Global Arab Network | Lebanon: Stable Ratings Affirmed for BBAC Bank

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Lebanon: Stable Ratings Affirmed for BBAC Bank

Global Arab Network - - Jihad Taki

Thursday, 19 May 2011 19:37

Lebanon Stable Ratings Affirmed for BBAC Bank

Global Arab Network - Capital Intelligence (CI) announced that it has affirmed BBAC’s Long-Term and Short-Term Foreign Currency Ratings of ‘B’ and ‘B’ respectively. These ratings continue to be constrained by CI’s sovereign ratings for Lebanon. The agency also affirmed the Financial Strength Rating (FSR) of ‘BB+’, reflecting the Bank’s comfortable liquidity, moderate profitability, adequate capital position and limited market share of assets and deposits. In common with other local banks, BBAC’s FSR rating remains constrained by ongoing asset and earning concentrations arising from investment in Lebanese government paper (rated ‘B’) and a challenging domestic political environment. Given the high likelihood of official support in case of need, the Support Level is ‘3’. The Outlook for all the ratings is ‘Stable’, Global Arab Network reports according to a press statement.

BBAC, together with the other Lebanese banks, was not impacted to any discernible degree by the global financial crisis. The Bank’s balance sheet continues to demonstrate comfortable liquidity reflecting a stable base of customer deposits coupled with a good level of bank placements with prime institutions abroad. However, the bulk of BBAC’s liquidity remains invested in Lebanese government securities and treasury bills giving rise to asset concentration. In contrast to its larger peers, who have expanded within the MENA region and diversified risk assets and revenue streams, BBAC’s assets remain largely domestic in nature.

Driven by Lebanon’s strong economic expansion in previous years, BBAC’s loan quality has improved as evidenced by the decline in the ratio of NPLs to gross loans. BBAC also achieved steady growth in net profit over the last four years, although the ROAA remains modest and lower than most of its peers. This is partly a function of the Bank’s moderately higher liquidity. Capital adequacy is satisfactory and has been reinforced in recent years through earnings retention. While BBAC’s exposure to Lebanese sovereign debt is some cause for concern given the size of the country’s debt burden and the continued lack of fiscal reform, Lebanon’s improved international liquidity position has mitigated the sovereign’s near term refinancing risks.

BBAC, formerly Bank of Beirut and the Arab Countries, was founded in 1956 by prominent public figures and businessmen. The Bank underwent a change in ownership in November 2005 after one of the founding shareholders sold their 37.05% stake to Fransabank, one of the top ten Lebanese banks. The Assaf family remains the largest owner, holding 54.06% of shares. BBAC offers a full range of commercial and retail banking services including treasury and investment and private banking services through 34 branches nationwide, a branch in Cyprus and a branch in Irbil, northern Iraq. Total assets at end 2010 amounted to LBP6,162 billion (USD4 billion) and total capital was LBP463 billion (USD307mn).

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