Banque Du Liban Et D'Outre-Mer Asgnd BB- Rtg By S&P.

LONDON--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/17/97-- Standard & Poor's today assigned its double-B-minus long-term counterparty rating to Banque du Liban et d'Outre-Mer (BLOM). The outlook on the rating is stable.

The rating on BLOM balances its relatively low risk asset profile, its high liquidity, and its international diversification with its comparatively lower capital position, and the risks of the current operating environment for banks in Lebanon, where the economy is recovering after a long civil war and the banks face a period of adjustment.

BLOM is the largest bank in Lebanon with total assets of approximately $3 billion equivalent. Its main business is managing the savings of rich Lebanese and in this it has a leading position in the market and a strong reputation. The key to understanding BLOM is the emphasis of management on keeping the bank very liquid at all times -- and indeed, the bank's liquidity measures outstrip those of its peers. Nearly 73% of assets were invested in lower risk cash and interbank placements and government securities at the end of June 1997. As a consequence of the low risk asset allocation, the bank's returns tend to lag those of its peers, although return on average assets of 1.1% in 1996 and even better returns anticipated for 1997, profitability is satisfactory. The conservative emphasis on liquidity does mean, however, that BLOM lags its peers in developing its lending franchise.

BLOM's international network has been a double-edged sword. The bank has the largest international presence of any Lebanese bank, following the consolidation of Banque Banorabe at year-end 1996, with operations in London, France, the Gulf, and Switzerland. During the civil war, the network provided the means by which operations could effectively be moved off-shore and clients could continue to be serviced; it also protected shareholders' investments from the currency devaluations that plagued Lebanon. Although Banque Banorabe, when consolidated, also brought with it a disproportionately large number of problem loans, from the U.K. real estate crisis in the late 1980s, these positions are comfortably reserved and Standard & Poor's does not expect any future problems to emanate from foreign operations. On the contrary, Banque Banorabe enhances the creditworthiness of BLOM by providing some diversification.

BLOM's capital indicators are also generally slightly below those of peers. This in part reflects the low risk nature of the assets that the equity is supporting, but also management's preferences. Whereas other rated peers have paid no dividends over the past few years, as earnings are reinvested in the bank to support it at a time of rapid growth, 20%-30% of BLOM's net income has been distributed to shareholders in the past three years.

More generally, Standard & Poor's sees the Lebanese banking system as evolving very rapidly as it modernizes. BLOM is not in the vanguard of new developments in terms of the consolidation of the system or the development of new products, preferring instead to emphasize safety. However, its emphasis on liquidity and its choice of the lowest risk allocation for its assets is clearly positive from the debtholder's perspective.

CONTACT: Richard Thomas, London (44) 171-826-3627

Scott Bugie, Paris (33) 1-4420-6680

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