Byblos gives Lebanon an image of stability

Bank's retail business to drive growth as it expands in region.

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Despite persistent political turmoil, Beirut has many attractive spots for investors to park their cash. Byblos Bank shares could be one of them. Like other Lebanese banks, Byblos draws deposits mainly from the Lebanese diaspora and regional investors who take comfort in the country's secrecy laws, which were put in place after 2001. This provides ample liquidity. But the retail sector is poised to be the profit driver for Byblos. The ratio of Lebanon's consumer lending to GDP is relatively low, at 19 per cent, especially when juxtaposed with the high rate of consumer spending.This indicates the retail market is underserved, which Byblos plans to address with a 20 per cent increase in its retail portfolio.

The retail play is a key factor in HC Brokerage's decision to initiate coverage of Byblos with a buy rating of $2.70 a share, compared with its closing price yesterday of $1.83, said the HC analyst Janany Vamadeva. With Lebanon there is always the question of risk, not only political but also the fact that the country has the highest public debt in the world. But Lebanon has never defaulted on its obligations throughout its history of instability. The banking sector manages its balance sheets very conservatively and Byblos is arguably the most conservative. It keeps 72 per cent of its retail portfolio tied to some kind of collateral. Byblos also has the highest non-performing loan (NPL) coverage ratio among Lebanese banks - 115 per cent, while Bank Audi has 99 per cent. Fee income accounts for 20 per cent of Byblos's total income, mostly through trade finance and loans to small and medium-sized enterprises.

Ms Vamadeva said the bank's increased participation in infrastructure projects and venture capital funds would support this segment. Byblos also plans to expand its international presence, especially in the region. The bank has operations Sudan, Syria and Iraq, and plans to enter Jordan and Algeria.