THE ETERNAL NICHE

Lebanon 2019 | FINANCE | INTERVIEW

Despite higher interest rates and some hesitance from foreign investors, strong remittances and an appetite for risk from the Lebanese diaspora have kept the country's financial sector strong.

Wael El Zein
BIOGRAPHY
Wael El Zein is the founder, chairman, and general manager of Lucid Investment Bank. An investment and commercial banker with 30 years of experience in the US, the UK, Lebanon, and the GCC, El Zein has particular expertise in wealth management, investment banking, and private banking. He holds an MBA from the George Washington University and a BS in computer science from the American University of Beirut.

How was 2018 for Lucid Investment Bank?

We are an investment bank, so a good part of our work relies on raising equity and semi-equity. The prevailing high interest rates posed a serious challenge to our fundraising efforts, while investor confidence was also affected by the prevailing economic conditions. That said, there was a great deal of exaggeration. Coupled with high interest rates, this pushed investors away from the equity market, which created a negative equity situation in Lebanon. In reply, we scaled up our creativity and diversified our operations, though it was challenging.

What are your criteria for selecting your clients?

Our main clients are high and ultra-high-net-worth individuals in Lebanon and the diaspora. These clients have needs on a personal and corporate level, which is where Lucid Investment Bank steps in. We are an investment bank that caters to the needs of companies and provides services that allow them to finance their growth. Companies in a turnaround situation or facing issues often come to us for solutions and restructuring, sometimes even for our specialized financing products. We also serve clients wishing to sell their companies, merge, or make acquisitions. We are not looking to compete with commercial banks on traditional retail banking (although we provide medium- to long-term deposits), but are creating our own niche market. This is our Blue Ocean Strategy; our target is to create alternative investments, and we strive to be leaders in providing the best services.

What makes the Lebanese economy so interesting and peculiar when it comes to investment?

Currently, there is little fundamental difference in the economy. Recently, investments here have been perceived by foreign investors and expats as risky, though those with an emotional attachment to Lebanon are willing to assume those relative risks. Except for select investments, Lebanon does not have much of a competitive edge or advantage these days. In short, we are an emerging market, and those who understand the risks are also aware of the high returns. It is a challenging environment and truly requires a great deal of out-of-the-box thinking, but remains interesting for carefully selected and innovative investment schemes.

What is the effect of interest rates on the investment market?

The prevailing high interest rates makes it extremely difficult for equity investments to materialize. The current rates are caused by an increase in interest rates internationally as well as the Lebanese economic situation; however, we have always had problems in our country and have survived. We grew stronger in spite of them, thanks to experience and confidence in the banking sector. That said, the Central Bank of Lebanon and all the relevant regulatory bodies are steadfast in their mission of keeping the sector functioning in an optimal fashion. Overall, the banking sector is performing extremely well, as evidenced by the high level of foreign currency reserves, the stability of the Lebanese pound, and the healthy consolidated balance sheet of the banking sector. Finally, 2018, as is almost always the case, also saw positive net remittances into the country, which further reinforces people's trust in Lebanon.

Which sectors are performing well?

The banking sector continues to perform well thanks to the strict regulation that focuses on the correct implementation of rules and regulations. However, other sectors such as real estate are not performing well, which is why we created Legacy One, a dedicated real estate investment platform where Lucid is the financial administrator. Overall, most sectors have been negatively affected by the economic situation, as high interest rates on deposits imply high interest on corporate loans, reaching prohibitive levels for any business to self-finance. However, the tourism sector continues to perform well, thanks to stronger security and the number of international-caliber festivals being held.