Lebanon 2017 | FINANCE | INTERVIEW

TBY talks to Freddie C. Baz, Group Strategy Director of Bank Audi, on the importance of Turkey and Egypt to Audi's portfolio, venturing into Africa and Latin America, and leading by example in corporate governance and risk management.

Freddie C. Baz
As Group Strategy Director, Freddie C. Baz is responsible for the development of internal and external oversight and communication. He was previously CFO from 2006 to 2015. In June 2015, he was appointed Vice-Chairman of the Board of Directors. He is also the Chairman of the Board of Directors of Bank Audi France SA. Baz is the General Manager of Bankdata Financial Services WLL, which publishes Bilanbanques, the only reference in Lebanon that provides an extensive structural analysis of all banks located in Lebanon. The author of numerous publications and a wide lecturer, he holds a PhD in economics from the University of Paris I, Panthéon-Sorbonne.

What factors led to such a strong year in 2016?

There are no miracles or mysteries; the bank's figures highlight the strong performance achieved in the three main markets of the group: Lebanon, Turkey, and Egypt. One ought to be careful when reading these figures because consolidated figures are normally expressed in US dollars, while the activity in our material subsidiaries abroad, mainly in Turkey and Egypt, is denominated in local currencies. Those two witnessed severe depreciations in 2016 relative to the US dollar, which has affected the translation of the real performances at the consolidated level. When the Egyptian pound and Turkish lira depreciate, the contribution to the consolidated assets and earnings translates into fewer dollars. It does not mean that the entities have not performed well; it is just a currency translation impact. Had the exchange rates of those currencies been the same as at end-December 2016 as they were as at end-December 2015, the fundamental business in both countries would have increased between 10 and 22%, outperforming in each country the growth achieved by peer banks. That supports and justifies the important results achieved. It is a combination of good performances in Turkey, Egypt, and Lebanon, despite the volatility.

Where do you stand relative to your diversification strategy?

Today, Egypt represents 7% and Turkey represents 25% of consolidated assets. In four years of average activity, we have succeeded in building USD11 billion of assets in Turkey, generating USD26 million of net profits after tax and provisions in the first quarter of 2017 as compared to USD69 million in 2016. Together they represent almost one-third of total assets and earnings of the group, which falls in line with the group's diversification strategy. With the regional expansion launched in 2006 aiming at achieving a balanced breakdown between Lebanon and abroad, in terms of assets and earnings we are already there.

How are the bank's efforts to have a presence in regions such as Latin America and Sub-Saharan Africa progressing?

We are already covering Sub-Saharan Africa and Latin America but without a physical presence there. We have desks for both in Lebanon, Switzerland, and France, not to mention relationship managers that have built a business portfolio of close to USD3 billion there. Those are mainly deposits or assets under management in Switzerland or some trade finance or corporate loans that are mainly granted from Paris and Beirut. When we succeed in building such an important franchise in places where we do not have a physical presence, it says quite a bit about our capacity to build material assets once we are on the ground.

What is your vision for economic development in the country this year?

Since the outbreak of the Arab Spring and the Syrian war, real GDP growth rates have gone down from 8-9% per annum to 1-2%, which represents a yearly forgone income of no less than 6-7% of GDP. However, things have slightly improved with the resolution of the presidential gridlock. In the case of a settlement in Syria, the favorable spillover effects on Lebanon will be significant. We believe there is room to stimulate domestic consumption and investment and more external demand from the low base of the past few years.

What are your goals and priorities for the group in Lebanon and the region?

As the leader in the Lebanese banking sector, we have a fiduciary responsibility to give an example in terms of governance, compliance, and risk management. We are keen to maintain our leadership at each of these levels. Domestically, it still revolves around consolidating and strengthening our leadership in Lebanon with all that entails in terms of products and service offering, technology and communication investments, and governance, compliance, and risk abidance by the best practices. At the level of foreign businesses, we have clearly set market share targets for our two most material markets: Turkey and Egypt.