ANNUAL REPORT 08 - BLOM Bank...Master in Civil Engineering & MBA Diploma in Law B.A in Finance...

ANNUAL REPORT 08

Introduction

When you’re looking for a banking partner that can offer you complete Peace ofMind, you need a partner that can offer you the most comprehensive set of servicesthat cater to every facet of your life. At BLOM BANK, we pride ourselves on offeringa full-range of services, continually developing and evolving to make sure we alwayskeep up with what your life needs, when it needs it.

Dr. Naaman AZHARI - Chairman of BLOM BANK GROUPMr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L

6

Table of ContentsCHAIRMAN’S LETTER 9CUSTOMERS’ DEPOSITS EVOLUTION 11EVOLUTION OF MAIN INDICATORS 12CONSOLIDATED FINANCIAL RATIOS 12STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS 13BLOM BANK’S GROUP CHART 14BLOM BANK’S ORGANIZATIONAL CHART 15CORPORATE GOVERNANCE 191. BLOM BANK S.A.L. CODE OF CORPORATE GOVERNANCE 202. BLOM BANK S.A.L. MAJOR COMMON SHAREHOLDERS 203. BLOM BANK S.A.L. BOARD OF DIRECTORS 21

3.1 List of Board Members 223.2 Information About Board of Directors 213.3 Number and Date of Board Meetings held in 2008 27

4. INFORMATION ON KEY MEMBERS OF BLOM BANK S.A.L. MANAGEMENT 275. BLOM BANK S.A.L COMMERCIAL ARRANGEMENTS 296. GENERAL MANAGEMENT OF BLOM BANK S.A.L. 29MANAGEMENT DISCUSSION & ANALYSIS 2008 351. OPERATING ENVIRONMENT 362. OVERVIEW 393. EVOLUTION OF TOTAL ASSETS 404. SOURCES OF FUNDS 40

4.1 Customers’ Deposits 414.2 Capitalization (Tier I & Tier II Capital) 41

5. USES OF FUNDS 425.1 Cash and Balances With the Central Banks 425.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds 435.3 Bonds and Financial Instruments with Fixed Income 445.4 Banks and Financial Institutions 455.5 Loans and Advances to Customers 45

6. LIQUIDIDTY 487. PROFITABILTY 48

7.1 Net interest income 497.2 Non-Interest Income 527.3 Staff and Operating Expenses 53

8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES 549. CAPITAL ADEQUACY RATIOS 5410. INTEREST RATE RISK 5411. RISK MANAGEMENT AND BASEL II PREPARATIONS 5512. UNIVERSAL BANKING SERVICES 56

12.1 Private and Investment Banking 5612.2 Commercial and Corporate Banking 5712.3 Retail Banking 5712.4 Islamic banking 5912.5 Insurance Products & Services 59

13. INFORMATION SYSTEMS AND TECHNOLOGY 5913.1 Customer Relationship Management 5913.2 Advanced Electronic Payment Systems 6013.3 Enterprise Application Integration (EAI) 6013.4 Basel II & Regulatory Compliance 6013.5 Systems Security & High Availability 60

14. PEOPLE DEVELOPMENT 6014.1 General Overview 6014.2 Policies and Procedures 61

15. BANK’S OPERATIONAL EFFICIENCY 6216. REGIONAL EXPANSION 63BLOM BANK S.A.L CONSOLIDATED FINANCIAL STATEMENTS 67

1. Auditors’ Report 682. Consolidated Income statement Year Ended 31 December 2008 693. Consolidated Balance Sheet at 31 December 2008 704. Consolidated Cash Flow Statement Year Ended 31 December 2008 725. Consolidated statement of changes in equity for year ended 31 December 2008 74

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 79BLOM BANK WORLDWIDE CORREPONDENT BANKS 144BLOM BANK GROUP MANAGEMENT AND DIRECTORY 145

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Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L

8

It was another exceptional year for BLOM Bank in 2008. Amid a tense domestic political environment in the first half

of the year and a severe global financial crisis in the second half, BLOM Bank proved to be an oasis of profitability,

stability, and resiliency. The Bank has shown its financial strength once again by earning the highest level of profits

in the Lebanese banking system at $251.6 million; and by continuing its healthy growth and attraction of deposits to

reach the levels of $17.9 billion in assets and $15.1 billion in deposits. The Bank achieved the best returns on average assets

at 1.46% and on average equity at 20.12%, against respective averages for the Lebanese banking system as a whole

of 1.22% and 16.12%.

The Bank also remained the banking address for stability and “peace of mind” at a time of growing financial turmoil

and increasing risk aversion. Its traditional concern for strong asset quality and risk management translated into comforting

measures of sound banking practice. These were reflected in a high liquidity ratio of 55.83% for foreign currency deposits;

a notable capital adequacy ratio of 12.14% under Basel II; and a low ratio of gross non-performing loans of 3.93%,

especially at a time when loans increased by 25.3% to $3.47 billion, constituting 23% of deposits.

In recognition of these achievements under trying times, the Bank received several awards from the ranking institutions

in the field. Most rewarding is the selection in 2009 as the "Best Bank in the Middle East" from Banker Middle East,

for it is the first time such an award is given to a Lebanese bank. In addition, the Bank received in 2008: “Best Bank

in Lebanon” from The Banker, Euromoney, and Global Finance; “Best Trade Finance Bank in the Middle East” from The

Banker and World Finance; “Best Trade Finance Bank in Lebanon” from Global Finance; “Best Foreign Exchange Bank in

Lebanon” from Global Finance; and “Best Internet Bank in Lebanon” from Global Finance.

BLOM Bank’s leading role is also a testimony to the success and durability of the Lebanese banking system. This system has

always managed to cope with the precarious economic and political conditions in Lebanon; and it has now shown to

withstand the financial distress that can plague global and financial markets. In fact, the system’s immunity to the crisis has

made it a magnet or “safe haven” for banking and deposit-taking services. And this capacity was surely facilitated by

the prudent regulatory and precautionary directives of the Central Bank (Banque du Liban), and the strong control from

the supervisory Banking Control Commission, that shielded the system from “toxic” financial assets, and helped maintain

exchange rate and monetary stability. The result was a favorable expansion in the Lebanese banking system that saw

its assets and deposits increase to $94.3 billion and $77.8 billion respectively, and its profits to $1.08 billion. And not

to forget, this expansion was also helped by the resurgent growth in the Lebanese economy. For after a hesitant start,

the Lebanese economy witnessed a marked improvement after the Doha Agreement of May 2008, managing to grow at a

real rate of 8.5%, increase foreign reserves to $18.8 billion, and reduce the public debt-to-GDP ratio to 163% from 168%.

CHAIRMAN’S LETTER

9

Going forward, BLOM Bank’s path will continue to capitalize on its resilient strategy of diversification in services and

in foreign and regional expansion. The aim is to attain the twin goals of long-term, measured, and organic growth; and

the short-term capability to deal with the challenges of competition, economic slowdown, and a tightening of interest

spreads. Regarding service diversification, BLOM Bank will continue to build on its universal banking model, offering

commercial, retail, corporate, investment, and Islamic banking services, besides insurance. As a result, we see that

in 2008 the share of liquidity from operating income declined to 51.8%, with the increasing balance accruing to income

from our diversified banking services. In addition, the share of fee income strengthened to 22.7% of operating income. With

respect to diversification in our regional and foreign presence, BLOM Bank had in 2008 through its affiliates and subsidiaries

128 branches operating in 10 countries: Lebanon, Syria, Egypt, Jordan, UAE, France, Switzerland, England, Cyprus, and

Romania; and they comprised 29% and 30% of deposits and net income respectively. Moreover, the Bank has established in

May 2009 an investment bank in Saudi Arabia,BLOMINVEST SAUDI ARABIA, and in July 2009 a corporate and private

bank in Qatar, BLOM BANK QATAR; and it has also established in February 2009 a securities subsidiary in Syria, the

Syria Overseas Financial Services, and in April 2009 two insurance companies in Egypt, Arope Egypt for Life Insurance

and Arope Egypt for Property Insurance. That is in addition to the Bank’s application for a license to operate in Algeria;

and the intention for further expansion of our branch network in Lebanon and overseas.

In closing, I would like to reiterate BLOM Bank's commitment to better long-term shareholders’ value; and its commitment

to offer its clients and other stakeholders the best and safest banking services and the soundest business practices.

Of course, we would not be able to achieve all of this without the talent and professionalism of our dedicated staff,

to whom we extend our sincere thanks.

Saad AZHARIChairman and Genaral Manager

10

1995

2001

2002

2003

2004

2005

2006

2007

1996

1997

1998

1999

2000

14000

12000

10000

8000

6000

4000

2000

0

Years

1991

1992

1993

1994

Dep

osits(inmillion

sof

USD)

CUSTOMERS’ DEPOSITS EVOLUTION (in USD Millions)

16000

504 595 8711,259

1,605

2,686

3,3333,861

4,330

13,737

11,735

10,161

8,992

7,686

6,215

5,5255,056

2008

15,109

11

LIQUIDITY RATIOSNet liquidity in LBPNet immediate liquidity in Foreign CurrencyLiquid assets over total assets

LOANS TO DEPOSITS RATIOSLBPF/CTotal

ASSETS QUALITY - NOT INCLUDING GENERAL PROVISIONNet doubtful loans over total loansProvision over doubtful loansProvision over total loansGross doubtful loans/ Gross total loans

CAPITAL ADEQUACY RATIOSBefore dividend distributionAfter dividend distribution

PROFITABILITY RATIOSReturn on average equityReturn on average assetsEarnings per share USDDividend per common share USDDividend payout ratioRetention RatioNet asset value per common share USD

TOTAL ASSETSLBPUSD

CUSTOMERS’ DEPOSITSLBPUSD

TOTAL NET LIQUIDITYLBPUSD

SHAREHOLDERS’ EQUITYLBPUSD

CAPITAL FUNDSLBPUSD

TOTAL LOANS AND ADVANCESLBPUSD

NET INCOME AFTER TAXLBPUSD

2008

26,980.81317,897.719

22,776.3715,108.71

16,436.9610,903.43

2,180.691,446.56

2,199.321,458.92

5,237.373,474.21

379.254251.578

2007

25,082.62516,638.557

20,708.5213,736.99

15,839.1110,506.87

2,063.691,368.95

2,092.411,388.00

4,179.312,772.34

308.586204.7

Change08/07

7.57%7.57%

9.99%9.99%

3.77%3.77%

5.67%5.67%

5.11%5.11%

25.32%25.32%

22.90%22.90%

EVOLUTION OF MAIN INDICATORS (in USD MIllions or LBP Billions)

CONSOLIDATED FINANCIAL RATIOS (in % or USD)

2008

104.38%55.83%60.92%

7.76%27.96%22.99%

0.87%78.69%4.16%3.92%

29.84%27.85%

17.87%1.46%

10.69 USD3.65 USD

34.13%65.87%

55.03 USD

2007

105.93%63.24%63.19%

9.98%22.11%20.18%

1.68%80.40%8.21%7.94%

31.53%29.05%

15.65%1.33%

8.22 USD3.65 USD44.39%55.61%

48.77 USD12

2004 2005 2006 2007 2008

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

11,918

14,212

16,63917,898

16,000

10,835

18,000

STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS

Total Assets (in USD Millions)

Net Profits (in USD Millions)

2004 2005 2006 2007 2008

300

250

200

150

100

50

0

136.85180.30

204.7

251.6

91.15

Tier I & Tier II Capital (in USD Millions)

2004 2005 2006 2007 2008

1400

1200

1000

800

600

400

200

0

1600

957.81,271.34

1,388.0

1,458.9

790.61

13

BLOM BANK GROUP CHART*

* August 2009

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BLOM BANK S.A.L ORGANIZATIONAL CHART

Board Audit CommitteeBoard Risk Management Committee

Consulting, Strategy & Corporate Governance CommitteeNomination & Renumeration Committee

EXTERNAL AUDITORS

Ernst&Young-Semaan,Gholam&Co.

SOLICITORS

Me. Georges ABOU ZAMELMe. Antoine MERHEB

DEPARTMENTS/ UNITS* MANAGEMENT COMMITTEES

Accounting

Administration

Compliance Unit

Back Office Operations

Communication & Investor Relations

Corporate Unit

Credit

Engineering

Human Resources

Information Systems

Information System Security Unit

Internal Audit

Internal Audit /Group Inspection

Legal

Marketing

Executive Committee

Credit Committee 1

Credit Committee 2

Exceptional Credit Committee

Follow-up Credit Risk Committee

Provisions Committee

Retail Credit Committee

Assets & Liabilities Committee

Investment & Treasury Committee

Marketing Committee

Information Technology Committee

Human Resources Committee

Internal Audit Committee

Legal Committee

Operations& Internal Procedures Committee

ForeignBranches&Subsidaries Committee

Compliance Committee

Purchasing & Maintenance Committee

Information System Securitiy Committee

Branch Managers

57 in Lebanon,1 in Cyprus

1 in Damascus Free Zone6 in Jordan

1 Chief Representative in AbuDhabi

Recovery & General ManagementSecretariat UnitRetail Banking

Risk Management

Strategic Planning & Organization

Trade Finance

International Affairs & Treasury

BOARD COMMITTEES

BOARD OF DIRECTORS

SHAREHOLDERS

* By alphabetical order

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CORPORATE GOVERNANCE

1. BLOM BANK S.A.L CODE OF CORPORATE GOVERNANCE

The Code of Corporate Governance was approved at the end of 2007 by the Board of Directors at BLOM BANK. It sets outthe structure that identifies the rights and responsibilities of each of the Board members, general management, employeesand external stakeholders. It complies with all local laws and regulations to which the Bank is subject, as well as the BaselCommittee’s principles on Corporate Governance and outlines the expected conduct of all parties in order to achieve theobjectives set for the Bank.

The Bank recognizes the paramount importance of Corporate Governance for its proper functioning and for the creation of anoptimal operational environment. To that end, the board and management deployed all means for the proper implementationof the Code in 2008. The Board itself partly exercises its duties and authorities through four Board Committees (the Audit Committee,the Risk Management Committee, the Consulting Strategy and Corporate Governance Committee in addition to the Nomination andRemuneration Committee) and is the body ultimately responsible for ensuring the best possible practice of Corporate Governance atBLOM BANK.Awareness sessions for all BLOM employees on Corporate Governance were organized and are planned for new employees in orderto introduce the Code and related principles, while enhancements will be communicated to all personnel.The Code was also published on the Bank’s Website. Relevant information on the Board charter and shareholders rights were madeavailable to the public in compliance with the disclosure requirements of the Code.

In light of the current global financial situation, the Bank’s Board of Directors view the ongoing development of CorporateGovernance as a matter of even greater importance and necessity in enhancing its competitive position by continuing to further raiseits standards vis-à-vis internal organization and services to clients.

2. BLOM BANK S.A.L MAJOR COMMON SHAREHOLDERS

NAME

Bank of New York Melon**

Banorabe S.A., SPF***

AZA Holding (Azhari Family over 50%)

Azhari Family

Actionnaires Unis (Azhari Family over 50%)

Shaker Holdings S.A.L. (Shaker Family)

Mrs. Nada Aoueini

Jaroudy Family

Saade Family

Khoury Family

Others

Address - n° PO Box

1 Wall Street, NY 10286, USA

67 Blvd De La Petrusse- L2320- Luxembourg

BLOM BANK’s bldg- Rashid Karami st., Beirut

C/O BLOM BANK, Rashid Karame Street, Beirut Lebanon

Grosvenor Sq., London W1K6LB – UK

Tallet El-Khayat – Aoueini Bldg- Beirut, Lebanon

Ain Ek Tineh, Al Sakhra Bldg

P.O. Box 4370 – Dubai – United Arab Emirates

Naccache – Villa Khoury

COMMON SHARES IN CAPITAL *

34.37 %

11.86 %

9.33 %

2.86 %

1.83%

5.39 %

5 %

4.92 %

2.81 %

2.00 %

19.63 %

*Total common shares: 21,500,000

**Starting 1998, and after the issuance of Global Depositary Receipts (GDR) by BLOM Bank Shareholders, the Bank of New Yorkas Depositary, became shareholder on the Bank’s register.

***The major shareholders of Banorabe S.A, SPF (Formerly Banorabe Holding S.A) are the same as in BLOM BANK (except Bankof New York and AZA Holding).

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3. BLOM BANK S.A.L BOARD OF DIRECTORS

Name

Mr. Saad AZHARI

Mr. Samer AZHARI

Me Youssef Salim TAKLA

Cheikh Ghassan SHAKER

Cheikh Salim EL-KHOURY

Mr. Habib RAHAL

Mr. Nicolas SAADE

Dr. Fadi OSSEIRAN

Mr. Joseph KHARRAT

Mr. Marwan JAROUDI

Position

Chairman & General Manager

Director & Secretary Generalof BLOM BANK Group

Director

Director

Director

Director & General Manager

Director

Director

Director

Director

Background/Competencies

Master in Engineering & MBA

Master in Civil Engineering & MBA

Diploma in Law

B.A in Finance

Diploma in Law

B.A. in Accounting Economics

Master in Finance & B.A. in Economics

Ph.D. in Economics

B.A. in Ecomomics

MBA in Ecomomics

Director since 1996Chairman and General Managersince 2007

Director since 1997

Director since 2006

Director since 1964

Director since 1987

Director since 2008General Manager since 1992

Director since 1990

Director since 2008

Member since 1984

Director since 2008

Number of directorshipyears with the Bank

3.1 List of Board Members

Dr. Naaman AZHARI Chairman of BLOM BANK GROUP

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Dr. Naaman W. AZHARI

CHAIRMAN OF BLOM BANK GROUP

Born in 1928

Head of the “Nomination andRemuneration Committee” at BLOMBANK.

Dr.Naaman AZHARI started his bankingexperience in 1951. He worked in a Frenchbank in Paris (which became SociétéGénérale).At the end of the 1950s, he established oneof the largest banks in Syria, “Banque del’Orient Arabe” and was appointedChairman of the Bank.From 1961 to 1962, he occupied the positionof Minister of Finance, Economy andPlanning in Syria.In 1962, he was appointed General Managerof BLOM BANK SAL.From 1971 until 2007, he occupied the posi-tion of Chairman & General Manager ofBLOM BANK .In 2007 he was appointed Chairman ofBLOM BANK GROUP.Dr. Naaman AZHARI holds a State DegreePHD in Economics from the University ofParis I ( Sorbonne) and a Diploma in Lawand a Diploma in Political Sciences from the“Institut des Sciences Politiques” in Paris.

Mr. Saad N. AZHARI

3.2 Information About Board of Directors

Chairman of the Board and GeneralManager of BLOM BANK S.A.L.

Born in 1961

Chairman of the Board and GeneralManager of BLOM BANK S.A.L.

Chairman and General Manager ofBLOMINVEST BANK

Chairman of BLOM BANK(SWITZERLAND)

Chairman of BLOM BANK EGYPT

Chairman of BLOM BANK QATAR

Member of the Board and Vice-Chairman of BLOMINVEST SaudiArabia.

Member of the Board of Directorsof Bank Of Syria And Overseas

Member of the Board of Directorsof BLOM DEVELOPMENT Bank S.A.L.

Member of the Board of Directorsof Société Fonçière du Liban etD’Outre-Mer S.A.L.

Mr. Saad AZHARI started his banking career in1986 in PBZ Privatbank, an affiliate of the UBSGroup, in which he worked until 1991. During thattime he was promoted to run, from Zurich, theBank’s operations in theMiddleEast andHongKong.He joined BLOM BANK (Switzerland) in 1991 andwas appointed its General Manager in 1997. In1998, he was elected Chairman and GeneralManager of BLOMINVEST BANK. This was fol-lowed by his election to the position of Chairmanof BLOM BANK (SWITZERLAND) in 2001. At thesame time, he was appointed Vice – Chairmanand General Manager of BLOM BANK S.A.L.In 2005 Mr. AZHARI became Chairman of BLOMBANK EGYPT and in 2007 he was electedChairman & General Manager of BLOM BANKS.A.L. Since 2008, Mr. AZHARI has beenChairman of BLOMBANKQatar and aMember ofthe Board and Vice-Chairman of BLOMINVESTSAUDI ARABIA.He is also a Member of the Board of Directors ofBank Of Syria & Overseas as well as being aMember of the Board of BLOM DEVELOPMENTBank S.A.L. and was its Chairman from 2006 untilbeginning of 2009.Mr. Saad AZHARI is also a Member of the Boardof Directors of Société Fonçière du Liban etD’Outre-Mer S.A.L.Since 2001, he has held the position of Vice-President of the Association of Banks in Lebanon.Mr. Saad AZHARI holds a Masters Degree inComputer Engineering and an MBA from theUniversityofMichigan-AnnArbor in theUnitedStates.

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H.E. Sheikh GhassanI. SHAKER

(Grand Officier de la Légion d’Honneur)

Non-Executive Director of BLOMBANK S.A.L.

Born in 1937

Director of BLOM BANK FRANCE

Businessman, banker, industrialist and diplo-mat, His Excellency Ghassan Ibrahim SHAKER,is among the most highly decorated personali-ties from the Arab world, including being aGrand Officier de la Légion D’Honneur-France.H.E. Sheikh Ghassan SHAKER has been aMemberof BLOM BANK’s Board since 1964 and is also aBoard Member of BLOM BANK FRANCE.He is a Personal Advisor to His Majesty TheSultan of Oman and Ambassador of the OmaniMission at the United Nations, Geneva,Switzerland. In addition, he is Plenipotentiaryfor the Embassy of the Sultanate of Oman, UKand Goodwill Ambassador at UNESCO, Paris.H.E. Sheikh Ghassan SHAKER is also Chairmanand Member of Board of Directors of variouscompanies in Asia and Europe:-ChairmanofArab Eastern InsuranceCo. Ltd-Bahrain,- ChairmanofHusseinAoueini&Co. Ltd -SaudiArabia.-Chairman of Gulf Conversion Co. Ltd –UnitedArab Emirates- Member of Group of 50 Investcorp Bank Bahrain.He was educated at Victoria College (1944-1946) and at St. John’s College, CambridgeUniversity (1956-1959). He is member of theBoard of Trustees, Georgetown University,Washington DC.

H.E. Me. Youssef S. TAKLA

Non-Executive Director of BLOMBANK SAL

Born in 1937

Member of the “Nomination andRemuneration Committee” at BLOMBank S.A.L.

H.E. Me Youssef TAKLA has been a BoardDirector of BLOM BANK SAL since 2006.He was a member of the Beirut BarAssociation since 1961 and Member of theParis Bar Association since 1983 . Between1993 and 1999, Me. TAKLA was also memberof the International Court of Arbitration of theInternational Chamber of Commerce.He has been additionally since 1992 a Memberof the Legislative Commission in the LebaneseMinistry of Justice and a Member of theCommittee of Modernization and Coordinationof Banking Laws at the Central Bank ofLebanon since 1993.H.E. Me. TAKLA was nominated Minister ofState in Lebanon in 2008 .He holds a diploma in law from the Universityof Saint-Joseph in Beirut .

23

Mr. Samer AZHARI

Director of BLOM Bank S.A.L.

Born in 1958

Secretary General of BLOM BANKGROUP

Chairman and General Manager ofBLOM BANK FRANCE

Board Member of BLOMINVEST BANK

Member of the Board of Bank Of SyriaAnd Overseas

Mr. Samer AZHARI joined Banque Banorabe,affiliated bank of BLOM BANK, in Paris in1985 and became its General Manager in1994.In 1997 he was appointed as GeneralManager of BLOM BANK SAL and occupiedthis position until 2001.Since 2001, Mr. Samer AZHARI has beenChairman & General Manager of BLOMBANK FRANCE (formerly BANQUE BANORABE.)He was Chairman and General Manager ofAROPE INSURANCE, an affiliated insurancecompany of BLOM BANK, from 1998 until 2008.From 1999 until 2001, he occupied theposition of Vice–President of theAssociation of Banks in Lebanon.Mr. Samer AZHARI has been BLOM BANKGroup’s Secretary General since 2007.Mr. Samer AZHARI holds a Master ofScience degree in Civil Engineering from theUniversity of Illinois, USA and an MBA fromINSEAD, France

Mr. Habib RAHAL

Director & General Managerof BLOM BANK S.A.L.

Born in 1944

Member of the “Consulting, Strategyand Corporate Governance Committee”at BLOM BANK S.A.L.

Chairman & General Manager of AropeInsurance S.A.L.

Board Member of BLOMINVEST BANKS.A.L.

Board Member of Arope Egypt LifeInsurance

Board Member of Arope EgyptProperties Insurance

Chairman of Société des Servicesd’Assurances et de Marketing

Mr. Habib RAHAL started his bankingexperience at Société Centrale de Banquesand occupied several managerial positionsat Moscow Narodny Bank and Royal Bankof Canada before joining Banque du CreditPopulaire where he was appointedGeneral Manager from 1974 to 1990 .In 1990, he joined BLOM BANK asChairman’s Advisor and was appointed in1992 as the Bank’s General Manager.Mr. Habib RAHAL has been a Member ofthe Board of Directors of AROPE INSURANCEsince 2004 and was elected its Chairmanand General Manager in 2007.Mr. RAHAL has been a Board Member ofBLOM BANK SAL. since 2008 and a BoardMember of BLOMINVEST BANK since 2001.He is also the Chairman of Société desServices d’Assurances et de Marketingsince 2003.In 2008 he became Board Member ofAROPE EGYPT LIFE INSURANCE and aBoard Member of AROPE EGYPT PROPERTIESINSURANCE.Mr. RAHAL represents BLOM BANK S.A.L.and sits as Director on the followingBoards of Directors: Banque de L’Habitat,Société Financière du Liban and IPN.Habib RAHAL is holder of a Bachelor Degree inAccounting & Economics from ESEC.

24

Sheikh Salim B. EL-KHOURY

Non – Executive Director of BLOMBANK SAL

Born in 1931

Sheikh Salim EL KHOURY has been a Memberof the Board of Directors of BLOM BANK SALsince 1987.He holds a degree in French law from theUniversity of Lyon in France and a degree inLebanese Law from Saint – JosephUniversity’s “Ecole de Droit de Beyrouth” andhas completed an Advanced ManagementProgram at Harvard Business School .

Mr. Nicolas SAADE

Non- Executive Director ofBLOM BANK SAL

Born in 1950

Head of the “Board Audit Committee” atBLOM BANK S.A.L.

Head of the “Board Risk ManagementCommittee” at BLOM BANK S.A.L.

Member of the “Consulting, Strategy andCorporate Governance Committee” atBLOM BANK S.A.L.

Board Member of BLOM DEVELOPMENTBANK

Board Member of BLOM BANK Qatar.

Mr. Nicolas SAADE has been a Board Directorof BLOM BANK since 1990.From April 1985 to July 1987, he wasRegional Manager of BLOM in Dubai, UAE.Between 1980 and 1985 he was DeputyGeneral Manager of Union de Banques enCote d”Ivoire (BANAFRIQUE).In 1975, he joined the Toronto Dominion Bankin which he stayed until July 1980, occupyingvarious managerial positions.Mr. Nicolas SAADE is proprietor andManaging Director of the Nicolas SAADE Est.in Dubai, which is a banking, investment andfinancial consulting firm. He is also theManaging Director of Elite ConsultantsInternational, Inc in Delaware, USA, an SECregistered investment advisory firm, andproprietor of Pioneer Auditing in Dubai.Previously, he was fund manager at FriendsProvident International Elite Fund in the Isle ofMan.Mr. Nicolas SAADE is holder of an HonorsBA in Economics from McMaster University inCanada and has an MBA from WhartonSchool, University of Pennsylvania, USA .

25

Dr. Fadi OSSEIRAN

Director of BLOM BANK SAL

Born in 1956

General Manager of BLOMINVESTBANK SAL

Board Member of BLOM BANK Egypt

Board Member of BLOMINVEST SAUDIARABIA.

Dr. Fadi OSSEIRAN started his banking career atBLOM BANK as Assistant Dealer from 1981 to1982 .From 1990 until 1933 , he was Manger ofCorporate Planning and Human ResourcesDevelopment at Méditerranée Group Services.From 1985 to 1987, he was an Instructor in theEconomics Department at the AmericanUniversity of Beirut and became AssistantProfessor at the Institute of Money and Bankingof AUB from 1988 to 1993 .Since 1994, he has been General Manager ofBLOMINVEST BANK S.A.L. and Advisor to theChairman – General Manager of BLOM BankS.A.L. Dr. Osseiran became a Member of theBoard of Directors of BLOM BANK S.A.L. in2008, and a Member of the Board of BLOMBANK Egypt in 2005. He has been a Director ofBLOMINVEST BANK Saudi Arabia since 2008 .Dr. OSSEIRAN has held the position of Presidentof the “Association of Stock Brokers in Beirut”since 2004 and has been a Member of the“Lebanese Economic Association” since 2004.He was also Member of the “ResearchCommittee” (1992-2006) and Member of the“Training Committee” (1994-1996) of theAssociation of Banks in Lebanon.He was Board Member of the LebaneseManagement Association from 1992 – 1996and has many publications in the Banking andEconomics Fields.Dr. OSSEIRAN is holder of a PHD in Economicsfrom New York University (NYU) in the United

Mr. Marwan JAROUDI

Non-Executive Director ofBLOM BANK SAL

Born in 1959

Head of the “Consulting, Strategy andCorporate Governance Committee” atBLOM BANK S.A.L.

Member of the “Nomination andRemuneration Committee” at BLOMBANK S.A.L.

Member of the “Board AuditCommittee” at BLOM BANK S.A.L.

Member of the “Board RiskManagement Committee” at BLOMBANK S.A.L.

Board Member of BLOM BANK FRANCE


Board Member of BLOMINVESTSAUDI ARABIA

He is BoardMember of BLOMBANKQATAR

Board Member of Arope Insurance

Board Member of Arope Syria

Mr. Marwan JAROUDI currently sits on the Boardof Directors of the following Companies :Industry Intelligence Inc., Los Angeles - USAForestweb, Inc., Los AngelesBLOMINVEST Saudi ArabiaBLOMINVEST Bank s.a.l.Arope Insurance s.a.l.Arope Syria, SyriaUnited Shareholders,BLOM BANK FRANCE,BLOM BANK SALHe has been a Board Member of BLOM BANKQATAR since 2008.He is Co-Founder, Director in Industry IntelligenceInc., Los Angeles – California, since 2007 .Since 1999, he occupies the positionof Co-Founder, Director in Forestweb, Inc., Los AngelesFrom 1996 until 1999 he was Co-Founder,Managing Director in Pulptrade, Choueifat,Lebanon.From 1985 until 1995, Mr. JAROUDI occupied anumber of managerial positions at Saudi HollandiBank in Jeddah.From 1989 until 1991 he was co-founder andFinance Director at Gulf Medical Co ltd.Mr. JAROUDI is holder of aMaster of Arts degreein Economics from Syracuse University in NewYork and has a BA in Economics from theAmerican University of Beirut.

26

Mr. Joseph KHARRAT

Non – Executive Director of BLOMBANK S.A.L

Born in 1941

Member of the Board Audit Committeeat BLOM Bank S.A.LMember of the “Nomination andRemuneration Committee” at BLOMBANK S.A.L.

Member of the “Board RiskManagement Committee” at BLOMBank S.A.L.

Member of the “Consulting, Strategyand Corporate Governance Committee”at BLOM Bank S.A.L.


Mr. Joseph KHARRAT is a non- Executive

Director of BLOM BANK since 1984 until to date.

He is Board Member of BLOMINVEST BANK

S.A.L since 1994 until to date

He is Chairman and General Manager of

several textile and real estate companies of

which: Kamaco S.A.L., Satexi (Abidjian) and

Kharrat Immobilière (Abidjian).

Mr. Joseph KHARRAT is holder of a Bachelor

degree in Economics from Reading University

in the U.K

27

3.3 Number and Date of Board Meetings Held in 2008

The following BLOM BANK S.A.L board meetings were held during 2008:- On 25/2/2008- On 18/3/2008- On 9/4/2008- On 19/5/2008- On 9/6/2008- On 25/7/2008- On 26/9/2008

Total: 7 Board meetings

4. INFORMATION ON KEY MEMBERS OF BLOM BANK S.A.L MANAGEMENT

Mr. Amr AZHARI

General Manager of BLOM BANK S.A.L.

Born in:1970

Vice Chairman of Bank of Syria andOverseas

Chairman and General Manager of BLOMDEVELOPMENT BANK

Chairman of AROPE SYRIA InternationalInsurance.

Chairman of Société Fonçière du Libanet D’Outre-Mer S.A.L.

Mr. Amr AZHARI started his banking experiencein 1991 at Banque Banorabe - Paris.From 1991 to 1992 he worked at Gestion Pictet& Cie Montreal - Canada, and from1995 to 1997he occupied the position of Assistant Manager- Banque Banorient - Geneva - Switzerland.During the same period, 1995-1997 he wasalso General Management Executive at BanqueBanorabe – Paris.He moved on to become from 1999 to 2001 theFinance Manager of Banque Banorabe – Dubai- UAE, followed by Manager of BanqueBanorabe Pairs – France from 2001 – 2004.In 2008 Mr. AZHARI became Chairman ofSociété Fonçière du Liban et D’Outre-MerS.A.L., and has been a Board Member of theDamascus Stock Exchange since 2006.Mr. Amr AZHARI holds the following degreesfrom McGill University- Montreal, Canada:Master of Business Administration, Bachelor ofCivil Law and Bachelor of Arts, major in Economics.

Mr. Elias ARACTINGI

Deputy General Manager of BLOMBANK S.A.L., in charge of Strategy,Organization and Retail Banking

Born in 1959

Managing Director and CEO of BLOMBANK EGYPT

Chairman of BLOM EGYPT SECURITIES

Mr. Elias ARACTINGI started his banking career in1983 at Bank Audi USA in New York where hewas promoted several times until he reached thetitle of Vice President and Head of Operations. Hejoined BSI (Banca della Svizzera Italiana)’s NewYork branch in 1988 as Vice President in theInternational Private Banking Group.In 1990, Mr. ARACTINGI joined Booz.Allen andHamilton, based in Singapore as an Associateand was promoted to Senior Associate in 1993,then to manager of the Bangkok office in 1994and finally to Principal in 1995.At the end of 1995, he joined BLOMBank in Beirutas Advisor to the Chairman, focusing on branchand head office reengineering. In 1997, heinitiated BLOM’s Retail Banking activities.In 2005, he was appointedManaging Director andCEO of BLOM BANK EGYPT, a position he helduntil September 2006. He was promoted in 2008to Deputy General Manager of BLOM Bank SAL.In 2009, he was re-appointed as ManagingDirector and CEO of BLOM BANK EGYPT and waselected Chairman of BLOM Egypt Securities.Mr. Elias ARACTINGI holds a Bachelor Degree inBusiness Administration with distinction from theAmerican University of Beirut and an MBA inFinance from Columbia University’s GraduateSchool of Business.

28

Mr. Antoine LAWANDOS*

Assistant General Manager andChief Information Officer of BLOMBank SAL

Born in 1963

Mr. Antoine LAWANDOS started his career in1986 with Istisharat, a banking software vendorwhere he became the head of one of the bankingsystems development units (ICBS).Before joining BLOM BANK in 1993, he also heldthe position of Systems Engineering DepartmentManager at BML (Business Machines ofLebanon), IBM representatives in Lebanon. AfterBML, he joined MDSL as project manager for theimplementation of an international universalbanking package.In 1993, he joined BLOMBANK as Project Directorfor the core banking application change, and thenin 1995, he was appointed Senior Manager forthe IT and Systems Development Departmentuntil 2006 when he became Chief InformationOfficer (CIO) of BLOM BANK.In 2008, he was appointed Assistant GeneralManager of BLOM BANK in addition to being CIO.Mr. LAWNDOS holds an MSc. degree inElectronics and Information Systems from “EcoleSuperieure des Ingenieurs de Beyrouth (ESIB)”,with over 23 years of experience in the ICT fieldapplied to the financial services industry.

Mr. Talal BABA*

Assistant General ManagerHead of Accounting Department atBLOM BANK S.A.L.

Born in 1967

Mr. Talal BABA joined BLOM BANK in 1991.In 2002 he was appointed AccountingManager.In 2006 he was promoted to SeniorAccounting Manager.In July 2008 he was appointed AssistantGeneral Manager - Head of the AccountingDepartment at BLOM BANK S.A.L.Mr. BABA is holder of a Master in BusinessAdministration from the Lebanese AmericanUniversity - Beirut.

Dr. Pierre ABOU-EZZE*

Assistant General Managerand Head of Human Resources atBLOM BANK S.A.L.

Born in:1955

Dr. Pierre ABOU-EZZE has 14 years of hands-onexperience in Human Resources. He has beenthe Head of Human Resources at BLOM BANKS.A.L. since 1998.In 2008, he was appointed Assistant GeneralManager at BLOM BANK S.A.L.From 1995 until 1998, he occupied the positionof Advisor to the Chairman of BLOM BANK onTraining Issues.He was a lecturer at the American University ofBeirut, Graduate School of Business &Management from 1998 until 2008 after beingAssistant Professor from 1991 until 1993 andDirector of the School of Business &Management from 1993 until 1997. From 1989until 1990 he was Assistant Professor at theUniversity of Kuwait and from 1988 until 1989he was Assistant Professor in the Departmentof Economics at the University of Ottawa, Canada.He is a holder of a Ph.D in Economics from theUniversity of McMaster, Canada.

* By alphabetical order

Dr. Naaman AZHARI

Mr. Saad AZHARI

Mr. Habib RAHAL

Mr. Amr AZHARI

Mr. Elias ARACTINGI

Dr. Pierre ABOU EZZE

Mr. Talal BABA

Mr. Antoine LAWANDOS

Mr. Fawaz KAYAL (**)

Sheikh Fahim MO’DAD

Mr. Georges SAYEGH

(*) By Alphabetical Order(**) Deceased on July 7th 2009

29

Any commercial arrangement between the Bank and any of its affiliates is pre-approved by the General Assembly ofShareholders of the Bank and of the concerned affiliate according to art. 158 of the Lebanese commerce law, whenapplicable.No change of control has occurred during 2008.

5. BLOM BANK S.A.L COMMERCIAL ARRANGEMENTS

General Managers

Assistant General Managers (*)

Chairman of BLOM BANK GROUP

Retail Banking Department

Human Resources Department

Accounting Department

Information Systems Department

Formerly Vice Governor of the Central Bank of Lebanon

Advisors (*)

6. GENERAL MANAGEMENT OF BLOM BANK S.A.L

Deputy General Manager (*)

Chairman & General Manager

Principal ManagersMr. Grégoire AZARMrs. Jocelyne CHAHWANMr. Georges CHEDIDMr.Mustapha GHALAYINIMr. Samir KASSISMr. Mekhael KAZZIMr. Naoum RAPHAELMr. Jacques SABOUNGIMr. Fouad SAIDMe. Aimee SAYEGHMr. Mohamed SOUBRAMr. Riad TABBARAMr. Ramzi TARABISHIMr. Samih ZEIN EL DINE

Regional ManagerMr. Elias MOKHACHEN

Managers (A)Mr. Gerard RIZKDr. Gladys YOUNES

Managers (B)Mr. Michel GHANEMMr. Rabih HALABIMr. Imad KADI

Deputy Managers (A)Mr. Marcel ABOU JAOUDEMr. Malek COSTA

Assistant Managers (A)Mr. Charles HADDADMs. Aya YAMMOUT

(*) By Alphabetical Order

Management (*) Departments & Units

International Affairs & Treasury DepartmentRetail Banking Department

Marketing Department / Syrian DeskCredit Department

Corporate UnitBack Office Operations Department

Group Inspection UnitTrade Finance Department

Marketing Department / OverseasLegal Affairs Department

IT Operations DivisionChairman / General Manager’s office

Internal Audit DepartmentAdministration Department

Marketing Department / Syrian Desk

Risk Management DepartmentCommunication & Investor Relations Department

Marketing DepartmentStrategic Planning & Organization

Retail Credit Division

Marketing Department / OverseasCompliance Department

Recovery & General Management Secretariat UnitInformation System Security Unit

30

MANAGEMENT DISCUSSION & ANALYSIS 2008

1. OPERATING ENVIRONMENT

The Lebanese economy turned in another solid performance in 2008, although the pattern of growth was uneven. Afterrecording a slow pace of expansion during the first 5 months of the year, before the Doha Agreement, the remaining7 months of the year witnessed a surge in economic activity despite the global financial and economic turmoil that hitthe world in the last quarter of the year. The housing market continued its strong upward trend, and in the second halfof 2008, tourism activity rebounded ending the year with a record number of tourists since 1974. Elsewhere in theeconomy, activity remained strong. Consumer spending increased vigorously in 2008 as households' real income madestrong gains. Business investment rose at a solid rate for the year as a whole, although it really kicked off late in theyear in part because of the political deadlock during the first 5 months. Demand for Lebanese exports rose at a robustpace in 2008, supported by strong economic activity abroad, especially in the GCC countries, during the first threequarters of the year. Against this backdrop, labor conditions relaxed by the end of the year due to the decline in joboffers in potential markets for the Lebanese workforce, particularly in the Gulf region, however businesses in Lebanoncontinued to add jobs at a steady rate, and the employment situation improved.

The brisk pace of economic activity in the second half of 2008 primarily reflected a rebound after 2 years of political and securityunrests. During the first half of the year, however, economic activity was slow to a pace somewhat equal to the average rate ofrecent years; but real GDP is reported to have increased at an average annual rate of 8.5 percent in 2008 compared to 7.5 percentin 2007. The speed up principally was the result of the end of the political deadlock following the Doha agreement, which led to asuccessful tourism season, the increase of private investments, particularly in the real estate sector, and the surge in exports bymore than 23 percent. In other sectors of the economy, consumer spending remained strong as Lebanese expatriates continue totransfer money to their relatives. Employment made solid gains with bargaining power of employees increasing to a level never seenbefore, as employers were obliged to compete with GCC companies to attract qualified people. Financial market conditions wereextremely supportive of economic expansion in 2008 with high liquidity ratios at commercial banks; equity market (BSE) recordedsizable gains in the first seven months of the year before losing ground in the remainder of the year.

Consumer price inflation declined in 2008 to 5.5 percent from its elevated rate of 9.3% in 2007, as energy and other commod-ity prices fell in the last quarter of the year, after rising rapidly over the first few months. Crude oil prices rose during the firsthalf of 2008 but turned down sharply later in the year. As a result, consumer price inflation climbed in the first 3 quarters ofthe year to reach 8.3 percent by end September before slowing in the last quarter. The sharp movements in prices of crude oilappear to have affected not only prices of gasoline and other petroleum-based types of energy but also prices of a broaderrange of goods and services that use petroleum-based inputs. Partly as a result, consumer price inflation excluding food andenergy-core consumer price inflation-moved up during the first half of the year but eased subsequently.

The monetary policy decisions in 2008 were intended to foster sustainable economic expansion and to promote a returnto low and stable inflation. In that regard, the central bank issued intermediary circulars in 2008 to promote housingloans for low-income people and to encourage banks to lend in Lebanese pounds. Furthermore, the central bank easedcredit to the financial sector to promote investment and recovery of bank customers following the 2006 July war.Delinquency rates on consumer loans and on most types of mortgages remained low. As for businesses, balance sheetswere quite liquid, credit quality was good, and most firms enjoyed ready access to funds due to the high liquidity atcommercial banks. On balance, growth of real gross domestic product in Lebanon appears likely to run slightly belowthat of the economy's potential over 2009 then to rise to the economy’s potential if global conditions improved andinvestment in sectors, other than the real estate, improved significantly.

36

MANAGEMENT DISCUSSION & ANALYSIS 2008

The budget deficit widened, in absolute terms, during the past year recording USD 2.92 billion-USD 370 million larger thanin the previous fiscal year. However, it slightly narrowed as a percentage of GDP to 10.1 percent compared to 10.2 percentin 2007, as the rise in nominal GDP marginally outpaced the rise in fiscal deficit. The deficit was significantly lower than itsrecent fiscal year peak of more than 13.6 percent of GDP in 2006. In 2008, outlays rose about in line with GDP, but receiptsincreased at a faster pace.

Government receipts rose 20.6 percent and were equivalent to almost 24.3 percent of nominal GDP, substantially higher thantheir recent fiscal year low of 19.87 percent of GDP in 2006. Income tax and VAT surged more than 28 percent to reach USD1.12 billion and USD 1.71 billion respectively. Government expenditures increased 19 percent and were about 34.4 percent ofnominal GDP, well above their most recent fiscal year low of 30.91 percent of GDP in 2005. Debt service increased 10percent to USD 3.29 billion in 2008, as interest rates rose in the first few months of the year and the authorities hadto pay interests on the financing of the 2007 budget deficit. EDL subsidies increased more than 60 percent to USD 1.61 billion asfuel prices skyrocketed during the first 3 quarters of last year.

With a slightly positive primary surplus, the government could have limited the increase of its public debt to the debtservice level. However it opted to accumulate deposits at the central bank before the upcoming parliamentary elections thattook place in June 2009. Consequently, gross public debt increased around USD 5 billion. Nonetheless, the ratio of public debt toGDP declined 6 percentage points to reach 163 percent in 2008 due to the higher increase in nominal GDP.

Lebanon’s current account deficit averaged USD 3.4 billion, or about 11.76 percent of nominal GDP in 2008. The deficit waswider than in 2007, partly because of a larger deficit on trade of goods. In addition, net investment income remained negativein 2008 and moved from USD 0.8 billion to USD 1.6 billion, further expanding the current account deficit. The trade deficitwidened throughout the year in 2008 as it rose to a record high in November. High commodity prices in the first three quarters of2008 were partly behind the elevated trade deficit.

Imports of goods grew by 36.4 percent, more rapidly than exports did throughout last year mainly because of the increase inboth the price and volume of imported oil. Exports of goods also pushed upward steadily throughout the year and grewsignificantly by 23.5 percent to reach USD 3.5 billion. Given that the level of exports was smaller than the level of imports,the faster import growth during 2008 widened even more the trade deficit that reached USD 12.7 billion.

However, the balance of payment registered a surplus of USD 3.5 billion owing to large capital inflows that started after the

Doha agreement, accelerated during the summer and continued in the last quarter of the year. The conservative management

at commercial banks as well as the circulars issued by the central bank few years ago, banning commercial banks from

investing in the subprime market, constituted crucial factors that enhanced confidence in the Lebanese financial system during

the global financial crisis. Lebanon’s banking system appeared as a safe haven despite its lower rating compared to other

regional and international markets. Consequently, capital continued to flow in the market. Foreign direct investment

maintained its 2007 level at about USD 2 billion, while portfolio investment surged to USD 4.8 billion compared to a

negative USD 2.1 billion in 2007.

Management discussion & analysis 2008

37

Financial markets showed strong resilience in 2008 against the global financial crisis. The interbank rate stood at an

average of 3.74 percent in 2008, down from 4.18 percent a year earlier as Central Banks around the world lowered their

benchmark rates to historic lows. Money supply continued to rise throughout 2008 as broad money increased by 14.75

percent to USD 68.6 billion compared to a growth rate of 12.4 percent in 2007. Dollarization of deposits shrank in 2008 to

69.6 percent from 77.33 percent, as demand for the higher yielding Lebanese Pound deposits went up significantly. Interest

rates on both the Lebanese Pound and the USD declined in 2008. The former fell to an average 7.25 percent from 7.46

percent in 2007, while the latter recorded a bigger fall to 3.7 percent from 4.85 percent. The value of cleared checks jumped

by 37.11 percent to USD 52.5 billion in 2008 with the dollarization rate increasing to 82.2 percent from 77 percent in 2007.

Cleared checks denominated in local currency accounted for the remaining 17.8 percent.

On the fixed income side, the government successfully swapped all of its 2008 USD 2.12 billion maturing debt with

three consecutive swaps of dollar denominated Eurobonds. The relative increase in demand for local debt, compared to

global sovereigns, sustained the BLOM bond index from falling further than 94.71 in 2008 compared to 97.76 in 2007.

Consequently, the weighted bond yield went up to 9.448 percent from 8.613 percent in 2007.

In the banking sector, the consolidated balance sheet of commercial banks mirrored the increasing confidence in the

Lebanese financial sector. As such, the balance sheet of domestic banks reflected an increase of 14.6 percent in total

banking assets to USD 94.3 billion. The sector’s high profitability was reflected in a 30.8 percent increase in consolidated

profits over the previous year to USD 1,255.76 million while its capitalisation went up 13.4 percent to USD 7.1 billion.

Customer deposits and loans rose by 15.6 percent and 22.6 percent to USD77.8 billion and USD25.04 billion respectively,

leading the loans to deposits ratio to increase to 32.18 percent as compared to 30.35 percent in 2007.

However, the global financial turmoil weighed on the Beirut stock exchange with the BLOM Stock Index (BSI) dropping about

22 percent in 2008. The index had peaked in July recording an all time high of 2,119 points before starting its decline to end

the year at 1,178. As a result, market capitalization fell by 16 percent to USD 8.54 billion following a 32.5 percent increase

in 2007. By contrast, total market turnover grew by 67.3 percent to USD 1,659 million from USD 991.8 million registered a

year earlier. The decline in share prices was led by the real estate sector, which fell 58 percent by the end of the year, from

its peak in July. The banking sector followed the downtrend of the real estate with the BLOM Mena Banking Index for

Lebanon (BMBI/Lebanon) falling 43 percent by year-end, from its peak reached in May 2008.

The high growth rate of the economy amidst the start of the global recession and the strength of the financial system

within the context of a stable political climate, led to an improvement in the country’s ratings. This was reflected in Standard

& Poor’s upgrade of the long-term foreign currency sovereign rating to B- from CC+ in August 2008.

Finally, the political turbulence witnessed in the first part of 2008 that was later coupled with the start of the global financial

crisis, put on hold vital elements of the reforms agenda set forth during the Paris III donors conference, including the privatization

of the mobile phone networks and the restructuring of the electricity utility company (EdL).

38

Key Indicators

Notes: Data included in “BLOM’s Environment” are based on several sources:

- Public finance, public debt, interest payments and cost of debt are based on the Ministry of Finance’s publications.

- Trade balance, FX reserves, cleared checks, balance of payments and banking sector’s performance are based on Banque

du Liban’s publications.

- GDP figures are based on IMF estimations.

- Stock market data, interbank rate, domestic interest spread and average eurobonds yield are based on calculations

performed by the Economic Research Department at BLOMINVEST Bank s.a.l.

2. OVERVIEW

BLOM Bank accomplished in 2008 another successful year marked by a solid financial position, a diversification of services

on offer and an increasing regional presence.

BLOM Bank’s strong position as the leading banking group in Lebanon was reflected by the number of awards the bank

received in 2008:

- “Best Trade Finance Bank in the Middle East” from The Banker Middle East- January 2008

- “Best Foreign Exchange Bank in Lebanon” from Global Finance- January 2008

- “Best Trade Finance Bank in Lebanon” from Global Finance- February 2008

- “Best Trade Finance Bank in the Middle East” from World Finance- May 2008

- “Best Bank in Lebanon” from Global Finance-May 2008

- “Best Bank in Lebanon” from Euromoney-June 2008

- “Best Internet Bank in Lebanon” from Global Finance- August 2008

- “Best Bank in Lebanon” from The Banker-December 2008


USD Millions or %Real GDP Growth RateEstimated Inflation (GDP Deflator)Balance of PaymentsTrade DeficitBudget DeficitCurrent AccountGross Public DebtBDL Foreign AssetsBanks AssetsBLOM Stock Index (BSI)BLOM Bond Index (BBI)

20077.5%3.8%

USD 2.03B(USD 8.99B)(USD 2.55B)(USD 1.97B)USD 42.03BUSD 12.39BUSD 82.2B

1,501.797.76

20088.5%6.5%

USD 3.46B(USD 12.66B)(USD 2.92B)(USD 3.42B)USD 47.02BUSD 19.73BUSD 94.3B

1,17894.71

% Change100bps270bps69.9%40.67%14.5%72.86%11.9%59.2%14.7%(21.5%)(3.12%)

39

BLOM Bank continued to maintain the highest financial ratings in Lebanon. As such, the Bank has been repeatedly rated by CapitalIntelligence, a Middle East-specialized rating agency, “BBB-” , which is the highest financial strength rating in Lebanon and hasreceived the highest national scale rating “Aa1.lb” from Moody’s.

In 2008, BLOM Bank continued to top the list and maintained its position as the most profitable bank in Lebanon. As one of thelargest banks in the country, net profits increased by an annual 22.9 % to USD 251.6 million while total assets reached USD 17.9billion and total customers’ deposits USD 15.1 billion by year end 2008.

In 2008, BLOM Bank continued to build on its strategy of geographic and business services diversification. Foreign expansion notonly spreads the risk of operating in Lebanon, but also takes advantage of the economic and business opportunities present inregional economies. In 2008, BLOM was operational in ten countries: Lebanon, Syria, Egypt, Jordan, UAE, France, Switzerland,England, Cyprus and Romania. In addition, the Bank has developed further its retail network by opening new branches in Egypt,Jordan and Syria. In Lebanon, the Bank inaugurated four new branches in the areas of Choueifat, Hadath, Mina El Hosn andDekwaneh as well as two retail branches in the areas of Sodeco and Furn el Cheback. Moreover, BLOM Bank established an invest-ment bank in Saudi Arabia, BLOMINVEST Saudi Arabia, as well as a representative office in Abu Dhabi (UAE) and a commercial andprivate bank in Qatar, BLOM Bank Qatar in QFC.

The other component of the strategy is to diversify business activities towards a universal banking model. As a result, the bank hasexpanded the operations of its investment arm, BLOMINVEST BANK, by enhancing its private and investment banking and capitalmarket activities, in addition to introducing asset and wealth management services. The latter aims at establishing funds andinvestment vehicles for retail and high net-worth investors that are diversified in their asset composition and geography. Followingthe success of the BLOM Cedars Balanced Fund that combines Lebanese fixed income and equity assets, the BLOM Petra balancedfund was launched in 2008. The fund invests in Jordanian equities and fixed income securities. The aim of the new products is thediversification in the sources of income that gives increasing share for non-interest income.

In these respects, BLOM BANK will continue to pursue its organic growth strategy in the coming years by capitalizing on itsexisting resources and capabilities.

3. EVOLUTION OF TOTAL ASSETS

BLOM Bank continued to increase its asset base in 2008. Total assets of the bank grew by 7.57% at the end of the year to reachUSD 17.9 billion, as compared to USD 16.6 billion recorded in 2007. A large part of the growth in assets was denominated inforeign currency as a result of the high rate of dollarization that stood at 75.66% by the end of 2008.

4. SOURCES OF FUNDS

Sources of funding fall into four main categories: customers’ deposits, capital funds (Tier I & Tier II), banks and financialinstitutions and other liabilities. The Bank’s main source of funds came in the form of customers’ deposits which accounted for84.42% of total funding in 2008. Tier I and Tier II capital constituted 8.15% of total funds for 2008, while the share of banksand financial institutions amounted to 4.43% in 2008.

16,000

12,000

8,000

4,000

0

Evolution of Total Assets (in USD Millions)

2008

20,000 17,89816,639

20072006200520042003

14,21211,918

10,8358,786

40

4.1 Customers’ DepositsWith the start of the global financial crisis in the latter part of 2008, deposits at BLOM Bank bucked the trend and continued torise but nonetheless at a decreasing rate compared to 2007. Customers’ deposits increased by 10%, up from USD13,737 million in 2007 to reach USD 15,109 million in 2008.

Foreign currencies’ share of total deposits declined at the end of 2008, standing at 75.44% of total deposits, down from 84.07%recorded in 2007. This decrease in the share of foreign currency is attributed to the rise in demand for the local currency dueto the higher yields on Lebanese Pound deposits compared to the low interest rates abroad. Another factor augmenting thistrend is the resilience of the Lebanese financial system that was relatively unaffected by the global financial crisisdue largely to the prudent regulatory measures imposed by Banque du Liban (BdL) which enhanced the confidence in theLebanese Pound.

BLOM Bank’s market share in terms of customers’ deposits in the Lebanese banking sector accounted for 19.43% in 2008recording a negligible decrease from 20.35% in 2007.Fiduciary deposits reached USD 3,521.169 million in 2008, increasing 34.07% year-on-year .

4.2 Capitalization (Tier I & Tier II Capital)Tier I Capital increased by 5.67% to USD 1,446.56 million at the end of 2008 compared to an increase of 9.75% at the endof 2007. Tier I increase can be mainly attributed to retained profits of the year 2008 amounting to USD 152 million after dividenddistribution.

Tier II capital continued its decreasing trend, falling by 35.13% at the end of 2008 to USD 12.36 million as a result of a 72%drop in the cumulative change in fair values due to the decline in financial assets prices.


16,000

12,000

8,000

4,000

0

Evolution of Customers’ Deposits (in USD Millions)

2008

15,10913,737

20072006200520042003

11,73510,161

8,9927,686

Sources of Funds

� Customers’ Deposits

� Tier I & Tier II Capital

� Banks & FinancialInstitutions

� Other Liabilities

20072008

8.31%

82.56%

6.20%2.93%

8.15%

84.42%

4.43%3.00%

41

5. USES OF FUNDS

BLOM Bank’s strategy stresses the maintenance of high asset quality and a strong portfolio of investments. The risk component,which has always been the Bank’s primary consideration while assessing the uses of funds, is reflected in the return on assets ratio,at a respectable 1.46% in 2008.

The share of Lebanese Pound Treasury Bills as well as other governmental debt securities to total assets stood at 26.42% in 2008,up from 20.25% in 2007. Nevertheless, the share of cash and deposits at the Central Bank to total assets dropped to 24.05% in 2008from 25.24% in 2007, while the share of bonds and financial instruments with fixed income rose to 4.78% in 2008, up from 4.72%in 2007. On the other hand, loans granted to customers constituted 19.41% of total assets in 2008, up from a ratio of 16.66% in2007. The Bank placements with other banks and financial institutions amounted to 22.20% of total assets in 2008 compared to30.14% in 2007.

5.1 Cash and Balances With the Central BanksCash and central banks reserves stood at USD 4,303 million in 2008, up 2.49% from last year. The share of subscription incertificates of deposit amounted to 44.81% of total cash and balances with central banks, up from 43.86% in 2007. CentralBanks reserves accounted for the largest share in 2008, standing at 52.77% of total cash and balances with central banksas compared to 54.12% in 2007; while cash represented the remaining 2.42%, slightly up from its contribution of 2.02% in 2007.

1600

1200

800

400

0

Tier I & Tier II Capital (in USD Millions)

1,247.35

20062005200420032002

894.25

696.51553.73484.85

1,368.95

2007

84.5 84.7 94.1 63.6 24.0 19.1

Tier I Capital Tier II Capital

1,446.56

2008

12.4

Uses of Funds

� Lebanese Treasury Billsand other government bonds

� Cash and Central banks

� Banks & FinancialInstitutions

� Bonds and FinancialInstruments with fixed Income

� Loans to Customers

� Others

20072008

2.99%20.25%

25.24%

30.14%

4.72%

16.66%3.14%

26.42%

24.05%

22.20%

4.78%

19.41%

42

The cash and central banks category includes non-interest bearing balances held by the Bank at the Lebanese CentralBank (Banque du Liban) in compliance with the obligatory reserve requirements for all banks operating in Lebanon oncommitments in Lebanese Pounds (calculated on the basis of 25% of sight and 15% of term commitments). Therequirement also applies to interest bearing placements at the rate of 15% of total deposits in foreign currencies, aswell as the certificates of deposit issued by the Central Bank of Lebanon.

5.2 Lebanese Treasury Bills and Other Governmental Bills and BondsThe Bank’s portfolio of Lebanese Treasury Bills and other governmental debt securities increased by 40.3% to reach USD 4,728.6million in 2008 from USD 3,370 million in 2007. Moreover, the share of Lebanese pounds denominated treasury bills increased to57.34% of the total portfolio as compared to 47.13% in 2007. On the other hand, the foreign currency-denominated governmentalbills constituted 42.66% of the total in 2008 as compared to 52.87% in 2007.

The treasury portfolio according to the new IFRS (International Financial Reporting Standards) classification that was adopted start-ing 1st January 2005 shows the following:


Distribution of Cash and balances with Central Banks (in USD Millions)

CashCentral BanksCertificates of DepositTotal

%2.0254.1243.86100.00

%2.4252.7744.81100.00

Amount85

2,2721,8424,199

Amount104

2,2711,9284,303

End of year 2008 End of year 2007

Distribution of the Treasury Portfolio ( Lebanese & Gov. Bills and Bonds ) (in USD Millions)

Investments Held for Trading:Treasury Bills and BondsAccrued interest

Available for sale investments:Treasury Bills and BondsAccrued interestUnrealized premiumsUnrealized discounts

Held to maturity:Treasury Bills and BondsAccrued interestUnrealized premiumsUnrealized discounts

Loans & Receivables :Treasury Bills and BondsAccrued interestUnrealized premiumsUnrealized discounts

Total

At Dec 31,200751.04450.1070.937

3,319.9883,291.218

65.8223.744

(41.796)

-----

-----

3,370.032

At Dec 31,20081.5451.5130.032

3,007.5772,966.747

52.0710.314

(11.555)

131.753129.8793.1890.038(1.353)

1,587.7371,578.546

31.9063.294

(26.009)

4,728.612

43

5.3 Bonds and Financial Instruments with Fixed IncomeBonds and financial instruments with fixed income increased by 9.10% in 2008 to USD 855.965 million from USD 784.570 million ayear earlier as the Bank opted for a diversification of its investments in high yielding instruments that are rated BBB or above.

This caption includes bonds and certificates of deposit that are classified as follows:- Held for Trading- Available for Sale- Loans and Receivables- Held to Maturity- Fair Value through Profit & Loss

Distribution of the Treasury Billsand other Governmental Bills

� Lebanese Treasury Bills

� Other Governmental Bondsin Foreign Currencies

20072008

Distribution of Bonds and Financial Instruments with Fixed Income (in USD Millions)

Trading:BondsAccrued InterestAvailable for Sale:BondsLess: provision for ImpairmentAccrued InterestCertificates of DepositAccrued InterestHeld to Maturity:BondsLess: provision for ImpairmentAccrued InterestLoans & Receivables:Certificates of DepositAccrued InterestUnrealized PremiumsUnrealized DiscountsBondsLess: provision for ImpairmentAccrued InterestUnrealized DiscountsFair Value through Profit & Loss :Convertible BondsAccrued InterestInvestments related to unit linked contractsTotal

At Dec 31,2007

14.09213.7390.353

578.564573.164

05.400

000000

150.077145.3864.691

000000

41.83730.0000.16211.675784.570

At Dec 31,2008

0.0040.004

0100.59652.211

-1.89545.1001.390

289.014287.275(0.431)2.170

411.98786.9792.4940.023(0.128)339.656(10.00)2.249(9.286)54.36427.0000.16427.200

855.965

52.87%

47.13%

42.66%

57.34%

44

5.4 Banks and Financial InstitutionsBLOM’s deposits at banks and financial institutions decreased by 20.77% in 2008 to USD 3,973 million as compared to USD 5,015million in 2007. This decrease resulted from the Bank’s increased investments in governmental debt instruments and loan to cusomers.

Time deposits constituted 91.10% of total deposits with banks and financial institutions in 2008, down from 95.65% in 2007. As inprevious years, more than 97% of the current and time deposits are denominated in foreign currencies.

5.5 Loans and Advances to CustomersAlthough BLOM Bank is adopting a conservative loan strategy in order to maintain a high asset quality, the ratio of net loans andadvances to total deposits, which has been successfully maintained at relatively low levels, increased by 3 percentage points onlyfrom 2007 to 23% in 2008. Outstanding loans reached USD 3,474 million at the end of 2008, increasing 25.3% from last yeardriven by growth in local and regional loans with local loans growing by 31.76% in 2008.

BLOM Bank’s market share in terms of total loans and advances reached 13.87% in 2008, up from 11.07% in 2007.

The Credit risk classification of the Bank’s Loans portfolio is as follows :

The above loan classification is in accordance with the Central Bank of Lebanon’s (Banque du Liban’s) classification under decreeN0 7159 dated November, 10th, 1998 and the decree related to bad debt classification dated December 2001. Below is a briefingabout the basis of loan classification defining each category’s characteristics.

- Regular Accounts:A- Unconditional: Covers accounts which display regular movements sufficient to repay the loan in accordance with the repaymentschedule. The latest financial statements should be available and adequate collateral should be taken to cover the loan.


2,000

1,500

1,000

500

0

Evolution of Total Loans and Advances (in USD Millions)

2008

2,500

3,474

2,772

20072006200520042003

1,988

1,670

1,3521,164

3,500

3,000

4,000

Credit Risk Classification of Total Net Loan Portfolio (in USD Millions)

Regular AccountsSpecial Attention AccountsNet SubstandardNet Doubtful AccountsNet Provisions for Commercial & Consumer Loans not ClassifiedBad Debt AccountsTotal

20072,659.68

77.6814.9746.56(26.55)0.00

2,772.34

20083,392.17

66.3710.2630.26(24.85)0.00

3,474.21

45

B- Incomplete file: as in point (A), adequate collateral and repayment on schedule are foreseen. However, the file is consideredincomplete because the client is late in submitting his financial statements.

- Special Attention Accounts:Display signs of irregular movements or exceed the credit limit on a continuous basis. Recent financial statements areunavailable and adverse economic conditions may affect the borrower’s ability to repay the debt. Collateral has not beenevaluated for the last 3 years. Such an account may be considered recoverable.

However, it should be closely monitored for a year, at the end of which the account is reclassified if the previously mentionedconditions are not regularized.

- Non-performing Accounts (substandard):Covers loans which display most or all of the following:- a significant drop in the client’s profitability- a drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting in repetitive delays in repaymentexceeding a period of 3 months.- a noticeable depreciation in the value of the collateral provided and repetitive delays in repayment for a period not exceeding threemonths.- credit facilities are not used – partially or in whole – for the purpose specified in the loan agreement.

The credit risk committee will review the repayment schedule with the client and will keep the account under close observation.However, interest and commissions will be classified as unrealized until the account is regularized.

- Doubtful Accounts:Represents loans which display all of the conditions of a non-performing account in addition to having a complete lack ofcredit movement into the account for a period of 6 months and a delay in payments of the rescheduled loan which exceeds3 months from the date of maturity. The Bank will make a partial provision for the loan and consider interest and commission asunrealized.

- Bad Debt Accounts:Includes all “Doubtful Accounts” which are considered unrecoverable due to the lack of a collateral or the loss of contactwith the client. In this case, interest ceases to be accrued and a provision of 100% of the principal amount of the loan ismade. The account is under litigation until a ruling by the court is made, after which it is written-off.

The improving quality of the loan portfolio was further highlighted by a decrease in the Bank’s ratio of gross doubtful debtsto gross total loans to 3.92% in 2008 from 7.92% in 2007. The coverage of doubtful accounts increased to 96.19% in 2008from 91.57% in 2007, still below the 98.04% of 2006.

Provisions and unrealized interest for doubtful debts and non-performing accounts decreased considerably by USD 82.322million to reach USD 144.662 million at the end of 2008, compared to USD 226.984 million in 2007. The amount includes provisionsfor commercial loans not classified at the end of 2008 amounting to USD 24.845 million.

The ratio of foreign currency loans with respect to total loans in 2008 remained the same as in 2007 at 92% while the ratioof foreign currency loans to foreign currency deposits increased to 27.96% in 2008, up from 22.11% in 2007.

The breakdown of the loan portfolio by maturities shows that medium and long term loans with maturities exceeding oneyear constituted 32.07% of the bank’s outstanding net commercial loans in 2008 as compared to 28.49% in 2007, whereasshort term loans, with maturities of less than one year, constituted 67.93% of the total net commercial loans, compared to71.51% in 2007.

46

As for the breakdown of the loan portfolio by economic sectors, it appears that the highest share of loans was granted to consumeractivities, followed by trade and services. Loans to the agriculture sector witnessed a slight increase to 0.72% of the total loanportfolio in 2008 from 0.71% in 2007. Loans granted to the manufacturing sector dropped to 10.2% in 2008 down from 10.42% in2007 while trade loans decreased also from 24.22% in 2007 to 22.12% in 2008 with 3.55% of the portfolio granted to retail tradeand 18.57% to wholesale trade. Loan portfolio to the services sector improved to 22.82% in 2008, up from 20.69% a year earlier.Unlike 2007, the construction sector witnessed a decrease and accounted for 10.78% of the loan portfolio for the year 2008, downfrom 16.7% in 2007 but remains higher than 7.19% in 2006. Loans given to freelance professions slightly increased to 8.69% in 2008from 8.08% in 2007. Finally, consumer loans recorded a significant increase to 24.67% in 2008, up from 19.15% in 2007.

The analysis of the loan portfolio by type of collateral reveals that the commercial loans secured by mortgages accounted for thelargest share of the 2008 portfolio, rising from 28.07% in 2007 to 31.66% in 2008. Moreover, advances against personal guaranteesrose, representing 13.41% of the total loans portfolio in 2008, up from 11.96% in 2007. Advances against cash collateral went upalso to 17.67% in 2008 from 17.09% in 2007. On the other hand, the share of LC financing declined to 1.46% in 2008, down from2.86% in 2007, whereas syndicated loans were nil in 2008 compared to 0.27% in 2007. Retail loans recorded an important increasein 2008, with its share in the total loan portfolio going up to 24.49% in 2008 from 19.15% in 2007. Loans to members of staffremained the same as last year at 0.20% while loans to directors and related parties accounted for 0.86%, down from 2.44% in2007. Overdraft fell significantly in 2008, representing 10.25% of the total loans portfolio in 2008 from 17.96% in 2007.


Distribution of Loans byEconomic Sector

� Agriculture and Forestry

� Manufacturing

� Trade

� Services

� Construction

� Freelance Professions

� Consumer Loans

20072008

Distribution of Loans by Type of Collateral

� Commercial Loans Securedby Mortgages

� Advances Against PersonalGuarantees

� LC Financing

� Advances Against CashCollateral

� Syndicated Loans

� Retail Loans

� Loans to Member of Saff

� Loans to Directors andRelated Parties

� Overdraft

20072008

0.72%

10.20%22.12%

22.82%

10.78%

8.69%

24.67%

17.96% 28.07%

11.96%

2.86%

17.09%0.27%

19.15%

0.20%2.44%

10.25% 31.66%

13.41%

1.46%

17.67%0.00%

24.49%

0.20%0.86%

0.71%

10.42%24.22%

20.69%

16.73%

8.08%

19.15%

47

6. LIQUIDIDTY

BLOM Bank’s ability to maintain high liquidity levels, minimize risks and ensure high quality of assets, has been at the centreof liquidity management and core objectives of the Group. The Bank has successfully maintained ample liquidity in 2008. Assuch, the Lebanese Pound liquidity ratio (including Lebanese government Treasury Bills) increased to 106.35% in 2008 comparedto 105.93% in 2007, reflecting high liquidity levels. Moreover, the immediate liquidity (cash & banks) in foreign currenciesaccounted for 55.83% of foreign currency deposits in 2008 compared to 63.24% in 2007, a small drop mainly due to the Bank’sregional expansion activities.Maturity mismatch between assets and liabilities, which characterises the Lebanese banking sector, was also noticeable inBLOM Bank accounts. In 2008, the gap was negative in the maturities from zero to one month and from as a whole 1 to 3 months,amounting to USD 7,788 million and USD 1,061 million respectively. After 3 months, the maturity gaps turn positive, reaching amaximum of USD 5,049 million for maturities of 2 to 5 years.

7. PROFITABILTY

BLOM Bank preserved its position as the most profitable bank in Lebanon for the year 2008. In fact, the bank recorded net profits ofUSD 251.6 million, increasing by a considerable 22.9% compared to the year 2007 where net profits stood at USD 204.7 million.BLOM Bank’s profits contributed to the biggest portion of the total banking sector profits as it accounted for a share of 20.04% ofthe total.

Return-on-average equity stood at 20.12% in 2008, increasing from 17.37% a year earlier.

Return-on-average assets for the year 2008 amounted to 1.46%, improving from the previously 1.33% recorded in 2007.

Earnings per share increased to USD10.69 in 2008 from USD 8.22 in 2007.

Asset-Liabilities Maturity Gap (2008) (in USD Millions)

Total AssetsTotal Liabilities & Shareholder’s Equities2008 Liquidity GapCumulative Maturity Gap

TotalOver 5years

From2 to 5years

From1 to 2years

From6 monthsto 1 year

From3 to 6

months

From1 to 3

months

Up to1 month

5,461

13,249

(7,788)

(7,788)

956

2,017

(1,061)

(8,849)

1,249

660

589

(8,260)

865

323

542

(7,718)

2,124

55

2,069

(5,649)

5,125

76

5,049

(600)

2,118

1,518

600

0

17,898

17,898

0

0

200.00

150.00

100.00

50.00

0.00

Evolution of Net Income (in USD Millions)

2008

250.00251.6

204.70

20072006200520042003

180.30

136.85

91.1588.30

300.00

48

7.1 Net interest incomeNet interest income registered a considerable 37.36% increase in 2008 to USD 410.102 million. The growth came as a result of a9.9% increase in interest and similar income to USD 1,082.167 million in 2008, and a 2.08% decline in interest charges in 2008 toreach USD 672.065 million.

On the other hand, net interest revenue after provisions and doubtful loans, went up by 31.13% to reach USD 401.452 million in2008 as compared to USD 306.140 million in 2007.

The growth of net interest income will be further elaborated through the breakdown of net interest income into interest and similarincome, interest and similar charges, interest margin as well as net provisions for doubtful loans.

7.1.1 Interest and similar incomeInterest and similar incomewitnessed a 9.9% increase in 2008 to USD 1,082.167million, after a rise of 17.9% to USD 984.881million in 2007.Average interest earning assets increased by 12.97% to reach USD 15,092 million in 2008 from USD 13,359 million in 2007.

The table below illustrates the breakdown of average earning assets by currency at the end of 2008:

In 2008, the weights of interest and similar interest generating assets changed from those of the year 2007. Lebanese and othergovernmental bills accounted for 26.62% of total average interest earning assets in 2008, climbing from 19.57% in 2007. Theaverage deposits with banks and central banks stood at 34.64% of the total in 2008, down from 43.70% in 2007. The share of bondsand other financial instruments with fixed income, including certificates of deposit, accounted for 17.28%, down from 19.32% a yearearlier while the weight of loans and advances increased to 21.46% in 2008, compared to 17.4% in 2007.

The breakdown of Interest and Similar Income is detailed in the following table:

The breakdown of interest and similar income reveals an increase in the share of Lebanese Treasury Bills and other governmentalbills to 32.28% in 2008 compared to 22.99% in 2007. On the other hand, the portion of income generated from deposits with banksand central banks dropped to 22% from 32.92%; while the contribution of bonds and other financial instruments with fixed income(including certificates of deposit) stood at 20.34% in 2008, down from 23.46% a year earlier. Finally, interest income generated fromloans and advances including related parties represented 25.38% of the total in 2008, increasing from 20.63% in 2007.


Breakdown of Average Interest Earning Assets at the End of 2008 (in USD Millions)

Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instrumentswith Fixed Income Including Certificates of DepositLoans and AdvancesTotal

TotalForeigncurrencies

LBP

2,095

153

512

257

3,017

1,923

5,075

2,095

2,982

12,075

4,018

5,228

2,607

3,239

15,092

Breakdown of Interest and Similar Income (in USD Millions)

Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instrumentswith Fixed Income Including Certificates of DepositLoans and Advances Including Related PartiesTotal

% of totalAmountAmount

349.370

238.055

220.092

274.650

1,082.167

226.400

324.262

231.026

203.193

984.881

22.99%

32.92%

23.46%

20.63%

100.00%

% of total

32.28%

22.00%

20.34%

25.38%

100.00%

End of 2007End of 2008

49

7.1.2 Interest and Similar ChargesInterest and similar charges declined by 2.08% to USD 672.065 million in 2008 down from USD 686.326 million in 2007, whileaverage interest bearing liabilities went up by 14.44% to USD 14,728 million compared to USD 12,870 million a year earlier.Deposits from customers including related parties accounted for the largest share of the average interest bearing liabilities,amounting to 98.06% in 2008 while deposits from banks and financial institutions represented the remaining 1.94%.

The breakdown of the interest and similar charges shows a modest decrease in the portion of deposits and similar accounts frombanks and financial institutions to 1.84% in 2008, down from 1.85% in 2007 while the share of interest paid on customers’ depositsslightly increased to 98.16% in 2008 compared to 98.15% in 2007. Finally, charges from notes and fixed income financialinstruments remained nil for the third year in a row.

Breakdown of Interest andSimilar Income

� Lebanese Treasury Billsand Other Governmental Bonds

� Deposits with Banks andCentral Banks

� Bonds and Other FinancialInstruments with Fixed Incomeincluding Certificates of Deposit

� Loans and Advances(including related parties)

20072008

Average Interest Bearing Liabilities at the End of 2008 (in USD Millions)

Deposits and Similar Accounts from Banks and Financial InstitutionsDeposits from Customers Including Related PartiesTotal

TotalForeigncurrencies

LBP

1

2,923

2,924

285

11,519

11,804

286

14,442

14,728

Breakdown of Interest and Similar Charges (in USD Millions)

Deposits & Similar Accounts from Banks & Financial InstitutionsNotes & Financial Instruments with Fixed IncomeDeposits from Customers Including Related PartiesTotal

% of totalAmountAmount

12.393

0

659.672

672.065

12.678

0

673.648

686.326

1.85%

0.00%

98.15%

100.00%

% of total

1.84%

0.00%

98.16%

100.00%

20.63% 22.99%

32.92%23.46%

25.38% 32.28%

22.00%20.34%

End of 2007End of 2008

50

7.1.3 Interest Margin (Before Provisions For Doubtful Loans)The Bank’s Net Interest Income before provisions for doubtful loans rose by 37.36% in 2008 to USD 410.102 million, while the netinterest margin before provisions on doubtful loans stood at 2.42% in 2008, up from 2.03% in 2007.

The ratio of interest charges to interest income decreased to 62.10% down from 69.69% in 2007 due to both a decline in interestcharges and an increase in interest income.


200

150

100

50

0

Net Interest Income (Before Provisions) (in USD Millions)

2008

250

410

271

20072006200520042003

181

157153148

350

300

400

Breakdown of Similar Charges

� Deposits and Similar Accountsfrom Banks and FinancialInstitutions

� Notes and FinancialInstruments with Fixed Income

� Deposits from CustomersIncluding Related Parties

20072008

450

2002

299

1.85%

98.15%

0.00%1.84%

98.16%

0.00%

51

7.1.4 Net Provisions for Doubtful LoansThe net provisions for doubtful loans decreased from a positive balance of USD 7.585 million in 2007 to a negative balance ofUSD 8.650 million in 2008.

7.2 Non-Interest IncomeNon-interest income increased by 40.74% year-on-year, amounting to USD 149.977 million in 2008 compared to USD 106.563million in 2007.

2.00%

1.50%

1.00%

0.50%

0.00%

Net Interest Margin (in percent)

2008

2.50%

2.13%

20072006200520042003

1.77%1.75%

2.13%2.34%

3.00%

2002

2.03%

2.42%

64.0%

62.0%

60.0%

58.0%

56.0%

Interest Cost / Interest Income Ratio (in percent)

2008

66.0%67.81%

20072006200520042003

70.66%71.25%70.91%70.40%

68.0%

2002

69.69%

62.10%

70.0%

72.0%

52

Net commissions increased from 2007 by 24.90% to USD 74.054 million in 2008, maintaining the largest share of total non-interestincome, accounting for 49.38%, down from 55.64% in 2007. Moreover, net trading income recorded a year on year growth of 44.23%to USD 27.4 million, representing 18.27% of the total non-interest income as compared to 17.83% in 2007. Net loss on financialassets and liabilities designated at fair value through Profit & Loss rose significantly from USD -1.189 million in 2007 to USD –3.000million in 2008, accounting for –2% of the total increasing from –1.12% year on year. Net income from financial operations,which dropped 50.54% to USD 6.507 million, stood at 4.34% of total non-interest income, decreasing sharply from 12.35% in 2007.However, other operating income surged by 176% to USD 45.016 million in 2008, representing 30.01% of the total compared to15.30% in 2007.

7.3 Staff and Operating ExpensesStaff and operating expenses reached USD 190.74 million in 2008, registering a year-on-year increase of 28.49%.

Staff expenses (salaries and related benefits) increased by 34.89% in 2008 to USD 115.55 million while operating expenses wentup by 19.75% to reach USD 75.19 million. Thus, staff expenses accounted for the largest share of staff and operating expenses with60.58% of the total while operating expenses stood at 39.42%.

BLOM Bank is still maintaining a relatively low cost-to-income ratio, reflecting the Bank’s efficient cost-containment policy.The cost-to-income ratio rose to 37.26% in 2008 compared to 34.63% in 2007.


Net CommissionsNet Trading IncomeNet Gain/Loss on Financial Assets& Liabilities designated at fair value through Profit & LossNet Gain/Loss on Financial OperationsOther Operating IncomeTotal

% of total55.64%17.83%

(1.12)%12.35%15.30%100%

% of total49.38%18.27%

(2.00)%4.34%30.01%100%

Amount59.29118.997

(1.189)13.15616.308106.563

Amount74.05427.400

(3.000)6.50745.016149.977

2008 2007

% change24.90%44.23%

152.31%(50.54)%176.04%40.74%

Constituents of Non-Interest Income

� Net Commissions

� Net Trading Income

� Net Gain/Loss on FinancialAssets and Liabilities designatedat Fair Value Through Profit and Loss

� Net Gain/Loss on FinancialOperations

� Other Operating Income

20072008

Breakdown of Non-Interest Income (in USD Millions)

Staff ExpensesOperating ExpensesTotal

% of total57.70%42.30%100.00%

% of total60.58%39.42%100.00%

Amount85.6662.79148.45

Amount115.5575.19190.74

2008 2007

% change34.89%19.75%28.49%

Distribution of Staff and Operating Expenses (in USD Millions)

15.30% 55.64%

17.83%

12.35%

-1.12%

30.01% 49.38%

18.27%

4.34%

-2%

53

8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES

During BLOM Bank’s Annual General Assembly, on April 8th 2009, the distribution of dividends for the year 2008 was approved.Preferred shares issue 2004 received USD 8.5 per share and their corresponding 2005 issue USD 9.5. As for common stocks andGlobal Depositary Receipts (GDR), the dividend payout was LBP 5,500 per share (USD 3.65 per share).

9. CAPITAL ADEQUACY RATIOS

The Bank’s capital adequacy ratio reached 29.84% (before dividend distribution) at the end of 2008, which is almost four foldsthe international ratio of 8% required by the Basel Commission. For Tier I capital alone, the capital adequacy ratio stood at29.60% at the end of 2008. After dividend distribution, the capital adequacy ratio reached 27.85% for Tier I &Tier II and 27.61%for Tier I alone.

10. INTEREST RATE RISK

Interest rate risk arises from adverse movements in interest rates, affecting the interest earning assets and liabilities of thebank. Interest rate risk is well managed through the continuous re-pricing of assets and liabilities. Most assets and liabilitiesare repriced within one year. Given that the majority of the bank’s deposits are re-priced within a 3 months interval, while mostof the bank’s treasury bills and government bonds portfolio are re-priced after the 3 months period, interest rate risk continuesto concentrate within this period.

Cost to Income Ratio

200720031999 2006200520042001 200220001997 1998

45%

40%

35%

30%

25%

50%

55%

2008

47.34%

42.56%

38.37% 38.09%36.80%

38.58%39.77%

40.93%

34.11%

35.10%

34.63%

37.26%

Capital Adequacy Ratios (After Dividend Distribution)

35.00%

30.00%

25.00%

20.00%

15.00%

40.00%

29.88% 33.23%29.76% 28.22%

36.10%

29.05%27.85%

2002 2003 2004 2005 2006 2007 2008

26.06% 28.02% 27.34%30.71%

35.33%

28.60% 27.61%

Tier I + Tier II CapitalTier I

54

The bank’s interest rate sensitivity position based on contractual re-pricing arrangements as of December 31,2008 is as follows:

11. RISK MANAGEMENT AND BASEL II PREPARATIONS

Development of the Group’s Risk Management Structure continued in 2008, including the dissemination of risk managementculture throughout the Bank. The Board of Directors places strong emphasis on having an effective Risk Management frameworkand accordingly ensures that Group Risk Management has the required tools to achieve this objective.

Group Risk Management is pro-actively managing the implementation of Basel II requirements including laying the groundworkto move on the more advanced approaches at a later stage. As part of the investment being channeled in this direction, 2009will witness the implementation of a Basel II calculation and reporting system supplied by Sungard.

In 2008, the Lebanese Banking Control Commission issued two Quantitative Impact Studies for Capital Adequacy calculationunder Pillar I of Basel II for end 2007, March and June 2008. Quantitative Impact Studies for September and end-2008 wereissued in 2009. The Bank’s consolidated Basel II Capital Adequacy (applying standardized approach for credit risk, standardizedmeasure for market risk and basic indicator approach for operational risk) reflected a solid solvency state with a ratio of 12.7%at the end of 2008, well above the international minimum of 8%. It is worth noting that this ratio was achieved despite a sovereignrating of B- for Lebanon which underlines BLOM Group’s fundamental strength. Indeed, even in a scenario of a CCC Sovereignrating, the Group’s consolidated Basel II Capital Adequacy would still be clearly above 8%.

Basel II capital adequacy ratios are also calculated on an entity by entity basis for end of 2008. These covered BLOM BANKS.A.L.(Lebanon), BLOM BANK FRANCE, BLOM BANK EGYPT, BANK OF SYRIA AND OVERSEAS, BLOMINVEST BANK, BLOMDEVELOPMENT BANK, BLOM BANK QATAR. Each of these entities had ratios comfortably above 8%.

Group Risk Management is undertaking preparations in relation to all three pillars of the Basel II accord. The Lebanese regulator isexpected to finalize its Pillar I requirements in 2009. Concentration, liquidity, strategic and reputational risks are fundamentalparts of management thinking, while public disclosures are gradually being increased in line with the Bank’s CorporateGovernance Code.

Group Risk Management in Beirut continued to develop the Risk Management organization within the various entities of theGroup. Risk Management departments are functioning in BLOM Bank Egypt, BLOM Bank France (with self supporting departmentsin UAE and Romania), BLOM branches in Jordan and most recently in our Syrian affiliate BSO.Moreover, Risk Managers were appointed for new operations expected to open in 2009 in BLOM Bank Qatar and BLOMINVESTSaudi Arabia. Each individual country Risk Manager has a direct reporting link to the Group Chief Risk Officer. We expect furtherdevelopment of these Risk Management departments in each overseas entity that will be centrally monitored by Group RiskManagement in Beirut.

In the area of Credit Risk, application of the Moody’s Risk Analyst System (MRA) continued with the inputting and rating ofadditional files. A new Web based version of the MRA was adopted in Q4 2008. The year 2009 will witness furtherenhancements of this system covering corporate and commercial credit portfolios. Moreover, an agreement was signed at theend of Q3 2008 with Fair Isaac to provide the Bank with application and behavioral score card models for its car loans, person-al loans and credit card portfolios. This will pave the way for the adoption of a more advanced approach under Basel II for theretail portfolio.

The Market Risk team continued the implementation of the Sungard Focus Asset-Liability Management System in 2008. This isa phased project covering static and dynamic interest rate and liquidity gap analysis for Lebanon that will be followed by othergroup entities in later phases. The latter will also include stochastic analysis and Funds Transfer Pricing.


Interest-Rate Sensitivity Position at the end of 2008 (in USD Millions)

Total AssetsTotal Liabilities and Shareholder's EquityInterest Rate Sensitivity Gap for 2008Cumulative Interest RateSensitivity Gap

Non-Sensitiveto Interestrate Risk

Over 5years

From2 to 5years

From1 to 2years

From6 monthsto 1 year

From3 to 6

months

From1 to 3

months

Up to1 month

4,030

12,369

(8,839)

(8,839)

857

1,908

(1,051)

(9,390)

1,148

633

515

(8,875)

2,163

53

2,110

(6,212)

4,897

75

4,822

(1,390)

1,705

14

1,691

301

2,270

2,571

(301)

0

828

275

553

(8,322)

55

All Risk Management Policies are being updated and enhanced for Credit, Market and Operational Risks. This is in line with theBank’s policy to enhance further Operational Risk Management capabilities ensuring that policies and procedures across allactivities are continuously updated and improved. The Bank has been running a Loss Incident database since 2006, and lossincidents recorded until the end of 2008 have been very modest, reflecting relatively tight risk management procedures in day-to-dayoperations.All products issued by the Bank are subject to a Risk Management assessment prior to their formal launching.Business Continuity Planning is being overhauled by Group Risk Management, with the intention of producing new and readily testedplans which would be updated on a regular basis.Next year will see further developments in the capabilities of Operational Risk Management based on its assessments anddevelopment of further statistical methodologies.

12. UNIVERSAL BANKING SERVICES

In line with its aim of maximizing customer satisfaction and increasing shareholders’ value, BLOM BANK has sustained its policy ofdiversification of its products and services. BLOM BANK provides the following universal banking services that suit allcustomers needs:- Private and investment banking.- Commercial banking.- Corporate banking.- Retail banking.- Islamic banking.- Insurance Services.

12.1 Private and Investment BankingBLOM BANK provides private banking services such as investment consulting and portfolio management through both itsinvestment-banking arm BLOMINVEST BANK Sal and its Geneva-based affiliate BLOM BANK (SWITZERLAND). Some of theseservices include:- Investment Products: includes a variety of investment funds and structured products focusing on Lebanese and foreigninstruments. The bank successfully launched in 2008 two mixed-asset mutual funds, Blom Cedars Balanced Fund and Blom PetraBalanced Fund that target the Levant region.- Project Finance : consists of extending medium and long term financing and participating in bank loan syndications.- Treasury & Capital Market Services: includes brokering on the Beirut Stock Exchange (BSE), advising on trades in internationalequities, trading in debt securities and dealing in foreign exchange markets.- Investment Banking: participates in the underwriting and distribution of Lebanese and other debt instruments and providesadvice on mergers and acquisitions and privatisation.- Asset & Portfolio Management: covers management of portfolios of shares, bonds and term placements in all currencies.- Research Department : produces daily, weekly and quarterly reports on the Lebanese economy, and analyzes leadingLebanese economic sectors. In addition, it provides country reports on regional economies, especially those where BLOM BANKhas a presence. It publishes as well the BLOM Stock Index (BSI), Lebanon’s first financial market index that covers all stocksquoted on the BSE, and conducts equity research on major Lebanese and regional companies.

56

12.2 Commercial and Corporate BankingDuring 2008, BLOM BANK further emphasized the conservative lending policy which has been adopted by the bank for severalyears. This proved to be effective in light of the recent global financial crisis. Throughout the year, although the bank continuedto expand its credit portfolio to corporate and commercial customers, the expansion was conducted on a solid ground due toour tight terms and required collaterals. Moreover, the bank continued to focus on trade finance, project finance as well as realestate developments. Hence, the bank financed several commercial and residential projects in the Beirut Central District (BCD)and other landmark areas. Our bank also catered to the financial needs of the commercial sector, particularly to trade and workingcapital financing. The latter benefited from our wide network of branches and subsidiaries. Furthermore, the bank’s expansionpolicy focuses on the strengthening of its position in existing regional countries to better meet the requirements of Arab andLebanese expatriates in those countries.

With the collaboration of the International Finance Corporation (IFC), BLOM BANK continues to monitor the soft loans that wereextended to customers affected by the July 2006 war. These loans were granted with the objective of helping victims overcomethe consequences of the war to enable them regain their prewar financial status.

12.3 Retail BankingIn 2008, BLOM BANK offered more than 115 retail products, classified under different categories:

Payment cards:BLOM BANK offers a wide range of payment cards that target different customers, provide diverse methods of payments andserve many purposes. As such, BLOM cards are under both brands, Visa and MasterCard, and range from Electronic, Classic,Gold, Titanium, Platinum, Black Platinum and Corporate (Platinum Corporate, Platinum Business, and Classic Corporate cards).The Bank also offers Internet cards dedicated for Internet users, as well as Mini prepaid cards and a Eurocard.

BLOM BANK launched the first Visa Platinum Corporate card in Lebanon and the Middle East.

In addition, the bank launched the first Visa Platinum Business card in Lebanon and the Levant. BLOM is also the owner of oneof the most successful co-branded credit card programs in Lebanon: the Alfa BLOM MasterCard, a first of its kind in Lebanonand the Middle East, offering to its holders free talk-time on the Alfa Active and Alfa Classic lines.

BLOM also launched “Watan”; a card for the sole use of the Lebanese army, internal security and national security forces.

“Personalize your card” is the first service of its kind in Lebanon to be provided by BLOM bank. By using this feature, cardholderscan add a personal image from their own collection, or select one from BLOM’s Image Library, which includes categories likesports, wildlife, scenery, pets, etc. The bank exclusively offers the possibility of having this service completed via the internetby visiting both BLOM and BLOM Retail websites. This service is also available throughout our network of branches.

POS Machines:BLOM machines accept all Visa, Visa Electron, MasterCard, MasterCard Electronic, and Maestro payment cards. The point ofsale machines (POS) are equipped with the latest EMV technology that allows acceptance of Chip cards.This technology provides ultimate security to both the cardholder and the merchant. In addition, BLOM has a one-day value datefor the settlement of the transaction amount.BLOM BANK also dedicates an account manager to handle all inquiries and suggestions concerning POS issues. Moreover,BLOM BANK offers a 24 hour call center that provides full service support.

Consumer loansBLOM Bank customers can take advantage of a number of consumer loans such as KARDI for personal loans, SAYARATI for carloans, and DARATI or Housing in collaboration with the Cooperative Housing Foundation (CHF). BLOM also offers loans guaranteedby Kafalat for small business owners.


57

Bancassurance ServicesAROPE Insurance, BLOM BANK’s subsidiary, offers a variety of insurance services ranging from personal accident, to health, fire, carand others.

BLOM BANK also offers savings programs in collaboration with Arope Insurance, such as DAMANATI and WALADI. The former is aretirement saving plan denominated in US Dollar coupled with life insurance, whereas the latter is a savings program gearedtowards children’s education, coupled with life insurance.

Reward ProgramsThe BLOM Golden Points Loyalty program enables customers to win a variety of gifts -such as airline tickets, free stays at the finesthotels, electronics and other by accumulating Golden points with every USD 100 purchases. In addition to that, the BLOM GiftsLoyalty program allows cardholders to win valuable gifts for purchases at certain establishments.

Also, BLOM offers a unique Cash Back program which allows cardholders to redeem a percentage ranging from 3% and up to 25%of their purchases with the use of their BLOM Visa Electron Card, BLOM Mini Card or BLOM Watan Card at participating points ofsale.

Investment ProductsBLOM BANK offers a variety of Investment products to help manage clients’ finances in a safer and yet more profitable manner.Accordingly, BLOM BANK, in collaboration with BLOMINVEST BANK, offers a selection of Mutual Fund products. Furthermore, BLOMBank and Arope Insurance offer structured products such as Tayseer, an investment vehicle which has been reintroduced more than5 times, each time investing in different products classes (such as Oil, Gold, BLOM GDR, Solidere, Lebanese Eurobonds, andCurrencies).

Special AccountsBLOM BANK offers a number of special accounts, catered for special needs. Namely, BLOM offers in addition to the traditional sav-ings and current accounts, a wedding account, Maksabi; a special savings account, utility bills settlement account, as well as SalaryDomiciliation accounts.

Network Branches & ATMsIn addition to the 52 existing branches that are optimally distributed throughout Lebanon, BLOM has already opened 5 retailbranches that offer faster transactions in terms of retail services. In order to better serve our customers, all BLOM branches haveATMs that allow 24-hour cash withdrawal. BLOM has a total of 74 ATMs located within its branch network, in addition to keylocations such as hospitals, universities, and supermarkets.

Sales ForceBLOM has more than one sales network ranging from direct sales to indoor sales, and telemarketing teams. They promote and sellthe various retail products and services offered.

Call CenterBLOM customers can enjoy the convenience of a 24-hour call center that caters for all their needs and inquiries. The retaildepartment also has a telemarketing team that reaches to potential clients.

E-bankingBLOM BANK offers its customers phone banking services such as “Allo BLOM” ( a 24-hour customer service center) as well asinternet banking services: e-BLOM. These services allow users to complete many of their routine banking transactions in the comfort oftheir home or office.

SMS Alert Service

The Bank provides a convenient SMS ALERT service, enabling customers to receive alerts whenever the balance of their accountschanges or a transaction is being performed.

Public WebsiteBLOM retail branches enjoy an independent website where all products and services are clearly presented. Users can make use ofsimulators and an online applications by visiting: www.blomretail.com and www.blom.com.lb.

58

12.4 Islamic Banking:BLOM DEVELOPMENT BANK (BDB) is a full fledged Islamic bank that was established in February 2006 and became operationalin March 2007. BDB carries out its banking practices in compliance with the provision of the Islamic Sharia and pursuant to theinstructions and regulations of the Lebanese Central Bank (Banque du Liban). BDB also abides by the rules of its Sharia boardthat consists of three prominent Sharia scholars.

BDB cover the whole spectrum of banking services including the acceptance of deposits and the provision of various Islamicfinancing solutions in the form of Murabaha, Ijara , Tawaruk , Forward Lease , Wakala and Istisna’a.

During 2008, BDB continued to make progress on its three-front strategy of growing the core business, broadening the scope ofoperations and expanding into neighboring markets. To that end, BDB explored various alternatives in developing innovativeand competitive investment products aiming at providing investors with strong fundamentals, attractive risk/return profiles,and significant mid to long-term value creation potential.

In an attempt to diversify from the traditional Murabaha financing structure, BDB identified new types of Shari’a compliantfinancing structures applicable to the Lebanese market. The bank already has several structures in the pipeline that willenhance BDB’s competitiveness. This will allow the bank to tap new local financing activities that are still considered to bedominated by conventional banks. In parallel, BDB’s corporate customer base grew in 2008 and financing activities expandeddue to the successful penetration into neighboring markets.

To enhance customer service and convenience, BDB established a new branch in Tripoli. In addition, several locations wereidentified in Beirut for the gradual entry into new areas where Islamic banking is in high demand.

The recent global financial turmoil has stressed the need for reviewing global financial and economic policies, which have beentaken for granted for a long time. This in fact will create more challenges for BDB as it seeks to expand into new markets andindustries that best suit its mechanisms, capabilities and services.

12.5 Insurance Products & ServicesAROPE INSURANCE, BLOM BANK's life and non-life insurance subsidiary, has also witnessed a year of growth and expansion,marked by the opening of three additional branches in Lebanon as well as one branch in Aleppo (Syria) through AROPE SYRIA.Arope Lebanon gained three ranks to 4th in the total Lebanese Insurance Market Ranking in 2008. In 2009, AROPE is projectedto continue its aggressive policy of expansion and will be the first to penetrate Egypt's commercial insurance sector through"AROPE EGYPT FOR LIFE INSURANCE" and "AROPE EGYPT FOR PROPERTY INSURANCES".

13. INFORMATION SYSTEMS AND TECHNOLOGY

In today’s technology-driven world, the effective use of banking technologies remains the key to differentiation, competitiveadvantage and institutional growth. This is behind BLOM BANK’s continuous endeavor to grow and evolve its business byproactively using powerful information technology tools in order to enhance customers experiences and enrich the bank’s products andservices portfolio. The cutting-edge information and communication technology infrastructure that has been put in placeencompass all areas of banking. In effect, we have been using state-of-the-art systems to diversify our delivery channels, innovatein payments and cards technologies, manage risks and enhance systems security, address national and international compliance andregulatory requirements and gain customer insights and business intelligence.

13.1 Customer Relationship ManagementThroughout the year, the bank kept on enhancing its on-line, real-time, around the clock banking services utilizing a variety ofchannels (including IVR, Internet, ATMs, SMS, Call Center and the conventional branch network) to interact with customers indifferent forms and functions. This 360o view of customer activity with the bank is enabled by the eBlom suite of integratedelectronic banking delivery mode that consists of:


59

- eBlom – ALLO BLOM – the Bank’s Interactive Voice Response System- eBlom – Internet Banking – the online banking service that offers a wide array of services with a high level of trust and securityenabled through a public key infrastructure (PKI) and digital certificates as a second factor for authentication.- eBlom – Self Service – using the bank Network of ATMs deployed all over Lebanon and where additional services are beingconstantly planned and added.- eBlom – SMS Alerts – a real-time alerting system based on delivering messages to our customers’ mobile phones notifying themof changes to their accounts and cards- eBlom – Contact Center – our contact center is ready 24/7 all year long and is benefiting from continuous enhancements to ourCTI and IP telephony to achieve seamless integration with the Bank’s CRM application.- eBlom – Live Information Broadcasting System – a system that enables the bank to broadcast in real-time over large LCD screensdeployed at the branches live and updated information covering stock quotes, foreign exchange quotes, news feeds, marketingcampaigns, new promotions, TV commercials etc..- eBlom – Targeted Information Passing System – a tool that allows the profiling of customers using a centralized knowledge basethat offers customers new products and services that are tailored to their needs. These custom offerings are presented to customersduring their presence at the branch.

13.2 Advanced Electronic Payment SystemsIn 2008, we kept on growing our Visa Card and MasterCard services by introducing new types of payment cards, namely the BLOMVisa Platinum Corporate Card and the BLOM Visa Platinum Business Card. These cards, that are unique to Lebanon and the MiddleEast, provide convenient, flexible and value-added payment solutions that manage corporate expenditures. Moreover, a credit cardpersonalization service was introduced whereby customers have the choice to tailor their cards through a web based application.This service was integrated in the card production workflow and provided a high degree of automation to the back-office operationsin charge of card production. This new service proved to be a great success. Furthermore, the online card fraud monitoring systemwas improved, sending real-time alerts to the bank call center and enabling immediate action should a fraud pattern be detected.This card fraud monitoring system drastically reduced fraud losses and incidences.

13.3 Enterprise Application Integration (EAI)During this year, the Service Oriented Architecture (SOA) framework was enhanced to achieve the highest degree of integrationbetween the bank’s different applications through the use of web-services, thus achieving straight-through processing (STP) of thesystems. In addition, this EAI framework was applied to diverse processes, in particular, our consumer loans processing systems.This consists of a loan origination system, a loan assessment system, and a loan granting system. The success of the EAIframework implementation has led to the migration of many of the bank’s business processes into this system. Using thisframework, the automation of incoming checks from the national clearing house was initiated. The objective is to de-materialize thechecks’ clearing through scanning and electronically send the checks’ images to the branches.

13.4 Basel II & Regulatory ComplianceIn 2008, special emphasis was given to credit management with the implementation of a state-of-the-art system for corporate andcommercial credit risk rating by MOODYS. Other software related to Assets & Liabilities Management, Funds Transfer Pricing andCapital Management were also acquired from SUNGARD. A large part of these projects were completed in 2008 while others areplanned for execution during 2009.

13.5 Systems Security & High AvailabilityAs a financial institution that has been around for over 55 years, the bank’s systems and data are considered important assets forbusiness continuity. Therefore, high IT Infrastructure reliability and availability was maintained. For this purpose, servers virtualizationand consolidation and enterprise storage consolidation was introduced. Moreover, employee awareness was raised, in addition tothe development of Information Security Policies and Procedures to address and prevent security threats and to pro-activelymonitor systems integrity through implementing detective controls and online monitoring.

14. PEOPLE DEVELOPMENT14.1 General OverviewHuman resources at BLOM are considered to be the most valuable asset, and the talent of our employees is recognized as verycritical for the effective functioning of the Bank. Human resources at BLOM are managed in a fair, ethical and transparent manner.A set of standards and procedures guide the relation of the bank with its employees, in regards to hiring, advancement,compensation, training, and other terms, conditions and privileges of employment. BLOM BANK policies in this respect,prohibit discrimination of any type, and offer equal opportunities to all employees and applicants without regard to sex, religion,ethnicity, age and disability.

60

All employees, on the other hand, are required to comply with a set of policies concerning safety, information security and a general codeof conduct. They are expected to adhere to the highest standards of ethical behavior in what relates to confidentiality, professionalism,transparency, conflict of interest and integrity.The most visible characteristics of BLOM Bank employees are their high level of education and their relatively young age. Themajority of employees (72.2 percent) hold a bachelor level degree or higher, while the average age of employees is 33.7 years.The following table presents the structure and distribution of BLOM Bank employees across the various units of BLOM Group,and according to various criteria.

14.2 Policies and ProceduresBLOM BANK recognizes the importance of the role of a talented labor force in keeping the bank highly competitive. Appropriatepolicies are implemented so that the creation and development of talent is maintained through attracting, developing andretaining the best and the brightest employees.

14.2.1 RecruitmentThe recruitment and selection process is of crucial importance to recruit the best available and most appropriate staff, and inline with the principles of non discrimination and equal opportunities for all.Requests of all departments and branches are received by the recruitment section and matched with profiles from the database. CVs in the bank’s data base are gathered from numerous sources including e-mail, job fairs, recommended trainees fromthe internship program, referrals from managers and employees, walk-ins, ads and recruitment agencies. Selected CVs areevaluated and approved by line managers and department heads before a set of exams is administered to the selected candidates.This will be followed by a set of interviews including the HR department, the concerned manager, and, for high level positions, theGeneral Manager. The file will be then presented to the HR committee for final decision after it passes a satisfactory backgroundcheck and a clearance from the Anti-Money Laundering unit.During the year 2008, the various units of the group recruited a total of 968 new employees to support the expansion of thebank across the region and to replace departing and retiring employees (see table below). New banking units in Saudi Arabia,Qatar, and Abu Dhabi were established during 2008, and a host of new branches in the various units of the group, mainly inLebanon and Egypt, were added to our branch network.


Distribution of BLOM Employees Across the Various Units of the Group by Gender, Age, Level of Education and Function as at 31/12/2008

Gender

Age

Level of Education

Functions

Number of manhours of training

BSOAROPEBLOMEGYPT

BLOMSWITZERLAND

BLOMFRANCE

(France, UAE,Romania,

London)

BLOM DEVBLOMINVEST

BLOM(LEBANON,

CYPRUS& JORDAN)

Total

Male

Female

Total

< 25

26-35

36-45

46-55

56-64

Total

Average Age

Graduate Degrees

Professional Certificates

Bachelor Degrees

Technical Certificates

Others

Total

Managers and Above

Deputies/ Assistant Managers

Supervisors

Employees

Total

883

700

1583

377

550

289

252

115

1583

33.5

332

6

741

42

462

1583

117

99

152

1215

1583

49775

54

32

86

22

39

18

5

2

86

31.9

34

2

39

1

10

86

3

11

6

66

86

2206

11

3

14

2

5

4

2

1

14

35.9

4

1

6

0

3

14

3

2

0

9

14

539

140

133

273

67

43

43

58

62

273

42.0

60

18

130

32

33

273

46

21

17

189

273

1047

13

9

22

4

1

0

6

11

22

47.9

5

2

1

13

1

22

4

5

0

13

22

186

564

179

743

172

315

140

93

23

743

34.0

3

0

628

112

743

99

37

124

483

743

17425

102

132

234

63

98

47

22

4

234

33.0

20

1

125

41

47

234

27

4

28

175

234

3695

181

143

324

132

154

31

5

2

324

28.0

21

3

219

49

32

324

25

10

22

267

324

9718

1948

1331

3279

839

1205

572

443

220

3279

33.7

479

33

1889

290

588

3279

324

189

349

2417

3279

84591

61

New Recruits and Turnover Rates of the Various Units of BLOM Group in 2008

14.2.2 TrainingInvestment in intellectual capital ranks amongst BLOM BANK’s top priorities, and the importance of continuous training is very muchemphasized by BLOM management. Effective training ensures that the skills, knowledge, abilities and performance meet thecurrent and future needs of both, the individual employee and the bank. This is done by performing training needs assessment onregular basis, and through the development, implementation and evaluation of training programs addressing the specific needs ofgroups and individuals.The HR department organizes a wide range of in-house and external training seminars for central departments and branchemployees. Technical in-house seminars are usually developed and delivered by field experts from BLOM BANK, while soft skilldevelopment seminars are delivered by professional trainers from local and international training firms.The total number of training hours performed during 2008 recorded 84,591 (see table below). Training was made available to themajority of BLOM employees, where the coverage ratio reached 86.6 percent, and training activities covered technical and non-technicalareas such as finance, banking techniques, risk management, marketing, leadership, information technology, and foreign languages.

14.2.3 Career Development and PromotionCareer development and promotion policy at BLOM BANK focuses on a number of well defined criteria to ensure that the selection ofcandidates for supervisory and managerial positions is made from a highly competitive and qualified individuals who have thenecessary skills and competencies required for top-level performance.BLOM BANK policy emphasizes the importance of career development of employees in order to help in creating a large pool of talentthat is essential for keeping the bank highly competitive in the local and the regional markets. This is supported by the increasing levelof investment in human capital. In addition to the individual training programs that are designed for high potential employees toprepare them for higher positions in the future, two particular programs, the Management Training Program (MTP) and the Fast TrackProgram (FTP) were designed and introduced in response to the immediate need for skills and to grow outstanding talent for the future.The selection of candidates for these two programs follows a very rigorous and transparent process where immediate supervisors, linemanagers and the HR department are all involved to ensure that the best performers with the highest potential are selected from thepool of young, ambitious and motivated employees.We continue to exert every effort to win the war for talent to better serve our customers and to keep our bank highly competitive.

15. BANK’S OPERATIONAL EFFICIENCY

In 2008, the group achieved a major improvement in its operational efficiency. Net profit by branch increased by 3.55% to USD1,965,625 while the net profit per employee gained 3.27% to USD 76,730. In addition, average assets by branch rose by a significant6.18% to reach USD 139,828,125 at the end of year 2008, compared to USD 131,685,185 recorded in 2007.

New RecruitsTurnover Rate

BSOAropeBLOMEGYPT

BLOMSWITZERLAND

BLOMFRANCE

BLOMDEV ELOPMENT

BLOMINVEST

BLOMLEBANON

Total

347

8.8

43

8.3

4

8.084

7.2

3

4.8

247

18.6

114

34.2

126

19.0968

14.3

Distribution of Training Activities Across the Various Units of BLOM Group in 2008

Hours of training

AROPEBSOBLOMEGYPT

BLOMSWITZERLAND

BLOMFRANCE

BLOMDEVEVELOPMENT

BLOMINVEST

BLOMLEBANON

Total

49,775 2,206 539 1,047 186 17,425 9,718 3,695 84,591

62


Number of EmployeesNumber of BranchesUSD Net Profit per EmployeeUSD Average Assets per EmployeeUSD Average Assets per BranchUSD Net Profit per Branch

BLOM Group’s Operational Efficiency Indicators

2008

3,279

128

76,730

5,458,371

139,828,125

1,965,625

2007

2,759

108

74,302

5,154,766

131,685,185

1,898,148

16. REGIONAL EXPANSION

During the year, BLOM BANK pursued its expansion policy by inaugurating new branches both within the Lebanese territory and abroad.

On the local front, BLOM BANK opened four branches in the areas of Choueifat, Hadath, Mina El Hosn and Dekwaneh as well as two retailbranches in the areas of Sodeco and Furn El Cheback.

On the regional front, one new branch “Irbid Branch” was inaugurated in Jordan in 2008. Additionally, BSO (Bank of Syria and Overseas)enlarged its existence by opening six new branches during the year (Al Sweida’s, Dara’a, Adra, Al Sulaimanieh, Al Mazraa and AlMuhafaza) noting that another three branches are under establishment (Al Midan (Damascus), Town Mall (Aleppo) and Al Sheikh Najjar(Aleppo)).

BLOM BANK EGYPT moved closer to completing its local reach, increasing the number of branches from 9 in 2006 to 24 in 2008. In 2008,three branches were inaugurated in the following areas: NewMaadi, Khalifa Maamoun, Tagamoa. Two other branches are currently underestablishment, Port Said and Tanta.

BLOM BANK FRANCE continued its expansion in Romania by establishing a new branch in Victoria in 2008.

On another note, BLOM BANK began operations in its representative office in Abu Dhabi during 2008 while BLOMINVEST BANK receiveda license to launch an investment bank in Saudi Arabia in January, under the name of “BLOM INVEST SAUDI ARABIA”. In April, the Bankexpanded further and was granted a license to establish a commercial and private bank in the Qatar Financial Center, under the name ofBLOM BANK QATAR.

63

BLOM BANK S.A.LCONSOLIDATED AUDITED 2008 FINANCIAL STATEMENTS

Interest and similar incomeInterest and similar expense

Net interest income

Fees and commission incomeFees and commission expense

Net fees and commission income

Net trading incomeNet loss on financial assets designated at fair value through profit or lossNet profit on financial operationsOther operating income

Total operating income

Credit loss (expense) incomeImpairment losses on financial investments

Net operating income

Personnel expensesDepreciation of property and equipmentAmortization of intangible assetsOther operating expenses

Total operating expenses

Net operating profitsNet profit from sale or disposal of other assets

Profit before tax

Income tax expense

Profit for the year

Attributable to:Equity holders of the parentMinority interest

Basic/diluted earnings per share attributable to equity holders of the parent for the year (in LL)

NOTES 2008LL million

1,484,708(1,034,637)

450,071

96,007(6,627)

89,380

28,638(1,793)19,83224,584

610,712

11,435-

622,147

(129,133)(17,717)

(633)(109,113)

(256,596)

365,55135

365,586

(57,000)

308,586

303,4725,114

308,58612,395

Restated 2007LL million

2. CONSOLIDATED INCOME STATEMENT Year ended 31 December 2008

1,631,367(1,013,138)

618,229

127,613(15,976)

111,637

41,305(4,523)

9,80967,861

844,318

(13,040)(15,723)

815,555

(174,191)(25,462)

(947)(162,253)

(362,853)

452,7025,024

457,726

(78,472)

379,254

365,27113,983

379,25416,116

45

6

7

89

1023

11242512

30

13

69

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classified as loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

Total assets

Liabilities and equityLiabilitiesDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement benefits obligation

Total liabilities

Equity attributable to equity holders of parentShare capital - Common sharesShare capital - Preferred sharesShare premium on common sharesShare premium on preferred sharesCapital reservesTreasury sharesRetained earningsReserves for revaluation variance - real estateCumulative changes in fair valuesForeign currency translation reserveOther reservesResults of the financial period - Profit

Minority interest

Total equity

Total liabilities and equity

The consolidated financial statements were authorized for issue in accordance with a resolution of the board of directors on 16 March 2009.


3,553,7397,472,944

19,030104,55463,070

4,173,3675,940

245,35712,895

5,883,3593,090,241

-602

259,7474,459

132,73560,586

25,082,625

1,555,91424,083

20,606,553101,963245,35731,984382,30815,89426,160

22,990,216

215,00025,000374,059351,903528,961(36,122)175,60314,72713,99537,737

-303,472

2,004,33588,074

2,092,409

25,082,625


3. CONSOLIDATED BALANCE SHEET AT 31 December 2008

3,580,4675,817,382

39,86714,26481,955

5,230,4476,926

202,21127,561

4,691,9866,094,232

634,306581

324,5765,307

165,60063,145

26,980,813

1,196,74656,779

22,636,095140,278202,21153,159

430,21131,48134,534

24,781,494

223,60018,200

374,059246,310595,391(39,877)229,86314,7273,905

46,565106

365,2712,078,120

121,199

2,199,319

26,980,813

151617181920392122232323

24252627

281729392130313233

343434343536

2437

70

OFF BALANCE SHEET

Financing commitments- Commitments issued to financial institutions- Commitments received from financial institutions- Commitments issued to customers

Guarantees commitments- Guarantees issued to financial institutions- Guarantees received from financial institutions- Guarantees issued to customers- Guarantees received from customers

Commitments on financial instruments- Financial assets to receiveout of which: values sold with an option to repurchase

- Financial asset to deliverout of which: values bought with an option to resell

Foreign currency operations- Foreign currencies to receive- Foreign currencies to deliver

Commitments on term financial instrumentsOther commitmentsFiduciary depositsFinancial assets under managementDoubtful loans fully provided for and transferred to off balance sheet


21,04339,981338,331

196,37826,537550,636

6,905,003

143,647143,647143,647143,647

2,942,5492,939,186

34,142156,978919,611

3,039,52528,312


CONSOLIDATED BALANCE SHEET AT 31 December 2008

35,51731,071

449,489

260,67558,886

525,2718,625,099

----

2,072,6512,056,942

77,325159,144

1,225,6494,082,514

83,928

40

40

40

4044-1 (A)

17

17

414120

71

OPERATING ACTIVITIESProfit for the financial period before income taxAdjustments for:Prior year adjustment by subsidiary companyDepreciation of property and equipmentAmortization of intangible assetsProfit from sale of property and equipmentWrite-back of provision for loans and advances, netProvision for impairment of financial assetsImpairment allowance for placements with other banksUnrealized loss (profit) for investment propertiesProvision for doubtful sundry debtorsProvision for retirement obligation benefitsNet provision for risks and chargesProvision for fiduciary customers’ commitmentsNet provision for outstanding claims and IBNR reservesProfit from sale of non-current assets held for saleProfit from sale of financial assets classified as loans and receivablesProfit from sale of available-for-sale financial investmentsUnrealized loss on financial assets designated at fair value through profit or loss

Changes in operating assets and liabilities:Financial assets held-for-trading (2)Financial assets designated at fair value through profit or lossBanks and financial institutions – debitDerivative financial instruments – debitLoans and advances to customersLoans and advances to related partiesNon-current assets held for saleOther assetsDerivative financial instruments – creditBanks and financial instruments – creditCustomers' depositsRelated parties’ depositsOther liabilities

Cash from operationsTaxes paidSettlement of provisions for risks and chargesRetirement obligation benefits paid

Net cash from operating activities


365,586

-17,717

633(35)

(11,435)--

(63)189

2,491(937)

-2,507(1,044)(14,558)(4,642)1,793

358,202

(49,058)(64,863)(415,840)(18,129)

(1,172,634)1,4606,590

(38,501)20,51791,021

2,991,43126,704118,322

1,855,222(53,953)

(54)(2,694)

1,798,521


4. CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2008

457,726

(8,773)25,462

947(5,024)(1,160)15,7233,765

211,275

10,526574

9,1607,226

(1,184)(101)

(9,232)4,523

511,454

26,866(23,408)

(229,354)(20,837)

(1,055,920)(986)

(13,460)(34,144)

32,696104,308

2,029,54238,31547,903

1,412,975(56,838)(1,591)(2,194)

1,352,352

2425

2316

2633323232

88

30

33

72

INVESTING ACTIVITIESTerm deposits with central banksFinancial investments – available for sale (1) (3)Financial assets classified as loans and receivables (1) (2) (3)Financial assets – held to maturityPurchase of intangible assetsPurchase of property and equipmentCash proceeds from the sale of property and equipment

Net cash used in investing activities

FINANCING ACTIVITIESRedemption of preferred sharesPurchase of treasury shares, netMinority interestsDividends paid

Net cash used in financing activities

Effect of exchange rate changes

Decrease in cash and cash equivalents

Cash and cash equivalents as of 1 JanuaryCash and cash equivalents as of 31 December

Operational cash flows from interest and dividendsInterest paidInterest receivedDividend received

(1) Non cash transactions in the investing activities include an increase in financial assets classified as loans and receivables in the amount ofLL 2,775,362 million, against a decrease in financial investments – available for sale in the investing activities in the same amount during2008.(2) Non cash transactions in the investing activities include an increase in financial assets classified as loans and receivables in the amount ofLL 63,424 million, against a decrease in financial assets held for trading in the operating activities in the same amount during 2008.(3) Non cash transactions in the investing activities include a decrease in financial assets classified as loans and receivables in the amount ofLL 1,109,280 million against an increase in financial investments – available for sale for the same amount during 2007.


(230,653)(1,189,338)(250,495)

-(2,104)(76,826)3,551

(1,745,865)

-12,818(1,038)

(147,245)

(135,465)

11,425

(71,384)

8,924,9128,853,528

956,2071,226,092

969


(199,704)(1,588,100)

(180,179)(634,956)

(1,760)(98,760)

11,034

(2,692,425)

(113,093)(3,635)17,446

(157,552)

(256,834)

4,879

(1,592,028)

8,853,5287,261,500

941,1491,335,022

8,255

2524

38

73

Balance at 31 December 2007

Cumulative changes in fair valueTranslation DifferenceResults of the financial period–profitfor the year 2008

Total income and expenses for the periodrecognized directly in equity

Capital increase (Note 34)Redemption of Preferred Shares 2002 (Note 34)Dividends Distributions (Note 14)Appropriation of 2007 profitsPurchase of treasury sharesSale of treasury sharesMinority interest share in capitalof newly established subsidiary companiesMinority interest share from dividendsdistribution in subsidiary companiesReallocation of tax related to dividendsdistribution booked in 2007Dividends on treasury shares (note 36)Other adjustment related to a subsidiaryOther transfers



Cumulative changes in fair valuesTranslation differenceProfit for the year 2007

Total income and expenses for the year

Dividends distributions (Note 14)Appropriation of 2006 profitsSale of treasury shares, netIncrease in minority due to decreasein majority shareMinority interest share from dividendsdistribution in subsidiary companiesDividends on treasury sharesForeign currency translation reserverealized upon sale of branches in Romania (Note 2)Others


Attributable to equity holders of the parent

5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2008

Capital

reserves

LL million

Share

permium on

prferred

shares

LL million

Share

capital

preferred

shares

LL million

Share

capital

common

shares

LL million

Treasury

shares

LL million

Share

permium on

common

shares

LL million

215,000

--

-

-

8,600-----

-

-

----

223,600

215,000

---

-

---

-

--

--

215,000

25,000

--

-

-

700(7,500)

----

-

-

----

18,200

25,000

---

-

---

-

--

--

25,000

374,059

--

-

-

------

-

-

----

374,059

374,059

--

-

---

-

--

--

374,059

351,903

--

-

-

-(105,593)

----

-

-

----

246,310

351,903

--

--

---

-

--

--

351,903

528,961

--

-

-

(9,300)--

83,936-

120

-

-

(8,326)---

595,391

463,864

--

--

-67,894(3,168)

-

--

-371

528,961

(36,122)

--

-

-

----

(14,900)11,145

-

-

----

(39,877)

(52,108)

--

--

--

15,986

-

--

--

(36,122)

74

Retained

earnings

LL millionTotal

LL million

Total

LL million

Minority

interest

LL million

Cumulative

changes in

fair fair

value

LL million

Results of

the

financial

period-profit

LL million

Foreign

currency

translation

reserve

LL million

Other

reserve

LL million

Reserve

for

revaluation

variance

Real estate

LL million

14,727

--

-

-

------

-

-

----

14,727

14,727

--

--

---

-

--

--

14,727

13,995

(10,090)-

-

(10,090)

------

-

-

----

3,905

21,001

(7,006)-

-(7,006)

---

-

--

--

13,995

37,737

-1,657

-

1,657

------

-

-

---

7,171

46,565

33,116

-11,792

-11,792

---

-

--

(7,171)-

37,737

-

--

-

-

---

106--

-

-

----

106

-

--

--

---

-

--

--

-

303,472

--

365,271

365,271

--

(159,141)(144,331)

--

-

-

----

365,271

269,604

--

303,472303,472

(148,391)(121,213)

-

-

--

--

303,472

175,603

--

-

-

---

60,289--

-

-

8,3261,589(8,773)(7,171)

229,863

121,207

--

--

-53,319

-

-

-1,146

-(69)

175,603

2,004,335

(10,090)1,657

365,271

356,838

-(113,093)(159,141)

-(14,900)11,265

-

-

-1,589(8,773)

-

2,078,120

1,837,373

(7,006)11,792

303,472308,258

(148,391)-

12,818

-

-1,146

(7,171)302

2,004,335

88,074

(1,876)3,572

13,983

15,679

------

21,227

(3,730)

--

(51)-

121,199

79,171

(264)4,826

5,1149,676

---

2,141

(2,871)-

(45)2

88,074

2,092,409

(11,966)5,229

379,254

372,517

-(113,093)(159,141)

-(14,900)11,265

21,227

(3,730)

-1,589(8,824)

-

2,199,319

1,916,544

(7,270)16,618

308,586317,934

(148,391)-

12,818

2,141

(2,871)1,146

(7,216)304

2,092,409

75

NOTES TO THE AUDITED CONSOLIDATED2008 FINANCIAL STATEMENTS

1. ACTIVITIES 802. ACCOUNTING POLICIES 803. SEGMENTAL INFORMATION 954. INTREST AND SIMILAR INCOME 975. INTREST AND SIMILAR EXPENSES 976. NET FEES AND COMMISSION INCOME 977. NET TRADING INCOME 978. NET PTOFIT ON FINANCIAL OPERATIONS 979. OTHER OPERATING INCOME 9810. CREDIT LOSS (EXPENSES) INCOME 9811. PERSONNEL EXPENSES 9812. OTHER OPERATING EXPENSES 9813. EARNINGS PER SHARE 9914. DIVIDENDS PAID AND PROPOSED 9915. CASH AND BALANCES WITH CENTRAL BANKS 9916. DUE FROM BANKS AND FINANCIAL INSTITUIONS 10017 DERIVATIVE FINANCIAL INSTRUMENTS 10018. FINANCIAL ASSETS HELD FOR TRADINGS 10119. FINANCIAL ASSETS DESIGNATED AT FAIR

VALUE THROUGH PROFIT AND LOSS 10220. LOANS AND ADVANCES TO CUSTOMERS 10221. BANKACCEPTANCES/ ENGAGEMENTS BYACCEPTANCES 10422. NON-CURRENT ASSETS HELD FOR SALE 10523 FINANCIAL INVESTMENTS 10524. PROPERTY AND EQUIPMENT 10625. INTANGIBLE ASSETS 10726. OTHER ASSETS 10827. GOODWILL 10928. DUE TO BANKS AND FINANCIAL INSTITUTIONS 110

29. CUSTOMERS’ DEPOSITS 11030. CURRENT TAX LIABILITIES 11031. OTHER LIABILITIES 11232.PROVISIONS FOR RISKS AND CHARGES 11333. RETIREMENT BENEFITS OBLIGATION 11334. SHARE CAPITAL AND PERMIUMS 11335. CAPITAL RESERVES 11536. TREASURY SHARES 11637. CUMULATIVE CHANGES IN FAIR VALUES 11638. CASH AND CASH EQUIVALENTS 11639. RELATED PARTY TRANSACTIONS 11740. CONTINGENT LIABILITIES,

COMMITMENTSAND LEASINGARRANGEMENTS 11741.FIDUCIARY DEPOSITS, ASSETS UNDER

MANAGEMENT AND CUSTODY ACCOUNTS 11842. CONCENTRATION OF ASSETS,

LIABILITIES AND OFF BALANCE SHEET ITEMS 11843. FAIR VALUE OF THE FINANCIAL INSTRUMENTS 11944.RISK MANAGEMENT 12145. OPERATIONAL RISK 13746. PREPAYMENT RISK 13747. CAPITAL MANAGEMENT 13748. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE 13849. COMPARATIVE INFORMATION 138

1. ACTIVITIES

BLOM BANK SAL, a Lebanese joint stock company, was incorporated in 1951 and registered under No 2464 at the commercialregistry of Beirut and under No 14 on the banks’ list published by the Bank of Lebanon. The headquarters of the Bank are located inVerdun, Rashid Karameh Street, Beirut, Lebanon.

The Bank, together with its subsidiaries, BLOM INVEST BANK SAL, AROPE INSURANCE SAL, SYRIA INTERNATIONAL INSURANCE(AROPE SYRIA) SA, BLOM BANK FRANCE SA, BLOM BANK (SWITZERLAND) SA, BANK OF SYRIA AND OVERSEAS SA, BLOM BANKEGYPT SAE, BLOM EGYPT SECURITIES SAE, BLOM DEVELOPMENT BANK SAL, BLOM INVEST SAUDI ARABIA (under establishment),BLOM BANK QATAR LLC (under establishment), AROPE LIFE INSURANCE EGYPT SAE and AROPE INSURANCE OF PROPERTIESAND RESPONSIBILITIES EGYPT SAE (the Group), provide all banking activities (commercial, investing and private), as well asinsurance and brokerage activities.

On 14 February 2008, the Central Bank of the United Arab Emirates licensed BLOM BANK SAL to open a representative office andoperate in the United Arab Emirates. This license is valid for five years.

On 12 September 2007, the Bank’s board of directors approved on the establishment of a bank in the state of Qatar to be located inQatar Financial Center with share capital of US$ 10 million, whereby the Bank will subscribe in 99% of its capital. On 18 February 2008,the Bank obtained the approval of the Central Bank of Lebanon, and provided the Central Bank of Lebanon and the Banking ControlCommission with the approval of the regulatory authorities in Qatar on 24 April 2008. Accordingly, BLOM BANK SAL subscribed inits share amounting to US$ 9.9 million on 10 July 2008.

On 26 December 2007, AROPE INSURANCE SAL and BLOM BANK EGYPT SAE, owned 88.872% and 99.371% respectively by BLOMBANK SAL, applied for two licenses from the Egyptian authorities for the constitution of two insurance companies in Egypt: (1) AROPE LIFEINSURANCE EGYPT SAE, activity includes life insurance, with a capital of EGP 100 million, and (2) AROPE INSURANCE OF PROPERTIESAND RESPONSIBILITIES EGYPT SAE SAE, activity includes properties and related responsibilities insurance, with a capital of EGP 100million.

On 12 March 2008, the two licenses were approved provided that shareholders will settle 50% of the issued capital of bothcompanies and obtain the Egyptian Prime Minister approval to own 10% and above of the issued capital of both companies.It is to be mentioned that ownership of these two companies is limited to AROPE INSURANCE SAL, BLOM BANK EGYPT SAEand BLOM EGYPT SECURITIES SAE. On 29 May 2008, the Egyptian Council of Ministers approved the ownership for AROPEINSURANCE SAL and BLOM BANK EGYPT SAE, of 80% and 15% respectively of the issued capital of AROPE LIFE INSURANCEEGYPT SAE and the ownership for AROPE INSURANCE SAL and BLOM BANK EGYPT SAE, of 60% and 35% respectively of theissued capital of AROPE INSURANCE OF PROPERTIES AND RESPONSIBILITIES EGYPT SAE. On 11 June 2008, the subscriberspaid 50% of the issued capital of the two companies amounting to EGP 100 million.

2. ACCOUNTING POLICIES

2.1 Basis of preparationThe consolidated financial statements are prepared under the historical cost convention as modified for the restatement of certaintangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for themeasurement at fair value of derivative financial instruments, financial assets held-for-trading, financial assets designated at fairvalue through profit or loss, financial investments – available for sale.

The consolidated financial statements have been presented in millions of Lebanese Lira (LL millions), which is the functionalcurrency of the Bank. Balances denominated in other currencies have been presented in thousands.

Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(IFRS) and the regulations of the Bank of Lebanon and the Banking Control Commission.

80

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2008

Basis of consolidationThe consolidated financial statements comprise the financial statements of the Bank and its subsidiaries for the year ended 31December. The financial statements of the Bank’s subsidiaries are prepared for the same reporting year as BLOM BANK SAL,using consistent accounting policies.

All intra-group balances, transactions, income and expenses are eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Bank. Control is achieved where the Bankhas the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The resultsof subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date ofacquisition or up to the date of disposal.

Minority interests represent the portion of profit or loss and net assets not owned, directly or indirectly, by the Bank and arepresented separately in the consolidated income statement and within equity in the consolidated balance sheet, separatelyfrom parent shareholders’ equity. Any losses applicable to the minority interest in excess of the minority interest are allocatedagainst the interests of the parent. Acquisitions of minority interests are accounted for using the parent entity extensionmethod, whereby, the difference between the consideration and the fair value of the share of the net assets acquired is recognizedas goodwill. If the cost of acquisition is below the fair values of the identifiable net assets acquired (i.e. a discount on acquisition),the difference is recognized directly in the income statement in the year of acquisition.

The consolidated financial statements include the financial statements of BLOM BANK SAL and the subsidiaries listed in thefollowing table:

BLOM BANK FRANCE SABLOM BANK (SWITZERLAND) SA owned by:BLOM BANK FRANCE SA (100%)BLOMINVEST BANK SALBLOM DEVELOPMENT BANK SAL owned by:BLOM INVEST BANK SAL (66.64%)BLOM BANK SAL (33.33%)BANK OF SYRIA AND OVERSEAS SAAROPE INSURANCE SALSYRIA INTERNATIONAL INSURANCE (AROPE SYRIA) SAowned by: BLOM BANK SAL (10%)BANK OF SYRIA AND OVERSEAS SA (5%)AROPE INSURANCE SAL (34%)BLOM BANK EGYPT SAEBLOM EGYPT SECURITIES SAE owned by:BLOM BANK EGYPT SAE (99.97%)BLOMINVEST SAUDI ARABIA (under establishment) owned by:BLOM INVEST BANK SAL (50%)BLOM BANK SAL (10%)BLOM BANK QATAR LLC (under establishment)AROPE LIFE INSURANCE EGYPT SAE owned by:AROPE INSURANCE SAL (80%)BLOM BANK EGYPT SAE (15%)BLOM EGYPT SECURITIES SAE (5%)AROPE INSURANCE OF PROPERTIES AND RESPONSIBILITIESEGYPT SAE owned by: AROPE INSURANCE SAL (60%)BLOM BANK EGYPT SAE (35%)BLOM EGYPT SECURITIES SAE (5%)SYRIA AND OVERSEAS COMPANY FOR FINANCIAL SERVICESowned by: BANK OF SYRIA AND OVERSEAS SA (52%)Blom INVEST BANK SAL (23.5%)

Notes

c

d

afb

c and fd

e

ee

e

e

% Effective equity interest

Country ofincorporationFranceSwitzerland

LebanonLebanon

SyriaLebanonSyria

EgyptEgypt

Saudi Arabia

QatarEgypt

Egypt

Syria

2008 %

99.99899.998

99.87599.887

39.00088.87242.167

99.41999.390

59.937

99.00091.009

93.118

43.750

2007 %

99.99899.998

99.87599.980

39.00088.56042.167

99.37199.371

-

--

-

-

Activities

Banking activitiesBanking activities

Banking activitiesIslamic banking activities

Banking activitiesInsurance activitiesInsurance activities

Banking activitiesBrokerage activities

Banking activities

Banking activitiesInsurance activities

Insurance activities

Brokerage activities

81

(a) Effective 1 January 2004, the Group obtained control, by virtue of agreement with other investors, over BANK OF SYRIA ANDOVERSEAS SA, and consequently, the financial statements of BANK OF SYRIA AND OVERSEAS SA have been consolidated withthose of the Group.(b) Effective 1 January 2006, the Group obtained control, by virtue of agreement with other investors, over SYRIA INTERNATIONALINSURANCE (AROPE SYRIA) SA, and consequently, the financial statements have been consolidated with those of the Group.(c) In November 2007, BLOM BANK EGYPT SAE sold its branches in Romania to BLOM BANK FRANCE SA. Consequently, theGroup realized foreign currency translation reserve in the amount of LL 7,171 million upon the sale of the branches in Romania.During 2008, the Group reclassified the foreign currency translation reserve realized in 2007 upon the sale of the branches inRomania from “Retained earnings” to “Foreign currency translation reserve”.(d) The change in ownership is due to restructuring among the Group with no economic substance.(e) These subsidiaries were newly established and consolidated in 2008.(f) The ownership interests of these subsidiaries were affected by the share capital increase of the respective subsidiarieswhich resulted in dilution of minority share.

2.2 Significant accounting judgments and estimatesIn the process of applying the Group’s accounting policies, management has exercised judgment and estimates in determiningthe amounts recognized in the financial statements. The most significant use of judgment and estimates are as follows:

Going concernThe Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Grouphas the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any materialuncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the financialstatements continue to be prepared on the going concern basis.

Fair value of financial instrumentsWhere the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from activemarkets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input tothese models is taken from observable market data where possible, but where observable market data are not available, judgmentis required to establish fair values. The judgments include considerations of liquidity and model inputs such as volatility for longerdated derivatives and discount rates, prepayment rates and default rate assumptions for asset backed securities. The valuationof financial instruments is described in more detail in Note 43.

Impairment losses on loans and advancesThe Group reviews its individually significant loans and advances at each balance sheet date to assess whether an impairmentloss should be recorded in the income statement. In particular, judgment by management is required in the estimation of theamount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makesjudgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based onassumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans andadvances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision shouldbe made due to incurred loss events for which there is objective evidence but whose effects are not yet evident.

The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization,loan to collateral ratios etc), concentrations of risks and economic data (including levels of unemployment, real estate pricesindices, country risk and the performance of different individual groups).

82


Impairment of available-for-sale investmentsThe Group reviews its debt securities classified as available-for-sale investments at each balance sheet date to assess whetherthey are impaired. This requires similar judgment as applied to the individual assessment of loans and advances.

The Group also records impairment charges on available-for-sale equity investments when there has been a significant or prolongeddecline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making thisjudgment, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fairvalue of an investment is less than its cost.

LiquidityThe Group manages its liquidity by maintaining an adequate ratio of net liquid assets to customer liabilities, which is set out in atable in the liquidity risk disclosures in Note 44-2. The table requires judgment with respect to whether assets can be consideredliquid.

Deferred tax assetsDeferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be availableagainst which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized,based upon the likely timing and level of future taxable profits, together with future tax planning strategies.

2.3 Changes in accounting policiesThe accounting policies adopted are consistent with those used in the previous financial year except for the Amendments toIAS 39 and IFRS 7 – Reclassification of Financial Assets referred to below:

Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments:Disclosures – Reclassification of Financial AssetsThe amendments allow entities to reclassify certain financial assets out of held-for-trading if they are no longer held for thepurpose of being sold or repurchased in the near term.

- Financial assets that would be eligible for classification as loans and receivables (i.e those assets which, apart from not beingheld with the intent of sale in the near term, have fixed or determinable payments, are not quoted in an active market and containno features which could cause the holder not to recover substantially all of its initial investment except through credit deterioration)may be transferred from “Held-for-trading” to “Loans and receivables”, if the entity has the intention and the ability to hold themfor the foreseeable future. Also, the amendments also allow the reclassification of financial assets from the available for salecategory to the loans and receivables category in particular circumstances.- Financial assets that are not eligible for classification as loans and receivables, may be transferred from “Held-for-trading” to“Available-for-sale” or to “Held-to-maturity”, only in rare circumstances.

The amendment requires detailed disclosures relating to such reclassifications. The effective date of the amendment is 1 July 2008 andreclassifications before that date are not permitted.

The Group has reclassified certain financial assets from “Available for sale” into the “Loans and receivables” category, as of 1 July 2008.A full analysis of the financial impact of the reclassification is provided in Note 43.

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Future changes in accounting policiesBelow is the list of standards issued but not yet effective for the year ended 31 December 2008:

IAS 1 (Revised): Presentation of Financial StatementsAmendments to IAS 23: Borrowing CostsIAS 27 (Revised 2008): Consolidated and Separate Financial Statements.Amendments to IAS 32: Financial Instruments – Presentation – Puttable Financial Instruments and Obligations Arising on LiquidationAmendments to IAS 39: Financial Instruments: Recognition and Measurement – Eligible Hedged ItemsIFRS 1: First time adoption of International Financial Reporting StandardsIFRS 2: Share based payments – Vesting Conditions and Cancellations (Amendments)IFRS 3 (Revised): Business CombinationsIFRS 8: Operating SegmentsIFRIC 13: Customer Loyalty ProgrammesIFRIC 15: Agreements for the construction of Real EstateIFRIC 16: Hedges of a Net Investment in a Foreign Operation

Management does not expect the above standards to have a significant impact on the Group’s financial statements whenimplemented in future years.

Improvements of IFRSsIn May 2008, the IASB issued its first annual set of non-urgent amendments to standards, primarily with a view to removinginconsistencies and clarifying wording.

The Group has decided not to early adopt the amendments and does not expect that their application to have significant effect.

2.4 Summary of significant accounting policies(1) Business combinations and goodwillBusiness combinations are accounted for using the purchase method of accounting. This involves recognizing identifiableassets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities but excluding futurerestructuring) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assetsacquired, the discount on acquisition is recognized directly in the income statement in the year of acquisition.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combinationover the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Followinginitial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment,annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated toeach of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergiesof the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit towhich the goodwill is allocated:- represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; andis not larger than an operating segment in accordance with IFRS 8 Operating Segments.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within thatunit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on therelative values of the operation disposed of and the portion of the cash-generating unit retained.

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When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences andgoodwill is recognized in the consolidated income statement.

(2) Financial instruments – initial recognition and subsequent measurement(i) Date of recognitionAll financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party tothe contractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assetswithin the time frame generally established by regulation or convention in the marketplace.

(ii) Initial measurement of financial instrumentsThe classification of financial instruments at initial recognition depends on the purpose and the management’s intention forwhich the financial instruments were acquired and their characteristics. All financial instruments are measured initially attheir fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair valuethrough profit or loss.

(iii) Derivatives recorded at fair value through profit or lossThe Group uses derivatives such as forward foreign exchange contracts and options on foreign currencies. Derivatives arerecorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative.Changes in the fair value of derivatives are included in “Net trading income”.

Derivatives embedded in other financial instruments, such as the conversion option in an acquired convertible bond, are treated asseparate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those ofthe host contract, and the host contract is not itself held-for-trading or designated at fair value through profit or loss. Theembedded derivatives separated from the host are carried at fair value in the trading portfolio with changes in fair value recognizedin the consolidated income statement.

(iv) Financial assets held-for-tradingFinancial assets held-for-trading are recorded in the consolidated balance sheet at fair value. Changes in fair value are recognizedin “Net trading income”. Interest and dividend income or expense is recorded in “Net trading income” according to the termsof the contract, or when the right to the payment has been established.

Included in this classification are debt securities and equities which have been acquired principally for the purpose of sellingor repurchasing in the near term.

(v) Financial assets designated at fair value through profit or lossFinancial assets classified in this category are those that have been designated by management on initial recognition.Management may only designate an instrument at fair value though profit or loss upon initial recognition when the followingcriteria are met, and designation is determined on an instrument by instrument basis:

- The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuringthe assets or liabilities or recognizing gains or losses on them on a different basis; or- The assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis,in accordance with a documented risk management or investment strategy; or- The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwisewould be required by the contract.

Financial assets at fair value through profit or loss are recorded in the consolidated balance sheet at fair value. Changes infair value are recorded in “Net gain or loss on financial assets designated at fair value through profit or loss”. Interest earnedis accrued in “Interest income” using the effective interest rate, while dividend income is recorded in “Other operatingincome” when the right to the payment has been established.

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(vi) Available-for-sale financial investmentsAvailable-for-sale investments include equity and debt securities. Equity investments classified as available-for-sale are thosewhich are neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities in this categoryare those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity orin response to changes in the market conditions.

The Group has not designated any loans or receivables as available-for-sale.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value. Unrealized gains andlosses are recognized directly in equity in the “Available-for-sale reserve”. When the investment is disposed of, the cumulative gainor loss previously recognized in equity is recognized in the consolidated income statement in “Net profit on financial operations”.Where the Group holds more than one investment in the same security they are deemed to be disposed of on a first-in first-outbasis. Interest earned whilst holding available-for-sale financial investments is reported as interest income using the effectiveinterest rate. Dividends earned whilst holding available-for-sale financial investments are recognized in the consolidatedincome statement as “Other operating income” when the right of the payment has been established. The losses arising fromimpairment of such investments are recognized in the income statement in “Impairment losses on financial investments” andremoved from the “Available-for-sale reserve”.

(vii) Held-to-maturity financial investmentsHeld-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments and fixed maturities,which the Group has the intention and ability to hold to maturity. After initial measurement, held-to-maturity financial investmentsare subsequently measured at amortized cost using the effective interest rate, less impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. Theamortization is included in “Interest and similar income” in the consolidated income statement. The losses arising from impairmentof such investments are recognized in the consolidated income statement line “Credit loss expense”.

If the Group were to sell or reclassify more than an insignificant amount of held-to-maturity investments before maturity (otherthan in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available-for-sale.Furthermore, the Group would be prohibited from classifying any financial assets as held to maturity during the following two years.

(viii) Financial assets classified as loans and receivablesFinancial assets classified as loans and receivables are non-derivative financial assets with fixed or determinable payments andfixed maturities, which the Group has the intention and ability to hold for the foreseeable future or until maturity. After initial measurement,financial assets classified as loans and receivables are subsequently measured at amortized cost using the effective interest rate, lessimpairment.

(ix) Due from banks and loans and advances to customersAfter initial measurement, amount “Due from banks” and “Loans and advances to customers” are subsequently measured at amortized costusing the effective interest rate, less allowance for impairment. Amortized cost is calculated by taking into account any discount orpremium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortization is included in“Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognized in theconsolidated income statement in “Credit loss expense”.

(x) Reclassification of financial assetsEffective from 1 July 2008, the Group may reclassify, in certain circumstances, non-derivative financial assets out of the “Held-for-trading” category and into the “Available-for-sale”, “Loans and receivables”, or “Held-to-maturity” categories. From this date it mayalso reclassify, in certain circumstances, financial instruments out of the “Available-for-sale” category and into the “Loans andreceivables” category. Reclassifications are recorded at fair value at the date of reclassification which becomes the new amortizedcost.

The Group may reclassify a non-derivative trading asset out of the “Held-for-trading” category and into the “Loans and receivables”category if it meets the definition of loans and receivables and the Group has the intention and ability to hold the financial asset forthe foreseeable future or until maturity. If a financial asset is reclassified, and if the Group subsequently increases its estimates offuture cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as anadjustment to the effective interest rate from the date of the change in estimate.

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For a financial asset reclassified out of the “Available-for-sale” category, any previous gain or loss on that asset that has beenrecognized in equity is amortized to profit or loss over the remaining life of the investment using the effective interest rate. Anydifference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset usingthe effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recycled tothe consolidated income statement.

Reclassification is at the election of management, and is determined on an instrument by instrument basis. The Group does notreclassify any financial instrument into the fair value through profit or loss category after initial recognition. An analysis ofreclassified assets is disclosed in Note 43.

(3) Derecognition of financial assets and financial liabilitiesi. Financial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:- the rights to receive cash flows from the asset have expired; or- the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cashflows in full without material delay to a third party under a ‘pass-through’ arrangement; and- either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred norretained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, andhas neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the assetis recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes anassociated liability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligationsthat the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured atthe lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be requiredto repay.

ii. Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existingfinancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liabilityare substantially modified, such an exchange or modification is treated as a derecognition of the original liability and therecognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(4) Determination of fair valueThe fair value for financial instruments traded in active markets at the balance sheet date is based on their quoted market price ordealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuationtechniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which marketobservable prices exist, options pricing models, credit models and other relevant valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 43.

(5) Property and equipmentProperty and equipment are stated at cost less accumulated depreciation and accumulated impairment in value. Certain of tangiblereal estate properties purchased prior to 1 January 1994 were restated for the changes in the general purchasing power of theLebanese Lira according to the provisions of law No 282 dated 30 December 1993. The net surplus arising on revaluation iscredited to the account of “Reserves for revaluation variance – real estate” recognized in shareholders’ equity.

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Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and treatedas changes in accounting estimates.

Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual valuesover their estimated useful lives. Freehold land is not depreciated. The estimated useful lives are as follows:

Property and equipment is derecognized on disposal or when no future economic benefits are expected from its use. Any gainor loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the asset) is recognized in “Net profit from sale or disposal of other assets” in the consolidated income statementin the year the asset is derecognized.

(6) Non current assets held for saleThe Group occasionally acquires real estate in settlement of certain loans and advances. Such real estate is stated at the lowerof the amount of the related loans and advances and the current fair value of such assets based on the instructions of theControl Authorities. Gains or losses on disposal, and revaluation losses, are recognized in the consolidated income statementfor the period.

(7) Intangible assetsThe Group’s other intangible assets include the value of computer software and key money. An intangible asset is recognizedonly when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributableto it will flow to the Group.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in abusiness combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carriedat cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortizedover the useful economic life. The amortization period and the amortization method for an intangible asset with a finite usefullife are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate,and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognizedin the income statement in the expense category consistent with the function of the intangible asset.Amortization is calculated using the straight-line method to write down the cost of intangible assets to their residual valuesover their estimated useful lives as follows:

Key money: the lesser of lease period or 5 yearsSoftware development cost: 5 years

(8) Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists,or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’srecoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. Wherethe carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risksspecific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

BuildingsVehiclesFurniture, office installations and computer equipment

50 years6.67 years

2 – 16.67 years

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For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’sor cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a changein the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversalis limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount thatwould have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal isrecognized in the consolidated income statement.

Impairment losses relating to goodwill cannot be reversed in future periods.

(9) Customers’ depositsAll customer deposits are carried at the fair value of the consideration received, less amounts repaid.

(10) Taxation(i) Current taxTaxation is provided for in accordance with the fiscal regulations of the respective countries in which the Group and its branchesand subsidiaries operate.

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paidto the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enactedby the balance sheet date.

The Bank’s profits from operations in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interest receivedaccording to Law no. 497/2003 dated 30 January 2003.

Dividends are subject to a flat 10% tax, reducible to 5% provided that the Bank is listed on a regulated stock exchange.

(ii) Deferred taxDeferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and theircarrying amounts in the financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences,except:- Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is nota business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and- In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses,to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and thecarry forward of unused tax credits and unused tax losses can be utilized except:

- Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liabilityin a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxableprofit or loss; and- In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized onlyto the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be availableagainst which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognizeddeferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable thatfuture taxable profit will allow the deferred tax asset to be recovered.

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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized orthe liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Current tax and deferred tax relating to items recognized directly in equity are also recognized in equity and not in the incomestatement.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets againstcurrent tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(11) Provisions for risks and chargesProvisions are recognized when the Group has a present obligation (legal or constructive) arising from a past event and the coststo settle the obligation are both probable and able to be reliably measured.

(12) Retirement obligation benefitsThe Group provides retirement obligation benefits to its employees. The entitlement of these benefits is based upon the employees’final salary, length of services and other local regulations where the Group operates. The expected costs of these benefits areaccrued over the period of employment.

With respect to employees based in Lebanon, the Group makes contribution to the National Social Security Fund calculated as apercentage of the employees’ salaries. The Group’s obligations are limited to these contributions, which are expensed when due.

(13) Treasury sharesOwn equity instruments of the Bank which are acquired by it or by any of its subsidiaries (treasury shares) are deducted fromequity and accounted for at weighted average cost. Consideration paid or received on the purchase sale, issue or cancellationof the Bank’s own equity instruments is recognized directly in equity. No gain or loss is recognized in the income statement onthe purchase, sale, issue or cancellation of the Bank’s own equity instruments.

When the Bank holds own equity instruments on behalf of its clients, those holdings are not included in the Bank’s balance sheet.

(14) Hedge accountingThe Group makes use of derivative instruments to manage exposures to foreign currency risks, including exposures arising from forecasttransactions and firm commitments.

Derivative financial instruments are stated at fair value.

For the purposes of hedge accounting, hedges are classified into three categories:

(a) fair value hedges which hedge the exposure to changes in the fair value of a recognized asset or liability;(b) cash flow hedges which hedge exposure to variability in cash flows of a recognized asset or liability or a forecasted transaction,and(c) hedges of the net investment in a foreign subsidiary bank.

In relation to effective fair value hedges any gain or loss from remeasuring the hedging instrument to fair value, as well as relatedchanges in fair value of the item being hedged, are recognized immediately in the consolidated income statement in “Net tradingincome”.

In relation to effective cash flow hedges, the gain or loss on the hedging instrument is recognized initially in equity and is transferred tothe income statement in the period in which the hedged transaction impacts the income statement, or included as part of the costof the related asset or liability.

In relation to effective hedges of the net investment in a foreign subsidiary bank, any gain or loss from remeasuring the hedginginstrument to fair value is recognized immediately in equity and is transferred to the income statement once the investment is sold.

For those hedges which do not qualify for hedge accounting, any gains or losses arising from changes in the fair value of the hedginginstrument are taken directly to the consolidated income statement for the period.

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Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies forhedge accounting or is revoked by the Group. For effective fair value hedges of financial instruments with fixed maturities anyadjustment arising from hedge accounting is amortized over the remaining term to maturity. For effective cash flow hedges, anycumulative gain or loss on the hedging instrument recognized in equity remains in equity until the hedged transaction occurs. If thehedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to the consolidatedincome statement.

(15) Fiduciary assetsThe Group provides trust and other fiduciary services that result in the holding or investing of assets on behalf of its clients. Assetsheld in a fiduciary capacity are not reported in the financial statements, as they are not the assets of the Group; and accordingly arerecorded as off balance sheet items.

(16) Off balance sheet itemsOff balance sheet balances include commitments which may take place in the Group’s normal operations such as commitments forloan granting, letters of guarantees, and letters of credit, without deducting the margins collected and related to these commitments.

(17) Offsetting financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the balance sheet, if, and only if, there is currentlyenforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously.

(18) Financial guaranteesIn the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances.Financial guarantees are initially recognised in the financial statements (within “Other liabilities”) at fair value, being the premiumreceived. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amountinitially recognized less, when appropriate, cumulative amortization recognized in the income statement, and the best estimate ofexpenditure required to settle any financial obligation arising as a result of the guarantee.Any increase in the liability relating to financial guarantees is recorded in the consolidated income statement in “Credit lossexpense”. The premium received is recognised in the consolidated income statement in “Net fees and commission income” on astraight line basis over the life of the guarantee.

(19) Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can bereliably measured. The following specific recognition criteria must also be met before revenue is recognized:

(i) Interest and similar income and expensesFor all financial instruments measured at amortized cost, interest bearing financial assets classified as available-for-sale andfinancial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effectiveinterest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of thefinancial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.The calculation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs thatare directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. Thecarrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. Theadjusted carrying amount is calculated based on the original effective interest rate. However, for a reclassified financial asset (seeNote 2.4.2 (x)) for which the Group subsequently increases its estimates of future cash receipts as a result of increased recoverabilityof those cash receipts, the effect of that increase is recognized as an adjustment to the effective interest rate from the date of thechange in estimate.

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Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interestincome continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuringthe impairment loss.

(ii) Fee and commission incomeThe Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can bedivided into the following two categories:

Fee income earned from services that are provided over a certain period of timeFees earned for the provision of services over a period of time are accrued over that period. These fees include commission incomeand asset management, custody and other management and advisory fees.

Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with anyincremental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan bedrawn down, the loan commitment fees are recognized over the commitment period on a straight line basis.

Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of theacquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlyingtransaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the correspondingcriteria.

(iii) Dividend incomeDividend income is recognized when the Group’s right to receive the payment is established.

(iv) Net trading incomeResults arising from trading activities include all gains and losses from changes in fair value and related interest income or expenseand dividends for financial assets and financial liabilities “Held-for-trading”. This includes any ineffectiveness recorded in hedgingtransactions.

(20) Foreign currency translationThe consolidated financial statements are presented in Lebanese Lira which is the Bank’s functional and presentation currency. Eachentity in the group determines its own functional currency and items included in the financial statements of each entity are measuredusing that functional currency.

Transactions and balancesTransactions in foreign currencies are initially recorded at the functional currency at the rate of exchange ruling at the date of thetransaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange at thebalance sheet date. All differences arising on non-trading activities are taken to ‘Other operating income’ in the income statement,with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in a foreignentity. These differences are taken directly to equity until the disposal of the net investment, at which time they are recognized in theincome statement. Tax charges and credits attributable to exchange differences on those borrowings are also recorded in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as atthe dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchangerates at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation and any fair valueadjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of theforeign operations and translated at closing rate.

Group companiesAs at the reporting date, the assets and liabilities of subsidiaries and overseas branches are translated into the Bank’s presentationcurrency at the rate of exchange as at the balance sheet date, and their income statements are translated at the weighted averageexchange rates for the year. Exchange differences arising on translation are taken directly to a separate component of equity. Ondisposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation isrecognized in the income statement in ‘Other operating expenses’ or ‘Other operating income’, respectively.

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(21) Cash and cash equivalentsCash and cash equivalents as referred to in the Cash Flow Statement comprise balances with original maturities of a period of threemonths or less including: cash and balances with central banks, deposits with banks and financial institutions, deposits due to banksand financial institutions, and treasury bills.

(22) Repurchase and reverse repurchase agreementsSecurities sold under agreement to repurchase at a specified future date are not derecognized from the balance sheet as the Groupretains substantially all the risks and rewards of ownership. The corresponding cash received is recognized in the balance sheet asan asset with a corresponding obligation to return it, including accrued interest as a liability within ‘Cash collateral on securitieslent and repurchase agreements’, reflecting the transaction’s economic substance as a loan to the Group. The difference betweenthe sale and repurchase prices is treated as interest expense and is accrued over the life of agreement using the effective interestrate. When the counterparty has the right to sell or repledge the securities, the Group reclassifies those securities in its balancesheet to ‘Financial assets held-for-trading pledged as collateral’ or to ‘Financial investments available-for-sale pledged as collateral’,as appropriate.

Conversely, securities purchased under agreements to resell at a specified future date are not recognised in the balance sheet. Theconsideration paid, including accrued interest, is recorded in the balance sheet, within ‘Cash collateral on securities borrowed and reverserepurchase agreements’, reflecting the transaction’s economic substance as a loan by the Group. The difference between the purchase andresale prices is recorded in ‘Net interest income’ and is accrued over the life of the agreement using the effective interest rate.

If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities isrecorded as a short sale within ‘Financial liabilities held-for-trading’ and measured at fair value with any gains or losses included in‘Net trading income’.

(23) Impairment of financial assetsThe Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financialassets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence ofimpairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) andthat loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assetsthat can be reliably estimated.

Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financialdifficulty, the probability that they will enter bankruptcy or other financial reorganization, default or delinquency in interest or principalpayments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such aschanges in arrears or economic conditions that correlate with defaults.

(i) Financial assets carried at amortized costFor financial assets carried at amortized cost (such as amounts due from banks, loans and advances to customers, financial assetsclassified as loans and receivables as well as held-to-maturity investments), the Group first assesses individually whether objectiveevidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets thatare not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessedfinancial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assessesthem for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be,recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit lossesthat have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in the consolidated income statement. Interest income continues to be accrued on the reduced carryingamount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairmentloss. The interest income is recorded as part of “Interest and similar income”. Loans together with the associated allowance arewritten off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to theGroup. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurringafter the impairment was recognized; the previously recognized impairment loss is increased or reduced by adjusting the allowanceaccount. If a future write-off is later recovered, the recovery is credited to the “Credit loss expense”.

93

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has avariable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. If the Group hasreclassified trading assets to loans and advances, the discount rate for measuring any impairment loss is the new effective interest rate(Refer to Note 2.4 (2) (x) above) determined at the reclassification date. The calculation of the present value of the estimated future cashflows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling thecollateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit gradingsystem, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status andother relevant factors.

Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historicalloss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basisof current observable data to reflect the effects of current conditions that did not affect the years on which the historical loss experienceis based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cashflows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes inunemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in thegroup and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduceany differences between loss estimates and actual loss experience.

See Note 23 for details of impairment losses on financial assets carried at amortized cost and Note 20 for an analysis of impairmentallowance on loans and advances by class.

(ii) Available-for-sale financial investmentsFor available-for-sale financial investments, the Group assess at each balance sheet date whether there is objective evidence that aninvestment is impaired.

In the case of debt instruments classified as available-for-sale, the Group assesses individually whether there is objective evidence ofimpairment based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is thecumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on thatinvestment previously recognized in the income statement. Future interest income is based on the reduced carrying amount and is accruedusing the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest incomeis recorded as part of “Interest and similar income”. If, in a subsequent period, the fair value of a debt instrument increases and theincrease can be objectively related to credit event occurring after the impairment loss was recognized in the income statement, theimpairment loss is reversed through the income statement.

In the case of equity investments classified as available-for-sale, objective evidence would also include a “significant” or “prolonged”decline in the fair value of the investment below its cost. The Group treats “significant” generally as 20% and “prolonged” as greaterthan 6 months. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost andthe current fair value, less any impairment loss on that investment previously recognized in the income statement – is removed fromequity and recognized in the income statement. Impairment losses on equity investments are not reversed through the income statement;increases in the fair value after impairment are recognized directly in equity.

(iii) Renegotiated loansWhere possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending thepayment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measuredusing the original effective interest rate as calculated before the modification of terms and the loan is no longer considered past due.Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. Theloans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interestrate.

(24) Operating leasesLeases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.Operating lease payments are recognized as an expenses in the income statement on a straight-line basis over the lease term.

94


(25) Accounting policies of subsidiary-insurance companiesThe financial statements of the subsidiary insurance companies have been prepared in accordance with International FinancialReporting Standards and the requirements of the regulations related to insurance and reinsurance companies where the subsidiariesoperate. The key accounting policies are as follows:

Premiums earnedNet premiums and accessories (gross premiums) are taken to income over the terms of the policies to which they relate using theprorata temporis method for non-marine business and 25% of gross premiums for marine business. Unearned premiums reserverepresents the portion of the gross premiums written relating to the unexpired period of coverage.

If the unearned premiums reserve is not considered adequate to cover future claims arising on these premiums a premium deficiencyreserve is created.

Commissions earned and paidCommissions earned are recognized at the time policies are written.

Commissions paid are expensed over the terms of the policies to which they relate using the pro-rata temporis method fornon-marine business and 25% of commissions paid for marine business. Deferred acquisition costs represent the portion ofcommissions paid relating to the unexpired period of coverage.

3. SEGMENTAL INFORMATION

The Group’s segments provide products or services subject to different risks and returns than other segments.

a) Primary Segments – GeographicalThe geographical segments provide products or services in various economical environments subject to different risks and returns.

The Group operates in two geographic markets based on the location of its markets and customers. The local market represents theLebanese market and the international market represents markets outside Lebanon. The following table shows the distribution ofthe Group’s gross income, total assets and capital expenditure by geographical segment. Transactions between segments are carriedaccording to market prices and pure commercial conditions.

The Group’s major business segment is banking. Insurance activities represent 2% of profit before income tax and 1% of total assets.

Net interest incomeNet fees and commission incomeNet trading incomeNet loss on financial assets designated at fairvalue through profit or lossNet profit on financial operationsOther operating incomeCredit loss (expense) incomeImpairment losses on financial investments


Total operating expensesNet profit from sale or disposal of other assets

Profit before tax

Total assets

Capital expenditures

2008LL million

389,14553,46810,879

(4,523)7,655

168,6775,470

-

630,771

(219,370)725

412,126

15,718,922

37,217

Domestic

2007LL million

282,29444,64913,663

(1,793)18,23514,49912,102

-

383,649

(156,787)35

226,897

12,844,265

28,801

2008LL million

229,08458,16930,426

-2,154

(100,816)(18,510)(15,723)

184,784

(143,483)4,299

45,600

11,261,891

63,303

International

2007LL million

167,77744,73114,975

-1,59710,085(667)

-

238,498

(99,809)-

138,689

12,238,360

49,989

2008LL million

618,229111,63741,305

(4,523)9,809

67,861(13,040)(15,723)

815,555

(362,853)5,024

457,726

26,980,813

100,520

Total

2007LL million

450,07189,38028,638

(1,793)19,83224,58411,435

-

622,147

(256,596)35

365,586

25,082,625

78,790

95

b) Secondary segments - BusinessThe Group operates in four major business segments: retail, corporate, treasury, money and capital markets, and asset management andprivate banking.

Retail banking: Principally handling individual, customers’ deposits and providing consumer loans, overdrafts, credit cards facilities andfunds transfer facilities.

Corporate banking: Principally handling loans and other credit facilities and deposit and current accounts for corporate andinstitutional customers.

Treasury, money and capital markets: Principally handling various investment services including operations in the money market forthe Group’s customers, trading operations (locally and internationally) and management of the liquidity risks and market risks. Thissegment also handles the management of the Group’s portfolio of equities, debt securities and other financial instruments.

Asset management and private banking: Principally providing investment products and services to institutional investors and intermediaries.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocationand performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measureddifferently from operating profit or loss in the consolidated financial statements. Income taxes are managed on a group basis and are notallocated to operating segments.

Interest income is reported net since the majority of the segments’ revenues are from interest. Management primarily relies on netinterest revenue, not the gross revenue and expense amounts.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments.

2008Net interest incomeNet fees and commission incomeNet trading incomeNet loss on financial assets designatedat fair value through profit or lossNet profit on financial operationsOther operating incomeCredit loss (expense) incomeImpairment losses on financial investments


Segment’s assets

Segment’s liabilities

2007Net interest incomeNet fees and commission incomeNet trading incomeNet loss on financial assets designatedat fair value through profit or lossNet profit on financial operationsOther operating incomeCredit loss (expense) incomeImpairment losses on financial investments


Segment’s assets

Segment’s liabilities

Treasury,money andcapital marketsLL million

CorporatebankingLL million

RetailbankingLL million

Assetmanagement andprivate bankingLL million

UnallocatedLL million

TotalLL million

461,32511,91414,269

(4,523)9,809

-(14,200)(15,723)

462,871

20,954,459

17,931,199

117,47471,066

-

---

1,246-

189,786

3,946,658

4,566,084

34,98720,62727,036

--

7,433(86)

-

89,997

1,324,940

1,359,929

4,4438,030

-

-----

12,473

167,987

172,686

---

--

60,428--

60,428

586,769

751,596

618,229111,63741,305

(4,523)9,809

67,861(13,040)(15,723)

815,555

26,980,813

24,781,494

357,2166,0408,475

(1,793)19,832

---

389,770

20,186,937

17,690,115

74,59161,628

-

---

12,927-

149,146

3,445,321

3,693,890

16,09010,94620,163

--

4,824(1,492)

-

50,531

856,763

796,812

2,17410,766

-

-----

12,940

122,581

107,696

---

--

19,760--

19,760

471,023

701,703

450,07189,38028,638

(1,793)19,83224,58411,435

-

622,147

25,082,625

22,990,21696


4. INTEREST AND SIMILAR INCOME

5. INTEREST AND SIMILAR EXPENSES

6. NET FEES AND COMMISSION INCOME

7. NET TRADING INCOME

8. NET PROFIT ON FINANCIAL OPERATIONS

Financial investments – available-for-saleFinancial investments – classified as loans and receivablesFinancial investments – held to maturityFinancial investments – fair value through profit or lossDeposits and similar accounts with banks and financial institutionsLoans and advances to customersLoans and advances to related parties

2008LL million

493,298332,87329,1083,184

358,869413,558

4771,631,367

2007LL million

689,324--

245488,825305,553

7611,484,708

Deposits and similar accounts from banks and financial institutionsDeposits from customers and other credit balancesDeposits from related parties

2008LL million

18,682989,085

5,3711,013,138

2007LL million

19,1121,010,636

4,8891,034,637

Fees and commission incomeLetters of credit, guarantees and acceptancesLoans and advances to customersAsset management and correspondent’s accounts (arising from fiduciary activities)Checking accounts and transfersCredit cardsCustomers’ depositsOther services

Fees and commission expense:Correspondents’ accounts

2008LL million

28,32524,0058,030

11,91410,27818,73626,325

127,613

(15,976)111,637

2007LL million

25,44822,49410,7666,0418,43113,6859,14296,007

(6,627)89,380

Debt securitiesEquitiesForeign exchange

2008LL million

4,6734,730

31,90241,305

2007LL million

7,1722,29019,17628,638

Dividend incomeGain from sale of financial assets classified as loans and receivablesGain from sale of available for sale financial investments

2008LL million

476101

9,2329,809

2007LL million

63214,5584,64219,832

97

9. OTHER OPERATING INCOME

10. CREDIT LOSS (EXPENSES) INCOME

11. PERSONNEL EXPENSES

12. OTHER OPERATING EXPENSES

Premiums earned on insurance contractsOthers

2008LL million

60,4287,433

67,861

2007LL million

19,7604,82424,584

Provisions for loans and advances:Provision for doubtful commercial loansProvision for doubtful consumer loansProvision for consumer loans not classified as doubtful debts at the balance sheet dateProvision for doubtful banks and financial institutions (note 16)Provision for fiduciary customers’ commitments (note 32)Provision for sundry debtors (note 26)

Recovery of Provisions for loans and advances:Recovery of provision for doubtful and bad loansRecovery of provision for off-balance sheet loansRecovery of provision on commitment by signatureRecovery of provision on settled legal suitsRecovery of provision on personal loans

2008LL million

(24,270)(99)

-(3,765)(9,160)(1,275)

19,1126,169

1422212

(13,040)

2007LL million

(12,661)(3,427)(3,938)

---

28,8522,590

--

1911,435

Wages and salariesSocial security contributionsProvisions for end of service indemnities (note 33)Additional allowances paidBonus paid

2008LL million

89,89815,89310,52617,81840,056

174,191

2007LL million

65,21512,4122,61512,61036,281129,133

Board of director’s attendance feesTaxes and feesFee for guarantee of depositsRent and related chargesElectricity and fuelProfessional feesPostage and telecommunicationsMaintenance and repairsTravel expensesInsuranceMarketing and advertisingStationary and printingsFiscal stampsComplementary taxesClaims paid on insurance contractsOthers

2008LL million

1,1536,5666,7688,5854,710

10,85510,7068,3743,9731,201

10,2656,9733,427

-49,83328,864

162,253

2007LL million

1,4162,6315,8936,2243,5947,8838,5575,6483,400727

8,1405,3262,08013,35014,00520,239109,113

98


13. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the Bank bythe weighted average number of ordinary shares outstanding during the year.

The following table shows the income and share data used in the basic earnings per share calculations:

No figure for diluted earnings per share has been presented as the Bank has not issued any instruments which would have an impact onearnings per share when exercised.

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of approvalof these consolidated financial statements.

14. DIVIDENDS PAID AND PROPOSED

According to the resolutions of the General Assembly Meetings held during the years 2008 and 2007, dividends paid were as follows:

In their meeting held on 16 March 2009, the board of directors proposed the distribution of dividends from 2008 operations as follows:

15. CASH AND BALANCES WITH CENTRAL BANKS

Net profit for the yearLess :Proposed dividends on preferred shares (note 14)Minority interestNet profit attributable to ordinary equity holders of the parentWeighted average number of ordinary shares for basic earnings per shareBasic earnings per share

2008LL million

379,254(23,932)(13,983)341,339

21,179,58416,116

2007LL million

308,586(40,891)(5,114)262,581

21,183,70412,395

LL millionLL millionLL millionLL million

LL

Preferred shares – 2002 issue: LL 22,612.50 per share (2007: LL 22,612.50 per share)Preferred shares – 2004 issue: LL 12,813.75 per share (2007: LL 12,813.75 per share)Preferred shares – 2005 issue: LL 14,321.25 per share (2007: LL 14,321.25 per share)Common shares: LL 5,500 per share (2007: LL 5,000 per share)

2008LL million

16,9599,610

14,322118,250159,141

2007LL million

16,9599,61014,322107,500148,391

Common shares (LL 5,500 per share)Preferred shares – 2004 issue (LL 12,813.75 per share)Preferred shares – 2005 issue (LL 14,321.25 per share)

LL million

118,2509,610

14,32223,932

142,182

CashCentral Banks:Current accountsTime depositsAccrued interest at 31 December

2008LL million

157,257

1,262,7702,123,457

36,9833,423,2103,580,467

2007LL million

128,083

951,9222,429,799

43,9353,425,6563,553,739

99

Cash and balances with the Central Banks include non-interest bearing balances held by the Group at the Bank of Lebanon in coverage ofthe obligatory reserve requirements for all banks operating in Lebanon on deposits in Lebanese Lira as required by the Lebanese bankingrules and regulations. This obligatory reserve is calculated on the basis of 25% of sight commitments and 15% of term commitments.

In addition to the above, all banks operating in Lebanon are required to deposit with the Bank of Lebanon interest- bearing placements atthe rate of 15% of total deposits in foreign currencies regardless of nature.

Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to the banking rulesand regulations of the countries in which they are located.

16. DUE FROM BANKS AND FINANCIAL INSTITUTIONS

Included in banks and financial institutions - debit, time deposits amounting to US$ 450,000 thousand (2007: US$ 620,000 thousand)being guarantees against short term borrowings in the amount of EUR 290,000 thousand (2007: Euro 325,000 thousand) reflectedunder banks and financial institutions - credit. According to the contracts entered into with these banks, the Bank can withdrawthese term deposits upon the settlement of the short-term borrowings.

Included also in banks and financial institutions-debit as of 31 December 2007, time deposits amounting to US$ 1,600 thousandbeing guarantees against two letters of credit matured in September 2008 and amounting to US$ 800 thousand each.

17. DERIVATIVE FINANCIAL INSTRUMENTS

The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notionalamounts by maturity. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and isthe basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactionsoutstanding at the year end and are indicative of neither the market risk nor the credit risk.

Current accountsCurrent accountsChecks for collectionAccrued interest as at 31 December

Time depositsTime depositsAccrued interest as at 31 DecemberDoubtful accounts with banksLess: Impairment allowance for placements with other banks (note 10)

2008LL million

460,03772,897

83533,017

5,261,51821,4705,142

(3,765)5,284,3655,817,382

2007LL million

254,96672,458

134327,558

7,118,91026,476

--

7,145,3867,472,944

2008Derivatives held for trading:Forward foreign exchange contractsEquity swaps and options

Derivatives used for hedging purposes:Forward foreign exchange contracts

2007Derivatives held for trading:Forward foreign exchange contractsEquity swaps and options

Derivatives used for hedging purposes:Forward foreign exchange contracts

AssetsLL million

LiablitiesLL million

Total Nationalamount

LL million

Less than 3months

LL million3 to 12 months

LL million1 to 5 years

LL million

National amount by maturity

37,8731,994

39,867

--

39,867

30,8361,994

32,830

23,94923,94956,779

1,842,08277,325

1,919,407

230,569230,569

2,149,976

1,834,129-

1,834,129

230,569230,569

2,064,698

7,95377,32585,278

--

85,278

---

---

19,030-

19,030

--

19,030

15,611-

15,611

8,4728,47224,083

2,703,81434,142

2,737,956

238,735238,735

2,976,691

2,651,292-

2,651,292

89,38789,387

2,740,679

52,52234,14286,664

149,348149,348236,012

---

---

100


Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. However, theseinstruments frequently involve a high degree of leverage and are very volatile. A relatively small movement in the value of the asset, rate orindex underlying a derivative contract may have a significant impact on the profit or loss of the Group.

Over-the-counter derivatives may expose the Group to the risks associated with the absence of an exchange market on which to close outan open position.

The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk (see alsoNote 44-3).

ForwardsForward contracts are contractual agreements to buy or sell a specified financial instrument at a specific price and date in the future.Forwards are customized contracts transacted in the over-the-counter market.

The risks associated with forward contracts are credit risk and liquidity risk. The Group has credit exposure to the counterparties of forwardcontracts. Forward contracts are settled gross and are, therefore, considered to bear a liquidity risk. Forward contracts result in market riskexposure.

OptionsOptions are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount ofa financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

The Group purchases and sells options through regulated exchanges and in the over-the-counter markets. Options purchased by the Groupprovide the Group with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed-upon value either onor before the expiration of the option. The Group is exposed to credit risk on purchased options only to the extent of their carrying amount,which is their fair value.

Derivative financial instruments held or issued for trading purposesMost of the Group’s derivative trading activities relate to deals with customers which are normally offset by transactions with othercounterparties. The Group may also take positions with the expectation of profiting from favourable movements in prices, rates or indices.Also included under this heading are any derivatives entered into for hedging purposes which do not meet the IAS 39 hedge accounting criteria.

Derivative held or issued for hedging purposesAs part of its asset and liability management, the Group uses derivatives for hedging purposes in order to reduce its exposure tocurrency risk.

The Group uses forward foreign exchange contracts to hedge against specifically identified currency risks.

The Bank uses forward foreign exchange contracts (to sell Euros and buy US Dollars) to hedge its net investment in a foreign subsidiarydenominated in Euro and amounting to Euro 107,904 thousand (2007: same). The notional amount of these contracts amounted toEuro 107,900 thousand (LL 230,569 million) as at 31 December 2008 (2007: same). The forward foreign exchange contracts wererevalued as of 31 December 2008 and resulted in unrealized losses of LL 23,949 million (2007: LL 8,472 million). The contracts matureon 4 February 2009 at latest.

18. FINANCIAL ASSETS HELD FOR TRADING

Debt securitiesEquitiesInvestment funds

2008LL million

2,3359,7932,136

14,264

2007LL million

98,1934,6631,698

104,554

101

19. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS

(i) The unrealized loss on investments related to unit-linked contracts amounted to LL 3,138 million for the year ended 31 December 2008(2007: unrealized profit of LL 2,172 million)

20. LOANS AND ADVANCES TO CUSTOMERS

Commercial loans as at 31 December 2008 include substandard loans amounting to LL 27,656 million (2007: LL 36,285 million).

Breakdown by economic sector

Convertible bondsInvestments related to unit-linked contracts (i)

2008LL million

40,95041,00581,955

2007LL million

45,47017,60063,070

Commercial loansLess:Provision for doubtful loans and provisions for commercial loans notclassified as doubtful debts as the balance sheet dateUnrealized interest-substandard loansUnrealized interest-doubtful loans

Consumer loansLess:Provision for doubtful consumer loans and provision for consumer loansnot classified as doubtful debts at the balance sheet date

2008LL million

4,102,485

(169,448)(12,187)(15,343)

3,905,5071,346,041

(21,101)1,324,9405,230,447

2007LL million

3,637,471

(237,898)(14,238)(68,730)

3,316,605878,073

(21,311)856,762

4,173,367

Agriculture and forestryManufacturingTrade retailTrade wholesaleServicesConstructionFreelance professionsConsumer loans

2008LL million

39,076556,334193,911

1,013,2971,237,941

588,088473,838

1,346,0415,448,526

2007LL million

32,226471,274322,725760,096929,535756,436365,179878,073

4,515,544

102


The movement of provision for doubtful loans and advances by class is as follows:

The movement of unrealized interest is as follows:

As required by Bank of Lebanon regulations, doubtful loans fulfilling certain conditions have been transferred to off-balance sheet, togetherwith the related provisions and unrealized interest.

Balance at 1 JanuaryAdd:Unrealized interest for the yearForeign exchange differenceTransferred from off-balance sheet

Less:Recoveries of unrealized interestAmounts written-offTransferred to off-balance sheet

Balance at 31 December

2008LL million

82,968

5,38711761

88,533

(6,363)(17,664)(36,976)(61,003)

27,530

2007LL million

87,593

12,827874

-101,294

(5,114)(13,212)

-(18,326)82,968

Balance at 1 JanuaryAdd:Charge for the yearProvision transferred fromoff balance sheetForeign exchange difference

Less:Provisions written-offRecovery of provisionsProvision transferred tooff balance sheetForeign exchange difference


Provisionfor doubtful

commercial loansand provision for

commercial loansnot classified yet

LL million


consumer loansand provision forconsumer loans

not classified yetLL million

TotalLL million

237,898

23,893

227560

262,578

(59,423)(12,484)

(21,329)106

(93,130)169,448

21,311

99

--

21,410

(32)(277)

--

(309)21,101

259,209

23,992

227560

283,988

(59,455)(12,761)

(21,329)106

(93,439)190,549


commercial loansand provision forcommercial loansnot classified yet

LL million


consumer loansand provision

for consumer loansnot classified yet

LL millionTotal

LL million

250,088

12,661

255,956

268,730

(6,869)(23,738)

-(225)

(30,832)237,898

14,068

7,365

--

21,433

(103)(19)

--

(122)21,311

264,156

20,026

255,956

290,163

(6,972)(23,757)

-(225)

(30,954)259,209

2008 2007

Individual provisionProvision for loans not classified yet

Gross amount of loans individuallydetermined to be impaired

LL million LL million LL million LL million LL million LL million2008 2007

149,74519,703

169,448

204,043

3,35117,75021,101

10,006

153,09637,453

190,549

214,049

215,62622,272237,898

345,829

3,56117,75021,311

12,280

219,18740,022259,209

358,109

103

The movement of provisions against fully provided bad loans included off balance sheet accounts is as follows:

The movement of unrealized interest included in off balance sheet accounts is summarized as follows:

The fair value of collateral that the Group holds relating to loans and advances to corporate customers individually determined tobe impaired (except for BLOM BANK EGYPT SAE) amounts to LL 122,459 million as of 31 December 2008. The net carrying value ofBLOM BANK EGYPT SAE’s individually impaired loans and advances amounted to LL 35,025 million as of 31 December 2008. Thecollateral consists of cash, securities, letters of guarantee and properties.

As for the consumer loans that are individually determined to be impaired, the fair value of the collateral that the Group holds exceedthe carrying value of these loans at the balance sheet date.

21. BANK ACCEPTANCES / ENGAGEMENTS BY ACCEPTANCES

Acceptances resulted from letters of credit opened for accounts of customers, with deferred payments.

Balance at 1 JanuaryAdd:Charge for the yearProvision transferred from unrealized interestProvision transferred from balance sheetForeign exchange difference

Less:Provisions written-backAmounts written-offProvision transferred to balance sheetForeign exchange difference


2008LL million

17,018

3771,436

21,329-

40,160

(3,632)(1,206)

(227)(53)

(5,118)35,042

2007LL million

20,202

---

16220,364

(2,265)(1,056)

(25)-

(3,346)17,018

Balance at 1 JanuaryAdd:Unrealized interest for the yearTransferred from balance sheetForeign exchange difference

Less:Unrealized interest transferred to provisionsRecoveriesAmounts written-offUnrealized interest on bad debts transferred to balance sheetForeign exchange difference

Balance at 31 DecemberTotal provisions and unrealized interest included in off balance sheet accounts

2008LL million

11,294

5,75636,976

-54,026

(1,436)(2,537)(1,045)

(61)(61)

(5,140)48,88683,928

2007LL million

23,703

1,484-

18525,372

-(325)

(13,753)--

(14,078)11,29428,312

Acceptances as of 31 December

2008LL million

202,211

2007LL million

245,357

104


22. NON-CURRENT ASSETS HELD FOR SALE

23. FINANCIAL INVESTMENTS

CostAt 1 January 2008AdditionsDisposalsTranslation differenceAt 31 December 2008ImpairmentAt 1 January 2008At 31 December 2008Net carrying value At 31 December 2008

LL million

20,09915,463

(819)22

34,765

7,2047,204

27,561

CostAt 1 January 2007AdditionsDisposalsTranslation differenceAt 31 December 2007ImpairmentAt 1 January 2007Provision written back during the yearTranslation differenceAt 31 December 2007Net carrying value At 31 December 2007

LL million

25,9125,346

(11,936)777

20,099

7,990(1,044)

2587,20412,895

Quoted financial assetsEquitiesDebt Securities

Unquoted financial assetsGovernment debt securitiesDebt securities issued by banksCertificates of deposit – Central Bankof LebanonCertificates of deposit – Commercialbanks and financial institutionsEquitiesGranted financial loansInvestment fund

Collective provision for financial assetsclassified as loans and receivables andheld to maturity

Financialinvestments-Available for

saleLL million

Financialassets

classifiedas loans &

receivablesLL million

Financialinvestments-

Held tomaturity

LL million

92228,81129,733

4,533,92352,753

-

70,0835,343

-151

4,662,253

-4,691,986

---

2,393,514501,425

2,907,053

134,721-

172,594-

6,109,307

(15,075)6,094,232

---

198,616436,340

-

----

634,956

(650)634,306

1,371-

1,371

5,003,374872,185

-

-6,278

-151

5,881,988

-5,883,359

---

--

2,776,292

226,241-

87,708-

3,090,241

-3,090,241

---

--

-

-----

--

2008

Financialinvestments-Available for

saleLL million

Financialassets

classifiedas loans &receivablesLL million

Financialinvestments-

Held tomaturity

LL million

2007

105

Collective provision for financial assets classified as loans and receivables and held to maturity

A reconciliation of the collective provision for financial assets classified as loans and receivables and held to maturity (relating to unquoteddebt securities), is as follows:

All unquoted available-for-sale financial investments are recorded at fair value as of 31 December except for the following:

All unquoted available-for-sale financial investments listed above are recorded at cost since their fair value cannot be reliably estimated.There is no market for these investments, and the Group intends to hold them for the long term.

24. PROPERTY AND EQUIPMENT

At 1 JanuaryCharge for the yearDifference on exchangeAt 31 December

2008LL million

-15,723

215,725

2007LL million

----

Debt securitiesEquitiesInvestment fund

2008LL million

13,8595,343

15119,353

2007LL million

177,8056,278151

184,234

CostAt 1 January 2008AdditionsDisposalsTransfersTranslation difference

At 31 December 2008

DepreciationAt 1 January 2008Charge for the yearRelating to disposalsTranslation difference

At 31 December 2008

Net carrying valueAt 31 December 2008

Freehold landand buildings

LL millionVehicles

LL million

Furniture, officeinstallations and

computerequipmentLL million

182,81236,567(6,595)

7,871(3,080)

217,575

31,1985,193

(1,123)(596)

34,672

182,903

4,498520

(125)-

(86)

4,807

2,078848

(124)4

2,806

2,001

146,11936,335(1,729)18,380

(103)

199,002

88,98919,421(1,613)

(56)

106,741

92,261

48,58325,338

(421)(26,251)

162

47,411

----

-

47,411

382,01298,760(8,870)

-(3,107)

468,795

122,26525,462(2,860)

(648)

144,219

324,576

Advances onacquisition

of fixed assetsand construction

in progressLL million

TotalLL million

106


Certain freehold land and buildings purchased prior to 1 January 1999 were restated for the changes in the general purchasing power of theLebanese Lira giving rise to a net surplus amounting to LL 14,727 million, which was credited to equity under “reserves forrevaluation variance – real estate”.

25. INTANGIBLE ASSETS

CostAt 1 January 2007AdditionsDisposalsTransfersTranslation difference

At 31 December 2007

DepreciationAt 1 January 2007Charge for the yearRelating to disposalsTransfersTranslation difference

At 31 December 2007


Freehold landand buildings

LL millionVehiclesLL million

Furniture, officeinstallations and

computerequipmentLL million

156,03119,938(115)5,4141,544

182,812

27,3613,604(58)

-291

31,198

151,614

3,4641,200(365)13663

4,498

1,640748(363)1439

2,078

2,420

119,35931,418(8,464)1,8261,980

146,119

79,45213,365(5,147)

(14)1,333

88,989

57,130

31,04924,270(140)

(7,376)780

48,583

-----

-

48,583

309,90376,826(9,084)

-4,367

382,012

108,45317,717(5,568)

-1,663

122,265

259,747


of fixed assets andconstructionin progressLL million

TotalLL million

CostAt 1 January 2008AdditionsTransfersTranslation difference

At 31 December 2008

AmortizationAt 1 January 2008Charge for the yearTranslation difference

At 31 December 2008


Softwaredevelopment

LL millionKey money

LL million


of intangibleassets

LL million

6,0071,411

707174

8,299

4,927799174

5,900

2,399

8,869--

179

9,048

6,37714890

6,615

2,433

887349

(707)(54)

475

---

-

475

15,7631,760

-299

17,822

11,304947264

12,515

5,307

TotalLL million

107

26. OTHER ASSETS

(i) Compulsory deposits represent amounts deposited with local authorities based on local regulations of the countries in which thesubsidiaries are located, and are detailed as follows:

(ii) Sundry debtors

CostAt 1 January 2007AdditionsTransfersTranslation difference

At 31 December 2007

AmortizationAt 1 January 2007Charge for the yearTranslation difference

At 31 December 2007


Softwaredevelopment

LL millionKey moneyLL million


of intangibleassets

LL million

4,4431,077

140347

6,007

4,078495354

4,927

1,080

8,305--

564

8,869

5,825138414

6,377

2,492

-1,027(140)

-

887

---

-

887

12,7482,104

-911

15,763

9,903633768

11,304

4,459

TotalLL million

Compulsory deposits (i)Precious metals and stampsCustomers’ transactions between head office and branchesPrepaid expensesSundry debtors (ii)Other revenues to be collectedReinsurer’s share of technical reservesTaxes paid in advance in a subsidiary bankInvestment in a non-consolidated subsidiary (iii)Other assets

2008LL million

15,033615

16,92927,7628,2788,528

14,44834,007

5039,950

165,600

2007LL million

14,903564

28,7398,14323,1071,75412,19019,997

5023,288132,735

BLOM INVEST SALBank OF SYRIA AND OVERSEAS SABLOM DEVELOPMENT BANK SAL

2008LL million

1,5009,0334,500

15,033

2007LL million

1,5008,9034,50014,903

Sundry debtorsLess: Provision against sundry debtors

2008LL million

11,015(2,737)

8,278

2007LL million

24,573(1,466)23,107

108


(iii) The book value of the subsidiary’s equity which was not consolidated because it is immaterial to the consolidatedfinancial statements as at 31 December is detailed as follows:

The movement of provision against sundry debtors is summarized as follows:

27. GOODWILL

Impairment testing of goodwillsidiaries of the Bank, for impairment testing as follows:

- BLOM BANK EGYPT SAE- BLOM BANK (SWITZERLAND) SA

The carrying amount of goodwill allocated to each of the subsidiaries is as follows:

Key assumptions used in value in use calculationsThe recoverable amount of BLOM BANK EGYPT SAE has been determined based on a value in use calculation, using cash flowprojections based on financial budgets approved by senior management covering a ten-year period. The following rates areused by the Bank.

Société de Services d’Assurances et de Marketing SAL

2008LL million

163

2007LL million

153

BLOM BANK EGYPT SAEBLOM BANK (SWITZERLAND) SA

2008LL million

62,0771,068

63,145

2007LL million

59,4801,10660,586

Balance at 1 JanuaryProvided during the yearTranslation differenceBalance at 31 December

2008LL million

1,4661,275

(4)2,737

2007LL million

1,26418913

1,466

Cost:At 1 JanuaryTranslation differenceAt 31 December

2008LL million

60,5862,559

63,145

2007LL million

63,980(3,394)60,586

Discount rateProjected growth rate (average during the first 5 years in 2008 and 4 year in 2007)Projected growth rate beyond the five year period in 2008 and four year period in 2007

2008%

9.41120

2007%

9.15300

109

The calculation of value in use for BLOM BANK EGYPT SAE is most sensitive to the following assumptions:- Interest margins;- Discount rates;- Projected growth rates;- Gross domestic product of the country where the subsidiary operates;- Local inflation rates.

Interest marginsInterest margins are based on average values achieved in the 13 months proceeding of the budget period. These are increased overthe budget period for anticipated market conditions.

Discount ratesDiscount rates reflect management’s estimate of return on capital employed. Discount rates are calculated by using the weightedaverage cost of capital.

Projected growth rates, GDP and local inflation ratesAssumptions are based on management analysis and published industry research.

Sensitivity to changes in assumptionsManagement believes that reasonable possible change in any of the above key assumptions would cause the carrying value of theunits to exceed their recoverable amount.

28. DUE TO BANKS AND FINANCIAL INSTITUTIONS

29. CUSTOMERS' DEPOSITS

Customers' deposits include coded deposit accounts in BLOM BANK SAL and BLOM INVEST BANK SAL amounting to LL 64,306million as of 31 December 2008 (2007: LL 76,092 million).

30. CURRENT TAX LIABILITIES

Income tax payableThe relationship between taxable profit and accounting profit of BLOM BANK SAL and its foreign branches and subsidiariesis as follows:

Current accounts

Term:TermAccrued interest at 31 December

2008LL million

334,912

859,9751,859

861,8341,196,746

2007LL million

186,913

1,365,8073,194

1,369,0011,555,914

Sight depositsTime depositsSaving accountsCredit accounts and deposits against debit accounts

2008LL million

2,632,13110,532,3848,696,333

775,24722,636,095

2007LL million

2,341,5949,589,7497,862,422812,788

20,606,553

110


(*) The insurance company in Lebanon is subject to income tax at the rate of 15% calculated based on gross insurance premiumsweighted differently for each class of business.

Income tax payable is detailed as follows:

(a) Current income tax charge in the consolidated income statement is detailed as follows:

Profit before income taxLess: Results of the subsidiary insurance company located in Lebanon (*)Accounting profit before income taxAdd:Provisions non tax deductibleOther non tax deductible chargesUnrealized loss on difference of exchangeCapital gainOthers

Less:Dividends received and previously subject to income taxRemunerations already taxed4% of a subsidiary’s capital eligible to be tax deductibleWrite-back of provisions previously subject to income taxNon taxable incomeDifference in depreciation of fixed assetsPermanent deductible chargesLosses related to prior yearsOthersTaxable profitThe effective income tax rate of the Group is approximately 17.14% (2007: 15.27%).The applicable income tax rate of the operations in Lebanon is 15% (2007: 15%)

2008LL million

457,726(6,722)

451,004

50,15731,5791,914

--

534,654

(410)(8,735)

(400)(18,137)(2,956)

-(49,964)(21,393)

(132)432,527

2007LL million

365,586(5,125)360,461

5,00937,1023,3762,751143

408,842

(2,194)(8,301)(400)

(20,552)(1,762)(2,433)(71,021)

-(855)

301,324

Income statement:Current income tax:Current income tax charge (a)Adjustments in respect of current income tax of previous years (b)Current distribution tax due (note 31)

2008LL million

78,472--

78,472

2007LL million

55,839603558

57,000

At 1 JanuaryTax expense for the yearTax paid during the yearExchange differenceAt 31 December

2008LL million

31,98456,794

(35,160)(459)

53,159

2007LL million

28,07933,198(30,709)1,41631,984

5% tax paid on interest revenue during the yearIncome tax on profit for the year

2008LL million

21,67856,79478,472

2007LL million

22,64133,19855,839

111

(b) During 2007, the tax authorities reviewed the Bank’s accounts in Lebanon for the years 2003 to 2005 (inclusive), and the reviewresulted in complementary taxes and fines amounted to LL 603 million, settled in full during the year ended 31 December 2007.

Current income tax allocation is as follows:

Income tax paid during 2008 and 2007 reflected in the consolidated cash flow statement is detailed as follows:

31. OTHER LIABILITIES

(i) Complementary taxes due related to a subsidiary bank represents mainly accruals for additional complementary taxes in a subsidiaryresulting from inspection by tax authorities for the years from 1991 onwards.

(ii) Movement of distribution tax due recognized in the balance sheet is detailed as follows:

In 2007, the Group accounted for deferred tax liability retroactively on its share of dividend distribution from the subsidiary, BLOMINVEST BANK SAL, in accordance with International Accounting Standard No. 12 (Income taxes).

Income tax-BLOM BANK SALIncome tax-foreign subsidiariesIncome tax-subsidiaries in Lebanon

2008LL million

50,7103,332

24,43078,472

2007LL million

41,94013,0112,04957,000

Margins on letters of creditComplementary taxes due related to a subsidiary bank (i)Distribution tax due on subsidiary’s dividends (ii)Other taxes dueDeposits related to entities under constitutionTransactions pending between consolidated subsidiariesAdvances from customers for acquisition of securitiesSundry creditorsDividends payableAccrued expensesTransactions pending between branchesUnearned premiums and liability related to unit linked insurance contracts

2008LL million

61,35050,269

-12,789

83417,02418,75745,819

33940,68617,351

164,993430,211

2007LL million

77,30038,51212,9849,58712,87512,78912,17024,483

28854,3996,127

120,794382,308

Income tax paid for the years 2007 and 20065% tax paid on interest revenue during the yearAdjustments in respect of current income tax of previous years

2008LL million

35,16021,678

-56,838

2007LL million

30,70922,641

60353,953

Balance at 1 JanuaryProvided during the yearSettlements during the year


2008LL million

12,984-

(12,984)

-

2007LL million

12,426558

-

12,984

112


32. PROVISIONS FOR RISKS AND CHARGES

(i) Provisions for risks and charges

(ii) The provision for fiduciary customers’ commitments amounting to LL 9,160 million represents a provision against probable defaultof Investment Dar S.A.K. - Kuwait to settle the fiduciary deposits of BLOM DEVELOPMENT BANK SAL’s (a subsidiary) customers.

(iii) Provisions for outstanding claims and IBNR reserves related to subsidiary-insurance companies

33. RETIREMENT BENEFITS OBLIGATION

34. SHARE CAPITAL AND PREMIUMS

a- On 8 May 2008, the nominal value of the common shares was increased from LL 10,000 to LL 10,400 through the transfer of anamount of LL 8,600 million from the free reserves to the share capital.

Provision for risks and charges (i)Provision for fiduciary customers’ commitments (note 10) (ii)Provision for outstanding claims and IBNR reserves related to subsidiary-insurance companies (iii)Other provision

2008LL million

4,6799,160

16,855787

31,481

2007LL million

5,546-

9,512836

15,894

Balance at 1 JanuaryCharge for the yearProvisions paid during the yearProvisions written-back during the yearExchange differenceBalance at 31 December

2008LL million

5,546637

(1,591)(14)101

4,679

2007LL million

5,642382(54)(622)198

5,546

Balance at 1 JanuaryProvision for outstanding claims and IBNR reserves charged for the yearProvisions used during the yearExchange differenceBalance at 31 December

2008LL million

9,5127,234

(8)117

16,855

2007LL million

6,9032,857(350)102

9,512

Balance at 1 JanuaryCharge for the yearIndemnities paidProvisions written-backExchange differenceBalance at 31 December

2008LL million

26,16010,526(2,194)

-42

34,534

2007LL million

26,4322,615(2,694)(124)(69)

26,160

Common shares – Authorized, issued and fully paid21,500,000 shares at LL 10,400 per share as of 31 December2008 (2007: 21,500,000 shares at LL 10,000 per share)

Share capitalLL million

223,600

Share premiumLL million

374,059


374, 059


215,000

20072008

113

b- On 16 February 2006, the Bank issued 3,000,000 common shares with a share premium of USD 248,443 thousand (LL 374,059 million).

a- Based on the decision of the ordinary general assembly of the shareholders, the Bank redeemed and cancelled all the preferredshares (2002 issue) and increased the nominal value of the preferred shares from LL 10,000 to LL 10,400 through the transfer of anamount of LL 700 million from the free reserves to the share capital.

b- Preferred shares consist of the following issues:

The total number of preferred shares is 1,750,000 shares as of 31 December 2008 (2007: 2,500,000 shares).

These preferred shares (2004 and 2005 issues) are redeemable 60 days after the annual general assemblies dealing with theaccounts for the years 2009 and 2010 respectively.

In the event of any liquidation, dissolution or winding-up of the Bank, the holders of series 2004 and 2005 preferred shares shall beentitled to be paid out of the assets of the Bank available for distribution to its shareholders on a pro rata basis, before anypayment shall be made to common shareholders.

All of the Bank’s common and preferred shares are listed in the Beirut Stock Exchange starting 20 June 2008. Out of the totalcommon shares, 7,389,601 shares are listed as General Depository Receipts (GDRs) in the Luxembourg Stock Exchange.

Preferred shares – Authorized, issued and fully paid750,000 preferred shares (2002 issue) of LL 10,000per share as of 31 December 2007750,000 preferred shares (2004 issue) of LL 10,400per share as of 31 December 2008 compared to LL 10,000per share as of 31 December 20071,000,000 preferred shares (2005 issue) of LL 10,400 per shareas of 31 December 2008 compared to LL 10,000per share as of 31 December 2007Total preferred shares

Number of shares

Premium(denominated in USD)Non cumulative benefits

11 October 2002 issue

750,000

LL 105,593 million(USD 70,045 thousand)

An annual amount equal to 11.25% ofthe net consolidated profits of theBank, with a minimum of USD 10 pershare and not in excess of USD 15 pershare, (subject to the approval of theShareholders’ General AssemblyMeeting and the availability of a non-consolidated distributable net incomefor the year).


-

7,800

10,40018,200


105,593

105,590

140,720351,903


-

105,590

140,720246,310


7,500

7,500

10,00025,000

20072008

4 June 2004 issue

750,000


An annual amount for each shareequal to USD 8.5 based on theexchange rate on the date of theGeneral Assembly Meeting, (subjectto the approval of theShareholders’ General AssemblyMeeting and the availability of anon-consolidated distributable netincome for the year).

17 September 2005 issue

1,000,000


2005 distributions to be based on afixed amount of USD 3.75 per shareand thereafter at an annual amountequal to 6% of the net consolidatedprofit of the Bank, with a minimum of7.5% and a maximum of 9.5% of theissue price (subject to the approvalof the Shareholder’s GeneralAssembly Meeting and the availabilityof a non-consolidated distributable netincome for the year).

114


35. CAPITAL RESERVES

Reserves for general banking risksAccording to the Bank of Lebanon regulations, banks are required to appropriate from their annual net profit a minimum of 0.2 per-cent and a maximum of 0.3 percent of total risk weighted assets and off-balance sheet accounts based on rates specified by theBank of Lebanon to cover general banking risks. The consolidated ratio should not be less than 1.25 percent of these risks at the endof year ten (2007) and 2 percent at the end of year twenty (2017). This reserve is part of the Group’s equity and cannot be distributedas dividends. This reserve is based on the denomination (Lebanese Lira and US Dollars) of the risk weighted assets and off-balancesheet accounts.

Legal reserveAccording to the Lebanese Code of Commerce and to the Money and Credit Act, banks and companies operating in Lebanon have totransfer 10% of their annual net profit to a legal reserve. This reserve cannot be distributed as dividends.

General reserveThe Group appropriated general reserves from its retained earnings to strengthen its equity. This reserve amounting to LL 270,286million as at 31 December 2008 (2007: LL 252,594 million) is available for dividends distribution.

Reserve for increase of share capitalThe balance amounting to LL 26,658 million (2007: LL 14,158 million) represents a regulatory reserve pursuant to circular no. 167issued by the Banking Control Commission. This reserve cannot be distributed as dividends.

Details of the reserve for increase of share capital are as follows:

Non distributable reservesNon distributable reserves resulted mainly from the increase of share capital of subsidiaries through transfer from the generalreserves and retained earnings.

Recoveries of provisions for doubtful debtsRevaluation reserves for fixed assets soldGain on sale of treasury shares

2008LL million

24,633438

1,58726,658

2008LL million

12,253438

1,46714,158

At 31 December 2006Appropriation of 2006 profitsNet loss on sale of treasury sharesOtherAt 31 December 2007Appropriation of 2007 profitsCapital increase (note 34)Reallocation of tax relatedto dividends distributionbooked in 2007Net gain on sale of treasury sharesAt 31 December 2008

Reservefor generalbanking risksLL million

LegalreserveLL million

GeneralreserveLL million

59,2529,874

--

69,12610,450

-

--

79,576

113,24523,250

--

136,49525,788

-

--

162,283

226,37525,848

-371

252,59435,318(9,300)

(8,326)-

270,286

Reserve forincrease ofshare capitalLL million

NondistributablereserveLL million

TotalLL million

8,4048,922(3,168)

-14,15812,380

-

-120

26,658

56,588---

56,588--

--

56,588

463,86467,894(3,168)

371528,96183,936(9,300)

(8,326)120

595,391

115

36. TREASURY SHARES

Movement of treasury shares recognized in the balance sheet is as follows:

The treasury shares represent Global Depository Receipts (GDR) owned by the Bank. The market value of one GDR was USD 72.85as of 31 December 2008 (2007: USD 90.20).

The Bank refunded the distribution of dividends on the treasury shares amounting to LL 1,589 million (2007: LL 1,146 million) resultingfrom the distribution of dividends for all ordinary shares in 2007.

The Group generated profits of LL 120 million from the sale of treasury shares during the year 2008 (2007: realized losses of LL 3,168million). Profit or loss is reflected under “Reserve for increase of share capital” in the “Capital reserves” (note 35).

37. CUMULATIVE CHANGES IN FAIR VALUES

The cumulative changes in fair values related to available for sale investments are as follows:

38. CASH AND CASH EQUIVALENTS

Balances with the Central Banks include term placements with the Bank of Lebanon, which are considered as cash equivalent basedon a contractual agreement with the Bank of Lebanon.

At 1 JanuaryAcquisition of treasury sharesSales of treasury sharesAt 31 December

No. of commonshares

LL million

306,000110,782(83,050)333,732

AmountLL million

52,10865,189(81,175)36,122

AmountLL million

36,12214,899

(11,144)39,877

No. of commonshares

LL million

414,400619,885(728,285)306,000

20072008

Balance at 1 JanuaryNet changes in fair values during the yearBalance at 31 December

2008LL million

13,995(10,090)

3,905

2007LL million

21,001(7,006)13,995

Cash and balances with central banksDebt securities (whose original maturities are less than three months)Deposits with banks and financial institutions (whose originalmaturities are less than 3 months)

Less:Due to banks and financial institutions (whose originalmaturities are less than 3 months)

2008LL million

3,438,17615,920

4,793,5408,247,636

(986,136)7,261,500

2007LL million

3,611,15217,297

6,674,69110,303,140

(1,449,612)8,853,528

116


39. RELATED PARTY TRANSACTIONS

The Group enters into transactions with major shareholders, directors, senior management, and their related concerns, and entitiescontrolled, jointly controlled or significantly influenced by such parties in the ordinary course of business at commercial interest andcommission rates. All the loans and advances to related parties are performing advances and are free of any provision for possiblecredit losses.

The transactions with related parties are as follows:

The board of directors and senior management remunerations are as follows:

All remunerations paid to board of directors and senior management are short term in nature.

40. CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS

Credit – related commitmentsTo meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Theseconsist of financial guarantees, letters of credit and other undrawn commitments to lend. Even though these obligations may not berecognized on the balance sheet, they do contain credit risk and are therefore part of the overall risk of the Group (see Note 44-1).

Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers inthe event of a specific act, generally related to the import or export of goods. Guarantees and standby letters of credit carry a simi-lar credit risk to loans.

The Group has the following credit related commitments:

Commitments issued to financial institutionsCommitments issued to customersGuarantees issued to financial institutionsGuarantees issued to customersAcceptances (Note 21)

Authorized but unutilized facilities

2008LL million

35,517449,489260,675525,271202,211

1,473,1632,347,5643,820,727

2008LL million

21,043338,331196,378550,636245,357

1,351,7451,358,4442,710,189

DepositsLoans and advancesIndirect facilitiesInterest received from loansand advancesInterest paid on depositsAccounting services’ revenuesfrom a non-consolidated subsidiary

Majorshareholders

LL million

Boardof directorsand senior

managementLL million

Otherrelatedparties

LL million

107,294-

65

-4,107

-

28,0084,809

-

3311,072

-

4,9762,117

25

145191

203

2008LL million

2007LL million

140,2786,926

90

4765,370

203

101,9635,940

58

7614,889

203

Board of directors and senior management remunerations

2008LL million

25,962

2008LL million

20,729

117

Legal claimsLitigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Group has formalcontrols and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonablyestimated, the Group makes adjustments to account for any adverse effects which the claims may have on its financial standing. Atyear end, the Group had several unresolved legal claims.

Management, after discussing with its counselors all such cases and proceedings against the Group, considers that the aggregateliability or loss, if any, resulting from an adverse determination would not have a material effect on the consolidated financialposition of the Group.

Other contingent liabilitiesThe Bank’s books in Lebanon have not been reviewed by the tax authorities for the years 2006 to 2008 (inclusive). The ultimateoutcome of any review that may take place by the tax authorities cannot be presently determined.

The Bank’s books in Lebanon have not been reviewed by the National Social Security Fund (NSSF) since 1998. The ultimateoutcome of any review by the NSSF on the Bank’s books from 1998 to 2008 (inclusive) cannot be presently determined.

Lease arrangementsThe commitments on capital expenditures and operating lease commitments at the balance sheet date, which were not providedfor, were as follows:

41. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS

Fiduciary accounts include notes, checks, policies, treasury bills/bonds, shares and documents for collection held by the Group tothe order of third parties.

42. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS

Concentrations arise when a number of counter parties are engaged in similar business activities or activities in the same geographicregion, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected bychanges in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performancedevelopments affecting a particular industry or geographic location.

Capital commitmentsTangible fixed assets purchases

Operating lease commitments – Group as lesseeFuture minimum lease payments under operating leases as at 31 Decemberare as follows:During one yearMore than 1 year and less than five yearsMore than five years

Total operating lease commitments at the balance sheet date

2008LL million

37,685

1,1574,8588,994

15,009

2007LL million

26,757

3,53113,98013,192

30,703

Fiduciary depositsFinancial assets under management

2008LL million

1,225,6494,082,5145,308,163

2007LL million

919,6113,039,5253,959,136

118


The distribution of assets, liabilities, and off-balance sheet items by geographic region was as follows:

43. FAIR VALUE OF THE FINANCIAL INSTRUMENTS

A. Determination of fair valueThe following table shows the difference between the carrying values and fair values for the financial assets and liabilitiesclassified in the balance sheet. This table does not show the fair values of non-financial assets and liabilities.

Fair value of financial assets and liabilities not carried at fair valueThe following describes the methodologies and assumptions used to determine fair values for those financial instruments which arenot already recorded at fair value in the consolidated financial statements:

Assets for which fair value approximates carrying valueFor financial assets and financial liabilities that have a short term maturity (less than three months), it is assumed that the carryingamounts approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without a specificmaturity. For other variable rate instruments, an adjustment is also made to reflect the change in required credit spread since theinstrument was first recognized.

Fixed rate financial instrumentsThe fair value of fixed rate financial assets and liabilities carried at amortized cost are estimated by comparing market interest rateswhen they were first recognized with current market rates offered for similar financial instruments. The estimated fair value of fixedinterest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similarcredit risk and maturity. For quoted debt issued the fair values are calculated based on quoted market prices. For those notes issuedwhere quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curveappropriate for the remaining term to maturity and credit spreads.

Geographical LocationLebanonOutside Lebanon

15,718,92211,261,89126,980,813

14,992,5649,788,930

24,781,494

2008

3,724,9515,004,1408,729,091

12,844,26512,238,36025,082,625

12,414,52410,575,69222,990,216

2007

5,078,7023,107,1608,185,862

Financial assetsCash and balances with central banksBanks and financial institutionsDerivative financial instrumentsFinancial assets held for tradingFinancial assets designated at fairvalue through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesFinancial investments - available for saleFinancial assets classified as loans andreceivablesFinancial investments - held to maturity

Financial liabilitiesDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties’ depositsEngagements by acceptances

Total unrecognized change in unrealizedfair value

3,580,4675,817,382

39,86714,264

81,9555,230,447

6,926202,211

4,691,986

6,094,232634,306

1,196,74656,779

22,636,095140,278202,211

3,810,7055,830,814

39,86714,264

81,9555,279,381

7,250202,211

4,691,986

5,979,223623,143

1,209,14156,779

22,676,813140,485202,211

2008

230,23813,432

--

-48,934

324--

(115,009)(11,163)

(12,395)-

(40,718)(207)

-

113,436

3,553,7397,472,944

19,030104,554

63,0704,173,367

5,940245,357

5,883,359

3,090,241-

1,555,91424,083

20,606,553101,963245,357

3,887,0597,479,607

19,030104,554

63,0704,176,815

5,940245,357

3,883,359

3,178,436-

1,555,91124,083

20,566,063101,752245,357

333,3206,663

--

-3,448

---

88,195-

3-

40,490211

-

472,330

carrying valueLL million

Fair valueLL million

Unrecognizedgains (losses)

LL million

2007

carrying valueLL million


Unrecognizedgains (losses)

LL million

AssetsLL million

LiabilitiesLL million

Off-balancesheet

LL millionAssets

LL millionLiabilitiesLL million

Off-balancesheet

LL million

119

Financial instruments recorded at fair valueThe following table shows an analysis of financial instruments recorded at fair value, between those whose fair value is based onquoted market prices and those involving valuation techniques where all the model inputs are observable in the market.

The unquoted financial instruments that are stated at cost approximately equal to fair value.

B. Reclassification of financial assets2008 was characterized by a substantial deterioration in global market conditions, including a severe shortage of liquidity and creditavailability. These conditions have led to a reduction in the level of market activity for many assets, and, particularly for residentialproperty-related assets, the inability to sell other than at substantially lower prices. Governments have taken unprecedented actionto mitigate these circumstances, including the injection of substantial levels of capital into banks, and the provision of banking guaranteesand liquidity facilities.

Following the amendments to IAS 39 and IFRS 7 Reclassification of Financial Assets (effective from 1 July 2008) and as a result ofthe contraction in the market for many classes of assets, the Group has undertaken a review of assets that are classified as “Held-for-trading” and “Available-for-sale”, in order to determine whether this classification remains appropriate. Where it was determinedthat the market for an asset is no longer active, and that the Group no longer intends to trade, management have reviewed theinstrument to determine whether it is appropriate to reclassify it to “Loans and receivables”. This reclassification has onlybeen performed where the Group, at the reclassification date, has the clear intention and ability to hold the financial asset for theforeseeable future or until maturity.

The following table shows the carrying amount and fair value of financial assets reclassified from “Held-for-trading” or “Availablefor sale” to the “Loans and receivables” category, as at the date of reclassification and as at the reporting date. All transfersoccurred on 1 July 2008 and thereafter. There were no reclassifications in the prior period.

The following table shows the total fair value gains and losses recorded on trading and available for sale assets reclassified to the“Loans and receivables” category, up until the date of transfer. It also shows the undiscounted amount of cash flows expected to berecovered from and the expected effective interest rate applied to, reclassified assets, as assessed at the date of reclassification.

Derivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fairvalue through profit or lossFinancial investments-available for sale

-9,793

47,42229,73386,948

39,8674,471

34,5334,642,9004,721,771

2008

--

-19,35319,353

Quotedmarketprices

LL million

Valuationtechniques -

marketobservable

inputsLL million

UnquotedLL million

2007

TotalLL million

39,86714,264

81,9554,691,9864,828,072

-4,663

55,7911,37161,825

19,03099,891

7,2795,697,7545,823,954

--

-184,234184,234

Quotedmarketprices

LL million

Valuationtechniques -

marketobservable

inputsLL million

UnquotedLL million

TotalLL million

19,030104,554

63,0705,883,3596,070,013

Financial assets reclassified duringthe year as at the date of reclassification

Financial assets reclassified duringthe year as at 31 December 2008

63,424

63,469

63,424

59,156

Debt securities held-for-trading

Carrying amountLL million


Debt securities-Available for sale

2,775,362

2,829,883

2,775,362

2,668,785

Carrying amountLL million


120


The distribution of assets, liabilities, and off-balance sheet items by geographic region was as follows:

The following table shows the total fair value gains or losses and net interest income that would have been recognized during theperiod subsequent to reclassification if the Group had not reclassified financial assets from the “Held-for-trading” and“Available-for-sale” to the “Loans and receivables” category. This disclosure is provided for information purposes only; it doesnot reflect what has actually been recorded in the consolidated financial statements of the Group.

The following table shows the net profit or loss actually recorded on assets reclassified to loans and receivables subsequentto reclassification:

The effect of the reclassification of financial assets on the basic earnings per share is:

44. RISK MANAGEMENT

The Bank manages its business activities within risk management guidelines as set by the Group’s “risk management policy”approved by the board of directors. The Group recognizes the role of the board of directors and executive management in the riskmanagement process as set out in the Banking Control Commission circular 242. In particular, it is recognized that ultimateresponsibility for establishment of effective risk management practices and culture lies with the board of directors as does thesetting up of Bank’s risk appetite and tolerance levels. The board of directors delegates through its risk management committee theday–to–day responsibility for establishment and monitoring of risk management process across the Bank’s group to the head of riskmanagement, who is directly appointed by the board of directors, in coordination with executive management at BLOM BANK SAL.

Cost of securities transferredFair value losses recognized in net trading income/equity:Recorded during 2008Recorded during 2007Recorded prior to 2007Carrying amount at date of reclassificationExpected undiscounted cash recoveries, as assessed at the date of reclassificationAnticipated average effective interest rate over the remaining life of the assets

Debt securitiesheld-for-trading

LL million


LL million

62,848

576--

63,424110,188

7,84%

2,776,120

17,494(2,214)

(16,038)2,775,3623,413,921

6,81%

Fair value gains and losses which would otherwise have been recordedafter reclassification, during the current periodNet interest income which would otherwise have been recorded afterreclassification, during the current periodTotal income or expense which would otherwise have beenrecorded during the year since reclassification

Income statementLL million

EquityLL million

(4,313)

52

(4,261)

(161,098)

-

(161,098)

Debt securities

Net interest incomeImpairment chargesNet profit


LL million

8,274-

8,274

56,661(15,073)

41,588

Increase of basic earnings per share

2008LL million

202

Debt securitiesavailable for sale

LL million

121

The Group is exposed to credit risk, liquidity risk, market risk and operational risk.

The board’s risk management committee has the mission to periodically (1) review and assess the risk management function to theGroup, (2) review the adequacy of the Bank’s capital and its allocation within the Group, and (3) review risk limits and reports andmake recommendations to the Board.

The head of risk management undertakes his responsibilities through the “Risk Management Department”, with its employeesreporting directly to the head of risk management. The risk manager is responsible for establishing the function of the departmentand its employees.

BLOM BANK’s risk management department aids executive management in controlling and actively managing the Group’s overallrisk. The department mainly ensures that:

- Risk policies and methodologies are consistent with the Group’s risk appetite.- Limits and risk across banking activities are monitored throughout the Group.

Through a comprehensive risk management framework, transactions and outstanding risk exposures are quantified and comparedagainst authorized limits, whereas non-quantifiable risks are monitored against policy guidelines as set by the Group’s “RiskManagement Policy”. Any discrepancies, breaches or deviations are escalated to executive senior management in a timely mannerfor appropriate action.

In addition to the Group’s risk management in Lebanon, risk managers and / or risk officers were assigned within the Group’sforeign subsidiaries or branches to report to the department and executive senior management in a manner that ensures:- Standardization of risk management functions and systems developed across the Group.- Regional consistency of conducted business in line with the board’s approved risk appetite.

The major objective of the risk management is the implementation of the Basel II frame work within the group. Pillar I capitaladequacy calculations have been generated since December 2004, while preparations for moving on to the more advancedapproaches of pillar I at some point in the future have been initiated and action taken for gradual pillar II and pillar III compliance.

44-1 Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incura financial loss. The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties, and continuously assessing the creditworthiness of counter parties.

The Group manages credit risk by setting limits for individual borrowers and groups of borrowers and for geographical and industrysegments. In addition the Group obtains security where appropriate.

The debt securities included in investments are mainly sovereign risk and standard grade securities. Analysis of investments bycounterparty is provided in notes 18, 19 and 22. For details of the composition of the loans and advances refer to note 20. Informationon credit risk relating to derivative instruments is provided in note 17 and for commitments and contingencies in note 40. Theinformation on the Group’s net maximum exposure by economic sectors is given in note (A) below.

The Group maintains a general credit risk policy that is in compliance with the Group’s general risk management related to theGroup’s credit transactions. It consists of the following:- The permissible activities, segments, programs and services that the Group intends to deliver and the acceptable limits;- The mechanism of the approval on credit-facilities;- The mechanism for managing and following up credit-facilities; and- The required actions for analyzing and organizing credit files.

The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter parties,and continually assessing the creditworthiness of counter parties. The Group’s risk management are designed to identify and to setappropriate risk limits and to monitor the risk adherence to limits. Actual exposures against limits are monitored daily, monthly andperiodically. Risk management is responsible for monitoring the risk profile of the Group’s loan portfolio by producing internal reportshighlighting any exposure of concern in corporate, commercial and consumer lending. The Group examines the level of concentrationwhether by credit quality, client groupings or economic sector and collateral coverage. Further, the Group monitors non-performing loansand takes the required provisions for these loans.

122


The Group in the ordinary course of lending activities holds collaterals and guarantees as security to mitigate credit risk in the loansand advances. These collaterals mostly include cash collateral, quoted shares and debt securities, real estate mortgages, personalguarantees and others. In addition, the collection unit in the Group dynamically manages and takes remedial actions for non-performingloans.

The Group uses an internal classification system based on risk ratings for its corporate and middle market customers. The risk ratingsystem, which is managed by an independent unit, provides a rating based on client and transaction level. The classification systemincludes six grades, of which three grades relate to the performing portfolio (regular credit facilities: risk ratings “1” and “2” andspecial mention – watch list: risk rating “3”), one grade relates to substandard loans (risk rating “4”) and two grades relate tonon-performing loans (risk ratings “5” and “6”). Credit cards, personal loans, car loans, housing loans and other loans related to theseloans are classified as regular as they are performing and have timely repayment with no past dues; except for those loans that haveunsettled bills due for more than 90 days. Each individual borrower is rated based on an internally developed debt rating model thatevaluates risk based on financial as well as qualitative inputs. The associated loss estimate norms for each grade have been calculatedbased on the Group’s historical default rates for each rating. These risk ratings are reviewed on a regular basis.

Introduction of the Moody’s Risk Analyst credit analysis and internal ratings system in the domestic market has provided the Bankwith an additional tool to enhance risk measurement and assessment of the corporate and commercial loan portfolios. This systemwill be gradually extended to all group entities over time.

At the same time, implementation of consumer loan application and behavioral scorecards will aid significantly in meeting Basel IIrequirements for the retail portfolio as well as making available new quality management resources.

Non-performing loans are closely monitored and well provisioned as required with remedial actions taken and managed proactivelyby a dedicated recovery unit. In line with Basel II, the Group considers payments that are past due for more than 90 days as beingnon-performing.

A- Maximum exposure to credit riskAn analysis of the Group’s financial assets before and after taking into account collateral held or other credit enhancements, is asfollows:

For on-balance sheet financial assets, the exposures set out above are based on net carrying amount as reported in the balancesheet.

Collateral and other credit enhancementsThe amount, type and valuation of collateral is based on guidelines specified in the risk management framework. The main types ofcollateral obtained include real estate, quoted shares, cash collateral and bank guarantees.

The revaluation and custody of collaterals are performed independent of the business units.

Balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesFinancial investments - available for saleFinancial assets classified as loans and receivablesFinancial investments - held to maturityOther assets

Contingent liabilitiesCommitments

Total credit exposure

Gross maximumexposureLL million

3,423,2105,817,382

39,86714,26481,955

5,230,4476,926

202,2114,691,9866,094,232

634,306165,600

26,402,3861,270,9522,347,5643,618,516

30,020,902

Net maximumexposureLL million

3,423,2105,817,382

39,86714,26481,955

2,431,5656,926

-4,691,9866,064,082

634,306165,600

23,371,1431,169,8221,152,3632,322,185

25,693,328

Gross maximumexposureLL million

3,425,6567,472,944

19,030104,55463,070

4,173,3675,940

245,3575,883,3593,090,241

-132,735

24,616,2531,106,3881,358,4442,464,83227,081,085

Net maximumexposureLL million

3,425,6567,472,944

19,030104,55463,070

1,700,2035,940

-5,883,3593,032,498

-132,735

21,839,989950,794603,691

1,554,48523,394,474

2008 2007

123

Guarantees received from customers are detailed as follows:

B- Risk concentrations of maximum exposure to credit risk

Personal guarantees received from customersReal estate guarantees receivedCash collateral received

2008LL million

4,283,0133,506,446

835,6408,625,099

2007LL million

3,379,0932,742,486783,424

6,905,003


Contingent liabilitiesCommitmentsTotal credit exposure

DomesticLL million

2,544,823606,225

8,9065,171

40,9502,465,046

497113,124

4,091,3915,522,542

4,67056,382

15,459,727167,737

1,681,95517,309,419

InternationalLL million

878,3875,211,157

30,9619,093

41,0052,765,401

6,42989,087

600,595571,690629,636109,218

10,942,6591,103,215

665,60912,711,483

2008

TotalLL million

3,423,2105,817,382

39,86714,26481,955

5,230,4476,926

202,2114,691,9866,094,232

634,306165,600

26,402,3861,270,9522,347,564

30,020,902


Contingent liabilitiesCommitmentsTotal credit exposure

2,294,147510,5426,46581,69045,470

2,318,2004,335

103,9574,760,5792,459,631

-74,399

12,659,415200,998

1,078,20913,938,622

1,131,5096,962,402

12,56522,86417,600

1,855,1671,605

141,4001,122,780630,610

-58,336

11,956,838905,390280,235

13,142,463

2007

3,425,6567,472,944

19,030104,55463,070

4,173,3675,940

245,3575,883,3593,090,241

-132,735

24,616,2531,106,3881,358,44427,081,085

DomesticLL million

InternationalLL million

TotalLL million

124


C- Credit quality per class of financial assetsIn managing its portfolio, the Group utilizes ratings and other measures and techniques which seek to take account of all aspects ofperceived risk. Credit exposures classified as “High” quality are those where the ultimate risk of financial loss from the obligor’s failureto discharge its obligation is assessed to be low. These include facilities to corporate entities with financial condition, risk indicators andcapacity to repay which are considered to be good to excellent. Credit exposures classified as “Standard” quality comprise all otherfacilities whose payment performance is fully compliant with contractual conditions and which are not “impaired”. The ultimate riskof possible financial loss on “Standard” quality is assessed to be higher than that for the exposures classified within the“High” quality range.

The credit quality of financial assets is managed by the Group using internal credit ratings. The table below shows the credit quality byclass of financial asset for balance sheet lines, based on the Group’s credit rating system.

D- Aging analysis of past due but not impaired loans

Balances with central banksDue from banks and financial institutionsLoans and advances to customers and related parties:Commercial loansRetail loansFinancial investments:Unquoted government debt securitiesUnquoted other debt securitiesQuoted debt securities

Total

Neither past due nor impaired

3,423,2105,816,005

3,777,6611,336,035

7,126,053676,766

-

22,155,730

--

88,960-

-313,75228,811

431,523

2008

High gradeLL million

Standardgrade

LL million

--

11,092-

---

11,092

Past duebut not

impairedLL million

Past due and impaired

--

27,655-

---

27,655

SubstandardLL million

-5,142

204,04310,006

---

219,191

DoubtfulLL million

3,423,2105,821,147

4,109,4111,346,041

7,126,053990,51828,811

22,845,191

TotalLL million

2007

Balances with central banksDue from banks and financial institutionsLoans and advances to customers and related parties:Commercial loansRetail loansFinancial investments:Unquoted government debt securitiesUnquoted other debt securitiesQuoted debt securities

Total

3,425,6567,472,944

3,143,671865,793

5,003,374872,185

-

20,783,623

--

105,078-

--

105,078

--

12,023-

---

12,023

--

36,810-

---

36,810

--

345,82912,280

---

358,109

3,425,6567,472,944

3,643,411878,073

5,003,374872,185

-

21,295,643

Loans and advances to customers 11,092

2008

-

More than90 days

LL million

11,092

Less than90 days

LL millionTotal

LL million

2007

12,023 - 12,023

Neither past due nor impaired

High gradeLL million

Standardgrade

LL million

Past duebut not

impairedLL million

Past due and impaired

SubstandardLL million

DoubtfulLL million

TotalLL million

More than90 days

LL million

Less than90 days

LL millionTotal

LL million

125

Impairment assessmentFor accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. Thismeans that losses can only be recognized when objective evidence of a specific loss event has been observed. This approach differs fromthe expected loss model used for regulatory capital purposes in accordance with Basel II.

The main considerations for the loan impairment assessment include whether any payments of principal or interest are overdue bymore than 90 days or whether there are any known difficulties in the cash flows of counterparties, credit rating downgrades, orinfringement of the original terms of the contract. The Group addresses impairment assessment in two areas: individually assessedallowances and collectively assessed allowances.

Individually assessed allowancesThe Group determines the allowances appropriate for each individually significant loan or advance on an individual basis. Itemsconsidered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improveperformance once a financial difficulty has arisen, projected receipts and the expected payout should bankruptcy ensue, theavailability of other financial support, the realisable value of collateral, and the timing of the expected cash flows. The impairmentlosses are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.

Collectively assessed allowancesAllowances are assessed collectively for losses on loans and advances and for held to maturity debt investments that are notindividually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individuallysignificant loans and advances that have been assessed individually and found not to be impaired. Allowances are evaluated separately ateach reporting date with each portfolio.

The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provisionshould be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in the individualloans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses on theportfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) or economicdata (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximate delaybetween the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairmentallowance is also taken into consideration. Local management is responsible for deciding the length of this period which can extendfor as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’soverall policy.

Financial guarantees and letters of credit are assessed and provisions are made in a similar manner as for loans.

Carrying amount of on-balance sheet financial assets whose terms have been renegotiated (except for BLOM BankEgypt SAE):

Loans and advances to customers 3,681

2008LL million

126


E- Credit quality using external risk ratings

44-2 Liquidity riskLiquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due under normal and stress circumstances.Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dryup immediately. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base,manages assets with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities.

High gradeRisk rating class 1Risk rating class 2Risk rating class 3Risk rating class 4

Standard gradeRisk rating class 5Risk rating class 6Risk rating class 7

Sub-standard gradeRisk rating class 8Risk rating class 9

ImpairedRisk rating class 10

Unclassified

AaaAa1 – A3

Baa1 – Baa2Baa3

Ba1Ba2 – Ba3

B1 – B2

B3Caa – C

D

AAAAA+ to A-

BBB+ to BBBBBB-

BB+BB to BB-

B+ to B

B-CCC+ to C

-

Moody’sequivalent

grades

S & Pequivalent

grades319,576

4,923,733333,57529,176

804,23963,957

40

11,880,372-

45,612

11,620,62230,020,902

Total riskLL million

2008

High gradeRisk rating class 1Risk rating class 2Risk rating class 3Risk rating class 4

Standard gradeRisk rating class 5Risk rating class 6Risk rating class 7

Sub-standard gradeRisk rating class 8Risk rating class 9

ImpairedRisk rating class 10

Unclassified

AaaAa1 – A3

Baa1 – Baa2Baa3

Ba1Ba2 – Ba3B1 – B2

B3Caa – C

D

AAAAA+ to A-

BBB+ to BBBBBB-

BB+BB to BB-B+ to B

B-CCC+ to C

-

247,5537,227,8241,013,378

74,902

-116,13211,922

9,449,028-

274,244

8,666,10227,081,085

2007

Moody’sequivalent

grades

S & Pequivalent

gradesTotal riskLL million

127

The management of liquidity risk is currently governed by the Group’s Assets and Liabilities Management policy. The mainobjectives converge around the following:

- Set targets and ranges for key balance sheet or income statement ratios to assure that the needed liquidity capacity of the Groupis maintained at all times, while providing sufficient flexibility to enable the Group to address short term fluctuations in liquiditypressures.- Provide general guidance on the sequence to be followed in drawing on the Group’s funding sources to meet a liquidity drain.- Review the current and prospective liquidity positions and monitor alternative funding sources.- Develop parameters for the pricing and maturity distributions of deposits, loans and investments.- Promulgate a contingency liquidity plan that identifies early indicators of stress conditions and describe actions to be taken in theevent of financial difficulties arising from systemic or other crises, while minimizing adverse long-term implications for the Group’sbusiness.

All assets and liability management issues are subject to review and monitoring by the Asset Liability Committee, which receivesregular reports from the group risk management as well as treasury.

In accordance with Lebanese banking rules and regulations, the Group is required to maintain 40% of its Tier 1 capital in LebaneseLira in liquid assets. It is also required to maintain a non-interest bearing balances at the Bank of Lebanon calculated on the basisof 25% of sight commitments and 15% of term commitments in Lebanese Lira. Regarding foreign currencies, the Group maintainsinterest-bearing placements at the Bank of Lebanon at the rate of 15% of total deposits in foreign currencies regardless of nature.Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to the banking rulesand regulations of the countries in which they are locates.

Furthermore, the Group has purchased the Sungard Focus Asset Liability Management system which, within its functionality, will beable to generate automated liquidity reports and sensitivity and stress scenarios analyses.

The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating toboth the market in general and specifically to the Group. One of these methods is to maintain limits on the ratio of liquid assets tocustomers’ deposits, set to reflect market conditions. Net liquid assets consist of cash, short-term deposits and liquid debtsecurities available for immediate sale less deposits for banks and financial institutions due to mature within the next month. Theratio during the year was as follows:

44-2-1 Analysis of financial liabilities by remaining contractual maturitiesThe table below summarizes the maturity profile of the Group’s financial liabilities at 31 December 2008 and 2007 based oncontractual undiscounted repayment obligations. As the special commission payments up to contractual maturity are included in thetable, totals do not match with the balance sheet. The contractual maturities of liabilities have been determined on the basis of theremaining period at the consolidated balance sheet date to the contractual maturity date and do not take into account the effectiveexpected maturities as shown on note 44-2-2 below (maturity analysis of assets and liabilities). Repayments which are subject tonotice are treated as if notice were being given immediately. However, the Group expects that many customers will not requestrepayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicatedby the Group’s deposit retention history.

At 31 DecemberAverage during the yearHighestLowest

2008%

22.9525.5628.2122.95

2007%

33.7933.7935.1532.29

128


The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments:

The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments.

Due to banks and financial institutionsCustomers’ depositsRelated parties’ DepositsEngagements by acceptances

Total undiscounted financial liabilities

1,117,47318,359,056

160,69352,510

19,689,732

14,7142,854,101

-102,779

2,971,594

2008

Up to 1month

LL million

1 to 3months

LL million

24,1021,363,312

-46,922

1,434,336

3 to 12months

LL million

90,360171,019

--

261,379

1 to 5years

LL million

-23,499

--

23,499

Over 5years

LL million

1,246,64922,770,987

160,693202,211

24,380,540

TotalLL million

Due to banks and financial institutionsCustomers’ depositsRelated parties’ DepositsEngagements by acceptances

Total undiscounted financial liabilities

1,487,14615,394,127

113,24672,930

17,067,449

2,4144,049,966

-119,773

4,172,153

2007

8,2951,095,153

-50,400

1,153,848

12,924155,694

-2,254

170,872

48,05212,635

--

60,687

1,558,83120,707,575

113,246245,357

22,625,009

Contingent liabilitiesCommitmentsForeign currencies to receiveCommitment on term financial instruments

1,270,9522,347,564

--

3,618,516

--

2,064,698-

2,064,698

2008

Up to 1month

LL million

1 to 3months

LL million

--

7,95377,32585,278

3 to 12months

LL million

-----

1 to 5years

LL million

-----

Over 5years

LL million

1,270,9522,347,5642,072,651

77,3255,768,492

TotalLL million

Contingent liabilitiesCommitmentsForeign currencies to receiveCommitment on term financial instruments

1,106,3881,358,444

--

2,464,832

--

2,740,679-

2,740,679

2007

--

201,87034,142236,012

-----

-----

1,106,3881,358,4442,942,549

34,1425,441,523

Up to 1month

LL million

1 to 3months

LL million

3 to 12months

LL million

1 to 5years

LLmillion

Over 5years

LL millionTotal

LL million

Up to 1month

LL million

1 to 3months

LL million

3 to 12months

LL million

1 to 5years

LLmillion

Over 5years

LL millionTotal

LL million

129

44-2-2 Maturity analysis of assets and liabilities

The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered orsettled. See note 44-2-1 above for the Group’s contractual undiscounted financial liabilities.

The maturity profile of the Group’s assets and liabilities as at 31 December 2008 is as follows:

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fairvalue through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classifiedas loans and receivablesFinancial investments - held tomaturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETS

LIABILITIESDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits

TOTAL LIABILITIES

NET LIQUIDITY GAP

Up to1 month

LL million

1,431,0624,758,565

30,9613,470

-1,752,797

6,92652,510

-21,076

79,3055,593

---

90,551-

8,232,816

1,071,22754,722

18,274,342140,27852,51035,274

344,587-

358

19,973,298

(11,740,482)

1 to 3months

LL million

69,597643,152

8,906-

-335,641

-102,779

-198,478

75,0093,397

---

1,861-

1,438,820

47,7802,057

2,840,423-

102,7795,519

41,744--

3,040,302

(1,601,482)

3 monthsto year

LL million

91,56580,462

-323

-1,462,125

-46,922

-1,039,767

333,17690,973

---

42,297-

3,187,610

32,514-

1,349,212-

46,92212,36640,897

--

1,481,911

1,705,699

SubtotalLL million

1,592,2245,482,179

39,8673,793

-3,550,563

6,926202,211

-1,259,321

487,49099,963

---

134,709-

12,859,246

1,151,52156,779

22,463,977140,278202,21153,159

427,228-

358

24,495,511

(11,636,265)

(2-5)years

LL million

1,807,34216,643

-1,782

40,950955,812

--

19,0492,489,500

2,311,03739,699

-24,803

519,883

-

7,726,505

45,225-

69,777---

146--

115,148

7,611,357

Over 5years

LL million

-29

-8,631

-235,513

--

805167,788

2,027,919372,238

581299,773

5,30210,92163,145

3,192,645

--

22,113---

15831,48134,176

87,928

3,104,717

SubtotalLL million

1,988,243335,203

-10,471

81,9551,679,884

--

27,5613,432,665

5,606,742534,343

581324,576

5,30730,89163,145

14,121,567

45,225-

172,118---

2,98331,48134,176

285,983

13,835,584

TotalLL million

3,580,4675,817,382

39,86714,264

81,9555,230,447

6,926202,21127,561

4,691,986

6,094,232634,306

581324,576

5,307165,60063,145

26,980,813

1,196,74656,779

22,636,095140,278202,21153,159

430,21131,48134,534

24,781,494

2,199,319

(1-2)years

LL million

180,901318,531

-58

41,005488,559

--

7,707775,377

1,267,786122,406

---

87-

3,202,417

--

80,228---

2,679--

82,907

3,119,510

Less than one year More than one year

130


The maturity profile of the Group’s assets and liabilities as at 31 December 2007 is as follows:

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated atfair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classifiedas loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETS


TOTAL LIABILITIES

NET LIQUIDITY GAP

Up to1 month

LL million

1,472,1496,224,244

19,030617

17,6001,689,298

5,94072,930

-243,297

527,305

---

86,255-

10,358,665

1,469,53024,083

15,296,430101,96372,930

-216,5343,954

-

17,185,424

(6,826,759)

1 to 3months

LL million

64,571826,035

-82

-307,679

-119,773

-143,875

53,267

---

15,391-

1,530,673

22,204-

4,112,411-

119,77331,97966,189

--

4,352,556

(2,821,883)

3 monthsto year

LL million

273,24889,451

-10,217

245985,520

-50,400

-809,997

75,931

---

23,767-

2,318,776

18,955-

1,053,796-

50,400-

58,313--

1,181,464

1,137,312

SubtotalLL million

1,809,9687,139,730

19,03010,916

17,8452,982,497

5,940243,103

-1,197,169

656,503

---

125,413-

14,208,114

1,510,68924,083

20,462,637101,963243,10331,979341,0363,954

-

22,719,444

(8,511,330)

(2-5)years

LL million

1,668,3968,465

-5,536

45,225742,703

---

2,311,936

775,173

---

36-

5,557,470

--

72,794--5---

72,799

5,484,671

Over 5years

LL million

-15,655

-87,084

-139,110

--

12,8951,204,678

847,093

602259,7474,4597,15360,586

2,639,062

45,225-

11,971---

38,74911,94026,160

134,045

2,505,017

SubtotalLL million

1,743,771333,214

-93,638

45,2251,190,870

-2,25412,895

4,686,190

2,433,738

602259,7474,4597,32260,586

10,874,511

45,225-

143,916-

2,2545

41,27211,94026,160

270,772

10,603,739

TotalLL million

3,553,7397,472,944

19,030104,554

63,0704,173,367

5,940245,35712,895

5,883,359

3,090,241

602259,7474,459

132,73560,586

25,082,625

1,555,91424,083

20,606,553101,963245,35731,984382,30815,89426,160

22,990,216

2,092,409

(1-2)years

LL million

75,375309,094

-1,018

-309,057

-2,254

-1,169,576

811,472

---

133-

2,677,979

--

59,151-

2,254-

2,523--

63,928

2,614,051

Less than one year More than one year

131

44-3 Market riskMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in marketprices. Market risks arise from open positions in interest rate and currency rate, all of which are exposed to general and specificmarket movements and changes in the level of volatility of market rates or prices such as interest rates and foreign exchangerates.

Risk management is responsible for generating internal reports quantifying the Group’s earnings at risk due to extreme movements ininterest rates, while daily monitoring the sensitivity of the Group’s trading portfolio of fixed income securities to changes inmarket prices and / or market parameters. Interest rate sensitivity gaps are reported to executive management and to theBanking Control Commission unconsolidated on a monthly basis and consolidated (Group level) on a semi- annual basis. TheBank’s Asset and Liability Management (ALM) policy assigns authority for its formulation, revision and administration to theAsset / Liability Management Committee (ALCO) of BLOM BANK SAL. Risk management will be responsible for monitoringcompliance with all limits set in the ALM policy ranging from core foreign currency liquidity to liquidity mismatch limits to interestsensitivity gap limits. The Bank is also in the process of implementing the newly acquired Asset and Liability Management system“Focus ALM” aimed at automating the management of the Bank’s assets and liabilities from a static and dynamic perspectivesincluding stress testing and extensive scenario analysis.

44-3-1 Interest rate riskInterest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values offinancial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assetsand liabilities and off-balance sheet items that mature or reprice in a given period. The Group manages this risk by matchingthe repricing of assets and liabilities through risk management strategies.

Interest rate sensitivityThe following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables heldconstant, of the Group’s income statement or statement of changes in equity.

The sensitivity of the income statement is the effect of the assumed changes in interest rates on the net interest income forone year, based on the floating rate non-trading financial assets and financial liabilities held at the year end, including theeffect of hedging instruments. The sensitivity of equity is calculated by revaluing the available for sale investments, based onthe assumption that there are parallel shifts in the yield curve.

The sensitivity of equity is analyzed by maturity of the assets or cash flow hedge swaps. All the non-trading book exposuresare monitored and analyzed in currency concentrations and relevant sensitivities are disclosed in local currency. The sensitivityanalysis does not take account of action by the Group that might be taken to mitigate the effect of such changes.

Currency

Lebanese LiraUnited States DollarEuroOthers

Increase inbasis points

0.50%0.50%0.25%0.25%

Sensitivity of netinterest income

LL million

(9,677)3,0511,378

947

0 to 6 monthsLL million

(7,814)(229)

-(154)

6 monthsto 1 year

LL million

(6,775)(207)

-(150)

(1-5)years

LL million

(19,688)(527)

-(1,117)

More than 5years

LL million

-(115)

-(296)

TotalLL million

(34,277)(1,078)

-(1,717)

Sensitivity of equity

2008

Currency


Decrease inbasis points

-0.50%-0.50%-0.25%-0.25%


LL million

9,677(3,051)(1,378)

(947)


8,722208

-176

6 monthsto 1 year

LL million

6,943184

-169

(1-5)years

LL million

20,059509

-1,248

More than 5years

LL million

-120

-301

TotalLL million

35,7241,021

-1,894


2008

132


Interest rate sensitivity gapThe Group’s interest rate sensitivity position based on contractual repricing arrangements or maturity as at 31 December 2008has been shown in the table below.

Currency


Increase in basispoints

0.50%0.50%0.25%0.25%


LL million

(4,756)2,655735

1,049


(4,559)(3,225)

(85)(101)

6 monthsto 1 yearLL million

(3,777)(3,873)

(90)(101)

(1-5)years

LL million

(10,681)(22,967)

(73)(582)

More than 5years

LL million

-(11,392)

-(214)

TotalLL million

(19,017)(41,457)

(248)(998)


2007

Currency


Decrease in basispoints

-0.50%-0.50%-0.25%-0.25%


LL million

4,756(2,655)(735)

(1,049)


4,6949,279169102

6 monthsto 1 yearLL million

3,8997,844140102

(1-5)years

LL million

11,40838,974

114591

More than 5years

LL million

-15,099

-218

TotalLL million

20,00171,196

4231,013


2007

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fairvalue through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classified as loansand receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETSLIABILITIESDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits

TOTAL LIABILITIES

Total interest rate sensitivity gap

Up to1 month

LL million

32,0224,288,765

-3,470

-1,598,365

6,926--

3,708

59,60283,040

-----

6,075,898

764,536-

17,741,602140,278

-----

18,646,416

(12,570,518)

1 to 3months

LL million

-637,647

--

-423,219

---

177,672

-53,730

-----

1,292,268

47,586-

2,828,639------

2,876,225

(1,583,957)

3 monthsto year

LL million

73,37578,888

-276

-1,395,898

---

1,025,758

313,07089,172

-----

2,978,437

31,893-

1,336,392------

1,368,285

(1,610,152)

(1-2)years

LL million

180,901317,745

-60

41,005476,192

---

775,376

1,349,996119,818

-----

3,261,093

--

80,542------

80,542

3,180,551

More than5 years

LL million

---

39

-166,027

---

140,750

2,011,188252,449

-----

2,570,453

--

21,308------

21,308

2,549,145

Non interestsensitive

LL million

1,674,623474,00539,8678,507

248265,206

-202,21127,56158,597

105,6384,602

581324,576

5,307165,60063,145

3,420,274

307,50656,779

559,871-

202,21153,159

430,21131,48134,534

1,675,752

1,744,522

SubtotalLL million

3,580,4675,817,382

39,86714,264

81,9555,230,447

6,926202,21127,561

4,691,986

6,094,232634,306

581324,576

5,307165,60063,145

26,980,813

1,196,74656,779

22,636,095140,278202,21153,159

430,21131,48134,534

24,781,494

(2-5)years

LL million

1,617,54620,332

-1,912

40,702905,540

---

2,510,125

2,254,73831,495

-----

7,382,390

45,225-

67,741------

112,966

7,269,424133

The Group’s interest rate sensitivity position based on contractual repricing arrangements or maturity as at 31 December 2007was as follows:

44-3-2 Currency riskCurrency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rate. The Bankty after adjustment according to specific requirements set by the Bank of Lebanon. The Bank is also allowed to hold a net tradingposition not to exceed 1 percent of its net shareholders’ equity, as long as the global foreign position does not exceed, at thesame time, 40 percent of its net shareholders’ equity, and that the related banks are abiding in a timely and consistent mannerwith the required solvency rate (Bank of Lebanon circular number 32).

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fairvalue through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classifiedas loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETS


TOTAL LIABILITIES

Total interest rate sensitivity gap

Up to1 month

LL million

475,4835,899,948

-1,770

-1,386,322

5,940--

225,060

508,623

-----

8,503,146

1,298,955-

14,650,150101,963

-----

16,051,068

(7,547,922)

1 to 3months

LL million

56,895821,991

--

-305,829

---

99,894

38,406

-----

1,323,015

22,184-

3,932,547------

3,954,731

(2,631,716)

3 monthsto year

LL million

270,161100,096

-9,647

-933,274

---

759,088

52,549

-----

2,124,815

18,475-

986,626------

1,005,101

1,119,714

(1-2)years

LL million

75,375234,361

-494

-306,435

---

1,262,630

810,724

-----

2,690,019

--

47,393------

47,393

2,642,626

More than 5years

LL million

-43,746

-80,572

-84,740

---

1,160,568

831,038

-----

2,200,664

45,225-

11,369------

56,594

2,144,070

Non interestsensitiveLLmillion

1,094,456330,61419,0306,535

17,946188,945

-245,35712,895106,488

65,647

602259,7474,459

132,73560,586

2,546,042

171,07524,083905,674

-245,35731,984382,30815,89426,160

1,802,535

743,507

SubtotalLL million

3,553,7397,472,944

19,030104,554

63,0704,173,367

5,940245,35712,895

5,883,359

3,090,241

602259,7474,459

132,73560,586

25,082,625

1,555,91424,083

20,606,553101,963245,35731,984382,30815,89426,160

22,990,216

(2-5)years

LL million

1,581,36942,188

-5,536

45,124967,822

---

2,269,631

783,254

-----

5,694,924

--

72,794------

72,794

5,622,130

134


The table below indicates the consolidated balance sheet detailed by currency.

The following consolidated balance sheet as of 31 December 2008, is detailed in Lebanese Lira (LL) and foreign currencies,translated into LL.

ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fairvalue through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classifiedas loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETS


Total liabilities

NET EXPOSURE

LL million

646,21966,2348,907

-

-433,889

87-

(2,667)4,090,268

1,117,938--

167,050574

34,450-

6,562,949

12,81927,399

5,557,35936,457

-33,30285,88023,23224,199

5,800,647

762,302

US Dollarsin

LL million

2,103,5572,996,367

-10,683

81,9552,872,684

4,279139,13810,372

127,305

4,811,009428,586

-9,637

91633,596

-

13,630,084

264,065-

12,278,64658,790

139,1381,591

204,900358

1,833

12,949,321

680,763

Euro inLL million

85,3231,610,988

1,353111

-242,594

1,89038,775

-7,814

150,314-

581464146

4,029-

2,144,382

706,893-

1,464,32518,08238,7751,322

21,94547

208

2,251,597

(107,215)

Otherforeign

currencyLL million

745,3681,143,793

29,6073,470

-1,681,280

67024,29819,856

466,599

14,971205,720

-147,425

3,67193,52563,145

4,643,398

212,96929,380

3,335,76526,94924,29816,944

117,4867,8448,294

3,779,929

863,469

TotalLL million

3,580,4675,817,382

39,86714,264

81,9555,230,447

6,926202,21127,561

4,691,986

6,094,232634,306

581324,576

5,307165,60063,145

26,980,813

1,196,74656,779

22,636,095140,278202,21153,159

430,21131,48134,534

24,781,494

2,199,319

Totalforeign

currencyLL million

2,934,2485,751,148

30,96014,264

81,9554,796,558

6,839202,21130,228

601,718

4,976,294634,306

581157,526

4,733131,15063,145

20,417,864

1,183,92729,380

17,078,736103,821202,21119,857

344,3318,249

10,335

18,980,847

1,437,017

Foreign currencies in Lebanese Lira

135


ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair valuethrough profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classifiedas loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill

TOTAL ASSETS


Total liabilities

NET EXPOSURE

LL million

494,48624,4136,465

8

81329,261

108-

(3,812)2,397,299

657,066

-147,256

82426,982

-

4,080,437

32,36711,640

3,275,71223,091

-19,787174,2008,97316,268

3,562,038

518,399

US Dollarsin

LL million

2,007,9435,090,838

-101,585

62,9892,140,621

5,832175,9505,371

3,084,772

1,831,344

-2,992

531,210

-

14,541,452

180,993-

13,009,05864,444175,950

5107,974

51,845

13,540,274

1,001,178

Euro inLL million

71,2191,896,574

-1,191

-304,940

-35,335

-127,853

8,287

6022,681

428,644

-

2,457,368

1,202,947-

1,281,59714,42835,3351,46917,682

-283

2,553,741

(96,373)

Otherforeign cur-

rencyLL million

980,091461,11912,5651,770

-1,398,545

-34,07211,336273,435

593,544

-106,8183,58865,89960,586

4,003,368

139,60712,443

3,040,186-

34,07210,72382,4526,9167,764

3,334,163

669,205

TotalLL million

3,553,7397,472,944

19,030104,554

63,0704,173,367

5,940245,35712,895

5,883,359

3,090,241

602259,7474,459

132,73560,586

25,082,625

1,555,91424,083

20,606,553101,963245,35731,984382,30815,89426,160

22,990,216

2,092,409

Totalforeign

currencyLL million

3,059,2537,448,531

12,565104,546

62,9893,844,106

5,832245,35716,707

3,486,060

2,433,175

602112,4913,635

105,75360,586

21,002,188

1,523,54712,443

17,330,84178,872245,35712,197208,1086,9219,892

19,428,178

1,574,010

Foreign currencies in Lebanese Lira

136


The table below indicates the extent to which the Group was exposed to currency risk at 31 December 2008 on its foreigncurrency positions. The analysis calculates the effects of a reasonably possible movement of the currency rate against theLebanese Lira, with all other variables held constant, including the effect of hedging instruments, on the consolidated incomestatement (due to the fair value of currency sensitive non-trading monetary assets and liabilities) and equity (due to the changein fair value of currency swaps and forward foreign exchange contracts used as cash flow hedges). The effect on equity is notsignificant. A negative amount in the table reflects a potential net reduction in consolidated income statement or equity, whilea positive amount reflects a net potential increase.

45. OPERATIONAL RISK

Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform,operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannotexpect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, theGroup is able to manage the risks. Controls include effective segregation of duties, access, authorization and reconciliationprocedures, staff education and assessment processes, including the use of internal audit.

46. PREPAYMENT RISK

Prepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay orrequest repayment earlier than expected, such as fixed rate housing loans when interest rate falls. The fixed rate assets ofthe Group are not significant compared to the total assets. Moreover, other market conditions causing prepayment is not significant inthe markets in which the Group operates. Therefore, the Group considers the effect of prepayment on net interest income isnot material after taking into account the effect of any prepayment penalties.

47. CAPITAL MANAGEMENT

The Bank maintains an actively managed capital base to cover risks, inherent in the business. The adequacy of the Bank’s capital ismonitored using, among other measures, the rules and ratios established by the Bank of Lebanon and the Banking Control commission.

The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally imposed capitalrequirements and that the Bank maintains strong credit ratings and healthy capital ratios in order to support its business and tomaximize shareholders’ value.

The Bank should maintain a required capital adequacy ratio (not less than 12%) based on the total tier one capital over the total riskweighted assets and off-balance sheet items. The Bank complies in full with all its externally imposed capital requirements (2007:the same).

The Bank manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the riskcharacteristics of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividendpayment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives,policies and processes from the previous years, however, it is under constant scrutiny of the Board.

Currency

USDEUR

Change in currencyrate % 2008

± 1%± 3%

Effect on profitbefore tax 2008

LL million

± 6,068± 717

Effect on profitbefore tax 2007

LL million

± 10,328± 500

Change in currencyrate % 2007

± 1%± 1%

137


Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, treasury shares, capital reserves,retained earnings including current year profit, foreign currency translation reserve and minority interests less proposed dividends,intangible assets and goodwill. The other component of regulatory capital Tier 2 capital, which includes reserves for revaluationvariance – real estate and cumulative changes in fair values of available-for sale investments.

48. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

On 6 February 2009, the board of directors of the Bank approved the participation of the Group in the establishment of a limitedliability company in Jordan, whose objective is providing credit card services in Jordan, through the ownership of up to 10% inthe share capital of the company to be established i.e. up to the amount of JOD 500,000 (equivalent to LL 1,063 million) providedthat the Bank obtains the approval of the Central Bank of Lebanon.

49. COMPARATIVE INFORMATION

The balance sheet and income statement captions were reclassified in accordance with the requirements of the Central Bankof Lebanon’s intermediary circular No 158 issued on 28 March 2008.

Regulatory capitalTier 1 capitalTier 2 capital

Total capital

Risk weighted assets

Tier 1 capital ratioTotal capital ratio

2008LL million

1,970,05318,632

1,988,685

7,140,285

27.59%27.85%

2007LL million

1,839,50128,722

1,868,223

6,430,811

28.60%29.05%

138


The effect of reclassifications on comparative figures is detailed as follows:

Consolidated balance sheet

Consolidated income statement

Account name

Cash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed income

Shares, securities and financial assets with variable income

Banks and financial institutions – DebitLoans and advances to customersInvestments and loans to related parties

Tangible fixed assets(including revaluation variance approved by BDL)Other assetsRegularization accounts and other debit accounts(inclusive of grossing up of derivatives)

Grossing up of derivatives

Customers’ depositsOther liabilitiesRegularization accounts and other credit accountsGrossing up of derivativesProvisions for risks and chargesReserve for general banking risksReserves and premiumsReserves and premiumsReserves and premiumsCumulative changes in fair valuesRetained earnings

Account name

Financial assets classified as loans and receivablesFinancial assets held for tradingFinancial investments – available for saleFinancial assets held for tradingFinancial assets at fair value through P&LFinancial investments – available for saleFinancial assets classified as loans and receivablesFinancial assets held for tradingFinancial investments – available for saleFinancial assets classified as loans and receivablesLoans and advances to related partiesOther assetsFinancial investments – available for saleBanks and financial institutions – DebitFinancial investments – available for saleInvestment propertiesNon-current assets held for saleFinancial assets at fair value through P&LOther assetsDerivative financial instruments – DebitOther assetsDerivative financial instruments - DebitRelated parties’ depositsCurrent tax liabilitiesDerivative financial instruments – CreditDerivative financial instruments – CreditRetirement benefits obligationOther liabilitiesCapital reservesCapital reservesShare premium on preferred sharesShare premium on common sharesForeign currency translation reserveForeign currency translation reserve

From To

BalanceLL million

2,776,2925,080,3231,165,140

11,725

87,7085,940

27,208

12,89517,600

119,487

15,612

101,96331,9848,471

15,61267,03069,503

462,237351,903374,059

502851

BalanceLL million

2,776,29276,949

5,003,37421,24445,470

872,185226,241

6,5125,213

87,7085,940

50752

24,1201,684

60212,89517,600

110,5528,9355,517

10,095101,96331,9848,471

15,61226,16040,87069,503

462,237351,903374,059

502851

Account name

Interest and similar incomeNet provisions less recoveries on loans and advancesProfit from financial operationsLoss on financial operationsDepreciation and amortization of tangible and intangible fixed assetsProvision for contingent liabilities

Account name

Net trading incomeCredit loss (expense) incomeNet trading incomeNet trading incomeAmortization of intangible assetsOther operating expenses

From To

BalanceLL million

6,04111,43527,064(7,888)

63313,350

BalanceLL million

6,04111,43527,064(7,888)

63313,350

139

CORRESPONDENT BANKSBLOM BANK GROUP MANAGEMENTBLOM BANK GROUP DIRECTORY

COUNTRY

Australia, Sydney

Bahrain, Manam

Canada, Toronto

Canada, Toronto

Denmark, Copenhagen

France, Paris

Germany, Frankfurt am Main



Italy, Milan

Italy, Milan

Italy, Rome

Japan, Tokyo

Japan, Tokyo

KSA, Jeddah

KSA, Riyadh

Kuwait, Kuwait

Norway, Oslo

Qatar, Doha

Spain, Madrid

Sweden, Stockholm

Switzerland, Geneva

Switzerland, Zurich

Switzerland, Zurich

Turkey, Istanbul

U.A.E, Dubai

U.K, London

U.K, London

U.S.A, New York

U.S.A, New York

Commonwealth Bank of Australia

National Bank of Bahrain

Royal Bank of Canada

Canadian Imperial Bank of Commerce (The)

Danske Bank A/S

BLOM BANK France SA

Commerzbank AG

Deutsche Bank AG

Dresdner Bank AG

Banca Intesa San Paolo SPA

Unicredit SPA

Banca Nazionale Del Lavoro SPA

Bank of Tokyo-Mitsubishi Ltd

JP Morgan Chase Bank N.A.

The National Commercial Bank

Riyad Bank

Gulf Bank KSC

Dnb NOR Bank ASA

Commercial Bank of Qatar (The) (QSC)

Banco Bilbao Vizcaya Argentaria S.A. (BBVA)

Skandinaviska Enskilda Banken AB

BLOM BANK Switzerland SA

Credit Suisse

UBS AG

Yapi Ve Kredi Bankasi A.S.

BLOM BANK France SA

BLOM BANK France SA

NATIONAL WESTMINSTER BANK PLC

Bank of New York Mellon (The)

JP Morgan Chase Bank N.A.

CORRESPONDENT BANK

AUD

BHD

CAD

CAD

DKK

EUR

EUR

EUR

EUR

EUR

EUR

EUR

JPY

JPY

SAR

SAR

KWD

NOK

QAR

EUR

EUR

CHF

EUR

EUR

TRY

AED

GBP

GBP

USD

USD

BLOM BANK Worldwide Correspondent Banks

144

BLOM BANK Group Managemnet and Directory

145

146

151

152

154

156

156

157

157

158

159

159

160

161

161

General Manager - JordanConsultant for General Management in Lebanon

Treasury and InvestmentFinancial Control

CreditClient Relationship

Sales & Retail MarketingIT Operations

Central OperationsInternal Audit

Risk ManagementCompliance

Legal and CollectionPersonnel

Branch Manager

Chief Representative

Branch Manager

Refer to page 21 until 31 of this report

Dr. Adnan AL AARAJMr. Adnan SALLAKH

Dr. Mohamed AMROMr. Mohanad BALBISSI (AL)Mr. Omar ABDULLAHMr. Moder KURDIMr. Ihab KHALILMs. Nahla ALLOUSHMr. Mohammad ALLANMr. Said OBEIDALLAHMr. Nabil OBALIMr. Maan ZOABIMr. Hani DIRANIMs. Mona KHOUZAI

Ziad EL MURR

Mr. Ramzi AKKARI

Mr. Joseph HAYEK

JORDAN - Regional Management

HEADS OF DEPARTMENTS

BOARD OF DIRECTORS & GENERAL MANAGEMENT

CYPRUS MANAGEMENT

ABU DHABI Representative Office

SYRIA Free Zone

HeadquartersVerdun – Rachid Karami St, BLOM BANK bldg - P.O. Box: 11-1912 Riad El-Solh, Beirut 1107 2807, LebanonPhone: (961-1) 743300 – 738938. Fax: (961-1) 738946E-mail: [email protected] - www.blom.com.lb

MOHAFAZAT BEIRUT BRANCHES

Main BranchVerdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 738938 – 743300. Fax: (961-1) 738946. Senior Manager / Branches: Mr. Walid ARISS

AshrafiehSassine SquarePhone: (961-1) 200147/8 – 320949. Fax: (961-1) 320949. Branch Manager: Mr. Ara BOGHOSSIAN

Ain El-MreissehIbn Sina St – Mashkhas bldgPhone: (961-1) 372780 – 370830 – 373102. Fax: (961-1) 370237. Branch Manager: Mr. Mahmoud MARRACH

BadaroBadaro Main St - Damascus Road intersection – Buick – Khoury bldgPhone: (961-1) 615818/19/20/21 – 615826 – 615952. Fax: (961-1) 615825. Branch Manager: Mr. Raoul CHERFAN

BlissBliss St, opposite Hobeish Police Station – Ras Beirut – Al Rayess BldgPhone: (961-1) 363732/34/42. Fax: (961-1) 363732. Branch Manager: Mr. Ziad SROUGI

LEBANON

146

LEBANON

BRANCH NETWORK

Burj Abi HaidarBurj Abi Haidar St, Salam TowerPhone: (961-1) 310687 – 310677/8/9 – 817560. Fax: (961-1) 310679. Branch Manager: Mr. Samer DIYA

HamraAbdel Aziz St, Daher bldgPhone: (961-1) 346290/1/2/3 – 341955 –343503. Fax: (961- 1) 744407. Senior Manager / Branches: Mr. Sami FARHAT

Hamra - RetailAbdel Aziz St, Daher bldgPhone: (961-1) 747752 /59 /60. Fax: (961-1) 747749. Branch Manager: Mr. Abbas TANNIR

IstiklalIstiklal St, Karakol El-Druze Area, next to Kettaneh Palace, Salhab bldgPhone: (961-1) 738050/1 – 749624. Fax: (961-1) 748337. Branch Manager: Mr. Mohamad Masri SIDANI

JnahBir Hassan Area, United Nations St, next to Beirut Hospital, Jaber bldgPhone: (961-1) 855903/4/5. Fax: (961-1) 855906. Branch Manager: Mr. Abbas KALOT

MaaradEmir Bechir St, Hibat el Maarad bldg - DowntownPhone: (961-1) 983230/1/2/3/4. Fax: (961-1) 983230. Branch Manager: Mr. Amer KAMAL

Mar EliasCorniche El Mazraa – opposite Helou’s barracks, Zantout bldgPhone: (961-1) 818616/7 – 818009 – 818038 – 864112. Fax: (961-1) 818618 . Branch Manager: Mr. Mohamad Abd el wahab Al TABSH

MazraaCorniche El Mazraa, Barbir SquarePhone: (961-1) 648020/1/2 – 664337. Fax: (961-1) 648020. Branch Manager: Mr. Marwan MOHTAR

NoueiriAl Noueiri Station – Hamada bldgPhone: (961-1) 630309– 658611 – 658610 – 664487. Fax: (961-1) 630319. Branch Manager: Mr. Yehya ORFALI

RaouchéRaouche Blvd – Al Rayess & Bou Dagher BldgPhone: (961-1) 812603/4/5/6. Fax: (961-1) 801634. Branch Manager: Mr. Mohamad Khodor MARRACH

RmeilAshrafieh, Orthodox Hospital St, Medical CenterPhone: (961-1) 565252 – 565454 – 567140 – 567141. Fax: (961-1) 565252 Branch Manager: Mrs. Salma ACHKOUTY

SaifiAl Arz Street – Akar bldgPhone: (961-1) 449899 – 581683 – 586340 – 566794 – 587196. Fax: (961-1) 449899. Branch Manager: Dr. Ousama CHAHINE

SanayehChamber of Commerce & Industry bldgPhone: (961-1) 346042/3 – 748339 – 749623. Fax: (961-1) 346043. Branch Manager: Mrs. Nahida WEHBE

Sodeco – Retail BranchSodeco Square, Damascus RoadPhone: (961-1) 611360/1. Fax: (961-1) 611362. Branch Manager: Mrs. Souraya KANDIL

TabarisGebran Tueini Square - Sursock TowerPhone: (961-1) 203142/3/4. Fax: (961-1) 203145. Senior Manager/Branches: Ms. Claire ABOU MRAD

Tariq Al-JedidehAl Malaab Al Baladi Square – Salim bldgPhone: (961-1) 818620/1 – 309959 – 816985. Fax: (961-1) 818620. Branch Manager: Mr. Khodor MNEIMNEH

VerdunVerdun St, opposite F.S.I. Barracks, Abdo bldgPhone: (961-1) 788412/3 – 800081 – 788411. Fax: (961-1) 800032. Branch Manager: Mr. Hani BAWAB

Verdun - Retail BranchVerdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 750160/1/2/3. Branch Manager: Mr. Marwan PHARAON

147

Ain El-RemanehChiyah District, Lamaa St, Next to Kasarjian BarracksPhone: (961-1) 386750/1/2/3. Fax: (961-1) 386750. Branch Manager: Mr. Johnny SALIBI

AleyAl Balakine, Property of Faysal Sultane WahabPhone: (961-5) 556612/13. Fax: (961-5) 556614. Branch Manager: Mrs. May BOU ALWAN

AnteliasNext to the Armenian Patriarchate – Kheirallah bldgPhone: (961-4) 411472 – 520210 – 410123 – 411418 – 410848. Fax: (961-4) 523666. Branch Manager: Mr. Laurent CHEBLI

AramounChoueifat – Al Koba, Aramoun Road, Zaynab CenterPhone: (961-5) 808591/2/3/4. Fax: (961-5) 808594. Branch Manager: Mrs. Nawal ABOU DIAB

Burj Al-BarajnehAin El Sekka St – Rahal bldgPhone: (961-1) 450381/2/3/4 – 450446/7. Fax: (961-1) 450384. Branch Manager: Dr. Hassan JABAK

Burj HammoudHarboyan CenterPhone: (961-1) 262067 – 266337/8 – 243604/5 – 242792 – 243139. Fax: (961-1) 266339. Branch Manager: Mr. Jean HOMSI

ChiyahChiyah Blvd, Round About Mar Mekhayel, Orient Center Bldg.Phone: (961-1) 270172/3/4 – 275783. Fax: (961-1) 270174. Senior Manager / Branches: Mr. Abbas TLAIS

ChoueifatAL Omaraa, Main Road, Al Tiro’s JunctionPhone: (961-5) 433203/6 . Fax: (961-5) 433208. Branch Manager: Mr. Kamal SLIM

DekwanehMain street, Mohana Center,Phone: (961-1) 686072- 686035/6 – 686051. Fax: (961-1) 686095. Branch Manager: Mr. Farid ZOGHBI

DoraBawchrieh, Tripoli Road, Banking Center bldgPhone: (961-1) 256527/28/32/37/38/39/41. Fax: (961-1) 256522. Senior Manager/ Branches: Mrs. Marlène DOUMIT

ElissarBeit El Kiko, Antelias - Bickfaya RoadPhone: (961-4) 916111/2/3/4. Fax: (961-4) 916115. Branch Manager: Mr. Joseph Francois GHOUSOUB

Furn el Chebbak – Retail BranchFurn el Chebbak, Abraj Center, Main Str., BeirutPhone: (961-1) 293810 /13. Fax: (961-1) 293816. Branch Manager: Mrs. Alice AHMARANI

GhobeyriCorniche El Ghobeyri - Chiah Blvd – Tohme & Jaber & Kalot bldgPhone: (961-1) 825509 – 825870 – 821895 – 856219. Fax: (961-1) 820153. Branch Manager: Mrs. Majida MIKATI

HadathHadath, Sfeir district,Phone: (961-5) 461506 - 461438 - 461365 - 461243. Fax: (961-5) 461815. Branch Manager: Mr. Jules HAIDAR

Haret HreikAl Abiad Area, Sayyed Hadi Nasrallah Highway, Abou Taam & Hoteit bldgPhone: (961-1) 543662 – 543658 – 543659. Fax: (961-1) 543661. Branch Manager: Mr. Ali CHREIF

HazmiehDamascus Road, Joseph Chahine CenterPhone: (961-5) 955240/1/2/3/4. Fax: (961-5) 955240. Branch Manager: Mr. Ziad KAREH

JbeilVoie 13 – Near Mar Charbel JunctionPhone: (961-9) 943702 /3 /4. Fax: (961-9) 943701. Branch Manager: Mr. Zakhia SARKIS

MOHAFAZAT MOUNT LEBANON BRANCHES

148

JouniehFacing “Palais de Justice” – Next to Fouad Chehab PlaygroundPhone: (961-9) 638011/12/13/14. Fax: (961-9) 638011. Branch Manager: Mr. Rachad YAGHI

KaslikKaslik Main St, Debs CenterPhone: (961-9) 640273 – 640095 – 636998/9 – 640297. Fax: (961-9) 831113 Branch Manager: Mr. Charles AOUDE

MansouriehMansourieh el Maten, Dar El Ain Plaza – New HighwayPhone: (961-4) 532856/7/8. Fax: (961-4) 532854 Branch Manager: Mr. Walid LABBAN

Sin El-FilFar Vision Center Fouad Chehab AvenuePhone: (961-1) 485270/1/2. Fax: (961-1) 485273. Branch Manager: Mr. Fadi EL MIR

Sin El-Fil – RetailHorsh Tabet, Charles De Gaulle St, Tayar CenterPhone: (961-1) 489733 – 489739 – 489742 – 489750 – 489757. Branch Manager: Mrs. Zeina KHATTAB

ZalkaZalka St, BLOM BANK bldg, Interior RoadPhone: (961-4) 713074/5. Fax: (961-4) 713077. Branch Manager: Mrs. Denise JALKH

Zouk MosbehZouk Mosbeh,Main St, Le Paradis Centre, Jeita’s cave junctionPhone: (961-9) 226991/2/3/4/5. Fax: (961-9) 226990. Branch Manager: Mrs. Marlène ABOU NAJM

Tripoli Abi SamraAl-Dinnawi Square, Khaled Darwiche bldgPhone: (961-6) 423565/6/7/8/9. Fax: (961-6) 423565. Branch Manager: Mrs. Salwa MERHI

Tripoli – AzmiAzmi St, Fattal bldgPhone: (961-6) 433064 – 443550/1/2. Fax: (961-6) 443550. Branch Manager: Mr. Fouad AL HAJJ

Tripoli – Al TellAbdel Hamid Karameh Square, Ghandour bldgPhone: (961-6) 430153 – 628200/2 – 431624. Fax: (961-6) 628200. Branch Manager: Mr. Chaina ASSI

Tripoli - ZahriehAl Tall St, Alam AL Din & Bissar bldgPhone: (961-6) 430150/2 – 423415 – 423414. Fax: (961-6) 430151. Branch Manager: Mr. Wassim BAGHDADI

ChtauraMain St, Najim El Din bldgPhone: (961-8) 540078 – 542504 – 544329/30 – 544914. Fax: (961-8) 542504. Branch Manager: Mr. Elie FREIJI

ZahlehManara Center, Fakhoury & Kfoury bldgPhone: (961-8) 807680/1/2/3/4 – 820661. Fax: (961-8) 807680. Branch Manager: Mr. Marwan CHAKRA (AL)

NabatiyehNabatieh Tahta, Hassan Kamel Al Sabbah St, Office 2000 bldgPhone: (961-7) 767854/5/6. Fax: (961-7) 767857. Branch Manager: Mr. Hani HAMMOUD

MOHAFAZAT NORTH LEBANON BRANCHES

MOHAFAZAT BEKAA BRANCHES

MOHAFAZAT NABATIYEH BRANCH

149

SaidaRiad Solh St, Al Zaatari & Fakhoury & Bizri bldgPhone: (961-7) 724866 – 723266 – 722801 – 739276. Fax: (961-7) 722801. Branch Manager: Mr. Moufid NAJJAR

TyrMain St, Chehade bldgPhone: (961-7) 740900 – 741649 – 742903. Fax: (961-7) 348487. Branch Manager: Mrs. Maysaa RAHAL

STAND BY BRANCH MANAGERSMr. Ziad CHANOUHAMr. Wassim FAHSMs. Nelly HARFOUCHEMr. Antoine MATARMr. Ahmad Jamal SINNOMr. Ahmad Koussai SINNOMr. Adel THAMINE

Branches Under EstablishmentAbbasya – TyrMina El Hosn branch – Beirut

BLOM BANKRegional Management - Amman18 Al Sharif Abdel Hamid Sharaf StP.O. Box 930321 Shmeisani, Amman 111 93, JordanPhone: (962-6) 5001200. Fax: (962-6) 5677177E-mail: [email protected] - www.blom.com.lb

IrbidAl-Qubba Circle-Irbid King Abdallah the second St.Phone: (962-2) 7240006. Fax: (962-2) 7240057. Branch Manager: Mr. Ahmad DABAAN

Jubeiha20 Yajouz St.Phone: (962-6) 5336653. Fax: (962-6) 5336657. Branch Manager: Mr. Omar ABU ASSAF

Mecca Street152 Mecca St. Al Husseine ComplexPhone: (962-6) 5503131. Fax: (962-6) 5521347. Branch Manager: Mr. Mohannad YOUNES

Shmeisani18 Al Sharif Abdel Hamid Sharaf StPhone: (962-6) 5001200. Fax: (962-6) 5605652. Branch Manager: Mr. Abdel jawad AL OWAISI

Sweifieh67 Abed Al Rahim Al Hajj Mohammad StPhone: (962-6) 5865527. Fax: (962-6) 5865346. Branch Manager: Baker HADDADIN

Wihdat453 Al Amir Hassan St, Oum HeiranPhone: (962-6) 4750050. Fax: (962-6) 4750055. Branch Manager: Mr. Mahmoud SADAKA

Victory House, 205Z Archbishop Makarios Ave, 3030 LimassolP.O.Box: 53243, 3301 Limassol, CyprusPhone: (357-25) 376433/4/5. Fax: (375-25) 376292E-mail: [email protected]

Al Bateen Towers – Tower C 6 – Suite C 907 - 9th floor, Al Bateen – Bainuna Street – Abu Dhabi – U.A.E.P.O. Box: 63040 - Al Bateen – Abu Dhabi – U.A.E.Phone: (971-2) 6676100. Fax: (971-2) 6676200E-mail: [email protected]

MOHAFAZAT SOUTH LEBANON BRANCHES

JORDAN

CYPRUS

ABU DHABI Representative Office

150

SYRIA Free Zone

Damascus Free Zone, Al-BaramkehPhone: (963-11) 2133170/1. Fax: (963-11)2133173E-mail: [email protected]

Mr. Samer AZHARIDr. Naaman AZHARIHE Sheikh Ghassan Ibrahim SHAKER (Grand Officier de la Légion d’Honneur)Mr. Christian DE LONGEVIALLEMr. Jean-Paul DESSERTINEMr. Marwan JAROUDI

Mr. Samer AZHARIMr. Michel ADWANMr. Gilbert MOINEMr. Iskandar ARMANMr. Amr EL TURKMr. Bassem ARISSMr. Jean-Pierre BAAKLINI

Chairman & General ManagerHonorary President and Permanent Representative of BLOM BANK S.A.L

MemberMemberMemberMember

Chairman & General ManagerDeputy General Manager

Senior ManagerManager Head Office

Senior Manager – LondonRegional Manager – UAE

General Manager – Romania

Board of Directors

General Management

HeadquartersFrance38-40 avenue des Champs-Elysées, 75008 Paris - FrancePhone: (33-1) 44950606. Fax: (33-1) 44950600E-mail : [email protected] - www.blomfrance.com

DubaiDeira, Al Maktoum St, Sheikh Ahmad Ben Rached al Maktoum bldgPhone: (971-4) 2284655 – 2278196. Fax: (971-4) 2236260. Branch Manager: Mr. Samir HOBEIKA

SharjahKhaled Lagoon, Corniche al Buhairah, Sheikh Nasser Bin Hamad al Thani bldgPhone: (971-6) 5736700 – 5736100. Fax: (971-6) 5736080. Branch Manager: Mr. Mokhtar KASSEM

London193-195 Brompton Road, London SW3 1LZ – EnglandPhone: (44-20) 75907777. Fax: (44-20) 78237356. Senior Manager: Mr. Amr TURK

FRANCE

UNITED ARAB EMIRATES

UNITED KINGDOM

151

BRANCH NETWORK

ROMANIA

Blom Bank France S.A. Paris, Romania Branch - HeadquarterUnirii Bldv. No. 66, Bloc K3, mezanin, Sector 3, Bucharest, P.O. Box 1-850Phone: (40-213) 027201 (06) - Fax: (40-213) 185214 (03)

Headquarter Bucharest – Unirii Customer DeskUnirii Bldv. No. 66, Bloc K3, mezanin, Sector 3, BucharestPhone: (40-213) 027201 (06). Fax: (40-213) 185214 (03) - Head of Operations: Florentina DELA

VictoriaBuzesti Street, No. 72, Sector 1, BucharestPhone: (40-213) 154205 (06/07). Fax: (40-213) 154208 (09). Agency Manager: Marius VOICULE

Hotel BucurestiPrelungirea George Enescu Street, No. 4, Sector 1, Bucharest, P. O. Box 1-850Phone: (40-213) 122751 - Fax: (40-213) 122753 - Agency Manager: Monica Mihaela CALIN

BrasovMihail Kogalniceanu Street, No. 23, Bloc C7, BrasovPhone: (40-268) 477383 - Fax:(40-268) 477 690 - Agency Manager: Marius Constantin VATAVU

ConstantaMamaia Blvd., No. 25 Bis, C.P. 2-89, ConstantaPhone: (40-341) 407485 (89) - Fax: (40-341) 510 952 - Agency Manager: Mihai BUTCARU

VoluntariVoluntari Blvd., No. 93-95, Judetul IlfovPhone: (40-212) 703298 (83). Fax: (40-212) 703771 - Agency Manager: Hesham SALEH

Dr. Rateb SHALLAHMr. Amr AZHARIMr. Georges SAYEGHDr. Ihsan BAALBAKIMr. Ibrahim SHEIKH DIBBLOM BANKMr. Mehran KHWANDAMr. Habib BETINJANEHMr. Samer AZHARIMr. Saad AZHARIMr. Mohamed Adib JOUD

Mr. Mazen ALIEHMr. Samir ASMARMr. Bachir YAKZANMs. Rima Jawad ZEINMr. Salem MAHMOUDMr. Georges EL HADDADMs. Inaya SOUBRAMr. Samer DAYAMr. Mohamed Y. KHALED

BOARD OF DIRECTORS

ChairmanVice Chairman

Board Secretary - General ManagerMemberMemberMemberMemberMemberMemberMember

Board Advisor

AccountingAdministration

CreditHuman Resources

Information TechnologyInternal AuditInternational

OperationsRetail Banking & Marketing

HEAD OF DEPARTMENTS

152

BRANCH NETWORK

HeadquartersAl Harika – Bab Barid - Near the Chamber of Commerce - DamascusP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 2460560. Fax: (963-11) 2460555E-mail: [email protected] - www.bso.com.sy

DAMASCUS

Al HarikaAl Harika – Bab Barid - Near the Chamber of Commerce - Phone: (963-11) 2460560. Fax: (963-11) 2460555. Branch Manager:Mr. Samir BASSOUS

Al Nejmeh SquareAl Nejmeh Square – Opposite Dar El Salam School - Phone: (963-11) 3344001. Fax: (963-11) 3344021. Branch Manager: Mr. Fadi ISTWANI

Al KassaaAl Kassaa – Burj El Rous - Phone: (963-11) 5431350. Fax: (963-11) 5431360. Branch Manager: Mr. Omar HAMMOUD

AL MezzehMezzeh - Next to Al Razi Hospital - Phone: (963-11) 6132411. Fax: (963-11) 6132409. Branch Manager: Mr. Tarek SHIHAB

KafarsussehDamascus – Kafarsusseh – Damasquino Mall - Phone: (963-11) 2143701. Fax: (963-11) 2143705. Branch Manager: Ms. Hadil DIB

Al MazraaAl Malek Al Adel Street - Phone: (963-11) 4430140. Fax: (963-11) 4430145. Branch Manager: Mr. Eyad AL SATI

Al MidanAl Midan Corniche – Al Ghowas - Behind Al Hassan Mosque - Phone: (963-11) 8838971. Fax: (963-11) 8838975.Branch Manager: Mr. Bassem MERHEJ

ALEPPO

Al AziziehAl Azizieh- Majd El Dine Al Jabiri Street - Phone: (963-21) 9960 - 2258570. Fax: (963-21) 2249800. Branch Manager: Mr. Eddy BECHARA

Al MadinaSaba’ Bahrat Street - Phone: (963-21) 9961. Fax: (963-21) 3335377. Branch Manager: Mr. Amro KAYAL

Al MuhafazaAl Kahira Street - Phone: (963 21) 2665022. Fax: (963 21) 2665035

Al SulaimaniehAleppo – Al Sulaimanieh Street. - Phone: (963-21) 9963 – 4611102. Fax: (963-21) 4611107. Branch Manager: Mrs. Mona JARJOUR

Town MallIzaz Street- kfarhamra- Town Mall- Near Shahba Mall- Aleppo- Syria - Phone: (963-21) 2521020. Fax: (963-21) 2501025

Al Sheikh NajjarIndustrial city – Sheikh Najjar - Administrative Services Center – Bank’s area – Aleppo – Syria - Phone: (963-21) 4716600. Fax: (963-21) 4716605

LATTAKIAAl Kamilia, March 8th Street - Phone: (963-41) 3010 - 452516. Fax: (963-41) 452573. Branch Manager: Mr. Bassem MERHEJ

HAMAAl Kouatli Street - Phone: (963-33) 213834- 5 – 9960. Fax: (963- 33) 213833. Branch Manager: Mr. Morhaf AL SHAKAKI

TARTOUSAl Thawra Street - Phone: (963-43) 9960 – 227474. Fax: (963-43) 226869. Branch Manager: Mr. Chamel EL MAKARI

HOMSCity Center Bldg. - Phone: (963-31) 9960 – 2453921. Fax: (963-31) 2453936. Branch Manager: Mrs. Anna DIBE

Al SWEIDA’ATishreen Street - Phone: (963 –16) 9960 – 233328. Fax: (963-16) 233478. Branch Manager: Mr. Toufic BAZ RADWAN

DARA’AAl Kouatli Street - Phone: (963-15) 9960. Fax: (963-15) 233055. Branch Manager: Mr. Anwar AL HARES

ADRAAAdraa Industrial Area – Central Management Services Area - Phone: (963-11) 5851350. Fax: (963-11) 5351360. Branch Manager: Mr. HusseinOBEID

BRANCHES UNDER ESTABLISHMENTDummar Project – Damascus

153

Mr. Saad AZHARIMr. Elias ARAKTANGIDr. Fadi OSSEIRANMr. Shaker ABDULLAHMr. Samir KASSISMr. Hani DANA

Mr. Elias ARAKTANGIMr. Hany EL DANAMr. Talal IBRAHIMMrs. Maya EL KADYMr. Tarek METWALLY

Mr. Abdel Aziz ALYMr. Ali ORABYMr. Belal FAROUKMr. Gamal DIAAMr. Halal EL SAWAFMr. Emad EL GUINDYMr. Khaled ABDEL HAMIDMr. Khaled YOUSRYMr. Maher ANWARMr. Mohamed RASHWANMr. Talaat EL OMDAMr. Yehia RASHEDMrs. Brigitte ABOU FARAHAT

ChairmanManaging Director & Chief Executive Officer

MemberMemberMember

Chairman Advisor & Senior Credit Officer

Managing Director & Chief Executive OfficerChairman’s Advisor & Chief Credit Officer

AMD - Total Quality ManagementAMD – Retail Banking

AMD – Institutional Banking

Governmental AffairsInformation Technology

ComplianceMedium Size Finance

Acting – Group Head of Retail Credit Fulfillment & CollectionCentral Operations

Branches - RegionalFinancial Institution

Legal AffairsInternal Audit

Human ResourcesRisk Management

Acting – Administration Group Head

GENERAL MANAGEMENT

Headquarters64 Mohey Al Din Abo El Ezz, Dokki, Egypt - Phone: (202) 33322770-9. Fax: (202) 37494508 - www.blombankegypt.com

Abbasia109 Abbasia St. - Phone: (202) 29222357 – 33039608. Fax: (202) 29222350. Acting Branch Manager: Mr. Tarek TALAAT

Cairo15 Abu El Feda St. – Zamalek – CairoPhone: (202) 27355246 – 27368045. Fax: (202) 27351832 – 27358613. Branch Manager: Mrs. Hanaa FOUAD

Heliopolis31 El Hegaz St. Heliopolis, In front of Merryland - CairoPhone: (202) 22015236. Fax: (202) 24519710. Acting Branch Manager: Mr. Hany ABDELDAYEM

Al Hurghada7 El Mena Holiday Inn Center St. AL Saquala Square – HurghadaPhone: (2065) 3447835 – 3448515. Fax: (2065) 3447834. Branch Manager: Mr. Hussein EL SWAIFY

Ismalia15 Street 144 Teraat Al Ismalia – next to El Rai Bridge - IsmaliaPhone: (2064) 3921779. Fax: (2064) 3921767. Branch Manager: Mr. Ahmed ABDEL AAL

154

BOARD OF DIRECTORS

HEAD OF DEPARTMENTS

BRANCH NETWORK

Khalifa El Maamoun20 Al Khalifa El Maamoun St. – Manshiet El Bakry - CairoPhone: (202) 22575625 – 22575645. Fax: (202) 22575651 – 22575665. Branch Manager: Mrs. Heba SAAD

Maadi4 Street 269 from Nasr St. – Albasateen - Maadi – CairoPhone: (202) 25198840 – 25198244. Fax: (202) 25199293 – 25197232. Branch Manager: Mr. Mouawad AHMED

Al Mansoura35 Tanzem Zaghloul Basha St. – MansouraPhone: (2050) 2309123. Fax: (2050) 2309122 – 2309125. Acting Branch Manager: Mr. Abdel Ghany BAKR

Mohandessen54 Lebanon St. – Mohandessen - CairoPhone: (202) 33006518 – 33006502. Fax: (202) 33039806 – 33447734. Branch Manager: Mr. Ahmed SABRY

Mohie Eldin Aboul Ezz64 Mohie Eldin Aboul Ezz St. Dokki - CairoPhone: (202) 37494572 – 37494643. Fax: (202) 37494652 – 37494679. Branch Manager: Mrs. Wafaa EZZAT

Nasr CityEl Akkad Mall – El Nasr Road – Nasr City - CairoPhone: (202) 29222360. Fax: (202) 26906803 – 26906805. Branch Manager: Mr. Hesham FOUAD

New Cairo101 City Commercial Center – El Tagamoa El Khames – New CairoPhone: (202) 29281193 – 29281200. Branch Deputy Manager: Mr. Tarek HELMY

New Maadi17/5 El Laselky - Nasr St. – New Maadi - CairoPhone: (202) 29820763 – 29820778. Fax: (202) 27550740 – 27550664. Branch Manager: Mrs. Hanem FAHMY

Opera4 A , Abdel Haak El Sonbaty – Opera Square - CairoPhone: (202) 23923197. Fax: (202) 23925265. Branch Manager: Mr. Ali Ezzat KHAFAGY

Orouba1 Cleopatra St. El Orouba – Heliopolis – CairoPhone: (202) 24144769. Fax: (202) 24144793. Acting Branch Manager: Mrs. Nayera LABIB

Shoubra232 Shoubra St. – EL Khalafawy Square - CairoPhone: (202) 24311416. Fax: (202) 24311364 – 24312678. Branch Manager: Mr. Sherif TAHER

6 th OctoberCentral Axis – El Madiena Commercial Center – Area No.4 – 1st District – 6th October cityPhone: (202) 38320602. Fax: (202) 38339279. Branch Manager: Mr. Mamdouh ZAYED

ALEXANDRIA

Montaza414 Gamal Abd El Naser – El Mandara - AlexandriaPhone: (203) 5488550 – 5488593. Fax: (203) 5488713. Branch Manager: Mr. Ibrahim ABAZA

El Shatby17 Port Said St. – El Shatby – AlexandriaPhone: (203) 5934059 – 5918755. Fax: (203) 5934058. Branch Manager: Mr. Ashraf TAHIO

Sporting273 El Horria Road – Sporting – AlexandriaPhone: (203) 4282050 – 4271723. Fax: (203) 4200094. Branch Manager: Mrs. Magda FAYED

Stadium1 Soliman Yousri St. ( Loumomba ) in front of stadium – AlexandriaPhone: (203) 4951629. Fax: (203) 4951635 – 4951636. Branch Manager: Mr. Ayman TALAAT

Manshya9 Oraby Square – in front of Elguindy El Maghol – AlexandriaPhone: (203) 4856088. Fax: (203) 4856120. Branch Manager: Mr. Mohamed REFAAT

Sharm El SheikhNaama Bay – El Amir Abdouallah St. – Murray Mall – Sharm El SheikPhone: (2069) 3603546. Fax: (2069) 3603541. Branch Manager: Alaa METWALLY

Damietta1 Cornish El Nil St. – El Shorta Tower – DamiettaPhone: (2057) 363470. Fax: (2057) 363453. Acting Branch Manager: Mr. Mohamed EL BERGISY

155

Dr. Naaman AZHARIMr. Saad AZHARIMr. André CATTINDr. Warner FREYME. Peter De La GANDARAMr. Ahmad G. SHAKER

Mr. Saad AZHARIMr. Antoine MAZLOUMMr. Thierry OTTMrs. Eléonore DAESCHERMr. Salim DIAB

Honorary Chairman of the BoardChairman

Vice ChairmanMemberMemberMember

ChairmanGeneral Manager

ManagerDeputy ManagerDeputy Manager

GENERAL COMMITTEE

1, Rue de la Rôtisserie, Geneva, Switzerland - P.O. Box: 3040 – CH 1211 Geneva 3 – SwitzerlandPhone: (41-22) 8177100. Fax: (41-22) 8177190 - E-mail: [email protected] - www.blombank.ch

Mr. Saad AZHARIMessrs. BLOM BANK SALMr. Joseph Emile KHARRATMr. Marwan JAROUDIMr. Samer AZHARIMr. Habib RAHAL

Mr. Saad AZHARIDr. Fadi OSSEIRAN

Mr. Georges TABETMr. Michel CHIKHANIMr. Elie CHALHOUBMr. Nicolas PHOTIADESMr. Walid KADRIMr. Ramzi TOHMEMr. Marwan MIKHAELMr. Marwan ABOU KHALIL

Chairman & General ManagerMemberMemberMemberMemberMember

Chairman & General ManagerGeneral Manager

Assistant General Manager - Head of Private BankingAssistant General Manager - Head of Asset Management

Head of AdministrationHead of Investment Banking

Head of Organization and Business DevelopmentHead of Operations

Head of ResearchHead of Capital Markets

LEBANON

156

BOARD OF DIRECTORS

HEADQUARTERS

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HEAD OF DEPARTMENTS

EGYPT

Verdun , Rachid Karami St, BLOM BANK bldg – 2nd floor - P.O. Box: 11-1540, Riad El Solh, Beirut 1107 2080 LebanonPhone: (961-1) 738938 – 743300 – 348246. Fax: (961-1) 749148 - E-mail: [email protected] - www.blominvestbank.com

HEADQUARTERS

8 Geziat el Arab st. - Mohandeseen - Phone: (202) 37621611 – 37617683. Fax: (202) 37617680E-mail: [email protected]

Mr. Ahmed GEMEIMr. Belal Farouk TAWFEKMr. Tarek Ibrahim METWALYMrs. Maya Tawfek AL KADYMr. Khaled MOHAMEDMr. Mohamed EL BANDARY

Mr. Ahmed GEMEIMr. Tawhed ZAHERMr. Mahmoud EL GAMMALMr. Ahmed A. RAHMANMr. Emam WAKED

Deputy Chairman & Managing DirectorMemberMemberMemberMemberMember

Deputy Chairman & Managing DirectorChief Operating Manager

Compliance OfficerFinancial Control

Head of Institutional Desk

Mr. Amr AZHARIMr. Saad AZHARIMr. Nicolas SAADEBLOM BANKBLOMINVEST BANK

Mr. Amr AZHARIMr. Mouataz NATAFGIMr. Ghassan CHAMMAS

Mr. Tarek HOUSSAMIMr. Mustapha SIBAI

Chairman & General ManagerMemberMemberMemberMember


General Management Advisor

Main Branch Manager & Head of Retail DepartmentFinancial Control & Investment

157

BOARD OF DIRECTORS

GENERAL MANAGEMENT

HEADQUARTERS

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HEAD OF DEPARTMENTS

Abdel Aziz St, Daher bldg. Beirut, LebanonPhone: (961-1) 751090/1/2/3. Fax: (961-1) 751094E-mail: [email protected]

Tripoli(under establishment)

Al Oula Building, 3rd Floor, King Fahd Road, Riyadh, Kingdom of Saudi ArabiaP.O.BOX: 8151 Riyadh - 11482Phone: (966-1) 4949555. Fax: (966-1) 4949551

BRANCH NETWORK

Mr. Abdallah Abd Al Latif Ahmad AL FOUZANMr. Mohamed Abd El Aziz Ibrahim AL AKILMr. Wali Abd El Aziz Saleh AL SAGHYIRMr. Saad Naaman AZHARIMr. Fahim Mohamed MO’DADDr. Fadi Toufic OSSEIRANMr. Marwan Mohamed Toufic AL JAROUDI

Mr. Nicolas PHOTIADESMr. Gladson DOGHLASMr. Motaz SIDANIMr. Georges HaddadMr. Wissam SOUBRAMr. Phillip DAGHERMr. Kamal ABOU NASRMr. Hani BazMr. Tarek Abdul RedaMr. Rashed HabliMr. Wadih Faddoul

Chairman of BLOMINVEST SAUDI ARABIA

Member

Member

Member

Member

Member

Chief Executive OfficerDeputy Chief Executive Officer - Head of Private Banking

Manager Investment BankingManager Brokerage

CFOChief Operating Officer

Head of Compliance DepartmentHead of Internal Audit Department

Head of ITPrivate BankerPrivate Banker

158

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HEADQUARTERS

Mr. Saad AZHARIMr. Fahim MO’DADMr. Marwan AL JAROUDIMr. Nicolas SAADEMr. Fares EL KADI

Mr. Saad AZHARIMr. Fares EL KADIMr. Ayman AWADAMr. Abbas BOU DIABMr. Bassam RIZK

NBK (Amwal) Tower, 11th floor, Office 1110, Al Wadha Street, West Bay AreaP.O.BOX- 27700 – Doha, QatarPhone: (974-4) 4992999. Fax: (974-4) 4992990

ChairmanMemberMemberMemberMember

ChairmanChief Executive OfficerChief Financial Officer

Head of Compliance & AMLRisk Manager

Mr. Habib RAHALMr. Fateh BEKDACHEMr. Samer AZHARIMr. Victor PEIGNETSCOR SE (Represented by Mr. Patrick LOISY)Mr. Serge OSOUFMr. Rami HOURIEMr. Marwan JAROUDY

Mr. Habib RAHALMr. Fateh BEKDACHEMs. Faten DOUGLAS

Chairman & General ManagerVice Chairman & General Manager

MemberMemberMemberMemberMemberMember


Deputy General Manager

159

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HEADQUARTERS

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HeadquartersVerdun – Rachid Karami St, BLOM BANK bldg, Arope PlazaP.O. Box: 113-5686 Beirut – LebanonPhone: (961-1) 759999. Fax: (961-1) 344012E-mail: [email protected] - www.arope.com

AleyAl BalakinePhone: (961 – 5) 556613 - Fax: (961 – 5) 556614

AramounChoueifat – Al Koba, Aramoun RoadPhone: (961– 5) 808 591 /2/ 3. Fax: (961– 5) 808594

Burj Al BarajnehAin El Sekka RoadPhone / Fax: (961 – 1) 452917

DoraMain Road – Cebaco CenterPhone / Fax: (961-1) 262222

JbeilVoie 13, near Saint Charbel Junction,Phone / Fax: (961 – 9) 943701

SaidaRiad Solh Street – Fakhoury bldgPhone / Fax: (961-7) 725303

TripoliZehrieh – Al Tall Street – Byssar bldgPhone / Fax: (961-6) 446877

TyrMain RoadPhone: (961 – 7) 740900 – 741 649. Fax: (961 – 7) 348487

ZahléZahlé Entrance – Manarah CenterPhone / Fax: (961-8) 818640

Mr. Amr AZHARIMr. Fateh BECKDACHEMr. Marwan JAROUDIMr. Hassan BAALBAKIMr. Samer AZHARIMr. Habib BATENJANIMr. Ibrahim EL SHEIKH DIB

Mr. Amr AZHARIMr. Bachar AL HALABI

ChairmanVice Chairman

MemberMemberMemberMemberMember

ChairmanGeneral Manager

160

BRANCH NETWORK

GENERAL MANAGEMENT

BOARD OF DIRECTORS

HeadquartersDamascus Al Rawda, Zuhair Ben Abi Salma St., Malki Bldg N18P.O. Box: 33015 - Phone: (963-11) 9279. Fax: (963-11) 3348144E-mail: [email protected]

AleppoAleppo- Azizieh- Majed Al Deen Al Jabri StreetPhone: (963-21) 9279. Fax: (963-21) 2118800

HomsCity center Building - Phone: (963-31) 9279

LattakiaAl Kamilia - 8 March Street - Phone: (963-41) 475213. Fax: (963-41) 475223

HamaAl Ashek Building – Al Amin Street - Phone: (963-33) 9279

Al Kamshli - Phone: (963-52) 430670. Fax: (963-52) 430670

Dair Al ZoorPhone : (963-51) 372828

8 Gezirat El Arab, Mohandeseen, Egypt - Phone: (202) 3336-1390, 3336-1490Email: [email protected] - www.aropeegypt.com

8 Gezirat El Arab, Mohandeseen, Egypt - Phone: (202) 3336-1390, 3336-1490Email: [email protected] - www.aropeegypt.com

HEADQUARTERS

161

BRANCH NETWORK

Mr. Hany El DanaMr. Fateh BekdacheMr. Habib RahalMrs. Maya Al-KadyMr. Tarek Metwally

ChairmanChairman

Vice-Chairman and Managing DirectorMembersMembersMembers

GENERAL MANAGEMENT

BOARD OF DIRECTORS

Mr. Hany El DanaMr. Fateh BekdacheMs. Faten DouglasMr. Michael Kelada

ChairmanVice-Chairman and Managing Director

Managing DirectorAssistant Managing Director

Mr. Hany El DanaMr. Fateh BekdacheMr. Habib RahalMrs. Maya Al-KadyMr. Tarek Metwally

ChairmanChairman

Vice-Chairman and Managing DirectorMembersMembersMembers

GENERAL MANAGEMENT

BOARD OF DIRECTORS

Mr. Hany El DanaMr. Fateh BekdacheMr. Michael Kelada

ChairmanVice-Chairman and Managing Director

Assistant Managing Director

HEADQUARTERS

ANNUAL REPORT 08 - BLOM Bank...Master in Civil Engineering & MBA Diploma in Law B.A in Finance...

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