Compared to 2016, how did Bank Audi perform in Lebanon, Turkey, and Egypt in 2017?
2017 was another successful year for Bank Audi. Within the context of persisting regional uncertainties across our pillar markets in Lebanon, Turkey, and Egypt, we adopted a consolidation mode, favoring primarily operating conditions and asset quality reinforcement over asset growth to further reinforce the bank's financial flexibility and efficiency. Notwithstanding, we succeeded in delivering double-digit growth in consolidated net profits, which rose to USD559 million, and USD464 million when excluding profits from discontinued operations, i.e. a net growth of 13% relative to the normalized net profits of 2016. This was a combination of great performances in Lebanon, Egypt, and Turkey, as well as across our private banking entities.
What are your main objectives for 2018?
For 2018 and beyond, we look to continue pursuing the consolidation mode allowing for conservative assets growth and prioritizing asset quality, efficiency, and profitability enhancements. The benefits of this direction will help us sustain double-digit growth in recurrent net profits without incurring additional risk weighted assets or consuming additional capital, thus reinforcing our financial flexibility. This strategy will also translate into an improved risk profile across entities, while further consolidating and strengthening our leadership in our home market, Lebanon, and our market positioning in Turkey and Egypt and also realizing our private banking business line objectives.
Which of the bank's offered products currently see the greatest demand?
Bank Audi has a comprehensive product and services offering that is well diversified across its core business, be it corporate and commercial banking, private banking, or retail banking. The most important development in 2017 was related to the newly updated internet banking platforms that provide customers with means to perform their banking transactions anywhere and anytime through a unified user experience. In two years, we have witnessed a considerable increase in adoption of those channels by customers, whereby the number of active users has increased by a third. The number of client logins on Bank Audi's digital channels have doubled, with 66% of those logins done on the mobile banking platform. The number of transactions has also more than doubled and now represents over half of the bank's movable transfers, with more than half of those transactions made on the Bank Audi app.
What are the bank's key initiatives in the area of responsible financing?
We have committed to responsible financing through the integration of environmental and social (E&S) risk considerations into our credit decision-making process. In 2014, the bank developed an ESMS framework that details the process against which every lending transaction is evaluated from an E&S risk perspective. This framework ensures that we conduct corporate and commercial lending activities in the line with the best practices in the field. In practice, the ESMS framework helps us identify and manage loans with potential environmental and social risks.
What effect does bank exposure to sovereign debt have on the overall Lebanese economy?
The effects of such exposure on the economy remain rather limited. Lebanese banks' holdings of sovereign exposure encompass Lebanese Treasury bills denominated in local currency and sovereign eurobonds denominated principally in USD. Given that Lebanese banks are not allowed to take any FX position exceeding 1% of their shareholders equity, we need to look at two separate balance sheets, one in LL and one in FX. For the LL balance sheet, the TBs portfolio of banks currently stands at 33% of LL deposits, bearing in mind that there is practically no default risk in local currency as the Central Bank is the issuer of Lebanese pounds. On the other hand, any exposure in FX in principle entails a default risk. However, the total eurobond portfolio of Lebanese banks represents less than 12% of deposits denominated in FX, while the primary liquidity in foreign currencies liquidity accounts for more than 50% of those deposits, which suggests a relatively limited exposure in FX.