.
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Fransabank El Djazaïr achieved good results for the yearunder review whereby total assets registered a 108.7%growth as compared to 2008, reaching USD 277.6 millionat end of December 2009. The credit portfolio increasedby 43%, reaching USD 53.7 million and clients’ depositsincreased by 51.4% reaching USD 123.9 million at theend of 2009. Shareholders’ equity was increased toUSD 142.2 million at the end of year 2009 as per theCentral Bank of Algeria new regulation, thus registeringan increase of 214.4% compared end of 2008.
In line with its ambitious geographic expansion strategy,Fransabank El Djazaïr inaugurated a new branch in Oran,West of the country.
By the end of the 2012, Fransabank El Djazaïr is planningto open several branches, to cover major cities of thecountry and to diversify its range of banking productsand services to anticipate and satisfy the needs of theircustomers.
• Fransabank Syria SA
Fransabank Syria launched its activities in January 2009with the strategy of becoming a universal bankundertaking all types of banking activities. The Banklaunched during its initial stages both its corporate andretail products and services, relying on a still smallbranch network, in Damascus and Aleppo.
Fransabank Syria achieved good results as compared toits direct competitors who launched their activitiesaround the same time, thus reaching a balance sheetlevel of approximately USD 300 million during its firstyear of operation. This has also favorably comparedwith some other banks which were already establishedin the Syrian market.
The year 2009 witnessed the introduction of major controland governance regulations by the local authorities in acondensed manner. Fransabank Syria, although in itslaunch phase, has actively coped and promptlyresponded to the application of the circulars. Moreover,Fransabank Syria was one of the first banks to positivelyrespond to the capital increase requirements of theSyrian authorities and shall increase its capital during2010 to SYP 5.25 billion (around USD 115 million), thusallowing the bank to further grow its activities in theSyrian market.
Fransabank Syria proposes to its customers a wide
range of retail products (personal, car & housing loans)and credit cards systems (cards & ATMs) as well as a fullrange of services targeted to companies, large, mediumand small, offering them traditional financing, tradefinance, project finance and other means of corporatefinance. The bank also began to participate in social andcultural events as part of its image building process.
As at May 2010, and in addition to its headquarters inDamascus, the branch network of Fransabank Syria iscomposed of 5 branches, two in Damascus, two inAleppo and one in Homs, with a plan to cover Lattakia,Tartus and Hama during the Summer of 2010.
• Fransabank OJSC (Belarus)
During the 4th quarter of 2008, Fransabank SAL andFransa Holding SAL, acquired Golden Taler, a small bankin Belarus with a capital of the equivalent of USD 7.3 millionand renamed it Fransabank OJSC. The Bank operatesthrough its headquarters and 21 exchange offices inMinsk, and one branch in Gomel. It focuses mainly oncorporate and medium size loans.
In 2009, in order to conform to the minimumrequirements of the National Bank of the Republic ofBelarus (NBRB), Fransabank OJSC increased its capitalto c/v of USD 23.67 million through a cash injection fromshareholders, and the issuance of a subordinated loanfor USD 12 million totally subscribed by Fransabank SALthus increasing the stake of this latter from 18% to62.21% as at 31 December 2009.
During 2009, Fransabank OJSC was able to achievegrowth despite the economic crisis in Belarus and thesharp devaluation of the ruble against the USD by around30%. The 2009 net profits increased to USD 3.6 million, fromUSD 1.1 million in 2008. As at 31 December 2009, totalassets reached USD 52.8 million against USD 26.3 millionas at 31 December 2008, net loans to customersamounted to USD 16 million up from USD 12.7 millionat end 2008, and customers’ deposits increased toUSD 9.2 million up from USD 8.6 million at end 2008.Shareholders’ equity reached USD 29.2 million as at31.12.09 up from USD 16.6 million as at end 2008.
During the 1st quarter of 2010, Fransabank SALincreased its stake in Fransabank OJSC to 80% througha purchase of shares from Fransa Holding SAL, whosepercentage of ownership will become 19.93%.
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Fransabank OJSC is expected to grow its loan portfolio,expand its network through opening 4 to 5 branches indifferent regions of Belarus, and develop its bankingproducts and services especially retail loans (car loans,housing loans, personal loans, etc) and credit cards.
• United Capital Bank
United Capital Bank was established in Sudan in 2006 asan associate of Fransabank SAL alongside reputableKuwaiti and Egyptian partners. It is an Islamic investmentand corporate bank offering various Sharia-compliantmodes of financing such as Mudaraba, Mucharaka,Murabaha, Ijarah and Istisnaa.
The Sudanese economy has witnessed a slowdown dueto the slump in oil prices in the second half of 2008 andthe political conjuncture prevailing in Sudan, which hasput pressure on the State revenues and foreign currencyreserves. This situation has led to a shortage in foreigncurrency and a restrictiveness of the policy of theCentral Bank of Sudan in matters of import financing.Matters have nonetheless gradually improved towardsthe end of the year with the increase in oil prices.
As at 31 December 2009, United Capital Bank’s totalassets reached USD 329.8 million thus registering a47.2% growth over the previous year. Total depositsincreased by 97.9% to USD 196.8 million, and its finance tocustomers (net) grew by 22.5% to stand at USD 140.8 million.Net profits for the year amounted to USD 8.8 milliontherefore staying roughly at the same level of those of2008. Shareholders’ equity reached USD 120.7 million,ranking United Capital Bank as one of the largestSudanese bank in terms of equity.
In addition, United Capital Bank inaugurated in 2009 twobranches located in Khartoum Bahri and Niala City.
Investment and Private Banking
Since 2001, Fransa Invest Bank (FIB) SAL has proventhat it has the expertise and vision to remain a leader inan extremely competitive and volatile marketplace. Asone of the leading investment and private bankinginstitutions in Lebanon, FIB has forged ahead, makingdeals, investing wisely and forming successful partnershipsalong the way. This continued progress is due to thestrong foundations FIB was built upon, almost 10 years
ago. At FIB, teamwork and open communication are toppriorities, which are further supported by an organizationalstructure that serves the purposes of meritocracy andlong-term partnerships.
FIB Activities
Within this advantageous framework, FIB excels in thefollowing four main activities: corporate finance advisory,equity & debt financing, wealth management and capitalmarkets.
Corporate finance advisory encompasses mergers andacquisitions, equity capital markets, private equityadvisory and debt advisory.
FIB also provides equity and debt financing opportunitiesfor corporate and project finance.
FIB’s wealth management department offers clientsadvice, expertise and solutions on a non-discretionarybasis to optimize returns on their investments throughthe Private Banking and Asset Management units.
Capital markets activities include full brokerage services,available for a wide range of financial products includingcurrencies, bonds, stocks, commodities, futures, andoptions with access to local, regional (GCC, Jordan andEgypt) and international markets (North America,Europe and Asia).
FIB also provides in-house economic, market and countryresearch and analysis, supported by international banksand asset managers.
2009 Achievements
In 2009, FIB was involved in several important activities,including the arrangement of the syndicated financing ofAl-Abadiyeh Hills Project.
FIB with its parent company, Fransabank SAL, co-signedwith IFA Hotels and Resorts SAL Holding- a subsidiary ofIFA Hotels & Resorts KSCC, a prominent Kuwaiti Group -a joint agreement through which FIB and Fransabankwill finance the “Al Abadieh Hills Project” over twophases and for a total amount of USD 30 million. Thetransaction was successfully arranged and financedamidst the prevailing international financial crisis, riskavert environment and bearish credit market, anddespite some internal political hurdles.
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FIB also grasped the opportunity to be one of the firstLebanese banks to promote more aggressively lendingin the Lebanese Pounds. In this regards, the Banksuccessfully negotiated placing 40% of the abovementioned loan in the local currency, a percentagewhich exceeds the prevailing industry average of 15%.FIB pushed the opportunity further to be a pioneer inpricing both the Lebanese Pound and the US dollarportions of the loan based on a local new benchmark theBeirut Reference Rate – recently developed, calculatedand recommended by the Lebanese Banks Association(LBA) – as an alternative to Libor which, due to theinternational financial turmoil, became non-indicative ofthe cost of credit in general and far from being reflectiveof the Lebanese country and credit risks.
In order to ensure diversity, FIB has also been active inthe provision of medium term corporate loans in orderto promote growth of the Lebanese economy via itsfinancial sector and in a direct investment in a new carreceivables securitization transaction, Cylinder II, whichclosed in October 2009. Additionally, FIB has acted asthe manager of Fransabank investments in two localfunds, Berytech Fund and Building Block Equity Fund,with an active role in the funds’ board meetings andspecial purpose committees elected to conduct duediligence with other local and international shareholders.
Throughout 2009, FIB succeeded in growing its pipeline,which currently includes potential direct investment innew financial companies, syndicated and corporatefinance deals, and mandates for financial advisory servicesfor equity raising in the real estate / tourism sector.
Fransa Invest Bank is constantly coming up with innovativeproducts and services for its clients as well asFransabank’s clients. In 2009, FIB issued another highlysuccessful retail structured product called Easy Times.Easy Times is a 3 year structured product that wasissued at a time of great market volatility, on May 19,2009. It was issued in USD and for a minimum investmentof USD 5,000. It also featured 100% capital guarantee atmaturity by Fransabank and pays guaranteed annualcoupons of 3.75%, 4%, and 4.25%, in the first, secondand third years respectively, payable semi-annually. Inaddition, investors receive the performance of a welldiversified equally-weighted basket of stocks over the3 year period, individually capped at 15%. This productraised a total of USD 26,305,000.
FIB also launched a deposit program for 2 and 3 yearterms in both USD and LBP. As a result, FIB increased itsclient base substantially.
2009 Financial Highlights
Fransa Invest Bank reported an outstanding performance in2009, whereby customers’ deposits in LBP increasedby 67.7% as at end 2009 to reach LBP 250.49 billionfrom LBP 149.32 billion as at end 2008. Deposits alsoincreased in foreign currency by 36.6% to USD 76.33 millionas at end 2009 compared to USD 55.88 million as at end2008. Profitability rose significantly, with net incomereaching USD 9.15 million in 2009 versus USD 4.93 millionin 2008, an increase of 85.6%. Return on Average Equity(ROAE) was 19.05% in 2009 compared to 12.32% in 2008,while Return on Average Assets (ROAA) reached 3.28%in 2009, as compared to 2.25% in 2008. Total assetsreached the equivalent of USD 336.69 million as at end2009, compared to USD 219.80 million as at end 2008,an increase of 53.18%.These financial results were atestament to the in-house expertise and the hard workand dedication of its staff.
FIB, with hard work and clear vision, has developed theinvestment and private banking expertise and knowledgeto benefit from Fransabank's expansion strategy to growits business accordingly at home and abroad.
Corporate Banking
In 2009, the Corporate Banking Division continued tosupport its clients in Lebanon and abroad while selectivelydevelop and diversify its customer base and loanportfolio. This is supported by an active corporate teamand by the Bank’s extended network of branches andsubsidiaries; coupled with a vibrant local economy.
Next to its broad spectrum of commercial bankingservices offered at competitive rates, the Bank continuedto treat its clients as partners offering them expertiseand advice in areas as diversified as:
- The Arab Trade Finance Program, to support theirexport and import activities;
- European Investment Bank loans, to finance new projectsor extensions of existing ones;
- Agence Française de Développement loans, to helpclients directly or indirectly affected by the events of2006 restructure;
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- The structuring of letters of credit and negotiating ofletters of guarantee with correspondents;
- Project finance;
- Aircraft and ship finance;
- Subsidized loans to industry, agriculture, tourism andnew technologies, the four sectors covered by theLebanese Government Loan Subsidy Program.
In 2009, Fransabank also aggressively marketed theBanque du Liban Circular 185 program designed, inparticular, to encourage borrowings in Lebanese Poundsand drastically reduce the cost of doing so to sectors ofthe Lebanese economy which did not currently benefitfrom the Loan Subsidy Program, like education andcommerce.
Fransabank’s corporate loan portfolio as at 31.12.2009expanded by USD 161.57 million (21.3%) in directbalance sheet utilizations (loans, overdrafts...) compared to31.12.2008, reaching a total of USD 918.48 million.
As at 31.12.2009, corporate loans represented 63% ofFransabank’s total loan portfolio.
The distribution of the Bank’s loan portfolio as at end of2009, over the main sectors of the Lebanese economy,was as such:
• Wholesale Trade 33.05%
• Manufacturing Industries 18.28%
• Contracting & Construction 8.59%
• Retail Trade 5.53%
• Transport, Warehouses & Communications 4.82%
• Agriculture, Forestry & Fishing 3.21%
• Electricity, Gas, Water & Oil 3.10%
• Hotels, Furnished Apartments & Restaurants 2.28%
• Health & Social Services 1.17%
In order to meet the added challenges imposed by thebanking industry new regulations and Fransabank’sdrive to further expand, the Corporate Banking Divisionrecruited additional staff and reorganized them in teams,headed by seasoned professionals with diversifiedbackgrounds, in charge of clusters of relationship andassistant relationship managers. Their main objective isto provide an efficient and a more personalized serviceto Bank’s customers.
Among the other salient developments of 2009, thegreater integration between the actions of the CorporateBanking Division and Lebanese Leasing Company (LLC)SAL, Fransabank’s Group leasing arm, both now reportingto the head of corporate banking. This coordination hasinjected new life in LLC which had yet another successfulyear in terms of business development and results, alsoallowing corporate banking to expand its offer with newsolutions.
As for the Small and Medium Enterprise (SME)Department, it has as always dedicated its efforts to helpin the development of companies with annual salesturnover not exceeding USD 5 million and/or with totalexposure within USD 2 million. This represents thewidest chunk of the Lebanese market. Fransabank considersit a duty to ensure its contribution in the growth of thesecompanies by offering them multiple products thatcover all their needs and granting them personalfinancial guidance and continuous risk assessment.
In 2009, the SME Department has contributed to theoverall profitability of the Bank through balanced lendingin Lebanese Pounds to new and existing customers.This was materialized in reaching a growth volume of25% in 2009. Thanks to the efforts of an organized teamworkbetween the SME department and the branch network.
The increase in Kafalat files is segregated either byregion or by sector as follows:
Kafalat by Region
North
Beirut & Suburbs
Bekaa South
Metn, Keserwan & Jbeil Chouf
25%
28%
13% 11%
9% 14%
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The SME Department has been financing new projectsand assisting new and existing clients expand theirbusiness under the new incentives provided by the BDLin 2009; whereby sectors which were not eligible tosubsidy can benefit and until June 2011 from a reducedinterest rate on their loans.
Since the Lebanese professional body required relevantfinancial support in order to acquire or expand its premises,the SME department granted all over the year thecommercial property loan that covered this importantneed in a very professional and organized manner.
During 2009, many workshops were held in severalregions in Lebanon in order to market Fransabank SMEproducts. The targeted categories of clients includedcooperatives, associations, businessmen, farmers...These workshops were held to attract many potentialclients and increasing thus the SME portfolio especiallyin Kafalat and subsidized loans.
Retail Banking Divisionand Branch Management Department
The Retail Banking Division at Fransabank hasmaintained its ever-expanding strategy along with itsconstant growth approach by focusing on the client’sspecific needs and relentlessly ensuring their ultimatesatisfaction. This strategy has unfolded positively, andoutstanding overall results were recorded. This provedthat the retail team succeeded in creating value to
Fransabank’s clients by anticipating their bankingfinancial needs while delivering to them the highestlevel of professionalism and expertise.
This approach has also positively impacted the internalstructure as well as the endowed responsibilities andduties of the division within the Bank. Consequently, bylate May 2009, the Branch Management Department -formerly known as the Branch Network Division - wasintegrated and attached into the Retail Banking Division.
In view of that, the Retail Banking Division currentlyincorporates five different sections:
• The “Regional Managers” are to fulfill their respectiveRegion’s quantitative and qualitative objectives insales, risk, human resources and customer service.
• The “Branch Management Department” monitorsbranches operational activities and follow-up on theirbusiness achievements with the aim of increasingefficiency, productivity and profitability.
• The “Retail Products and Services Department”monitors the products management including retaillending as well as insurance products throughout thevarious channels of the Bank.
• The “Plastic Cards Center” develops and enhance thecards business - whether in issuing or in acquiring -while managing, overseeing and controlling all thecards related functions.
• The “Retail Risk Department” handles the analysisand general administration of all retail loans receivedfrom the branches while ensuring proper coordinationwith all parties concerned.
The last couple of years were marked by a quantum leapin Fransabank local expansion strategy. This comes inline with the Bank’s overall business strategy whichpartially aims, and at the local level, at developing andincreasing its organic growth either by expanding theBank’s business activities or by enriching its overallgeographic expansion in the Lebanese territories.Accordingly, in line with this ambitious geographicexpansion strategy, the opening of several new brancheswithin the different regions is being prepared andscheduled. In a matter of fact, the logistic preparations,administrative details and human resources selections
Kafalat by Sector
Tourism
Industry
Other
Agriculture
45%
41%
2% 12%
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are almost completed for the perceived opening of anew branch at Moussaitbeh area, Salim Slam within theBeirut region. In addition to the Saifi Branch, that joinedthe list of branches with a whole new revamped lookafter it was relocated on one of the most prominentstreet of Saifi/Gemmayzeh area.
In 2009, the newly formed Retail Banking Divisioncontinued to deliver the Bank clients easy, secure, andwell-suitable solutions for their growing financial needs,yielding into a noticeable increase in the number ofapplications received, positively affecting the overalllending portfolio.
The remarkable results of 2009 were coupled with adiversification of the retail products range; be it throughthe introduction of new products or via the conditionamendment of already existing ones, thus adapting tothe ever changing needs and demands of Fransabank’sclients.
Accordingly, several products and services were devel-oped and planned to be introduced in order to maintainthe bank’s image and position while enhancing itsdynamic role and social well-being.
Thus, the year 2009 marked the launch of new productsas being a part of Fransabank’s commitment to fulfillingthe needs of its client base.
• A new improved housing loan was introduced inassociation with the BDL, in a way to keep-up with themarket’s changes while focusing on two main concerns:setting appropriate interest rates and offering largeramounts. This new loan aims at attracting a newsegment of clients, what will positively impact theglobal economical growth of the country.
• An educational loan was newly introduced, also inassociation with the BDL, following the sense for sucha need in the market. This new customer-tailoredproduct will offer a chance for all qualified students topursue their education and fulfill their career dreamswithout worrying of paying back the loan until aftergraduation.
• A special personal loan was also introduced enablingthe public sector employees to benefit from apre-imbursement of the retroactive on grades andsalaries increases.
In parallel, Fransabank launched in several promotionalcampaigns that had a remarkable impact in theLebanese market, most notably:
• Credit cards promotional campaigns focusing onencouraging cardholder’s spending, whether withVISA or MasterCard, with various rewards and benefits.
• Housing loans campaigns promoting competitivetools such as lower interest rate, longer grace period,lower or exempted down payment and others appealingaspects.
• New educational loan campaign promoting theprogram’s special characteristics with additional andexclusive benefits from the bank to applying students.
As part of the bank’s commitment to the developmentand growth of the economy through support to low-income individuals, and with the aim of improving thewelfare of communities and alleviate poverty,Fransabank’s launched two distinctive micro businesscredits: Ameen and Maan loans. While specifically targetingareas outside the capital – such as the Bekaa, the South,the North, Mount Lebanon and Jbeil – the Ameen andMaan loans offer flexible conditions that enableindividuals to further develop their own small-scalebusiness or improve and even expand their existingone. Accordingly, the customer service representativesin branches were encouraged to rigorously promote themicro-credit programs.
The overall branch network achieved satisfying resultsby relentlessly working on further improving the providedclients’ service standards and persistently maintaining asteady business development. Thus, branches continuedbeing the main distribution channel by effectivelyproviding the excellent customer support and service,as well as promoting and selling the bank assorted products.Hence, as at the end of 2009; an encouraging growthwas observed within the retail business line.
Clients’ Deposits
For the past two years, the clients’ deposits portfoliogrowth rate has been steadily increasing. In fact,between December 2007 and December 2008, thegrowth rate was 13%, whereas throughout the year2009, the clients’ deposits growth rate improved to19%.
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Retail Loans
Likewise, between 2007 and 2009, the total retail loansportfolio has actually doubled. In fact, throughout theyear 2009, retail loans significantly increased by almost40%. Accordingly, total consumer loans portfolioincreased by 44%, total housing loans portfolio has alsoincreased by almost 30%, while car loans portfolioreached an outstanding growth rate of +67%.
Plastic Cards
As at the end of December 2009, the total plastic cardsportfolio had increased by almost 11%. On the otherhand, the total cards portfolio was constituted by almost40% of credit cards and 60% of debit cards.
Bancassurance Products
By the end of December 2009, the overallBancassurance products portfolio had increased byalmost 21%.
On the other hand, FransaFuture – the retirement savingand investment plan – was introduced during the year.As well, the all new FransaPlus – a life insurance planwith accidental coverage – was being prepared, incollaboration with Bancassurance SAL, to be launchedas at the beginning of the upcoming year.
Over the past few years, the Retail Banking Division hassuccessfully shown a notable growth in terms of clients’deposits, retail loans, plastic cards and insurance products.
Thus, empowered with a solid steady growth andconstant development, it is considered as a key playerand one of the major business lines within the Bank.
Human Resources
In 2009, Fransabank’s Human Resources Divisionpersisted with the implementation of successful policiesand procedures as well as enhancing existing ones,both locally and in our overseas operations. Only byeffectively using our human capital assets and bydeveloping its potential can our Bank remain on thecutting edge of success.
Code of Conduct and Corporate Ethics
As part of its corporate governance commitment, HRDconstantly improves and controls the implementation ofFransabank’s code of conduct. This document wasdesigned to offer guidelines and rules for all to follow,stressing the need to conduct business in an ethically,socially, environmentally, and professionally responsiblemanner, while building upon and maintaining the Bank’scorporate management philosophy. The code definesfive main areas, namely employee behavior, clientsrelations, employees relations, dealing with other banks,and reporting unacceptable behavior.
Training and Development (T&D)
Improving the skill-set of our staff is one of HRD’s toppriorities, as it fosters a positive atmosphere and developsemployees’ productivity. During 2009, 84% of executives,64% of middle managers, and 81% of employeesattended both internal and external seminars, totaling15,736 training hours and averaging 15.6 hours peremployee: executives benefited from an average of 7training hours, middle managers received an average of15 training hours, and regular staff members participatedin an average of 14 training hours per employee.
The number of participants increased by 6.5% in 2009(from 942 to 1,003), which means that 77% ofFransabank employees received training and attendedseminars. As a result of proper, focused training, wewere able to discover that 26 individuals could holdhigher functions and effectively be promoted as follows:4 Heads of Departments, 2 Deputy Heads, 2 BranchManagers, 5 Deputy Branch Managers, 8 CommercialControllers, and 5 Operational Controllers.
Segregation of Retail Loans
Car Loans
ConsumerLoans
Micro-Credit Loans
HousingLoans
Revolving &Staff Loans
31%
41%
23%
4% 1%
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In addition to offering seminars to Fransabank employees,T&D provided Summer internship training to 206students from various universities, a 35% increase ininterns compared to 2008’s 153 undergraduates.
Talents
Talent Management is a practice of selecting mainly newrecruits or recently hired employees (with a totalexperience with Fransabank ranging from 1 to 5 years)whose career path is yet to be determined or ascertained.
Talents are high profile individuals, selected based on acombination of personal skills, educational background,and banking knowledge. Training & DevelopmentDepartment seeks to retain them and enhance theirexisting capabilities, constantly monitoring their
potential career development purposes. In 2009,140 talents were uncovered, divided as follows
This regional sub-division allows HRD to determinetalent distribution across the country, helping T&D inidentifying potentials with a solid understanding of eachbranch’s strengths and limitations, building up theirskills, and eventually promoting them.
Potentials
Potentials are existing employees that have exhibited ahigh level of competence in their functions, and werethus identified by Training & Development Departmentas ready to hold higher positions in the short and mediumterm. The constant observation of this population willcontinue in 2010, allowing T&D to ascertain the potential ofeach of the 123 individuals prior to furthering their training.
Training hours distribution
Internal Training External Training
Year 2008
8,14
0
6,75
5
16.1
65
8.98
1
Year 2009
27%
24%
9%14%
12%
14%
NorthMetn, Kesrwan & Jbeil
BekaaBeirut & Suburbs
SouthAley & Chouf
Talents Situation by Region - 2009
34%
16%
12%
15%7%
16%
NorthMetn, Kesrwan & Jbeil
BekaaBeirut & Suburbs
SouthAley & Chouf
Potentials Development Program by Region - 2009
57%
15%
6%
13%
7%
2%
Management& Behavioral Skills
Banking &Financial Techniques
Foreign Languages
InformationTechnology
Economic &Financial Education
Marketing &Selling Skills
Training Distribution Per Topic
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Bank’s Description
Polyvalence
Polyvalence is an advanced concept based on the ideathat an employee can assume multiple functions in timeof need, both for contingency purposes and productivityimprovement. In 2009, there were 148 polyvalentemployees, distributed as per the here below graph. Weexpect to have 89 new polyvalent employees in 2010,and achieve significant progress with the remaining 114currently receiving training.
Continuous Education as a Principle
As part of Fransabank’s vision in encouraging employeesto further develop their professional skills, the HumanResources Division has, for many years, committeditself in offering financial support to all employeesinterested in pursuing a professional certification (suchas CPA, FRM, CIA, CISA, CFA, among others) as well asgraduate studies (MBA, MS, MA, PHD, etc.) in any fieldrelevant to banking and directly related to the jobcurrently held by the staff member, or related to his/hercareer path. Therefore, HRD provides eligibleemployees financial facilities equivalent to 40 salariesreimbursed over 10 years with zero interest.
Continuous education loans amounting to LBP 86.3 millionwere offered since the program was launched, andincludes, in 2009, 4 new files in addition to supplementaryloans for 13 previous profiles.
Moreover, in accordance with BDL Circular 103 thatstates that employees holding specific positions need tobe categorized into exempted or non-exempted, withthe latter organized into five main groups (A, B, C, D andE), Fransabank’s Training & Development Departmentassessed that there was a grand total of 256 employeesrequiring certifications, with 181 staff members comingfrom branches, and the remaining 75 hailing fromdepartments.
Continuous TrainingFransabank Subsidiaries and Associate
The HRD is dedicated to continuously assist, improve,and enhance the HR processes and activities of oursubsidiaries and associate banks. During 2009, theHuman Resources Division trained 21 new hires forFransabank Syria, 4 employees from our Belarussiansubsidiary, Fransabank OJSC, and offered rotationaltraining for the Head of Iraq’s Al Rafidein BankCommercial Management Department.
Moreover, we conducted comprehensive and customizedtraining for each new Syrian hire and employee,
Population Growth1400
981
1031
1049 11
56 1220 12
97
2004
200
0
400
600
800
1000
1200
2005 2006 2007 2008 2009
8
Turnover Rate
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
4
4.54.39
5.79
4.71
5.24
5.71
5.67
7.50
4.844.69
6.50
5
5.5
6
6.5
7
7.5
26%
23%15%
15%
17%
4%
NorthMetn, Kesrwan & Jbeil
BekaaBeirut &Suburbs
SouthAley & Chouf
Training for Polyvalence by Region - 2009
55FransabankAnnual Report 2009
Management Report
Bank’s Description
permitting each staff member to accomplish his dutiesas per function and position. Numerous FransabankSyria staff members came to receive training inLebanon, and trainers from Fransabank SAL visitedSyria and taught seminars there as well. Also, manyFransabank Al Djazaïr employees benefitted from thesame type of instruction as well as special orientation,both locally and in our Beirut premises.
Information & Communication Technology
The ICT department is continuing the path to supportthe business to stay at the forefront by using latesttechnology to advance its systems and provide adiversified portfolio of banking products and high qualityservices to its customers. Improving employee’sproductivity and efficiency is a non-stop mission thatstarted a couple of years ago and still one of the maingoals of 2010. Advanced communication, and collaborationtools and applications to automate more businessprocesses are being implemented. Improving overallsystems security and availability has the highest priorityas well as expanding our branch network and upgradingour major business applications and systems to cater forexcellent customer services and wider geographicaloutreach.
A new and advanced Call center / CRM solution wasimplemented during 2009 and was officially launched onMarch 8, 2010. The new solution allows us to betterunderstand our customer’s needs by having a 360 degreesview of our customers to identify and target potentialmarket segments and improve customer value, satisfaction,profitability and retention.
An advanced credit cards management system to caterfor new and improved credit card products and servicesis also under implementation. EMV support for bothVisa and MasterCard has been added to our core ATMswitch and ATM machines. Issuance of chip cards for allour products will start soon.
The ICT department is in the process of implementing acomprehensive and integrated Enterprise ResourcePlanning application which is based around financial,human resource, procurement, order management,fixed asset life cycle management, maintenance and
project management. The new system allows the HRdepartment to attain well-managed human resources bydevoting their time and energy to attracting, training,deploying, assessing and rewarding the organization’sstaff more effectively; The ERP solution will also assistthe administration department to fully automate andbetter manage the full life cycle of fixed assets,procurement process, maintenance, and the completefinancial aspect from purchase orders, contracts handling,to payable and receivable. Our E-banking servicescontinued to improve in terms of additional functionalityand compliance with latest international regulations.Extending the Internet banking services to support FIB isreaching its final phase, also providing this services toFransabank Syria is under implementation. SMS servicesis under constant improvement to support moreapplications and additional types of alerts to ourcustomers and improving the availability and resiliencyof our servers.
Improving information sharing and collaborationamongst Fransabank employees was one of the keyinitiatives started during 2009. A new unified messagingand communication infrastructure, including SharePoint,Exchange and Unified messaging is in its final stage ofimplementation and deployment. This service will beoffered to all Fransabank employees in headquartersand branches by the end of 2010. It is worth noting thatFransabank, the leader in adopting Windows 2008 R2technology in the ME region (testimony of Microsoft).
During 2009-2010 we continue our Information technologystrategy to adopt the latest innovation in IT architecture,to consolidate our services and information and itsmanagement in order to improve its security, availabilityto our customers. A study for a comprehensive disasterrecovery and business continuity solution has beenconcluded. The study provided a range of options forbusiness continuity and disaster recovery whichencompassed local and remote replication capabilitiesto help respond quickly to virtually any type of outages,disaster, emergency, or disruption, while making thecomputing environment more productive.
ICT Division is playing a major role in the implementationof new systems and infrastructure improvement ofFransabank subsidiaries in Syria, Algeria and Belarus.
FransabankAnnual Report 2009
56
Management Report
Bank’s Description
Beginning 2009 an important decision was made toacquire a new banking solution. The ICT in collaborationwith other departments is in the process of implementingthe new solution which is expected to have tremendousimpact on providing diversified products and improvedcustomers services.
At the organizational level, the ICT department hascontinued with the improvement of our IT work force byproviding extensive training for our staff to strengthentheir capabilities and skills. In addition, more highlyskilled individuals were recruited to enrich the skill setand overall capability of the ICT division to fully supportand serve the business strategy and users community ofthe Bank.
57FransabankAnnual Report 2009
To the ShareholdersFransabank SALBeirut, Lebanon
Report on the Financial Statements
We have audited the accompanying consolidated statement offinancial position of Fransabank SAL, and its subsidiaries (The“Group”) which comprise the consolidated statement of financialposition as at December 31, 2009, and the consolidated incomestatement, the consolidated statement of comprehensive income,consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentationof these consolidated financial statements in accordance withInternational Financial Reporting Standards. This responsibilityincludes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in thecircumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.
Independant Auditors’ Report
FransabankAnnual Report 2009
60
An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements, withinthe framework of local banking laws. The procedures selected dependon the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. Anaudit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, inall material respects, the consolidated financial position of FransabankSAL as of December 31, 2009, and of its financial performance and itsconsolidated cash flows for the year then ended in accordance withInternational Financial Reporting Standards.
Beirut, LebanonMarch 31, 2010
Independant Auditors’ Report
B. D. O. Deloitte & Touche
61FransabankAnnual Report 2009
ASSETS
LBP’000 Notes 2009
Cash and Central Banks 5 2,652,897,068
Deposits with banks and financial institutions 6 1,499,152,008
Trading assets 7 95,821,389
Loans to banks 8 58,817,514
Loans and advances to customers 9 3,480,742,204
Available for sale investments 10 6,359,346,312
Held to maturity investments 10 1,411,773,814
Customers' liability under acceptances 11 113,482,239
Investments in associates 12 47,039,352
Assets acquired in satisfaction of loans 13 189,101,540
Property and equipment 14 192,333,734
Intangible assets 15 55,651,275
Other assets 16 143,872,028
TOTAL ASSETS 16,300,030,477
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Documentary and commercial letters of credit 39 401,435,169
Guarantees and standby letters of credit 39 366,326,284
Forward contracts 375,876,728
2008
2,667,150,819
914,570,668
85,539,871
69,589,736
2,586,188,278
4,005,987,296
1,761,865,859
99,264,760
48,674,046
205,317,590
156,000,627
55,170,426
89,875,224
12,745,195,200
240,413,584
259,439,924
85,431,302
Financial StatementsConsolidated Statement of Financial Positionas at December 31,
FransabankAnnual Report 2009
62
LIABILITIES
LBP’000 Notes 2009
Deposits and borrowings from banks 17 330,547,147
Liabilities designated at fair value through profit or loss 18 162,712,400
Customers' accounts at amortized cost 19 13,424,411,818
Customers' acceptance liability 11 113,482,239
Other borrowings 20 412,820,091
Other liabilities 21 198,618,966
Provisions 22 37,972,227
TOTAL LIABILITIES 14,680,564,888
EQUITYShare capital 23 420,000,000
Shareholders’ cash contribution to capital 24 17,113,885
Preference shares 25 150,750,000
Reserves 26 123,814,947
Special reserve 27 2,547,675
Cumulative change in fair value of investment securities 28 304,396,470
Retained earnings 242,390,633
Profit for the year 30 144,760,203
Equity attributable to the owners of the Bank 1,405,773,813
Non-controlling interests 29 213,691,776
TOTAL EQUITY 1,619,465,589
TOTAL LIABILITIES AND EQUITY 16,300,030,477
2008
156,805,260
163,587,785
10,614,499,454
99,264,760
384,639,705
148,522,448
37,376,770
11,604,696,182
420,000,000
17,113,885
150,750,000
96,185,040
-
36,968,563
169,449,293
124,892,599
1,015,359,380
125,139,638
1,140,499,018
12,745,195,200
Financial StatementsConsolidated Statement of Financial Positionas at December 31,
63FransabankAnnual Report 2009
LBP’000 Notes 2009
Interest income 32 887,941,701
Interest expense 33 (571,954,589)
Net interest income 315,987,112
Fee and commission income 34 74,751,952
Fee and commission expense 35 (23,072,609)
Net fee and commission income 51,679,343
Net interest and other gain / (loss) on trading portfolio 36 17,264,688
Net interest and other gain / (loss) on financial
instruments designated at fair value through profit or loss 37 (9,855,561)
Other operating income 38 46,581,360
Net financial revenues 421,656,942
Allowance for impairment of loans and advances 9 (5,020,459)
Write-back of impairment loss on loans and advances 9 11,747,971
Bad debts expense (1,214,349)
Write-back of discount on loan portfolio purchased 9 751,765
Write-back of impairment loss on loans off financial position 598,924
Net financial revenues after impairment of loans and advances 428,520,794
Staff costs (136,801,983)
Administrative expenses (70,040,742)
Depreciation and amortization 14, 15, 16 (29,748,850)
Provisions for charges (net) 22 (342,929)
Profit before income tax 191,586,290
Income tax expense 21 (28,686,061)
Deferred tax on associates and subsidiaries' profits (5,785,026)
PROFIT FOR THE YEAR 30 157,115,203
Attributable to:
Owners of the Bank 30 144,760,203
Non-controlling interests 30 12,355,000
2008
805,085,929
(514,884,926)
290,201,003
62,505,489
(20,272,251)
42,233,238
1,447,882
(9,191,961)
62,092,338
386,782,500
(29,033,711)
16,836,727
(3,264,825)
6,248,077
1,824,769
379,393,537
(117,289,142)
(67,411,353)
(27,418,250)
(1,929,960)
165,344,832
(26,666,129)
(5,517,534)
133,161,169
124,892,599
8,268,570
Financial Statements
Consolidated Income Statementfor the Financial Year ended December 31,
FransabankAnnual Report 2009
64
LBP’000 Notes 2009
Profit for the year 157,115,203
Other comprehensive income:
Net change in fair value of available for saleinvestment securities 336,822,110
Change in fair value recycled to profit and loss 38 (3,425,253)
Net change in currency translation adjustment 2,624,526
Unrealized gain / (losses) of associates reported directly 12 1,800,062
Deferred tax (48,414,570)
289,406,875
TOTAL COMPREHENSIVE INCOME 446,522,078
Attributable to:
Owners of the Bank 416,612,698
Non-controlling interest 29,909,380
2008
133,161,169
42,064,912
(1,015,442)
(6,955,373)
(1,773,391)
(5,916,544)
26,404,162
159,565,331
148,302,607
11,262,724
Financial Statements
Consolidated Statement of Comprehensive Incomefor the Financial Year ended December 31,
65FransabankAnnual Report 2009
CashContribution Preference
LBP’000 Capital to Capital Shares Reserves
Balance as at January 1, 2008 420,000,000 17,113,885 - 84,419,998
Dividends paid - - - -
Issuance of preference shares - - 150,750,000 -
Effect of partial disposal of equity tonon-controlling interests - - - -
Cash invested by non-controlling interestsin Fransabank Syria - - - -
Prior year adjustment of associates (Note 12) - - - (144,306)
Other movement - - - ( 51,869)
Allocation of 2007 profit - - - 23,498,842
Reallocation between reserves and retained earnings - - - (4,582,252)
Comprehensive income for the year 2008 - - - (6,955,373)
Balance as at December 31, 2008 420,000,000 17,113,885 150,750,000 96,185,040
Dividends paid – Ordinary shares - - - -
Dividends paid – Preference shares - - - -
Effect of acquisition of additional equity interest - - - 391,033
Deferred liabilities - - - -
Other movement - - - 3,134
Allocation of 2008 profit - - - 26,025,901
Reallocation between reserves and retained earnings - - - (1,414,687)
Comprehensive income for the year 2009 - - - 2,624,526
BALANCE AS AT DECEMBER 31, 2009 420,000,000 17,113,885 150,750,000 123,814,947
Equity Attributable to
Financial Statements
Consolidated Statement of Changes in Equityfor the Financial Year ended December 31, 2009
FransabankAnnual Report 2009
66
CumulativeChange in
Fair Value of Non-Special Retained Profit Investment Total Controlling TotalReserve Earnings (Group) Securities Group Equity Interests Equity
- 120,238,602 90,900,672 4,829,791 737,502,948 43,004,926 780,507,874
- - ( 21,000,000) - ( 21,000,000) - (21,000,000)
- - - - 150,750,000 - 150,750,000
- - - - - 42,456,631 42,456,631
- - - - - 28,490,654 28,490,654
- - - - (144,306) - (144,306)
- - - - (51,869) (75,297) (127,166)
- 46,401,830 (69,900,672) - - - -
- 4,582,252 - - - - -
- (1,773,391) 124,892,599 32,138,772 148,302,607 11,262,724 159,565,331
- 169,449,293 124,892,599 36,968,563 1,015,359,380 125,139,638 1,140,499,018
- - (21,000,000) - (21,000,000) (3,687,105) (24,687,105)
- - (7,537,500) - (7,537,500) - (7,537,500)
- (248,257) - - 142,776 61,278,990 61,421,766
- 2,275,411 - - 2,275,411 911,874 3,187,285
- (82,086) - - (78,952) 138,999 60,047
2,547,675 67,781,523 (96,355,099) - - - -
- 1,414,687 - - - - -
- 1,800,062 144,760,203 267,427,907 416,612,698 29,909,380 446,522,078
2,547,675 242,390,633 144,760,203 304,396,470 1,405,773,813 213,691,776 1,619,465,589
the Owners of the Parent
Financial Statements
Consolidated Statement of Changes in Equityfor the Financial Year ended December 31, 2009
67FransabankAnnual Report 2009
2008
165,344,832
5,252,641(6,268,558)27,419,8367,388,963
--
68,127-
(6,710,998)--
8,000,539(27,370,728)524,144,640
(810,480,021)(6,821,513)
(120,032,240)(921,988)
(42,792,087)(456,741,367)
(5,361)(7,041,413)
(106,933,911)(16,289,561)
18,409,7681,448,984,521
(203,359)20,018,71721,489,347(1,809,605)
756,131,461(516,552,926)
753,836,9138,435,754
(17,470,525)984,380,677
69,708--
(547,359,394)(58,653,961)(5,440,387)
(48,479,517)(5,257,063)83,462,394
(581,658,220)
150,750,000(91,813,088)
28,490,654(21,000,000)
66,427,566
469,150,02326,299,065(2,563,403)
-1,227,068,9141,719,954,599
LBP’000 Notes 2009
CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year before tax 191,586,291Adjustments for:
Unrealized (gain) / loss on trading assets 36 (10,889,336)Share in profits of associates 12 (7,579,190)Depreciation, amortization and write-off 14,15,16 29,748,850Impairment allowance of loans and advances to customers 9 (7,479,277)Impairment allowance of banks 6 131,375Impairment allowance of investment in securities 10 126,269Gain / (loss) on disposal of property and equipment (95,832)Loss on disposal of intangible assets 22,975Gain on disposal of assets acquired in satisfaction of loans (13,477,277)Gain on disposal of part of equity interest in an associate (14,100)Gain on increase of equity interest in subsidiary (2,002,191)Provisions 22 3,208,779Gain on disposal of shares in subsidiaries 15 -Interest expense 581,841,712Interest income (893,260,389)Dividend income 36,38 (6,761,844)
(134,893,185)Net decrease / (increase) in trading assets 7 496,188Change decrease / (increase) in loans to banks 8 24,145,268Net increase in loans and advances to customers 9 (861,086,762)Expenses paid on assets acquired in satisfaction of loans 13 -Net increase in other assets 16 (36,239,632)Net increase in compulsory deposits with Central Banks 5 (139,618,102)Net increase / (decrease) in deposits and borrowings from banks 17 48,570,807Net increase in deposits at FVTPL 18 267,757Net increase in deposits at amortized cost 19 2,694,763,431Net decrease / (increase) in pledged deposits 6 4,045,837Net (decrease) / increase in other liabilities 21 (1,441,222)Proceeds from disposal of foreclosed assets 33,519,424Settlement of provisions 22 (2,896,670)
1,629,633,139Interest paid (563,163,116)Interest received 1,100,896,246Dividends received 9,711,098Income tax paid 21 (32,888,207)Net cash provided from operating activities 2,144,189,160
CASH FLOWS FROM INVESTING ACTIVITIESProceeds from disposal of property and equipment 1,306,728Proceeds from disposal of part of equity interest in associate 250,598Paid-up share in subsidiaries 3A (54,453,342)Net increase in investment securities 10 (1,606,106,657)Net increase in placements with banks (76,785,037)Increase in associates 12 -Acquisition of property, plant and equipment 14 (40,903,104)Acquisition of intangible assets 15 (2,214,510)Proceeds from partial sale of interest in subsidiary 15 -Net cash used in investing activities (1,778,905,324)
CASH FLOWS FROM FINANCING ACTIVITIESIssuance of preferred shares 25 -Net increase / (decrease) in other borrowings 20 28,282,793Cash invested by non-controlling interests in subsidiaries 46,409,342Dividends paid 31 (32,224,605)Net cash provided from financing activities 42,467,530
Net increase in cash and cash equivalents 407,751,366Initial cash invested in 2007 in consolidated subsidiary 3A -Unrealized translation adjustment in foreign subsidiaries 4,381,232Cash received from acquiring of subsidiaries 33,441,529Cash and cash equivalents beginning of year 1,719,954,599CASH AND CASH EQUIVALENTS END OF YEAR 41 2,165,528,726
Financial Statements
Consolidated Statement of Cash Flowsfor the Financial Year ended December 31,
FransabankAnnual Report 2009
68
1. GENERAL INFORMATIONFransabank SAL (the “Bank”) is a Lebanese joint-stockcompany registered in the Trade Register under Number25699 and in the Central Bank of Lebanon list of banks undernumber 1. The consolidated financial statements of the Bankcomprise the Bank and its subsidiaries (the “Group”). TheGroup is primarily involved in investment, corporate andretail banking.
The Bank’s registered address is Fransabank Center, Hamra,P.O. Box 11-0393 Beirut, Lebanon.
2. ADOPTION OF NEW AND REVISEDINTERNATIONAL FINANCIAL REPORTINGSTANDARDS (IFRS)
2.1 Standards affecting presentation and disclosure
The following new and revised Standards have been adopted in the current period in these financial statements.Details of other Standards and Interpretations adopted butthat have had no effect on the financial statements are setout in section 2.2:
• IAS 1 (as revised in 2007) Presentation of FinancialStatementsIAS 1 (2007) has introduced terminology changes (includ-ing revised titles for the financial statements) and changesin the format and content of the financial statements.
• Improving disclosures about Financial Instruments(Amendments to IFRS 7 Financial Instruments:Disclosures)The amendments to IFRS 7 expand the disclosuresrequired in respect of fair value measurements and liquidity risk. The Bank has elected not to provide comparative information for these expanded disclosuresin the current year in accordance with the transitionalreliefs offered in these amendments.
2.2 Standards and Interpretations adopted with no effecton the financial statements
The following new and revised Standards andInterpretations have also been adopted in these financialstatements. Their adoption has not had any significantimpact on the amounts reported in these financial statementsbut may affect the accounting for future transactions orarrangements.
• Amendments to IFRS 2 Share-based Payment - VestingConditions and Cancellations The amendments clarify the definition of vestingconditions for the purposes of IFRS 2, introduce theconcept of ‘non-vesting’ conditions, and clarify theaccounting treatment for cancellations.
• Amendments to IAS 32 Financial Instruments:Presentation and IAS 1 Presentation of FinancialStatements - Puttable Financial Instruments andObligations Arising on LiquidationThe revisions to IAS 32 amend the criteria for debt/equityclassification by permitting certain puttable financialinstruments and instruments (or components of instru-ments) that impose on an entity an obligation to deliver toanother party a pro-rata share of the net assets of theentity only on liquidation, to be classified as equity, subjectto specified criteria being met.
• IFRIC 13 Customer Loyalty ProgrammesThe Interpretation provides guidance on how entitiesshould account for customer loyalty programmes byallocating revenue on sale to possible future awardattached to the sale.
• IFRIC 15 Agreements for the Construction of Real Estate The Interpretation addresses how entities should deter-mine whether an agreement for the construction of realestate is within the scope of IAS 11 Construction Contractsor IAS 18 Revenue and when revenue from theconstruction of real estate should be recognized.
•IFRIC 16 Hedges of a Net Investment in a ForeignOperation The Interpretation provides guidance on the detailedrequirements for net investment hedging for certain hedgeaccounting designations.
•Improvements to IFRSs (2008)Amendments to IFRS 5, IAS 1, IAS 16, IAS 19, IAS 20, IAS23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 36, IAS 38, IAS 39,IAS 40 and IAS 41 resulting from the May and October2008 Annual Improvements to IFRSs majority of which areeffective for annual periods beginning on or after 1January 2009.
Notes to the Consolidated Financial Statementsfor the Year ended December 31, 2009
69FransabankAnnual Report 2009
2.3 Standards and Interpretations in issue not yet effective
New Standards and amendments to Standards:
• IFRS 1 (revised) First time Adoption of IFRS and IAS 27(revised) Consolidated and Separate Financial Statements– Amendment relating to Cost of an Investment in aSubsidiary, Jointly Controlled Entity or AssociateEffective for annual periods beginning on or after 1st July 2009
• IFRS 3 (revised) Business Combinations – Comprehensiverevision on applying the acquisition method andconsequential amendments to IAS 27 (revised)Consolidated and Separate Financial Statements, IAS 28(revised) Investments in Associates and IAS 31 (revised)Interests in Joint VenturesEffective for annual periods beginning on or after 1st July 2009
• IAS 39 (revised) Financial Instruments: Recognition andMeasurement – Amendments relating to Eligible HedgedItems (such as hedging inflation risk and hedging withoptions)Effective for annual periods beginning on or after 1st July 2009
• IFRS 2 (revised) Share-based payment – Amendmentrelating to Bank cash-settled Share-based paymentsEffective for annual periods beginning on or after 1st January 2010
• IAS 32 (revised) Financial Instruments: Presentation –Amendments relating to classification of Rights IssueEffective for annual periods beginning on or after 1st February 2010
• IAS 24 Related Party Disclosures – Amendment on disclo-sure requirements for entities that are controlled, jointlycontrolled or significantly influenced by a GovernmentEffective for annual periods beginning on or after 1st January 2011
• IFRS 9 Financial Instruments: Classification andMeasurement (intended as complete replacement for IAS39 and IFRS 7)Effective for annual periods beginning on or after 1st January 2013
• Amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS17, IAS 18, IAS 36, IAS 38 and IAS 39 resulting from April2009 Annual Improvements to IFRSs.Majority effective for annual periods beginning on or after1st January 2010
The directors anticipate that the adoption of all of the aboveStandards and Interpretations will have no material impacton the financial statements of the Group in the period ofinitial application, except for IFRS 9 Financial instruments:“Classification and Measurement” for which directors havenot yet had an opportunity to consider the potential impactof the adoption/early adoption of this standard.
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The consolidated financial statements have been preparedin accordance with International Financial ReportingStandards (IFRSs).
Basis of Measurement
The consolidated financial statements have been preparedon the historical cost basis except for the following:
- Land and buildings acquired in years prior to 1993 aremeasured at their revalued amounts based on marketprices prevailing during 1995.
- Financial assets and liabilities designated at fair valuethrough profit and loss.
- Available for sale financial assets are measured at fair value.
- Derivative financial instruments are measured at fair value.
The principal accounting policies are set out below:
A. Basis of Consolidation:
The consolidated financial statements of Fransabank SALincorporate the financial statements of the Bank andenterprises controlled by the Bank (its subsidiaries). Controlis achieved when, among other things, the Bank has thepower to govern the financial and operating policies of anentity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of duringthe year are included in the consolidated income statementfrom the effective date of acquisition or up to the effectivedate of disposal, as appropriate.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
70
• During 2009, the Bank acquired an additional equityinterest of 0.77% in its subsidiary BLC Bank SAL.
• During 2009, the Bank increased its share in the equitystake of Lebanese Leasing Company SAL, Sogefon SAL,Express SARL and Fransabank OJSC by 2.49%, 7.38%,31.35% and 44.20% respectively through additionalinvestment of capital.
Where necessary, adjustments are made to the financialstatements of the subsidiaries to bring their accountingpolicies into line with those used by other entities of theGroup.
All intra-group transactions balances, income and expensesare eliminated in full on consolidation.
Non-controlling interests in the net assets (excluding good-will) of consolidated subsidiaries are identified separatelyfrom the Group’s equity therein. Non-controlling interestsconsist of the amount of those interests at the date of theoriginal business combination and their share of changes inequity since the date of the combination. Losses applicableto the non-controlling interests in excess of their interest inthe subsidiary’s equity are allocated against the interests ofthe Group except to the extent that the non-controllinginterests have a binding obligation and are able to make anadditional investment to cover the losses.
B. Business Combinations:
Acquisitions of subsidiaries are accounted for using theacquisition method. The cost of the business combination ismeasured as the aggregate of the fair values (at the date ofexchange) of assets given, liabilities incurred or assumed,and equity instruments issued by the Group in exchange forcontrol of the acquiree, plus any costs directly attributable tothe business combination. The acquiree’s identifiable assets,liabilities and contingent liabilities that meet the conditionsfor recognition under IFRS 3 Business Combinations arerecognized at their fair values at the acquisition date, exceptfor non-current assets (or disposal groups) that are classifiedas held for sale in accordance with IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations, which arerecognized and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognized as an asset andinitially measured at cost, being the excess of the cost of thebusiness combination over the Group’s interest in the net fairvalue of the identifiable assets, liabilities and contingentliabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiableassets, liabilities and contingent liabilities exceeds the cost ofthe business combination, the excess is recognized immediately in profit or loss.
The interest of non-controlling shareholders in the acquireeis initially measured at the non-controlling interest’s proportion of the net fair value of the assets, liabilities andcontingent liabilities recognized.
C. Foreign Currencies:
The consolidated financial statements are presented inLebanese Pound which is the Group’s reporting currency.However, the primary currency of the economic environmentin which the Group operates (functional currency) is the U.S.Dollar.
In preparing the financial statements of the individual entities,transactions in currencies other than the Group’s reportingcurrency (foreign currencies) are recorded at the rates ofexchange prevailing at the dates of the transactions. At eachstatement of financial position date, monetary items denominated in foreign currencies are retranslated at therates prevailing at that date. Non-monetary items carried atfair value that are denominated in foreign currencies areretranslated at the rates prevailing at the date when the fairvalue was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency arenot retranslated.
Exchange differences are recognized in profit or loss in theperiod in which they arise except for exchange differenceson transactions entered into in order to hedge certain foreign
Fransa Invest Bank SAL Lebanon 99.99 99.99 SpecializedBank
Fransabank France SA France 59.98 59.98 Banking
Lebanese Leasing Lebanon 87.47 84.98 Financial Company SAL Leasing
Switch and Electronics Lebanon 99.60 99.60 Financial Services SAL Services
Sogefon SAL Lebanon 99.88 92.50 Real Estate Company
Fransabank Insurance Lebanon 99.70 99.70 InsuranceServices Co. SAL
Fransabank El-Djazaïr SPA Algeria 67.99 67.96 Banking
BLC Bank SAL & its Lebanon 74.81 74.04 BankingSubsidiaries (BLC Services SAL, BLC Finance SAL & Lati Bank SAL)
Express SARL Lebanon 98.35 67.00 Restaurant
Fransabank Syria Syria 48.00 48.00 Banking
Fransabank OJSC Belarus 62.21 - Banking
Percentage ofCountry of Ownership Business
Company Incorporation 2009 2008 Activity% %
The consolidated subsidiaries consist of:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
71FransabankAnnual Report 2009
currency risks, and exchange differences on monetary itemsreceivable from or payable to a foreign operation for whichsettlement is neither planned nor likely to occur, which formpart of the net investment in a foreign operation, and whichare recognized in the foreign currency translation reserveand recognized in profit or loss on disposal of the netinvestment.
For the purpose of presenting consolidated financialstatements, the assets and liabilities of the Group’s foreignoperations are expressed in Lebanese Pound usingexchange rates prevailing at the statement of financialposition date. Income and expense items are translated atthe average exchange rates for the period. Exchangedifferences arising, if any, are classified as equity andrecognized in the Group’s foreign currency translationreserve. Such exchange differences are recognized in profitor loss in the period in which the foreign operation isdisposed of.
D. Financial Assets and Liabilities:
Recognition and Derecognition:The Group initially recognizes loans and advances, deposits,debt securities issued and subordinated liabilities on the datethat they are originated. All other financial assets andliabilities are initially recognized on the trade date at whichthe Group becomes a party to the contractual provisions ofthe instrument.
The Group derecognizes a financial asset when thecontractual rights to the cash flows from the asset expire, orit transfers the rights to receive the contractual cash flows onthe financial asset in a transaction in which all the risks andrewards of ownership of the financial asset are transferred.
Debt securities exchanged against securities with longermaturities with similar risks, and issued by the same issuer,are not derecognized because they do not meet theconditions for derecognition. Premiums and discountsderived from the exchange of said securities are deferred tobe amortized as a yield enhancement on a time proportionatebasis, over the period of the extended maturities.
When the Group enters into transactions whereby it transfersassets recognized on its statement of financial position andretains all risks and rewards of the transferred assets, thenthe transferred assets are not derecognized, for example,securities lending and repurchase transactions.
The Group derecognizes a financial liability when itscontractual obligations are discharged, cancelled or expired.
Offsetting:Financial assets and liabilities are set-off and the net amountis presented in the statement of financial position when, andonly when, the Group has a legal right to set-off the amountsor intends either to settle on a net basis or to realize the assetand settle the liability simultaneously.
Fair Value Measurement:Fair value is the amount agreed to exchange an asset or tosettle a liability between a willing buyer and a willing seller inan arm’s length transaction.
When published price quotations exist, the Group measuresthe fair value of a financial instrument that is traded in anactive market using quoted prices for that instrument. A financial instrument is regarded as quoted in active marketif quoted prices are readily and regularly available and thoseprices represent actual and regularly occurring markettransactions on an arm’s length basis.
If the market for a financial instrument is not active, the Groupestablishes fair value by using valuation techniques.Valuation techniques include observable market data aboutthe market conditions and other factors that are likely toaffect the instrument’s fair value. The fair value of a financialinstrument is based on one or more factors such as the timevalue of money and the credit risk of the instrument andadjusted for any other factors such as liquidity risk.
Impairment of Financial Assets:Financial assets, other than those at fair value through profitor loss, are assessed for indicators of impairment at the endof each reporting period. Financial assets are impairedwhere there is objective evidence that, as a result of one ormore events that occurred after the initial recognition of theasset, a loss event has occurred which has an impact on theestimated future cash flows of the asset.
Objective evidence that an impairment loss related tofinancial assets has been incurred can include informationabout the debtors’ or issuers’ liquidity, solvency andbusiness and financial risk exposures and levels of andtrends in delinquencies for similar financial assets, taking intoaccount the fair value of collateral and guarantees.
For investments in equity securities, a significant orprolonged decline in fair value below cost is objectiveevidence of impairment.
Impairment losses on assets carried at amortized cost aremeasured as the difference between the carrying amount of
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
72
the financial assets and the present value of estimated futurecash flows discounted at the original effective interest rate.Losses are recognized in profit or loss and reduce thecarrying amount of the asset to its estimated recoverableamount. If, in a subsequent period, the amount of theimpairment loss decreases, the previously recognizedimpairment loss is reversed through profit or loss to theextent that the carrying amount of the investment at the datethe impairment is reversed does not exceed what the amortized cost would have been had the impairment notbeen recognized.
In respect of available for sale investment securities, thepreviously accumulated losses recorded under equity arerecognized in profit or loss in case of objective evidenceof impairment. Any increase in fair value subsequent toan impairment loss is not recognized in profit or loss foravailable for sale equity securities. Any increase in fairvalue subsequent to an impairment loss is recognized inprofit or loss for available for sale debt securities.
Designation at Fair Value Through Profit or Loss:The Group has designated financial assets and liabilities atfair value through profit or loss when either:
• The assets or liabilities are managed, evaluated andreported internally on a fair value basis;
• The designation eliminates or significantly reduces anaccounting mismatch which would otherwise arise; or
• The asset or liability contains an embedded derivative thatsignificantly modifies the cash flows that would otherwisebe required under the contract.
Financial assets and liabilities designated at fair value throughprofit or loss are initially recognized and subsequentlymeasured at fair value.
A description of the basis for each designation at fair valuethrough profit or loss is set out in the note for the relevantasset or liability class.
E. Investment Securities:
Investment securities are initially measured at fair value plusincremental direct transaction costs, and subsequentlyaccounted for depending on their classification as either heldto maturity or available for sale.
Held to Maturity Investment Securities:Held to maturity investments are non-derivative assets withfixed or determinable payments and fixed maturity that the
Group has the positive intent and ability to hold to maturity,and which are not designated at fair value through profit orloss or available for sale.
Held to maturity investments are carried at amortizedcost using the effective interest method. Any sale orreclassification of a significant amount of held to maturityinvestments not close to their maturity would result in thereclassification of all held to maturity investments as available for sale, and prevent the Group from classifyinginvestment securities as held to maturity for the current andthe following two financial years, unless the amount of held-of held to maturity is insignificant, or close to maturity,or in case of significant deterioration in the issuer credit worthiness, or change in statutory or regulatory requirementor in major business combination.
Available for Sale Investment Securities:Available for sale investments are non derivativeinvestments that are not designated as another categoryof financial assets. Unquoted equity securities whose fairvalue cannot be reliably measured are carried at cost. Allother available for sale investments are carried at fairvalue and unrealized gains or losses are included in othercomprehensive income and accumulated under equity.
F. Trading Assets and Liabilities:
Trading assets and liabilities are initially recognized andsubsequently measured at fair value. Transaction costs areincluded in the income statement. Subsequent changes infair value of these securities are recognized immediately inprofit or loss.
G. Loans and Advances:
Loans and advances are non-derivative financial assets withfixed or determinable payments that are not quoted in anactive market. Loans and advances are disclosed at amortized cost net of unrealized interest and after provisionfor credit losses where applicable. Bad and doubtful debtsare carried on a cash basis because of doubts and the probability of non-collection of principal and/or interest.
H. Derivative Financial Instruments:
Derivatives are initially recognized at fair value at the date aderivative contract is entered into and are subsequentlyremeasured to their fair value at each statement of financialposition date. The resulting gain or loss is recognized inprofit or loss immediately unless the derivative is designatedand effective as a hedging instrument, in which event thetiming of the recognition in profit or loss depends on thenature of the hedge relationship. The Group designates
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
73FransabankAnnual Report 2009
certain derivatives as either hedges of the fair value ofrecognized assets or liabilities or firm commitments (fairvalue hedges), hedges of highly probable forecasttransactions or hedges of foreign currency risk of firmcommitments (cash flow hedges), or hedges of netinvestments in foreign operations.
Embedded Derivatives:Derivatives embedded in other financial instruments or otherhost contracts are treated as separate derivatives when theirrisks and characteristics are not closely related to those of thehost contracts and the host contracts are not measured at fairvalue with changes in fair value recognized in profit or loss.
Hedge Accounting:The Group designates certain hedging instruments,which include derivatives, embedded derivatives andnon-derivatives in respect of foreign currency risk, aseither fair value hedges, cash flow hedges, or hedges ofnet investments in foreign operations. Hedges of foreignexchange risk on firm commitments are accounted for ascash flow hedges.
At the inception of the hedge relationship, the entitydocuments the relationship between the hedginginstrument and the hedged item, along with its riskmanagement objectives and its strategy for undertakingvarious hedge transactions. Furthermore, at the inceptionof the hedge and on an ongoing basis, the Groupdocuments whether the hedging instrument that is usedin a hedging relationship is highly effective in offsettingchanges in fair values or cash flows of the hedged item.
Fair Value Hedge:Changes in the fair value of derivatives that are designatedand qualify as fair value hedges are recorded in profit or lossimmediately, together with any changes in the fair value ofthe hedged item that are attributable to the hedged risk. Thechange in the fair value of the hedging instrument and thechange in the hedged item attributable to the hedged risk arerecognized in the line of the income statement relating to thehedged item.
Hedge accounting is discontinued when the Group revokesthe hedging relationship, the hedging instrument expires oris sold, terminated, or exercised, or no longer qualifies forhedge accounting. The adjustment to the carrying amount ofthe hedged item arising from the hedged risk is amortised toprofit or loss from that date.
Cash Flow Hedge:The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash flowhedges are included in other comprehensive income andaccumulated under equity. The gain or loss relating to theineffective portion is recognized immediately in profit or loss,and is included in the “other gains and losses” line of theincome statement.
Amounts previously accumulated in equity are recycled inprofit or loss in the periods when the hedged item isrecognized in profit or loss, in the same line of the incomestatement as the recognized hedged item. However, whenthe forecast transaction that is hedged results in therecognition of a non-financial asset or a non-financial liability,the gains and losses previously deferred in equity aretransferred from equity and included in the initialmeasurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokesthe hedging relationship, the hedging instrument expires oris sold, terminated, or exercised, or no longer qualifies forhedge accounting. Any cumulative gain or loss deferred inequity at that time remains in equity and is recognized whenthe forecast transaction is ultimately recognized in profit orloss. When a forecast transaction is no longer expected tooccur, the cumulative gain or loss that was deferred in equity is recognized immediately in profit or loss.
I. Investments in Associates:
An associate is an entity over which the Group has significantinfluence and that is neither a subsidiary nor an interest in ajoint venture. Significant influence is the power to participatein the financial and operating policy decisions of the investeebut is not control or joint control over those policies.
Investments in associates over which the Group hassignificant influence are accounted for at cost and reflectedon the basis of the equity method of accounting in theconsolidated financial statements.
J. Financial Guarantees:
Financial guarantees contracts are contracts that require theGroup to make specified payments to reimburse the holderfor a loss it incurs because a specified debtor fails to makepayment when due in accordance with the terms of a debtinstrument. These contracts can have various judicial forms(guarantees, letters of credit, credit-insurance contracts).
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
74
Financial guarantee liabilities are initially measured at theirfair value, and subsequently carried at the higher of thisamortized amount and the present value of any expectedpayment (when a payment under the guarantee has becomeprobable). Financial guarantees are included within other lia-bilities.
K. Property and Equipment:
Property and equipment except for buildings acquired priorto 1993 are stated at historical cost, less accumulated depreciation and impairment loss, if any. Buildings acquiredprior to 1993 are stated at their revalued amounts, based onmarket prices prevailing during 1995 less accumulateddepreciation and impairment loss, if any. Resultingrevaluation surplus is reflected under “Reserves” in equity.
Depreciation is recognized so as to write off the cost orvaluation of property and equipment, other than land andadvance payments on capital expenditures less their residualvalues, if any, over the estimated useful lives of the relatedassets using the straight-line method as follows:
YearsBuildings 50Office improvements and installations 5 - 17Furniture, equipment and machines 5 - 12Computer equipment 3 - 5Vehicles 5 - 10
The estimate useful life, residual values and depreciationmethod is reviewed at each year end, with the effect of anychanges in estimate accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of anitem of property and equipment is determined as thedifference between the sales proceed and the carryingamount of the asset and is recognized in profit or loss.
L. Intangible Assets:
Computer Software:Intangible assets consisting of computer software areamortized over a period of 3 to 5 years and are subject toimpairment testing. Subsequent expenditure on softwareassets is capitalized only when it increases the futureeconomic benefits embodied in the specific asset to which itrelates. All other expenditure is expensed as incurred.
Goodwill: Goodwill represents the excess of the cost of acquisitionover the Group’s interest in the net fair value of theidentifiable assets, liabilities and contingent liabilities of theacquiree. When the excess is negative, it is recognizedimmediately in profit or loss.
Goodwill is measured at cost less accumulated impairmentlosses.
M. Assets Acquired in Satisfaction of Loans:
Real estate property acquired through the enforcement ofsecurity over loans and advances to customers is measuredat cost less any accumulated impairment losses.The acquisition of such assets is regulated by the local bankingauthorities which require the liquidation of these assets within 2 years from acquisition. In case of default ofliquidation the Group’s lead regulator requires an appro-priation from the yearly net income to a special reservethat is reflected under equity.
N. Impairment of Tangible and Intangible Assets (ExceptGoodwill):
At each statement of financial position date, the Groupreviews the carrying amounts of its tangible and intangibleassets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset isestimated in order to determine the extent of the impairmentloss (if any).
Recoverable amount is the higher of fair value less costs tosell and value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current marketassessments of the time value of money and the risksspecific to the asset for which the estimates of future cashflows have not been adjusted.
If the recoverable amount of an asset is estimated to be lessthan its carrying amount, the carrying amount of the asset isreduced to its recoverable amount. An impairment loss isrecognized immediately in profit or loss, unless the relevantasset is carried at a revalued amount, in which case theimpairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, thecarrying amount of the asset (cash-generating unit) isincreased to the revised estimate of its recoverable amount,but so that the increased carrying amount does not exceedthe carrying amount that would have been determined had
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
75FransabankAnnual Report 2009
no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognized immediately in profit or loss, unless therelevant asset is carried at a revalued amount, in which casethe reversal of the impairment loss is treated as a revaluationincrease.
O. Impairment of Goodwill:
The Group determines whether goodwill is impaired at leaston an annual basis.
P. Employees' Benefits:
Obligations for contributions to defined employees’ benefitsare recognized as an expense on a current basis.
Employees' End-of-Service Indemnities: (Under the LebaneseJurisdiction)The provision for staff termination indemnities is basedon the liability that would arise if the employment of allthe staff were terminated consensually at the statementof financial position date. This provision is calculated inaccordance with the directives of the Lebanese SocialSecurity Fund and Labor laws based on the number ofyears of service multiplied by the monthly average of thelast 12 months remunerations and less contributions paidto the Lebanese Social Security National Fund andinterest accrued by the Fund.
Defined Benefit Plans: (Under other Jurisdictions)Obligations in respect of defined benefit pension plans iscalculated separately for each plan by estimating the amountof future benefit that employees have earned in return fortheir service in the current and prior periods; that benefit isdiscounted to determine its present value, and anyunrecognized past service costs and the fair value of any planassets are deducted.
Q. Provisions:
Provision is recognized if, as a result of a past event, theGroup has a present legal or constructive obligation that canbe estimated reliably, and it is probable that an outflow ofeconomic benefits will be required to settle the obligation.
R. Revenue and Expense Recognition:
Interest income and expense are recognized on an accrualbasis, taking account of the principal outstanding and the rateapplicable, except for non-performing loans and advancesfor which interest income is only recognized upon realization.Interest income and expense include the amortizationdiscount or premium.
• Interest income and expense presented in the incomestatement include:- Interest on financial assets and liabilities at amortized cost.- Interest on available for sale investment securities.- Fair value changes in qualifying derivatives and related
hedged items when interest rate risk is the hedged risk.
• Net trading income presented in the income statementincludes:
- Interest income and expense on the trading portfolio.- Dividend income on the trading equities. - Realized and unrealized gains and losses on the trading
portfolio.
• Interest income and expense on financial portfoliodesignated at fair value through profit or loss upon initialrecognition is recognized under net income from otherfinancial instruments carried at fair value
• Fees and commission income and expense that areintegral to the effective interest rate on a financial asset orliability (i.e. commissions and fees earned on the loanbook) are included under interest income and expense.
• Other fees and commission income are recognized as therelated services are performed.
• Dividend income is recognized when the right to receivepayment is established.
S. Income Tax:
Income tax expense represents the sum of the tax currentlypayable and deferred tax. Income tax is recognized in theincome statement except to the extent that it relates to itemsrecognized directly in other comprehensive income, in whichcase it is recognized in other comprehensive income.
The tax currently payable is based on taxable profit for theyear. Taxable profit differs from profit as reported in theconsolidated income statement because of items that arenever taxable or deductible. The Group’s liability for currenttax is calculated using tax rates and has been enacted issubstantively enacted by the end of the reporting period.
Income tax payable is reflected in the consolidated statementof financial position net of taxes previously settled in the formof withholding tax.
Deferred tax is recognized on differences between thecarrying amounts of assets and liabilities in the financialstatements and the corresponding tax base used in the
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
76
computation of taxable profit, and are accounted for usingthe statement of financial position liability method. Deferredtax liabilities are generally recognized for all taxabletemporary differences and deferred tax assets arerecognized to the extent that it is probable that taxable profits will be available against which deductible temporarydifferences can be utilized.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies,which are described in note 3, the directors are requiredto make judgements, estimates and assumptions aboutthe carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates andassociated assumptions are based on historicalexperience and other factors that are considered to berelevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimate is revised ifthe revision affects only that period or in the period of therevision and future periods if the revision affects both currentand future periods.
A. Critical Accounting Judgments in Applying the Group’sAccounting Policies:
Classification of Financial Assets:The Group’s accounting policies provide scope forinvestment securities to be designated on inception intodifferent categories in certain circumstances based onspecific conditions. In classifying investment securitiesas held to maturity, the Group has determined that it hasboth the positive intent and ability to hold these assets untiltheir maturity as required by in accounting policy under note3E. The carrying amount of the held to maturity financialassets is LBP 1,377 billion (exclusive of accrued interest) at2009 year end. If the Group fails to keep these investmentsuntil maturity other than for the specific circumstances, it willrequire reclassifying the entire category as available for salethat will be measured at fair value with the correspondingcumulative positive change in fair value of LBP 45.7 billion atDecember 31, 2009 booked in equity.
In designating financial assets or liabilities at fair valuethrough profit or loss, the Group has determined that it hasmet one of the criteria for this designation set out inaccounting policy 3D.
B. Key Sources of Estimation Uncertainty:
The following are the key assumptions concerning the future,and other key sources of estimation uncertainty at thestatement of financial position date, that have a significantrisk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year.
Allowances for Credit Losses:Specific impairment for credit losses is determined byassessing each case individually. This method applies toclassified loans and advances and the factors taken intoconsideration when estimating the allowance for creditlosses include the counterparty’s credit limit, thecounterparty’s ability to generate cash flows sufficient tosettle his advances and the value of collateral andpotential repossession. Loans collectively assessed forimpairment are determined based on losses incurred byloans portfolios with similar characteristics.
Determining Fair Values:The determination of fair value for financial assets forwhich there is no observable market price requires theuse of valuation techniques as described in Note 3D. Forfinancial instruments that trade infrequently and havelittle price transparency, fair value is less objective, andrequires varying degrees of judgment depending onliquidity, concentration, uncertainty of market factors,pricing assumptions and other risks affecting the specificinstrument.
Where available, management has used market indicators inits mark to model approach for the valuation of the Lebanesegovernment debt securities and Central Bank Certificates ofDeposits at fair value. The IFRS fair value hierarchy allocatesthe highest priority to quoted prices (unadjusted) in activemarkets for identical assets or liabilities, and the lowestpriority to unobservable inputs. The fair value hierarchy usedin the determination of fair value consists of three levels ofinput data for determining the fair value of an asset or liability.
Level 1quoted prices for identical items in active, liquid and visiblemarkets such as stock exchanges,
Level 2observable information for similar items in active or inactivemarkets,
Level 3 unobservable inputs used in situations where markets eitherdo not exist or are illiquid.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
77FransabankAnnual Report 2009
Unobservable inputs are used to measure fair value to theextent that observable inputs are not available, therebyallowing for situations in which there is little, if any, marketactivity for the asset or liability at the measurement date.However, the fair value measurement objective shouldremain the same; that is, an exit price from the perspectiveof a market participant that holds the asset or owes the liability. Unobservable inputs are developed based on thebest information available in the circumstances, which mayinclude the reporting entity's own data. Where practical, thediscount rate used in the mark to model approach includedobservable data collected from market participants, includ-ing risk free interest rates and credit default swap rates for pricing of credit risk (both own and counter party), and a
liquidity risk factor which is added to the applied discountrate. Changes in assumptions about any of these factorscould affect the reported fair value of the LebaneseGovernment debt Securities and Central Bank Certificates ofDeposits.
Impairment of Available for Sale Equity Investments:The Group determines that available for sale equity investments are impaired when there has been a significantor prolonged decline in the fair value below its cost. Thisdetermination requires judgment. In making this judgmentthe Group evaluates among other factors, the history of theLebanese government default with respect to governmentbonds and the normal volatility in share price.
Compulsory deposits with Central Bank of Lebanon are notavailable for use in the Group’s day-to-day operations.
Compulsory deposits under current accounts with CentralBank of Lebanon are in Lebanese Pounds and non-interestearning. These deposits are computed on the basis of 25%and 15% of the average weekly sight and term customers’deposits in Lebanese Pounds in accordance with the localbanking regulations.
Regulatory deposits under term placements with CentralBank of Lebanon are in foreign currencies and made inaccordance with local banking regulations which requirebanks to maintain interest earning placements in foreign currency to the extent of 15% of customers’ deposits in foreign currencies, certificates of deposits and loansacquired from non-resident financial institutions.
5. CASH AND CENTRAL BANKS
December 31, 2009
of whichCompulsory /
RegulatoryTotal Deposits
December 31, 2008
of whichCompulsory /
RegulatoryTotal Deposits
Cash on hand 81,336,245 -
Current accounts with Central Bank of Lebanon 655,879,155 521,924,856
Current accounts with Central Bank of France 3,858,887 3,476,759
Current accounts with Central Bank of Algeria 26,512,156 15,254,492
Current accounts with Central Bank of Syria 58,359,284 22,393,217
Current accounts with Central Bank of Belarus 6,162,437 332,356
Term placements with Central Bank of Lebanon 1,558,420,225 1,121,457,005
Term placements with Central Bank of Algeria 260,187,960 -
Accrued interest receivable 2,180,719 -
TOTAL 2,652,897,068 1,684,838,685
80,781,336 -
467,048,115 404,699,971
6,113,812 5,998,222
13,328,976 8,880,053
15,618,349 -
- -
1,788,968,750 966,151,400
72,348,090 -
222,943,391 -
2,667,150,819 1,385,729,646
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
78
December 31, 2009
LBP Base Accounts F/Cy Base Accounts
Average AverageMaturity Amount Interest Rate % Amount Interest Rate % Total
2010 368,200,000 3.02 558,200,850 0.79 926,400,850
2011 3,391,875 1.17 - - 3,391,875
2012 753,750 1.16 472,601,250 1.17 473,355,000
2013 - - 149,242,500 1.17 149,242,500
2014 6,030,000 1.67 - - 6,030,000
TOTAL 378,375,625 1,180,044,600 1,558,420,225
December 31, 2008
Term placement with Central Bank of Algeria mature within one year or less.
Interest rates on term placements with Central Bank of Lebanon reprice at each coupon date.
Term placements with Central Bank of Lebanon bear the following maturities:
LBP Base Accounts F/Cy Base Accounts
Average AverageMaturity Amount Interest Rate % Amount Interest Rate % Total
2009 238,000,000 14.85 699,480,000 2.25 937,480,000
2010 100,000,000 17.17 130,398,750 4.20 230,398,750
2012 - - 471,847,500 3.25 471,847,500
2013 - - 149,242,500 3.15 149,242,500
TOTAL 338,000,000 1,450,968,750 1,788,968,750
6. DEPOSITS WITH BANKS AND FINANCIAL INSTITUTIONS
LBP’000 2009 2008
Checks in course of collection 12,458,021
Current accounts with banks and financial institutions 113,389,251
Term placements with banks and financial institutions 1,345,653,245
Term placements with related banks and financial institutions 24,839,425
Pledged deposits with banks and financial institutions -
Accrued interest receivable 2,947,817
Accrued interest receivable - related parties 3,534
Regulatory allowance for country risk (139,285)
TOTAL 1,499,152,008
10,545,218
61,873,301
790,464,185
45,942,920
4,045,837
1,682,766
16,441
-
914,570,668
LBP’000
LBP’000
Pledged deposits are blocked against letters of guarantee in the amount of LBP 3.4 billion at 2008 year end (See Note 42).
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
79FransabankAnnual Report 2009
LBP Base Accounts F/Cy Base Accounts
Average AverageMaturity Amount Interest Rate % Amount Interest Rate % Total
2010 33,700,000 3.96 1,324,943,652 1.13 1,358,643,652
2012 - - 11,849,018 5.50 11,849,018
TOTAL 33,700,000 1,336,792,670 1,370,492,670
LBP Base Accounts F/Cy Base Accounts
Average AverageMaturity Amount Interest Rate % Amount Interest Rate % Total
2009 19,000,000 3.75 796,878,822 1.83 815,878,822
2010 - - 24,574,120 4.02 24,574,120
TOTAL 19,000,000 821,452,942 840,452,942
7. TRADING ASSETS
LBP’000 2009 2008
Lebanese Treasury bills 2,875,790
Lebanese Government bonds 63,584,155
Certificates of deposit issued by Central Bank of Lebanon 2,344,139
Equities – Quoted 25,465,674
Equities – Unquoted 361,800
Accrued interest receivable 1,189,831
TOTAL 95,821,389
2,777,968
58,815,316
2,387,725
19,940,826
316,575
1,301,461
85,539,871
The unrealized gain on trading securities during 2009 amounted to LBP 10.9 billion and is reflected under “NetInterest and Gain and Loss on Trading Portfolio” in the accompanying consolidated income statement (unrealizedloss of LBP 5.2 billion during 2008) – Note 36.
December 31, 2009
LBP’000
LBP’000
Term placements and pledged deposits bear the following maturities:
December 31, 2008
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
80
Accrued interest receivable on trading assets consists of the following:
Loans to banks are reflected at amortized cost and consist of the following as at December 31:
8. LOANS TO BANKS
LBP’000 2009 2008
Regular performing accounts 56,060,848
Regular performing accounts - Related parties 2,431,596
TOTAL 58,492,444
Accrued interest receivable 249,555
Accrued interest receivable - Related parties 75,515
TOTAL 58,817,514
43,399,222
25,355,747
68,754,969
261,397
573,370
69,589,736
LBP’000 2009 2008
Lebanese Treasury bills 83,995
Lebanese Government bonds 1,096,572
Certificates of deposit issued by the Central Bank of Lebanon 9,264
TOTAL 1,189,831
83,242
1,151,844
66,375
1,301,461
LBP Interest Rate % CV/ of F/Cy Interest Rate %
Up to 1 year 208,719 - 16,430,690 12.35
1 to 3 years - - - -
3 years to 5 years - - 16,748,105 13.44
Beyond 5 years 25,430,000 5.45 - -
TOTAL 25,638,719 33,178,795
Loans to banks mature as follows:
December 31, 2009
LBP’000
LBP Interest Rate % CV/ of F/Cy Interest Rate %
Up to 1 year 210,396 - 21,359,943 5.26
1 to 3 years - - 4,620,175 10.75
3 years to 5 years - - 16,569,222 7.92
Beyond 5 years 26,830,000 5.46 - -
TOTAL 27,040,396 42,549,340
December 31, 2008
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
81FransabankAnnual Report 2009
The movement of loans to banks was as follows during 2009 and 2008:
LBP’000 2009 2008
Balance January 1 68,754,969
Additions 2,366,067
Additions due to acquisition of subsidiary 13,882,743
Settlements (26,690,218)
Effect of exchange rate changes 178,883
BALANCE DECEMBER 31 58,492,444
25,962,882
56,336,245
-
(15,019,766)
1,475,608
68,754,969
9. LOANS AND ADVANCES TO CUSTOMERS
Gross Unrealized Discount on Impairment Carrying Gross Unrealized Discount on Impairment CarryingAmount Interest Loan Book Allowance Amount Amount Interest Loan Bank Allowance Amount
Loans and advances to customers are reflected at amortized cost and consist of the following:
December 31, 2009 December 31, 2008
LBP’000
Regular and Watch ListRetail Customers:Mortgage loans 313,290,461 - - - 313,290,461 204,287,970 - - - 204,287,970 Personal loans 240,891,170 - - - 240,891,170 166,706,764 - - - 166,706,764 Car loans 245,186,488 - - - 245,186,488 144,501,669 - - - 144,501,669 Credit cards 31,379,884 - - - 31,379,884 28,138,336 - - - 28,138,336 Educational loans 1,502,459 - - - 1,502,459 - - - - -Overdrafts 1,242,970 - - - 1,242,970 1,486,050 - - - 1,486,050 Other 25,308,332 - - - 25,308,332 9,428,500 - - - 9,428,500 Loans to staff 8,531,142 - - - 8,531,142 7,534,301 - - - 7,534,301
Regular and Watch ListCorporate Customers:Corporate 1,647,965,654 - - - 1,647,965,654 1,218,734,922 - - - 1,218,734,922 Small and medium enterprises 797,372,812 - - - 797,372,812 628,013,038 - - - 628,013,038
Low and Non-PerformingLoans and Advances:Purchased loan book 3,677,874 - - - 3,677,874 4,562,025 - - - 4,562,025 Sub-standard 33,295,403 (13,527,828) - - 19,767,575 28,769,263 (13,966,322) - - 14,802,941 Doubtful 811,603,939 (518,017,892) (8,059,495) (172,917,326) 112,609,226 795,656,600 (465,960,151) (8,345,651) (196,827,616) 124,523,182 Bad 154,181,851 (108,085,832) (1,541,791) (44,554,228) - 181,361,438 (130,881,947) (1,646,148) (48,833,343) -
Restructured Loansand Advances:Regular 23,013,389 - - - 23,013,389 25,200,812 - - - 25,200,812 Sub-standard 8,803,779 (1,140,534) - - 7,663,245 6,301,588 (696,839) - - 5,604,749 Doubtful and bad 15,471,433 (4,158,503) (433,807) (6,472,987) 4,406,136 19,694,013 (5,321,021) (664,160) (6,113,275) 7,595,557
Allowance for CollectivelyImpaired Loans:Un-Classified loans - - - (5,225,366) (5,225,366) - - - - -Doubtful and bad - - - (5,360,626) (5,360,626) - - - (9,887,949) (9,887,949) Accrued Interest Receivable 7,519,379 - - - 7,519,379 4,955,411 - - - 4,955,411
TOTAL 4,370,238,419 (644,930,589) (10,035,093) (234,530,533) 3,480,742,204 3,475,332,700 (616,826,280) (10,655,959) (261,662,183) 2,586,188,278
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
82
The carrying value of loans and advances to customersinclude accidentally temporary debtors with carryingvalue amounting to LBP 39.1 billion as at December 31,2009 (LBP 39.1 billion as at December 31, 2008).
The carrying value of loans and advances to customersinclude loans to related parties in the aggregate ofLBP 170.89 billion as at December 31, 2009 (LBP 154.55billion in 2008) (See Note 40).
Restructured loans represent loans with renegotiated termsand are categorized within the same loan classification priorto restructuring.
The movement of unrealized interest during 2009 and 2008is summarized as follows:
The movement of allowance for impairment of doubtful and bad loans during 2009 and 2008 is summarized as follows:
LBP’000 2009 2008
Balance January 1 616,826,280
Additions 126,031,169
Additions from acquired subsidiaries 1,846,391
Recoveries (8,406,228)
Write-off (51,805,659)
Transfer to off-financial position (38,365,501)
Reclassification from unrealized interest to
allowance for impairment (56,461)
Transfer (to) / from allowance for collectively impaired loans 1,223
Change in expected contractual write-off (1,103,318)
Effect of exchange rates changes (37,307)
BALANCE DECEMBER 31 644,930,589
592,539,959
109,476,879
-
(8,803,471)
(75,180,626)
(18,266,009)
(276,509)
(42,030)
16,975,619
402,468
616,826,280
LBP’000 2009 2008
Balance January 1 251,774,234
Additions 5,020,459
Additions from acquired subsidiaries 2,929,999
Recoveries (11,112,717)
Write-off (20,756,130)
Transfer to off-financial position (5,469,903)
Reclassification to allowance for impairment
from unrealized interest 56,461
Transfer from allowance for collectively impaired loans 36,650
Change in expected contractual write-off 1,781,382
Effect of exchange rates changes (315,894)
BALANCE DECEMBER 31 223,944,541
260,911,254
25,968,380
-
(16,664,890)
(24,559,731)
(8,327,398)
276,509
414,563
12,751,171
1,004,376
251,774,234
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
83FransabankAnnual Report 2009
The movement of the discount on loan book purchased during 2009 and 2008 is summarized as follows:
LBP’000 2009 2008
Balance January 1 10,655,959
Additions -
Recoveries (751,765)
Write-off (653,710)
Change in expected contractual write-off 784,609
BALANCE DECEMBER 31 10,035,093
26,836,282
152,123
(6,248,077)
(9,436,910)
(647,459)
10,655,959
The movement of the allowance for collectively impaired loans during 2009 and 2008 is as follows:
LBP’000 2009 2008
Balance January 1 9,887,949
Additions -
Additions from acquired subsidiaries 1,411,962
Recoveries (635,254)
Transfer to specific allowance for impairment (36,650)
Transfer to provision for contingencies -
Write-off (40,792)
Transfer to / (from) unrealized interest (1,223)
BALANCE DECEMBER 31 10,585,992
13,622,550
3,065,331
-
(171,837)
(414,563)
(6,234,251)
(21,311)
42,030
9,887,949
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
84
December 31, 2009
Available for Sale Held to MaturityLBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total
Equities and preferred shares 119,618,195 46,450,756 166,068,951 - 1,507,500 1,507,500
Lebanese Treasury bills 1,376,741,737 - 1,376,741,737 352,659,724 - 352,659,724
Lebanese Government bonds - 1,042,048,268 1,042,048,268 - 702,990,633 702,990,633
Banks Eurobonds - 26,577,372 26,577,372 - 248,788 248,788
Certificates of deposit issuedby Central Bank of Lebanon 3,094,793,820 447,270,665 3,542,064,485 - 309,580,585 309,580,585
Certificates of deposit issued by banks - 68,733,790 68,733,790 - 7,434,190 7,434,190
Mutual funds - 365,579 365,579 - - -
Banks and corporate bonds - 27,701,737 27,701,737 - 2,862,576 2,862,576
Asset-backed securities - 2,224,392 2,224,392 - - -
Accrued interest receivable 74,520,672 32,299,329 106,820,001 13,705,056 20,784,762 34,489,818
TOTAL 4,665,674,424 1,693,671,888 6,359,346,312 366,364,780 1,045,409,034 1,411,773,814
December 31, 2008
Available for Sale Held to MaturityLBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total
Equities and preferred shares 109,728,444 42,553,638 152,282,082 - 1,507,500 1,507,500
Lebanese Treasury bills 1,176,475,461 - 1,176,475,461 601,597,901 - 601,597,901
Lebanese Government bonds - 876,173,605 876,173,605 - 714,106,175 714,106,175
Certificates of deposit issuedby Central Bank of Lebanon 1,235,573,234 422,261,080 1,657,834,314 94,382,179 300,593,731 394,975,910
Certificates of deposit issuedby Banks - 55,103,913 55,103,913 - 7,404,439 7,404,439
Corporate bonds - - - - 358,785 358,785
Accrued interest receivable 58,193,916 29,924,005 88,117,921 23,281,321 18,633,828 41,915,149
TOTAL 2,579,971,055 1,426,016,241 4,005,987,296 719,261,401 1,042,604,458 1,761,865,859
10. INVESTMENT SECURITIES
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
85FransabankAnnual Report 2009
A. Available for Sale Investments:
December 31, 2009
Balances in LBP Balances in F/CyAllowance Carrying Cumulative Allowance Carrying Cumulative
Amortized for Fair Change in Amortized for Fair Change inLBP’000 Cost Impairment Value Fair Value Cost Impairment Value Fair Value
Quoted equities - - - - 20,674,017 - 24,705,188 4,031,171
Unquoted equities 87,987,868 ( 170,000) 119,618,195 31,800,327 30,500,434 (8,813,418) 21,745,568 58,552
Lebanese Treasury bills 1,313,864,364 - 1,376,741,737 62,877,373 - - - -
Lebanese Government bonds - - - - 1,005,574,965 - 1,042,048,268 36,473,303
Banks Eurobonds - - - - 26,827,440 (140,985) 26,577,372 (109,083)
Certificates of deposit issuedby Central Bank of Lebanon 2,890,118,984 - 3,094,793,820 204,674,836 427,100,687 - 447,270,665 20,169,978
Certificates of deposit issued by banks - - - - 67,062,230 - 68,733,790 1,671,560
Mutual funds - - - - 541,133 - 365,579 (175,554)
Banks and corporate bonds - - - - 27,828,238 - 27,701,737 (126,501)
Asset-backed securities - - - - 2,226,102 - 2,224,392 (1,710)
Accrued interest receivable 74,520,672 - 74,520,672 - 32,299,329 - 32,299,329 -
TOTAL 4,366,491,888 (170,000) 4,665,674,424 299,352,536 1,640,634,575 (8,954,403) 1,693,671,888 61,991,716
December 31, 2008
Balances in LBP Balances in F/CyAllowance Carrying Cumulative Allowance Carrying Cumulative
Amortized for Fair Change in Amortized for Fair Change inLBP’000 Cost Impairment Value Fair Value Cost Impairment Value Fair Value
Quoted equities - - - - 20,674,017 - 22,481,890 1,807,873
Unquoted equities 87,845,868 (170,000) 109,728,444 22,052,576 27,529,520 (7,532,044) 20,071,748 74,272
Lebanese Treasury bills 1,146,972,231 - 1,176,475,461 29,503,230 - - - -
Lebanese Government bonds - - - - 933,470,235 - 876,173,605 (57,296,630)
Certificates of deposit issuedby Central Bank of Lebanon 1,195,953,396 - 1,235,573,234 39,619,838 427,447,332 - 422,261,080 (5,186,252)
Certificates of deposit issuedby banks - - - - 57,555,874 - 55,103,913 (2,451,961)
Accrued interest receivable 58,193,916 - 58,193,916 - 29,924,005 - 29,924,005 -
TOTAL 2,488,965,411 (170,000) 2,579,971,055 91,175,644 1,496,600,983 (7,532,044) 1,426,016,241 (63,052,698)
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
86
December 31, 2009
AmortizedCost (Net of Average
Redemption Allowance for Net Carrying InterestRemaining period to maturity Value Impairment) Fair Value Rate %
Lebanese Treasury bills:Up to one year 264,163,260 261,425,508 263,951,540 8.181 year to 3 years 1,028,199,250 1,026,691,270 1,086,489,011 9.343 years to 5 years 25,750,000 25,747,586 26,301,186 8.23TOTAL 1,318,112,510 1,313,864,364 1,376,741,737Lebanese Government bonds:Up to one year 56,385,909 56,264,212 56,316,916 7.061 year to 3 years 352,455,706 351,607,791 353,106,462 6.963 years to 5 years 95,081,859 94,926,575 96,574,690 7.795 years to 10 years 271,590,446 281,806,667 298,894,937 9.05Beyond 10 years 221,724,608 220,969,720 237,155,263 8.25TOTAL 997,238,528 1,005,574,965 1,042,048,268Bank Eurobonds:Up to one year 12,555,242 12,555,242 12,555,242 15.431 year to 3 years 1,402,244 1,402,244 1,402,244 15.503 years to 5 years 3,768,750 3,748,655 3,692,979 5.005 years to 10 years 7,537,500 7,476,506 7,404,405 7.50Beyond 10 years 1,507,500 1,503,808 1,522,502 5.25TOTAL 26,771,236 26,686,455 26,577,372Certificates of deposit issued byCentral Bank of Lebanon:Up to one year 96,000,000 95,880,248 97,572,654 11.301 year to 3 years 169,045,020 168,944,371 176,830,485 8.613 years to 5 years 2,635,698,000 2,643,440,458 2,859,092,807 10.015 years to 10 years 406,426,250 408,954,594 408,568,539 8.47TOTAL 3,307,169,270 3,317,219,671 3,542,064,485Certificates of deposit issued by banks:Up to one year 14,924,250 14,927,474 14,946,711 7.631 year to 3 years 52,158,657 52,134,756 53,787,079 7.63TOTAL 67,082,907 67,062,230 68,733,790Banks and corporate bonds:3 years to 5 years 20,116,581 19,977,805 19,941,172 5.235 years to 10 years 7,914,067 7,850,433 7,760,565 7.44TOTAL 28,030,648 27,828,238 27,701,737Asset-backed securities:3 years to 5 years 2,261,250 2,226,102 2,224,392 7.25TOTAL 2,261,250 2,226,102 2,224,392
Available for sale fixed income investments are segregated over remaining periods to maturity as follows:
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
87FransabankAnnual Report 2009
December 31, 2008
AmortizedCost (Net of Average
Redemption Allowance for Net Carrying InterestRemaining period to maturity Value Impairment) Fair Value Rate %
Lebanese Treasury bills:Up to one year 323,251,130 323,232,826 326,290,601 6.071 year to 3 years 584,821,560 583,455,193 593,879,413 8.603 years to 5 years 242,371,250 240,284,212 256,305,447 11.34TOTAL 1,150,443,940 1,146,972,231 1,176,475,461
Lebanese Government bonds:Up to one year 42,619,297 42,704,556 42,265,917 9.051 year to 3 years 185,389,402 185,035,091 179,574,911 7.913 years to 5 years 216,213,721 215,231,335 199,104,457 7.375 years to 10 years 177,187,028 187,732,759 174,794,147 8.66Beyond 10 years 303,848,685 302,766,494 280,434,173 8.56TOTAL 925,258,133 933,470,235 876,173,605
Certificates of deposit issued byCentral Bank of Lebanon:1 year to 3 years 351,000,000 348,421,836 365,502,065 11.243 years to 5 years 1,234,743,020 1,237,746,478 1,255,759,249 10.415 years to 10 years 35,426,250 37,232,414 36,573,000 9.61TOTAL 1,621,169,270 1,623,400,728 1,657,834,314
Certificates of deposit issued by banks:1 year to 3 years 14,924,250 14,933,454 14,566,066 7.633 years to 5 years 42,888,375 42,622,420 40,537,847 8.49TOTAL 57,812,625 57,555,874 55,103,913
Available for sale fixed income investments are segregated over remaining periods to maturity as follows:
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
88
The movement of the allowance for impairment of available for sale investments was as follows:
Accrued interest receivable on available for sale investments is broken down as follows as at December 31:
LBP’000 2009 2008
Balance January 1 7,702,044
Additions 126,269
Additions from acquired subsidiaries 1,296,090
BALANCE DECEMBER 31 9,124,403
7,702,044
-
-
7,702,044
Certificates of deposit issued by Central Bank of Lebanoninclude certificates of deposit with carrying value ofLBP 46.25 billion and nominal value of LBP 41.46 billionmaturing in 2015 with a put option exercisable at aredemption value of 91.63% of par in year 2012. TheGroup follows the policy of providing annually for the
difference of 8.37% between the nominal value and theearly redemption value in 2012. Provisions booked up to2009 year-end is reflected under “Other Liabilities” (Note21) and amounted to LBP 1.38 billion (LBP 1.2 billion upto 2008 year-end).
LBP’000 2009 2008
Lebanese Treasury bills 25,193,345
Lebanese Government bonds 23,495,580
Banks Eurobonds 268,503
Certificates of deposit issued by Central bank of Lebanon 56,704,549
Certificates of deposit issued by banks 763,082
Banks and corporate bonds 368,891
Asset-backed securities 26,051
TOTAL 106,820,001
26,189,386
21,745,867
-
39,381,752
668,068
132,848
-
88,117,921
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
89FransabankAnnual Report 2009
B. Held to Maturity Investments:
December 31, 2009
Balances in LBP Balances in F/CyCarrying Fair Carrying Fair
Value Value Value Value
Unquoted equities - - 1,507,500 1,507,500Lebanese Treasury bills 352,659,724 357,725,309 - -Lebanese Government bonds - - 702,990,633 727,557,145Banks Eurobonds - - 248,788 234,114Certificates of deposit issuedby Central Bank of Lebanon - - 309,580,585 325,277,707Certificates of deposit issued by banks - - 7,434,190 7,594,868Corporate bonds - - 2,862,576 3,096,554Accrued interest receivable 13,705,056 13,705,056 20,784,762 20,784,762TOTAL 366,364,780 371,430,365 1,045,409,034 1,086,052,650
December 31, 2008
At December 31, 2009 and 2008 the Group had Held to maturity treasury bills with carrying value of LBP 319 billion thatare pledged against soft loans granted by Central Bank of Lebanon in connection with the acquisition by the Group ofproblematic banks – (Notes 20(g) and 42).
Balances in LBP Balances in F/CyCarrying Fair Carrying Fair
Value Value Value Value
Unquoted equities - - 1,507,500 1,507,500Lebanese Treasury bills 601,597,901 615,627,650 - -Lebanese Government bonds - - 714,106,175 694,174,805Certificates of deposit issuedby Central Bank of Lebanon 94,382,179 100,377,013 300,593,731 295,238,493Certificates of deposit issued by banks - - 7,404,439 7,123,691Corporate bonds - - 358,785 358,785Accrued interest receivable 23,281,321 23,281,321 18,633,828 18,633,828TOTAL 719,261,401 739,285,984 1,042,604,458 1,017,037,102
LBP’000
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
90
December 31, 2009
AverageRedemption Amortized Interest
Value Cost Fair Value Rate %
Lebanese Treasury bills:Up to one year 319,405,020 319,371,063 323,184,211 8.421 year to 3 years 30,711,720 30,703,691 31,814,635 9.103 years to 5 years 2,560,000 2,584,970 2,726,463 8.54TOTAL 352,676,740 352,659,724 357,725,309Lebanese Government bonds:Up to one year 98,289,000 98,281,900 98,239,891 7.131 year to 3 years 325,965,865 323,297,243 324,966,094 7.443 years to 5 years 67,762,125 67,756,576 71,824,633 8.995 years to 10 years 164,338,605 163,840,719 179,095,048 9.01Beyond 10 years 49,955,535 49,814,195 53,431,479 8.25TOTAL 706,311,130 702,990,633 727,557,145Bank Eurobonds:Up to one year 226,125 248,788 234,114 12.00TOTAL 226,125 248,788 234,114Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 273,415,275 277,756,522 292,141,496 9.093 years to 5 years 23,119,020 23,177,854 23,970,436 8.545 years to 10 years 8,215,875 8,646,209 9,165,775 10.00TOTAL 304,750,170 309,580,585 325,277,707Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,434,190 7,594,868 7.63TOTAL 7,537,500 7,434,190 7,594,868Corporate bonds:1 year to 3 years 148,628 148,628 217,345 6.003 years to 5 years 770,382 783,882 849,587 7.505 years to 10 years 1,940,190 1,930,066 2,029,622 9.34TOTAL 2,859,200 2,862,576 3,096,554
Held to maturity investments are segregated over the remaining period to maturity as follows:
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
91FransabankAnnual Report 2009
December 31, 2008
AverageRedemption Amortized Interest
Value Cost Fair Value Rate %
Lebanese Treasury bills:Up to one year 266,911,080 266,596,976 268,749,750 10.301 year to 3 years 335,116,740 335,000,925 346,877,900 9.40TOTAL 602,027,820 601,597,901 615,627,650Lebanese Government bonds:Up to one year 205,479,755 205,464,667 203,349,317 7.921 year to 3 years 208,035,000 207,443,704 202,029,537 7.763 years to 5 years 150,750,000 150,506,409 143,498,728 8.535 years to 10 years 106,149,105 106,908,036 104,757,876 9.01Beyond 10 years 43,925,535 43,783,359 40,539,347 8.58TOTAL 714,339,395 714,106,175 694,174,805Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 96,000,000 94,382,179 100,377,013 7.743 years to 5 years 294,520,275 300,593,731 295,238,493 9.35TOTAL 390,520,275 394,975,910 395,615,506Certificates of deposit issued by banks:3 years to 5 years 7,537,500 7,404,439 7,123,691 9.31TOTAL 7,537,500 7,404,439 7,123,691Corporate bonds:Beyond 10 years 358,785 358,785 358,785 4.75TOTAL 358,785 358,785 358,785
Held to maturity certificates of deposit issued by CentralBank of Lebanon include certificates of deposit withcarrying value of LBP 103 billion and nominal value ofLBP 98 billion maturing in 2015 which carry a put optionexercised at a redemption value of 91.63% of par in year2012. The Group follows the policy of providing annually
for the difference of 8.37% between the nominal valueand the early redemption value in 2012. Provisionsbooked up to 2009 year-end is reflected under “OtherLiabilities” (Note 21) and amounted to LBP 5.49 billion(LBP 4.32 billion up to 2008 year-end).
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
92
Accrued interest receivable on Held to maturity investments is segregated as follows:
LBP’000 2009 2008
Lebanese Treasury bills 13,705,056
Lebanese Government bonds 16,823,533
Banks Eurobonds 6,391
Certificates of deposit issued by Central bank of Lebanon 3,814,631
Certificates of deposit issued by banks 28,343
Corporate bonds 111,864
TOTAL 34,489,818
20,569,321
15,004,679
-
6,301,232
28,343
11,574
41,915,149
11. CUSTOMERS’ LIABILITY UNDER ACCEPTANCES
Acceptances represent documentary credits which the Group has committed to settle on behalf of its customers againstcommitments by those customers (acceptances). The commitments resulting from these acceptances arestated as a liability in the statement of financial position for the same amount.
During 2008, the Group has acquired an equity stake of18.01% in “Golden Taler Bank” in Belarus which namewas subsequently changed to “Fransabank OJSC”.Although the interest held is 18.01%, this investment isclassified as “Investment in Associate” since the Groupexercised a significant influence over the bank. During2009, “Fransabank OJSC”, increased its capital and theGroup subscribed in all this increase therefore increasingthe interest held in “Fransabank OJSC” to 62.21%.Consequently, the Group achieved control over this
entity (reclassified to subsidiary) which has been includedin the consolidated financial statements.
During 2009, the Group sold part of its equity interest in“International Payment Network” for an amount of LBP250 million resulting in a gain of LBP 14 million (Note 38).Although the interest held in “International PaymentNetwork” decreased below 20%, nevertheless, theGroup is still exercising a significant influence over thisentity.
12. INVESTMENTS IN ASSOCIATES
Investments in the associates, which are unlisted, are as follows:
Country of Interest Held Interest HeldIncorporation 2009 2008 2009 2008
% %
Bancassurance SAL Lebanon 39.99 39.99 9,211,328 4,440,584United Capital Bank Sudan 20.00 20.00 36,702,558 37,740,252International Payment Network Lebanon 18.80 23.50 1,125,466 1,252,993Fransabank OJSC Belarus - 18.01 - 5,240,217TOTAL 47,039,352 48,674,046
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
93FransabankAnnual Report 2009
The movement of investments in associates is as follows:
Assets acquired in satisfaction of loans have been acquired through enforcement of security over loans and advances to customers.
LBP’000 2009 2008
Balance January 1 48,674,046
Acquisition of equity interest in "Fransabank OJSC" -
Unrealized gain / (losses) through other comprehensive income 1,800,062
Dividends received (2,949,254)
Share in net profit (Note 38) 7,579,190
Investment incorporated in consolidation (6,021,194)
Partial disposal of equity interest (236,498)
Currency translation adjustment (1,807,000)
Prior year's adjustment (booked to retained earnings) -
BALANCE DECEMBER 31 47,039,352
45,014,174
5,440,387
(1,773,391)
(1,614,241)
6,268,558
-
-
(4,517,135)
(144,306)
48,674,046
13. ASSETS ACQUIRED IN SATISFACTION OF LOANS
Real EquityEstate Interest Total
Cost:Balance January 1, 2008 214,225,776 1,499,963 215,725,739Additions 19,154,039 7,537 19,161,576Disposals (14,984,916) - (14,984,916)Sundry movements (7,500) - (7,500)Transfer from property and equipment - prior year adjustment 483,102 - 483,102Transfer to property and equipment (207,459) - (207,459)Balance December 31, 2008 218,663,042 1,507,500 220,170,542Additions 5,111,411 - 5,111,411Disposals (19,335,873) (1,507,500) (20,843,373)Transfer to property and equipment (1,285,314) - (1,285,314)Balance December 31, 2009 203,153,266 - 203,153,266
Impairment allowance:Balance January 1, 2008 (15,072,380) - (15,072,380)Retirement upon disposal 206,567 - 206,567Write-off against unrecorded registration fees 12,861 - 12,861Balance December 31, 2008 (14,852,952) - (14,852,952)Retirement upon disposal 800,999 - 800,999Write-off against unrecorded registration fees 227 - 227Balance December 31, 2009 (14,051,726) - (14,051,726)
Carrying amount:DECEMBER 31, 2009 189,101,540 - 189,101,540DECEMBER 31, 2008 203,810,090 1,507,500 205,317,590
The movement of assets acquired in satisfaction of loans during 2009 and 2008 was as follows:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
FransabankAnnual Report 2009
94
The major asset component of entities in which the Grouphas acquired an equity interest in satisfaction of debtsconsists of real estate properties.
The acquisition of assets in settlement of loans requires theapproval of the banking regulatory authorities and theseshould be liquidated within 2 years. In case of default ofliquidation, a regulatory reserve should be appropriatedfrom the yearly net profits over a period of 5 years. However,
the intermediary circular No.41 has allowed banks to extendyearly appropriation over a period of 20 years with respectto those assets acquired through loans’ restructuringsapproved by Central Bank of Lebanon or with respect to theentirety of those assets acquired in settlement of loansprovided that the Banks restructure before 2007 year end, atleast 50% of the balance of non-performing loansoutstanding at June 30, 2003. This condition was satisfied bythe Group during year 2006.
14. PROPERTY AND EQUIPMENT
Additions andBalance at Transfer from Additions due Transfer from Currency Balance atJanuary 1, Advance to Acquisition Assets Acquired Translation December 31,
LBP’000 2009 Payments Retirements of Subsidiaries against Debts Adjustment 2009
Cost/Revaluation:
Land 1,809,242 15,175,962 - - - (16,760) 16,968,444
Building 134,827,384 5,778,614 (1,042,531) 5,121,584 1,285,314 54,459 146,024,824
Furniture, equipment and computer 54,866,400 5,007,601 (1,410,849) 2,168,588 - 26,188 60,657,928
Vehicles 2,993,296 326,200 (191,210) 403,720 - (530) 3,531,476
Office improvements and installations 46,117,481 4,777,999 (345,111) 123,899 - 17,944 50,692,212
Key money 133,687 - - - - - 133,687
TOTAL 240,747,490 31,066,376 (2,989,701) 7,817,791 1,285,314 81,301 278,008,571
Accumulated depreciation:
Building (21,507,289) (2,896,336) 126,198 (176,974) - (2,362) (24,456,763)
Furniture, equipment and computer (32,560,061) (5,284,443) 1,122,894 (928,430) - (9,384) (37,659,424)
Vehicles (1,132,582) (310,074) 188,171 (170,743) - (1,155) (1,426,383)
Office improvements and installations (31,075,564) (4,764,313) 341,542 (24,102) - (9,012) (35,531,449)
Key money (133,653) - - - - - (133,653)
TOTAL (86,409,149) (13,255,166) 1,778,805 (1,300,249) - (21,913) (99,207,672)
Provision for impairment: (3,253,236) - - - - - (3,253,236)
Advance payments 8,609,947 20,029,296
Provision allocated to advance payments (3,694,425) (3,243,225)
Net advance payments 4,915,522 16,786,071
NET BOOK VALUE 156,000,627 192,333,734
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
95FransabankAnnual Report 2009
Additions and Transfer to AssetsBalance at Transfer from Acquired against Transfer from Currency Balance atJanuary 1, Advance Debts – Prior Year Assets Acquired Translation December 31,
2008 Payments Retirements Adjustment against Debts Adjustment 2008
Cost/Revaluation:
Land - 1,809,242 - - - - 1,809,242
Building 105,589,365 29,030,560 - - 207,459 - 134,827,384
Furniture, equipment and computer 47,589,643 9,522,254 (2,162,530) - - (82,967) 54,866,400
Vehicles 2,207,900 954,880 (158,165) - - (11,319) 2,993,296
Office improvements and installations 39,735,315 7,047,740 (2,644) (619,962) - (42,968) 46,117,481
Key money 133,687 - - - - - 133,687
TOTAL 195,255,910 48,364,676 (2,323,339) (619,962) 207,459 (137,254) 240,747,490
Accumulated depreciation:
Building (19,347,767) (2,162,004) - - - 2,482 (21,507,289)
Furniture, equipment and computer (30,045,280) (4,653,367) 2,083,795 - - 54,791 (32,560,061)
Vehicles (986,730) (251,834) 99,065 - - 6,917 (1,132,582)
Office improvements and installations (27,237,588) (3,998,094) 2,644 136,860 - 20,614 (31,075,564)
Key money (133,653) - - - - - (133,653)
TOTAL (77,751,018) (11,065,299) 2,185,504 136,860 - 84,804 (86,409,149)
Provision for impairment: (3,253,236) - - - - - (3,253,236)
Advance payments 8,495,106 8,609,947
Provision allocated to advance payments (3,694,425) (3,694,425)
Net advance payments 4,800,681 4,915,522
NET BOOK VALUE 119,052,337 156,000,627
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
FransabankAnnual Report 2009
96
15. INTANGIBLE ASSETS
Additions andBalance at Transfer from Additions due Currency Balance as atJanuary 1, Advance to Acquisition Translation December 31,
LBP’000 2009 Payments Retirements of Subsidiary Adjustments 2009
Cost:Purchased software 20,253,963 1,228,882 (88,365) - 11,096 21,405,576Goodwill 43,194,326 - - 1,621,818 - 44,816,144Licenses - - - 20,577 - 20,577TOTAL 63,448,289 1,228,882 (88,365) 1,642,395 11,096 66,242,297
Accumulated depreciation:Purchased software (10,102,074) (3,347,257) 65,390 - (14,791) (13,398,732)Licenses - (542) - (1,587) - (2,129)TOTAL (10,102,074) (3,347,799) 65,390 (1,587) (14,791) (13,400,861)
Advance payments: 1,824,211 2,809,839
NET BOOK VALUE 55,170,426 55,651,275
The additional goodwill recognized during 2009 is derived from 2 subsidiaries as follows:
- Goodwill in the amount of LBP 721 million being original goodwill upon initial acquisition of “Fransabank OJSC”.- Goodwill in the amount of LBP 901 million derived from the additional equity interest in BLC Bank SAL.
Additions andBalance at Transfer from Decrease due to Currency Balance as atJanuary 1, Advance Partial Disposal Translation December 31,
LBP’000 2008 Payments Write-off of Subsidiary Adjustments 2008
Cost:Purchased software 15,560,798 4,778,541 - - (85,376) 20,253,963Study and research expenses 1,586 - (1,586) - - -Goodwill 65,665,340 - (8,835,979) (13,635,035) - 43,194,326TOTAL 81,227,724 4,778,541 (8,837,565) (13,635,035) (85,376) 63,448,289
Accumulated depreciation:Purchased software (6,957,409) (3,206,115) - - 61,450 (10,102,074)Goodwill (8,835,979) - 8,835,979 - - -TOTAL (15,793,388) (3,206,115) 8,835,979 - 61,450 (10,102,074)
Advance payments: 1,345,689 1,824,211
NET BOOK VALUE 66,780,025 55,170,426
In 2008, the Group disposed of 23.48% of its interest in BLC Bank SAL which resulted in net gain of LBP 27 billionreflected under “Other Operating Income” in the accompanying consolidated income statement. The Group hasremeasured goodwill by the share disposed of.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
97FransabankAnnual Report 2009
16. OTHER ASSETS
(a) Deferred charges on acquired problematic banksrepresent losses related to problematic banks acquiredin previous years and compensated by Central Bank ofLebanon in the form of future cash flows and benefitsoriginated from the soft loans granted to the Group (referto Note 20 g).
The Group is amortizing these charges against thereduction of future economic benefits derived from thesoft loans and thus the carrying value of these deferredcharges corresponds to the present value of future cashflows expected to be derived from the soft loans.
The movement of “deferred charges on acquired problematic banks” was as follows:
LBP’000 2009 2008
Deferred charges on acquired problematic banks (a) 9,772,748
Derivative assets held for risk management (b) 1,170,480
Deferred tax asset (c) 1,943,450
Regulatory blocked deposit (d) 7,854,950
Assets in process of acquisition in settlement of loans (e) 1,011,272
Deferred charges (f) 4,036,120
Deferred receivables (g) 30,588,391
Sundry accounts receivable (h) 61,558,637
Prepayments 23,432,493
Foreign exchange operations 2,026,965
Accrued income 724,386
Sundry assets -
Allowance for doubtful accounts receivable (247,864)
TOTAL 143,872,028
22,918,633
2,885,412
620,802
7,803,164
1,011,272
4,833,661
-
30,399,551
18,827,890
341,885
786,535
51,550
(605,131)
89,875,224
United BankUniversal of Saudi and
LBP’000 Bank SAL Lebanon SAL Total
Gross:As at December 31, 2009 and 2008 123,426,043 160,008,712Accumulated amortization:Balance January 1, 2008 (89,436,183) (123,943,243)2008 amortization (12,798,841) (13,146,836)Balance December 31, 2008 (102,235,024) (137,090,079)2009 amortization (12,798,841) (13,145,885)Balance December 31, 2009 (115,033,865) (150,235,964)Carrying value:DECEMBER 31, 2009 8,392,178 9,772,748 DECEMBER 31, 2008 21,191,019 22,918,633
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
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98
36,582,669
(34,507,060)(347,995)
(34,855,055)(347,044)
(35,202,099)
1,380,570 1,727,614
(b) The derivative assets held for risk management consist of the following:
(f) Deferred charges consist of the following at December 31:
The OTC structured derivative is designated as fair valuehedge. The OTC structured derivative represents an embedded derivative in 3 structured deposit products whichguarantee a minimum redemption value of 100% (95%,100% and 100% during 2008) (Note 18).
The forward contract swap derivative is designated as cashflows hedge.The Group used forward contract swaps to manage itsexposure to exchange rate movements on forwardcontracts with National Bank of the Republic of Belarus bypurchasing foreign currencies against buying BelarussianRuble. At December 31, 2009 currencies with notionalprincipal amounts of BYR 12.5 billion were designated ashedges of future cash flows against USD 5 million.
(c) Deferred tax asset as at December 31, 2009 and 2008represent deferred tax on loss of a subsidiary.
(d) The regulatory blocked deposits represent non-interestearning compulsory deposits placed with the LebaneseTreasury and Central Bank of Syria upon the inception ofbanks according to Article 132 of the Lebanese Code ofMoney and Credit and article 19 of the Syrian Law No.28respectively and are refundable in case of cease ofoperations.
(e) Assets in process of acquisition in settlement of debtsrepresent the value of loans written-off against enforcementof real estate security held and will be reallocated to “AssetsAcquired in Settlement of Loans” once the registration in thename of the Group is finalized.
(g) Deferred receivables represent excess of considerationand acquisition costs over fair value of net assets of Bank LatiSAL acquired by the Group.
On September 8, 2009, the Group signed an agreement toacquire the shares of Bank Lati SAL totaling to 10,500,000shares with a nominal value of LBP 1,000 per share for a totalconsideration of USD 20,037,192. An approval has beengiven to the Group by the Central Council of the Central Bankin relation to the acquisition of all the assets, liabilities, rights,and commitments of Bank Lati SAL based on clause 10 of lawnumber 93/192 and its amendments, waiting for the final
approval of the Central Council in order for the Group toproceed with the merger. The Group will be granted a softloan from the Central Bank for a period of five years to coveran approximate amount of USD 25 million with thepossibility of increasing the loan amount to cover additionalcharges that will be determined in a period of six monthsfrom the date of the final approval on the merger. The loancarries a fixed interest of 3.5% per annum and will be investedin five years Lebanese Treasury bills. In this sense, the Groupbooked the excess of consideration paid over the fair valueof net assets acquired as deferred receivables subject toamortization over the term of the soft loan expected.
Fair Value as at December 31,
LBP’000 2009 2008
Over-the counter (OTC) structured derivative 1,157,920
Forward contracts SWAP 12,560
TOTAL 1,170,480
2,885,412
-
2,885,412
LBP’000 2009 2008
Unamortized costs related to deposits with embedded derivatives 4,006,284
Other deferred charges 29,836
TOTAL 4,036,120
4,577,199
256,462
4,833,661
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
99FransabankAnnual Report 2009
The condensed classes of assets and liabilities of Bank Lati that were acquired and assumed are as follows:
Deposits and borrowings from banks are reflected at amortized cost and consist of the following:
Money market deposits and other short term borrowings have maturities of one year or less.
(h) Sundry account receivable include an amount of LBP 36.5 billion (USD 24,228,000) representing the amount paid by theGroup on behalf of one of the shareholders in Fransabank El-Djazaïr for the increase of the capital of this subsidiary. Thispayment was deferred against pledging of the shareholder’s shares and possible subsequent acquisition of the shares.
LBP’000 December 31, 2009
ASSETSCash and banks 27,912,538
Loans and advances to customers 6,739,031
Investment securities 48,701,667
Customers’ liability under acceptances 2,491,769
Property, equipment and other assets 4,953,629
TOTAL ASSETS 90,798,634
LIABILITIESDeposits and borrowings from banks 2,279,562
Customers’ accounts at amortized cost 85,033,147
Liability under acceptances 2,491,769
Provisions and other liabilities 739,241
TOTAL LIABILITIES 90,543,719
FAIR VALUE OF NET ASSETS 254,915
Consideration paid 30,206,067
Additional acquisition costs 637,239
TOTAL 30,843,306
EXCESS OF CONSIDERATION AND ACQUISITION COSTS OVER FAIR VALUE OF NET ASSETS 30,588,391
17. DEPOSITS AND BORROWINGS FROM BANKS
LBP’000 2009 2008
Current deposits of banks and financial institutions 85,023,119
Current deposits - related parties 110,751
Money market deposits 183,675,025
Money market deposits - related parties 30,736,482
Other short term borrowings 30,020,522
Accrued interest payable 970,647
Accrued interest payable - related parties 10,601
TOTAL 330,547,147
67,724,803
947,787
22,060,537
42,992,484
22,848,258
160,794
70,597
156,805,260
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
100
(a) Certain deposits from customers have been designat-ed at fair value through profit or loss as they are matchedwith an embedded derivative. An accounting mismatchwould arise if customers’ deposits were accounted for atamortized cost, because the related derivative ismeasured at fair value with movements in the fair valuetaken through the income statement. By designatingthose deposits from customers at fair value, themovements in the fair value of these deposits arerecorded in the income statement. These instrumentsprovide notional amounts protection for customers ofLBP 157 billion equivalent to 100% of the initially invest-
ed amount (LBP 156 billion in 2008 equivalent to 95% to100% of the initially invested amounts).
(b) Represents deposits denominated in Lebanesepounds with option to redeem in US Dollar at fixed rateof exchange. An accounting mismatch would arise ifcustomers’ deposits were accounted for at amortizedcost, because the related derivative is measured at fairvalue with movements in the fair value taken through theprofit or loss. By designating those deposits fromcustomers at fair value, the movements in the fair valueof these deposits are recorded in the income statement.
18. LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
LBP’000 2009 2008
Customers’ deposits with guaranteed capital
at fair value through profit or loss (a) 157,942,443
Customers’ deposits at fair value through profit or loss (b) 2,249,996
Accrued interest payable 2,519,961
TOTAL 162,712,400
159,402,178
2,249,996
1,935,611
163,587,785
LBP’000 2009 2008
Customers’ deposits at fair value through profit or loss 160,192,439
Related derivative contracts - Note 16 1,157,920
161,652,174
2,885,412
This section consists of the following:
The fair value recognized on these deposits and the related derivatives is as follows:
Fair Value
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
101FransabankAnnual Report 2009
19. CUSTOMERS’ ACCOUNTS AT AMORTIZED COST
December 31, 2009LBP Base Accounts F/Cy Base Accounts
Interest Non-Interest Interest Non-InterestLBP’000 Bearing Bearing Total Bearing Bearing Total Total
Deposits from customers:
Current / demand deposits 80,148,588 146,952,587 227,101,175 272,120,144 717,458,235 989,578,379 1,216,679,554
Term deposits 4,750,984,543 43,203,791 4,794,188,334 6,526,471,525 70,689,266 6,597,160,791 11,391,349,125
Collateral against loans and advances 224,829,980 8,807,193 233,637,173 289,776,591 18,184,700 307,961,291 541,598,464
Margins and other collateral:
Margins for irrevocable import letters of credit 208,294 27 208,321 35,930,579 43,886,870 79,817,449 80,025,770
Margins on letters of guarantee 27,906,172 2,273,613 30,179,785 36,282,683 8,077,046 44,359,729 74,539,514
Other margins 1,360,549 9,111 1,369,660 5,895,944 2,288,747 8,184,691 9,554,351
Blocked accounts 2,074,254 1,983,421 4,057,675 23,105,758 7,399,828 30,505,586 34,563,261
Credit versus debit - - - 211 1,593,875 1,594,086 1,594,086
Accrued interest payable: 40,800,995 - 40,800,995 33,706,698 - 33,706,698 74,507,693
TOTAL 5,128,313,375 203,229,743 5,331,543,118 7,223,290,133 869,578,567 8,092,868,700 13,424,411,818
December 31, 2008
LBP Base Accounts F/Cy Base AccountsInterest Non-Interest Interest Non-Interest
LBP’000 Bearing Bearing Total Bearing Bearing Total Total
Deposits from customers:
Current / demand deposits 83,475,030 110,331,013 193,806,043 260,259,329 533,610,452 793,869,781 987,675,824
Term deposits 3,458,928,175 45,719,051 3,504,647,226 5,392,038,169 51,866,960 5,443,905,129 8,948,552,355
Collateral against loans and advances 85,146,518 148,412,462 233,558,980 241,891,442 39,482,598 281,374,040 514,933,020
Margins and other collateral:
Margins for irrevocable import letters of credit - 45,425 45,425 8,372,637 41,790,636 50,163,273 50,208,698
Margins on letters of guarantee 4,912,456 1,904,347 6,816,803 11,433,444 7,439,030 18,872,474 25,689,277
Other margins 1,804,638 68 1,804,706 4,602,709 973,724 5,576,433 7,381,139
Blocked accounts 2,124,399 1,609,145 3,733,544 11,911,633 7,119,124 19,030,757 22,764,301
Credit versus debit - - - 98 233,836 233,934 233,934
Accrued interest payable: 24,906,331 - 24,906,331 32,154,575 - 32,154,575 57,060,906
TOTAL 3,661,297,547 308,021,511 3,969,319,058 5,962,664,036 682,516,360 6,645,180,396 10,614,499,454
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
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102
Customers’ deposits include related parties deposits detailed as follows:
December 31, 2009
LBP Base Accounts F/Cy Base AccountsInterest Non-Interest Interest Non-Interest
LBP’000 Bearing Bearing Total Bearing Bearing Total Total
Deposits from related:
Current / demand deposits 549,695 598,443 1,148,138 2,045,359 10,020,507 12,065,866 13,214,004
Term deposits 5,982,533 3,050,046 9,032,579 54,018,881 3,562,968 57,581,849 66,614,428
Collateral against loans and advances 144,171,740 - 144,171,740 551,092 361,800 912,892 145,084,632
Margins and other collateral:
Margins for irrevocable import letters of credit - - - - 381,466 381,466 381,466
Margins on letters of guarantee - - - 2,261 10,779 13,040 13,040
Blocked accounts - - - 1,077,763 72,645 1,150,408 1,150,408
Accrued interest payable: 15,670 - 15,670 1,480,733 - 1,480,733 1,496,403
TOTAL 150,719,638 3,648,489 154,368,127 59,176,089 14,410,165 73,586,254 227,954,381
December 31, 2008
LBP Base Accounts F/Cy Base AccountsInterest Non-Interest Interest Non-Interest
LBP’000 Bearing Bearing Total Bearing Bearing Total Total
Deposits from related:
Current / demand deposits 517,653 851,882 1,369,535 1,972,304 4,929,296 6,901,600 8,271,135
Term deposits 975,308 461 975,769 36,401,791 375,718 36,777,509 37,753,278
Collateral against loans and advances 2,225,005 145,596,657 147,821,662 7,312,767 5,301,482 12,614,249 160,435,911
Margins and other collateral:
Margins for irrevocable import letters of credit - - - - 1,071,961 1,071,961 1,071,961
Margins on letters of guarantee - 120 120 2,261 4,824 7,085 7,205
Blocked accounts - - - 1,013,176 72,646 1,085,822 1,085,822
Accrued interest payable: 2,185 - 2,185 1,168,083 - 1,168,083 1,170,268
TOTAL 3,720,151 146,449,120 150,169,271 47,870,382 11,755,927 59,626,309 209,795,580
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
103FransabankAnnual Report 2009
Deposits at amortized cost are allocated by brackets of deposits as follows:
Deposits from customers at amortized cost include atDecember 31, 2009 coded deposit accounts totaling LBP228.73 billion (LBP 186.17 billion in 2008). These accountsare subject to the provisions of Article 3 of the LebaneseBanking Secrecy Law dated September 3, 1956 whichprovides that the Bank’s management, in the normal courseof business, cannot reveal the identities of these depositors
to third parties, including its independent public accountants.
Deposits from customers include fiduciary depositsreceived from resident and non-resident banks for a totalamount of LBP 16.6 billion and LBP 408.9 billion respectively(LBP 32 billion and LBP 69 billion respectively in 2008).
December 31, 2009
LBP Base Accounts F/Cy Base AccountsNo. of Total % to Total Total % to Total
Accounts Deposits Deposits Deposits Deposits Total
December 31, 2008
LBP Base Accounts F/Cy Base AccountsNo. of Total % to Total Total % to Total
Accounts Deposits Deposits Deposits Deposits Total
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
LBP’000
376,301 2,558,373,541 48 2,130,989,338 26 4,689,362,879
8,147 1,576,210,592 30 2,119,725,752 26 3,695,936,344
778 1,196,958,985 22 3,842,153,610 48 5,039,112,595
385,226 5,331,543,118 100 8,092,868,700 100 13,424,411,818
Less than LBP 200 million
From LBP 200 million to LBP 1.5 billion
Above LBP 1.5 billion
TOTAL
Less than LBP 200 million
From LBP 200 million to LBP 1.5 billion
Above LBP 1.5 billion
TOTAL
376,388 2,119,229,826 53 2,157,249,817 32 4,276,479,643
7,071 1,049,225,014 27 1,986,677,791 30 3,035,902,805
609 800,864,218 20 2,501,252,788 38 3,302,117,006
384,068 3,969,319,058 100 6,645,180,396 100 10,614,499,454
FransabankAnnual Report 2009
104
20. OTHER BORROWINGS
Borrowings are reflected at amortized cost and consist of the following:
(a) Borrowings from European Investment Bank:
Borrowings from European Investment Bank represent termborrowings obtained by the Group to finance loansextended to customers. These borrowings are divided into2 types, a 12 years line of credit for touristic loans for a limitof Euro 30 million (LBP 65 billion) or its equivalent in U.S.Dollars and a 10 years line of credit for industrial loans for alimit of Euro 30 million (LBP 65 billion). These loans matureduring 2012, 2013, 2015, 2019 and 2020 and the applicableaverage interest rate is 2.86%.
(b) Borrowings from Proparco:
Borrowings from Proparco represent a 5 years line of creditfor a limit of Euro 5 million (LBP 11 billion) or its equivalentin USD and are granted to co-finance new investments.Proparco is a subsidiary of “Agence Française deDéveloppement”. These loans matured during 2009 and theapplicable average interest rate was 6.17%.
(c) Borrowing from Agence Française de Développement:
Borrowing from Agence Française de Développementrepresents a 10 years line of credit for a limit of Euro10 million (LBP 22 billion) and is granted to help the smalland medium enterprises that were affected by the July andAugust 2006 Lebanon war. This loan matures during 2017and the applicable average interest rate is 3.83%.
(d) Borrowing from International Finance Corporation:
The borrowing from International Finance Corporationrepresents a 6 years line of credit for a limit of USD 25 million(LBP 38 billion) and is granted to help the Group’s customersthat were affected directly and indirectly by the July andAugust 2006 Lebanon war. This loan matures during 2013and the applicable average interest rate is 2.7%.
(e) Borrowing from EFSD-CDR:
ESFD loan is funded by European Union through theLebanese Council for Development and Reconstruction forthe purpose of lending to small size enterprises. Loanduration is for six years with a grace period of 12 monthsstarting the date of disbursement of the first tranche fromthe fund. Repayments of principal will be in quarterlyinstallments in the remaining five years. The cost of funds islinked to the benchmark of the two-year certificates ofdeposits as issued by Central Bank of Lebanon.
(f) Borrowing from Arab Trade Financing Program:
The borrowing from Arab Trade Financing Programrepresents a revolving line of credit for USD 15 million(LBP 23 billion) granted in year 2000 to support inter-Arab Trade exchanges. The applicable average interestrate is 1.46%.
December 31, 2009 December 31, 2008
LBP’000 LBP C/V of F/Cy Total LBP C/V of F/Cy Total
Borrowings from European Investment Bank (a) - 39,979,646 39,979,646 - 15,635,394 15,635,394Borrowings from Proparco (b) - - - - 1,154,557 1,154,557Borrowings from Agence Française de Développement (c) - 27,041,505 27,041,505 - 21,354,675 21,354,675Borrowings from International Finance Corporation (d) - 11,122,938 11,122,938 - 13,903,673 13,903,673ESFD-CDR loan funded by the European Union (e) 11,456,600 - 11,456,600 11,844,407 - 11,844,407Borrowings from Arab Trade Financing Program (f) - 3,621,015 3,621,015 - 1,046,205 1,046,205Soft loans from Central Bank of Lebanon (g) 318,811,712 - 318,811,712 318,811,712 - 318,811,712Accrued interest payable 399,381 387,294 786,675 392,698 496,384 889,082
TOTAL 330,667,693 82,152,398 412,820,091 331,048,817 53,590,888 384,639,705
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
105FransabankAnnual Report 2009
g) Soft Loans from Central Bank of Lebanon:This caption represents soft loans granted by the Central Bank of Lebanon in connection with the acquisition in previous yearsof problematic banks as detailed below:
December 31, 2009 December 31, 2008Interest Interest
Carrying Expense Carrying ExpenseDate Maturity Interest Value of during Interest Value of during
Granted Date Rate % Loan the Year Rate % Loan the Year
Additional soft loanagainst mergerwith Universal Bank SAL June 30, 2005 June 28, 2013 4.86 8,843,712 435,774 4.86 8,843,712 427,837
Soft loan against merger with United Bank of Saudi and Lebanon SAL August 8, 2002 August 6, 2010 6.24 289,000,000 17,979,161 6.054 289,000,000 17,787,661
Additional soft loan against merger with United Bank of Saudi and Lebanon SAL Dec. 22, 2005 Dec. 20, 2013 4.6 10,468,000 488,216 4.6 10,468,000 494,671
Additional soft loan against merger withUnited Bank of Saudi and Lebanon SAL October 25, 2007 October 25, 2012 4.82 10,500,000 513,129 4.82 10,500,000 514,535
Soft loan against merger with United Bank of Lebanon October 5, 2000 October 5, 2008 - - - 4.82 - 3,855,985
TOTAL 318,811,712 19,416,280 318,811,712 23,080,689
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
FransabankAnnual Report 2009
106
Soft loans are secured against pledged Lebanese treasury bills detailed as follows:
The remaining contractual maturities of all above borrowings are as follows:
The Group has not had any defaults of principal, interest or other breaches with respect to these borrowings.
December 31, 2009 December 31, 2008
Interest InterestIncome Income
Redemption Amortized Interest during Redemption Amortized Interest duringValue Cost Rate % the Year Value Cost Rate % the Year
Additional soft loan against merger with Universal Bank SAL 8,843,720 8,843,720 9.26 821,178 8,843,720 8,843,720 9.26 826,868
Soft loan against merger with United Bank of Saudi and Lebanon SAL 289,000,000 289,000,000 9.32 27,008,797 289,000,000 289,000,000 9.32 27,080,570
Additional soft loan against merger with United Bank of Saudi and Lebanon SAL 10,468,000 10,468,000 9.00 944,708 10,468,000 10,468,000 9.00 984,400
Additional soft loan against merger with United Bank of Saudi and Lebanon SAL 10,500,000 10,500,000 9.32 981,289 10,500,000 10,500,000 9.32 983,977
Soft loan against merger with United Bank of Lebanon - - - - - - 8.50 6,737,825
TOTAL 318,811,720 318,811,720 29,755,972 318,811,720 318,811,720 36,613,640
LBP’000 2009 2008
Less than one year 301,819,941
From 1 to 3 years 33,712,413
From 3 to 5 years 45,362,430
From 5 to 10 years 31,732,298
More than 10 years 193,009
TOTAL 412,820,091
4,870,525
292,196,185
53,900,537
30,431,333
3,241,125
384,639,705
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
Pledged Treasury Bills against
107FransabankAnnual Report 2009
Accrued interest payable is segregated as follows as at December 31:
LBP’000 2009 2008
European Investment Bank 141,346
Proparco -
Agence Française de Développement 161,188
International Finance Corporation 64,973
ESFD-CDR loan funded by the European Union 1,375
Arab Trade Financing Program 19,787
Soft loans from Central Bank of Lebanon 398,006
TOTAL 786,675
120,734
12,259
195,117
154,078
1,316
14,196
391,382
889,082
21. OTHER LIABILITIES
LBP’000 2009 2008
Current tax liability (a) 8,151,696
Deferred tax liability on change in fair value of investment securities 51,978,018
Deferred tax liability on interest 1,236,303
Deferred tax liability on share in profits of associates 13,395,289
Withholding and other taxes payable 5,513,614
Due to the Social Security National Fund 1,468,330
Checks and incoming payment orders in course of settlement 28,580,450
Accrued expenses 29,788,630
Accrued interest payable - Cash contribution to capital 3,282
Derivative liabilities held for risk management (b) 42,954
Provision for early redemption of available for sale investments (Note 10) 1,380,268
Provision for early redemption of held to maturity investments (Note 10) 5,488,017
Financial guarantee contracts issued 1,627,290
Effect of exchange rates changes on structural position 2,493,015
Sundry accounts payable 47,471,810
TOTAL 198,618,966
11,007,158
3,563,448
1,270,762
11,485,896
4,393,053
1,304,851
17,913,804
28,839,353
3,273
-
1,206,185
4,317,283
1,144,756
2,212,804
59,859,822
148,522,448
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
108
22. PROVISIONS
(a) Current tax liability is computed as follows:
(b) The derivative liabilities held for risk management as at December 31, 2009 represent forward contract swapdesignated as cash flow hedge.
The Group used forward contract swaps to manage its exposure to exchange rate movements on forwardcontracts with National bank of the Republic of Belarus by purchasing foreign currencies against buying BelarussianRuble. At December 31, 2009 currencies with notional principal amounts of BYR 6.8 billion were designated as hedgesof future cash flows against Euro 1.5 million.
Provisions consist of the following:
LBP’000 2009 2008
Profit before tax 191,586,290
Income tax based on national applicable rates 29,607,327
Effect of non-deductible expense and non taxable income (921,266)
Income tax expense 28,686,061
Less: Tax paid in advance (21,881,049)
Net effect of deferred tax assets (Note 16 (c)) 1,322,648
Effect of exchange rates changes 24,036
CURRENT TAX PAYABLE 8,151,696
165,344,832
25,182,833
1,483,296
26,666,129
(16,118,650)
620,802
(161,123)
11,007,158
LBP’000 2009 2008
Provision for staff termination indemnities 17,804,543
Provision for contingencies 20,080,252
Provision for loss on foreign currency position 87,432
TOTAL 37,972,227
The movement of provision for staff termination indemnities is as follows:
LBP’000 2009 2008
Balance January 1 15,561,131
Additions - Employees 3,229,089
Additions - Lawyers 60,362
Additions in business combination (Bank Lati SAL) 185,481
Additions - Legal expenses 76,122
Transfer from other liabilities -
Settlements (1,307,642)
BALANCE DECEMBER 31 17,804,543
11,913,372
4,637,844
84,877
-
-
226,125
(1,301,087)
15,561,131
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
109FransabankAnnual Report 2009
15,561,131
21,567,707
247,932
37,376,770
The movement of the provision for contingencies was as follows:
LBP’000 2009 2008
Balance January 1 21,567,707
Additions 1,950,434
Additions in business combination (Fransabank OJSC) 71,643
Settlements (1,665,150)
Write-back (1,865,605)
Transfer from collective provision (Note 9) -
Effect of exchange rates changes 21,223
BALANCE DECEMBER 31 20,080,252
14,012,954
1,990,260
-
(515,843)
(60,300)
6,234,251
(93,615)
21,567,707
26. RESERVES
Reserves consist of the following:
LBP’000 2009 2008
Legal reserve 28,406,857
Reserve for general banking risks 43,573,937
Reserve for assets acquired in satisfaction of loans – Note 13 22,286,706
Owned buildings revaluation reserve 26,140,614
Foreign currency translation reserve 3,406,833
TOTAL 123,814,947
15,937,412
36,996,586
17,122,647
25,914,110
214,285
96,185,040
23. SHARE CAPITALAt December 31, 2009 and 2008, the authorized ordinary share capital of the Bank was LBP 420 billion consisting of 21,000,000 fully paid shares of LBP 20,000 each.
25. PREFERENCE SHARESOn June 30, 2008 and upon the decision taken in the shareholders’ General Assembly meeting held on March 28, 2008 andthe approval of the Central Bank of Lebanon dated March 15, 2008, the Bank issued 500,000 non-cumulative convertibleredeemable series “A” preference shares with nominal value of LBP 20,000 each at an issue price of USD 200 per share.
The shareholders’ cash contribution to capital is for a total amount of LBP 17.1 billion (USD 11,352,494) as at December 31,2009 and 2008 and it is subject to a yearly interest of 7% payable from unrestricted profits after securing the approval of CentralBank of Lebanon.
This sort of financial instrument is accounted for in foreign currency and therefore allows hedging against nationalcurrency exchange fluctuation.
24. SHAREHOLDERS’ CASH CONTRIBUTION TO CAPITAL
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
110
LBP’000 2009 2008
Unrealized gain on Lebanese Treasury bills 49,337,049
Unrealized gain/(loss) Lebanese Government bonds 62,915,013
Unrealized loss Banks Eurobonds (109,083)
Unrealized gain on certificates of deposit issued by Central Bank of Lebanon 229,377,467
Unrealized gain/(loss) on certificates of deposit issued by banks 2,614,561
Unrealized loss on corporate bonds (126,501)
Unrealized gain on equity securities 33,471,316
Unrealized loss on asset-backed securities (1,710)
Other (471,264)
Less: Deferred tax (51,978,018)
Total 325,028,830
Non-controlling interests share (20,632,360)
OWNERS OF THE BANK'S SHARE 304,396,470
15,962,905
(30,860,481)
-
38,966,390
(1,509,280)
-
21,521,721
-
(471,264)
(3,563,448)
40,046,543
(3,077,980)
36,968,563
27. SPECIAL RESERVEBased on item “4” paragraph “f” of article 1 of the intermediary circular 41, the Bank has allocated during 2009 an amountof LBP 2.5 billion to special reserve for the uncovered portion of the doubtful debts outstanding as at June 30, 2003.
28. CUMULATIVE CHANGE IN FAIR VALUE OF INVESTMENT SECURITIES
The legal reserve is constituted in conformity with therequirements of the Lebanese Money and Credit Code onthe basis of 10% of net profit. This reserve is not availablefor distribution.
The reserve for general banking risks is constituted according to local banking regulations, from net profit, onthe basis of a minimum of 2 per mil and a maximum of 3 per
mil of the total risk weighted assets, off-financial position riskand global exchange position as defined for the computation of the solvency ratio at year-end. This reserveis constituted in Lebanese Pound and in foreign currenciesin proportion to the composition of the Group’s total riskweighted assets and off-financial position items. Thisreserve is not available for distribution.
The cumulative change in fair value of available for sale investment securities consists of the following:
The cumulative change in fair value as reflected above was adjusted for the effect of fair value adjustment ofinvestment securities acquired through the business combination with BLC Bank SAL during 2007.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
111FransabankAnnual Report 2009
LBP’000 2009 2008
Capital 163,054,006
Change in fair value of available for sale investment securities 20,632,360
Reserves and retained earnings 14,923,666
Effect of acquisition of Fransabank OJSC 2,726,744
Profit for the year 12,355,000
TOTAL 213,691,776
103,847,359
3,077,980
9,945,729
-
8,268,570
125,139,638
29. NON-CONTROLLING INTERESTS
30. PROFIT FOR THE YEAR
The consolidated income is allocated as follows between the Bank and its subsidiaries:
Non-controlling interests represent the minority share in the subsidiaries’ equities as follows:
Owners of Non-Controllingthe Bank Interests
Share Share Total
Income of the Bank 90,323,298 - 90,323,298
Income of subsidiaries:
Fransa Invest Bank SAL 13,844,356 368 13,844,724
Fransabank France SA 1,599,548 1,067,339 2,666,887
Lebanese Leasing Company SAL 708,113 101,437 809,550
Switch and Electronics Services SAL 270,093 1,085 271,178
Sogefon SAL (192,675) (6) (192,681)
Fransabank El-Djazaïr SPA 1,499,234 703,907 2,203,141
Fransabank Insurance Services SAL 1,565,614 4,711 1,570,325
BLC Bank SAL and subsidiaries 38,527,364 13,089,003 51,616,367
Express SARL 5,138 86 5,224
Fransabank Syria (2,016,689) (2,184,746) (4,201,435)
Fransabank OJSC 3,529,932 453,719 3,983,651
Deferred tax on profit from associates and subsidiaries (4,903,123) (881,903) (5,785,026)
TOTAL 144,760,203 12,355,000 157,115,203
Year ended December 31, 2009
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
FransabankAnnual Report 2009
112
Owners of Non-Controllingthe Bank Interests
Share Share Total
Income of the Bank 95,807,388 - 95,807,388
Income of subsidiaries:
Fransa Invest Bank SAL 5,828,812 198 5,829,010
Fransabank France SA 873,863 583,107 1,456,970
Lebanese Leasing Company SAL 733,513 129,693 863,206
Switch and Electronics Services SAL 241,804 971 242,775
Sogefon SAL (1,346,201) (5,481) (1,351,682)
Fransabank El-Djazaïr SPA 2,381,018 1,122,540 3,503,558
Fransabank Insurance Services SAL 902,433 2,715 905,148
BLC Bank SAL and subsidiaries 25,544,647 9,177,144 34,721,791
Express SARL (186,805) (92,008) (278,813)
Fransabank Syria (1,449,911) (1,570,737) (3,020,648)
Deferred tax on profit from associates and subsidiaries (4,437,962) (1,079,572) (5,517,534)
TOTAL 124,892,599 8,268,570 133,161,169
Year ended - December 31, 2008
LBP’000 2009 2008
LBP 1,000 per Ordinary share paid by the Bank paid from 2008net income (LBP 1,000 during 2008 paid from 2007 net income) 21,000,000
USD 10 (LBP 15,075) per Preference share 7,537,500
LBP 86 per Ordinary share paid by BLC Bank SAL to its non-controlling interests 3,687,105
21,000,000
-
-
31. DIVIDENDS PAID
The following dividends were declared and paid by the Group:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
113FransabankAnnual Report 2009
LBP’000 2009 2008
Deposits with Central Banks 38,620,368
Deposits with banks and financial institutions 13,482,205
Deposits with related party banks and financial institutions 102,888
Available for sale investment securities 464,769,001
Held to maturity investment securities 101,947,594
Held to maturity investment securities against soft loan 29,755,972
Loans to banks 2,906,973
Loans to related party banks 905,093
Loans and advances to customers 215,776,364
Loans and advances to related parties 10,394,087
Interest recognized on impaired loans and advances to customers 8,406,228
Interest recognized on impaired loans transferred to off financial position 747,018
Other interest 127,910
TOTAL 887,941,701
94,077,168
31,433,538
17,124
295,908,313
144,664,478
36,612,641
2,585,801
1,080,328
181,487,216
8,081,950
8,803,471
159,912
173,989
805,085,929
32. INTEREST INCOME
Interest income realized on impaired loans and advances to customers represent recoveries of interest. Accruedinterest on impaired loans and advances is not recognized until recovery / rescheduling agreements are signed withcustomers.
Interest income on trading portfolio is included under net interest and gain on trading portfolio. (Note 36).
LBP’000 2009 2008
Deposits and borrowings from banks and financial institutions 3,231,147
Deposits and borrowings from related party banks and financial institutions -
Customers’ deposits at amortized cost 528,619,010
Related parties’ deposits at amortized cost 16,597,469
Other borrowings (Note 20) 22,308,991
Borrowings from related party (Note 20) -
Shareholders’ cash contribution to capital (Note 24) 1,197,972
TOTAL 571,954,589
3,066,181
73,531
469,168,092
15,153,306
25,391,322
834,522
1,197,972
514,884,926
33. INTEREST EXPENSE
Interest expense on customers’ accounts designated at fair value through profit or loss is included under net interest and gainon financial instruments designated at fair value through profit or loss. (Note 37).
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
114
LBP’000 2009 2008
Commission on documentary credits 12,192,641
Commission on letters of guarantee 4,960,117
Service fees on customers’ transactions 54,863,946
Commission on transactions with banks 53,919
Asset management fees 2,681,329
TOTAL 74,751,952
11,113,889
3,862,669
46,101,100
94,967
1,332,864
62,505,489
34. FEE AND COMMISSION INCOME
This caption consists of the following:
Fee and commission income include fees and commission to related parties with immaterial amounts.
LBP’000 2009 2008
Commission on transactions with banks and financial institutions 2,592,168
Other (including commissions on customers' transactions) 20,480,441
TOTAL 23,072,609
2,284,720
17,987,531
20,272,251
35. FEE AND COMMISSION EXPENSE
This caption consists of the following:
Fees and commission expenses include fees and commission to related parties with immaterial amounts.
LBP’000 2009 2008
Interest income 5,318,688
Dividends received 1,050,973
Net unrealized gain / (loss) 10,889,336
Net realized gain 5,691
TOTAL 17,264,688
5,394,092
1,025,871
(5,252,641)
280,560
1,447,882
36. NET INTEREST AND OTHER GAIN / LOSS ON TRADING PORTFOLIO
This caption consists of the following:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
115FransabankAnnual Report 2009
LBP’000 2009 2008
Interest expense on customers’ accounts designatedat fair value through profit or loss (9,887,123)
Fee income on customers’ accounts designatedat fair value through profit or loss 31,562
TOTAL (9,855,561)
(9,259,714)
67,753(9,191,961)
37. NET INTEREST AND OTHER GAIN / LOSS ON FINANCIAL INSTRUMENTSDESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
This caption consists of the following:
LBP’000 2009 2008
Gain on sale of available for sale securities 3,425,253
Dividends received on investment securities 5,710,871
Gain from sale of subsidiary -
Gain from disposal of part of equity interest in an associate (Note 12) 14,100
Share in profits of associates (Note 12) 7,579,190
Foreign exchange gain 10,395,796
Other operating income - Net 19,456,150
TOTAL 46,581,360
1,015,442
5,795,642
27,370,728
-
6,268,558
9,017,944
12,624,024
62,092,338
38. OTHER OPERATING INCOME
This caption consists of the following:
39. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The guarantees and standby letters of credit and the documentary and commercial letters of credit representfinancial instruments with contractual amountsrepresenting credit risk. The guarantees and standby letters of credit represent irrevocable assurances that theGroup will make payments in the event that a customercan not meet its obligations to third parties and are not different from loans and advances on the statement of
financial position. However, documentary and commercialletters of credit, which represent written undertakings bythe Group on behalf of a customer authorizing a thirdparty to draw drafts on the Group up to a stipulatedamount under specific terms and conditions, are collateralized by the underlying shipments documents ofgoods to which they relate and, therefore, have significantly less risks.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
Other operating income includes an amount of LBP 2.9 billion representing income recognized from the increase of investmentin "Fransabank OJSC".
FransabankAnnual Report 2009
116
LBP’000 2009 2008
Shareholders, directors and other key management personneland close family members:Direct facilities & credit balances
Secured loans and advances 135,982,095Unsecured loans and advances 1,774,356Deposits at amortized cost 179,829,978
Indirect facilitiesLetters of guarantees 1,521,113
Associated companies:Term placement with banks 24,839,425Loans to banks 2,431,596Deposits from banks 110,751Money market deposits from banks 30,736,482Direct facilities & credit balances
Secured loans and advances 13,560,952Unsecured loans and advances 18,793,873Deposits at amortized cost 46,628,000
Indirect facilitiesLetters of credit 2,543,108Letters of guarantee 625,543Acceptances -
Accrued interest receivable:Term placement with banks 3,534Loans to banks 75,515Loans and advances 777,414
Accrued interest payable:Money market deposits from banks 10,601Deposits at amortized cost 1,496,403Cash contribution to capital 3,282
Income statement accounts:Interest income from deposits with banks 102,888Interest income from loans to banks 905,093Interest income from loans and advances 10,394,087Interest expense on deposits from banks -Interest expense on deposits at amortized cost 16,597,469Interest expense on borrowings from related parties -Interest expense on cash contribution to capital 1,197,972
141,562,8556,771,896
160,123,600
1,519,229
45,942,92025,355,747
947,78742,992,484
-6,067,377
48,501,712
727,6287,296,1956,283,591
16,441573,370145,287
70,5971,170,268
3,273
17,1241,080,3288,081,950
73,53115,153,306
834,5221,197,972
40. BALANCES / TRANSACTIONS WITH RELATED PARTIES
In the ordinary course of its activities, the Group conductstransactions with related parties including shareholders,directors, subsidiaries and associates. Also, the Group conducts sale and purchase transactions of investment
securities with subsidiary banks and these transactions aremade at net book value of the financial instruments.Balances with related parties as at year-end consist of thefollowing:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
117FransabankAnnual Report 2009
Interest rates charged on balances outstanding are thesame rates that would be charged in an arm’s transaction.Secured loans and advances are covered by real estatemortgage to the extent of LBP 24.7 billion (LBP 1.5 billionin 2008) and by pledged deposits of the respectiveborrowers to the extent of LBP 144.6 billion (LBP 143.8 billion
in 2008) and by shares pledged to the extent of LBP 10.4 billion.The remunerations of executive management amountedto LBP 22.1 billion during 2009 (LBP 19.3 billion during2008). This includes accrued remuneration payable to thechairman and vice chairman calculated on the basis of 8%of profit before tax.
Time deposits with and from Central Banks and banks and financial institutions represent inter-bank placements andborrowings with an original term of 90 days or less.
LBP’000 2009 2008
Cash 81,336,245
Current accounts with Central Banks 206,453,846
Time deposits with Central Banks 752,221,310
Purchased checks 12,458,021
Current accounts with banks and financial institutions 113,249,966
Time deposits with banks and financial institutions 1,252,160,873
Demand deposits from banks (85,133,870)
Time deposits from banks (167,217,665)
TOTAL 2,165,528,726
80,781,336
97,409,281
812,828,090
10,545,218
61,873,301
790,242,984
(68,672,590)
(65,053,021)
1,719,954,599
41. CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the cash flows statement consist of the following:
Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013
Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013
Treasury bills held to maturity 289,000,000 Soft loan 289,000,000 August 6, 2010
Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012
TOTAL 318,811,720 318,811,712
42. COLLATERAL GIVEN
Financial assets given as collateral are as follows:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
December 31, 2009
LBP’000
FransabankAnnual Report 2009
118
Redemption valueof Pledged Assets
Nature ofFacility
Amount ofFacility
MaturityDate
Corresponding Facilities
Deposit with bank 3,043,251 Letters of guarantee 2,864,250 July 2, 2009
Deposit with bank 160,420 Letters of guarantee 150,750 July 2, 2009
Deposit with bank 842,166 Letters of guarantee 366,298 April & July 31, 2009
Treasury bills held to maturity 8,843,710 8,843,712 June 28, 2013
Treasury bills held to maturity 10,468,000 10,468,000 December 20, 2013
Treasury bills held to maturity 289,000,000 289,000,000 August 6, 2010
Treasury bills held to maturity 10,500,000 10,500,000 October 25, 2012
TOTAL 322,857,547 322,193,010
43. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS
Risk Management Framework
The Group is exposed to different types of risk mainlycredit risk, liquidity risk, market risk and operational risk.These risks are inherent in the Group’s activities but aremanaged through an ongoing process of identification,measurement and monitoring, subject to risk limits.The Board of Directors has overall responsibility for theestablishment and oversight of the Group’s RiskManagement framework. The Chief Risk Officer and othermanagers also have certain responsibilities in supportingFransabank Group’s risk management and promotingcompliance with its risk appetite.
Board of Directors
Within the risk management framework, the Board ofDirectors is ultimately responsible for defining the strate-gic objectives, identifying and setting the level of tolera-ble risks to which the Group is exposed, approving theRisk Management policies and procedures, and takingcorrective measures to improve the risk managementprocess.
Risk Management Division
The Risk Management Division, which is headed by theChief Risk Officer, is independent of the business lines. Itworks closely with the Risk Management Committee andSenior Management to assist them in managing theGroup's risks and ensuring that proper controls are set upin order to highlight risks and mitigate them.In addition to the above, the Risk Management Division
ensures that the capital adequacy ratio is adequate tocover credit, market and operational risks as defined bythe Central Bank of Lebanon and the Banking ControlCommission, as well as, it monitors compliance with policies, procedures and risk limits and accordinglyreports to the Board Risk Management Committee withappropriate recommendations if necessary.
Internal Audit Department
Risk management processes are independently reviewedby the Internal Audit Department, at least annually. Thisreview includes examination of both adequacy andeffectiveness of risk control procedures.
Credit Risk
Credit risk is most simply defined as the potential that abank’s borrower or counterparties fail to meet theirobligations in accordance with agreed terms. One of theprimary goals of credit risk management is to maximizeGroup’s risk-adjusted rate of return by maintaining creditrisk exposure within acceptable parameters.
Oversight of credit risk starts at the level of the ExecutiveCommittee, which is responsible for: (1) deciding onstrategies and credit policies within the guidance providedby the Group’s main regulator (Central Bank of Lebanon),(2) evaluating the quality of the credit portfolio based onapplicable policies and procedures and (3) evaluatingexpansion projects.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
LBP’000
December 31, 2008
119FransabankAnnual Report 2009
Redemption valueof Pledged Assets
Nature ofFacility
Amount ofFacility
MaturityDate
Corresponding Facilities
Soft loan
Soft loan
Soft loan
Soft loan
Management of credit risk mainly includes:
a) Establishing and developing credit policies namelywith respect to the authorization structure for new andexisting customers, real and personal guaranteesrequirements, procedures and templates for creditassessment, loans grading and checklist ofdocuments to be collected from customers.
b) Providing guidance for compliance with regulatoryrequirements while assessing credit risk at theborrower’s level.
c) Assessing credit risk for new and existing facilitiesthrough conducting a credit review that tackles amongother things following up the accounts’performance, recurring over-limits and counterparty’sfinancial situation.
d) Providing adequate controls over risk by ensuring thatcredit exposures are within levels consistent withprudential threshold limits stipulated by Central Bankof Lebanon Circular No. 48 dated August 1998, as wellas internal limits.
Retail Lending
Different retail credit applications are used for eachproduct type which are submitted by sales channels andanalyzed centrally based on the set policies andprocedures. These comprise the following:
• Borrower’s eligibility criteria (i.e., age, nationality, yearsof experience, monthly income / salary, etc…)
• Required documents (i.e., income declaration, proof ofresidence, etc…)
• General conditions ( i.e., monthly installment over monthlyincome ratio, financing ratio)
• Collateral
Loan applications are approved by the Retail & HousingCommittee which is composed of the Head of Product andCredit Manager. The Head of the Retail Risk Departmentapproves or rejects the request in case of un-unanimous agreement and/or deviations fromstandard credit policies and procedures.
The Retail & Housing Committee is held on a daily basis tocater for prompt feedback to clients. Different authority levels are specified for approving each producttypes depending on loan amount. The Collection Unit
handles delinquency issues. The main purpose ofcreating this unit in 2004 is to centralize the follow-up ofdelinquent retail loans. Clients in default are contactedwithin 7 days after the maturity becomes due.Rescheduling, extension of payment, warning letters,salary domiciliation and other means of payment arrange-ments are frequently considered by the collection staff toprevent downgrading a loan, eventually subject to a legalsuit.
The efficiency of the collection unit is evidenced by a2.14% infection rate during 2009 (2.76% during 2008).
Corporate and SME Lending
The Corporate Banking Department processes creditapplications with total combined facilities above theequivalent of USD 2 million and/or turnover aboveUSD 5 million. These applications are reviewed and completed by the Relationship Manager and forwardedto an analyst within the department who proceeds with afull review of applications on hand. Credit Reviews arethen sent to Corporate Banking Management for comments and thereafter to the Credit Appraisal unit fora second opinion prior to their discussion and approvalby the Credit Committee.
A company is classified Small and Medium enterprise(SME) as long as its annual sales turnover does notexceed USD 5 million and/or its total exposure is withinUSD 2 million.
Measurement of Credit Risk
Loans and Advances to Customers
In measuring credit risk of loans and advances, the Bankconsiders the following:
• Ability of the counterparty to honor its contractualobligations based on the account’s performance, recurring overdues and related reasons, the counterparty’s financial position and effect thereto ofthe economic environment and market conditions;
• Exposure levels of the counterparty and unutilizedcredit limits granted;
• Exposure levels of the counterparty with other banks;
• Purpose of the credit facilities granted to the counterparty and conformity of utilization by thecounterparty.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
120
In accordance with Central Bank of Lebanon circular No.58 the Group’s customers are categorized into five classifications as described below:
Classification Description
1 Standard monitoring Indicates that borrowers are able to honor their commitments andthere is no reason to doubt their ability to repay principal and inter-est in full and in a timely manner. Some of the indicators related to this category are: continuous cash inflows, timely submission of financial statements and / or sufficient collateral.
2 Special monitoring Indicates that borrowers are able to honor their current commitments, although repayment may be adversely affected byspecific factors. Such borrowers are subject to special monitoring.Major characteristics of this category are: inadequate loan information such as annual financial statements availability,condition of and control over collateral held is questionable and /or declining profitability.
3 Sub-standard Indicates that borrowers' ability to serve their commitments is inquestion. In this context, borrowers cannot depend on theirnormal business revenues to pay back principal and interest, i.e.losses may occur. The main characteristics of this category aresevere decline in profitability and in cash inflows. In this case, theGroup considers interests and commissions as unrealized but doesnot establish an allowance for impairment.
4 Doubtful Indicates that borrowers cannot honor their commitments in fulland on time. Significant losses will be incurred even collateral heldis invoked due to payment overdues. The net realizable value ofcollateral held is insufficient to cover payment ofprincipal and interest. In this case, the Group considers interestsand commissions as unrealized and established an allowance forimpairment accordingly.
5 Bad Indicates that commitments cannot be covered even after taking allpossible measures and resorting to necessary legalprocedures. Some signals of this category would be inexistence ofcollateral low value of collateral and / or, losing contact with theborrower. In this case, the bank considers interests andcommissions as unrealized, ceases their accumulation, andprovides the whole amount of the exposure’s balance.
(Watch list)
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
121FransabankAnnual Report 2009
LBP’000 2009 2008
Less than 30 days 5,128,746
Between 30-60 days 9,577,363
Between 60-90 days 1,010,026
Between 90-180 days 1,667,481
Beyond 180 days 7,988,203
TOTAL 25,371,819
12,710,754
12,367,140
30,505,048
3,040,997
8,787,498
67,411,437
Loans’ classifications are assessed and updated regularly.
Note 9 discloses the distribution of loans and advances to customers by classification.
Most of customers’ exposures represent credit facilities granted to corporations which do not have external credit rating.
Debt Investment Securities and Other Bills
The risk of the debt instruments included in the investmentportfolio relates mainly to sovereign risk (including CentralBank of Lebanon) (96% in 2009 and 2008).
Limiting of Credit Risk
The Bank structures the levels of credit risk undertaken byplacing limits on the amount of risk accepted in relation toone borrower, or groups of borrowers, and to geographicaland industry segments . Such risks are monitored on arevolving basis and subject to an annual or more frequentreview, when considered necessary.
Exposures to any one borrower including banks are furtherrestricted by sub-limits covering on and off-financialposition exposures. Actual exposures against limits aremonitored on a regular basis.
In addition to the above, the Group’s lead regulator (CentralBank of Lebanon – BDL) and the Banking ControlCommission (BCC) have set up the following regulationswith respect to limits of credit risks:
• With respect to loans and advances to customers, BDLbasic circular No.81 provides the following:
- The Board of Directors should be periodicallyinformed about single borrowers (or group of relatedborrowers) with total facilities in excess ofUSD 1 million or equivalent.
- Facilities granted to related parties should not exceed5% of the Bank’s capital base. This percentage falls to2% in case the Bank does not abide with article 152 ofthe Lebanese Code of Money and Credit.
- Allowed temporary and accidental over-limits shouldnot exceed 10% of authorized overdraft limit.
• BDL circular No.48 and BCC circular No.258 (issuedduring December 2007) specify the ceiling for the creditfacilities and regulations related to country limits andexposures per customer or group of customers.
• BDL circular No.51 states that facilities granted against thepledge of shares, in case the purpose is acquiring saidshares, should not exceed 50% of value of listed shares.
Standard and special monitoring loans and advances include overdue accounts but not impaired as follows:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
122
Concentration of Credit Risk by Geographical Location:
Middle East NorthLBP’000 Lebanon and Africa America Europe Gulf Other Total
Financial and trading assets:
Cash and Central Banks 2,287,568,583 349,978,650 - 15,349,835 - - 2,652,897,068
Deposits with banks and financial institutions 63,416,987 316,827,727 42,100,261 999,674,070 71,141,248 5,991,715 1,499,152,008
Trading assets 92,206,753 - - 3,445,677 168,959 - 95,821,389
Loans to banks 25,638,716 2,507,113 - 13,882,743 - 16,788,942 58,817,514
Loans and advances to customers 2,893,187,614 357,003,230 512,569 90,528,504 89,228,059 50,282,228 3,480,742,204
Available for sale investments 6,315,600,764 335,288 3,367,154 25,773,125 14,269,981 - 6,359,346,312
Held to maturity investments 1,408,193,258 - - 3,580,556 - - 1,411,773,814
Derivative assets held for risk management 1,125,787 10,344 5,238 22,112 6,119 880 1,170,480
TOTAL 13,086,938,462 1,026,662,352 45,985,222 1,152,256,622 174,814,366 73,063,765 15,559,720,789
Financial liabilities:
Deposits and borrowingsfrom banks 50,957,787 142,218,363 7,593,433 94,520,525 34,535,735 721,304 330,547,147
Liabilities designated at fair value throughprofit or loss 155,861,816 2,019,430 362,028 1,689,132 2,670,658 109,336 162,712,400
Customers' accounts at amortized cost 11,098,049,241 699,254,622 34,080,708 562,003,120 942,020,273 89,003,854 13,424,411,818
Other borrowings 330,667,693 - 11,187,911 67,323,685 3,640,802 - 412,820,091
Derivative liabilities held for risk management - - - 42,954 - - 42,954
Financial guarantee contracts issued 1,627,290 - - - - - 1,627,290
TOTAL 11,637,163,827 843,492,415 53,224,080 725,579,416 982,867,468 89,834,494 14,332,161,700
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
December 31, 2009
123FransabankAnnual Report 2009
Middle East NorthLBP’000 Lebanon and Africa America Europe Gulf Other Total
Financial and trading assets:
Cash and Central Banks 2,558,064,399 102,850,917 - 6,235,503 - - 2,667,150,819
Deposits with banks and financial institutions 47,699,543 121,518,796 14,854,081 613,194,650 116,364,533 939,065 914,570,668
Trading assets 82,888,872 - - 2,438,006 212,993 - 85,539,871
Loans to banks 27,040,397 25,929,117 - - - 16,620,222 69,589,736
Loans and advances to customers 2,253,102,784 202,974,242 376,678 5,545,586 40,277,626 83,911,362 2,586,188,278
Available for sale investments 4,002,975,584 338,423 1,710,128 90,988 872,173 - 4,005,987,296
Held to maturity investments 1,761,495,500 - - 370,359 - - 1,761,865,859
Derivative assets held for risk management 2,800,211 17,151 11,065 22,130 34,855 - 2,885,412
TOTAL 10,736,067,290 453,628,646 16,951,952 627,897,222 157,762,180 101,470,649 12,093,777,939
Financial liabilities:
Deposits and borrowingsfrom banks 23,338,303 20,279,096 5,514,724 82,716,759 19,957,213 4,999,165 156,805,260
Liabilities designated at fair value through profit or loss 156,636,125 1,888,373 339,248 1,658,049 2,988,173 77,817 163,587,785
Customers' accounts at amortized cost 9,159,641,914 376,086,508 26,016,398 252,532,946 750,264,242 49,957,446 10,614,499,454
Other borrowings 331,048,817 - 14,098,789 38,431,698 1,060,401 - 384,639,705
Financial guarantee contracts issued 1,144,756 - - - - - 1,144,756
TOTAL 9,671,809,915 398,253,977 45,969,159 375,339,452 774,270,029 55,034,428 11,320,676,960
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
December 31, 2008
FransabankAnnual Report 2009
124
Other specific control and mitigation measures are outlined below:
a) Collateral:
The principal collateral types for loans and advances consist of mortgages over real estate properties, bank guarantees,business assets including inventories and accounts receivable.
The Group will seek additional collateral from the counterparty as soon as impairment indicators are noticed for therelevant individual loans and advances.
b) Netting arrangements:
The Group enters into netting arrangements when with counterparties having a significant volume of transactions inorder to restrict its exposure to credit losses. These arrangements do not generally result in an offset of assets andliabilities balances in the statement of financial position.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
125FransabankAnnual Report 2009
December 31, 2009
LBP’000
Standard and special monitoring 3,343,204,140 - 3,343,204,140 576,665,636
Sub-standard (including restructured debts) 27,430,820 - 27,430,820 3,488,732
Doubtful (including restructured debts) 295,669,337 (178,653,975) 117,015,362 2,379,493
Loss (including restructured debts) 45,290,566 (45,290,566) - 2,349,577
Loan portfolio purchased 3,677,874 - 3,677,874 -
Allowance for collectively impaired loans - (10,585,992) (10,585,992) -
TOTAL 3,715,272,737 (234,530,533) 3,480,742,204 584,883,438
December 31, 2008
LBP’000
Standard and special monitoring 2,438,987,773 - 2,438,987,773 566,644,094
Sub-standard (including restructured debts) 20,407,690 - 20,407,690 1,534,740
Doubtful (including restructured debts) 334,830,760 (202,712,021) 132,118,739 2,370,360
Loss (including restructured debts) 49,062,213 (49,062,213) - 1,062
Loan portfolio purchased 4,562,025 - 4,562,025 -
Allowance for collectively impaired loans - (9,887,949) (9,887,949) -
TOTAL 2,847,850,461 (261,662,183) 2,586,188,278 570,550,256
Collateral Held Against Loans and Advances to Customers:
Market RisksMarket risk is defined as the risk of losses in on and off-financial position, arising from adverse movements in market prices.The risks subject to Market Risk include: Interest Rate Risk and Equity Risk in the trading book, Foreign Exchange Risk andCommodities Risk.
The overall authority for market risk is vested in ALCO.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
GrossExposure Netof UnrealizedInterest and
Discount
Allowancefor
ImpairmentNet
ExposurePledgedFunds
GrossExposure Netof UnrealizedInterest and
Discount
Allowancefor
ImpairmentNet
ExposurePledgedFunds
FransabankAnnual Report 2009
126
Fair Value of Collateral held
125,526,453 1,454,582,130 106,771,923 3,204,977 646,397,750 2,913,148,869 1,882,695,047
388,628 55,309,509 183,789 - 726,971 60,097,629 24,422,169
128,008 257,997,395 5,224 - 1,297,908 261,808,028 166,306,045
70,769 12,265,815 13,500 - 1,655,410 16,355,071 10,027,687
- - - - - - -
- - - - - - -
126,113,858 1,780,154,849 106,974,436 3,204,977 650,078,039 3,251,409,597 2,083,450,948
Fair Value of Collateral held
161,309,871 905,228,490 23,623,339 1,422,198 274,876,908 1,933,104,900 1,375,316,253
920,642 46,847,675 185,815 - 842,753 50,331,625 24,826,149
128,008 261,619,343 101,437 - 317,686 264,536,834 178,669,682
- 8,080,235 13,500 - 1,797,978 9,892,775 5,238,134
- - - - - - -
- - - - - - -
162,358,521 1,221,775,743 23,924,091 1,422,198 277,835,325 2,257,866,134 1,584,050,218
Management of Market Risks
Trading PortfolioA Trading Book consists of positions in financialinstru-ments held either with trading intent or in order tohedge other elements of the trading book. The market riskfor trading book is managed and monitored using theStandardized Measurement Method.
Foreign Exchange RiskThe capital charge for foreign exchange risk applies to for-eign exchange risk of the entire business. Two processesare used to calculate the capital charge for foreignexchange risk. The first is to measure the bank’s netopen position in each currency. The second is to meas-ure the risks inherent in the bank’s mix of long and shortpositions in different currencies. The capital charge is 8%of the higher of either the net long currency position or thenet short currency position.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
BankGuarantees
& Kafalat
Mortgageon
PropertiesEquity
SecuritiesDebts
Securities Others
TotalCollateral
Held
Lesser ofIndividualExposureor Total
Collateral
BankGuarantees
& Kafalat
Mortgageon
PropertiesEquity
SecuritiesDebts
Securities Others
TotalCollateral
Held
Lesser ofIndividualExposureor Total
Collateral
127FransabankAnnual Report 2009
Assets and liabilities are segregated as follows by major currencies:
December 31, 2009
LBP’000 LBP USD Euro Other Total
ASSETSCash and Central Banks 944,046,626 1,266,250,293 93,044,195 349,555,954 2,652,897,068Deposits with banks andfinancial institutions 35,005,613 672,127,139 531,449,451 260,569,805 1,499,152,008Trading assets 4,971,306 75,301,284 13,996,447 1,552,352 95,821,389Loans to banks 25,638,719 8,386,361 16,788,941 8,003,493 58,817,514Loans and advances to customers 663,337,387 2,456,056,613 183,099,937 178,248,267 3,480,742,204Available for sale investments 4,665,674,424 1,527,327,486 156,039,721 10,304,681 6,359,346,312Held to maturity investments 366,364,780 988,608,002 56,801,032 - 1,411,773,814Customers' liability under acceptances 299,999 90,243,948 12,328,252 10,610,040 113,482,239Investments in associates 10,336,794 36,702,558 - - 47,039,352Assets acquired in satisfaction of loans 63,752,591 125,348,949 - - 189,101,540Property and equipment 169,460,072 (1,028,869) 151,282 23,751,249 192,333,734Intangible assets 53,614,177 57,458 37,633 1,942,007 55,651,275Other assets 59,161,708 62,200,356 2,608,228 19,901,736 143,872,028
TOTAL ASSETS 7,061,664,196 7,307,581,578 1,066,345,119 864,439,584 16,300,030,477
LIABILITIESDeposits and borrowings from banks 34,007,884 149,961,870 16,257,663 130,319,730 330,547,147Liabilities designated at fair valuethrough profit or loss 2,256,269 160,456,131 - - 162,712,400Customers' accounts at amortized cost 5,331,543,118 6,750,772,945 939,684,726 402,411,029 13,424,411,818Customers' acceptance liability 299,999 90,243,948 12,328,252 10,610,040 113,482,239Other borrowings 330,667,693 53,331,447 28,820,951 - 412,820,091Other liabilities 105,003,808 65,584,396 15,167,542 12,863,220 198,618,966Provisions 20,021,753 14,945,224 485,988 2,519,262 37,972,227TOTAL LIABILITIES 5,823,800,524 7,285,295,961 1,012,745,122 558,723,281 14,680,564,888Currencies to be received 1,454,868 347,242,057 20,874,489 5,942,326 375,513,740Currencies to be delivered (300,890,480) (26,608,332) (20,331,022) (25,652,805) (373,482,639)
(299,435,612) 320,633,725 543,467 (19,710,479) 2,031,101
NET ON-BALANCE SHEET FINANCIAL POSITION 938,428,060 342,919,342 54,143,464 286,005,824 1,621,496,690
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
128
December 31, 2008
LBP’000 LBP USD Euro Other Total
ASSETSCash and Central Banks 993,895,144 1,558,530,161 13,586,424 101,139,090 2,667,150,819Deposits with banks andfinancial institutions 19,188,121 504,660,661 282,755,377 107,966,509 914,570,668Trading assets 5,315,308 65,006,547 13,914,852 1,303,164 85,539,871Loans to banks 27,040,396 25,929,117 16,620,223 - 69,589,736Loans and advances to customers 407,178,796 1,950,753,548 149,692,609 78,563,325 2,586,188,278Available for sale investments 2,579,971,055 1,267,254,862 158,422,956 338,423 4,005,987,296Held to maturity investments 719,261,401 984,545,170 58,059,288 - 1,761,865,859Customers' liability under acceptances 150,000 70,677,807 20,087,037 8,349,916 99,264,760Investments in associates 5,693,577 42,980,469 - - 48,674,046Assets acquired in satisfaction of loans 64,455,728 140,861,862 - - 205,317,590Property and equipment 142,685,988 (1,028,869) 173,544 14,169,964 156,000,627Intangible assets 53,752,596 - 60,324 1,357,506 55,170,426Other assets 45,182,280 29,878,525 2,765,623 12,048,796 89,875,224
TOTAL ASSETS 5,063,770,390 6,640,049,860 716,138,257 325,236,693 12,745,195,200
LIABILITIESDeposits and borrowings from banks 17,350,620 120,678,803 15,173,052 3,602,785 156,805,260Liabilities designated at fair valuethrough profit or loss 2,255,707 161,332,078 - - 163,587,785Customers' accounts at amortized cost 3,969,319,058 5,861,415,064 611,379,985 172,385,347 10,614,499,454Customers' acceptance liability 150,000 70,677,807 20,087,037 8,349,916 99,264,760Other borrowings 331,048,817 30,078,549 23,512,339 - 384,639,705Other liabilities 76,760,607 55,119,602 9,917,485 6,724,754 148,522,448Provisions 19,828,931 16,291,781 - 1,256,058 37,376,770TOTAL LIABILITIES 4,416,713,740 6,315,593,684 680,069,898 192,318,860 11,604,696,182Currencies to be received 7,505,075 54,470,251 18,218,472 5,675,517 85,869,315Currencies to be delivered (31,000) (29,061,940) (17,440,099) (38,984,618) (85,517,657)
7,474,075 25,408,311 778,373 (33,309,101) 351,658
NET ON-BALANCE SHEET FINANCIAL POSITION 654,530,725 349,864,487 36,846,732 99,608,732 1,140,850,676
Non-Trading Portfolio - Interest Rate Risk
Fransabank Group is also exposed to Interest Rate Risk in the Banking Book (IRRBB) which includes financialinstruments not subject to the above definition of Market Risk in the trading book. IRRBB arises from core bankingactivities such as lending, deposit taking, etc… The IRRBB is measured by using a maturity / repricing schedule whichis referred to as “gap analysis”.
Interest rate risk is managed principally through monitoring interest rate gaps.
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
129FransabankAnnual Report 2009
Interest Rate Sensitivity Statement of Financial Position
FloatingNon-
Interest Up to 3 Months to 1 to 3 3 to 5LBP’000 Bearing 3 Months 1 Year Years Years
ASSETSCash and Central Banks 575,349,039 368,697,587 - - -
Deposits with banks and financial institutions 903,318 34,102,295 - - -
Trading assets 87,730 - - - -
Loans to banks 208,719 - - - -
Loans and advances to customers 22,386,465 175,358,389 34,622,262 81,769,083 55,701,862
Available for sale investments 194,138,867 157,518,607 - - -
Held to maturity investments 13,705,056 99,982 - - -
Customers' liability under acceptances 299,999 - - - -
Investments in associates 10,336,794 - - - -
Assets acquired in satisfaction of loans 63,752,591 - - - -
Property and equipment 169,460,072 - - - -
Intangible assets 53,614,177 - - - -
Other assets 59,161,708 - - - -
TOTAL ASSETS 1,163,404,535 735,776,860 34,622,262 81,769,083 55,701,862
LIABILITIESDeposits and borrowings from banks 12,231,063 19,497,927 2,278,894 - -
Liabilities designated at fair valuethrough profit or loss 6,272 - - - -
Customers' accounts at amortized cost 216,086,509 4,627,106,374 177,430,455 41,407,613 -
Customers' acceptance liability 299,999 - - - -
Other borrowings 398,006 - 292,221,173 15,643,825 22,404,689
Other liabilities 105,003,808 - - - -
Provisions 20,021,753 - - - -
TOTAL LIABILITIES 354,047,410 4,646,604,301 471,930,522 57,051,438 22,404,689
INTEREST RATE GAP POSITION 809,357,125 (3,910,827,441) (437,308,260) 24,717,645 33,297,173
A summary of the Group’s interest rate gap position is as follows at December 31, 2009:
Interest Sensitivity Analysis for Accounts in Lebanese Pounds as at December 31, 2009:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
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130
Interest Rate Sensitivity Statement of Financial Position
Floating FixedOver 3 Months
Over less than 1 to 3 3 to 5 Over Grand5 Years Total 1 year Years Years 5 Years Total Total
- 368,697,587 - - - - - 944,046,626
- 34,102,295 - - - - - 35,005,613
- - - 2,875,790 - 2,007,786 4,883,576 4,971,306
- - 1,400,000 5,646,000 5,646,000 12,738,000 25,430,000 25,638,719
87,096,305 434,547,901 43,813,776 109,947,221 44,872,054 7,769,970 206,403,021 663,337,387
- 157,518,607 204,005,587 1,086,489,011 2,654,488,447 369,033,905 4,314,016,950 4,665,674,424
- 99,982 319,271,082 30,703,691 2,584,969 - 352,559,742 366,364,780
- - - - - - - 299,999
- - - - - - - 10,336,794
- - - - - - - 63,752,591
- - - - - - - 169,460,072
- - - - - - - 53,614,177
- - - - - - - 59,161,708
87,096,305 994,966,372 568,490,445 1,235,661,713 2,707,591,470 391,549,661 4,903,293,289 7,061,664,196
- 21,776,821 - - - - - 34,007,884
- - - 2,249,997 - - 2,249,997 2,256,269
- 4,845,944,442 269,509,746 2,421 - - 269,512,167 5,331,543,118
- - - - - - - 299,999
- 330,269,687 - - - - - 330,667,693
- - - - - - - 105,003,808
- - - - - - - 20,021,753
- 5,197,990,950 269,509,746 2,252,418 - - 271,762,164 5,823,800,524
87,096,305 (4,203,024,578) 298,980,699 1,233,409,295 2,707,591,470 391,549,661 4,631,531,125 1,237,863,672
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
131FransabankAnnual Report 2009
Interest Rate Sensitivity Statement of Financial Position
Floating
Up to 3 Months to 1 to 3 3 to 5LBP’000 3 Months 1 Year Years Years
ASSETSCash and Central Banks 235,785,903 691,781,636 130,398,750 472,601,250 149,242,500
Deposits with banks and financial institutions 88,391,703 470,543,521 875,109,646 - -
Trading assets 26,929,575 - - - -
Loans to banks 116,350 10,406,999 7,662,770 8,374,053 4,187,026
Loans and advances to customers 117,817,986 2,031,302,922 131,004,085 129,326,877 77,455,277
Available for sale investments 74,593,165 54,787,614 - - -
Held to maturity investments 22,292,262 98,281,900 - - -
Customers' liability under acceptances 113,182,240 - - - -
Investments in associates 36,702,558 - - - -
Assets acquired in satisfaction of loans 125,348,949 - - - -
Property and equipment 22,873,662 - - - -
Intangible assets 2,037,098 - - - -
Other assets 84,710,320 - - - -
TOTAL ASSETS 950,781,771 3,357,104,592 1,144,175,251 610,302,180 230,884,803
LIABILITIESDeposits and borrowings from banks 8,277,207 241,068,215 47,193,841 - -
Liabilities designated at fair valuethrough profit or loss 3,671,609 - 85,414,950 71,369,572 -
Customers' accounts at amortized cost 957,149,721 6,185,591,870 681,428,120 32,037,734 -
Customers' acceptance liability 113,182,240 - - - -
Other borrowings 387,294 2,776,394 5,201,026 9,233,349 12,965,680
Other liabilities 93,615,158 - - - -
Provisions 17,950,474 - - - -
TOTAL LIABILITIES 1,194,233,703 6,429,436,479 819,237,937 112,640,655 12,965,680
INTEREST RATE GAP POSITION (243,451,932) (3,072,331,887) 324,937,314 497,661,525 217,919,123
Interest Sensitivity Analysis for Accounts in Foreign Currencies as at December 31, 2009:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
132
Non-InterestBearing
Interest Rate Sensitivity Statement of Financial Position
Floating FixedOver 3 Months
Over less than 1 to 3 3 to 5 Over Grand5 Years Total 1 year Years Years 5 Years Total Total
- 1,444,024,136 18,843,750 4,144,690 6,051,963 - 29,040,403 1,708,850,442
- 1,345,653,167 24,839,425 - 5,262,100 - 30,101,525 1,464,146,395
- - 1,752,974 950,186 39,283,873 21,933,475 63,920,508 90,850,083
- 30,630,848 2,431,597 - - - 2,431,597 33,178,795
45,844,053 2,414,933,214 97,574,056 60,152,950 101,971,857 24,954,754 284,653,617 2,817,404,817
- 54,787,614 29,031,236 589,648,768 351,114,392 594,496,713 1,564,291,109 1,693,671,888
- 98,281,900 248,787 608,636,588 91,718,310 224,231,187 924,834,872 1,045,409,034
- - - - - - - 113,182,240
- - - - - - - 36,702,558
- - - - - - - 125,348,949
- - - - - - - 22,873,662
- - - - - - - 2,037,098
- - - - - - - 84,710,320
45,844,053 5,388,310,879 174,721,825 1,263,533,182 595,402,495 865,616,129 2,899,273,631 9,238,366,281
- 288,262,056 - - - - - 296,539,263
- 156,784,522 - - - - - 160,456,131
- 6,899,057,724 229,575,776 7,085,479 - - 236,661,255 8,092,868,700
- - - - - - - 113,182,240
18,764,933 48,941,382 836,048 8,835,239 9,992,061 13,160,374 32,823,722 82,152,398
- - - - - - - 93,615,158
- - - - - - - 17,950,474
18,764,933 7,393,045,684 230,411,824 15,920,718 9,992,061 13,160,374 269,484,977 8,856,764,364
27,079,120 (2,004,734,805) (55,689,999) 1,247,612,464 585,410,434 852,455,755 2,629,788,654 381,601,917
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
133FransabankAnnual Report 2009
Interest Rate Sensitivity Statement of Financial Position
FloatingNon-
Interest Up to 3 Months to 1 to 3 3 to 5LBP’000 Bearing 3 Months 1 Year Years Years
ASSETSCash and Central Banks 655,484,426 41,410,718 - - -
Deposits with banks and financial institutions 52,515 19,135,606 - - -
Trading assets 149,615 - - - -
Loans to banks 210,396 - - - -
Loans and advances to customers 15,066,116 102,367,546 791,284 5,148,974 10,797,889
Available for sale investments 167,922,360 113,775,815 - - -
Held to maturity investments 23,281,321 266,596,976 - - -
Customers' liability under acceptances 150,000 - - - -
Investments in associates 5,693,577 - - - -
Assets acquired in satisfaction of loans 64,455,728 - - - -
Property and equipment 142,685,988 - - - -
Intangible assets 53,752,596 - - - -
Other assets 45,182,280 - - - -
TOTAL ASSETS 1,174,086,918 543,286,661 791,284 5,148,974 10,797,889
LIABILITIESDeposits and borrowings from banks 7,817,528 9,289,958 - - -Liabilities designated at fair value throughprofit or loss 5,711 - - - -
Customers' accounts at amortized cost 313,421,625 3,433,764,668 66,016,303 3,600 -
Customers' acceptance liability 150,000 - - - -
Other borrowings 391,382 - 1,781,997 292,196,185 36,679,253
Other liabilities 76,760,607 - - - -
Provisions 19,828,931 - - - -
TOTAL LIABILITIES 418,375,784 3,443,054,626 67,798,300 292,199,785 36,679,253
INTEREST RATE GAP POSITION 755,711,134 (2,899,767,965) (67,007,016) (287,050,811) (25,881,364)
Interest Sensitivity Analysis for Accounts in Lebanese Pounds as at December 31, 2008:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
134
Interest Rate Sensitivity Statement of Financial Position
Floating FixedOver 3 Months
Over less than 1 to 3 3 to 5 Over Grand5 Years Total 1 year Years Years 5 Years Total Total
- 41,410,718 - 297,000,000 - - 297,000,000 993,895,144
- 19,135,606 - - - - - 19,188,121
- - - 2,076,577 2,777,968 311,148 5,165,693 5,315,308
- - - - - 26,830,000 26,830,000 27,040,396
25,579,978 144,685,671 57,304,300 122,161,814 40,331,600 27,629,295 247,427,009 407,178,796
- 113,775,815 212,514,786 959,381,478 1,126,376,616 - 2,298,272,880 2,579,971,055
- 266,596,976 - 429,383,104 - - 429,383,104 719,261,401
- - - - - - - 150,000
- - - - - - - 5,693,577
- - - - - - - 64,455,728
- - - - - - - 142,685,988
- - - - - - - 53,752,596
- - - - - - - 45,182,280
25,579,978 585,604,786 269,819,086 1,810,002,973 1,169,486,184 54,770,443 3,304,078,686 5,063,770,390
- 9,289,958 243,134 - - - 243,134 17,350,620
- - - 2,249,996 - - 2,249,996 2,255,707
- 3,499,784,571 154,636,380 1,476,482 - - 156,112,862 3,969,319,058
- - - - - - - 150,000
- 330,657,435 - - - - - 331,048,817
- - - - - - - 76,760,607
- - - - - - - 19,828,931
- 3,839,731,964 154,879,514 3,726,478 - - 158,605,992 4,416,713,740
25,579,978 (3,254,127,178) 114,939,572 1,806,276,495 1,169,486,184 54,770,443 3,145,472,694 647,056,650
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
135FransabankAnnual Report 2009
Interest Sensitivity Analysis for Accounts in Foreign Currencies as at December 31, 2008:
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
Interest Rate Sensitivity Statement of Financial Position
Floating
Up to 3 Months to 1 to 3 3 to 5LBP’000 3 Months 1 Year Years Years
ASSETSCash and Central Banks 124,688,305 797,078,620 - 130,398,750 621,090,000
Deposits with banks and financial institutions 46,956,284 802,262,143 21,590,000 - -
Trading assets 21,409,247 - - - -
Loans to banks 624,371 - - - 16,569,222
Loans and advances to customers 138,837,600 1,632,822,553 20,946,217 23,557,073 30,098,414
Available for sale investments 67,955,143 - - - -
Held to maturity investments 20,141,328 - - - -
Customers' liability under acceptances 99,114,760 - - - -
Investments in associates 42,980,469 - - - -
Assets acquired in satisfaction of loans 140,861,862 - - - -
Property and equipment 13,314,639 - - - -
Intangible assets 1,417,830 - - - -
Other assets 44,692,944 - - - -
TOTAL ASSETS 762,994,782 3,232,163,316 42,536,217 153,955,823 667,757,636
LIABILITIESDeposits and borrowings from banks 20,716,595 118,738,045 - - -
Liabilities designated at fair value throughprofit or loss 1,929,900 40,109,078 - 119,293,100 -
Customers' accounts at amortized cost 684,173,622 5,514,290,428 289,193,085 7,750,875 -
Customers' acceptance liability 99,114,760 - - - -
Other borrowings 496,384 - 2,200,762 - 17,221,283
Other liabilities 71,761,841 - - - -
Provisions 17,547,839 - - - -
TOTAL LIABILITIES 895,740,941 5,673,137,551 291,393,847 127,043,975 17,221,283
INTEREST RATE GAP POSITION (132,746,159) (2,440,974,235) (248,857,630) 26,911,848 650,536,353
Non-InterestBearing
FransabankAnnual Report 2009
136
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
Interest Rate Sensitivity Statement of Financial Position
Floating FixedOver 3 Months
Over less than 1 to 3 3 to 5 Over Grand5 Years Total 1 year Years Years 5 Years Total Total
- 1,548,567,370 - - - - - 1,673,255,675
- 823,852,143 - 24,574,120 - - 24,574,120 895,382,547
- - 1,967,076 2,666,574 30,898,941 23,282,725 58,815,316 80,224,563
- 16,569,222 20,735,572 4,620,175 - - 25,355,747 42,549,340
23,266,719 1,730,690,976 72,491,751 116,363,466 83,948,435 36,677,254 309,480,906 2,179,009,482
- - 42,265,917 198,663,477 625,330,384 491,801,320 1,358,061,098 1,426,016,241
- - 205,464,667 207,443,704 458,504,579 151,050,180 1,022,463,130 1,042,604,458
- - - - - - - 99,114,760
- - - - - - - 42,980,469
- - - - - - - 140,861,862
- - - - - - - 13,314,639
- - - - - - - 1,417,830
- - - - - - - 44,692,944
23,266,719 4,119,679,711 342,924,983 554,331,516 1,198,682,339 702,811,479 2,798,750,317 7,681,424,810
- 118,738,045 - - - - - 139,454,640
- 159,402,178 - - - - - 161,332,078
- 5,811,234,388 141,767,641 3,577,870 4,426,875 - 149,772,386 6,645,180,396
- - - - - - - 99,114,760
33,672,459 53,094,504 - - - - - 53,590,888
- - - - - - - 71,761,841
- - - - - - - 17,547,839
33,672,459 6,142,469,115 141,767,641 3,577,870 4,426,875 - 149,772,386 7,187,982,442
(10,405,740) (2,022,789,404) 201,157,342 550,753,646 1,194,255,464 702,811,479 2,648,977,931 493,442,368
137FransabankAnnual Report 2009
Liquidity Risk
The table below summarizes the maturity profile of theGroup's financial liabilities based on contractual undiscountedrepayment obligations. The Group maintains a portfolio ofhighly marketable and diverse assets readily liquefiable in theevent of an unforeseen interruption to cash flow.
The Group maintains obligatory reserves with CentralBank of Lebanon and other Central Banks. Liquidity isassessed and managed using a variety of stressedscenarios applicable to the Group.
December 31, 2009
Lebanese Pounds Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over
LBP’000 No Maturity 3 Months 1 Year Years Years 5 Years Total
ASSETS
Cash and Central Banks 575,427,168 368,619,458 - - - - 944,046,626
Deposits with banks andfinancial institutions 1,305,613 33,700,000 - - - - 35,005,613
Trading assets (2) - - 2,959,786 - 2,011,522 4,971,306
Loans to banks - - 1,608,719 5,646,000 5,646,000 12,738,000 25,638,719
Loans and advances to customers 82,088,446 51,163,359 142,426,338 191,951,295 100,657,890 95,050,059 663,337,387
Available for sale investments 119,714,446 208,163,553 227,785,062 1,086,489,011 2,654,488,447 369,033,905 4,665,674,424
Held to maturity investments - 13,557,335 319,518,785 30,703,691 2,584,969 - 366,364,780
Customers' liabilityunder acceptances 299,999 - - - - - 299,999
Investments in associates 10,336,794 - - - - - 10,336,794
Assets acquired insatisfaction of loans 63,752,591 - - - - - 63,752,591
Property and equipment 169,460,072 - - - - - 169,460,072
Intangible assets 53,614,177 - - - - - 53,614,177
Other assets 59,161,708 - - - - - 59,161,708
TOTAL ASSETS 1,135,161,012 675,203,705 691,338,904 1,317,749,783 2,763,377,306 478,833,486 7,061,664,196
LIABILITIES
Deposits and borrowings from banks 13,424,686 20,583,198 - - - - 34,007,884
Liabilities designated at fairvalue through profit or loss 6,272 - - 2,249,997 - - 2,256,269
Customers' accounts at amortized cost 277,452,653 4,583,478,887 431,288,579 39,322,999 - - 5,331,543,118
Customers' acceptance liability 299,999 - - - - - 299,999
Other borrowings - - 292,619,179 15,643,825 22,404,689 - 330,667,693
Other liabilities 105,003,808 - - - - - 105,003,808
Provisions 20,021,753 - - - - - 20,021,753
TOTAL LIABILITIES 416,209,171 4,604,062,085 723,907,758 57,216,821 22,404,689 - 5,823,800,524
MATURITY GAP 718,951,841 (3,928,858,380) (32,568,854) 1,260,532,962 2,740,972,617 478,833,486 1,237,863,672
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
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138
December 31, 2009
Foreign Currencies Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over
LBP’000 No Maturity 3 Months 1 Year Years Years 5 Years Total
ASSETS
Cash and Central Banks 517,148,436 410,419,086 149,242,500 476,746,085 155,294,335 - 1,708,850,442
Deposits with banks and financial institutions 123,057,695 1,217,178,912 118,647,692 - 5,262,096 - 1,464,146,395
Trading assets 25,827,474 - 2,757,647 965,796 40,348,216 20,950,950 90,850,083
Loans to banks - 10,523,347 10,094,369 8,374,053 4,187,026 - 33,178,795
Loans and advances to customers 1,513,654,272 383,829,579 454,929,873 202,271,741 187,157,853 75,561,499 2,817,404,817
Available for sale investments 43,558,735 75,130,363 39,718,917 589,648,768 351,114,392 594,500,713 1,693,671,888
Held to maturity investments 1,507,500 112,925,200 6,390,249 608,636,590 91,718,312 224,231,183 1,045,409,034
Customers' liability under acceptances 113,182,240 - - - - - 113,182,240
Investments in associates 36,702,558 - - - - - 36,702,558
Assets acquired insatisfaction of loans 125,348,949 - - - - - 125,348,949
Property and equipment 22,873,662 - - - - - 22,873,662
Intangible assets 2,037,098 - - - - - 2,037,098
Other assets 84,710,320 - - - - - 84,710,320
TOTAL ASSETS 2,609,608,939 2,210,006,487 781,781,247 1,886,643,033 835,082,230 915,244,345 9,238,366,281
LIABILITIES
Deposits and borrowingsfrom banks 70,382,162 178,963,260 47,193,841 - - - 296,539,263
Liabilities designated at fairvalue through profit or loss 3,671,608 - 85,414,950 71,369,573 - - 160,456,131
Customers' accountsat amortized cost 972,130,739 6,160,285,875 921,280,289 39,171,797 - - 8,092,868,700
Customers' acceptance liability 113,182,240 - - - - - 113,182,240
Other borrowings - 2,925,107 6,275,655 18,068,588 22,957,741 31,925,307 82,152,398
Other liabilities 93,615,158 - - - - - 93,615,158
Provisions 17,950,474 - - - - - 17,950,474
TOTAL LIABILITIES 1,270,932,381 6,342,174,242 1,060,164,735 128,609,958 22,957,741 31,925,307 8,856,764,364
MATURITY GAP 1,338,676,558 (4,132,167,755) (278,383,488) 1,758,033,075 812,124,489 883,319,038 381,601,917
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
139FransabankAnnual Report 2009
December 31, 2008
Lebanese Pounds Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over
LBP’000 No Maturity 3 Months 1 Year Years Years 5 Years Total
ASSETS
Cash and Central Banks 438,114,189 41,431,335 346,643,371 167,706,249 - - 993,895,144
Deposits with banks andfinancial institutions 709,307 18,478,814 - - - - 19,188,121
Trading assets - 149,615 - 2,076,577 2,777,968 311,148 5,315,308
Loans to banks - - 210,396 - - 26,830,000 27,040,396
Loans and advancesto customers 14,296,890 30,838,167 129,732,815 127,831,328 51,141,660 53,337,936 407,178,796
Available for sale investments 109,728,444 158,788,046 225,696,470 959,381,478 1,126,376,617 - 2,579,971,055
Held to maturity investments - 289,638,121 240,176 429,383,104 - - 719,261,401
Customers' liabilityunder acceptances 150,000 - - - - - 150,000
Investments in associates 5,693,577 - - - - - 5,693,577
Assets acquired insatisfaction of loans 64,455,728 - - - - - 64,455,728
Property and equipment 142,685,988 - - - - - 142,685,988
Intangible assets 53,752,596 - - - - - 53,752,596
Other assets 45,182,280 - - - - - 45,182,280
TOTAL ASSETS 874,768,999 539,324,098 702,523,228 1,686,378,736 1,180,296,245 80,479,084 5,063,770,390
LIABILITIES
Deposits and borrowingsfrom banks 7,837,738 9,269,748 243,134 - - - 17,350,620
Liabilities designated at fairvalue through profit or loss - 5,711 - 2,249,996 - - 2,255,707
Customers' accountsat amortized cost 188,982,459 3,552,750,208 226,097,715 1,488,626 - 50 3,969,319,058
Customers' acceptance liability 150,000 - - - - - 150,000
Other borrowings - 48,600 2,124,779 292,196,185 36,679,253 - 331,048,817
Other liabilities 76,760,607 - - - - - 76,760,607
Provisions 19,828,931 - - - - - 19,828,931
TOTAL LIABILITIES 293,559,735 3,562,074,267 228,465,628 295,934,807 36,679,253 50 4,416,713,740
MATURITY GAP 581,209,264 (3,022,750,169) 474,057,600 1,390,443,929 1,143,616,992 80,479,034 647,056,650
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
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140
December 31, 2008
Foreign Currencies Base AccountsAccounts with Up to 3 Months to 1 to 3 3 to 5 Over
LBP’000 No Maturity 3 Months 1 Year Years Years 5 Years Total
ASSETS
Cash and Central Banks 109,866,020 811,900,905 - 130,398,750 621,090,000 - 1,673,255,675
Deposits with banks andfinancial institutions 63,982,012 785,236,415 21,590,000 24,574,120 - - 895,382,547
Trading assets 20,257,401 1,151,846 1,967,076 2,666,574 30,898,941 23,282,725 80,224,563
Loans to banks - 193,103 21,166,840 4,620,175 16,569,222 - 42,549,340
Loans and advancesto customers 1,270,599,698 206,580,123 387,511,317 140,173,481 114,200,890 59,943,973 2,179,009,482
Available for sale investments 38,031,138 18,984,795 53,206,383 198,663,477 625,329,128 491,801,320 1,426,016,241
Held to maturity investments 1,507,500 9,490,055 214,608,440 207,443,704 458,504,579 151,050,180 1,042,604,458
Customers' liabilityunder acceptances 99,114,760 - - - - - 99,114,760
Investments in associates 42,980,469 - - - - - 42,980,469
Assets acquired insatisfaction of loans 140,861,862 - - - - - 140,861,862
Property and equipment 13,314,639 - - - - - 13,314,639
Intangible assets 1,417,830 - - - - - 1,417,830
Other assets 44,692,944 - - - - - 44,692,944
TOTAL ASSETS 1,846,626,273 1,833,537,242 700,050,056 708,540,281 1,866,592,760 726,078,198 7,681,424,810
LIABILITIES
Deposits and borrowingsfrom banks 59,995,696 79,458,944 - - - - 139,454,640
Liabilities designated at fairvalue through profit or loss 1,929,900 40,109,078 - 119,293,100 - - 161,332,078
Customers' accountsat amortized cost 675,120,579 5,520,034,070 434,262,142 11,336,730 4,426,875 - 6,645,180,396
Customers' acceptance liability 99,114,760 - - - - - 99,114,760
Other borrowings - 121,538 2,575,608 - 17,221,283 33,672,459 53,590,888
Other liabilities 71,761,841 - - - - - 71,761,841
Provisions 17,547,839 - - - - - 17,547,839
TOTAL LIABILITIES 925,470,615 5,639,723,630 436,837,750 130,629,830 21,648,158 33,672,459 7,187,982,442
MATURITY GAP 921,155,658 (3,806,186,388) 263,212,306 577,910,451 1,844,944,602 692,405,739 493,442,368
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
141FransabankAnnual Report 2009
44. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value of financial assets and liabilities as at December 31, 2009 and 2008 was as follows:
December 31, 2009
Assets at Fair Other at Total Trading Value through Available for Held to Loans and Amortized Carrying TotalAssets Profit or Loss Sale Maturity Receivables Cost Value Fair Value
Financial and trading assets:
Cash and Central Banks - - - - - 2,652,897,068 2,652,897,068 2,656,717,187
Deposits with banks andfinancial institutions - - - - - 1,499,152,008 1,499,152,008 1,499,152,008
Trading assets 95,821,389 - - - - - 95,821,389 95,821,389
Loans to banks - - - - 58,817,514 - 58,817,514 52,245,962
Loans and advances to customers - - - - 3,480,742,204 - 3,480,742,204 3,508,202,170
Available for sale investments - - 6,359,346,312 - - - 6,359,346,312 6,359,346,312
Held to maturity investments - - - 1,411,773,814 - - 1,411,773,814 1,438,329,535
Derivative assets held for risk management - 1,170,480 - - - - 1,170,480 1,170,480
TOTAL 95,821,389 1,170,480 6,359,346,312 1,411,773,814 3,539,559,718 4,152,049,076 15,559,720,789 15,610,985,043
Financial liabilities:
Deposits and borrowings from banks - - - - - 330,547,147 330,547,147 330,547,144
Customers' accounts - 162,712,400 - - - 13,424,411,818 13,587,124,218 13,587,124,218
Other borrowings - - - - - 412,820,091 412,820,091 387,142,100
Derivative liabilities held for riskmanagement - 42,954 - - - - 42,954 42,954
Financial guarantee contracts issued - 1,627,290 - - - - 1,627,290 1,627,290
TOTAL - 164,382,644 - - - 14,167,779,056 14,332,161,700 14,306,483,706
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
142
December 31, 2008
Assets at Fair Other at Total Trading Value through Available for Held to Loans and Amortized Carrying TotalAssets Profit or Loss Sale Maturity Receivables Cost Value Fair Value
Financial and trading assets:
Cash and Central Banks - - - - - 2,667,150,819 2,667,150,819 2,692,532,577
Deposits with banks and financialinstitutions - - - - - 914,570,668 914,570,668 914,570,668
Trading assets 85,539,871 - - - - - 85,539,871 85,539,871
Loans to banks - - - - 69,589,736 - 69,589,736 60,015,052
Loans and advances to customers - - - - 2,586,188,278 - 2,586,188,278 2,621,096,928
Available for sale investments - - 4,005,987,296 - - - 4,005,987,296 4,005,987,296
Held to maturity investments - - - 1,761,865,859 - - 1,761,865,859 1,756,323,086
Derivative assets - 2,885,412 - - - - 2,885,412 2,885,412
TOTAL 85,539,871 2,885,412 4,005,987,296 1,761,865,859 2,655,778,014 3,581,721,487 12,093,777,939 12,138,950,890
Financial liabilities:
Deposits and borrowings from banks - - - - - 156,805,260 156,805,260 156,805,260
Customers' accounts - 163,587,785 - - - 10,614,499,454 10,778,087,239 10,778,087,239
Other borrowings - - - - - 384,639,705 384,639,705 360,010,632
Financial guarantee contracts issued - 1,144,756 - - - - 1,144,756 1,144,756
TOTAL - 164,732,541 - - - 11,155,944,419 11,320,676,960 11,296,047,887
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition atfair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
LBP’000 Level 1 Level 3 Total
Assets at fair value:Trading securities 25,465,674 70,355,715 95,821,389 Available for sale investment securities 24,705,188 6,334,641,124 6,359,346,312 TOTAL 50,170,862 6,404,996,839 6,455,167,701
Liabilities at fair value:
Customers’ deposits at fair value through profit or loss 162,712,400 - 162,712,400
December 31, 2009
LBP’000
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
143FransabankAnnual Report 2009
45. CAPITAL MANAGEMENTThe Group manages its capital to comply with the capitaladequacy requirements set by the Central Bank of Lebanon,the Group’s lead regulator. The Group’s foreign entities arealso required to respect particular ratios according to thecompetent authorities of supervisions.
The Group’s capital is split as follows:
Tier I capital:Comprises share capital after deduction of treasury shares,Shareholders’ cash contribution to capital, certain reservesfrom appropriation of profits, retained earnings (exclusiveof current year’s net profit) and minority interest. Goodwillis deducted from Tier I Capital.
Tier II capital:Comprises qualifying subordinated liabilities, collectiveimpairment allowance and cumulative change in fairvalue of available for sale securities.
Investments in associates are deducted from Tier I andTier II capital.
Also, various limits are applied to the elements of capitalbase: Qualifying Tier II capital cannot exceed Tier I capitaland qualifying short term subordinated loan capital maynot exceed 50% of Tier I capital.
The Group has complied with the imposed capitalrequirements throughout the period.
46. APPROVAL OF THE FINANCIAL STATEMENTSThe consolidated financial statements were approved by the Bank’s Board of Directors in its meeting held onMarch 23, 2010.
Starting year 2009, the Group started calculating its capital adequacy according to pillar I of Basel II Accord. The Group’scapital adequacy ratio was as follows (without taking into consideration the net profit for the year):
LBP’000 December 31, 2009
Total regulatory capital
Credit risk
Market risk
Operational risk
Risk-weighted assets of credit, market and operational risks
Capital adequacy ratio
Notes to the Consolidated Financial Statements
for the Year ended December 31, 2009
FransabankAnnual Report 2009
144
1,139,584,000
8,880,428,000
142,247,000
595,119,000
9,617,794,000
11.85%
Main Ratios
A. PROFITABILITY
ROAA (Return on Average Assets)
ROACE (Return on Average Common Equity)
Total interest paid to Total interest received
Net interest income to Average assets
Net commissions to Net financial revenues (before allocation to provisions)
Operating expenses to Net financial revenues (Cost-to-income ratio)
Non-interest income to Net financial revenues (before allocation to provisions)
Operating expenses to Average customers creditor accounts
EPS in US$ (Earnings per Common Share in US Dollar)
DPS in US$ (Dividend per Common Share in US Dollar)*
Dividend payout ratio(Dividends on Common and Preferred Shares / Distributable profits)*
B. LIQUIDITY
Average net customers’ loans to Average customers’ creditor accounts
Average customers’ creditor accounts to Average total deposits
Foreign currency customers’ loans to Foreign currency customers’ creditor accounts
C. CAPITAL ADEQUACY
Shareholders’ equity to Total assets
Shareholders’ equity to Loans and acceptances
Capital Adequacy Ratio as per Basel II requirements
D. ASSET QUALITY RATIOS
Doubtful debts (net) to Total customers’ loans (net)
Doubtful debts (net) to Shareholders’ equity
Provisions for doubtful debts to Doubtful debts
Sub-standard accounts (net) to Total customers’ loans (net)
Unrealized interest for sub-standard accounts to Sub-standard accounts
Total provisions and unrealized interest to Total customers’ loans
(*) On an unconsolidated basis.
2008
1.13%
14.54%
64.67%
2.42%
10.92%
53.25%
25.97%
1.98%
3.97
0.66
39.80%
23.61%
98.64%
32.01%
8.95%
42.47%
10.22%
4.90%
11.12%
87.34%
0.79%
41.81%
25.58%
2009
1.08%
12.03%
65.14%
2.14%
12.26%
54.70%
26.14%
1.83%
4.56
0.66
51.00%
24.90%
98.04%
34.14%
9.94%
45.06%
11.85%
3.31%
7.12%
88.29%
0.79%
34.84%
20.35%
145FransabankAnnual Report 2009
Mother Company
- Fransabank SAL
62 branches
• 33 branches in Beirut & Suburbs
• 8 branches in Northern Lebanon
• 10 branches in Southern Lebanon
• 2 branches in Aley & Chouf
• 7 branches in the Bekaa Region
• 2 branches temporarily closed
Subsidiaries
- BLC Bank SAL (with BLC Services, BLC Finance and Banque Lati SAL)
43 branches
• 24 branches in Beirut & Suburbs
• 6 branches in Northern Lebanon
• 3 branches in Southern Lebanon
• 2 branches in the Bekaa Region
• 8 branches temporarily closed
- Fransa Invest Bank SAL (FIB)
- Société Générale Foncière SAL (Sogefon)
- Lebanese Leasing Company SAL
- Fransabank Insurance Services Company SAL
- Switch & Electronic Services SAL
- Société Express SARL
Associated Companies
- Bancassurance SAL
- International Payment Network SAL
Group Network
FransabankAnnual Report 2009
148
In Lebanon
BLC Bank SAL
Société Générale Foncière SAL "Sogefon"
2009 was an exceptional year for Sogefon. Despite the international financial crisis, theLebanese real estate market remained resilient. Investors from the Arab Countries aswell as Lebanese expatriates, topped with local demand, gave the real estatemarket a great boost.
Sogefon exceeded its targeted sales of Fransabank estates, historically acquired inloans settlement, with an extraordinary 22% increase in sales figures, bearing in mindthat the new real estate acquisition between 2008 and 2009 declined by 30%.Sogefon sales team and management had to deal with each and every sale on a caseby case basis, as they could not rely on earlier evaluation of the properties which hadto be updated almost weekly to follow the upward trend, this resulted inincreasing the profitability margin up to 41%. In addition, Fransabank branch networkplayed an active role in identifying potential buyers, which were then handled bySogefon sales team.
In brief, Sogefon contributed to maximize the profit margin on each and every realestate sale for Fransabank, in addition to its traditional role of providing realestate services within Fransabank Group.
In 2009, BLC Bank has registered a new record growth that exceeded its initialforecasts and advanced its ranking within the Lebanese banking industry.
In this context, the 2009 net profit increased to USD 34.24 million fromUSD 23.03 million in 2008 (+ 48.66%). Also, as at 31 December 2009, totalassets reached USD 2.592 billion against USD 1.971 billion as at 31 December2008 (+ 31.50%), net loans to customers amounted to USD 475.5 million up fromUSD 275.5 million at end 2008 (+ 72.60 %), and customers’ deposits increased toUSD 2.274 billion up from USD 1.733 billion at end 2008 (+ 31.22%).Shareholders’ equity reached USD 228.45 million as at 31.12.09 up from USD157.09 million as at end 2008 (+ 45.43%). ROAA stood at 1.50 % for 2009against 1.24% for 2008 and ROAE at 18.38% for 2009 against 16.80% for 2008.
In 2009 as well, the Bank has allocated important investments to develop andequip its resources to accommodate its expected growth on the medium andlonger terms: The Bank’s IT platform was upgraded providing state-of-the-artsystems both at the front and backends. Advanced internet banking and CRMsolutions projects were initiated, comprehensive revision of the Bank’s policiesand procedures including workflow processes complemented by continuousupgrade and development of human resources skills and capabilities via verywell targeted and multi dimensional training programs.
The Bank as well has achieved considerable progress in developing andimplementing risk management, corporate governance and internal auditrequirements in full synchronization with its parent company.
149FransabankAnnual Report 2009
Group NetworkIn Lebanon
Bancassurance new launched products in 2009 are:
• The range of life insurance for obligatory products
Bancassurance has launched the life insurance products for the housing andeducational loans offered by the BDL and for the Kafalat loans. These contractsaim at guarantying the Bank against the death and disability of the borrower ofa personal, housing or public housing loan.
• The range of term life products
A new product « Fransaplus-Life insurance plan with accidental covers » was added tothis range of products while offering an important coverage due to accidents withattractive premium. These contracts meet the needs for family protection against therisks of death and disability.
• The range of saving and life insurance products
These plans allow the insured to constitute a supplement capital in order tosecure a pleasant retirement or to finance the university studies of his children;the unit link contracts are integrated in the range of saving-investment products.
Bancassurance SAL is the life insurance company for three renowned banks:Fransabank SAL (40%), Banque Libano-Française SAL (31%) and Credit Agricole -France (29%).
In 2009, Bancassurance SAL was ranked first bank insurer and one of the majorleaders in the life insurance market in Lebanon.
The net profits of Bancassurance and its sales turnover have been on a linearupward trend since the foundation of the company in 2000. Net profits reachedUSD 6.05 million as of December 31, 2009, an increase of 27% as compared to lastyear. The sales turnover registered USD 34.77 million, an increase of 14% over last year.These results were achieved due to the strong determination of its banking partnersand the devotion of the sales force, in addition to the reactivity of Bancassurance team.
Group Network
In Lebanon
FransabankAnnual Report 2009
150
Bancassurance SAL
Group Network
Addresses in Lebanon
• BBiikkffaayyaaAdel Dagher Bldg., Bikfaya Place,Main RoadTel: (961-4) 986901/2Fax: (961-4) 986903
• BBoouurrjj EEll BBrraajjnneehhAhmad Nabbouh Bldg.,Ain El Sekkeh, Dr Hosni Jalloul Str.Tel: (961-1) 453200/1/2
(961-3) 740410Fax: (961-1) 453203
• BBoouurrjj HHaammmmoouuddHarboyan Center, Near St. Vartan Str.,Bourj Hammoud entrance, 2nd floorTel: (961-1) 258100/1/2Fax: (961-1) 264446
• CChhiiyyaahhTayyar Bldg., facing Moawad junctions,Ghobeiri Blvd., ChiyahNext to the Ministry of LaborTel: (961-1) 279671/3Fax: (961-1) 279680
• CChhoouueeiiffaattMahmoud El Kheshen Bldg.,Haret Al Oumara, Saida Main Road(Saida Old Road)Tel: (961-5) 431169
(961-5) 431178Fax: (961-5) 431183
• EEllyyssssaarrFransabank Bldg., Mazraat Yachouh, Bikfaya Main RoadTel: (961-4) 914802/3/4Fax: (961-4) 914805
• FFuurrnn EEll CChheebbbbaakkSaadeh Center,Opposite Planete Abraj, Damas Str.Tel: (961-1) 293025/6Fax: (961-1) 293027
• HHaaddaatthhBechara Beik Karam Str., Al Saha, Near Al Saydeh Church, Main RoadTel: (961-5) 463974/5/6/7Fax: (961-5) 463980
Headquarters
Fransabank Center, Hamra Street.
P.O.Box: 11-0393
Riad El Solh Beirut 1107 2803
Lebanon
Tel (961-1) 340180/8
(961-1) 745761/4
(961-3) 650700
Fax (961-1) 354572
Cable FRANSABANK
Swift FSAB LB BX
Website www.fransabank.com
Email [email protected]
Call Center (961-1) 734000
Forex Tel (961-1) 343706
Reuters: FRBK
Beirut & Suburbs
• AAcchhrraaffiieehh ((SSaassssiinnee))Notre Dame Center, Sassine SquareTel: (961-1) 203466/7Fax: (961-1) 200651
• AAcchhrraaffiieehh ((SSaayyddeehh))Debs Bldg., Saydeh Str.Tel: (961-1) 200842/3
(961-1) 215940Fax: (961-1) 215422
• AAcchhrraaffiieehh ((SSooddeeccoo))Dakota Bldg., Ground Floor, SodecoTel: (961-1) 423573/4
• AAiinn EEll MMrreeiisssseehhNawrass Bldg.,Opposite Ain El Mreisseh MosqueTel: (961-1) 373240/1/2/4Fax: (961-1) 373243
• AAlllleennbbyy(temporarily closed)
• AAnntteelliiaassOrder Antonin Maronite Bldg.,Catholicossat Armenien Str.Tel: (961-4) 417240 /1Fax: (961-4) 412990
• BBaabb EEddrriissssSabbagh Bldg., Patriarch Hoayek Str.(temporarily closed)
• BBaaddaarrooKhatoun Bldg., Badaro Str.Tel: (961-1) 387024
(961-1) 386900Fax: (961-1) 390409
• BBaassttaaFransabank Bldg., Cross Roadsof Saleh Ben Yehia, Basta Str.Tel: (961-1) 663116/7Fax: (961-1) 663117
• BBaauucchhrriieehhChaer Center, Sin El Fil Blvd.Tel: (961-1) 897490/1/2Fax: (961-1) 897029
151FransabankAnnual Report 2009
• HHaammrraaFransabank Center, Hamra Str.,1st FloorTel: (961-1) 340180/1/8
(961-1) 750125Fax: (961-1) 341413
• HHaazzmmiieehhUnigroup Bldg., Sayyad SquareTel: (961-5) 459602
(961-5) 450350Fax: (961-5) 457312
• JJaall EEll DDiibbLe Baron Center, Jal El Dib Highway,1st floorTel: (961-1) 889884/5Fax: (961-1) 902959
• JJbbeeiillCordahi Center, JbeilTel: (961-9) 547178/9
(961-9) 945108/9Fax: (961-9) 540967
• JJnnaahhAssaf Bldg., Adnan El Hakim Str.Tel: (961-1) 857973/4
(961-1) 857833Fax: (961-1) 857972
• JJoouunniieehhSaint Paul Center, P.T.T Str.Tel: (961-9) 830190/1Fax: (961-9) 830192
• MMaannssoouurriieehhMaalouf Center, Opposite P.T.T., Main RoadTel: (961-4) 409840/1
(961-3) 740420Fax: (961-4) 409840
• MMaarr EElliiaassMetco Center,. Moussaitbeh,Mar Elias Str.Tel: (961-1) 818529/30
(961-1) 817770Fax: (961-1) 300617
• MMoouussssaaiittbbeehhAl Ali & Ghalayani Bldg.,Salim Slam Str. Tel: (961-1) 305189(opening soon)
• SSaaiiffiiAndraos Bldg., El-Arz Str.Tel: (961-1) 442418
(961-1) 585699(961-3) 650703
Fax: (961-1) 442417
• SSaarrbbaaAntoine & Youssef Kallas Bldg.,Sarba HighwayTel: (961-9) 640293
(961-9) 640060Fax: (961-9) 640543
• SSiinn EEll FFiillKibinian & Kazangian Bldg.,Delta Center, Horch TabetTel: (961-1) 510571/2/3
(961-3) 650708Fax: (961-1) 481680
• SSttaarrccooStarco Center, Bloc C,Omar Daouk Str.Tel: (961-1) 367346/7/8Fax: (961-1) 367350
• TTaabbaarriissSNA Bldg., Tabaris RoundaboutTel: (961-1) 203422
(961-1) 328600Fax: (961-1) 201141
• TTaarriikk JJddiiddeeKassar Bldg., Loubos Str.Tel: (961-1) 702930/1/2
(961-3) 650705Fax: (961-1) 309090
• VVeerrdduunnVerdun 730 Center,Rachid Karame Str., 1st floorTel: (961-1) 788690/1/2/3/4
(961-3) 650709Fax: (961-1) 788691
• ZZoouukkChrist le Roi Center, Zouk HighwayTel: (961-9) 217271/2/3Fax: (961-9) 217271/2/3
Group Network
North
• CChheekkkkaaFaddous Bldg. Main RoadTel: (961-6) 545035
(961-6) 540642/3Fax: (961-6) 545035
• HHaallbbaaMarwan Ibrahim Bldg., Main RoadTel: (961-6) 693331/2
(961-6) 692000Fax: (961-6) 692001
• KKaallaammoouunnEzzedine Almir Bldg., Main RoadTel: (961-6) 400102/3Fax: (961-6) 400096
• MMeerryyaattaaAyoush Bldg., Ardeh RoadTel: (961-6) 255560/1/2/3Fax: (961-6) 255564
• TTrriippoollii ((AAbboouu SSaammrraa))Sayadi Bldg., Saadoun SquareTel: (961-6) 424617/9Fax: (961-6) 424611
• TTrriippoollii ((AAll MMiinnaa))Hassan & Hassane Abbas Bldg.,Bawabet Al Mina Str.Tel (961-6) 611524
(961-6) 611249/50Fax: (961-6) 611250
• TTrriippoollii ((GGeemmmmaayyzzaatt))Fattal Bldg., Gemmayzat Str.Tel: (961-6) 430011/2/3Fax: (961-6) 625735
• TTrriippoollii ((TTeellll))Gaston Habib Bldg., Kayal SquareTel: (961-6) 442815
(961-6) 441881/2Fax: (961-6) 441881/2
Aley & Chouf
• AAlleeyySaid Chehayeb Bldg. (DANA),Next to Telephone Central, Main RoadTel: (961-5) 557042/3/4Fax: (961-5) 557046
• BBaaaakklliinneeAkram El Eid Center, El MarjTel: (961-5) 303005
(961-5) 301267Fax: (961-5) 303006
Addresses in Lebanon
FransabankAnnual Report 2009
152
Group Network
Addresses in Lebanon
153FransabankAnnual Report 2009
Off-Premises ATM,s
-- UUFFAA IInnssuurraannccee,, DDoowwnn TToowwnn
-- HHaammrraa SSttrreeeett
-- VVeerrdduunn 773300 CCeenntteerr,, VVeerrdduunn
-- VVeerrdduunn 773322 CCeenntteerr,, VVeerrdduunn
-- CCaasseerrnnee EEll HHeelloouu,, MMaarr EElliiaass
-- BBiieell CCoonnvveennttiioonn CCeenntteerr,,
DDoowwnn TToowwnn
-- UUSS EEmmbbaassssyy,, AAoouukkaarr
-- UUnniitteedd NNaattiioonnss CCeenntteerr,, NNaakkoouurraa
-- MMeemmaa GGaass SSttaattiioonn,, FFaarraayyaa
-- CCaalliipprriixx SSuuppeerrmmaarrkkeett,, JJoouunniieehh
-- OObbeeiidd SSuuppeerrmmaarrkkeett,, KKaabbrreecchhmmoouunn
-- CClluubb LLaa MMaarriinnaa,, DDbbaayyeehh
South
• BBiinntt JJbbeeiillFransabank Bldg., Saf El-Hawa,Main RoadTel: (961-7) 450700/1/2/3/4
(961-3) 239092Fax: (961-7) 450701
• CChheehhiimmWehbe Center, Main RoadTel: (961-7) 241916/7Fax: (961-7) 241921
• GGhhaazziieehhKhalifeh Center, Ghazieh,Main Square(opening soon)
• JJeezzzziinneeSt. Therese Center,Jezzine HighwayTel: (961-7) 780941- 780052Fax: (961-7) 780941
• MMaarrjjeeyyoouunnRaef Abla Bldg., Main RoadTel: (961-7) 830139- 830140Fax: (961-7) 830139
• NNaabbaattiieehhKodeih Center, Sabbagh Str.Tel: (961-7) 760258- 764264Fax: (961-7) 761750
• NNaakkoouurraaHamzeh Bldg., Near UNIFIL, Main Road, 1st FloorTel: (961-7) 460235/6/7
(961-3) 067702Fax: (961-7) 460236
• SSaaiiddaaFransabank Bldg., Riad El Solh Str.Tel: (961-7) 722180/1/2
(961-3) 650701Fax: (961-7) 721194
• TTyyrrAbou Saleh Bldg., Senegal Str.,Tyr Main Entrance, 1st FloorTel: (961-7) 345278 - 345315Fax: (961-7) 345308
• TTyyrr ((AAbbbbaassiieehh))Khalaf Bldg., Jal El Bahr, Main RoadTel: (961-7) 740388
(961-7) 740486Fax: (961-7) 740084
Bekaa
• BBaaaallbbeecckkMohammad Said El Lakiss Bldg., Ras Al-Ayn, Main RoadTel: (961-8) 373150/1
(961-8)371800/1Fax: (961-8) 370379
• BBeeddnnaayyeellAli Fouad Sleiman Bldg., Main RoadTel: (961-8) 911124/5
(961-8) 912021Fax: (961-8) 911125
• CChhttaauurraaHaddad Bldg., Main RoadTel: (961-8) 541988
(961-8) 542498Fax: (961-8) 543843
• LLaabboouueeNear Laboue Square, Main RoadTel: (961-8) 230801/2/3/4/5Fax: (961-8) 230805
• RRiiyyaakkHosch HalaTel: (961-8) 900333
(961-8) 900444Fax: (961-8) 900107
• ZZaahhllee ((BBaarrbbaarraa))Ghossain Bldg., St. Barbe Str.Tel: (961-8) 811061
(961-8) 803715Fax: (961-8) 822335
• ZZaahhllee ((WWaarrddee))Warde Center, Main RoadTel: (961-8) 800340
(961-8) 821411Fax: (961-8) 810187
Board of DirectorsMr. Adel Kassar Chairman &
General ManagerMr. Yvan de La Porte De Theil Deputy Chairman Mr. Nabil Kassar Member, representing
Fransabank SAL
Mr. Bruno Deletré Member, representingFinancière Océor
Mr. Adnan Kassar MemberMr. Mansour Bteish MemberAttorney Walid Daouk MemberMr. Dany Makhlouf MemberMr. Charles Milhaud Member
Headquarters & Main Branch 104, Avenue des Champs-Elysées, 75008 - Paris, FranceTel (33-1) 53768400Fax (33-1) 45635700Swift FRAF FR PPEmail [email protected]
Board of Directors
Mr. Adel Kassar Chairman Mr. Adnan Kassar Member, representing
Fransabank SAL
Mr. Nabil Kassar Member, representingFransabank SAL
Mr. Chadi Karam Member, representingFransabank SAL
Mr. Ahmad Al-Shihabi Member Mr. Elie Sioufi Member Mr. Ali Wahib Merhi Member Mr. Sami Rabbath Member Mr. Mohammad Sabih Al-Nahas Member
Headquarters & Main Branch
Abou Remmaneh Al Mahdi Ben Barakeh Str.Al Otaki Bldg. Tel (963-11) 3353030Fax (963-11) 3353037Swift FSBS SY DAE-mail [email protected]
2 branches in Damascus, 2 branches in Aleppoand 1 branch in Homs
Subsidiaries Banks
Supervisory Council
Mr. Adnan Kassar Chairman
Mr. Adel Kassar Deputy Chairman
Mr. Ghantous Gemayel Member
Mr. Georges Andraos Member
Headquarters & Main Branch
3, Tatarskaya Str., 220035, Minsk -
Republic of Belarus
Telefax (375-17) 3064426
Swift GTB NBY 22
E-mail [email protected]
Website www.fransabank.by
21 exchange offices in Minskand 1 branch in Gomel
Group Network
International Presence
FransabankAnnual Report 2009
154
Fransabank (France) SA Fransabank Syria SA
Fransabank El Djazaïr SPA
Fransabank OJSC (Belarus)
Board of DirectorsMr. Nadim Kassar Chairman Mr. Nabil Kassar Member, representing
Fransabank SAL-Lebanon
Mr. Raja Sarkis Member, representingCMA-CGM SA-France
Mr. Lazhar Hani Member, representingMerit Corporation SAL-Lebanon
Mr. Abdelrahmane Salhi Member, representingMaghreb Truck SPA-Algeria
Mr. Mansour Bteish Member Attorney Walid Daouk Member
Headquarters & Main Branch45B, Lot Petite Provence, Sidi Yahia Hydra, 16405, Algiers - AlgeriaTel Headquarters (213-21) 481296 / 482748Tel Main Branch (213-21) 480029 / 480212Fax (213-21) 606606Swift FSBK DZ ALEmail [email protected]
2 branches in Algiers and Oran
Bourj El Fateh, Tower 1, 17th Floor, Office nº 174,P. O. Box 81963 Tripoli, LibyaTel (218-21) 3351250Fax (218-21) 3351251Email [email protected]
Calle 72 nº 505 e/ 5ta - Ave. y 5ta-A Miramar Playa, Ciudad de la Habana, CubaTel (537-204) 9272 / (537-204) 9305/6Fax (537-204) 9273Email [email protected]
Associate Bank Representative Offices
International Presence
Group Network
Board of Directors
Mr. Saad Al Wazzan Chairman
Mr. Mansour Bteish Deputy Chairman
Mr. Ali Al-Alami Member
Mr. Faras Al Bahar Member
Mr. Ebrahim Al Khuzam Member
Mr. Tareq Alabdulghafour Member
Mr. Al Sharef Al Budr Member(Sudanese Independent Director)
Headquarters & Main Branch
Bldg. n 499, Square 65, Obeid Khatem Str.
East Khartoum, East Riyad Park, P.O. Box 8210 Al Amarat,
Khartoum - Sudan
Tel (249-183) 247700/1
Fax (249-183) 235000
Swift CBSK SD KH
E-mail [email protected]
Website www.capitalbank-sudan.com
www.bankalmal.com
2 branches in Khartoum & Rebak
155FransabankAnnual Report 2009
United Capital Bank Fransabank SAL Libya
Fransabank SAL Cuba
FransabankAnnual Report 2009
156
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