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BLC Bank eyes expansion with preferred shares capital.

Summary: When BLC Bank's preferred shares float on the Beirut Stock Exchange Friday, they join a profitable and increasingly vibrant segment of the market.

BEIRUT: When BLC Bank's preferred shares float on the Beirut Stock Exchange Friday, they join a profitable and increasingly vibrant segment of the market. Their success, however, will not only hinge on the exchange's liquidity, but also on the outcome of the bank's strategic plans for expansion of both its footprint and offerings.

"The capital raised from preferred shares will be channeled toward achieving BLC's vision of local and international expansion. In particular, we are seeking to develop our private banking business and to launch an investment banking arm for which we already received approval from the Central Bank," said Georges Tabet, adviser to the chairman of BLC Bank and deputy general manager of BLC Finance SAL and BLC Services SAL in an interview with The Daily Star.

BLC Bank raised nearly $95 million from two heavily oversubscribed preferred share issuances in 2011. In the middle of 2011, the bank raised $40 million from 400,000 Class "A" preferred shares at 7 percent, 33 percent more than the original issue size, and another $55 million from Class "B" shares at 7.25 percent sold at the end of the year. Both share classes are redeemable within five years at $103 per share.

According to Tabet, holders of the latest offering include "more than 300 private investors who subscribed in small amounts and no institutional holders," reflecting the strength and breadth of the issue's success.

BLC Bank, which already has 51 million of its common shares listed on the BSE, is the last among its five public peers to float its preferred shares, although the bank's prospects are no less attractive than the rest of the pack.

The bank's history dates back to the glory days of Lebanese banking in the second half of the 20th century, but its modern legacy is one of resurrection. BLC Bank was acquired by the Qatar Investment Authority in 2005 for a little over $236 million, following a successful restructuring at the hands of some of its current executives. By August 2007, Fransabank had picked up QIA's majority stake for $153 million, while the latter retained the bank's five UAE branches and French subsidiary.

Almost half a decade later, BLC Bank has regrown its international footprint by acquiring Cyprus's USB Bank and is seeking renewed presence in the Gulf, as part of its plans for a global universal banking franchise. The bank's roster of domestic branches has been virtually steady at 35 for several years, but that too appears to be in line for a boost.

"We are in the process of opening a representative office in Abu Dhabi and will be inaugurating three to four new branches in Lebanon in 2012, including at least three outside Beirut," said Tabet.

According to Tabet, under the ownership of the Central Bank, BLC's activities were restricted to conservative traditional lending, but under new management, the bank started to target corporate clients, especially small and medium enterprises.

"Although the corporate segment does not currently represent a sizeable share of our deposits, it is growing at a very noticeable rate," said Tabet.

Luck also appears to be swinging in BLC's favor. The bank's absence in both Egypt and Syria spared it the brunt of regional turmoil, more than can be said for the modern-day titans of Lebanese banking. The bank had also planned to acquire a 10 percent stake in Fransabank Syria, but it's not clear if the deal has been postponed or scrapped altogether.

"We are not involved in Egypt in any way, and have a very small number of Syrian clients, hardly anything that qualifies as exposure," said Tabet.

As a result, BLC posted exceptional growth in its consolidated balance sheet and net income in the first nine months of 2011. Total assets grew 38 percent to $4.28 billion in the first nine months of 2011, and its net income rose 12.8 percent year-over-year to $37 million during the same period, far exceeding growth at other Alpha Banks, some of which disclosed flat assets and profitability.

Similarly, the bank's common shares, although rarely traded, have outperformed the market and their peers, their price rising 9 percent in 2011 to $1.81.

Favorable fundamentals and attractive returns are sure to go a long way in promoting BLC's new preferred shares, but as the dormant BSE shows, there's more to price than value. Instead, depressed investor sentiment has brought down trading activity along with the exchange's index to multiyear lows.

Within the ashes, however, lies an increasingly vibrant and profitably preferred shares market. Although the BLOM Preferred Shares Index closed 2011 down 0.4 percent to 103.6 points, it has been steadily rising since it hit a bottom of 102.4 points in July 2011, and is up 0.53 percent in 2012 through Jan. 26.

Trading in preferred shares has picked up considerably in the second half of 2011 to finish the year down only 6.4 percent to 1.67 million shares from an all time high in 2010.

The resurgence in market activity is one of the factors that BLC Bank is counting on. "We expect activity to pick up and prices of BLC's preferred shares and others to rise as the economic environment in Lebanon improves, but the success of BLC is a result of its choices and culture of delivering what matters to it stakeholders," said Tabet.

Copyright 2012, The Daily Star. All rights reserved.

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Publication:The Daily Star (Beirut, Lebanon)
Date:Jan 27, 2012
Words:936
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