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AdliehBeirut,[email protected]

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WeeklyMarketWatch

IssueNo.524

October29th–November4th2016

LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> Lebanon Ranks 105th in the World in the 2016 Legatum Overall Prosperity Index 1

> Fitch Ratings Praises the End of the Presidential Void & Calls > for Greater Political Consensus 2 > EFG Hermes’ Outlook on Lebanon Remains “Neutral” After

Presidential Elections 2 > Lebanon’s Balance of Trade Deficit Widens to $12.01 Billion by

September 2016 3 > Commercial Banks’ Assets up at $198.07 Billion by September

2016 4 > Gross Public Debt at $74.73 Billion at End of September 2016 5 > Consolidated Assets of Investment Banks down at $4.55 Billion

in September 2016 6 > Reserves at BDL Reach $52.30 Billion as at End of October

2016 7 > Value Traded on the BSE up by 48.68% Y-O-Y by October 2016 8 CORPORATE NEWS

> The Combined Profits of Listed Banks Post a Double Digit Annual Growth by September 2016 9 > BLOM Bank Posts an 18.74% Y-O-Y Increase in Profits to $344.07 Million by September 2016 10 > BLC Bank Posts a 15.35% Y-O-Y Drop in Profits to $27.75 Million by September 2016 11 > RYMCO’s Net Profits at $5.88 Million in 2015 12 MONETARY PERFORMANCE

> Monetary Aggregates 13 > Money Markets 13 LEBANESE EQUITIES

> Lebanese Equities & Credit Libanais Indices 14

Lebanon's Economic & Financial Sector Indicators 16 Lebanon's Ratings 17

LEBANON RANKS 105TH IN THE WORLD IN THE 2016 LEGATUM OVERALL PROSPERITY INDEX

Lebanon was assigned a global rank of 105 in the Legatum Institute’s 2016 overall prosperity index among 149 covered counties, regressing as such from the 98th position it occupied in the year 2015. FITCH RATINGS PRAISES THE END OF THE PRESIDENTIAL VOID & CALLS FOR GREATER POLITICAL CONSENSUS

Fitch Ratings praised the election of a new Lebanese president and stressed that the country’s weak economic performance would improve in the event a political consensus is reached and a national unity government is formed. EFG HERMES’ OUTLOOK ON LEBANON REMAINS “NEUTRAL” AFTER PRESIDENTIAL ELECTIONS

EFG Hermes Research considered that the election of a new president for the Republic of Lebanon on October 31, 2016 would undoubtedly improve investor sentiment, yet is insufficient for a palpable progress in the economy. THE COMBINED PROFITS OF LISTED BANKS POST A DOUBLE DIGIT ANNUAL GROWTH BY SEPTEMBER 2016

The combined profits of all six listed Lebanese banks rose by 12.13% year-on-year to $995.86 million as at end of September 2016, up from $888.15 million recorded in the same period of the previous year.

TABLE OF CONTENTS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

"BDL" Banque Du Liban "ABL" Association of Banks in Lebanon "MOF" The Lebanese Ministry of

Finance "BOP" Balance of Payment "IMF" The International Monetary Fund "Moody's" Moody's Investors Service "BSE" Beirut Stock Exchange "GDRs" Global Depositary Receipts "M1" Currency in Circulation + Demand

Deposits in LBP "M2" M1 + Other Deposits in LBP "M3" M2 + Deposits in Foreign Currencies "M4" M3+ Treasury Bills Held By Non Banking System, Including Accrued

Interests "CPI" Consumer Price Index "PPI" Producer Price Index "CLASI" Credit Libanais Aggregate Stock Index "CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index “EIU” Economist Intelligence Unit “EOY” End of Year "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "YTD" Year To Date "YTD Price Performance" Yield to Date Price Appreciation

"Forex" Foreign Exchange "LBP" The Lebanese Pound "USD" The United States Dollar "Yen" The Japanese Yen "GBP" The British Pound/ Sterling Pound "CHF" The Swiss Franc "Y-O-Y" Year-On-Year "GDP" Gross Domestic Product "MENA" Middle East and North Africa

“LE” Livre Egyptienne – Egyptian Pound

“SAR” Saudi Arabian Riyal “AED” United Arab Emirates Dirham “BD” Bahraini Dinar

SYNOPSIS OF TERMS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

LEBANON NEWS

Weekly Market Watch

SOURCE: LEGATUM INSTITUTE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

LEBANON RANKS 105TH IN THE WORLD IN THE 2016 LEGATUM OVERALL PROSPERITY INDEX

The Legatum Institute, an independent policy, advisory, and advocacy organization within the Legatum group of companies, released on November 3, 2016 its “2016 Prosperity Index”, consisting of a gauge of prosperity across 149 countries around the globe based on material wealth and personal wellbeing. More specifically, the Legatum Prosperity Index is published on an annual basis and covers nine parameters in its assessment for each country, namely “Economy”, “Education”, “Entrepreneurship & Opportunity”, “Governance”, “Health”, “Personal Freedom”, “Safety & Security”, “Social Capital”, and “Natural Environment”. The Natural Environment sub-index was introduced for the first time focusing on measuring a country’s performance in three main areas: the quality of the natural environment, environmental pressures, and preservation efforts. Key findings in the 2016 Legatum Prosperity Index reveal a multiplicity of facts that are worth mentioning. To begin with, global prosperity has presently hit its highest point over the past ten years driven by several improvements on various fronts in the different regions of the World. Specifically, the World has seen improvements in Personal Freedom, particularly in Western Europe and Central and Latin America; improvements in Health and Education in Asia; and a better Business Environment in the Middle East and North Africa, Sub-Saharan Africa, and Eastern Europe. However, the picture is not fully optimistic and universally positive. For instance, the wide-spread presence of terrorist organizations in the Middle East since the Arab Spring has imposed a severe limit on prosperity growth in the region. The Western world is not immune to challenges either with American prosperity stagnating over the past ten years. Luxembourg emerged as the freest country in the world, ranking 1st in the personal freedom metric while Canada came 2nd in this respect given the high tolerance the country is portraying towards immigrants. From another standpoint, the European continent suffered from a relatively high disparity among its nations in terms of health and wellbeing, yet hosted three of the world’s top 5 countries in terms of prosperity for the year 2016. In fact, Norway ranked 2nd in the world in the overall prosperity index stepping down from 1st position for the first time in eight consecutive years, with Finland ranking 3rd (1st in terms of the Governance sub-index) and thus recording a great improvement from its 9th rank in the previous year and Switzerland positioning 4th (1st in terms of the Education sub-index) down from 2nd in the previous year. On a regional basis, the report uncovered how turbulence in the Middle East has made prosperity a very far-fetched goal in many countries. Rankings show that countries that are suffering from civil war, namely, Libya, Iraq, and Yemen, bottom the list, something which reflects how devastating the current situation is. On the local front, Lebanon did not show a satisfying and encouraging performance. Deterioration was the case with most of the sub-indices covered. Lebanon was assigned a global rank of 105 in the 2016 overall prosperity index among 149 covered counties, regressing as such from the 98th position it occupied in the year 2015. Nonetheless, Lebanon managed to fare better than many of its regional peers such as Algeria (global rank: 111th), Egypt (117th), Iran (118th), Libya (136th), Iraq (143rd), Sudan (146th), and Yemen (149th and last in the ranking). As for the Index sub-categories, Lebanon saw some improvement in two of the sub-indices, advancing to the 120th place in its Personal Freedom sub-index and to the 80th place in Safety and Security. Conversely, Lebanon slipped to the 82nd position in the Economy metric, 100th in Entrepreneurship & Opportunity, 131st in Governance, 101st in Education, 83rd in Health, and 129th in Social Capital. With respect to the Natural Environment sub-index, Lebanon came 82nd in the global ranking.

0 20 40 60 80 100 120 140 160

United Arab Emirates

Qatar

Bahrain

Oman

Kuwait

Saudi Arabia

Jordan

Tunisia

Morocco

Lebanon

Algeria

Egypt

Iran

Libya

Iraq

Sudan

Yemen

41

46

67

70

71

85

89

93

101

105

111

117

118

136

143

146

149

The 2016 Legatum Prosperity Index Rankings -MENA Countries

Source: The Legatum Institute, Credit Libanais Economic Research Unit

Country Economy Entrepreneurship & Opportunity Governance Education Health Safety &

SecurityPersonal Freedom

Social Capital

Natural Environment

United Arab Emirates 21 23 53 66 28 32 109 25 43Qatar 24 24 60 93 15 41 98 36 69Bahrain 31 46 91 67 29 51 127 56 119Oman 51 54 90 77 26 34 104 66 137Kuwait 59 94 97 95 31 39 108 35 99Saudi Arabia 70 50 95 83 45 74 133 45 71Jordan 90 112 79 86 48 54 119 68 103Tunisia 92 95 55 105 71 61 115 136 84Morocco 66 84 118 118 87 44 118 144 66Lebanon 82 100 131 101 83 80 120 129 82Algeria 116 131 120 90 53 60 136 138 75Egypt 105 101 117 92 88 93 146 134 131Iran 114 114 136 71 92 120 145 74 111Libya 137 147 144 108 59 138 144 54 136Iraq 142 146 134 126 131 147 139 62 148Sudan 141 142 142 144 133 144 148 107 143Yemen 149 149 149 142 125 140 147 148 145Source: The Legatum Institute, Credit Libanais Economic Research Unit

The 2016 Legatum Prosperity Sub-Indices Rankings - MENA Countries

LEBANON NEWS

Weekly Market Watch

SOURCE: FITCH RATINGS, EFG HERMES, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

FITCH RATINGS PRAISES THE END OF THE PRESIDENTIAL VOID & CALLS FOR GREATER POLITICAL CONSENSUS

Fitch Ratings, the international rating agency, praised the election of a new Lebanese president on November 2, 2016 and considered it primordial for a political agreement between the different factions. The rating agency stressed that the country’s weak economic performance would improve in the event a political consensus is reached and a national unity government is formed. However, the agency commented that the raging war in neighboring Syria and Lebanon’s very frail public finances are still weighing on the country’s economic performance and political environment. Furthermore, the consensus over the electoral law for the upcoming parliamentary elections scheduled for mid-2017 remains a “divisive issue” among Lebanese factions. It is worth noting that the rating agency had amended last July Lebanon’s long-term local and foreign currency Issuer Default Rating (IDR) from “B” to “B-” with a “Stable” outlook. The agency also commented that additional signs of political consensus would reinforce consumer confidence and bolster investment and deposits growth. Fitch reiterated the significant dependence of the Lebanese government on local banks to finance its public debt assisted by a resilient yet declining growth in deposits, which largely stems from the diaspora remittances. In details, the growth in deposits has slowed down from double digits to circa 5% recently. Moreover, and according to the agency, the economic gains of the recent positive political developments are likely to be hindered by both Lebanon’s struggling public finances, given that the current debt to GDP stands at 140%, and the ongoing conflict in neighboring Syria. Tourism, real estate and construction activity fueled real GDP growth which attained the 8-10% mark during the 2007-2010 period according to Fitch, but since the eruption of the Syrian war in 2011, the performance of these vital sectors has slowed down and FDI inflows fell from around 12% of GDP in the 2004-2010 period to just 6% of GDP during the 2011-2015 period. EFG HERMES’ OUTLOOK ON LEBANON REMAINS “NEUTRAL” AFTER PRESIDENTIAL ELECTIONS

EFG Hermes Research released a MENA Strategy Note on November 2, 2016 in which it expressed its view on the repercussions of the new presidential election in Lebanon on the country’s economic prospects. In details, EFG Hermes considered that the election of a new president for the Republic of Lebanon on October 31, 2016 would undoubtedly improve investor sentiment, yet is insufficient for a palpable progress in the economy. EFG’s outlook for the country remained accordingly “Neutral”, with many pending issues needing to be tackled. In fact, and despite anticipations of a smooth formation of a new cabinet given the apparent consensus between the various political factions, the report cited the blurry outlook surrounding the upcoming parliamentary elections as one of the country’s main challenges. The report also spotted the light on the urgent need to implement reform measures to address the recurrent fiscal deficit and attenuate the high debt-to-GDP ratio of around 140% to be able to spur capital expenditures. Nonetheless, EFG Hermes ruled out any tangible development in Lebanon’s oil and gas sector on the short run despite its importance. In the same vein, the report commented that it is unlikely for the recent hike in the prices of Solidere stocks to be contagious to other listed stocks on the Beirut Stock Exchange or to be sustainable, with the Syrian crisis still weighing on the Lebanese economy and many of its sectors. From a more positive angle, the report praised the ample foreign currency reserves held at Banque Du Liban constituting nearly 100% of the country’s GDP and contributing to the protection of the local currency peg against the US Dollar. EFG Hermes concluded its report by projecting a low single-digit credit growth at least for the period preceding the parliamentary elections, yet applauded the financial performance of certain listed stocks, namely BLOM Bank, Bank Audi, and Byblos Bank despite the harsh economic environment.

LEBANON NEWS

Weekly Market Watch

SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

LEBANON’S BALANCE OF TRADE DEFICIT WIDENS TO $12.01 BILLION BY SEPTEMBER 2016

On the current account side of the balance of payments, Lebanon’s balance of trade deficit widened by $1.03 billion on an annual basis to around $12.01 billion as at the end of Q3-2016, up from $10.99 billion a year earlier, and this according to statistics published by Lebanon’s Higher Customs Council. Said increase in the deficit was fueled by some $1.02 billion y-o-y expansion in imports to $14.24 billion, coupled with a $6 million drop in exports to $2.23 billion. China topped the list of countries exporting to Lebanon, with its exports bill reaching $1,595 million (11.20% of Lebanon’s imports) YTD September 2016. South Africa, on the other hand, led the list of countries importing from Lebanon, with its imports invoice aggregating to $518 million (23.23% of Lebanon’s exports). This is further elaborated in the tables below: Exports of “pearls, precious stones and metals” accounted alone for 29.29% ($653 million) of total Lebanese exports by end of September 2016, followed by “prepared foodstuffs, beverages, & tobacco” ($326 million <14.62%>), “machinery & electrical instruments” ($248 million <11.11%>), and “chemical products” ($233 million <10.44%>). On the other hand, “mineral products” constituted the lion’s share of imported goods ($3,097 million <21.75%>), trailed, and by far, by “chemical products” ($1,532 million <10.76%>), “machinery & electrical instruments” ($1,392 million <9.77%>), and “transport equipment” ($1,307 million <9.18%>).

Balance of Trade Y-O-Y

(US$ Million) Sep-2015 Sep-2016 % ChangeExports 2,234 2,228 -0.25%Imports 13,221 14,240 7.71%

Trade Balance (10,987) (12,012) 9.32%Source: Higher Customs Council, Credit Libanais Economic Research Unit

For the Nine-Month Period Ending

-16,000

-12,000

-8,000

-4,000

0

4,000

8,000

12,000

16,000

Sep-2015 Sep-2016

USD Million

Cumulative Balance of Trade Deficit

Exports Imports Deficit

Source: Higher Customs Council, Credit Libanais Economic Research Unit

China 1,595 11.20%Italy 1,050 7.37%U.S.A. 933 6.55%Germany 865 6.08%Greece 754 5.29%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Major Import Sources (in USD Million)South Africa 518 23.23%Saudi Arabia 207 9.27%U.A.E. 182 8.15%Syria 128 5.73%Iraq 125 5.60%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Major Export Destinations (in USD Million)

Product Value ($ Million)

% ofTotal

Pearls, Precious Stones and Metals 653 29.29%

Prepared Foodstuffs, Beverages, Tobacco 326 14.62%

Machinery, Electrical Instruments 248 11.11%

Chemical Products 233 10.44%Others 770 34.54%Total Exports 2,228 100%

Breakdown of Exports by Product YTD September 2016


Product Value ($ Million)

% ofTotal

Mineral Products 3,097 21.75%

Chemical Products 1,532 10.76%

Machinery, Electrical Instruments 1,392 9.77%

Transport Equipment 1,307 9.18%Others 6,912 48.54%Total Imports 14,240 100%

Breakdown of Imports by Product YTD September 2016


LEBANON NEWS

Weekly Market Watch

SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

COMMERCIAL BANKS’ ASSETS UP AT $198.07 BILLION BY SEPTEMBER 2016

The consolidated balance sheet of commercial banks operating in Lebanon rose by 6.50% (LBP 18,213 billion) during the first nine months of 2016 to LBP 298,592 billion ($198.07 billion), up from LBP 280,379 billion ($185.99 billion) at end of year 2015. On an annual basis, the consolidated assets of the banking sector came in 9.23% higher than the LBP 273,373 billion ($181.34 billion) reading reported at end of September 2015. The sector remains highly liquid, enjoying a primary liquidity ratio of 80.76% up from 77.81% a year before. On the funding side of the balance sheet, customer deposits (private and public sector) rose by 4.31% (LBP 10,066 billion) during the first nine months of 2016 to LBP 243,655 billion ($161.63 billion) at end of September, up from LBP 233,589 billion ($154.95 billion) at year-end 2015. Said rise comes as a result of the 4.51% (LBP 8,132 billion) expansion in deposits from the resident private sector to LBP 188,621 billion ($125.12 billion), accompanied by a 3.66% (LBP 1,758 billion) increase in deposits from the non-resident private sector to LBP 49,784 billion ($33.02 billion). From a currency denomination standpoint, deposits in Lebanese Pounds rose by 3.99% (LBP 3,405 billion) since beginning 2016 to LBP 88,744 billion ($58.87 billion), with foreign currency deposits increasing by 4.49% (LBP 6,662 billion) to LBP 154,912 billion ($102.76 billion). In this context, the deposit dollarization rate rose to 64.98% in September, from 64.88% at end of year 2015 and 64.62% in September 2015. On an annual basis, customer deposits rose by 6.09% from LBP 229,675 billion ($152.35 billion) at end of September 2015. On the lending front, loans to the private sector increased by 4.48% (LBP 3,662 billion) YTD September to LBP 85,405 billion ($56.65 billion), up from LBP 81,743 billion ($54.22 billion) in December 2015. The loans portfolio increased by 7.69% annually, lifting the ratio of net loans to customer deposits to 35.05%, up from 34.99% in December and 34.53% in September of last year. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits inched higher to 25.40%, from 24.11% at year-end 2015 and 23.82% at end of September 2015. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits inched lower to 40.58% in September, down from 41.26% in December and 40.75% in September of last year. The consolidated capital accounts of commercial banks operating in Lebanon reached LBP 26,332 billion ($17.47 billion) in September, compared to LBP 25,131 billion ($16.67 billion) at end of year 2015 and LBP 24,553 billion ($16.29 billion) in September of last year. This can be explained by banks’ continuous reinforcement of their capital bases to meet BDL solvency requirements.

USD Billion 2011 2012 2013 2014 Sept-2015 2015 Sept-2016

Total Assets 140.58 151.88 164.82 175.70 181.34 185.99 198.07

Loans to the Private Sector 39.38 43.45 47.38 50.90 52.61 54.22 56.65

Customer Deposits, o/w: 117.70 127.66 139.17 147.64 152.35 154.95 161.63

- Resident Private Sector Deposits 94.45 100.91 107.73 114.12 118.38 119.73 125.12

- Non-Resident Private Sector Deposits 21.26 24.09 28.48 30.30 30.74 31.86 33.02

- Public Sector Deposits 1.99 2.66 2.96 3.21 3.24 3.37 3.48

Capital Accounts 10.72 12.64 14.20 15.73 16.29 16.67 17.47

Dollarization Rate 65.92% 64.82% 66.14% 65.71% 64.62% 64.88% 64.98%

Private Sector Loans/Deposits Ratio 33.45% 34.04% 34.05% 34.48% 34.53% 34.99% 35.05%

- LBP Private Sector Loans/LBP Deposits 20.53% 20.84% 22.65% 23.58% 23.82% 24.11% 25.40%

- FC Private Sector Loans/FC Deposits 40.47% 41.63% 40.26% 40.53% 40.75% 41.26% 40.58%Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

0.0020.0040.0060.0080.00

100.00120.00140.00160.00180.00200.00

2011 2012 2013 2014 2015 Sept-2016

140.58151.88

164.82175.70

185.99 198.07USD Billion

Evolution of Commercial Banks' Consolidated Assets

Source: ABL, Credit Libanais Economic Research Unit

LEBANON NEWS

Weekly Market Watch

SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

GROSS PUBLIC DEBT AT $74.73 BILLION AT END OF SEPTEMBER 2016

On the public finance front, Lebanon’s gross public debt widened by around $677.94 million during the month of September 2016 to $74.73 billion, up from $74.04 billion in August. On an annual basis, gross public debt grew by $6.00 billion from $68.73 billion in September 2015. The Lebanese banking sector remains a major financing source for the Lebanese government, with its share of gross public debt increasing to 47.26% in September, from 46.89% in August. As far as debt in local currency is concerned, the latter rose by 1.51% month-on-month and by 7.26% year-on-year to $45.63 billion. Concurrently, debt in foreign currencies remained almost flat on a monthly basis and increased by 11.11% on a yearly basis to $29.09 billion. The share of debt in local currency increased to 61.07% of gross public debt by September, from 60.72% one month earlier, while that in foreign currencies narrowed to 38.93%. Net public debt, which factors out public sector deposits, came in 6.39% higher y-o-y at $64.27 billion, up from $60.41 billion in September 2015. The chart below sketches the annual evolution of Lebanon’s public debt since September 2009, resulting in a 5.80% compounded annual growth in net debt over the concerned period.

Sep-2015 Sep-2016 Y-O-Y % Change

Gross Public Debt 68.73 74.73 8.73% Debt in LBP 42.55 45.63 7.26% Debt in Foreign Currencies 26.18 29.09 11.11%Public Sector Deposits 8.32 10.46 25.71%

Net Public Debt 60.41 64.27 6.39%

Public Debt (USD Billion)

Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

Debt in LBP

61.07%

Debt in Foreign

Currencies38.93%

Composition of Gross Public Debt in September 2016


0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Sep-2009 Sep-2010 Sep-2011 Sep-2012 Sep-2013 Sep-2014 Sep-2015 Sep-2016

43.32 44.45 45.69 47.8451.73

55.9260.41

64.27Billions of USD

Evolution of Net Public Debt


LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

CONSOLIDATED ASSETS OF INVESTMENT BANKS DOWN AT $4.55 BILLION IN SEPTEMBER 2016

According to Banque Du Liban (BDL) statistics, the consolidated balance sheet of investment banks operating in Lebanon contracted by a shy 0.08% YTD September 2016 to around $4.550 billion down from $4.554 billion at end of year 2015. This small contraction owes to the 10.64% drop in liabilities to the public sector to $194 million coupled with the 5.05% decline in private sector deposits to $2.031 billion which slightly outweighed the 8.41% increase in capital accounts to $1.34 billion and the 9.90% expansion in liabilities to the financial sector to $795 million. Abiding by legislative decree number 50 and subsequent BDL circulars, investment banks operating in Lebanon have managed over the last couple of years to increase loans to the private sector at the expense of reducing exposure to the public sector. Consequently, the surplus representing the difference between loans to the private sector and claims on the public sector ended the month of September 2016 at $759 million in comparison with $868 million at end of year 2015, $832 million at year-end 2014, $709 million in the year 2013, and $419 million in 2012. Claims on the private sector rose by 1.03% YTD September to around $1.40 billion with claims on public sector increasing at a much higher pace of 23.74% to $645 million.

in Millions of USD 2012 2013 2014 2015 Sep 2016 % changeCash and Banks 1,736 1,922 1,886 2,290 2,134 -6.78%Claims on Private Sector 1,181 1,203 1,380 1,389 1,404 1.03%Claims on Public Sector 762 493 548 521 645 23.74%Other Items 338 368 301 354 367 3.88%Total Assets 4,017 3,986 4,114 4,554 4,550 -0.08%

Private Sector Deposits: 2,178 1,946 2,002 2,140 2,031 -5.05% o/w Resident Deposits in LBP 849 688 735 736 735 -0.16% o/w Resident Deposits in Foreign Currencies 1,022 971 947 1,031 1,029 -0.23% o/w Non Resident Deposits in LBP 74 66 67 78 64 -17.82% o/w Non Resident Deposits in Foreign Currencies 233 220 254 294 203 -30.83%Liabilities to the Public Sector 162 193 186 217 194 -10.64%Liabilities to the Financial Sector 570 598 637 723 795 9.90%Capital Accounts 927 1,000 1,137 1,236 1,340 8.41%Other Items 181 250 151 237 189 -20.35%Total Liabilities 4,017 3,986 4,114 4,554 4,550 -0.08%Source: BDL, Credit Libanais Economic Research Unit

Evolution of Investment Banks Consolidated Balance Sheet

0

200

400

600

800

1,000

1,200

1,400

1,600

2012 2013 2014 2015 Sep 2016

762

493 548 521 645

1,181 1,2031,380 1,389 1,404

Investment Banks' Loans to the Private Sector V/S Claims on The Public Sector ($ Million)

Claims on Public Sector Claims on Private Sector

Starting the year 2010, Investment Banks' Loans to the Private Sector > Claims on the Public Sector in Conformity with BDL's Directives

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

RESERVES AT BDL REACH $52.30 BILLION AS AT END OF OCTOBER 2016

The Lebanese Central Bank’s balance sheet conveys some $207 million contraction in its foreign assets (foreign currency reserves) portfolio during the second half of October 2016 to $40.56 billion, from $40.77 billion as at mid-October. On the other hand, the value of gold reserves at BDL increased by around $145.90 million to reach $11.74 billion under pressure of a weaker U.S. dollar and speculations about possible interest rate hike in the coming months. On an annual basis, foreign assets at BDL came in 7.48% higher than the $37.74 billion reading reported at end of October 2015. Similarly, the value of gold reserves appreciated by around $1.14 billion (10.80%) year-on-year when compared to the $10.59 billion figure booked at end of October of last year. Overall, total reserves (foreign currency and gold) at BDL increased by $3.97 billion annually to $52.30 billion, up from $48.33 billion a year before. These reserves cover around 129.03 months of debt service and constitute around 4.69 folds the principal value of foreign and local currency debt that matures in 2016, and 69.98% & 81.37% of Lebanon’s gross and net public debt on a respective basis:

BDL’s balance sheet inched higher by $9.09 million during the second half of October to $103.65 billion as a result of the 0.71% increase in BDL’s securities portfolio to $25.84 billion coupled with a shy 0.04% expansion in the value of loans to local financial sector to $6.03 billion which altogether outweighed the 0.12% drop in the value of total reserves to $52.30 billion with the 0.59% decline in the value of other assets to $19.25 billion. In a related note, the share of gold and foreign currency reserves at BDL decreased to 50.46% of the Central Bank’s total assets by end of October 2016, down from 50.52% as at mid-October of the same year, and continue to linger behind the 52.47% level reported in the same period in 2015.

$ Billion End of October 2010

End of October 2011

End of October 2012

End of October 2013

End of October 2014

End of October 2015

End of October 2016

Gold 12.34 15.90 15.86 12.26 10.81 10.59 11.74Foreign Assets 31.18 32.01 35.15 35.63 38.87 37.74 40.56Total Reserves 43.52 47.91 51.01 47.90 49.68 48.33 52.30Source: Banque Du Liban, Credit Libanais Economic Research Unit

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

End ofOctober2010

End ofOctober2011

End ofOctober2012

End ofOctober2013

End ofOctober2014

End ofOctober

2015

End ofOctober2016

12.3415.90 15.86

12.2610.81 10.59

11.74

31.18 32.0135.15 35.63

38.8737.74

40.56

Evolution of Total Reserves at Banque Du Liban

Gold Foreign Assets

Source: Banque Du Liban, Credit Libanais Economic Research Unit

USD Billion

Total Reserves50.46%

Securities Portfolio24.93%

Loans to Public Sector0.00%

Loans to Local Financial Sector

5.82%

Valuation Adjustment

0.00%

Other Assets18.58%

Fixed Assets0.21%

Breakdown of BDL's Balance Sheet as at End ofOctober 2016

Source: BDL, Credit Libanais Economic Research Unit

Total Reserves

as a % of Year 2016 Short Term Debt* 469.47%

as a % of Gross Public Debt (1) 69.98%

as a % of Net Public Debt (1) 81.37%

In months of Debt Service (2) 129.03

(1) As at End of September 2016(2) Average Monthly Debt Service as at End of June 2016Source: ABL, MOF, Credit Libanais Economic Research Unit

* Due to the unavailability of data on projected interest payments for the year 2016, this figure only includes principal repayments on Eurobond Securities and Treasury Bills

$ Billion End of October 2015

Mid October 2016

End of October 2016

Bi-Weekly (% change)

Y-O-Y (% change)

Total Reserves 48.33 52.36 52.30 -0.12% 8.21%Securities Portfolio 17.26 25.66 25.84 0.71% 49.70%Loans to Public Sector 0.00 0.00 0.00 - -Loans to Local Financial Sector 4.85 6.03 6.03 0.04% 24.39%Valuation Adjustment 0.00 0.00 0.00 0.00% 0.00%Other Assets 21.44 19.37 19.25 -0.59% -10.20%Fixed Assets 0.23 0.22 0.22 -0.03% -2.77%Total Assets 92.11 103.64 103.65 0.01% 12.53%Currency in Circulation Outside BDL 2.87 3.29 3.29 0.02% 14.66%Financial Sector Deposits 74.12 82.50 82.61 0.13% 11.46%Public Sector Deposits 5.30 6.81 6.37 -6.36% 20.24%Valuation Adjustment 4.85 6.07 6.20 2.20% 27.95%Other Liabilities 1.58 1.47 1.67 13.71% 5.37%Capital Accounts 3.39 3.50 3.50 0.00% 3.26%Total Liabilities 92.11 103.64 103.65 0.01% 12.53%Source: Banque Du Liban, Credit Libanais Economic Research Unit

LEBANON NEWS

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

VALUE TRADED ON THE BSE UP BY 48.68% Y-O-Y BY OCTOBER 2016

The BSE witnessed a noticeable monthly increase in trading activity in October amid a consensus on the election of the new president, coupled with the release of satisfactory third quarter financial results by listed banks. More specifically, several rounds of block trades have been reported involving more than 6 million BLOM Bank listed shares in total and over 4 million BLOM Bank GDRs, the disposal of nearly 8 million BEMO Bank listed shares by one shareholder to his three children, and large traded chunks on Bank Audi listed shares (around 700 thousand shares during the last week alone). Consequently, volume traded on the Beirut Stock Exchange (BSE) rose by 31.31% month-on-month to just over 22.97 million shares, from 17.49 million shares in September. Value traded concurrently increased by 28.08% in October to nearly $169.76 million, from around $132.54 million a month before. Trades mainly consisted of banking stocks, which represented 88.62% of the total traded volume, followed, and at quite a distance, by real estate (11.30%) and industry & trading (0.08%) stocks. As far as market capitalization is concerned, the latter soared to about $11.87 billion at end of October, up from $11.11 billion in September and $10.89 billion in October of the previous year. This can be explained by the exceptional hike in the prices of Solidere “A” (33.33%) and “B” (30.37%) shares in light of the rosy political picture and the listing of Bank of Beirut Preferred shares Series “K”, additional BLC Bank common shares, and BLC Bank Preferred shares Class “D”. On a cumulative basis, traded volume on the BSE rallied by 49.31% y-o-y to just above 96.28 million shares by the end of the first ten months of 2016, with value traded surging by 48.68% to approximately $801.24 million. As far as trading multiples are concerned, the weighted average Price to Earning (P/E) and Price to Book Value (P/BV) multiples of stocks listed on the BSE ended the month of October significantly higher at 8.177x and 0.894x respectively, compared to 7.268x and 0.840x in September, mainly propelled by the correction in the prices of Solidere “A” and “B”.

Overall, trading activity remained rather thin despite the aforementioned block trades as portrayed by the small turnover ratio (being the number of shares traded divided by total listed shares) of 1.30% in October alone and 5.45% as at the end of the first ten months of the year.

Real Estate Sector, 11.30%

Banking Sector, 88.62%

Industry & Trading Sector,

0.08%

Allocation of Traded Volume in October2016

Analysis of the BSE Activity

September 2016 October 2016 Monthly % Change October 2015 October 2016 Y-O-Y %

ChangeTraded Value ($ 000) 132,538 169,757 28.08% 538,900 801,236 48.68%Traded Volume (000) 17,494 22,971 31.31% 64,485 96,284 49.31%Market Capitalization ($ Million) 11,114 11,866 6.76% 10,886 11,866 9.00%Traded Value/Market Capitalization 1.19% 1.43% 4.95% 6.75%Turnover Ratio 1.00% 1.30% 3.69% 5.45%

For the Ten-Month Period EndedFor the Month of

538,900

801,236

64,485 96,284

10,886

11,866

10,20010,40010,60010,80011,00011,20011,40011,60011,80012,000

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

YTD Oct-2015 YTD Oct-2016

Beirut Bourse Cumulative Trading Activity

Traded Value ($ 000) Traded Volume (000) Market Capitalization ($ Million)

Real Estate Sector

18.10%

Banking Sector81.77%

Industry & Trading Sector

0.14%

Allocation of Traded Value in October2016

Weekly Market Watch


THE COMBINED PROFITS OF LISTED BANKS POST A DOUBLE DIGIT ANNUAL GROWTH BY SEPTEMBER 2016

The combined profits of all six listed Lebanese banks, namely Audi Bank, BLOM Bank, Byblos Bank, Bank of Beirut, BEMO Bank, and BLC Bank rose by 12.13% year-on-year to $995.86 million as at end of September 2016, up from $888.15 million recorded in the same period of the previous year. More specifically, the aggregate net interest income of all six banks grew by 7.00% y-o-y to $1,750.03 million, with net fee & commission income rallying by 143.53% annually from $440.44 million to $1,072.60 million, fueling some 32.63% expansion in net operating income to $3,001.40 million. Audi Bank enjoyed the highest share (35.18%) of all six banks’ combined profits, followed by BLOM Bank (34.55%), Bank of Beirut (15.03%), Byblos Bank (11.41%), BLC Bank (2.79%), and BEMO Bank (1.04%). On the balance sheet front, the combined assets of listed Lebanese banks inched up by 4.30% during the first nine months of 2016 to $119.68 billion, up from $114.75 billion as at end of year 2015, with Audi Bank controlling 37.83% of the combined assets of all six banks, BLOM Bank amassing a share of 25.18%, Byblos Bank detaining 17.19%, the share of Bank of Beirut reaching 13.80%, that of BLC Bank firming at 4.57%, trailed and at quite a distance by BEMO Bank’s share of 1.43%. The increase in the combined assets of all six banks came as a result of the 4.82% expansion in their combined net loans portfolio to $38.67 billion. Bank of Beirut outperformed the other five banks in terms of the growth in its loan portfolio (9.39% YTD September), followed by Audi Bank (4.94%), BEMO Bank (4.90%), BLOM Bank (4.41%), Byblos Bank (4.19%), and BLC Bank (-3.39%). On the funding side of the balance sheet, the combined deposits of all six banks edged 2.42% higher since the beginning of 2016 to nearly $97.77 billion at end of September 2016. Consequently, the combined ratio of customer loans to customer deposits of all 6 banks improved to 39.55% by September 2016, from 38.64% at end of year 2015, with BEMO Bank topping the list (a ratio of 51.45%), exceeding by far BLOM Bank’s most conservative ratio of 29.30%. On the capitalization front, the combined equity of all 6 listed banks added a significant 7.68% momentum since the beginning of the year to circa $11.11 billion.

CORPORATE NEWS

As at End of 2015

As at End of September

2016 Change

Key Balance Sheet Figures $ Million W* $ Million W* $ Million W* $ Million W* $ Million W* $ Million W* $ Million $ Million %Total Assets 45,274.71 37.83% 30,130.93 25.18% 20,571.92 17.19% 16,521.39 13.80% 1,710.77 1.43% 5,471.75 4.57% 114,750.13 119,681.46 4.30%Net Loans & Advances 18,814.39 48.66% 7,513.54 19.43% 5,137.74 13.29% 4,649.78 12.03% 708.47 1.83% 1,842.67 4.77% 36,888.63 38,666.59 4.82%Customer Deposits 36,962.65 37.81% 25,643.51 26.23% 17,171.50 17.56% 12,087.33 12.36% 1,377.03 1.41% 4,523.54 4.63% 95,458.83 97,765.57 2.42%Shareholders' Equity 3,670.29 33.03% 2,817.04 25.35% 1,698.94 15.29% 2,302.03 20.72% 139.04 1.25% 483.06 4.35% 10,318.43 11,110.41 7.68%

Key RatiosNet Loans / Deposits 50.90% 29.30% 29.92% 38.47% 51.45% 40.74% 38.64% 39.55%

YTD September

2015

YTD September

2016Change

Key P&L Figures $ Million $ Million %

759.70 43.41% 506.70 28.95% 183.92 10.51% 190.37 10.88% 19.60 1.12% 89.74 5.13% 1,635.54 1,750.03 7.00%819.52 76.40% 112.10 10.45% 60.75 5.66% 61.86 5.77% 4.40 0.41% 13.98 1.30% 440.44 1,072.60 143.53%

1,535.56 51.16% 691.02 23.02% 329.27 10.97% 314.61 10.48% 32.40 1.08% 98.54 3.28% 2,262.96 3,001.40 32.63%350.34 35.18% 344.07 34.55% 113.66 11.41% 149.65 15.03% 10.39 1.04% 27.75 2.79% 888.15 995.86 12.13%

*W: Weight as a % of TotalSource: BSE, Credit Libanais Economic Research Unit

Net Interest IncomeNet Fee & Commission IncomeNet Operating IncomeNet Profits

Consolidated Financial Performance

Audi Bank BLOM Bank Byblos Bank Bank of Beirut BEMO Bank BLC Bank

Standalone Financial Performance

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%


15.18%18.74%

0.51%

8.43%

0.61%

-15.35%

Annual Growth In the Profitability of Listed Banks in the first nine months of 2016

Source: BSE, Credit Libanais Economic Research Unit

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%


7.11%

3.55%3.54%

2.30%

5.53%

-4.69%

YTD Growth In the Balance Sheet of Listed Banks - Q3 2016

Source: BSE, Credit Libanais Economic Research Unit-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

Audi Bank BLOM Bank Byblos Bank Bank ofBeirut

BEMO Bank BLC Bank

3.80%

2.20%

3.21%

-0.82%

1.81%

-1.28%

YTD Growth In Customer Deposits at Listed Banks - Q3 2016

Source: BSE, Credit Libanais Economic Research

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%


4.94%

4.41% 4.19%

9.39%

4.90%

-3.39%

YTD Growth In Net Loans at Listed Banks - Q3 2016


Weekly Market Watch

SOURCE: BSE, BLOM BANK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

BLOM BANK POSTS AN 18.74% Y-O-Y INCREASE IN PROFITS TO $344.07 MILLION BY SEPTEMBER 2016

BLOM Bank released its unaudited financial statements this week reporting some 18.74% annual increase in net after tax profits to $344.07 million YTD September 2016, up from $289.77 million in the same period last year. BLOM Bank attributed part of the stellar increase in its net consolidated profits to its foreign units. More specifically, the bank’s net interest income rose by 12.64% y-o-y to $506.70 million, while net fee & commission income increased by 2.42% to $112.10 million accompanied by a considerable 111.63% ($56.66 million) rally in net gains on financial instruments & other operating income to $107.42 million. As a result, the bank saw its net operating income bolster by 14.49% y-o-y to $691.02 million by September 2016, compared to $603.56 million during the same period in 2015. On the balance sheet front, BLOM Bank’s consolidated assets widened by 3.55% during the first nine months of 2016 to just over $30.13 billion, from $29.10 billion as at end of year 2015, thanks to the 4.41% increase in its net loans portfolio to $7.51 billion. Concurrently, customer deposits at BLOM Bank came 2.20% higher YTD September at $25.64 billion. Consequently, the ratio of net loans to customer deposits notched higher to 29.30% by end September with shareholders’ equity increasing to $2.82 billion. According to a press release published by the bank, the coverage ratio for non-performing loans (including collective provisions and real guarantees) reached 151% as at end of September with the primary liquidity (expressed as a percentage of customers deposits) and capital adequacy (calculated according to Basel III) ratios attaining 66.60% and 18.10% respectively. Moreover, BLOM Bank’s annualized return on average assets and return on average common equity came in highest among listed banks at 1.55% and 16.99% respectively with the cost to income ratio reaching 35.26%, the lowest among its listed peers.

CORPORATE NEWS

260

280

300

320

340

360

YTD September 2015 YTD September 2016

289.77

344.07

Mill

ion

s of

US

D

Evolution of BLOM Bank's Profitability

BLOM Bank

In Millions of USDAs at end of

2015As at end of

September 2016 % ChangeKey Balance Sheet FiguresTotal Assets 29,099.15 30,130.93 3.55%Net Loans and Advances 7,195.97 7,513.54 4.41%Customer Deposits 25,090.80 25,643.51 2.20%Shareholders' Equity 2,721.60 2,817.04 3.51%

Ratios (%)Net Loans to Customer Deposits 28.68% 29.30%

Coverage Ratio for Non-Performing Loans 153.00% 151.00%

Primary Liquidity Ratio 67.00% 66.60%

Capital Adequacy Ratio (Basel III) 18.00% 18.10%

In millions of USDYTD September

2015YTD September

2016 Y-O-Y % ChangeKey P&L FiguresNet Interest Income 449.83 506.70 12.64%

Net Commission and Fee Income 109.46 112.10 2.42%Net Gain on Financial Instruments & Other Operating Income 50.76 107.42 111.63%

Net Operating Income 603.56 691.02 14.49%Total Operating Expenses 243.04 263.61 8.46%Net Profits 289.77 344.07 18.74%

Profitability Ratios (%)Cost to Income Ratio 36.43% 35.26%ROaA 1.42% 1.55%ROaCE 16.04% 16.99%Source: BSE, BLOM Bank, Credit Libanais Economic Research Unit

Weekly Market Watch

SOURCE: BSE, BLC BANK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

BLC BANK POSTS A 15.35% Y-O-Y DROP IN PROFITS TO $27.75 MILLION BY SEPTEMBER 2016

BLC Bank published its unaudited financial statements this week, reporting a 15.35% y-o-y drop in net after tax profits to $27.75 million by September 2016, down from $32.78 million a year earlier. BLC Bank attributed this drop in its net consolidated profits to the booking of additional provisions for its subsidiary bank (USB Bank) in Cyprus. More specifically, the bank’s net interest income fell by 2.65% y-o-y to $89.74 million, while net commission & fee income inched higher by 1.13% to $13.98 million. Consequently, BLC Bank’s net financial revenues after impairment shed some 1.49% on an annual basis to $98.54 million as at end of Q3-2016. On the balance sheet front, the bank’s total assets contracted by 4.69% during the first nine months of 2016 to just over $5.47 billion owing to a 3.39% drop in net loans to just below $1.85 billion. Customer deposits were no exception decreasing by 1.28% to just below $4.53 billion. Consequently, the bank’s ratio of net loans to customer deposits edged slightly lower to 40.74% at end of September compared to 41.62% at end of year 2015. On the capitalization front, the bank’s shareholders’ equity fell by 4.39% during the first three quarters of 2016 to $483.06 million, from $505.25 million by year-end 2015. The bank’s capital adequacy ratio (calculated according to Basel III) reached 14.20% according to a statement circulated by the bank.

CORPORATE NEWS

In Millions of USDAs at End of

2015

As at End of September

2016 % ChangeKey Balance Sheet FiguresTotal Assets 5,741.09 5,471.75 -4.69%Net Loans and Advances 1,907.26 1,842.67 -3.39%Customer Deposits 4,582.37 4,523.54 -1.28%Shareholders' Equity 505.25 483.06 -4.39%

Ratios (%)Net Loans to Customer Deposits 41.62% 40.74%Capital Adequacy Ratio (Basel III) - 14.20%

In Millions of USD

YTD September

2015

YTD September

2016Y-O-Y

% ChangeKey P&L FiguresNet Interest Income 92.18 89.74 -2.65%Net Commission and Fee Income 13.82 13.98 1.13%Net Financial Revenues after Impairment 100.03 98.54 -1.49%Net Profits 32.78 27.75 -15.35%

BLC Bank

Source: BSE, BLC Bank, Credit Libanais Economic Research Unit

252627282930313233

YTD September 2015 YTD September 2016

32.78

27.75

Mill

ion

s of

US

D

Evolution of BLC Bank's Profitability

Source: BSE, BLC Bank, Credit Libanais Economic Research Unit

Weekly Market Watch

SOURCE: BSE, RYMCO, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12

RYMCO’S NET PROFITS AT $5.88 MILLION IN 2015

Rasamny Younis Motor Company s.a.l. (RYMCO), the exclusive agent of Nissan, Infinity, GMC, and Lotus, among others in Lebanon, released its audited financial statements for the year 2015, revealing a 143.11% y-o-y rally in net profits to $5.88 million, compared to $2.42 million in 2014. In fact, RYMCO’s net sales rose by 29.51% on an annual basis to $229.39 million, attenuated, to some extent, by the 30.54% hike in the company’s cost of goods sold to $201.41 million, resulting in some 22.53% increase in gross profits to $27.98 million. On the other hand, selling, general, and administrative expenses remained almost flat at $19.45 million, resulting in a twofold increase in operating profits to $8.86 million. The company’s gross profit margin fell to 12.20% in 2015, while the operating profit margin and the net profit margin improved to 3.86% and 2.56% respectively. On the balance sheet front, RYMCO’s total assets widened by 16.45% in 2015 to $208.22 million, fueled by some 16.47% expansion in notes and accounts receivable to $65.72 million. The company’s inventory of cars and spare parts, however, shed 2.20% y-o-y to $54.62 million. On the liabilities side, due to banks was up by 1.00% in 2015 to $41.65 million, while liabilities under acceptances and trade payables soared by 20.41% to $86.10 million. In parallel, shareholders’ equity came in 3.94% higher y-o-y at $52.53 million at end of 2015, leading to a drop in the company’s bank indebtedness to equity ratio to 79.28%. The company’s return on assets (ROA) and return on equity (ROE) ratios ended the year 2015 higher at 2.82% and 11.19% respectively, up from 1.35% and 4.79% in 2014.

CORPORATE NEWS

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2014 2015

2.42

5.88Millions of USD

Evolution of RYMCO's Profitability


In Millions of USD 2014 2015 Y-O-Y % Change

Key Balance Sheet FiguresTotal Assets 178.81 208.22 16.45%Notes & Accounts Receivable 56.43 65.72 16.47%Inventory of Cars & Spare Parts 55.85 54.62 -2.20%Tangible & Intangible Fixed Assets 32.63 32.87 0.74%Due to Banks 41.23 41.65 1.00%Liabilities Under Acceptances & Trade Payables 71.51 86.10 20.41%Shareholders' Equity 50.54 52.53 3.94%

Key P&L FiguresNet Sales 177.12 229.39 29.51%Cost of Goods Sold 154.29 201.41 30.54%Gross Profit 22.84 27.98 22.53%Selling, General, & Administrative Expenses 19.50 19.45 -0.28%

EBIT 3.94 8.86 124.72%Net Interest Expenses & Financial Charges 1.25 2.11 68.38%Income Before Tax 2.69 6.75 150.99%Net Income (Loss) 2.42 5.88 143.11%

RatiosROA 1.35% 2.82%ROE 4.79% 11.19%Bank Debt to Equity Ratio 81.58% 79.28%Total Debt to Equity Ratio 253.80% 296.36%Gross Profit Margin 12.89% 12.20%EBIT Margin 2.23% 3.86%Net Profit Margin 1.37% 2.56%

RYMCO


MONETARY AGGREGATES

All monetary aggregates ended the week of October 20, 2016 on a negative note. More specifically, the overall money supply, “M4”, narrowed by LBP 613.56 billion on a weekly basis to LBP 204,257 billion, noting that the non-banking sector Treasury bills portfolio rose by LBP 19 billion. In parallel, Lebanese-pound denominated deposits and currency in circulation, “M1”, shed LBP 345.79 billion week-on-week to LBP 8,879 billion on the back of some LBP 145 billion contraction in money in circulation and a LBP 201 billion drop in demand deposits. Local currency term deposits, “M2”, also lost some LBP 433.61 billion on a weekly basis, yet registered a 3.88% year-on-year increase to LBP 80,808 billion. Consequently, private sector term and saving deposits denominated in LBP (“M2- M1”) edged slightly lower to LBP 71,929 billion, with deposits denominated in foreign currencies (“M3–M2”) slipping to LBP 112,586 billion. MONEY MARKETS

The October 27th Treasury bill auction raised LBP 407.560 billion ($270.35 million), compared to LBP 119.606 billion ($79.34 million) in the auction of the previous week.

The majority of subscriptions (50.36%) was concentrated in the ten-year to maturity T-bonds, followed by the two-year (37.20%) and six-month (12.44%) tenure bills.

Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 6.55% in the auction of October 27. The yields on the six-month, two-year, and ten-year to maturity Treasury securities remained flat at 4.99%, 5.84%, and 7.46% respectively.

MONETARY PERFORMANCE

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13

3 Months

6 Months

12 Months

24 Months

36 Months

60 Months

84 Months

120 Months

180 Months

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

0 1 2 3 4 5 6 7 8 9 10

On The Run Yield Curve

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months 180 MonthsTreasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.08% 7.46% 7.90%

Mone y Supply

LBP Billion

M1 9 ,2 2 5 8 ,8 7 9 - 3 .7 5 %

M2 8 1,2 4 1 8 0 ,8 0 8 - 0 .5 3 %

M3 19 4 ,0 2 7 19 3 ,3 9 4 - 0 .3 3 %

M4 2 0 4 ,8 7 0 2 0 4 ,2 5 7 - 0 .3 0 %

M2 - M1 7 2 ,0 17 7 1,9 2 9 - 0 .12 %

M3 - M2 112 ,7 8 6 112 ,5 8 6 - 0 .18 %Source: Banque Du Liban, Credit Libanais Economic Research Unit

Oc tobe r 13 , 2 0 16 Oc tobe r 2 0 , 2 0 16 % Cha nge

6,000

26,000

46,000

66,000

86,000

October 13,2016

October 20,2016

204,870 204,257194,027 193,394

Money Supply - LBP Billion -

M4 M3

Source: BDL, Credit Libanais Economic Research Unit

Lebanese Treasury Bills

Yield (%) Face Value (in billions

of LBP)

% of Total Face Value

6 Months 4.99% 50.697 12.44%24 Months 5.84% 151.620 37.20%120 Months 7.46% 205.243 50.36% Total 407.560 100.00%Source: Reuters, Credit Libanais Economic Research Unit

October 27, 2016

LEBANESE EQUITIES

The unparalleled boom in the Lebanese equity market during the past couple of weeks was attenuated to some extent after the buildup in anticipation of a successful presidential election dissipated. Activity on the Beirut Stock Exchange remained, however, somewhat solid this week, with a block trade on Byblos Bank listed shares involving one million stocks on Thursday. In fact, the number of shares changing hands plunged to 2,051,885 shares, down from 10,659,880 shares last week, with value traded sinking to just below $14.61 million, from nearly $41.52 million a week before. The contribution of banking sector stocks of total weekly traded volume stood at 71.88% this week, compared to 91.52% last week.

In parallel, the average daily trading volume fell to 410,377 shares this week, from 2,131,976 shares last week. Similarly, the average daily trading value narrowed to $2.92 million, from $8.30 million a week earlier. Three heavy market cap-weighted losers and seven gainers were screened this week, dragging the BSE’s market capitalization down by 0.57% week-on-week to around $11.81 billion and the Credit Libanais Aggregate Stock Index (“CLASI”) lower by 0.70% to 1,148.30.

In the real estate sector, trades solely consisted of Solidere “A” and “B” shares (28.12% of total traded volume), with the price of Solidere “A” shedding 5.13% to $11.84 and that of Solidere “B” slipping by 3.93% to $11.74. Consequently, the Credit Libanais Construction Sector Stock Index (“CLCI”) ended its week down by 4.01% at 651.91 after two consecutive weekly gains.

In the banking sector, Byblos Bank listed shares amassed the highest concentration of trades (48.90% of total traded volume) on a thin turnover ratio of 0.18%. The Credit Libanais Financial Sector Stock Index (“CLFI”) inched 0.31% higher this week to 1,463.42 amid the 0.96% appreciation in the price of Bank Audi listed shares to $6.30 and the 1.45% increase in the price of BLOM Bank GDRs to $10.50, which outweighed the 1.20% drop in the price of Byblos Bank listed shares to $1.65.

LEBANESE EQUITIES

Weekly Market Watch


Credit Libanais Week of Week of Weekly YTDIndices 28-Oct-16 4-Nov-16 % Change % ChangeCredit Libanais AggregateStock Index <.CLASI> 1,156.45 1,148.30 -0.70% 7.53%

Credit Libanais FinancialSector Stock Index <.CLFI> 1,458.93 1,463.42 0.31% 5.55%

Credit Libanais ConstructionSector Stock Index <.CLCI> 679.17 651.91 -4.01% 15.00%

.CLASI Credit Libanais Aggregate Stock Index

Value Daily % Chng Daily Net Chng

1,148.30 0.118% 1.35

Yr.High Year Hi.Date Yr.Low Year.Lo.Date

1,156.45 28-Oct-16 1,065.48 9-Mar-16

Life High Life Hi.Date Life Low Life.Lo.Date

1,801.01 7-Jul-08 836.11 25-Mar-09

Friday, November 04, 2016

1,000

1,020

1,040

1,060

1,080

1,100

1,120

1,140

1,160

1,180

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Credit Libanais Aggregate Stock IndexWeekly Performance

CLASI

CLASI 0.70%

1,300

1,320

1,340

1,360

1,380

1,400

1,420

1,440

1,460

1,480

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Credit Libanais Financial Sector Stock IndexWeekly Performance

CLFI

CLFI 0.31%

450

500

550

600

650

700

04-N

ov-1

5

26-D

ec-1

5

16-F

eb-1

6

08-A

pr-1

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30-M

ay-1

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21-J

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11-S

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Credit Libanais Construction Sector Stock IndexWeekly Performance

CLCI

CLCI 4.01%

The weighted average price to earnings (P/E) and price to book (P/BV) multiples of listed stocks reversed their two-week upturn, ending Friday’s session lower at 8.013x and 0.886x respectively.

LEBANESE EQUITIES

Weekly Market Watch


P/E P/BV

Solidere A $11.84 -5.13% 439,585 21.42% $5,468,135 37.43% 100,000,000 $1,184,000 13.61 0.97 7.05% 1.90% 1.81% 8.86%Solidere B $11.74 -3.93% 137,441 6.70% $1,675,677 11.47% 65,000,000 $763,100 13.49 0.96 6.05% 1.92% 1.82% 7.87%BLC Bank $1.69 0.00% - - - - 71,033,333 $120,046 13.00 0.85 -0.59% 15.38% 14.61% 14.03%BLC Bank Preferred Class "B" $100.00 0.00% - - - - 550,000 $55,000 n.a n.a -2.44% 6.65% 6.32% 3.88%BLC Bank Preferred Class "C" $100.00 0.00% - - - - 350,000 $35,000 n.a n.a -0.99% 6.41% 6.09% 5.10%BLC Bank Preferred Class "D" $100.00 0.00% 5,300 0.26% $530,000 3.63% 750,000 $75,000 n.a n.a 0.00% - - -Bank Audi - Listed Shares $6.30 0.96% 2,967 0.14% $18,678 0.13% 399,749,204 $2,518,420 5.73 0.82 4.13% 6.35% 6.03% 10.16%Bank Audi GDR $6.44 0.00% 64,737 3.16% $417,546 2.86% 114,988,117 $740,523 5.85 0.84 7.33% 6.21% 5.90% 13.23%Bank Audi Preferred "F" $101.50 1.00% 1,500 0.07% $152,250 1.04% 1,500,000 $152,250 n.a n.a -0.20% 5.91% 5.62% 5.42%Bank Audi Preferred "G" $102.00 0.20% 1,000 0.05% $102,000 0.70% 1,500,000 $153,000 n.a n.a 0.99% 5.88% 5.59% 6.58%Bank Audi Preferred "H" $101.00 0.00% 2,125 0.10% $214,625 1.47% 750,000 $75,750 n.a n.a -0.49% 6.44% 6.11% 5.62%Bank Of Beirut - Listed Shares $18.80 0.00% - - - - 17,746,417 $333,633 9.64 1.08 0.00% 3.18% 3.02% 3.02%Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - - - 4,762,000 $100,002 10.77 1.21 0.00% 4.00% 3.80% 3.80%Bank Of Beirut Preferred "H" $26.25 0.00% 2,000 0.10% 52,500 0.36% 5,400,000 $141,750 n.a n.a -0.94% 6.67% 6.33% 5.39%Bank Of Beirut Preferred "I" $26.00 0.00% - - - - 5,000,000 $130,000 n.a n.a -1.89% 6.49% 6.17% 4.28%Bank Of Beirut Preferred "J" $26.25 0.00% - - - - 3,000,000 $78,750 n.a n.a 1.94% 6.19% 5.88% 7.82%Bank Of Beirut Preferred "K" $25.00 0.00% - - - - 4,000,000 $100,000 n.a n.a 0.00% - - -Byblos Bank - Listed Shares $1.65 -1.20% 1,003,417 48.90% $1,655,567 11.33% 565,515,040 $933,100 8.68 0.75 2.48% 8.04% 7.64% 10.12%Byblos Bank Preferred Class 2008 $101.50 0.40% 1,000 0.05% $101,500 0.69% 2,000,000 $203,000 n.a n.a 0.30% 7.88% 7.49% 7.78%Byblos Bank Preferred Class 2009 $101.60 0.20% 1,822 0.09% $184,967 1.27% 2,000,000 $203,200 n.a n.a 0.99% 7.87% 7.48% 8.47%Byblos Bank GDR $79.00 0.00% - - - - 1,309,078 $103,417 8.32 0.71 -1.25% 8.40% 7.98% 6.73%BEMO Bank - Listed Shares $1.60 0.00% - - - - 51,400,000 $82,240 8.89 0.95 -15.79% 2.36% 2.25% -13.54%BEMO Bank Preferred Class 2013 $100.00 0.50% 1,000 0.05% $100,000 0.68% 350,000 $35,000 n.a n.a 0.00% 7.00% 6.65% 6.65%BLOM Bank GDR $10.50 1.45% 102,250 4.98% $1,071,895 7.34% 73,896,010 $775,908 6.36 0.89 7.69% 7.90% 7.50% 15.19%BLOM Bank Listed Shares $10.00 0.00% 253,143 12.34% $2,536,062 17.36% 215,000,000 $2,150,000 6.06 0.84 6.38% 8.29% 7.88% 14.26%BLOM Bank Preferred Class 2011 $10.00 0.00% 32,598 1.59% $325,980 2.23% 20,000,000 $200,000 n.a n.a -1.48% 7.00% 6.65% 5.17%RYMCO Class "B" $3.25 0.00% - - - - 10,920,000 $35,490 14.77 1.67 0.62% 3.37% 3.20% 3.82%Holcim Liban $15.80 0.00% - - - - 19,516,040 $308,353 7.09 1.31 8.82% 5.12% 4.86% 13.68%Ciment Blancs Bearer $2.70 0.00% - - - - 6,000,000 $16,200 4.91 1.23 -30.77% 10.64% 10.11% -20.66%Ciment Blancs Nominal $1.57 0.00% - - - - 3,000,000 $4,710 2.85 0.71 -49.35% 18.29% 17.38% -31.97%

Note: n.a stands for not applicable

Market Capitalisation

($000)BEIRUT STOCK EXCHANGE

Weekly Value Traded

Total Listed Shares

Weekly %Change

Closing

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

% of Weekly Volume Traded

% of Weekly Value Traded

Gross Dividend

Yield

Net Dividend

Yield

YTD Total Net

Return

Lebanese Equities

YTD Price Perf.

Weekly Volume Traded

Previous Last % ChangeValue Traded ($) 41,517,531 14,607,381 -64.82%Volume Traded 10,659,880 2,051,885 -80.75%Average Daily Trading Value ($) 8,303,506 2,921,476 -64.82%Average Daily Trading Volume 2,131,976 410,377 -80.75%Market Cap - BSE ($) 11,875,108,893 11,806,842,946 -0.57%Weighted Average P/E 8.195 8.013 -2.22%Weighted Average P/BV 0.894 0.886 -0.92%Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Activity Analysis


0

2

4

6

8

10

Oct 28, 2016 Nov 4, 2016

8.195 8.013

0.894 0.886

Evolution of Beirut Bourse Comparable Benchmarks

P/E P/BV

LEBANON’S MAIN INDICATORS

Weekly Market Watch

SOURCE: BDL, ABL, MOF, IMF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16

2 0 0 9 2 0 10 2 0 11 2 0 12 2 0 13 2 0 14 2 0 15 2 0 16

MACROECONOMIC INDICATORS

GDP ($ Billion) 35.14 38.01 40.08 44.10 47.60 49.94* 51.17* 52.80*

Real GDP Growth Rate 10.30% 8.00% 0.90% 2.80% 2.50% 2.00%* 1.00%* 1.00%*

GDP Per Capita ($) 8,274 8,756 9,144 9,966 10,655 11,073* 11,237* 11,484*

Net Foreign Direct Investment ($ Billion) 4.84 4.96 3.40 2.30 3.79

FDI/GDP Ratio 13.77% 13.05% 11.79% 7.86% 12.71%

INDUSTRY

Industrial Exports ($ Million) 2,595 3,291 3,530 2,952 3,076 3,150 2,956 1,713 (6)

Import of Industrial Machinery ($ Million) 199 227 239 288 300 269 234 167 (6)

TOURISM

Total Number of Tourists 1,851,081 2,167,989 1,655,051 1,365,845 1,274,362 1,354,647 1,517,927 955,813 (5)

Growth in Tax- Free Spending 13% 21% 10% - 6% 4% 8% 2% - 10% (7)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 6,958 9,479 8,841 9,175 8,708 8,952 8,006 6,118 (7)

Number of Real Estate Sales Transactions 83,465 94,202 82,984 74,569 69,198 70,721 63,386 45,848 (7)

Construction Permits (000 sqm) 11,509 15,187 13,980 12,362 10,527 11,164 10,294 7,483 (7)

Cement Delivery (000 tons) 4,897 5,227 5,550 5,309 5,831 5,517 5,043 3,414 (6)

TRANSPORTATION

Beirut Port: Freight Activity (000 Tons) 5,769 6,469 6,677 7,225 8,268 8,281 7,240 6,600 (7)

Beirut Airport: Number of Passengers (million) 4.74 5.55 5.65 5.96 6.26 6.57 8.22 5.90 (7)

FOREIGN TRADE

Imports ($ Million) 16,242 17,964 20,158 21,280 21,228 20,494 18,069 14,240 (7)

Exports ($ Million) 3,484 4,253 4,265 4,483 3,936 3,313 2,952 2,228 (7)

Trade Balance ($ Million) (12,758) (13,711) (15,893) (16,797) (17,292) (17,181) (15,117) (12,012) (7)

BALANCE OF PAYMENTS

Net Foreign Assets at the Financial Sector ($ Million) 7,899 3,325 (1,996) (1,537) (1,127) (1,407) (3,354) 366 (6)

Foreign Assets ($ Billion) 28.30 30.85 32.24 35.74 35.29 37.86 37.09 40.56 (9)

PUBLIC FINANCE

Government Expenditures ($ Million) 11,388 11,336 11,675 13,321 13,640 13,952 13,528 7,273 (4)

Government Revenues ($ Million) 8,428 8,414 9,333 9,396 9,420 10,879 9,576 5,337 (4)

Budget Primary Defic it / Surplus ($ Million) 3,380 1,203 1,662 (110) (240) 1,307 724 495 (4)

Total Defic it ($ Million) (2,960) (2,894) (2,342) (3,925) (4,220) (3,073) (3,952) (1,936) (4)

Defic it / GDP Ratio 8.42% 7.61% 5.84% 8.90% 8.87% 6.14% 7.26%

Debt Service / GDP Ratio 11.49% 10.85% 9.99% 8.21% 7.96% 8.75% 8.60%

Net Public Debt ($ Billion) 44.11 45.01 46.35 49.12 53.18 57.30 61.54 64.27 (7)

Gross Public Debt/GDP Ratio 145.57% 138.39% 133.89% 130.80% 133.36% 133.28% 139.08%

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 87.08 97.31 103.50 110.00 117.41 124.53 131.17 135.49 (8)

(M2- M1) ($ Billion) 31.14 35.66 35.82 39.32 40.56 43.27 46.25 47.71 (8)

Monetization Level (M2/GDP Ratio) 97.35% 103.46% 99.32% 99.44% 95.68% 97.34% 101.74%

Change in CPI (%) 4.20% 6.19% 4.27% 4.68% 2.05% - 1.66% - 3.40% 1.03% (7)

BANKING SY STEM

Number of Commercial Banks 53 54 54 54 56 55 53 53 (1)

Number of Branches 885 912 948 962 985 1,020 1,039 1,039 (1)

Total Assets ($ Million) 115,250 128,925 140,576 151,883 164,821 175,697 185,989 198,071 (7)

Total Deposits ($ Million) 96,821 108,601 117,703 127,657 139,166 147,637 154,951 161,629 (7)

Loans to the Private Sector ($ Million) 28,374 34,929 39,375 43,452 47,381 50,899 54,224 56,653 (7)

Customer Loans/ Deposits 29.31% 32.16% 33.45% 34.04% 34.05% 34.48% 34.99% 35.05% (7)

Dollarization Rate 64.46% 63.24% 65.92% 64.82% 66.10% 65.71% 64.88% 64.98% (7)

Net Profit - After Tax ($ Million) 1,429 1,838 1,743 1,620

Exchange Rate (LBP to USD) 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50

* Figures Reflect IM F Estimates

(1) As at End of M arch, 2016, (2) As at End of April, 2016, (3) As at End of M ay, 2016, (4) As at End of June, 2016, (5) As at End o f July, 2016, (6) As at End of August, 2016, (7) As at End of September, 2016

Recap of Lebanon's Major Indicators

(8) As at October 20, 2016, (9) As at End of October, 2016

LEBANON’S RATINGS

Weekly Market Watch

SOURCE: S&P, MOODY’S, FITCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17

Rating Agency Tenor Rating

Long- Te rm B-

Short- Te rm B

Moody's Inve stors Se rvic e Long- Te rm B2

Fitc h Ra tings Long- Te rm B-

Short- Te rm B-

Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings

Stable

S table

Ne ga tive

Republic Of Lebanon Sovereign Ratings

Outlook

Sta nda rd & Poor's Globa l Ra tings

Rated Banks

Long Term Foreign Currency

Financial Strength

Outlook Long Term

IDR

Outlook Long-Term Counterparty Credit Rating

Short-Term Counterparty Credit Rating

Outlook

Bank Audi B2 E+ Negative B- Stable B- C Stable

BLOM Bank B2 E+ Negative - - B- - Stable

Credit Libanais - - - - - - - -

Byblos Bank B2 E+ Negative B- Stable - - -

BBAC - - - - - - - -

Fransabank - - - - - - - -

BankMed - - - - - B- C Stable

S&P Global Ratings

Lebanese Banks' Latest Ratings

Moody's Investors Service Fitch Ratings

Sources: M oody's Investors Service, Fitch Ratings, S&P Global Ratings

CONTACTS

RESEARCH

Fadlo I. Choueiri, CFA

[email protected]

961-1-608 000 EXT: 1280 Jad Abi Haidar, CFA [email protected] 961-1-608 000 EXT. 1283

Joelle Samaha [email protected] 961-1-608 000 EXT. 1281 Mayda Zaarour [email protected] 961-1-608 000 EXT. 1282

Nagham Abdel Ahad [email protected] 961-1-608 000 EXT. 1284

MONEY MARKETS DESK

Robert Araman

[email protected]

961-1-608 000 EXT. 0760

This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document does not constitute an offer or invitation to subscribe to or purchase any security, and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable.

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 18

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