Lebanon 2012 | FINANCE | INTERVIEW

TBY talks to Antoun Sehnaoui, Chairman of SGBL, on its expansion, target business lines, and deposit growth.

Antoun Sehnaoui
Antoun Sehnaoui is Chairman and CEO of Société Générale de Banque au Liban (SGBL). He is also the Chairman of Fidus, SGBL Group’s Lebanon-based financial brokerage firm. Furthermore, he is a member of the Board of Directors of the Association of Banks in Lebanon.

How will SGBL's acquisition of certain assets and liabilities of the Lebanese-Canadian Bank (LCB) impact your operations in Lebanon?

SGBL acquired certain assets and liabilities of the Lebanese-Canadian Bank after an account screening process based on Société Générale Group's standards. The acquisition of these assets and liabilities has increased our group assets to slightly over $11 billion, leading SGBL to rank fifth of sixth among Lebanese banks, up from ninth position. At the domestic level, the operation has allowed us to develop our branch network to better cover Lebanese territory; we now operate 78 branches, up from 43. However, most importantly, the acquisition will enable us to strengthen and develop our core business lines, including retail, corporate, and private banking thanks to a broader customer base, both inside and outside Lebanon. Not only do the new clients who have joined SGBL as a consequence of the acquisition bolster our client base, but they also contribute to diversifying it. Indeed, our newly acquired clientele allows for better risk diversification within SGBL's portfolio, and greater involvement in the Lebanese economy for our bank. We also believe that our broad product and service range will appeal to our new clients and will boost our performance, and we are putting in all the necessary efforts to give them the satisfaction that they deserve. On another level, the acquisition of some of the assets and liabilities of the Lebanese-Canadian Bank opens up new horizons for developing our customer base abroad. Indeed, some of the assets acquired relate to non-resident clients, namely based in some African countries. We have long since believed the Lebanese diaspora to represent one of the major growth opportunities for our group, and are therefore banking on this new portfolio of non-resident clients to further tap new markets. Overall, we are confident that our continuous quest for client satisfaction and our drive for quality will be the engine for growth, both domestically and internationally. In terms of efficiency, the acquisition is expected to generate economies of scale as well as synergies, both of which should support the quality of our products and services, the profitability of our businesses, as well as the cohesion of our teams.

SGBL recently acquired a majority stake in Société Générale Cyprus as well as raised its stake in its Jordanian subsidiary. What is the significance of these markets for SGBL's overall operations?

SGBL Group is a regional banking and insurance group. We also belong to Société Générale Group, which is a large financial group at the international level. This gives us invaluable support and an international platform to work on. This belonging is, in itself, an opportunity for business development and growth worldwide. Although Société Générale Bank in Jordan (SGBJ) is still a relatively small entity as compared to major market players in the Kingdom, we perceive Jordan as being a key market for us. We entered the Jordanian market 10 years ago and we strongly believe that the Kingdom offers strong potential for growth, both in the banking business as well as in our other business lines, at the top of which is insurance. Beyond that, we are confident that our presence in Jordan will enable us to reach new markets from our Jordanian base. To start with, Iraq and the Palestinian territories are markets that we believe have high potential. That is why we set an ambitious action plan for SGBJ a few years back, supporting human resource development, consolidating our presence in the market, and strengthening our competitive edge as a retail and corporate bank. The plan has started to yield fruit, and we hope to take our ambitions to the next level soon. As for our recent penetration of the Cypriot market, it has indeed been a major step forward for our group. The acquisition of Société Générale Cyprus has introduced the group into Europe, thus also paving the way for future growth prospects, this time in the European market. Cyprus' vicinity to Lebanon and its position in Europe give it outstanding advantages that have already allowed SGBL Group to tap new business opportunities.

What factors do you feel have contributed most to overall deposit growth in Lebanon over the last few years?

First, it is worth mentioning that Lebanon's deposit base is practically three times the country's GDP. It is made up of 80% resident deposits and 20% non-resident. In particular, the non-resident deposit component has been increasing steadily, especially since 2008, with savings fleeing from shaky markets into what was perceived as a safe haven. The rocketing of oil prices also drove Arab deposits into Lebanon and gave momentum to the economy as a whole. But besides being driven by international economic developments, Lebanon's deposits are strongly correlated to the domestic political and economic scenes. Lebanon has been registering robust growth since 2007, and our balance of payments has registered historical surpluses as confidence strengthened and the country's risk perception was subdued by a stable political environment and good economic performance.

“We are confident that our continuous quest for client satisfaction and our drive for quality will be the engines for growth."

What is your forecast for continued deposit growth, and what does this signal for corollary loan growth?

Deposits have increased at a strong pace in recent years; they rose by 20% on average per year between 2008 and 2010, bolstered by the international financial crisis. In 2011, we expect growth to come back to more realistic and average levels—around 8% in the sector. On the one hand, the economic slump in most of the leading economies, and on the other hand, a troubled situation in a major part of the Arab world, have had a direct impact on Lebanon, both at the level of the real economy and at the banking level. Still, it is unlikely that this relatively weaker growth in deposits will affect loan growth. In fact, loan growth has reached around 24% per year on average if we consider the last three years, thus slightly higher than deposit growth, as it was driven by economic momentum and an overall improvement in sovereign risk. Although they have typically privileged public sector lending for many years, Lebanese banks have been gradually turning to private sector lending as sovereign risk diminished and yields on government paper shrank. Both the retail and corporate industries have benefited from this strategic shift in bankers' behavior. This trend is expected to continue as long as Lebanon's political scene remains stable or better still, if it improves. It might even become more sustained should the government embark seriously on much needed reform and restructuring programs that would help support the country's investment framework.