ANNUAL REPORT 2016 - Credit Libanais€¦ · Annual Report 062016 Credit Libanais Group The Bank also participated in several national loan syndications deals. Moreover, CL adopted

B a n k i n g G r o u p

ANNUAL REPORT 2016

MOVING FORWARD WITH RESILIENCE AND COMMITMENT

Statement of the Chairman General Manager

Financial Highlights

CL Group Medium-Term Strategy

Credit Libanais' Identity

Corporate Governance

Macroeconomic Operating Environment

Business Segments Activities and Analysis

Retail Banking Activities

Marketing and Business Development

Electronic Banking

Corporate Banking

Corporate Responsibility

Foreign Entities

Affiliated Companies

Treasury, Global Markets, Asset Management and Private Banking

Investment Banking (CLIB)

Control Functions Activities and Analysis

Risk Management and Strategy

Internal Audit

Compliance and AML/CFT

Financial Consumer Protection

Support Functions Activities and Analysis

Banking Information Technologies

Human Resources

Financial Statements

CL Group Financial Results

CLIB Financial Results

CLA Financial Results

Branch Network and Correspondent Banks

CL Network in Lebanon

CL Network Worldwide

Correspondent Banks Network

CL Milestones

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Annual Report 2016 Credit Libanais Group

Statement of theCHAIRMAN GENERAL MANAGER

On October 31, 2016, Lebanon elected a new president, followed soon after by the formation of a new government in December, thus putting an end to the extended stalemate that paralyzed the country and its economy. In a difficult regional conjuncture, the Syrian crisis continued to put pressure on Lebanon’s economy and frail infrastructure.

CREDIT LIBANAIS GROUP, ONE OF THE ALPHA BANKS IN LEBANON, REMAINS

DEEPLY ROOTED IN THE COUNTRY, WITH A LANDMARK REFERENCE HEAD OFFICE

TOWER IN THE BANKING SECTOR.

In this difficult context, the banking sector continued to prove its resilience, registering an astounding 9.85% increase in the combined balance sheet of commercial banks to nearly $204 billion as at end of December, propelled by some 5.45% growth in loans to the private sector to some $57 billion. Customer deposits were no exception, constantly growing in spite of the turbulences in the region, ending the month of December with some 7.42% YOY growth to around $166 billion. The sector remained highly liquid in the year 2016, enjoying a primary liquidity ratio of 81.80%. The deposit base at Lebanese banks remains highly dollarized, with the deposit dollarization rate standing at 65.82% in December, compared to 64.88% at year-end 2015.

On the other hand, Central Bank of Lebanon introduced another round of stimulus packages as a quantitative easing tool, aggregating to around USD 6 billion since 2013 at low interest rates (1%) geared towards the financing of various sectors of the economy, and contributing to almost half of the country’s GDP growth.

Credit Libanais Group one of the alpha banks in Lebanon remains deeply rooted in the country, with a landmark reference Head Office Tower in the banking sector.

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THE BANK HAS THE 8TH LARGEST NETWORK IN THE COUNTRY WITH 77 BRANCHES

INCLUDING THE LOCAL AND INTERNATIONAL OUTREACH IN CYPRUS, BAHRAIN

AND IRAQ, A REPRESENTATIVE OFFICE IN CANADA AND A SUBSIDIARY BANK IN

SENEGAL.

The Bank has the 8th largest network in the country with 77 branches including the local and international outreach in Cyprus, Bahrain and Iraq, a representative office in Canada and a subsidiary bank in Senegal. As a matter of fact, Credit International sa (CISA) is the only Lebanese bank currently present in the West African Monetary Union (“WAMU”) which inaugurated its first branch in Dakar in 2011 and opened its second branch in 2015.

The year 2016 saw a major change in the shareholding structure of Credit Libanais pursuant to the decision of its majority shareholder EFG Hermes Holding SAL to sell its stake in the Bank with the objective of further consolidating the company’s investment activities in the MENA region. Consequently, a diversified network of prominent investors from Lebanon and the region have joined the Bank’s shareholding base. The deal has been considered a strategic achievement for the Lebanese banking sector amid the difficult regional and national conditions, reiterating investors’ confidence in the sector. The transaction has also highlighted the robust financial standing of Credit Libanais, as well as the professionalism of its management team who successfully marketed the deal in such a critical timing.

In this context, CL continued to move forward with resilience relying on a prudent strategy, embedded risk management and a thorough corporate governance culture. In 2016, Capital Intelligence Ratings (CI) revised the outlook on Credit Libanais (FCR) to “Stable” from “Negative”. In addition, the Bank maintained a sound activity growth and, with major indicators reporting healthy increases:

consolidated assets reached USD 10,66 billion, revealing a y-o-y increase of 7.27%, customer deposits neared USD $8,91 billion, posting a y-o-y increase of 6%, net loans reached USD 3,2 billion, demonstrating a y-o-y increase of 8.09%, loans-to-deposits ratio firmed at 36%, pre-tax return on average equity (ROaE) stood at to 11.44%, pre-tax return on average assets (ROaA) reached 0.81%, while net profits amounted to USD 70,3 million.

Furthermore, CL Group preserved strong asset quality metrics in its lending portfolio, as non-performing loans (NPL) ratio remained at comfortable levels in 2016, well below the average reported by peers. The Bank also enjoys robust capitalization profile while maintaining a healthy balance sheet growth, as solvency ratios were among the strongest in the sector with the Bank’s Capital Adequacy Ratio reaching 14.75%, compared to BDL threshold of 14.0% at year-end 2016 and shareholders’ equity (including profits of the year) nearing USD 869 million. Similarly to most Banks in the Lebanese banking sector, Group CL enjoys sound liquidity ratio of 79.86%. Also, net interest income stood at USD 163.96 million, with net fees and commission income expanding to USD 38.31 million, increasing net financial revenues to USD 212.71 million.

On the corporate banking level, despite the difficulties hindering trade activities in 2016, corporate banking closed the year on a positive note, with a 3.5% growth in unfunded facilities utilization, and a remarkable 11% growth in funded facilities utilization, coupled with an improved portfolio risk rating illustrated by a noticeable decrease in doubtful loans.


The Bank also participated in several national loan syndications deals. Moreover, CL adopted a risk-based pricing approach, in line with the capital adequacy requirements of the Basel III framework. Compliance with anti-money laundering and counter-financing of terrorism regulations, as well as embedded social responsibility standards remained strong performance indicators marking the elapsed year. In addition, implementation processes of the profitability and IFRS9 modules, as well as several restructuring initiatives highlighted the year’s developments and resulted in a positively competitive work environment, higher employee performance and better career development opportunities.

In parallel, subsidized Central Bank of Lebanon (BDL) lines of credits, as well as partnerships with the International Finance Corporation (IFC), the Arab Trade Finance Program (ATFP), the European Investment Bank (EIB) and other international bodies helped us further extend our financing capabilities and consolidate our liquidity ratio. In this context, the Bank secures important financing at low cost from several international banks in support of its trade activities.

On the retail banking level, with Credit Libanais’ one-to-one banking privileged service model, our dedicated account managers continued to offer diversified products and solutions to meet customers’ financial and investment needs. Driven by market conditions which further deteriorated in 2016, retail activities achieved good results, nonetheless.Deposit volume is largely composed of individual customer deposits converging from the Bank’s large network of branches. Leveraging on this extensive outreach, the Bank continues to further build on opportunities to offer its customers numerous innovative services in trade and corporate finance, investment banking services, government subsidized finance, e-commerce, leasing, consumer loans, smart cards, points of

sale, bancassurance, and micro-finance, (SMEs) funding especially to those in deprived areas, who find it difficult to access mainstream banking.

In retail commercial lending, CL achieved a 6.4% growth rate on performing loans, with a special focus on green environmental facilities. Moreover, building on the Bank’s important role in financial inclusion through various lending schemes to SMEs and micro finance, the Bank continued to lead initiatives and design campaigns in 2016 geared towards craftspeople who promote the values of “heritage”. Such lending schemes offer flexible repayment terms to cater to various business models of customers, and our teams of account managers consistently provide them with tailored advisory services. Also, CL offerings to “inclusive” markets continued to expand with programs such as “VITAS,”“ESFD”, “KAFALAT” and microfinance in general. In this context, ESFD (Economic and Social Fund for Development) loans grew by 15.78% in 2016, and SME outstanding facilities achieved a y-o-y growth of 9.6%.

Also, in 2016, CL reaffirmed its leading role in supporting stability in the lives of Lebanese families, including various professional associations (lawyers, judges, medical doctors, pharmacists, etc…) by extending various affordable housing loans schemes which recorded a growth in the performing portfolio of over 19%, while the military housing schemes registered a growth of 32.8% in the performing portfolio.

CL digital journey was further enhanced in 2016 to cater to the new demands of the millennials. Our e-outreach encompasses more than 10,000 electronic point-of-sale, 150,000 banking cards distributed, 24/7 secure online banking services and customer service center, 95 ATMs, CL e-bank applications, to name but a few. By the same token, in the cards business, we were proudly the first bank in Lebanon to become fully compliant

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with Payment Application Data Security Standards (PA-DSS), providing our cardholders with the highest international security standards with regards to their transactions and data protection.

To support the business functions in meeting the growth objectives of the Bank, various system upgrades and new technology were introduced in 2016; in fact, the seamless transition during the major upgrade of the core banking system allowed for better customer experience and enhanced internal user interfaces. Also, with the role of compliance gaining more grounds, Credit Libanais Group built on the latest regulations and best practice standards in national and international contexts and further upgraded FATCA and AML systems throughout the Group. Implementation of the Common Reporting Standard is ongoing in 2017. In parallel, extensive training programs to staff go hand in hand with the evolving enhancements and their respective implementations.

In addition, the Financial Consumer Protection Unit established in 2015 continued to build on the culture of transparency and equitability of the Bank’s products and services, thus ensuring a fair and suitable relationship with customers through training, capacity building and enhancement of the professional experience.

The results of the past year were clearly supported by the CL Group human resources capital, whereby 85% of our workforce is composed of university graduates and 45% are women. We therefore continue to retain and attract the best talents and consistently reward our people for good performance and high ethical values. Year after year, Credit Libanais reaffirms its commitment to conducting business with high ethical standards and sustainability in mind. In 2015, the Bank officially joined the United Nations Global Compact Network, the world’s largest corporate responsibility initiative with over 9000 business and 4000 non-business participants in 170 countries, and is an active member in the local UNGC Network. On a final note, I would like to thank our customers and shareholders for their support during 2016 and above all our great people for their utmost dedication and motivation in all operating conditions.

Dr. Joseph TorbeyChairman General Manager


Financial HighlightsAs at 31 December

2016 2015(millions LBP)

Balance SheetTotal assetsCustomer depositsShareholders’ equityLiquid assetsLoans & advances to customers

Income StatementNet interest incomeNet financial operating incomeNet profit for the yearLiquidity ratioReturn on Average Assets (ROA)*Return on Average Equity (ROE)*

GrowthTotal Assets

Customer depositsSolvency ratio (As per Basel II)Loans and advances to customersLoan to depositLiquidity/Assets

* After excluding extraordinary items

2014 2013

14,978,191 12,673,778 1,260,677 10,004,584 4,474,881

228,808 292,859 100,418 78.95%0.81%11.18%

8.44%

8.64%

15.47%3.94%35.31%66.79%

16,066,394 13,427,483 1,310,549 10,723,673 4,836,811

247,175 320,665 106,035 79.86%0.81%11.46%

7.27%

5.95%14.75%8.09%36.02%66.75%

13,812,327 11,665,846 1,197,015 8,951,213 4,305,329

210,612 284,663 96,829 76.73%0.84%11.17%

9.60%

8.11%

15.77%9.87%36.91%64.81%

12,602,250 10,790,958 1,148,350 8,165,539 3,918,607

206,292 288,423 103,218 75.67%0.84% *12.06% *

5.18%

2.84%

16.63%16.34%36.31%64.79%

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Capital Adequacy Ratio(as per Basel II)

14.75%

GROWTHin Total Assets

7.27%

11.46%

PRE-TAXReturn On average Equity (ROaE)

Sustainable Profitability and Value CreationNet Financial Income (millions LBP)

Strong Capital BaseShareholders’ Equity (millions LBP)

Growth Trend in the Banking Activity

2013

2013

2013

2013

2013

2013

288,423284,663

292,859

320,665

2014

2014

2014

2014

2014

20142015

2015

2015

2015

2015

20152016

2016

2016

2016

2016

2016

Total Assets (millions LBP)

Total Customer Deposits (millions LBP)

Liquid Assets (millions LBP)

Loans & Advances to Customers (millions LBP)

1,148,350

12,602,250

13,812,32714,978,191

10,790,958 11,665,84612,673,778 13,427,483

3,918,6074,305,329 4,474,881

4,836,811

16,066,394

1,197,015

1,260,677

1,310,549

8,165,5398,951,213

10,004,58410,723,673


Facts and Figures

Four BanksCredit Libanais salCredit Libanais Investment Bank salLebanese Islamic Bank salCredit International S.A. Senegal

One Financial InstitutionCredilease sal

www.creditlibanais.comLebanon:1518International: +961 1 607 100

One Insurance CompanyCredit Libanais d’Assurances et de Reassurances (CLA) sal

Real Estate CompanyCedars Real Estate sal

Credit Libanais Group

IT, E-Banking and E-Commerce CompaniesCredit Card Management sal International Payment Network salNet Commerce salSoft Management sal

6 Countries of Geographical Outreach

468,000 accounts261,118 customers

10,329 electronic POS 150,000 banking cards distributed95 ATMsA state-of-the-art customer service24/7 online banking services

LebanonBahrainCanadaCyprusIraqSenegal

(*) Several waves of data cleaning were conducted over the elapsed year.

Large Network

Customers & Accounts*

Extensive E-Outreach

8th largest network in Lebanon77 total branches

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International and Local Awards

Awardsfor Excellence

-JP Morgan and Citibank recognize Credit Libanais SAL with the USD Payments Straight Through Processing (STP) Excellence Awards.(2015)

- Cross Knowledge E-learning Iquad Solutions recognizes Credit Libanais with the Best E-learning Roll-out Academy Awards.- Citibank recognizes Credit Libanais with the USD Payments STP Excellence Award.- Deutsche Bank recognizes Credit Libanais with the Euro STP Excellence Award.

- Standard Chartered grants Credit Libanais the STP USD Clearing Excellence Award.- The Social Economic Award (SEA) grants Credit Libanais the National and Social Impact Award. (2014)

- Standard Chartered grants Credit Libanais the STP USD Clearing Excellence Award. - JP Morgan recognizes Credit Libanais with the USD Clearing Elite Quality Recognition Award.- World Finance Banking Awards names Credit Libanais the Best Commercial Bank in Lebanon.- The World Confederation of Businesses, the awarding body of the Bizz Awards, grants Credit Libanais the Peak of Success Award.(2013)

- The Social Economic Award (SEA) grants Credit Libanais the Housing loans Category Award for financing stability in the lives of Lebanese families.(2012)

Drive Growth, Expansion and Business Diversification Locally and Abroad (West Africa and Middle East).

Maintain Sound Profitability Management Improving Fee Income and Follow Responsible Cost Efficiency Management.

Optimize Capital Allocation and Preserve Sound Capital and Liquidity Management.

Maintain Embedded Prudent Risk Management, Compliance Culture and Corporate Governance Strategy.

Enhance our Strategic Marketing Vision Based on Resources Optimization.

Focus on Sustainable Technological Growth and Engage in the Digital Customer Journey.

Optimize People Capital, Linking Reward to Long-Term Risk Based Performance; and

Engage in a Transversal Corporate Social Responsibility Strategy, to Ensure Sustainability Across the People, Planet and Profit

Dimensions.

CL Group Medium-Term Strategy

For the Medium-Term Strategy 2020, Credit Libanais reaffirms its commitment to remain a leading global universal Bank, in its home market and in selected captive markets in the Middle East and West Africa. The Bank will maintain its plans for further capital enhancement, organic growth and acquisitions, operational excellence and cultural changes, in order to differentiate and reposition itself against local peers. The strategy and goals of the Bank are based on a number of key assumptions reviewed at least annually.

The presidential elections and the designation of a new prime minister following a two-year vacuum are considered credit positive for the country, whereby the agreement among political parties could help improve economic activity, public finances and ultimately restore investors’ confidence in Lebanon’s long-term economic prospects. However, the ongoing regional tensions, particularly the Syrian outbreak, will continue to weigh negatively on the economic growth in the medium-term. Moreover, the dynamic changes in the local and international regulatory framework, and the continuous globalization and technical progress will also add to the banking sector challenges. According to the IMF and World Bank, a conservative local GDP growth in the range of 1.5% to 2% is projected for the period under review.

The strategy of the Bank is based on assumptions of the Lebanese Pound stability, mainly supported by the significant foreign currency reserves and gold levels held by the BDL, which have reached a historical high as a result of the recent financial engineering scheme, the stability of the local interest rate levels due to the substantial margin and the continued inflow of customer deposits.

The Bank established its main business pillars to balance its earnings mix and to satisfy increasingly complex and global customer needs. The strategy is set and reviewed annually in close coordination with Management in order to fulfill the Bank’s directions and objectives for the upcoming three years. It outlines the path towards creating distinctive client centric approach and innovative banking services tailored to target markets, while maintaining firm risk management and compliance culture and best corporate governance practices. The Bank will continue to closely manage and optimize the return on its liquidity resources. Revenue optimization will also take into consideration the costs related to the increasingly stringent domestic regulatory framework and international requirements and best practices. This shall be accompanied by a parallel enhancement of the Bank’s cross selling capabilities and operational efficiencies, improving the support functions and heightening the importance of IT in partnering with the business. In parallel, the Bank will also keep striving towards enhancing the management and development of its human capital and adopting improved approaches to link reward to performance. Furthermore, the Bank has a major responsibility to contribute to the sustainable financial stability of the communities where it operates, by setting high standards of corporate social responsibility throughout its activities.

Undoubtedly, the targets ahead are challenging amid tough operating conditions and limited lending and investment opportunities, however, we at Credit Libanais are committed to maintaining our aim towards excellence and value creation to all our stakeholders. In Strategy 2020, we will strengthen and redirect our focus onto eight major strategic pillars:

Credit Libanais’ Identity

Credit Libanais’ Business Principles

Vision

Mission

Core Values

Credit Libanais’ core values are customer focus, innovation, teamwork, ethics, transperency and integrity as well as reward for performance.

Credit Libanais is the preferred bank in Lebanon for customers and employees.

Credit Libanais is primarily a retail bank and serves selected corporate customers.

Credit Libanais’ purpose is to enhance shareholder, customer and employee value.

We are open. We encourage continual dialogue across all units and levels.

We value each other’s ideas. We treat colleagues fairly, sincerely and courteously regardless of differences in background.

We function as a team. Cooperation among individuals and units is fundamental in delivering the whole Bank to the customers.

We emphasize delegation. Acceptance of personal accountability permeates our corporate culture.

Serve Act Perform

Improve

Empower

Cooperate

Build

Communicate

Respect

We deliver superior customer service. We gain customer satisfaction with service that exceeds customers’ expectations.

We increase productivity each year. Ethics and Profit per employee are key measures for Bank performance.

We embrace change. We continuously seek better solutions to problems for the customer and the Bank.

We emphasize delegation. Acceptance of personal accountability permeates our corporate culture.

We are action-oriented and encourage personal initiative. Can Do and Will Do are basic attitudes of all employees.

WeWe

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Corporate GovernanceCL Group Corporate Governance FrameworkCredit Libanais Group is committed to safeguarding the interests of all stakeholders and recognizes the importance of good Corporate Governance for its sustainable success. In this respect, CL Group reviewed its Code of Corporate Governance aiming at complying with the changing local and international Corporate Governance standards. The Code is disseminated to all staff and made available on the Bank’s website.

The Board of Directors oversees the implementation of the Bank’s governance framework and periodically reviews that it remains appropriate, in the light of any material changes to the Bank’s size, complexity, geographical footprint, business strategy, markets and regulatory requirements. As part of the overall corporate governance framework, the Board and Senior Executive Management establish and make decisions related to the Bank’s strategy and risk approach, articulate and monitor adherence to risk appetite and risk limits, capital and financial plans and remuneration policy, and identify, measure, manage and control risks. Therefore, CL Group continues to increase focus on risk and the establishment of effective risk governance framework, which includes identifying the responsibilities of CL Group concerned parties for addressing and managing risk. This is referred to as the “lines of defence”: Business lines, risk management, internal audit, and financial consumer protection.

Board of Directors’ Own Structure and Practices The Board defines appropriate governance structures and practices for its own work, and puts in place the means for such practices to be followed and periodically reviewed for ongoing effectiveness. The Board structures itself in terms of leadership, size, frequency of meetings and the use of its committees to effectively carry out its oversight role and other responsibilities.

Remuneration Policy and System1. The Board established a Board Remuneration Committee as an integral part of its governance structure and organization, to recommend and oversee the Remuneration System’s design and operation.

2. CL has developed a remuneration policy and system, approved by the Board upon the recommendation of the CGNHRR committee. It is a coherent and transparent system, translating the Bank’s objectives for good corporate governance,

and is consistent with the Banks’ culture, business strategy, objectives, values, control and performance environments, as well as the long term interests of the Bank, taking into account the legal and regulatory requirements. The performance management process aims at creating opportunities to motivate and engage people by linking reward to performance on a fair, suitable and equitable manner. Open communication is the cornerstone of the performance appraisal, where managers discuss with their employees’ future aspirations. It is a future oriented feedback system, focused on building careers, retaining and developing talent while observing the rules of compliance, business ethics and values, as well as the size of business to ensure the promotion of the long-term strategy of the Bank in a competitive market.No deferrals or clawbacks arrangements are being made for the moment, except for legally required matters.

3. Remuneration is based on measurable performance as well as goal achievements and results, translated into various schemes and incentive programs, taking into account all matters associated with the Bank financial status and interests. Linking reward to performance has a direct impact on the overall results of the Bank, and plays an important role in motivating employees. In fact, staff participation rate in the e-appraisal system process is increasing on a yearly basis, and has reached 82% in 2016.

4. Total amount of remuneration is based on a combination of factors: assessment of the employee performance and the business unit concerned, the employee’ professional experience and academic qualifications as well as their organizational responsibility, and the overall results of the Bank. This process contributes to motivating, developing and retaining talent within the Bank, despite the fierce competition. Noteworthy that remuneration is governed by the principles of non-discrimination and equitable treatment.

5. Remuneration comprises the fixed and variable elements such as the basic salary and the performance-based bonuses in addition to the legal benefits and allocations, taking into account the suitability standards with regards to employees selling products and services to customers. Employees performing internal control functions are remunerated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control.

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6. As reported in the Bank’s Financial Statements, Key management personnel compensation for the year 2016 consisting of short-term benefits amounted to LBP 9.9 billion. More details are further elaborated in the “Financial Results” section of this Report.

Assets and Liabilities Management (ALM) ALM function supports the capital and liquidity management process, governed by the Group Asset and Liability Committee (ALCO). ALM is responsible for the development of the Group’s investment policies, market risk, interest rate risk and liquidity risk, in addition to the hedging of foreign exchange exposures of capital investments abroad, managing capital ratios, and the Group-wide capital requirements.

Capital and Liquidity Adequacy as per Basel III requirementsCL Group complies with national and international requirements in terms of capital adequacy regulatory framework, internal capital adequacy assessment process, Basel III, liquidity coverage ratio, loan impairment, related specific and collective provisions as well as general reserves for the loan portfolio. CL Group complies with the quantitative and qualitative requirements of the third pillar of the Basel accord and its subsequent updates.

Audit, Risk Management, Compliance Financial Consumer Protection and other Internal Controls The Bank’s Audit, Risk Management, Compliance Financial Consumer Protection and other Internal Control functions have the necessary authority, stature, independence, resources and access to the Board to carry out their duties, in an independent and transparent manner. Those functions keep pace with changes related to the Bank’s risk profile, including its organic and international growth. An open and timely internal communication within the Bank is ensured, both across the organization and through reporting to the Board and SEM.

Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT)On November 24, 2015, the Lebanese Parliament ratified the Law 42 on the declaration of amounts of carried cash at the border, Law 43 on the exchange of tax information, Law 53 on the International Convention for the Suppression of the Financing of Terrorism, Law 44 on AML/CFT, and consequently

BDL issued Basic Circular No. 136 related to the implementation of FATF Recommendation 6 concerning UN Security Council Resolutions 1267 (1999), 1988 (2011), 1989 (2011), and related successor resolutions. In the increasing interconnected and risky business world, CL banking group provides particular attention to AML/CFT and complies with all the national and international laws and regulations issued, across all entities of the group, financial institutions, correspondents and customers, especially those seeking to engage in cross-border transactions or to utilize correspondent banks.

The Foreign Account Tax Compliance Act (FATCA)FATCA was enacted into United States (US) law on March 18, 2010 and the related regulations were issued on January 17, 2013. FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Services (IRS) informationabout financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Lebanese banks like all FFIs worldwide comply with FATCA since July 1, 2014. Therefore, CL Group has the responsibility of identifying US tax payers among its clients and for reporting to the US Internal Revenue Services (IRS) names and accounts’ information. CL Group only undertakes business relations with FATCA compliant FFIs.

The Quality Management System (QMS)Given the success that Credit Libanais has achieved throughout the years in terms of implementing and maintaining the ISO 9001:2008 Certification, the Bank will continue on implementing the requirements of this international standard that provides a framework for continuous improvement to achieve quality objectives and enhance customer experience.Spreading the ISO culture to subsidiaries, both the International Payment Network (IPN) and Credit Libanais d’Assurances et de Réassurances (CLA) obtained the ISO 9001:2008 Certification in 2015 and performed their first surveillance in 2016.

CL Group ReportingCL Group reporting is made in accordance with International Financial Reporting Standards (IFRS), providing for a high degree of transparency and facilitating comparability with international peers. Complying with regulatory requirements, CL Group’s Annual Report has become richer in terms of disclosures and information.


Internal Communications To optimize top-down and bottom-up channels of communication between staff and management, the Corporate Publishing function ensures the publication of the Group’s major reports in a timely and professional manner. Internal publications ensure the dissemination of informative, argumentative, financial and economic articles among staff members. Publications also feature financial awareness and education articles, corporate responsibility initiatives, as well as various events. Moreover, employees receive regular updates related to training and development events as well as the latest developments in the banking industry, through the FX and Market Snapshots, Weekly Market Watch, Monthly Economic Wrap, and CL Indices. This plethora of information is communicated via various internal and external channels.

CL Group Employee Handbook The handbook elaborates on the rights and duties of employees. It also incorporates CL code of conduct, business ethics and requirements to ensure that activities are conducted with integrity and honesty.

The Employee Handbook is made available to staff on the Bank’s intranet portal. In case of breaches to CL core principles and values, a disciplinary council takes corrective action to ensure that CL culture of trust is well preserved and respected by all staff.

Corporate Citizenship and ResponsibilityIn 2015, Credit Libanais officially joined the United Nations Global Compact, the world’s largest corporate responsibility initiative with over 9000 business and 4000 non-business participants in 170 countries. CL also became a member of the Global Compact Network in Lebanon. The United Nations Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption. By joining the United Nations Global Compact, CL committed to incorporate the ten principles in its daily operations and all its strategic decisions and started publishing the Communication on Progress (COP) Report according to international guidelines.

* During 2016, the following changes occurred to the Board of Directors’ composition: the ordinary General Assembly accepted the resignation of Mr. Philip Khoury, Mrs. Fatma Lotfy, Mr. Mohamad Abdel-Halim Arafa and Mr. Mostapha Ahmad Nasser, and elected four new Directors: Mr. Abdulelah Abdo Mukred Ali, Mr. Rabah Kamel Jaber, Me. Joe Farid Issa El Khoury and Mr. Rabah Idriss, effective July 21, 2016 for the remaining period of the current Board, which expires upon the convening of the General Assembly (expected in 2018) that examines the accounts of the financial year 2017.

Composition of the Board of Directors

CL Group is governed by a board consisting of twelve members, who are leading bankers and businessmen enjoying wide and diverse expertise in Lebanon and the region. Board Members are elected by the General Assembly of shareholders for a term of three years. The Board is of an appropriate size to oversee the Group’s businesses, with a suitable diversity of backgrounds and a mix of experience and expertise to maximize efficiency.

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Biographies of the Board of Directors

Chairman General Manager

Members

Dr. Joseph Torbey is the Chairman General Manager of Credit Libanais Group. After graduating from university, he held numerous public functions, including Controller at the Lebanese Audit Court and the Ministry of Finance, where he headed the Income Tax Department. Very active on the professional level, he currently serves as Chairman of the Association of Banks in Lebanon (ABL) which represents the banking profession and defends the interests of the Lebanese banking sector; and serves as Chairman of the World Union of Arab Bankers (WUAB), the premier Arab professional organization for Arab bankers and finance professionals. He is also Chairman of the Executive Committee of the Union of Arab Banks (UAB), a Union which Board he chaired for two consecutive mandates, and which is the regional organization that comprises more than 320 Arab financial and banking institutions. On the academic front, he is the co-founder and first Chairman of the Institut Supérieur d’Études Bancaires (ISEB) at St Joseph University (Beirut); serves as Member of the Executive Committee of the Arab Academy for Banking and Financial Sciences (Jordan) since 2001; and is an Honorary Professor at the University of Vienna. Dr. Torbey has a number of publications in taxation, economics and banking.

Mr. Karim Awad is the Group Chief Executive Officer and Director of EFG Hermes Holding SAE, the leading investment bank of the Arab world. Since assuming leadership of the firm in 2013, Mr. Awad has led EFG Hermes’ return to profitability by building a regional advisory pipeline. He enjoys a long track record advising major corporations on equity offerings, mergers and acquisitions transactions. Prior to assuming his current role, Mr. Awad was the Chief Executive Officer of the Investment Banking platform with an overall responsibility for managing the firm’s investment banking, securities brokerage, research, asset management and private equity divisions.

Mr. Abdullah Saudi, a world-renowned and respected international banker. Founder of the Libyan Arab Foreign Bank, where he served as Executive Chairman establishing branches of the Bank worldwide. Founder of the Arab Banking Corporation, Bahrain where he served as President and Chief Executive. In addition to being voted one of the most Innovative Bankers by the representatives of governments and international commercial bankers attending the IMF and World Bank meetings in 1980, Mr. Saudi has won many international accolades, including an Award at Georgetown University and the Award of Best Banker from the Association of Arab American Banks in New York in 1991. He was the first to receive the Arab Banker of the Year Award in 1993 from the Union of Arab Banks. In recognition of his role in the development of banking relationships between Arab and European countries, Mr. Saudi received several awards, amongst which are those awarded in 1977 by the King of Spain and the President of Italy and that given to him by the President of Tunisia in 1996. He is currently the Executive Chairman of ASA Consultants W.L.L., Bahrain.

CIH Bahrain International Holding sal Represented by Mr. Abdullah Saudi


Mr. Efstratios Arapoglou is a Corporate Advisor with a long international executive career in Corporate and Investment banking, International Capital Markets and in managing, restructuring and advising Financial Institutions. He has been the CEO of Commercial Banking at EFG Hermes Holding SAE Group, operating in the Middle East and Africa, and served as Chairman and CEO of the National Bank of Greece Group, Chairman of the Hellenic Banks Association and Managing Director and Global Head of the Banks and Securities Industry for Citigroup. Mr. Arapoglou served on several Boards of publicly listed companies in Europe, the Middle East and Africa, as well as on Boards of Educational Foundations, including the Institute of Corporate Culture affairs in Frankfurt as Chairman. He is the Chairman of the International Advisory Board of Tufts University in Boston, Ma. and member of the Business Advisory Council for the International MBA program of Athens University of Economics and Business.

Mr. Rabah Idriss is a well-known Lebanese businessman enjoying a wide expertise in the fields of finance, trade and manufacture of food products, and is very active in professional organizations, such as the Chamber of Commerce and Agriculture of Beirut, among many others.

Mr. Mohamad Wajih El-Bizri is an influential Lebanese businessman. He is the President of SIPES Group, one of the largest paint manufacturers in the Middle East , having production facilities in six Arab countries. Mr. El-Bizri serves as the Honorary Consul of the Republic of South Africa in Lebanon. He is also President of the International Chamber of Commerce in Lebanon, Vice President of the Association of Lebanese Industrialists and Vice President of Business in the Community Association in Lebanon.

Mr. Sarkis Demerdjian is a civil engineer and a prominent Lebanese businessman. He is the Chairman of Demco Group, Lebanon’s leading steel supplier, trading and servicing company established in 1922, which has also ventured in the real estate industry, engaging various construction projects while preserving and respecting the environment. Mr. Demerdjian is member of the Council of Trustees of AGBU (Armenian General Benevolent Union) established in 1906 and present in many countries around the world.

H.E. Mr. Marwan Hamade currently serves as Minister of Education in Lebanon. He previously held various public responsibilities under numerous cabinets and served as Minister of Telecommunications, Minister of Economy and Trade, Minister of Tourism, Minister of Health and Minister of the Displaced. He started his career as an economic and political columnist in an-Nahar and L’Orient-Le-Jour daily newspapers before serving as an-Nahar Group President and Director. He also served as member of the Higher Council of the Lebanese Press; Consultant for the World Organization of Health for the Middle East; member of the International Committee of Bioethics at UNESCO and is currently member of the Strategic Council of St Joseph University in Beirut.

18 - 19

Me. Adel Macaron currently serves as the Head of the Legal Department at Credit Libanais sal. He is member of the Beirut Bar Association since 1973 and serves as Credit Libanais sal Secretary of the Board of Directors.

Secretary of the Board of Directors

Mr. Rabah Jaber is an influential Lebanese businessman. A prominent investor in Lebanon and overseas, he is active in various sectors encompassing real estate development and investment, industry, construction as well as hotels and tourism.

Mr. Abdulelah Abdu Mukred Ali is a world-renowned and respected international banker. He currently serves as Director for different companies, namely: Arab Asian Holding Company (Bahrain); Capital International Holding Company (Bahrain); LPC Government securities Trading Company (USA) and Ceravision Limited (U.K). He also holds the position of Head of Treasury & Investments at Al Murjan Group (Saudi Arabia). He previously served as General Manager and Investment Division Head at Samba (Saudi Arabia) and as CEO of Al Murjan Trading and Industry Group (Saudi Arabia). Mr. Abdulelah Abdu Mukred Ali was also the Chairman of Board and Audit Committee of Prime Commercial Bank (Pakistan) and Chairman of Audit Committee and member of the board of Credit Libanais (2001-2009) and currently serves as CL board member and Audit Committee member.

Dr. Michel Khadige is a prominent and well known Lebanese banker, who has been serving Credit Libanais since 1988. He currently heads the Corporate Banking and Financial Institutions Division and sits on a number of Senior Executive Committees at the Bank. Dr. Khadige is a member of the General Rules and Banking Regulations Committee at the Association of Banks in Lebanon.

Me. Joe Issa El-Khoury is a renowned Lebanese lawyer enjoying a wide expertise in different areas of legal advisory, corporate governance, litigation, banking and insurance laws among other fields. Me El-Khoury currently serves as member of the Committee for modernization of laws established by the Ministry of Justice in Lebanon, and member of the board of directors of Finance Bank. He previously served as member of the board of directors of NECB bank and Midclear sal. He was also member of the Committee of the Lebanese Center of Arbitration, and member of the Committee for the modernization of laws established by the Central Bank of Lebanon. He served as an editorialist at the Lebanese daily, L’Orient, and director at “Fisk International” company.


Shareholding Structure

CIH Bahrain International Holding sal (2)

EFG Hermes CL Holding sal (3)

Others(4)

Total Shareholding

LebanonLebanonMajority Lebanese

35.06%9.46%55.48 %100%

Shareholders / Group of Shareholders Country (Ultimate Economic Ownership)

The following table sets out the composition of the holders of the Common Shares, as at May 29, 2017.

Percentage Ownership (1)

(1) Percentage ownership figures represent both Common Shares owned by the named Shareholders and are expressed as a percentage of the total number of Common Shares issued and outstanding. (2) CIH Bahrain International Holding sal is the major shareholder, 35.06% majority owned by Capital Investment Holding Manama Bahrain (99%). (3) EFG Hermes CL Holding sal, owned by EFG Hermes CB Holding LTD (99.98%). (4) No shareholder among this percentage holds more than 5% of the capital of the Bank.

Dividend PolicyUpon recommendation of the Board and approval of the General Assembly, Credit Libanais Group has enjoyed a constant track record of dividend payments on Common Shares for the past 19 years, demonstrating the Bank’s sustainability and value creation to shareholders.

Board CommitteesThe Board is supported by the Corporate Governance, Nominations, Human Resources and Remuneration Committee (CGNHRR Committee), the Audit Committee, the Risk Committee, and the Credit Policy Committee. Each Committee has an approved charter that sets out its mandate, scope and working procedures in order to support the Board in its duties.

Corporate Governance, Nominations, Human Resources and Remuneration Committee The CGNHRR Committee is composed of two Non-Executive Directors and two Independent Directors, one of whom acts as its Chairman. The CGNHRR Committee’s main mission is to: (i) oversee Senior Executive Management’s implementation of the Bank’s Corporate Governance Framework, principles and corporate values, including the Code of Conduct; (ii) provide recommendations to the Board for the nomination of new Directors and members of Senior Executive Management; (iii) oversee the Human Resource Policies; (iv) prepare and review periodically the Bank’s Remuneration Policy and System ensuring their alignment with the Bank’s strategy and the development of its operations; (v) set a Performance Evaluation System to evaluate the performance of all-level employees in

an objective and transparent manner; and (vi) ensure that the compensation is effectively aligned with prudent risk-taking, consistent with the Bank’s long-term strategy adjusted for all types of risk. The CGNHRR Committee Charter complies with the BDL Basic Circular No.106 and BDL Basic Circular No. 133. It meets at least twice a year, or more frequently as needed. Audit Committee The Audit Committee is composed of two Non-Executive Directors and two Independent Directors, one of whom acts as its Chairman. The Audit Committee’s main mission is to assist the Board in its responsibilities, in terms of: adequacy of accounting, financial reporting policies, internal control and compliance system. The Audit Committee also recommends the appointment, compensation, effectiveness and dismissal of external auditors; ensures the independence and effectiveness of the internal audit function; reviews and approves the scope and frequency of audits; and ensures that Senior Executive Management is taking the necessary corrective actions in a timely manner to address control weaknesses, non-compliance with policies, laws and regulations and other problems identified by internal and external auditors. In addition, the Audit Committee oversees the establishment of accounting policies and practices by the Bank. The Audit Committee Charter complies with BDL Basic Circular No. 118 dated July 21, 2008. External auditors are appointed for a renewable period of three years, with the partner rotation principle applying for a maximum period of five years in line with BDL Basic Circular No. 122 dated August 13, 2009. The Audit Committee meets at least once quarterly, or more frequently as needed.

20 - 21

Risk Committee The Risk Committee is composed of two Non-Executive Directors and two Independent Directors, one of whom acts as its Chairman. The Risk Committee’s main mission is to advise the Board on the Bank’s overall current and future risk tolerance/appetite and strategy, and provides oversight of Senior Executive Management’s activities in implementing group-wide risk management policies for capital and liquidity management, as well as credit, market, operational, compliance, reputational and other risks of Group CL. The effectiveness of the Risk Committee is further enhanced by receiving formal and informal communication from the Bank’s Risk Management and Chief Risk Officer (CRO). The Risk Committee Charter complies with the BDL Basic Circular N°118. The Risk Committee meets at least once quarterly, or more frequently as needed.

Credit Policy Committee The Credit Policy Committee is headed by the Chairman - General Manager, and includes one Executive Director - the Group Head of Corporate Banking and Financial Institutions Division, the Group Head of Retail Banking and Branches Division, the Group Head of Risk Management and Strategy

Management Committee The Management Committee regularly reviews the growth and performance of the Bank and ensures the execution of the Bank’s medium-term strategy, policies and procedures as approved by the Board. The Management Committee plays

a key role in ensuring the participation of key employees in managerial decision-making through regular communication and liaison with all regional managers. This Committee meets at least quarterly or more frequently as needed.

Division and the Group Head of Finance Division. The General Controller - Group Head of Internal Audit Division participates as an observer. The Credit Policy Committee’s main mission is to set the Bank’s lending policies at the level of Group CL, in line with the Board’s objectives. The Credit Policy Committee defines credit risk strategies, policies and limits for the efficient management of the various counterparty risk exposures, industries, aggregate exposures by product, segment of activity and country exposure on a stand-alone and consolidated basis. The Committee meets at least once a year, or more frequently as needed.

Senior Committees at Management levelEach Committee has an approved charter that sets out its mandate, scope and working procedures in order to support the Chairman General Manager in carrying out this duties. The Committees’ respective authorities are of decisive and consultative nature, where all recommendations that require Board approval are submitted through the Chairman General Manager for review, decision-making or ratification. The Board is kept informed of all major decisions governing the Bank’s overall activities as submitted and recommended by the various committees.

SENIOR COMMITTEES AT MANAGEMENT LEVEL

Management Committee

Foreign Entities Committee

Human Resources and Training Committee

Sales and Business Development Committee

Information Technology Steering Committee

Business Continuity Planning Committee

Asset and Liability Committee

Credit Committees

Financial Institutions and Country Credit Committee

Compliance, Anti-Money Laundering and Counter-Financing of Terrorism Committee

Information Security Committee

The Bank’s various committees are established with clear missions, authorities and responsibilities.

Recommendations made by any committees that require the Board of Directors’ approval are submitted through the Chairman General Manager for

review, decision-making or ratification.


CL Management Committee

Foreign Entities Committee The Foreign Entities Committee approves the medium-term strategy and annual business plans of foreign entities, reviews their business performance and evaluates their risk exposure. The Foreign Entities Committee also ensures the compliance of foreign entities with applicable laws and regulations. The Committee places emphasis on the ongoing monitoring of regulatory compliance in the hosting country, risk management, anti-money laundering and terrorism financing, fraudulent activities and information security in foreign entities, and convenes at least quarterly or more frequently as needed.

Human Resources and Training Committee The Human Resources (HR) and Training Committee is responsible for establishing the policies and procedures pertaining to human resources management and overseeing the execution of HR plans. The Committee also supervises orientation and training programs to existing and new staff. It reviews the Remuneration Policy and System, the Performance Evaluation System and the annual budget for training and development then submit them for the CGNHRR Committee approval. This Committee convenes quarterly or more frequently as needed.

Sales and Business Development Committee The Sales and Business Development Committee ensures the introduction, maintenance and promotion of the Bank’s various products and services to the market. Moreover, it introduces new and profitable products and services and ensures adequate funding and analysis of the risk-adjusted-return on capital of such products and services. The Committee coordinates and implements the Bank’s overall advertising strategy, and monitors results and feedback. The Sales and Business Development Committee meets quarterly or more frequently as needed.

Information Technology Steering Committee The banking Group Information Technology Steering Committee sets the general strategies and policies for developments relating to banking information technology, in accordance with the Bank’s master strategic plan. The Committee’s main objectives are to ensure the adequate functioning and development of information technology systems in line with the continuous development of systems, applications and services to support the Bank’s expansion plans. This Committee convenes quarterly or more frequently as needed.

Chairman

Members

Secretary

Chairman General ManagerDr. Joseph Torbey

Dr. Michel Khadige

Mr. Michele Cherenti

Mr. Georges Gerios

Mr. Georges Karkabi

Mr. Anthony Ussher

Mr. Elie Abimrad

Mr. Alexandre Salem

Mrs. Nada Awad Rizkallah

H.E. Dr. Alain Hakim

Mr. Badih Azzi

Mr. Najib Ghanem

Mr. Charbel Mourad

Mrs. Hayat Nader

BOD Member and Deputy General Manager - Corporate Banking and Financial Institutions

Deputy General Manager - Retail Banking and Branches

Deputy General Manager - Operations and Support Services

Deputy General Manager - Investment Banking

Deputy General Manager - E-Banking

General Controller - Internal Audit

Deputy General Manager - Treasury, Global Markets, Asset Management & Private Banking

Deputy General Manager - Risk Management and Strategy

Assistant General Manager - Marketing and Business Development

Assistant General Manager - Human Resources

Assistant General Manager - Information Technology

Assistant General Manager - Finance

Chief Compliance Officer

Mrs. Nina Elhajj Srour Senior Manager - Consumer Protection and Corporate Publishing - CEO Office

22 - 23

Business Continuity Planning Committee The Business Continuity Planning (BCP) Committee ensures continuity of service to the Bank’s customers and stakeholders in an efficient and timely manner in case of a potential event that might disrupt the Bank’s regular activities. The BCP Committee proposes policies, recommends priorities, and establishes plans to meet business continuity requirements and ensures adequate communication and training is maintained at Bank. The BCP Committee meets at least quarterly or more frequently as needed.

Asset and Liability Committee The Group Asset and Liability Committee (ALCO) is responsible for managing and controlling the Bank’s balance sheet and income statements, and formulating the general financial strategy. ALCO reviews all activities of the Bank which impact balance sheet and income statement items. It focuses on risks and strategic issues related to interest rate monitoring, liquidity management and market risks, as well as their control and mitigation. The ALCO reviews and validates all relevant policies and procedures and ensures their compliance with regulatory guidelines pertaining to risks related to liquidity, investment portfolio, interest rate and foreign exchange, market, political and sovereign, pricing of loans and deposits, profitability, and risks of unrealized gains and losses resulting from long-term positions, prior to submitting such policies and procedures to the Risk Committee and the Board for final approval. ALCO meets at least monthly or more frequently as needed.

Credit Committees The Bank has a number of Credit Committees with different levels of lending authority, depending on the business segments concerned and the exposure. Credit Committees are responsible for ensuring the adequacy of the Bank’s lending policies and compliance of lending activities with the Bank’s credit policy and applicable laws and regulations. The Credit Committees meet regularly on a weekly basis and ensure the implementation and monitoring of their decisions by the business owners under the supervision and control of the Credit Administration and Control departments that report to the Credit Risk Management Department. The presence of a member of the Risk Management Division is an integral part of the credit approval process and the monitoring of the Credit Committees’ decisions.

Financial Institutions and Country Credit Committee The Financial Institutions and Country Credit Committee approves the banks and financial institutions whom the Bank deals with or intends to deal with. The Committee defines the credit lines to be granted for each banking and financial institution counterparty in compliance with applicable laws and regulations, and in line with the Board’s strategic objectives and the Group’s financial institutions credit policy. Risk Management is an integral part of the approval process of the banks and financial institutions, and the monitoring of the Committee’s decisions. This Committee meets on a monthly basis or more frequently as need be.

Compliance, Anti-Money Laundering and Counter-Financing of Terrorism Committee The Compliance, Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) Committee reviews all relevant policies and procedures, in accordance with local and international laws and regulations. It reviews the AML/CFT systems adopted by the Bank and ensures that adequate are implemented to check Bank’s customers and transactions. It closely monitors suspicious cases and takes pro-active steps to prevent AML/CFT fraudulent activities within the Bank. The Committee reports suspicious cases to the Special Investigation Commission at the BDL, and is responsible for FATCA implementation and compliance. This Committee meets at least once quarterly, or on a need basis.

Information Security Committee CL Group Information Security Committee reviews and approves CL Group’s information security strategy, sets security policies and procedures and submits them for the approval of the Risk Committee and the Board. This Committee also reviews and approves the scope of security programs and related budgets; oversees the implementation of the security programs and the compliance of Payment Card Industry Data Security Standard (PCI-DSS) for the Bank and its affiliates; and provides solutions on how to deal with security breaches or control overrides. This Committee also recommends security training programs for the Bank’s staff and convenes at least once quarterly.


Organizational Structure

CGNHRR* Committee

*Corporate Governance, Nominations, Human Resources and Remuneration Committee

Audit Committee

Risk Committee Credit Policy Committee

Internal Audit Risk Management and Strategy Compliance

- Branch Audit- Head Office Audit- Credit and E-Banking Audit- IT Audit- Back Office Audit- LIB Audit- CLIB Audit- Overseas and Affiliates Audit- Quality Assurance and Improvement

- Strategy and Risk Analytics- Risk Mgt Project Office / Credit Portfolio Mgt / Credit Risk Models- Credit Risk Management- Operational Risk Management- Information Security Risk Management- Business Continuity Planning

- AML / CFT- Regulatory Compliance- Research and Training for AML/CFT

Legal

Consumer Protection and Corporate Publishing

Bancassurance Advisor

Board Committees

Board of Directors Chairman General Manager

Control Functions

24 - 25

Retail Banking and Branches Corporate Banking and Financial Institutions

Treasury, Global Markets, Asset Management & Private Banking

- Regional Branch Management**- Consumer Banking and Retail Products- Commercial Retail Lending and Kafalat- Marketing and Business Development- Information Department- Insurance Services

- Financial Institutions and Correspondent Banking- Corporate and Medium Business Unit- Global Business Development- Recovery- Public Relations

- Treasury Management- Foreign Exchange Management- Global Markets- Private Banking and Asset Management- Middle Office Treasury and Global Markets

**Riad El Solh | Hamra | Kaslik | Bekaa & South | North

Electronic Banking Foreign Entities

- Cyprus- Bahrain- Senegal- Iraq- Canada

Business Lines

- E-Banking Card Systems, Applications and Development- Card Administration and Operations- E-Channels and Customer Service- Merchant Relationship- Customer Relationship Management (CRM)

Finance Human Resources

Operations and Support Services

Information Technology- Financial Control- Financial Management- Reconciliation- BDL Subsidies- Performance and Budget Control- Cards Business Accounting- Central Accounting

- Recruitment and Evaluation- Compensation and Benefits- Training and Development

- Administration and Support Services- Engineering- Trade Finance- Central Processing- Methods and Procedures- Automated Payments- Treasury and Global Markets Back Office- Quality Management- System Implementation and Support

- IT Infrastructure- Network and Communication- Software Development- Implementation and Support- MIS Reporting- Regulatory Reporting

Support Functions


High Level Structure

* Corporate Governance, Nominations, Human Resources and Remuneration Committee

Senior Committees at Management Level

Control Functions Business Lines Support Functions

Management Committee

Foreign Entities Committee

Human Resources and Training Committee

Sales and Business Development Committee

Information Technology Steering Committee

Business Continuity Planning Committee

Asset and Liability Committee

Credit Committees

Financial Institutions and Country Credit Committee

Compliance, Anti-Money Laundering and Counter-

Financing of Terrorism Committee

Information Security Committee

Internal AuditRisk Management and StrategyCompliance and AML/CFT

FinanceHuman ResourcesBanking Information TechnologyOperations and Support Services

Retail Banking and BranchesTreasury, Global Markets, Asset Management and Private BankingElectronic BankingCorporate Banking and Financial Institutions

CGNHRR* Committee

Risk Committee

Audit Committee

Credit Policy Committee


Shareholders

External Auditors

Board of Directors

Legal

Consumer Protection and Corporate Publishing

Bancassurance Advisor

26 - 27

Credit Libanais Investment Bank sal 99.86%Banking

Banking

Banking

Real Estate

Real Estate

Insurance

Advertising

Tourism and Ticketing

IT Solutions

Collection Services of Receivables

Leasing Services

Lebanese Islamic Bank sal 99.84%

Credit International sa - Senegal 87.82%

Cedar’s Real Estate sal 99.92%

Hermes Tourism and Travel sal 99.99%

Collect sal 44.94%

Soft Management sal 47.00%

Credilease sal

98.62%

Credit Libanais d’Assurances et de Réassurances sal

98.00%

99.26%

Business Development Center sarl

Capital Real Estate sal

66.97%

Group Entities

Geographical Presence Credit Libanais Group

Lebanese Islamic Bank salCredit Libanais Investment Bank sal

During 2015, the Group sold 50,000 shares in Credit Libanais International SA reducing its ownership from 92.82% to 87.82%.

Credit Libanais sal Credilease sal Credit Libanais d’Assurances et de Réassurances sal

Lebanon

Cyprus Credit Libanais sal (Limassol Branch)

Senegal Credit International sa - CISA (2 branches in Dakar)

Bahrain Credit Libanais sal (Manama Branch)

Canada Representative Office (Montreal)

Credit Libanais sal (Baghdad and Erbil Branches)Iraq


Macroeconomic Operating Environment

In Lebanon

Lebanon finally arose from the ashes of a thorny era, dusting off the dregs of a long political deadlock that had reigned for over two years and crippled its economy. In fact, a new president for the Republic of Lebanon was elected on October 31, 2016, followed soon after by the formation of a new government in December, enkindling the flame of hope for a rosy new eon. Prior to the emergence of said game-changers, the Lebanese economy had been wading through a plethora of challenges during the first three quarters of the year, with no progress in sight concerning any of the pending issues the country had been battling for quite some time. In fact, major international rating agencies unanimously agreed on the downward risks pinning Lebanon’s economic performance, with said risks generally revolving around the heightened geo-political tensions, and especially the raging war in neighboring Syria and large number of refugees on the Lebanese territories, in addition to the lack of necessary policy actions and ailing public finances. This had prompted the International Monetary Fund (IMF) to downwardly revise its growth estimations for Lebanon to 1.0% in its April 2016 World Economic Outlook (WEO) report, from 2.5% previously.

It is worth noting that the Lebanese Central Bank introduced yet another round of stimulus packages in 2016 as a quantitative easing tool, aggregating to around $6 billion since 2013 and contributing to almost half of the country’s GDP growth. Through these packages, Banque Du Liban (BDL) would inject lines of credit into banks at low interest rates (1%) geared towards the financing of various sectors of the economy, of which productive sectors, the housing sector, research & development, education, and eco-friendly projects, only to name a few.

These stimulus packages, coupled with the attractive campaigns and competitive new real estate projects advertised by contractors, in addition to the confidence boost in the midst of the encouraging political developments, all payed off, as evidenced by the increase in the number (1.36% annually) and value (5.89% annually) of real estate transactions, compared to double-digit drops in 2015. Cement deliveries also rose by 4.41%, while construction permits slipped by a shy 3.55% in the year 2016 (compared to 8.59% and 7.79% respective contractions in 2015).

In parallel, tourism activity continued to blossom in 2016, with the number of tourists arriving to Lebanon surging by nearly 11.23% throughout the year and the number of passengers travelling via the Beirut International Airport (BIA) increasing by 5.11%.

On the public finance front, Lebanon’s fiscal deficit (budgetary & treasury) widened to just above $4.94 billion by end of 2016 on the back of some 9.90% annual hike in government expenditures (including debt service) to nearly $14.87 billion, which outweighed the shy 3.63% y-o-y increase in government revenues to $9.92 billion. From another standpoint, Lebanon’s gross public debt continued to pile up, adding $4.56 billion to attain $74.89 billion at end of December. This has further swelled the country’s debt-to-GDP ratio to an estimated 144%, up from 138% in 2015, according to the IMF. Lebanon’s snowballing public debt burden remains, however, tamed by the solid gold and foreign currencies reserves at BDL, which appreciated by $4.47 billion in 2016 to $51.41 billion. It is worth noting that a swap mechanism was introduced by BDL between May and August 2016 under the umbrella of which it issued Certificates of Deposit subscribed to by banks, and purchased in exchange LBP-denominated Treasury bills from banks’ books discounted at zero percent. This mechanism helped shore up foreign currency reserves at BDL to an all-time high of $40.73 billion as at end of August, up from $35.74 billion just before the swap mechanism kicked in. Foreign assets later ended the year at $40.71 billion, with the value of gold reserves standing at $10.71 billion.

The swap mechanism introduced by BDL also had a positive impact on the country’s balance of payments, with the net foreign assets of Lebanon’s financial sector recording a historic monthly surplus (the highest amongst publicly available data dating back to January 1993) of $1.79 billion in August and the first cumulative surplus since 25 months ($366.2 million) by the end of that same month. More recently, the net foreign assets of Lebanon’s financial sector registered a surplus of $1,237.5 million in 2016, compared to a $3,354.6 million deficit reported a year before.

28 - 29

On the current account side of the balance of payments, the impact of the drop in international oil prices on Lebanon’s balance of trade did not last, translating into a $637 million y-o-y expansion in imports to around $18.71 billion as at end of 2016, which outweighed the $24 million rise in exports to $2.98 billion. The country’s balance of trade deficit consequently widened by $0.61 billion on an annual basis to about $15.73 billion.

As far as the banking sector is concerned, it continued to prove its resilience for yet another consecutive year, registering an astounding 9.85% increase in the combined balance sheet of

commercial banks to over $204 billion as at end of December, propelled by some 5.45% expansion in loans to the private sector to circa $57 billion. Customer deposits were no exception, constantly growing in spite of the turbulences in the region, ending the year with some 7.42% hike to around $166 billion. The sector remained highly liquid in the year 2016, enjoying a primary liquidity ratio of 81.80%. The deposit base at Lebanese banks remains highly dollarized, with the deposit dollarization rate standing at 65.82% in December, compared to 64.88% at year-end 2015.

Recap of Lebanon’s Major Economic and Banking Sector Indicators

2016 2015(USD Bill ion)

Key Macroeconomic Indicators- Real GDP Growth Rate- Annual Inflation Rate- Trade Balance- Current Account Deficit/GDP- Balance of Payments- Foreign Currency Reserves- Gold Reserves- Total Reserves (Foreign Assets & Gold)- Total Reserves/Gross Public Debt- Total Primary Surplus- Budget Deficit- General Gov. Overall Fiscal Balance/GDP- Gross Public Debt- Gross Public Debt/GDP

Key Banking Sector Indicators- Total Assets- Loans to the Private Sector- Customer Deposits- Private Sector Loans/Deposits- Primary Liquidity Ratio- Dollarization Rate

1.00%

3.1%

(15.73)

20.37%

1.24

40.71

10.71

51.41

68.65%

0.02

(4.94)

-8.10%

74.89

143.87%

204.31

57.18

166.45

34.35%

81.80%65.82%

1.00%

-3.4%

(15.12)

20.97%

(3.35)

37.09

9.85

46.94

66.76%

0.72

(3.95)

-7.40%

70.33

138.41%

185.99

54.22

154.95

34.99%

78.22%64.88%

Source: IMF, CAS, BDL, ABL, MOF, Higher Customs Council, Credit Libanais Economic Research Unit


In International Markets

Bahrain Operating Environment Bahrain economy grew by 3.6% during the first three quarters of 2016 (Y.O.Y) ahead of the 2.9% growth rate seen in 2015. The decline in oil prices coupled with weaker public finances at the outset of 2016 were outweighed by the growth in the non-oil infrastructure spending and investments. Renewed optimism was sparked by a number of factors; US Fed rate increase, which increased the prospects of growth, the agreement by OPEC and leading Non-OPEC oil producers to cut off output, which triggered a rally in oil prices. Meanwhile, a new legal framework governing the real estate sector has boosted investor confidence, and has had a positive impact on the real estate sector as a whole. A number of major development projects are underway. Looking ahead, Credit Libanais Bahrain branch is determined to strengthen its involvement in the Bahrain economy by deploying more resources and engaging in new and competitive bank products.

Cyprus Operating EnvironmentIn Cyprus, the country’s long term foreign local currency issuer rating remained at B with a positive outlook from a previous “stable”. The European Commission, European Central Bank and the International Monetary Fund (IMF) underline some changes that need to be taken by the authorities to improve the credit rating and market perception. GDP grew by 1.6% during 2016 and is expected to rise further, as the economy continues to benefit from lower energy prices and improved labor conditions. Overall market sentiment was up during the year, as a result in the pick-up of business confidence in services, retail trade and construction. Property sales were up by 43% in 2016. Credit Libanais Cyprus branch continues to target and service Lebanese and foreign communities on the island and looks at more engagement in diverse onshore banking activities.

Iraq Operating EnvironmentThe macroeconomic outlook is still subject to major risks related to the fate of the IS insurgency on one hand which is taking its toll internally, and to the global economic environment at the current weak pace and slow growth rate. Iraq is highly dependent on the hydrocarbon sector, which accounts for two thirds of its annual GDP. The recent increase in oil production during 2016 should help offset any future decline in oil prices. The country needs to diversify its economy, and undertake serious reforms.

On the financial and banking side, the Central Bank of Iraq enacted new laws which required Lebanese banks operating in Iraq to increase their capital. In the meantime, economic cooperation between the Kurdistan region and Lebanon is witnessing a positive growth, and prospects for further increase in exchanges in trade and investments are considerable. This will definitely open new business avenues that require more banking solutions. Our Iraq branches remain well poised in the market to grab such opportunities as and when they occur.

Credit International SA – CISA Senegal Operating Environment According to the IMF, Senegal GDP growth recorded 6.0% in 2016 and is expected to rise to an estimated 6.5% in 2017. The rise in growth rate is driven by the vigor of the agricultural sector, the dynamic cement industry, building and public works, energy, telecommunications and financial services. Moreover, the implementation of the flagship projects in the Emerging Senegal Plan (Plan Sénégal émergent (PSE), along with the major reforms are expected to speed up their completion. Authorities, however, must ensure the sustained implementation of the major reforms in many sectors of the business environment. In this context, Credit Libanais International SA (CISA) fulfills its mission of value creation and participation in the sustainable development in the African continent, by building a strong banking presence in the West African zone “UEMOA”. To achieve this objective, CISA relies on a strong technological platform, as well as a robust support from head office to offer a range of differentiated products and services adapted to various market needs, and service a large network of Lebanese and African businesses throughout CISA two branches in Dakar, especially in the areas of trade finance.

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PROVIDING EXCELLENT FINANCIAL SERVICES,

FOR AND AROUND CUSTOMERS


Retail Banking Activities2016 in ReviewDespite the severe adverse market conditions on multiple fronts during 2016, the geographical presence of CL throughout its 69 domestic branches across all 5 territorial regional managements allowed us, both through commercial lending and products, to record another year of good results. The used modelling analysis allows our teams to propose timely solutions to customers, and we continue to support Lebanon’s high-value-added and export-oriented growth model this year. By simplifying a large number of business processes and leveraging on technology, efficiency was further enhanced, in a context where the banking industry agenda is dominated by return on equity, capital adequacy ratio and asset quality.

In addition, CL one-to-one banking approach allows our dedicated account managers to provide customers with exclusive and integrated services, according to their profiles and growth appetite. Expanding in scope across Lebanon, Credit Libanais puts at the disposal of customers a rich array of investment products and other services through the Group’s subsidiaries in the areas of credit cards management, payment gateway, leasing, bancassurance, real estate services, travel and tourism and Islamic banking.

Encouraging Saving, Growing DepositsCL consolidated total deposits reached LBP 13,427,483 million or YOY growth of 5.95%. This healthy deposit growth, a large share of which is comprised of individual customer deposits, diversifies risk and provides the Bank with flexibility in funding its lending activities as well as room for maneuvering in efficient utilization of its resources. Leveraging on the advantage of its far-reaching branch network, the Bank continues to conduct effective deposit marketing activities in all corners of Lebanon emphasizing opportunities presented by local market conditions.

Savings ProductsCredit Libanais offers products that facilitate savings behaviors in order to lend concrete support to expanding the savings base. Customers make regular contributions to their savings in any foreign currency and maturity they wish.

Housing LoansAmid the severe market conditions CL reaffirmed its leading role in supporting stability in the lives of Lebanese families, with a 9.5% growth rate in the housing loans portfolio.

In addition, various tailored and affordable housing schemes were designed for professional associations (lawyers, judges, medical doctors, pharmacists, the Lebanese Customs and the Beirut Fire Department etc…), which recorded a growth in the performing portfolio of over 19%, while the military housing schemes registered a growth in performing portfolio of 32.8%. Overseas housing loans cater to the Lebanese diaspora who wish to have a foothold in their homeland.

Consumer BankingCredit Libanais continued to team up with many major brands in the Lebanese retail market and continued to offer consumer loans at large stores selected according to strategic criteria. Total growth of all products combined recorded a sound 6.52%. Cognizant of the significance of lending procedures and loan disbursement speed in consumer loans, Credit Libanais unveiled structured products as pioneering offerings in the industry.

Growing Product Portfolio in Mutual FundsAs the search for yield in the investment world increases, Credit Libanais continues to offer investors a full array of options with an extensive range of investment funds including equities, fixed-income securities, traditional investment vehicles and commodities.

Annual Report 2016 Credit Libanais Group 34 - 35


Retail Commercial LendingIn retail commercial lending, CL achieved a 6.4% growth rate on performing loans, with a special focus on green environmental facilities. In addition, we extend long-term financing for industrial energy efficiency projects, rehabilitation of buildings and renewable energy investments including solar and energy projects in general.

Moreover, building on the Bank’s important role in financial inclusion through various lending schemes to SMEs and Micro SMEs, considered as our business partners, the Bank continues to lead initiatives and design campaigns geared towards craftspeople who promote the values of “heritage”. Such lending schemes offer flexible repayment terms to cater to various business models, and our teams of account managers consistently provide them with tailored advisory services. Intermediation services for cooperation and partnership opportunities of customers are also designed and developed.

Also in 2016, CL offerings to “inclusive” markets continued to expand with programs such as “VITAS,” “ESFD”, “KAFALAT” and microfinance in general. Such programs assist customers to grow in a sustainable manner, by proactively identifying their financial and non-financial needs on an individual basis, and developing solutions to help them enhance their competitiveness. In this context, ESFD (Economic and Social Fund for Development) loans grew by 15.78% in 2016, and SME outstanding facilities achieved a y-o-y growth of 9.6%.

For the entrepreneurial ecosystem, many alternative solutions are designed for the startups, including training programs and advisory services, as well as credit facilities offering advantages such as collateral terms, long term loans and low interest rates.

For companies conducting business in international markets, the Bank assists them throughout their business cycle. Leveraging on CL extensive correspondent network to intermediate foreign trade transactions of companies with various locations across the world, Credit Libanais supports business activities in foreign markets, in the Middle East and Gulf Region, in medium to long term project financing and strategic advisory.

BancassuranceCredit Libanais has made maximizing customer experience and satisfaction a strategic priority. As part of the bancassurance programs, the Bank caters to customers’ needs and expectations through the right channel by offering the suitable insurance product or service in a transparent manner, and in line with the regulatory requirements.In this perspective, a large variety of insurance products and services are offered throughout the Bank’s network of branches easily accessible in every corner of Lebanon, supported by a 24/7 customer care center, and a revamped, secure and sophisticated internet portal. Leveraging on the Bank’s key role in increasing the accessibility and spreading the use of alternative distribution channels, a considerable number of life and non-life insurance products and services are made available; those cover a wide variety of plans as retirement, education, life, automotive, fire, trade, travel and much more.

2016 in ReviewThe Marketing and Development function continues to develop effective approaches to serve retail and corporate customers while insuring growth through sales activities and communication. We focus on developing awareness of CL brand and building trust around that brand. To roll out the strategy, many initiatives and tactics are initiated, among which:

CL Initiatives towards Lebanon Modernization and the E-governmentCL undertook a number of initiatives towards the country’s modernization, by being the first Lebanese bank to launch the e-government services related to online tax payments: with this pioneer service, customers are able to settle their income tax, indirect tax, value added tax (VAT), and built property taxes by direct transfer from their Credit Libanais bank account via the online banking services, or using any banking card. Moreover, engineers are now able to settle their membership fees on-line, owing to CL initiative with the Order of Engineers in Beirut. In addition, in 2016, CL offered customers the e-service allowing them to settle their water bills via the establishment’s website using any CL MasterCard or Visa card or any local or international banks cards. Other public entities will follow, such as municipalities, in terms of online payment services. All payments are made in a highly secure manner through the Group subsidiary, NetCommerce payment gateway.

Continuous Innovation in ProductsIn parallel, innovative products and services were introduced in 2016, such as the “Overseas Home Loan” designed for Lebanese wishing to acquire a residential property abroad, the VISA Infinite card, offering a range of exclusive privileges, benefits, loyalty points and VIP airport lounges access around the world, and the ATM Deposit Card allowing corporate customers to use CL ATMs for cash and checks deposits, with the highest safety standards. The ATM Deposit Card for individuals, on the other hand, adds on to the range of debit cards that Credit Libanais offers to its customers, giving them 24/7 access to the deposit and withdrawal services through the bank’s extensive network of ATMs.

Loyalty Programs and CampaignsTo reward customers for their loyalty in cards spending, Credit Libanais offers them exceptional privileges and rewards.

CL Loyalty program allows cardholders to collect miles and travel for free with any airline company, or choose gifts from a large variety of merchants across Lebanon. In 2016, the Bank took part in many campaigns launched by Visa International throughout the year, giving cardholders the chance to win rewards and benefit from a plethora of discounts and cash rebates programs. Noteworthy that the redemption rate increased by 42% in 2016.

The Public SectorCredit Libanais remains the pioneer Bank in the Public Sector, mainly targeting the Internal Security Forces, the Lebanese Army, the General Security and other military institutions all across the Lebanese territory. The Bank offers its wide variety of quality products and services to military personnel. In this context, the Bank signed a new Housing Loan protocol with the Lebanese Customs and the Beirut Fire Department to offer housing loans at privileged interest rates and conditions to this segment. New protocols with other public sector institutions are also in the pipeline. In 2016, the sales force team efforts lead to the execution of a volume reaching $67,300,000 in loans.

The Sales Force TeamThe sales force has become an essential provider to the overall bank results by generating sales into the corporate and retail lending as well as Iskan and Housing loans, contributing to a 19% increase with a total volume of $62,551,480. In 2016, the sales force team sustained the aim of satisfying customers’ needs while improving the Bank’s cross selling ratio.

Customer Relation Management (CRM)By efficiently managing a diversity of available data, CRM technology has become a natural partner of Credit Libanais business intelligence and analytics tools, to manage customer relationships and measure marketing campaigns over multiple networks. Moreover, CRM/CMS system improves and facilitates sales as well as supports branches’ interactions with customers, prospects and business partners throughout the enterprise.

The Mystery Shopper ProgramFor the 10th consecutive year, the program is continuously enhanced in coordination with IPSOS-Lebanon, one of the largest market research companies, and serves as an efficient tool to help the Bank appraise employees’ product knowledge



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and evaluate the overall branches performance. Outcomes assessments highlight the strengths and weaknesses which serve as a basis to identify training needs, enhance staff performance, customer approach, product knowledge and sales skills, for an ultimate customer experience.

The Marketing Intelligence UnitThe Marketing Intelligence Unit presents informative communication and revised reports to support management decisions, mainly at the marketing as well as branch objectives and incentives levels. These reports are created by organizing, storing, retrieving and analyzing relevant data and information gathered from various sources, internally and from the competitive environment. Practical and effective tools are used, among which competitive intelligence, media monitoring, collection of information and other relevant data. Also, the Unit assists in setting the Bank’s existing and new marketing campaigns, added to analytical data related to accounts closing.

In 2016, the first issue of the Marketing Intelligence quarterly report was launched to staff, covering Credit Libanais latest products and services and ongoing marketing campaigns, as well as news from local competition, and the hottest banking trends mainly in innovation and technology. The Net Promoter Score (NPS) e-survey is being prepared for 2017 to be launched on the online banking and mobile application platforms to track customer satisfaction across business units, and monitor changes in customer satisfaction trends over time.

Communication and Advertising Credit Libanais continuously implements campaigns with creative concepts and strategic media planning based on resources optimization which enable the Bank reach a wider audience and generate a valuable relation with customers. In 2016, the Bank further enhanced its brand image by reshaping advertisements and communication styles to follow new market trends, through above and below the line communication tools. The efficient and consistent above the line advertising presence reached a broad range of customers, especially on national TV Stations during highly ranked programs. Below the line tools encompass the Social media channels, e-mails, SMS, newsletters, etc..

PROVIDING VALUE FOR CUSTOMERS THROUGH

OUR DIGITAL JOURNEY


The IT platform enables the Bank to provide systems, logistics and marketing for ATM and POS networks and payment gateway solutions for e-commerce.The Bank runs a state-of-the-art customer service center to service customers on a 24/7 basis.The Bank is pioneer in the history of Lebanese banking technology, introducing products and services, point-of-sale technologies, ATMs, payment platforms and internet banking innovations.The Bank has a track record of innovation, from the launch of the first commercial plastic card in Lebanon, to the introduction of the first internet payment gateway.Growth of internet usage represents an important opportunity to capture new clients, both in Lebanon and within the Lebanese diaspora.Credit Libanais owns and manages high-end banking and payment technology companies serving the Group as well as other leading banks.This synergy boosts developments within the Bank and across the Lebanese market.Credit Libanais controls a solid 50% of the Visa acquiring market share in Lebanon, with the Bank’s card portfolio including more than 150k cards and still growing.

CL Digital StrategyCredit Libanais Electronic Banking strives to provide the Bank’s customers with a smooth and pleasurable banking experience through existing and new digital channels in an effort to target each customer through their preferred media. In 2016, new online banking services were introduced such as Mobile card recharge top up, mobile bill payment, loan payment, wedding payment, activate e-services, request e-statement by inserting related email address (card, loyalty, account) and enroll for e-newsletter. The wedding account online payment service was launched allowing guests to use their own local or international payment cards to send gifts securely and online through the Bank’s website to the couple’s account. The wedding account comes with a package of services and products (cards, loans, gifts, travel package, insurance etc.).

CL E-Bank mobile app was improved by adding new services such as private banking and wealth management services (open position, pending orders, transactions statement, valuation statements) as wells as Loyalty Points balance , location of the new Deposit ATMs. In addition fingerprint recognition was adopted for additional security.

Social Media In 2016, a significant increase in number of followers on all Social Media Channels was registered; the Bank obtained a high community ranking versus other local banks: Top 3 on Facebook, fourth on Twitter, fifth on Instagram.

The Visa Infinite Card was introduced with high credit limit and distinctive banking services and advantages such as Worldwide Premium Airport Lounges Access, Personalized Concierge services available 24/7 from anywhere in the world, Comprehensive Travel Insurance and Extended Warrant.

ATM NetworkIn 2016, our large network of ATMs continued to offer value added services to customers in terms of cash and check deposits and withdrawals, 24/7. In addition, Deposit ATMs installed in Credit Libanais branches were upgraded to accept and allowing multiple check deposits through scalable checks processing modules (SCPM). Customer usage of our increasing network of Deposit capable ATMs has grown substantially in 2016. Another upgrade was also executed on the ATM and debit card switch IRIS. A “smart” ATM module was implemented offering new enhanced features and easier accessibility and user friendly features such as:

Single click cash withdrawal: The ATM recognizes the cardholder’s preferred and most repeated cash withdrawal transaction amount for the past 3 months and immediately prompts it on the ATM screen for the user after the pin entry.Greeting customers based on time of day and by name.Language preference: whereby the ATM recognizes the preferred language (Arabic, French or English) of the card and uses it automatically.Corporate message notification.

Electronic Banking

Credit Libanais holds a strong position in the e-banking and e-commerce business in Lebanon

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Acquiring Back OfficeIn 2016, E-banking Acquiring back office was upgraded to a PCI compliant framework and enhanced to accept additional acceptance features such as Near Field Communication (NFC) also known as Visa Paywave or MasterCard Paypass. The new Prime 4 version offers a real time connection with the online authorization system and ensures data synchronization 24/7. The acquiring daily operations have benefited from this integration which has replaced many of the previously independent processes executed manually by a clean single automated process.From the technical side, the system has been upgraded to Oracle 11g+ allowing a faster end of day processing, almost reducing it by half.

Telephone MonitoringA new application was developed to monitor in real time staff incoming and outgoing phone calls. The new application centralized and indexed data collected from branches and departments allowing for searches and inquiries. Reports provide management with clear and precise information as to the cost, frequency and time of calls. The application is flexible and can be adjusted to any future phone system and is accessible online by concerned managers.

Cost Analysis SystemA new application was developed to analyze and provide detailed information regarding cost of each department or branch. It allows management to identify and consequently take action regarding any unnecessary costs in their unit. The general cost breakdown analysis per entity covers all fees such as electricity bills, phone bills and any other charge. These costs can be provided down by region, branch, department or division.

Card Fraud and Management Control As part of our ongoing efforts to stay ahead of the more sophisticated fraud environment, we are proud to be the first bank in Lebanon to achieve PCI PA/DSS compliance – a worldwide data standard developed and monitored by the major payment card companies. Combined with our existing SMS alerts, Verified By Visa and 3D SecureCode, Fraud Management and Control is well equipped to monitor, detect and block fraudulent transactions as they happen. Moreover, we continue to deliver periodic workshops to our staff to update them on fraudsters’ tactics and the countermeasures to deter them.

www.creditlibanais.com | [email protected]

Credit Libanais Tower, Corniche El Nahr, Adlieh1518 | +961 1 607100 | 69 branches at your service ONLINE

WEDDING GIFT

Your Guests Can Contribute to Your Wedding List Through www.creditlibanais.com

INNOVATION FOR

ORGANIZATIONAL AGILITY


Global Business Development DeskThe Global Business Development Desk continues to actively and selectively identify target group of Lebanese, regional and international institutions, corporate, correspondent banking and private investors, domestically and in the MENA region, in line with the Group expansion and business development strategy.

Compliance with regulations related to anti-money-laundering and financing of terrorism, added to embedded social responsibility standards remained strong underlying basics for the Division.

Corporate Loans Portfolio

Agriculture (1%)

Services (20%) Doubtful (1%)

Industry (19%) Substandard (1%)

Construction (19%) Watch & Settlement (3%)

Trade (39%) Normal & Follow up (95%)

Individuals (2%)

1% 1% 1%

19%

95%

19%

39%

20%

2%

3%

byEconomic

Sector

byRisk

Categories

2016 in Review At the national level, 2016 was perhaps one of the most difficult years for trade activities; nonetheless, CL registered a 3.5% growth in unfunded facilities utilization, and posted an outstanding 11% growth in funded facilities utilization. In this context, the improved portfolio risk rating was illustrated by a noticeable decrease in doubtful loans.

In 2016, CL lending portfolio quality was additionally strengthened with real guarantees, namely mortgages, fire and life insurance policies, as well as assignment of proceeds in compliance with financial and non-financial covenants. We also adopted a risk-based pricing approach in line with the capital adequacy requirements of the Basel III framework. In 2016, our team of experienced corporate banking managers was fully engaged in the Profitability Module and the IFRS9 implementation workshops, while focusing on cross selling of existing products, development of new products and services such as the corporate credit card and the corporate online banking.

On another front, the team participated in several loan syndications, and had a substantial contribution in the sales of EFG Hermes shares in Credit Libanais capital. The internal restructuring initiatives resulted in a positively competitive work environment and higher employee engagement.

Based on a solid and diversified customer base, we further developed our corporate lending portfolio, by focusing on low-risk business opportunities with existing and new customers. While aiming to achieve leadership in our primary markets as the financial institution of choice for high net worth corporate customers, we strive to maximize shareholders’ value, boost our portfolio growth trend, reinforce customer loyalty, and continuously develop our human capital. We conduct business with core values as the cornerstone of our conduct: a win-win culture putting the customer’s interests ahead, compliance, integrity, responsibility, responsiveness, efficiency, stretching capabilities and continuous improvement.

The subsidized Banque Du Liban (BDL) lines of credits, as well as partnerships with the International Finance Corporation (IFC), the Arab Trade Finance Program (ATFP), The European Investment Bank (EIB), and others helped us further extend our financing capabilities and consolidate our liquidity ratio. In this context, we secured important financing at low cost from several international banks, in support of the trade activities; part of this financing is guaranteed by IFC while the rest is on clean basis. By keeping close to customers, we proactively gain an edge over the competition in identifying their financing needs and helping them meet their business development goals in a timely manner.

Corporate Banking

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At Credit Libanais we are conscious of our important role in the societies and are committed to our Corporate Responsibility towards customers, employees, communities and the environment, and aim to remain one of the best corporate

accountable citizen and a source of major wealth creation where

we operate. Our core values are defined by high standards

of ethics and integrity, respect of human and labor rights, as

well as national and international banking regulations and

best practices. Based on the Bank’s determination to create

sustainable business, Credit Libanais Group officially joined in

2015 the United Nations Global Compact (UNGC), the world’s

largest corporate responsibility initiative with over 9000 business

and 4000 non-business participants in 170 countries. CL Group

also became a member of the Global Compact Network in

Lebanon. The United Nations Global Compact is a strategic

policy initiative for businesses that are committed to aligning

their operations and strategies with ten universally accepted

principles in the areas of human rights, labor, environment and

anti-corruption. By joining the United Nations Global Compact, CL committed to incorporate the ten principles in its daily operations and all its strategic decisions and started publishing the Communication on Progress (COP) Report according to international guidelines.

Our human development policy consists of improving the capability and commitment of our strongest assets, our employees, to drive sustainable high performance while helping them thrive and achieve their goals as well. The Code of conduct is periodically reviewed and the latest version is communicated

to existing and new staff and made available on the intranet.

Credit Libanais makes sure that the implementation of all policies

governing the human rights are followed and implemented. A culture of transparency, responsibility, accountability and fairness is implemented across all functions of the Bank.

Our Bank fully abides by the Lebanese Labor Law, which

prohibits child labor and employment before the age of 18. We

strive to support diversity at the banking Group and ensure

equal opportunities for all staff. This policy governs all aspects

of employment and career advancement: selection, job

assignment, compensation, discipline, termination, and access to benefits and training. In the same scope, maintaining a healthy working environment is an important part of our efforts to create a performance culture. The Bank has set the good example by making the premises smoke-free.

The safety of our staff is as well paramount to us. Therefore, regular fire drill simulations are conducted for staff and extensive training in safety and injury prevention is disseminated across the Bank, in close coordination with a specialized accredited company. All our employees also benefit from health insurance coverage and tuition allowance for their children.

Our community projects give our employees opportunities to engage in volunteer work. In this respect, the Bank welcomed for the fourth year in a row the “Lebanese Red Cross” at the Bank Headquarters for a blood drive, under the motto “One Love, One Blood – Donate and save a life”. The drive aimed at involving and encouraging staff from all branches, departments and sister companies to donate blood, whereas 59 blood units were donated to save lives. Similarly, to encourage staff participation in sports events, CL sponsors many events including marathons in various Lebanese regions, triathlons, rallies, as well as a variety of tournaments. In 2016, CL staff ran for the NGO “Kunhadi” during the “BDL Beirut Marathon 2016” to increase awareness on matters of road safety and safe driving in Lebanon. Credit Libanais believes in its fundamental role in society and its responsibility to create a long-term value for all stakeholders. Safeguarding our culture and protecting our heritage and family values is vital to maintaining our unique identity. We constantly contribute to university and school events that aim at offering professional guidance and presenting different employers to students. Our selected contributions to professional, educational, sports, cultural and social activities have positively impacted the communities we work in and by the same token, boosted CL’s image in various Lebanese regions and towns.

Corporate Responsibility


Part of our responsibility towards the social economic development in our country is to support financial inclusion to ensure that everyone has access to financial services. In this perspective, Credit Libanais further builds on its banking inclusion strategy to reach out to an increasing number of Lebanese in towns and remote areas across Lebanon, at an affordable cost. While domiciling employees’ salaries at our Bank enables the private and public sectors to easily pay employees through a bank account, such a procedure usually reduces operating costs and boosts the efficiency of institutions. Consequently, new account holders cash their salaries at Credit Libanais and have access to a variety of banking products and services.

In a move towards facilitating the banking experience of public sector servants and enhancing the financial inclusion ratios, special retail loans (car, personal, housing) targeting the Lebanese Army and Security Forces are specially designed to that purpose.

At Credit Libanais we believe in environment protection. To reduce the Bank’s carbon footprint, CL departments and branches became greener with reduced paper consumption and responsible recycling for glass, plastic, electronic consumables and others. Special care is also given to eliminate the printing of unnecessary e-mails exchanged among various parties.In 2016, some 13.84 tons of papers were sent to a local recycling factory. In this perspective, Credit Libanais is extending support to local NGOs who benefit from the recycled material to finance awareness campaigns or acquire medical support equipment to patients across Lebanon. Moreover, some 534 Items IT equipment (Pc, Screen, Servers) were sent to a local NGO that uses them to finance awareness campaigns on road safety programs. Some other 263 electronic equipment (Tel, faxes...) were also donated. These initiatives contribute to cultivate a green culture throughout CL Group.

DOING BUSINESS WITH GREAT

ETHICS AND VALUES

Bahrain BranchCL Bahrain branch is determined to strengthen its involvement in the Bahrain economy by engaging in innovative and competitive products and services. Plans are underway to introduce new housing loan schemes that aim to attract middle and high income expatriate Lebanese executives as well as other nationals who wish to acquire properties in Bahrain.

Cyprus BranchCL Cyprus branch continues to target and service Lebanese and other communities on the island primarily for deposits and other operational services such as letters of credit, guarantees etc. Looking forward, we expect the branch to further engage in diverse onshore banking activities and deploy more human resources, in line with the regulatory requirements and those of the European Commission.

Iraq BranchesThe financial sector is slowly evolving in Iraq. Recently, the Central Bank of Iraq enacted new laws which required Lebanese

banks operating in Iraq to increase their capital, and be more involved in the Iraqi market. In the meantime, economic cooperation between Kurdistan and Lebanon is witnessing apositive growth, and the potential is considerable for further development in both trade and investment flows. Our branches remain well poised in the market, to meet such opportunities as and when those emerge.

Credit International SA – CISA SenegalCredit International SA (CISA)’s mission is to create added value to its partners and participate in the sustainable development of the African continent, while building a profitable banking presence in the countries of the West African zone “UEMOA” and in particular in Senegal. To achieve this objective, CISA relies on an advanced technological platform, standardized organization and procedures that enable it to offer a range of differentiated products and services adapted to each market sector, especially in the areas of commercial and corporate banking, as well as trade finance.

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Foreign Entities

CL foreign entities in Cyprus, Bahrain, Iraq and Senegal benefit from the backing of the Bank in Lebanon, where all key departments at head office ensure the support needed. The recent technological upgrade of the IT systems has been a key success factor in bringing CL branches abroad to a seamless operating platform with Lebanon head office and branch network. By continuously observing market conditions in each respective market, we ensure compliance to local rules and regulations with adequate efficiency and transparency.


CCM is the largest processor for card payment acceptance and issuance in Lebanon. CCM offers a single point of contact to all merchants looking to accept international cards such as Visa, MasterCard and Amex on all point of sale solutions: in-store top counter POS to wireless and mobile POS. CCM also offers merchants proprietary loyalty and gift card programs cu stomized to their needs and businesses.Services offered cover a wide range of options from chip card personalization, card embossing, encoding, indenting to secure storage, mailing and secure transportation.Again in 2016, CCM provided its customers, banks and merchants, quality service and up to date technologies and products.Online services are made available to existing customers; merchants can securely access their POS information, manage their proprietary cards schemes in terms of card issuance requests, turnovers and earnings, and generation of accounting and management reports.CCM help desk provides all merchants with a single point of contact for all queries and needs in order to centralize, monitor and ensure a quick and efficient response to all their needs.CCM continues to deploy new series of POS embedded with more flexibility features and wireless connectivity options, to better satisfy our customers.

The year 2016 Following the relocation to CL Tower, CCM personalization department was completely upgraded. In fact, the Datacard® MX2100™ card issuance system is one of the most affordable high-volume solutions offering true field modularity; The new personalization system installed configures Magnetic, chip cards as well as NFC products. CCM also implemented the Dexxis instant issuance solution from Gemalto allowing the immediate issuance and activation of the card ready for customers use, and immediate replacement of a card in case of an emergency replacement request.Over the elapsed year, the Company developed an integration application between the cash register and the POS terminal accepting international payment brands as well as proprietary payment cards. CCM developed and customized new loyalty solutions, volume based rewards and targeted campaigns for merchants.

Successfully certified with Visa and MasterCard CCM obtained the Global Vendor Certification Program (GVCP) from MasterCard and the Visa Attestation of Compliance (VAOC).CCM also obtained certification from MasterCard for NFC acceptance or contactless acquiring also known as Paypass.

In 2016, CCM overall network of POS exceeded the 10,000 active terminals out of which 40% are of the latest Telium Ingenico model with NFC capability.

Affiliated Companies

Credit Card Management sal (CCM)

CCM General inquiries

Website

Help desk

E-mail

+ 961 1 608600

www.ccm.com.lb

+ 961 1 899915

[email protected]

www.ccm.com.lb

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NetCommerce SAL has been a premium provider of internet payment services and e-business solutions since 1999, enabling Lebanese merchants to access worldwide markets and sell their products and services online in real-time, using Visa and MasterCard card types.

NetCommerce plans to further acquire a significant market share by benefiting from the latest technology and providing fast and advanced payment solutions to high tech emerging businesses, e-government projects, and mobile technologies.

In this respect, adding on the previous e-payment success projects with the Lebanese government, NetCommerce continues to offer new secure payment services to public departments, ministries, municipalities and syndicates, thus dynamically participating in the modernization of Lebanon by moving towards a full-fledged e-government in terms of secure on-line payment services.

A Reputation You Can TrustWith a growing portfolio of more than 1000 merchants who trust NetCommerce to process their payment transactions securely and reliably, NetCommerce has become the largest payment service provider in Lebanon, processing hundred thousands of transactions each year from various operating industries.

The Most Secure and Reliable Solution for Payment OnlineNetCommerce adopts the latest world technology and security implementations to deliver innovative, reliable, and secure payment processing solutions, and allows both merchants and cardholders to trade and purchase online with confidence.

NetCommerce uses VeriSign Authentication Services and solutions that allow companies and consumers to engage in e-commerce transaction securely.NetCommerce is PCI-DSS (Payment Card Industry Data Security Standard) compliant since March 2010. This program applies the latest security implementation derived by Visa and MasterCard in the protection of cardholder data and payment services.NetCommerce also uses the Verified by Visa and MasterCard Secure Code protocols. These protocols provide 3D-Secure payment authentication between the merchant, cardholder, issuer bank, and the acquirer bank on each transaction to better authenticate each payment online.

Ease of IntegrationNetCommerce has self-developed its payment platform to respond to the different needs of the Lebanese market, with the ability to develop custom and vertical solutions that tailor both market and customer needs.NetCommerce has made easy the integration into its payment interface, with different options that best suit the different merchants’ needs.

NetCommerce SAL

The Payment Service Provider for Internet Credit Card Processing

CCM General inquiries

Website

Help desk

E-mail

+ 961 1 879 709

www.netcommercepay.com

+ 961 1 879 709 (ext: 11)

[email protected]

www.netcommercepay.com


Established in 1996 at the initiative of Credit Libanais and the participation of 5 other major Lebanese bank, International Payment Network sal (IPN) grew to become Lebanon’s leading ATM Network Switch, currently owned by 5 leading banks, that manages the most extensive network in the country with around 1000 ATMs and servicing more than 16 member banks.

To ensure an excellent service to customers in terms of Automated Teller Machines, IPN continuously reinvests in the state of the art technology and has finalized the main part of its software solution from Base 24 to Base 24 EPS, known to be the most innovative finance services solution worldwide, which currently runs under the Non Stop High Availability System NS series.

From the security perspective, following the EMV compliance rightfully acquired several years ago, IPN has been certified since 2011 as PCI compliant according to the norms of Visa and MasterCard international, and since 2012 as ISO 9001:2008 compliant.

IPN services in terms of ATM Services include Cash Withdrawal, Balance Inquiry, Mini Statement, Mobile Recharge, Account Transfers, Pin Change, BNA (band and envelop deposit), Bills Payment and much more.

IPN services in terms of ATM Solutions include Installation of ATMs, Choice of ATM supplier, Customized Screens and Receipts, Managements of ATMs Cash Position, Control of Consumables, Control of Captured Cards, Encryption Key Management, 24/7 Service Desk Support, Anti-Skimming Detective Alert, Assistance in Applying for all Visa/MasterCard/Amex Mandate Certifications, and Host-to-Host connections.

Credilease is a financial institution affiliated to Credit Libanais sal. Financial solutions brought are efficient, confidential and competitive and are specifically designed to meet individual and corporate needs of each customer.

Credilease specializes in the following financial services:Leasing operations such as rent to own: machinery, transport equipment, industrial equipment, hospital equipment, etc .Credit facilities such as car loans, personal loans, housing loans, subsidized loans.Consumer finance loans as well as credit facilities to household and consumer appliances sectors.Credilease is also ready to extend investment and private banking activities including equity and wealth management services.

Credilease trained and skilled team develops the best personalized service needed. Employees are knowledgeable and equipped with the latest technological tools to provide a fast, reliable and confidential service.

The International Payment Network SAL (IPN)

Credilease SAL

IPN General inquiries

Help desk

E-mail

Address

Tel / Fax

E-mail

Website

+ 961 1 871 248

+ 961 1 878470

[email protected]

Credit Libanais Tower, Corniche el Nahr Adlieh – Beirut, Lebanon

+961 1 425760/1/2/3/4

[email protected]

www.creditlibanais.com

46 - 47


Treasury, Global Markets, Asset Management and Private Banking

As the trusted advisor of customers in Lebanon and the region, CL Group grows on the solid values of excellence, integrity and creativity. Ethics and deontology principles are minutely applied by our team of experts who invest their efforts in building a strong and reputable image for the Bank with the objective of becoming a leading player in local and regional markets. We spare no effort in matters of customer satisfaction, employee engagement, profitability and growth, and operate in full compliance with the Central Bank of Lebanon and the Capital Markets Authority requirements and regulations while adopting the best practices in local and international banking standards.

CL Group Treasury, Global Markets, Asset Management and Private Banking offers a broad range of investment solutions, as well as portfolio management and brokerage services including equities, fixed income, foreign exchange trading, multi-asset class investment funds, exchange traded funds (ETFs), hedge funds, structured products with various underlying instruments, capital protected products, Sharia’a-compliant investment products, custody services and safekeeping of various types of financial instruments.

The Bank also provides private banking customers with continuous updated perspectives pertaining to market trends and economic forecasts.

Our team offers a broad range of personalized advisory services to high net-worth customers and is backed by an in-house research unit that regularly communicates market reports and updates to customers, to assist them in their decision making process regarding their future investments and portfolio allocation.

Our performance is facilitated by the Bank’s leading position in an array of treasury and capital market services and products coupled with a strict risk management culture.

With the continued geopolitical developments in the region in addition to the uncertainty witnessed in global economic trends, 2016 was another challenging year. Amidst such developments, we followed a more proactive approach while closely monitoring our portfolios and taking appropriate measures to limit avoidable exposures. This has resulted in a positive growth in both financial results and assets under management, positively driven by increased volumes and customers seeking well-balanced investment opportunities.

Treasury and Foreign Exchange

CL Group Treasury continued to further build its capabilities by diversifying funding operations and effectively managing risks. The optimization of synergies throughout the Group enabled us to closely select investment opportunities in various markets and optimize our Asset/Liability management model.

The Group Treasury and Foreign Exchange desk supports various activities of the Bank growing branch network, subsidiaries and affiliates both domestically and internationally. In parallel, we strive to diversify our customer base and products, by offering a variety of services related to interest rates and foreign exchange markets. Our activities encompass deposits, foreign exchange, lending, and raising money to fund assets and cater to specific transactions. Our professional trading desk offers a combination of financial services supported by efficient channels of execution.

CL Money Market and Foreign Exchange activities were positively affected by a period of exceptional volatility on Foreign Exchange and increasing customer hedging needs, despite challenges faced by historically low interest rates and yields and further tightening of the international regulatory framework.

Risks inherent to these activities are mainly driven by exposure to foreign exchange fluctuations and interest rate mismatches. We identify these sensitivity risks by regularly running simulations and conducting stress test analyses that enable us to better manage exposures according to changes in market conditions and trends.


Global Markets CL Group Global Markets desk ensures the sales, trading and structuring of a wide range of financial products including bonds, equities, equity-linked products, commodities and securitized instruments.

Fixed Income MarketsTrading activity focuses on fixed income trading where Credit Libanais acts as a Market-Marker in Lebanese domestic and international securities, which increases our capacity to satisfy both institutional and private customers’ transaction needs at competitive terms and conditions. In addition, Credit Libanais extensively covers major international fixed income markets with the objective of further developing our securities and brokerage services.In 2016, CL Group’s fixed income trading desk performed well despite several challenges and the continuing difficult market conditions mainly driven by uncertainty surrounding global interest rates environment. Our market share and income streams increased in terms of volumes and geographical coverage.

Risks inherent to our proprietary activities are managed according to strict investment policies through a system of continuous monitoring of position limits, and sensitivity analysis of our portfolios, in terms of credit risk, market risk and country risk exposures.

Equity MarketsThe year 2016 was marked by the Chinese economic slowdown, the Brexit, the US elections and a tendency towards increasing interest rates by the Federal Reserve. All factors combined led to a volatile year in the equity markets. Despite adverse conditions, CL group’s experienced team seized several attractive market opportunities to attract new customers and further develop existing business relationships. We succeeded in branching out our coverage and developing our offering terms to increase market share.

In 2016, Mutual funds and equities activities witnessed a regain in activity, based on customers’ needs for risk mitigation, investment diversification and capital appreciation. Investors showed a continuous increased interest in ETFs, covering different economic sectors, commodities, and various geographical areas, mostly driven by capital gains or portfolio hedging. Over the elapsed year, Beirut Stock Exchange (BSE), in which Credit Libanais holds a member seat through its subsidiary Credit Libanais Investment Bank witnessed a limited demand and low volumes due to a dull performance caused by the regional turmoil and domestic political tensions.

Private Banking Driven by skilled and qualified professionals enjoying extensive knowledge and expertise, CL private banking arm offers personalized investment guidance to high net-worth individuals. The team’s main drivers remain the long term satisfactory relationship with customers, with special emphasis on capital preservation and growth.

During 2016, CL Group private bankers followed a proactive approach in developing the customer base. The team constantly assists customers in developing investment strategies while monitoring portfolios on an on-going basis. Our primary concern remains the proper allocation of assets and investments to each particular investor, allowing them to meet their specific requirements and investment objectives. Our comprehensive services include tailor-made investment products, innovative solutions in term of assets and products allocation, as well as geographical diversification. Our investment approach is based on customers’ risk tolerance, diversification objectives, and risk/return expectations. For a more efficient interaction and portfolio follow-up, CL Private Banking online platform is further enhanced to allow customers benefit from a quasi-live update of the value and performance of their securities holdings and portfolios.

48 - 49


Investment Banking (CLIB)CLIB Organizational Chart

Remuneration CommitteeRisk Committee Audit Committee

Group Chief Risk Officer* Group Head of Internal Audit**

Legal

Financial Consumer Protection Unit

Board of Directors CLIB Chairman General Manager

Deputy General Manager

Treasury, Global Markets, Asset

Management and Private Banking

Human Resources

Compliance

Finance

- Operations and Support Services

(CPD)- Administration and

Support Services- Treasury and Global Markets Back Office


Information Technologies

Services Level Agreement with Credit Libanais

Finance and Accounting Department

Securitization and Structured Finance

Corporate Finance, Advisory and Research

IT Department

Credit Department

Legal Department

Credit Administration and Control*

Internal Audit**


On the 21st birthday of its establishment, and thanks to a

dedicated team of professionals, CLIB is persistently on the lookout for new business ventures while engaging in inorganic growth opportunities for the Group, as well as for local, regional and international private and institutional customers in an endeavor to improve an already strong market positioning among its peers in Lebanon.

StrategyCLIB’s strategy pivots around bolstering its position in equity project financing and advisory services and continuing to provide a wide array of investment banking services through:

A complete set of medium and long term investment plans.Financial services.Syndication of loans.Establishment and management of investment funds.Granting medium and long term loans; andOffering corporate finance advisory services to institutional customers

Credit Libanais Investment Bank (CLIB) provides its customers with an inclusive bouquet of advisory and financing solutions ranging from term lending to highly structured and specialized products across the investment banking spectrum. During the year 2016 CLIB analyzed and participated in several local and regional investment opportunities including asset backed securitizations (namely in the automotive and agricultural sectors) and private equity investments in VC funds that invest in knowledge economy related startup companies. In addition, Credit Libanais Investment Bank has analyzed acquisition opportunities on behalf of the Group both on the local and international fronts. In this context, net profits deriving from investment banking activities accounted for 12.87% of the Group’s 2016 consolidated net profits.

2016 at a GlanceThe Lebanese economy almost went into shambles during the year 2016 had it not been for the timely intervention of the Central Bank through the swap operations it introduced in mid-year added a new set of stimulus packages injected in banks

which together provided a lifeline for the economy. Accordingly, and like its peers in the investment banking field, CLIB’s operations were negatively affected by the prevailing economic woes, with its conservative approach to lending being reflected by a 9.73% drop in commercial loans (SME and Corporate) and a 1.60% contraction in housing loans. In the same vein, customer deposits at CLIB contracted by 10.37% in 2016, leading to an 8.48% drop in total assets.

However, the election of a new president followed by the formation of a national unity government in late 2016 offers a glimmer of hope for the Lebanese economy for the years to come, which should reflect positively on the future performance of the sector as a whole.

Asides from conventional commercial banking services, CLIB is providing its customers with a plethora of investment banking services including funding for project finance, direct equity financing, access to investment funds, financial intermediation, corporate advisory, and economic research, only to name a few.

Corporate Finance and Advisory Activities The year 2016 was a dynamic year for the Corporate Finance Department at Credit Libanais Investment Bank. CLIB was in fact exclusively mandated to structure and sell a majority stake in the Credit Libanais Group; a deal that was successfully concluded in spite of the harsh economic and political conditions in Lebanon and the region.

CLIB continued to extend its advisory role to the Group in terms of spotting and analyzing new business ventures, and assessing attractive investment opportunities domestically and internationally. In addition, the department analyzed and engaged in several structured finance transactions and studied and analyzed several acquisition opportunities in the banking industry backed by intensive due diligence.

Furthermore, the department studied a number of regional expansion ventures whether greenfield or in the form of acquisitions.

Company ProfileA fully-owned (99.86%) subsidiary of Credit Libanais, Credit Libanais Investment Bank acts as the investment banking platform of Credit Libanais. Throughout a history of more than two decades (established in 1996), Credit Libanais Investment Bank has always strived to align its product and services offering with the tastes and preferences of its customers in accordance with legislative decree number 50, dated July 1983.

50 - 51


Also on the advisory front, the Corporate Finance department at CLIB completed several valuation mandates for corporate customers based in Lebanon. On the asset management front, CLIB’s advisory arm structured, back-tested, and engineered a USD-denominated fixed income fund which is expected to be launched in the first half of 2017 pursuant to obtaining the approval of the regulator.

In addition, CLIB broadened its exposure to the ICT sector through its portfolio of investments in VC funds that are BDL compliant and that invest in Lebanese start-up companies operating in the knowledge economy in accordance with the provisions of intermediary circular 331.

ServicesThe Corporate Finance and Advisory Department at CLIB is well equipped to offer a wide array of tailor-made financial services and solutions to private and institutional customers, locally, regionally and internationally, specifically in the following areas:

Financial AdvisoryThese include engineering financial solutions designed to meet the strategic and organizational needs of institutional customers. This comprises financial assistance to customers in need of:

Evaluating the financial performance of their business.Assessing the viability of an expansion / investment alternative.Seeking financial reengineering / turnaround.Opening their capital to prospective investors.Merging with / acquiring another business unit.Strategic alliances and partnering transactions.

Debt and Equity PlacementsServices include advising customers to help them make a more informed decision regarding the desirable capital structure, locating financing sources as well as negotiating and repositioning their company.

Mergers and AcquisitionsThis includes offering comprehensive assistance to customers seeking to merge with or acquire other private or public business units. CLIB will get involved in every step of the transaction including:

Preparation of the saleDetermination of the strategyCompany valuationSearchDetermination of the best financing structureNegotiation of the contractDue diligence

Recapitalization and Strategic AdvisoryThe restructuring of a company’s capital structure, most often with the aim of making a company’s debt/equity assortment more sustainable.

Economic Research ActivitiesThe Economic Research Unit at CLIB issues a weekly economic newsletter, the “Weekly Market Watch”, covering major local economic developments and indicators, in addition to the performance of the domestic money market and equity market. The Economic Research Unit also distributes on a periodical basis a number of research publications tackling hot topics surrounding the Lebanese economy. For instance, the Unit published in 2016 a research report analyzing the ramifications of the latest drop in international oil prices, including the repercussion of said drop on Lebanon’s balance of trade, public finances, inflationary environment, and capital inflows. Later throughout the year, the Unit published a research paper dissecting the Lebanese public debt dynamics and proposing a set of reform measures to tame the mounting debt burden.

Through these publications, Credit Libanais’ Economic Research Unit headlined once again the economic sections of major local and regional TV stations, newspapers, and bulletins. In addition, the Economic Research Unit conducted several interviews with local and foreign television stations, radio stations, newspapers, and magazines, addressing a variety of pertinent economic and banking sector-related topics. The Research Unit continues to monitor the daily performance and activity of the Beirut Bourse (BSE) through its stock market benchmarks, namely the Credit Libanais Aggregate Stock Index (CLASI), the Financial Sector Stock Index (CLFI), and Construction Sector Stock Index (CLCI). These three indices mirror to local and regional stock market enthusiasts trends in the market capitalization of listed stocks by sector or industry and can be used as a gauge to monitor the Beirut Stock Exchange’s daily performance.


Indices Performance

Inception Date

Inception Value

Value on January 1,2016

Value on December

31,2016

%Change in 2016

%Change since

inceptionYear High Year Low All Time High All Time Low

CLASI

CLFI

CLCI

Oct-06

Oct-06

Oct-06

1,089.15

1,390.69

613.89

6.33%

10.50%

-7.91%

1,177.90

1,541.06

679.17

1,801.01

1,666.64

1,948.82

1,000

1,000

1,000

1,158.13

1,536.74

565.32

15.81%

53.67%

-43.47%

1,065.48

1,383.39

509.43

836.11

864.82

485.11

Inde

x Va

lue

Credit Libanais Aggregate Stock Index CLASI

Credit Libanais Financial Sector Stock Index CLFI

Credit Libanais Construction Sector Stock Index CLCI

Year

ly Pe

rform

ance

600

700

800

900

1,000

1,100

1,200

1,300

500

01-J

an-1

6

15-A

pr-1

6

28-J

ul-1

6

09-N

ov-1

6

22-F

eb-1

6

06-J

un-1

6

18-S

ep-1

6

31-D

ec-1

6

CLASI 6.33%

500

700

900

1,100

1,300

1,500

1,700

01-J

an-1

6

15-A

pr-1

6

28-J

ul-1

6

09-N

ov-1

6

22-F

eb-1

6

06-J

un-1

6

18-S

ep-1

6

31-D

ec-1

6

CLFI 10.50%

450

500

550

600

650

700

400

01-J

an-1

6

15-A

pr-1

6

28-J

ul-1

6

09-N

ov-1

6

22-F

eb-1

6

06-J

un-1

6

18-S

ep-1

6

31-D

ec-1

6

CLCI 7.91%

52 - 53


CREATING LONG-TERM VALUE FOR ALL

STAKEHOLDERS


Risk Management and Strategy

Board of Directors

Risk Committee Risk Management and Strategy

Chief Risk Officer

Chairman-General Manager

Strategy & Risk Analytics

Risk Management Project Office / Credit Portfolio Management / Credit Risk Models

Credit Risk Management

Operational Risk Management

Information Security Risk Management

Business Continuity Planning

Risk Management and StrategyThe Risk Management and Strategy function is fully independent from the commercial lines of business reporting to the Chairman - General Manager and the Board through the Board Risk Committee. In addition to Credit Libanais SAL, its scope covers local and foreign banking and financial institutions subsidiaries of CL Group. Duties are carried out through an integrated strategic risk planning and process review, supported by sound risk management practices and effective framework. The cornerstone of this function is a strong risk management culture supported by a robust set of policies, procedures and limits, managed by professionals and other functional teams.

Risk Governance Framework The Bank’s risk governance framework includes well defined organizational responsibilities for risk management, typically referred to as the three lines of defense:

the first line of defense is the Business Lines, which take risks and are responsible and accountable for the ongoing management of such risks. the second line of defense includes: (1) an independent Risk Management Function, which complements the Business Lines’ risk activities through its monitoring and reporting responsibilities. (2) the Finance Function plays a critical role in ensuring that business performance and profit and loss results are accurately captured and reported to the Board, SEM and Business Lines and (3) an independent and effective compliance function, which routinely monitors compliance with laws, corporate governance rules, regulations, codes and policies to which the Bank is subject; and (4) the Financial Consumer Protection which ensures that banking and operations with customers are conducted according to regulations.the third line of defense consists of an independent and effective Internal Audit Function which conducts risk-based and general audits and reviews.

Risk Appetite FrameworkCL Group applies the following six overarching principles in the risk identification, monitoring and management throughout the organization:

balancing risk and reward;management of risk is shared at all levels of the organization;effective decision-making is based on a strong understanding of risk;all business activities are conducted with a view of not risking the Bank’s reputation;ensuring that provided services are suitable for and understood by the Bank’s customers; andapplying appropriate judgment as a mandate throughout the organization for the management of risk.

56 - 57


Enterprise-wide Risk Management Framework (ERM)The Bank follows a comprehensive ERM Framework, appropriately scaled to its size, complexity and risk profile. Under ERM, the Board is responsible for confirming the risk appetite, and monitoring compliance to risk management processes. Management is responsible for identifying, evaluating, mitigating and reporting on risk exposures.

Capital and liquidity requirements issued and reviewed by the Basel Committee on Banking Supervision (BCBS), covering capital adequacy, capital buffers, and liquidity risk management are applied on a cross-border level across local and foreign subsidiaries. Moreover, CL Group fully complies with home (i.e. BDL and BCC) and host regulatory requirements to comply with the Basel II/III framework.

Strategy & Risk AnalyticsCapital ManagementCapital Management’s fundamental elements include the implementation of a policy that addresses the quantity, quality and composition of capital needed; the distribution of dividends and redemptions of capital instruments to shareholders; and monitoring and reporting requirements.Market Risk ManagementMarket Risk Management’s fundamental parts include implementing a policy that addresses the authorized types, limits and concentration of investments, other financial instruments, and assets; the defined and prudent levels of decision-making authority; identifying, measuring, providing for and recording market impairments; and monitoring and Board reporting requirements.Asset and Liability Risk ManagementCL Group Asset and Liability Risk Management’s fundamental basics include implementing a policy that addresses the limits on the balance sheet mix and maturities of capital, deposits, loans and investments; criteria for pricing of deposits and loans; limits on the exposure to Foreign Currency Risk;

limits on the exposure to changes in interest rates; use of appropriate techniques for measuring the Bank’s Asset and Liability Risk and evaluating the potential impact under current and reasonably foreseeable scenarios.Internal Capital Adequacy Assessment ProcessThe Bank operates with capital positions well above the minimum regulatory capital ratios, with an amount of capital that is commensurate with its risk profile on stand-alone and consolidated basis. In addition, the Bank has robust, forward-looking capital planning processes and governance, which account for its inherent risks and that permit continued operations during times of economic and financial stress.

As per regulatory requirements, CL Group refined its risk methodologies and included more sensitive risk measures for the evaluation of the Internal Capital Adequacy Assessment Processes (ICAAP), to ensure that the Bank holds adequate capital to maintain ready access to funding, continue operations and meet its obligations to creditors and counterparties, and continues to serve as credit intermediaries, even under adverse conditions.

The Central Bank of Lebanon previously adopted an accelerated implementation timetable for Basel III, where more stringent ratios have been required.

Lebanese Banks should apply a Capital Conservation Buffer made up of Common Equity Tier One Capital amounting to a minimum of 4.5% of Risk Weighted Assets starting Year-End 2018. This is an Increase from the previous minimum ratio of 2.5%.

The Capital Conservation Buffer* will be phased in and the minimum capital adequacy ratios will be as follows:

* All ratios include the Capital Conservation buffer equal to 4.5% of Risk Weighted Assets.

8.5%

11%

14%

9%

12%

14.5%

10%

13%

15%

31/12/2016 31/12/2017 31/12/2018

Common Equity Tier 1 Ratio

Tier 1 Ratio

Total Capital Ratio


Risk ProfileBased on the detailed analysis of the different types of risks, the Bank considers that there is a low risk of encountering difficulties in the future, considering its overall medium-high inherent risk, its good internal governance, risk management and control that are appropriate to its activities. Based on the review of all types of risk, the Bank’s overall risk profile is ranked medium-low with some increasing trend, due to the economic challenges despite the improving operating environment as a result of the presidential elections and the unity government formation.

Regulatory Capital Structure

Noting that the quality of capital, and the approved capital targets including the buffers and the capital planning, reflect appropriate levels. Therefore, the assessment of the capital adequacy is ranked good.

Capital Structure and Regulatory Capital RatiosCL Group maintains an actively managed capital base to cover risks inherent to the business. The adequacy of the Bank’s capital is monitored using the rules and ratios established by the BDL and the BCC amongst other measures.

(C/V millions of LBP) 20152016

Common Equity Tier 1 Capital resources

Share capital

Share premium account

Legal reserves

Reserves for unspecified banking risks

Other reserves

Reserves for Assets under Liquidation

Reserves for irrecoverable bad debts as per BDL Circular No. 73

Retained earnings

Profit and loss account (taking into account interim net losses)

Minority Interest

Revaluation of fixed assets

Net unrealized Profit / Loss on Financial Assets held at FVOCI

Foreign Currency Position

Common Equity Tier 1

Common Equity Tier 1 Regulatory Adjustments

Profit and loss account

Gross unrealized Profit on Financial Assets held at FVOCI

Revaluation of fixed assets

Reserves for Assets under Liquidation

Reserves for irrecoverable bad debts as per BDL Circular No. 73

Intangible assets including goodwill

Foreign Currency Position

257,400

110,644

118,298

247,687

17,238

3,910

185,038

106,039

1,585

65,584

33,908

728

1,148,060

(106,039)

(36,636)

(65,584)

(17,238)

(3,910)

(6,787)

(728)

257,400

101,833

103,695

231,401

14,025

3,986

178,051

100,413

1,798

65,584

34,139

444

1,092,768

(100,413)

(36,816)

(65,584)

(14,025)

(3,986)

(5,989)

(444)

58 - 59


(C/V millions of LBP)


2015

2015

2016

2016

Excess over limits of articles 152 and 153 of the Code of Money and Credit

Other Common Equity Deductions

Common Equity Tier 1 After Deductions

Share Capital - Non-cumulative perpetual preferred shares

Share premium - Non-cumulative preferred shares

Minority Interest

Additional Tier 1 Capital

Additional Tier 1 Capital Regulatory Adjustments

Total Tier 1 Capital

Tier 2 Capital Resources

Medium to long-term subordinated debt instruments

Minority Interest

Real estate revaluation approved by the BDL and qualifying under Tier 2 Capital

50% of the Foreign Currency Position

50% of the gross unrealized profit on Financial Assets held at FVOCI

(Other Tier 2 Capital Deductions)

Total Tier 2 Capital

Total Capital

Total Risk Weighted Assets

Common Equity Tier 1 Ratio

Tier 1 Capital Ratio

Total Capital Ratio

Pillar 1 Capital Requirements for:

Credit risk

Market risk

Operational risk

Total Pillar 1 Capital Requirements

---

---

865,511

11,000

139,750

310

151,060

1,016,572

113,063

---

7,828

222

18,408

(67,838)

71,683

1,088,255

7,034,806

12.30%

14.45%

15.47%

---

---

911,138

11,000

139,750

466

151,216

1,062,354

113,063

559

7,828

364

18,318

(90,450)

49,681

1,112,035

7,541,170

12.08 %

14.09 %

14.75 %

511,466

9,724

41,595

562,785

549,901

9,537

43,857

603,294

The above three ratios are higher than Basel Ill regulatory requirements, so the Bank is considered as well capitalized.

Pillar 1 Capital Requirements The tables below set out Pillar 1 Capital Requirements and associated risk weighted assets for CL Group with separate disclosures for the credit risk, market risk and operational risk requirements.




2015

2015

2016

2016

Equity Position Risk

Interest Rate Risk (FVTP&L):

Specific Risk

General Market Risk

Equities Risk (FVTP&L):

Specific Risk

General Market Risk

Foreign Exchange Risk

Total Capital Requirements for Market Risk

Total Risk Weighted Assets for Market Risk

Central governments and central banks

Public Sector Entities (PSEs)

Banks

Corporates

Small and Medium Enterprises (SMEs)

Retail

Residential Mortgage Loan

Claims secured by Commercial Real Estate

Securitization positions standardized approach

Non-performing loans

Other Assets

Total for Credit Risk

9,304,729

2,565

1,047,909

1,511,594

1,124,485

416,732

1,509,198

233,497

2,714

137,146

695,835

15,986,404

2,600,847

-

276,820

1,564,998

764,054

327,331

526,821

238,441

2,035

97,647

474,764

6,873,758

208,068

-

22,146

125,200

61,124

26,186

42,146

19,075

163

7,812

37,981

549,901

8,623,205

3,544

1,038,722

1,366,294

1,039,164

442,586

1,378,092

217,072

7,726

112,245

696,605

14,925,255

2,412,770

-

284,424

1,403,329

696,601

331,525

480,629

220,015

4,830

80,818

478,383

6,393,324

193,022

-

22,754

112,266

55,728

26,522

38,450

17,601

386

6,466

38,271

511,466

0

1,729

1,608

62

61

6,263

9,724

121,546

0

2,489

2,267

180

180

4,421

9,537

119,206

Credit Risk: Standardized Approach by Exposure Class Disclosure of the amount of exposures subject to the Standardized Approach of Credit Risk and their related risk weighted assets and capital requirements.

Market risk: Standardized Approach Disclosure of the level of Market Risk in terms of capital requirements and risk weighted assets as per the Standardized Approach, which is detailed in the BCC Circular No. 256 dated September 26, 2007.

Exposure value

Exposure value

Risk Weighted Assets

Risk Weighted Assets

CapitalRequirements

CapitalRequirements

60 - 61


(C/V millions of LBP) 20152016

Capital Requirements for Operational Risk

Risk Weighted Assets for Operational Risk

43,857

548,206

41,595

519,936

Operational Risk: Basic Indicator Approach Disclosure of the level of Operational Risk in terms of capital requirements and risk weighted assets as per the Basic Indicator Approach, which is detailed in the BCC Circular No. 257 dated October 08, 2007.

Capital PlanningIn light of the new Basel III requirements and CL Group’s expansion plans locally and abroad, a semi-annual 5-year capital planning exercise is prepared, on a stand-alone and consolidated basis, which is presented to the Board after being approved by the ALCO and the Board Risk Committee.

Market Risk ManagementThe overall objective of managing market risk is to avoid unexpected losses due to changes in market prices and to optimize the use of market risk capital.

Interest Rate Risk The interest rate risk the Bank is exposed to in its banking book is assessed from both, the net interest income (NII) and the economic value of equity (EVE) perspectives using interest rate re-pricing gap analysis.

Foreign Exchange Risk (Currency Risk)Credit Libanais does not maintain material non-trading open currency positions, other than the structural foreign currency translation exposures arising from its investments in foreign subsidiaries and associated undertakings and their related currency funding. Credit Libanais applies various hedging strategies to manage and minimize adverse effects arising from these exposures.

Equity Position RiskThe Bank has established a comprehensive transaction and position based limits framework against which regular monitoring is performed.

Liquidity Risk and Funding ManagementThe Bank’s Liquidity Risk Management Policy establishes specific liquidity gap limits and includes cash flow projections and emergency funding mechanisms. The monitoring and

control of liquidity risk is established on an ongoing basis and involves balance sheet ratio analysis and the measurement of the cash flow gaps and stress positions. In addition, the Bank is abiding with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) as required by the Basel III framework.

Financial Institutions Risk ManagementThe Bank defined a framework and an action plan for activities with Banks and Financial Institutions in which credit risk is inherent and has set the criteria for risk acceptance and the guidelines followed in the FI Risk Management process. A Financial Institutions Risk Administration Unit has been established, and has the responsibility of following-up and monitoring the relationships of the Bank with its financial counterparties.

Country Risk ManagementTo effectively control the level of risk associated with international activities, CL Group has a Risk Management process that focuses on the broadly defined concept of Country and Cross border risks. A sound Country Risk Management process includes oversight by ALCO and Country exposure limits. Limits reflect several considerations, including the country’s risk rating and the Bank’s appetite for risk.

Credit Portfolio ManagementThe Bank’s approach to controlling various risks begins with optimizing the diversification of its commitments. The management criteria set out in its internal policies include measures designed to maintain a healthy degree of diversification of credit risk in its portfolios. The criteria established for portfolio diversification and related limits, which are set by type of business segments, products, entities, credit risk mitigants, economic sector, regional and country exposures, are based on the findings of sector-based studies and analyses conducted


by the Risk Management and Strategy Division at Group level, and are approved by the Credit Policy Committee. Continuous portfolio analyses are performed to anticipate problems with any sector or borrower before they materialize as defaulted payments.

Credit Risk ManagementOur credit risk management principles are guided by the following six overall risk management principles:

ensuring that credit quality is not compromised for growth;diversifying credit risks in transactions, relationships and portfolios;using our credit risk rating and scoring systems, policies and tools;appropriate pricing of the credit risks taken; applying consistent credit risk exposure measurements; andmitigating credit risk through prevention and early detection and warning signals’ controls.our business activities are conducted in such a way as to avoid any reputational risks. The Bank has selective lending criteria in this respect approved at level of the Risk Committee and Board of Directors.

Credit Risk Rating SystemThe corporate and SME Credit Risk Rating System is designed to measure and identify the risks inherent in credit activities. Each obligor is assigned a borrower rating (BR), reflecting the probability of default (PD), after an assessment of the credit quality of the obligor. Generally, the key risk factors assessed include industry, markets, firm competitiveness, company’s qualitative assessment, management quality and financial performance indicators.

Credit Risk Monitoring and Control Credit risk monitoring refers to continuous monitoring of individual credits inclusive of off-balance sheet exposures to obligors, as well as the overall credit portfolio of the Bank. The Bank enunciates a system that enables it monitor the quality of the credit portfolio on a day-to-day basis and takes remedial measures as and when any deterioration occurs.

Delegation of AuthorityThe Bank establishes responsibility for credit sanctions and delegates authority to approve credits or changes in credit terms in line with the Bank’s lending policies and procedures.

The Board approves the overall lending authority structure, and explicitly delegates credit sanctioning authority to Senior Executive Management and the Credit Committees. Lending authority assigned to officers is commensurate with the experience, ability and personal character. The Bank develops risk-based authority structures where lending power is tied to the risk ratings of the obligor and the type of the lending product and collateral types in line with the bank lending policy.

Managing Collection of Delinquent LoansA loan is delinquent if any of its scheduled payments are in arrears for a period greater than three days. Retail loans which are in arrears are actively managed by the Collection Department and the Regional Management with the intent of avoiding losses, or mitigating them to the greatest extent possible. Management makes general provisions for delinquent loans on a monthly basis. For commercial facilities, delinquent loans or excesses over limits are regularly communicated to the Senior Executive Management and pertinent credit committees for close monitoring and decisions accordingly. Decisions of downgrade and classification of the Borrowers are taken at the level of the respective Credit Committee including an impairment study.

Managing Problem CreditsThe Bank establishes strict systems and policies to identify and follow up on problem loans. Once the loan is identified as problematic, it is managed under a dedicated remedial function independent of the originating Business Lines.

Policy and Tools for the Monitoring and Recovery of Impaired AssetsThe BDL Basic Circular No. 58 requires, inter alias, banks to classify loans into six categories as follows:“Normal”; “Follow Up”; “Watch and Settlement”; “Substandard”; “Doubtful”; and “Loss”.

Consequently, the Bank believes that it has satisfied all the related regulatory requirements.

As per IFRS 9 guidelines and local regulatory requirements, the Bank has amended its own model to set out retail specific and collective provisions based on the new requirements, whereas non-retail collective provision level are based on seven-year

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historical credit loss information, which is verified by the External Auditors. The Bank periodically reviews the SME and Corporate loan portfolio and allocates specific provisions for loans. This exercise covers incurred losses for credit activity of Group CL.

IFRS 9 RequirementsThe International Accounting Standards Board (IASB) issued the final version of its requirements of the International Financial Reporting Standard (IFRS9) which includes three main phases.The Bank completed during the year 2016, in compliance with BCC Memo referenced 15/2016, a questionnaire providing its proposed approach to implement its forward looking impairment model for its financial assets, staging criteria, detailing the methodology for assessing significant increases in credit risk and for measuring both the lifetime and 12-months Expected Credit Losses. The Bank is in the process of contracting with international vendors to acquire IFRS 9 modeling solutions that build on the exiting risk rating system.

Environmental and Social RisksThe Bank continuously endeavors to ensure effective Social and Environmental Management practices in all its lending activities and seeks to effectively manage and mitigate environmental and social risks in the projects they finance.

International Finance Corporation (IFC)CL Group is directed by its agreement with the IFC to adhere to sound banking principles and promote the full range of its activities in environmentally and socially reliable developments.

Social and Environmental Management System (SEMS)The Credit Risk Management has developed the SEMS with the basic objective of ensuring that the environmental and social implications of a potential customer are identified and assessed early in the Bank’s planning and decision-making process and that these environmental considerations are incorporated into the preparation and approval of facilities.

Operational Risk Management FunctionThe ORMF has a reporting structure independent of the risk generating Business Lines and is responsible for the design, maintenance and on-going development of the Operational Risk Framework within the Bank. This function includes the operational risk measurement and reporting processes, risk committees and responsibility for Board reporting.

The Operational Risk Framework encompasses the identification and assessment of operationalrisks, implementing a process to regularly monitor operational risk profiles and material exposures to losses, control and mitigation of Operational Risk, and appropriate disclosures. In line with the BCC Circular No.252 dated September 14, 2006, the Bank developed procedures, under which it launched the collection process on operational loss events / probable events / near misses and provided the Business Lines with supporting guidance and a standardised template to ensure a consistent approach. RCSA is a structured approach that helps line management to identify and assess inherent risks in their existing or new products, processes, activities or systems and take mitigating actions for identified risks. RCSA missions consisting of questionnaires and workshop sessions, typically evaluate inherent risks (the risks before controls are considered), the effectiveness of the control environment and residual risks (the risk exposure after controls are considered).Scorecards build on RCSAs by weighting residual risks to provide a means of translating the RCSA output into metrics that give a relative ranking of the control environment. The ORMF identifies and develops appropriate Key Risk Indicators (KRIs) that provide management with early warning signals of Operational Risk issues.As per BDL Basic Circular No.104 and the BCC Circular No.257, the capital charge required to cover the Operational Risk is calculated using the Basel II Basic Indicator Approach (BIA).

Information Security RisksThe Information Security Team safeguards CL Group “information asset” and in particular the IT Environment against numerous cyber-attacks by setting several security objectives at the beginning of the year and making sure that all are properly met. To note that these objectives are aligned with international security standards “ISO27001” and “PCI-DSS”.

Business Continuity Planning Credit Libanais has instituted its Business Continuity Plan more than 10 years ago, which it continues to develop and maintain to keep it up-to-date, efficient, and ready in case of adversities. Our approach to Business Continuity is compliant with leading Business Continuity Management standards, Central Banks’ regulations in Lebanon and other countries where Credit Libanais has a presence.


The Internal Audit Division (IAD) is responsible for strengthening Credit Libanais’ business risk/control environment by providing comprehensive and independent professional audit and consulting services to all divisions and entities operating within the Group, and by assisting management in maintaining proper controls over the assets and operations, thus adding value to the overall business performance. IAD’s mission is to ensure that management establishes and consistently maintains a sound internal control and governance environment at the Bank.

Internal Audit Division strives to provide best quality internal audit services with the highest standards of governance and professional excellence, while adding value to all business units.The ultimate goal of the internal audit function is to independently serve the Bank and its key stakeholders by contributing to the achievement of the Bank’s strategic goals and objectives in a changing business environment.IAD’s key values are based on integrity, objectivity, confidentiality and competency.

IAD RoleThe Internal Audit Division provides assurance to the Board through its Audit Committee that:

The tone of control set by the Board is properly applied by management throughout the Bank.The deployed internal controls are adequate to mitigate risks.Governance processes are effective and efficient.Organizational goals and objectives are met.

IAD Main Objectives are Summarized as Follows:Align the audit activities with the bank’s strategy.Address risky activities and processes by providing tailored recommendations and implementing best practices.Add value to the business risk control environment.Ensure adequate implementation of risk management procedures and methodologies and the efficient functioning of the internal control framework.Complete a full coverage of the audit areas mentioned in the audit year plan.Assign a risk control grade for each business unit and to monitor its improvement over time.

Other ObjectivesProvide consultancy services regarding the improvement of the risk control framework. Stimulate objectivity, uniformity, comparability, confidentiality and transparency.Accelerate and promote improvements in thecontrol environment.Fulfill and properly handle all management requests and special assignments in a timely manner. Conduct independent and objective audit reviews and evaluations, while meeting the auditees’ expectations.Conduct adequate tests and reviews of information systems and applications.Maintain quality services and audit documentation according to standards.

Internal Audit

Head of Group Internal Audit

Branch Audit Back Office Audit Credit AuditHead Office Audit IT AuditE-Banking Audit CLIB AuditLIB Audit

Quality Assurance and Improvement

Performance Measurement

Overseas Audit

Board of Directors

Audit Committee

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Appraise management actions regarding:- Effectiveness of measures taken to assess and manage risks.- Reliability, consistency and integrity of data.- Measures taken to safeguard assets, documents and records.- Compliance with policies, laws and regulations. - Respect of code of conduct and the bank’s values.

The internal audit function strives to increase the value added to Credit Libanais Group structures, systems and processes and to improve operational effectiveness and efficiency by:

Establishing robust risk assessment methodology and annual planning process to focus on existing and emerging risky areas such as strategic, technology and business risks.Aligning the audit work plans and other oversight activities with the Bank’s strategic goals, objectives and plans.Coordinating oversight activities between internal audit function as a third line of defense and other assurance providers within the group, including risk management, compliance and information security functions.Regularly reviewing and improving the quality of audit reports by increasing the use of available information technology tools to gather, analyze and present factual data to further enhance the accuracy, completeness and timeliness of audit reports.Attract and retain internal audit staff with the right balance of education, technical experience and professional skills and competencies.

IAD Organizational StructureThe IAD is business-centric, and is composed of specialized audit departments that have gained sufficient experience in the business and can provide quality services and pertinent recommendations to improve the activities of business units. These departments include Branch Audit, Head Office Audit, Credit Audit, E-banking and Cards Audit, IT Audit, Back-Office Audit, Overseas Audit (Limassol, Bahrain, Senegal, Iraq), other affiliated banks (Credit Libanais Investment Bank and Lebanese Islamic Bank) and subsidiaries (Credilease, CLA, etc.). Audit department heads enjoy sufficient expertise to manage a team composed of senior and junior auditors, and to deliver high quality audit and consulting services. They report hierarchically to the Head of IAD (Chief Audit Executive) who in turn reports to the Board of Directors, through the Audit Committee.

Knowledge ManagementThe IAD is adequately structured and staffed with qualified internal auditors to carry out their duties and responsibilities in a professional manner. They have full knowledge and expertise over the business areas they examine, and are considered experts in their field of specialization, capable of delivering high quality services to auditees, whether the latter are branches, centralized activities or affiliated companies.

Audit Methodology and ApproachThe division follows a risk-based approach when auditing business units. This consists of identifying and assessing the inherent risks to the business, the effectiveness of controls that mitigate those risks, and the residual risks remaining after these controls are in place. Based on this approach and related risk assessment, emphasis and priority are placed on the business areas where the highest risks are identified.

Professional StaffSufficient technical and on-the-job trainings are delivered to allow our audit team to excel in their missions. Personal development plans are performed for every auditor and include training and education in order to maintain proficiency. Auditors are encouraged to enroll for the CIA (Certified Internal Auditors) certification to enhance their professional knowledge and skills. In that respect, some members have already started attending the CIA courses, in addition to the E-learning courses that were made available to all audit staff to enhance their technical knowledge and continuously improve their professional skills and capabilities.

Support and Development The Quality Assurance and Improvement Department within the IAD covers all aspects of internal audit activities and continuously monitors its effectiveness through developing quality assurance techniques. It helps the Head of IAD in adding value through improving the Bank’s operations and providing assurance to the Board that the internal audit function is in conformity with the set standards and the Code of Ethics.


Branch Audit All branches are assigned an overall audit rating according to the level of internal controls exercised by branch management and to residual operational risks inherent to their activities. Based on the overall audit rating, corrective measures are taken in branches to enhance their risk profiles and to address the observations and deficiencies raised in the audit reports.Branch Audit contributed in the issuance of several new procedural notes that improved the internal control framework and enhanced management oversight over branch operations and activities. Branch Audit exercises regular follow-up with branches to ensure that reported audit deficiencies are properly addressed and timely regularized. Audit assignments in branches were conducted according to the annual audit plan approved by the Board Audit Committee for the year 2016.

Head Office Audit Head Office Audit covered all centralized (non-credit related) activities as scheduled in the year plan of 2016 and conducted on-site missions among the different business divisions and support functions.

Credit Audit Periodic risk-based audits over credit processes and portfolios are undertaken by the Credit Audit function and include consideration of the adequacy and clarity of credit policies and procedures, and in-depth analysis of selection of loan accounts for commercial facilities and retail products. Credit Audit conducts regular reviews over the adequacy of provisions to cover any potential impairment over the loan portfolio.This department covered credit assignments as scheduled in the year plan of 2016 which encompassed retail products, retail and corporate commercial facilities and credit risk management processes.

Overseas Audit Overseas Audit covered the audit of operations and activities pertaining to foreign branches and entities (Limassol, Bahrain, Baghdad and Erbil branches, and the affiliated bank (Credit International S.A. in Senegal) during 2016. Reports issued were discussed with local management and communicated to the regulatory authorities.

Back-Office Audit This department exercises an off-site control over specific MIS and exception reports produced on branches, and initiates inquiries with branch management for particular deficiencies, while maintaining close coordination with the branch audit team in charge of performing on-site visits to branches, thus complementing the oversight function exercised by the IA Division over branch operations and activities in a way to improve the role of internal audit function.

IT AuditSeveral audit assignments were performed on the IT functions which covered various systems, applications and processes applied at the Bank level. An IT General Control review was also conducted to enhance physical and logical security over the IT environment.

Special AssignmentsSpecial assignments were conducted by the IA Division at the request of the General Management and different issues that needed additional investigation and proper follow-up were tackled.

Affiliated Banks/SubsidiariesResident auditors are assigned to review the operations and activities of the affiliated banks (CLIB and LIB). Internal audit reports issued based on an approved year plan for 2016 were duly submitted to their respective Board Audit Committees. Furthermore, an audit field visit was performed at Credit International SA (Senegal) covering all activities and operations of this affiliated bank.This department covered also during 2016 the non-banking subsidiaries in which the parent bank Credit Libanais maintains controlling interest, in accordance with regulatory requirements.

Quality Assurance and ImprovementA timely follow-up is being conducted by this department on all audited businesses to ensure that all observations raised in the internal audit reports are well implemented within the timeframe agreed-upon, which was reflected in a significant improvement in the control framework during the year 2016.

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Review reports are being submitted to management and to the Board Audit Committee on a quarterly basis showing the major audit findings that were identified and that might affect the realization of the Bank’s objectives, in addition to a briefing showing the compliance of auditees with the audit recommendations and their current status.Quality reviews are also conducted by this department over the audit files and documentation to ensure that quality services are consistently delivered throughout all the audit assignments and in accordance with the standards and policies set.

2016 in ReviewThe elapsed year witnessed the following activities:

Introduction of new tools and techniques to better manage and properly allocate the audit resources and to enhance the internal audit function within the Group.Standardization of the audit reports, including the introduction of a systematic rating methodology of audit observations and the assignment of an overall audit rating for all audited units.Greater audit coverage includes all branches and central departments within the last 2 years (Audit Cycle).

The Board Audit Committee of the parent bank (Credit Libanais) met on a regular basis (3 meetings in 2016 attended by all members) to discuss the major activities and findings that occurred during the internal audit assignments, out of which:- two meetings were dedicated to discuss with the external auditors the financial reporting and accounting issues, - one meeting with the Head of Compliance and AML to discuss developments and actions taken by the Bank to combat money laundering and financing terrorism, and to discuss the Compliance Officer report and the Annual Risk Assessment report for the year 2015 on Limassol branch, and the internal audit report dated 28/10/2015 issued on Limassol branch - meetings with other senior management officers to discuss the major challenges facing their duties, and the ways to overcome them.Separate meetings were also dedicated to the Audit Committees of the affiliated banks (4 meetings for each of CLIB and LIB, in which they discussed the financial reporting and accounting issues with the external auditors, and 2 meetings for CISA during the year 2016).


Maintaining efficient AML/CFT compliance procedures and compliant business strategies in respect to legal and regulatory frameworks. Ensuring that policies and controls are efficiently applicable top down within the Bank with respect to the code of compliance ethics and the regulatory compliance regulations.Minimizing the exposure to irregularities by implementing a preventive compliance program to mitigate risks.Sustaining sound relationships with the banking and financial community globally by conducting transparent and comprehensive banking practices.

During 2016, CL Group continued to strengthen its compliance function amidst increasing regulatory requirements.In this context, CL Group has developed a procedural framework to monitor the business and ensure conformity with regulations, particularly in the areas of anti-money laundering and combating the financing of terrorism (AML/CFT). On the other hand, CL

Group appointed a dedicated FATCA team to supervise and follow-up on the implementation of FATCA provisions across the Group and is proceeding as per the FATCA/IRS timetable agenda. Moreover, a procedural framework focused on FATCA integration has been established by amending the KYC forms and conducting FATCA due diligence with the Bank’s FFIs, in addition to extensive training programs that are continuously conducted to familiarize the Bank’s staff with FATCA requirements.

Legal and Regulatory Compliance In accordance with local and international regulations, CL Group Legal Compliance Department identifies, prevents and mitigates risks, while ensuring compliance with local and foreign regulators’ directives (Central Bank of Lebanon, Banking Control Commission, Special Investigation Commission, Association of Banks and other regulators where the Bank has presence abroad).

THE AML /CFT ComplianceIn accordance with Law 44 of November, 2015 and all subsequent BDL circulars regulating the control of financial and banking operations for Fighting Money Laundering and Combating the Financing of Terrorism, the AML/CFT Compliance function ensures a rigorous control on banking transactions, correspondent banking relations and all regulated banking operations requesting a stringent AML/CFT program.

AML/CFT function is entrusted with the following duties:developing an AML program including documented policies and procedures, designation of compliance officers and compliance enhanced training programs for the Bank employees;monitoring activities in view of identifying unusual or suspicious transactions, or ranging outside the risk profile parameters either set by legislation or in accordance with the Bank’s risk assessment policies; reporting unusual or suspicious transactions to the Central Bank’s Special Investigation Commission (SIC) investigating details surrounding the suspicious transactions and documenting the resolution;identifying, documenting and assessing compliance risks associated with customer’s activities on a pro-active basis;

Credit Libanais (CL) Group compliance strategy is designed in accordance with the Board of Directors and Senior Management guidelines. As such, the Bank has put in place a compliance policy, procedural manuals, applicable standards and processes to reinforce the application of laws, regulations and sanctions imposed by each of the jurisdictions in which the Group operates.

CL Group’s main objective is to ensure effectiveness and competencies of the Bank structures, processes and procedures to prevent, manage and mitigate compliance risks. Therefore, CL Group has embedded regulatory compliance across all entities, locally and abroad, to ensure application of sound banking practices within a safe financial environment, while abiding by highly recognized ethics and Code of Conduct.

The compliance function has the necessary independence, authority, resources, expertise and access to information to perform its duties according to compliance requirements.

The compliance function sets out the Bank’s mechanisms and procedures in view of:

Protecting the reputation of the Bank and increasing its credibility towards all stakeholders concerned with the safety of the financial institutions’ interests and sound reputation.

Compliance and AML/CFT

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assessing appropriate adequacy of the Bank’s compliance procedures and guidelines, promptly remediating any identified deficiencies or irregularities and proposing adequate adjustments;providing guidance and advice to staff in collaboration with the legal department and relevant business units;assisting management in educating staff on compliance issues, and act as a contact point within the Bank for compliance queries from staff members; providing technical expertise to AML/CFT delegates by administrating in–house trainings. AML/CFT delegates will also enhance their performing skills by following external training sessions;monitoring compliance by performing sufficient compliance risk assessment and independent testing.performing ongoing due diligence on the correspondent institution, ongoing transaction monitoring and request for information about transactions, ongoing communication and dialogue between both parties in order to improve their AML/CFT controls and processes.

AML/CFT Procedural Framework

Know Your CustomerEnhanced KYC management is the due diligence that financial institutions must perform to identify their customers and establish related relevant information to undertake business with them.

Establishment of Customer IdentityThe Bank establishes and maintains relationships exclusively with those customers whose source of wealth and funds, as well as the nature of business activities undertaken with Credit Libanais, can be reasonably established as legitimate. Moreover a reasonably designed Risk Based Approach framework and methodology for customer identificationand verification is applied when assessing the degrees of potential Money Laundering risks associated with customers and transactions which represent higher risks to the Bank.In this respect Credit Libanais operates an Enhanced Due Diligence (EDD) in customer screening and monitoring which relies on the following steps:

Applying appropriate Due Diligence when entering into relationship with customers.Exercising an on-going monitoring on customers’ profiles and customers’ transactions throughout the course of the relationship.Updating of customers profiles and establishment of a clean Customer Database enabling as well the customer’s identification and verification processes as the assignment of adequate banking services and products to the right customers for business relationship enhancement.

Establishment of a Beneficial OwnerWhenever the Bank is required to identify a customer, the ultimate beneficial owner(s) are also effectively identified.

Establishment of Account PurposePrior to opening an account for a customer, the Bank gathers sufficient information from the customer concerning the purpose and reasons for the opening of account.

Enhanced Customer Due DiligenceEnhanced customer due diligence is performed on those customers identified with a higher risk profile, additional inquiries are made or information is obtained from those customers.

AML/CFT Compliance OfficersA successful Compliance Officer is a qualified delegate that abides by the Bank’s corporate culture, places emphasis on compliance, and possesses the ability to manage compliance risks while permitting business development.In this respect, the Bank has integrated the compliance officers’ function for branches as well as for Trade finance, Central Processing and Capital Markets departments which are supervised by two compliance units’ heads, as per the directives of the Central Bank of Lebanon (Intermediate Circular 371) in order to apply rigorous compliance controls and stringent monitoring of banking operations and financial transactions at the branch/department level. It is worth mentioning that unusual cases are directly escalated to the AML Committee for review and consideration.

Compliance Management ToolsThe latest tools are accessible to the AML/CFT function for more efficiency and effectiveness. Those are:


The AML/CFT ReporterAML-Reporter is an automated activity monitoring system designed to mitigate reputation and regulatory risk. In conjunction with the bank’s AML (Anti-Money Laundering) program, the software helps meet the requirements of local regulators, as well as assisting in meeting the international FATF (Financial Action Task Force) and MENAFATF (Middle East and North Africa Financial Action Task Force) recommendations.

The Alert Management and Check Surveillance Tool within AML/CFT Reporter

The AML/CFT Reporter is implemented at both the branch level and the AML/CFT Compliance Unit level. An online system allows both ends to monitor accounts and analyze alerts when an unusual activities suspicious customer profile breaks the expected client’s profile.

The Designated Name Filtering System (DNFS)The Bank has also integrated an automated filtering tool that can assist CL in comparing our customer Database and funds transfer activity to International black-listed names and the ones provided by the Special Investigation Commission (SIC), and other lists of undesirables published globally.

AML/CFT CommitteeThe AML/CFT Committee ensures that crucial compliance issues are coordinated and communicated throughout the Bank. Its main goal is to reflect the involvement of the whole bank’s Management in the decision making process regarding AML/CFT issues.

AML/CFT Compliance Awareness and Training In view of ensuring the understanding of the compliance regulatory requirements and adequate application of the procedural framework, CL has implemented an AML/Compliance Training Unit focused on providing all Bank employees with adequate AML/Compliance training in-house sessions as well as external trainings/seminars. Moreover this Unit is dedicated to conducting AML/CFT and Compliance research in view of assessing the risks associated with the implementation of new products and activities at the Bank.Moreover, the Training Unit provides the Bank with procedural directives in the form of Compliance Guidelines and a Duties and Responsibilities Manual. In parallel, the Unit ensures the

communication of the Code of Conduct and Business Ethics and the promotion of the compliance culture internally, in accordance with BDL Basic circular 128.

FATCA Implementation Process The Lebanese financial banking sector regulators issued directives to banks operating in Lebanon and their foreign entities, to act as a compliant Participating Foreign Financial Institutions - PFFI to the American Fiscal Law “FATCA” (Foreign Account Tax Compliance Act), released by the US Internal Revenue Services (IRS) and enacted on March 18, 2010.Credit Libanais Group successfully registered since April 2014 to the Internal Revenue Services - IRS, as a compliant PFFI to FATCA, and fully implemented FATCA provisions regarding Foreign Financial Institutions’ duties towards the American fiscal authorities.Accordingly, Credit Libanais group has established the required procedural programs to implement a “FATCA Strategy” and a “FATCA Action Plan” throughout CL Group. Moreover; a FATCA solution was acquired from a specialized vendor in order to assist Credit Libanais FFIs in the identification and reporting process of customers who must abide by FATCA regulations.Therefore, CL group acts as an entirely FATCA Compliant Group. A designated working group of FATCA experts ensures the proper follow up and implementation process to avoid compliance breaches. FATCA focused training encompassing all Bank employees is regularly conducted and supervised by the Compliance Division, across all units and entities.

OECD Common Reporting StandardThe Lebanese Authorities have signed the Multilateral Competent Authority Agreement for the automatic exchange of Financial Information of Financial Accounts. Therefore; the Lebanese Authorities are required to obtain certain information from the Financial Institutions operating in Lebanon in order to automatically exchange that information with other jurisdictions on annual basis. In this respect, CL Group is committed to preventing financial crime of all types and will fully comply with the new laws related to the automatic exchange of financial information of financial Accounts which is known as OECD Common Reporting Standard. This project is under way as the Bank Group has started identifying its customers, designing and developing the required tools (forms, templates, IT solution, etc.) used for reporting purposes.

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PROMOTING TRANSPARENCY AND COMPLIANCE

AT ALL TIMES


Financial Consumer ProtectionPrinciples of Banking and Financial Operations with Customers

The International FrameworkThe global financial crisis that started in 2007 highlighted the need for more effective financial consumer protection measures as consumers face more sophisticated and difficult markets. The availability of information has grown both in quantityand complexity, and the pace of change, in terms of new product developments, disruptive innovations and technological advances, has increased dramatically according to the OECD.

In February 2011, the G20, the OECD, the Financial Stability Board (FSB) and other international bodies developed common principles on Consumer Protection in the field of financial services. These principles were endorsed at the G20 meeting on 14-15 October 2011.

The financial consumer protection principles set clear and transparent rules of conduct for financial institutions in the daily conduct of business. The aim of the principles is to ensure that consumers receive the transparent information required, allowing them to make informed decisions and shielding them from unfair or deceptive practices.

The National FrameworkIn Lebanon, Banque du Liban (BDL) issued in February 2015 circular in No.134 related to the Principles of Banking and Financial Operations with Customers, following which the Bank established a new Consumer Protection Unit (CPU) directly reporting to the Chairman General Manager, independent from the operations execution, and entrusted with the application of BDL Circular 134 and related BCC Circular 281 with regards to conducting Principles of Banking and Financial Operations with Customers. CPU periodically reports to the Chairman GM and the Board of Directors on matters related to the implementation of the Policy, Charter, and Action Plan, and puts forth suggestions for improvements of Principles of Banking and Financial Operations with customers as per the regulatory requirements, to promote a better customer experience.

Moreover, CPU is entrusted with spreading awareness among staff and customers in matters of customers’ Rights and Duties, as well as standards of suitability, transparency, fairness and equitability. To ensure a direct access of customers to the Bank in matters of suggestions or complaints, CPU has established a clear complaints handling mechanism across CL banking Group branches, website and social media channels, and continuously ensures awareness spreading through training, capacity building and enhancement of professional experience including the implementation of the provision of the Basic Circular # 103 dated March 9, 2006.

THE FINANCIAL CONSUMER PROTECTION UNIT(CPU) - FRAMEWORK OF ACTIONAccording to the Policy approved by the Chairman General Manager and the Board of Directors on July 30, 2015, CPU at CL Group ensures the following:

Take prior cognizance of the advertisements, brochures, contract samples, account statements and other documents provided to customers; review them and submit the necessary suggestions that guarantee their clarity and transparency.Participate in the preparation of a clear, transparent and simple key facts statement concerning services and products, to be given to, and signed by the customer upon receipt.Include in the Code of Conduct, specific criteria concerning the relationship with customers. Contribute to the development of customers’ awareness and education programs. Obtain the customer’s signature on the List of “Customer Rights and Duties”. Publish the “List of Fees and Charges” and ensure the business conduct with customers in a suitable and transparent manner.Protect customers’ personal and financial information, without prejudice to the legislation in force, particularly the Banking secrecy Law and Anti-Money Laundering Law.

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Suggest and participate in the development of training programs that educate employees on how to deal/interact with customers, and how to explain to them the features, risks and suitability of products and services with the customer’s situation and needs.Follow-up on handling claims from customers, received via the various communication channels implemented in branches or electronically, examining them and giving an opinion in this regard prior to informing the customer about the outcome of the claim.

Submit directly to the General Manager periodic reports, at least quarterly, about customers’ claims, the nature, handling, and outcome of these claims, and the measures proposed to improve the policy relating to the Consumer Protection Unit. The General Manager must be promptly notified of any major critical claim that might expose the Bank or the Financial Institution to high reputational risks or significant financial losses; and a copy of these claims must be sent to the Board of Directors.

At CL Group, we support BDL efforts in spreading financial literacy and banking awareness, and we believe that it is our main responsibility to foster financial inclusion by targeting various categories of customers, including those with special needs.

BDL Basic Circular No. 134 related to the Principles of Banking and Financial Operations with Customers.BCCL (Banking Control Commission of Lebanon) Circular No. 281 complementing BDL Circular No. 134 BDL Basic Circular No. 124 and its related BCC Circular No. 273.The CMA (Capital Markets Authority) of Lebanon regulations, namely (Series 3000) related to Business Conduct.BDL Intermediary Circular No. 458 related to banking services offered to people with special needs in general and those with visual disability in particular.

Major Local Regulatory Requirements


Banking Information TechnologiesFollowing the path of the Bank’s Digital Journey, and as the main supporter of business growth and development, CL Group’s information technology services have been significantly improved in 2016 with the consolidation and upgrade of the Bank’s core banking technology. Such enhancements remain fundamental in the launch of new products and initiatives including many retail, corporate and cards products as well as several strategic projects aiming at improving customer experience and engagement across multiple channels.

The year 2016 witnessed various upgrades and introduction of new equipment. In fact, the Bank underwent a seamless transition during the major upgrade of the core banking system to the latest supported release for a better customer experience and a better internal user interface. Moreover, in line with the management decision for core banking unification across the Group branches, Cyprus was also migrated to the new core banking system.

Taking into account the increased regulatory and compliance requirements both locally and internationally, FATCA and AML systems were upgraded to the latest releases and AML connections were duly provided to the Group international branches in Iraq, Cyprus and Bahrain. Also, the new required Common Reporting Standard (CRS) is under implementation in 2017.

CL Data Center is one of the most technologically advanced in the region with many exclusive features:As a landmark reference, it is visited by national and regional peers. The data center that handles all the functions of the Bank is Tier III Certified of the Design, Constructed Facility, and Operations, and spans about 450 m2 with 120 kW of net IT load.An additional 350-m2 space hosts the sister company Credit Card Management (CCM), which has a dedicated server room within CL data center.The data center provides reliable service to more than 1,600 employees, departmental servers and thousands of users in Lebanon and abroad.CL disaster site is located miles away and contains all the necessary equipment to run the Bank in the remote case of system failure at the main site.The core banking platforms, the Trade finance and the newly selected Corporate Online Banking, all have been acquired from Misys, one of the leading international firms in this domain.The Equation system is a customer-centric banking system providing full universal banking functionality for both front and back office deployment. It has an enhancement for the wide range of retail banking instruments such as lending, deposits, and payments in addition to supporting business and enterprise banking requirements including treasury and trade services.The Bank’s strategy is to utilize the same core banking for all the group branches, including the foreign ones. This has improved the efficiency and productivity, reduced the operation cost and provided a better MIS and financial consolidation.

Green and Energy Efficient Data Center based on Latest TechnologyIBM AS400 DS8000 Blades and supporting DS7000 storage from IBM Storage for EMC

On the other hand, to cater to the needs of corporate customers, the new Corporate Online banking system currently in the final testing stages will provide customers with the needed flexibility to manage their corporate accounts including those held with other banks and carry out their cash management efficiently.

To further enhance the quality service in the growing cards business, the support system was further improved by reducing the system outage to the minimum, providing a 24/7 service for debit cards operations, and allowing for scheduled maintenance of the core banking system without customers’ transaction interruption. Moreover, cards storage and servers infrastructure were enhanced to support the card core system upgrade, and a project for full high availability was initiated, supporting the Three Tier applications for the presentation, database and application layers.

In addition, an agreement with the main database suppliers was initiated, to allow for a cloud-based setup for development and testing, and to reduce operational cost by the same token.

As per the strategic plan, many projects are in the pipeline to optimize the systems and finalize a multitude of transformational business projects such as Profitability, Asset Lability Management, Enterprise Resource Planning and IFRS9.

76 - 77


Training Activity Report Per Category For The Year 20161161 hours for Internal/external and overseas seminars 2922 total trainees by course sessions

Human ResourcesCL Human Resources management aligns practices to respond to the Bank overall strategy for growth and sustainability, while ensuring that our people grow while the Bank grows. The organizational initiatives that the HR has taken during the year 2016 include a targeted recruitment, training, development, as well as the reward management, integrating as such the systems and aligning the management of human capital with organizational goals, and building a solid pool of successors for the future.

In 2016, we further built on developing future leaders and promoting continuous development of our workforce, in a fair and pleasant workplace. Open communication and transparency are the foundations of the HR function which endeavors to create a positive atmosphere among staff and a good reputation for the Bank. The HR team is alert to employee inquiries, concerns, and complaints, which can be communicated through the intranet or any other channel. Grievances are treated in a professional and confidential manner and settled in a win-win spirit, ensuring a positive work environment. Noteworthy that during 2016 turnover rate reached a mere (1.92%).

Moreover, during the recruitment and selection process, responsibilities and expectations of both parties are clarified to ensure the best fit for the job, while accounting for the Bank overall needs and cultural dimensions. In 2016, we received more than 2200 CVs through various sources: referred to us by our stakeholders, through the career online link and the job fairs events. Also on-boarding sessions were organized on a monthly basis, and aimed at introducing new recruits to the Bank’s vision, mission, values and culture, and ensuring a swift integration within the teams, leading to a strong performance of the Bank.

Appraisal and Remuneration Creating opportunities to motivate and engage people is the aim of the Bank through the performance management process. Open communication is the cornerstone of the performance appraisal, where managers discuss performance and future aspirations with their employees. It is a future oriented feedback system, focused on building careers, retaining and developing talent while observing the rules of compliance, business ethics and values, ensuring the promotion of the long-term strategy of the Bank in a competitive market.

Banking Financial QualificationsDuring the year 2016, 122 employees successfully passed their BFQ certifications in Lebanese Financial Regulations, CAMS, Combating Financial Crime, Financial Derivatives, Global Securities, International Introduction to Investment, Investments and Risks, and Risk in Financial Services, as per BDL 103 and other regulatory requirements.

Learning and DevelopmentCL learning program is based on in-house and external training activities complemented by the online e-learning system, according to the career path planning of employees.

Training activities were distributed among departments and branches per category:

184 hours for Leadership and Management including the “Action Coalition Team-ACT Workshop” and “Art of Negotiation”, 204 hours for Auditing and Finance including “Certified Internal Auditor” training and “Finance for Non-Financial Managers”, 270 hours for Banking Operations including “BDL Loans and Circulars” and “Branch Compliance Officer “, 159 hours for Risk Management including “Emergency Response Plan-CL Adlieh Tower” and “Information Security”.

Executive (3)

Middle (1559)

Others (1360)

3

1360 1559

Hours

Private Banking

Compliance

Risk Management

Banking Operations

Languages

Marketing & Sales

Information Technology

Auditing & Finance

Leadership & Management

Others

8

36

159

272

204

184

50

89

92

67


Schools In 2016, the “Cards Product Knowledge” school was launched to Branch Managers and Customer Relations Agents. Training sessions covered major topics such as cards selling and increasing proficiency of cards. In addition, the Assistant Branch Managers and Branch Supervisors ABM/BS School II continued to cover the training needs in major subjects such as Branches Risk Control Self-Assessment (RCSA), Information Security and Unpaid Bills.

Internal Certification ProgramOver the elapsed year, the “Internal Certification Program” was initiated for Tellers in view of assessing. Their technical knowledge, standardizing activities and minimizing skill gaps. This program will help the Bank strategically and considerately develop its talents while aligning with organizational goals and performance.

Training Activities - Year 2016

Leadership & Management

Marketing & Sales

Risk Management

Auditing & Finance

Languages

Others

Information Techology

Banking Operations

Compliance

Private Banking

0.7%3%

5.7%

13.4%

24.8%

4.2% 7.5%7.8%

17.4%

15.5%

E-Learning ProgramsSince its launching in 2011, the e-learning program has been providing CL Group employees with valuable knowledge, in a flexible and easy manner. Each year, the e-programs are enriched with new curricula to respond to training needs. In 2016, total number of employees who started their learning plan reached 808 across branches and departments, the majority of whom finished their learning plans and successfully passed the post assessments.

Career Management Program Based on the Bank’s Career Management Program, more technical trainings were delivered to participants in the ICP 2 (Individual Career Planning) such as team building activities and effective negotiations, aiming at reinforcing individual and team skills. Workshops included “BADER”, “ACT” (Action Coalition Team) workshop, and “The Art of Negotiation” among others.

Summer InternshipIn 2016, 211 candidates were accepted from various renowned universities in Lebanon and abroad. The program aims at providing the needed internships to university students, and provides them with the required field experience.

Head Office Regional ManagementRiad El Solh

Regional Management

Kaslik

Regional Management

Hamra

Regional Management

Bekaa and South

Regional Management

North

48

1724

59

45

18

78 - 79


CULTIVATING HUMAN WORKFORCE TALENT

IN AN ATTRACTIVE WORKPLACE

Financial StatementsCredit Libanais Group

Management’s Discussion And Analysis of financial condition and results of operations of Credit Libanais Group

Independent auditors’ report

Consolidated statementof financial position

Consolidated statement of profit or loss and other comprehensive income

Consolidated statementof changes in equity

Consolidated statementof cash flows

Notes to the consolidatedfinancial statements

82

93

96

98

100

104

106



Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of Credit Libanais Group

Basis Of Presentation

The following discussion and analysis have been prepared based on the audited consolidated financial statements of the Group as at and for the years ended 31 December 2016 and 2015 and on selected financial information.

The consolidated financial statements of the Group as at 31 December 2016 represent the financial position of Credit Libanais Group which incorporates the activities of Credit Libanais SAL together with its wholly owned subsidiaries, Credit Libanais Investment Bank SAL (CLIB), Lebanese Islamic Bank SAL (LIB) and Credit International SA – Senegal (CISA) and other companies directly or indirectly owned by Credit Libanais SAL. All material inter-company transactions incurred during the years 2016 and 2015 were eliminated when preparing the consolidated financial statements in accordance with regulations and standards agreed upon for consolidation purposes.

Lebanese Banking SectorTotal Lebanese banking sector assets reached LBP 307,999 billion (or US$ 204.31 billion) as at 31 December 2016, compared to LBP 280,379 billion as at 31 December 2015 (or US$ 185.99 billion), reflecting an annual increase of LBP 27,620 billion or 9.85% year-on-year. Total loans to private sector made by the Lebanese banks increased by 5.45% in 2016 to LBP 86,198 billion (or US$ 57.18 billion) as at 31 December 2016 up from LBP 81,743 billion as at 31 December 2015. Total customer deposits, including non-resident private deposits, held by the Lebanese banking sector increased by 7.42% in 2016 to LBP 250,917 billion (or US$ 166.45 billion) as at 31 December 2016 from LBP 233,589 billion as at 31 December 2015. In addition, the deposit dollarization rate increased to 64.26% as at 31 December 2016, compared to 63.47% as at year-end 2015.

The following table sets out a breakdown of the Group’s sources of funding as at 31 December 2016 and 2015, respectively:

Analysis Of Financial Position

Total AssetsAs at 31 December 2016, the Group had total assets of LBP 16,066.39 billion, compared to LBP 14,978.19 billion as at 31 December 2015, reflecting a year-on-year increase of LBP 1,088.20 billion or 7.27%. This increase in total assets, particularly in liquid assets, was substantially matched by increases in funding, which consisted primarily of customer deposits. The average growth in total assets of the Lebanese banking sector stood at 9.85% during the year 2016.

The Group’s share of total assets of the Lebanese banking sector reached 5.22% at year-end 2016, compared to 5.34% at year-end 2015.

Customer depositsTotal customer deposits of the Group increased by 5.95% to LBP 13,427.48 billion as at 31 December 2016 from LBP 12,673.78 billion as at 31 December 2015, while the average growth rate in total deposits of the Lebanese banking sector stood at 7.42% during the year 2016. Customer deposits represent the principal source of the Group’s funding and comprised 83.58% and 84.62% of the Group’s total assets as at 31 December 2016 and 2015, respectively.

Year-on-year, foreign currency deposits were 5.31% higher as at 31 December 2016, compared to 31 December 2015, while LBP deposits increased by 6.67% over the year 2016, compared to an increase of 4.32% in LBP deposits for the Lebanese banking sector. As at 31 December 2016, customer deposits held in foreign currencies, principally US Dollars, represented 52.77% of total customer deposits as at such date, compared to 53.09% as at 31 December 2015 and marginally below the sector, while the banking sector’s deposits dollarization increased to 64.26% as at year-end 2016 from 63.47% as at year-end 2015. The Group’s deposits in foreign currency were lower than the sector’s average primarily because of the Group’s retail activities in rural areas (Bekaa region) where customers traditionally use Lebanese Pound as the functional currency.

Foreign currency deposits are primarily comprised of time deposits and savings accounts.

Loans PortfolioAs at 31 December 2016, loans and advances to customers (net of provisions for doubtful debts and reserved interest) amounted to LBP 4,836.81 billion, compared to LBP 4,474.88 billion as at 31 December 2015, reflecting a year-on-year increase of 8.09%.

Over the same period, aggregate loans to private sector made by Lebanese banks grew by 5.45%.The growth in the Group’s loans portfolio reflected primarily the extension of housing loans to individuals and commercial facilities to Corporate and SMEs, which are subsidised or guaranteed by financial public institutions. The growth in the loans volume as at year-end 2016, compared to year-end 2015, consolidated the Group’s position in the retail market, through the introduction of new consumer lending products resulting in the enlargement and diversification of its retail customer base.

The ratio of the Group’s total loans to total assets was 30.11% as at 31 December 2016, compared to 29.88% as at 31 December 2015.The Group’s loans-to-deposits ratio improved to 36.02% as at 31 December 2016 compared to 35.31% as at 31 December 2015 and compared to the average of 35.19% for the Lebanese banking sector.

As at 31 December 2016, savings accounts, which are mostly held by individuals and have, average maturities of approximately 3 to 6 months, represented the largest portion of the Group’s customer deposits 53.76%. Demand deposits, which earn the minimum balance rate offered by the Group, represented 9.66% of total deposits; and time deposits, which are mostly held by businesses, represented 36.58% of total deposits.

Sources of Funding

millions LBP

Banks and Financial Institutions Demand deposits Time deposits

Customer Deposits Demand deposits Time deposits Sight saving accounts Time saving accounts

Total

6,341.894,700.23

13,427.48

5,945.224,463.39

12,673.78

6.67%5.31%

5.95%

396.67236.84

753.70

4.32%8.76%

7.42%

Percentage Change31 December 2015

2015

2016

2016

854,25831,533822,725

13,427,4831,297,0014,911,442225,540

6,993,50014,281,741

669,50033,814635,686

12,673,7781,306,8644,499,156226,299

6,641,45913,343,278

27.60%-6.7529.435.95%-0.75%9.16%-0.34%5.30%7.04%

The following table sets out the compositions of the Group’s customer deposits, by currency, as at 31 December 2016 and 2015, respectively:

In LBP (LBP billion)In foreign currency (converted into USD million)Total (LBP billion)

Increase Group Sector31 December

DepositsDeposits by Currency Deposits Percentage Change



The table below sets out the composition of the Group’s loans portfolio, by currency, as at 31 December 2016 and 2015, respectively:

Loans by Currency

In LBP (LBP billion)In foreign currency (converted into USD million)Total (LBP billion)

Increase Group Sector31 December

Loans Loans Percentage Change

2,039.361,855.69

4,836.81

1,854.091,738.50

4,474.88

185.27117.19

361.93

9.99%6.74%

8.09%

14.75%2.32%

5.45%

20152016

Of the Group’s total loans portfolio, LBP 2,039.36 billion or 42.16% were denominated in Lebanese Pounds, with the remaining 57.84% denominated in foreign currencies, principally in US Dollars, as at 31 December 2016. Loans in foreign currencies represented 39.48% of total foreign currency customer deposits as at 31 December 2016, compared to 38.95% of total foreign currency customer deposits as at 31 December 2015, and compared to the average of 38.82% for the Lebanese banking sector as at 31 December 2016.

To support and reinforce the loans portfolio during the difficult economic conditions prevailing in the country, Credit Libanais Group improved the level of provisions set against non-

Personal, consumer and housing loans decreased to 42.53% of total loans as at 31 December 2016, compared to 42.71% as at 31 December 2015, while trade and services loans increased to 28.55% of total loans as at 31 December 2016, compared to 27.53% as at 31 December 2015.

The average rate of return on Lebanese Pounds ordinary treasury bills subscribed by Credit Libanais SAL and amounting to LBP 2,433.79 billion stood at 7.02. The overall yield on the Group’s portfolio of treasury bills held in Lebanese Pounds aggregated to 7.02% at 31 December 2016,

compared to 6.97% at the end of the preceding year. The average yield on Lebanese Government treasury bills issued in foreign currencies was 6.54% at 31 December 2016, compared to 6.53% at the end of the preceding year.

The Group’s industrial loans, construction loans, brokerage loans and agriculture loans comprised 12.68%, 14.56%, 0.31% and 1.40% of total loans, respectively, as at 31 December 2016, compared to 13.30%, 14.58%, 0.36% and 1.52% of total loans, respectively, as at 31 December 2015.

The following table sets out the composition of the Group’s loans portfolio by the borrower’s economic activity, after accounting for specified loan loss provisions as at 31 December 2016 and 2015:

performing loans (NPLs), increasing those by the amount of LBP 28.51 billion as provision charge during the year 2016, before deduction of the write back provision (compared to LBP 14.65 billion during the year 2015). Total provisions and suspended interest on doubtful loans amounted to LBP 149.91 billion at 31/12/2016 and represented 3.01% of the total loan portfolio, or 83.48% of non-performing loans. The Group continues to adopt a conservative policy in terms of provisions on NPLs, as confirmed by the amount of collections and recoveries realized every year resulting in substantial provisions written-back to the income statement for LBP 8.23 billion during the year 2016, compared to LBP 2.18 billion during the year 2015.

Retail (personal, consumer and housing loans)Trade and ServicesIndustriesConstruction and Real EstateBrokerageAgricultureTotal

millions LBP Percentage Change31 December 20152016

2,056,8981,380,766613,295703,94314,62567,284

4,836,811

2,433.7936.07(2.35)

2,467.51

826.3011.66(1.23)836.73

3,679.4353.65(4.21)

3,728.87

1,911,1081,231,844595,219652,24216,43068,038

4,474,881

7.63%12.09%3.04%7.93%

-10.99%-1.11%8.09%

47336738373

654484

2,434

58.6930.002.89

31.09183.04520.59826.30

561412387120930

1,2693,679

LiquidityAs at 31 December 2016, Credit Libanais Group maintained high liquidity levels which represented 73.57% of total customer deposits and other liabilities and 66.75% of total assets, compared to 73.84% and 66.79% respectively, as at 31 December 2015. Liquidity was distributed on the basis of 51.49% in Lebanese Pounds and 48.51% in foreign currencies at 31 December 2016, compared to 50.82% and 49.18% respectively as at 31 December 2015.

As a result of the international financial crisis that almost affected the majority of banks operating all over the world, the Group reconsidered the risk exposures maintained with its bank correspondents and accordingly redistributed the liquidity held and the credit limits granted to them in a way to avoid high concentration of liquidity with a single correspondent and to deal with prime banks that can benefit from their government’s financial support.

Lebanese government securitiesThe following table sets out the composition of the Group’s portfolio of Lebanese treasury bills and Eurobonds as at 31 December 2016:

The following table sets out the composition of the Group’s portfolio of Lebanese treasury bills, by maturity, as at 31 December 2016:

billions LBP

Ordinary Treasury billsPlus: Accrued interest on treasury billsDeductionsTotal

In LBP In FCAs at 31 December 2016

Total

Totalbillions LBP

Less than 6 monthsBetween 7 and 12 monthsBetween 13 and 18 monthsBetween 19 and 24 monthsBetween 2 and 5 yearsOver 5 yearsTotal Lebanese treasury bills




Investments and Marketable SecuritiesThe Group held investments and marketable securities amounting to LBP 1,855.69 billion as at year-end 2016 compared to LBP 1,654.61 billion as at year-end 2015, reflecting an increase of LBP 201.07 billion or 12.15%.

Shareholders’ EquityShareholders’ equity is divided into core capital (Tier I) and supplementary capital (Tier II). Tier I capital comprises paid-up common share capital, reserves, retained earnings,

At 31 December 2014, the authorised and issued share capital comprised 23,400,000 ordinary shares with a nominal value of LBP 11,000. All shares rank equally with regards to the Bank’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time. All issued shares are fully paid.

In July 2013, the extraordinary general assembly of shareholders approved the issue of 1,000,000 perpetual non-cumulative preferred shares with a nominal value of LBP 11,000; increasing the share capital of the Bank from LBP 257,400 million to LBP 268,400 million, thus an increase of LBP 11,000 million. The share premium amounted to LBP 139,750 per share.

Holders of these shares receive a non-cumulative dividend at the Bank’s discretion, or whenever dividends to ordinary

Asset / Liability ManagementThe Group’s consolidated balance sheet is structured in terms of percentage of total assets as shown in the table below at 31 December 2016 and 2015:

Results Of OperationsInterest IncomeThe following table sets out the principal components of the Group’s interest income, by amount and as a percentage change therein, for each of the years ended 31 December 2016 and 2015, respectively:

shareholders are declared. They do not have the right to participate in any additional dividends declared for ordinary shareholders. These shares do not have voting rights.

Equity to assets ratio reached 7.41% as at 31 December 2016, compared to 7.61% at year-end 2015.

Capital AdequacyDuring 2016, the Group conducted a quantitative impact study to assess the implications of the Basel III Accord on the shareholders’ equity of the Group. The capital adequacy ratio stood at 14.75% at year-end 2016 compared to 15.47% at year-end 2015 (compared to the minimum required 14%), after taking into consideration credit, market and operational risks of the Group.

and reserves for unspecified banking risks, less any unfavorable change in fair value of available-for-sale securities.

The following table sets out the composition of the Group’s portfolio of investments and marketable securities, by type of instrument, as at 31 December 2016:

Average rate of return on bonds and certificates of deposits held in foreign currencies stood at 5,64% for the year ended 31 december 2016, in pind to 5,30% for the year ended 31 december 2015.

The following table sets out the composition of the Group’s shareholders’ equity as at 31 December 2016 and 2015, respectively:

All investments consisted of instruments and papers issued by Lebanese banks and prime local and international companies and are quoted in regulated financial markets.

——

4.6601,080.3261,084.986

257,400 11,000

139,750 233,310 126,961 33,908 257,455 99,711

1,159,495 30,678

1,190,173

385,084

160,599307,316852,999

32%23%12%30%2%1%

100%

30%25%11%30%2%2%

100%

Due to banks Customer deposits Long-term liabilities Other creditors and payables Shareholders’ equity

Total Liabilities and Equity

5%84%

-3%8%

100%

4%85%

-3%8%

100%

32.75217.02861.713399.751511.244

49.37325.67097.692

1,682.9501,855.685

Totalmillions LBP

Corporate Bonds & Other Sovereign Bonds Certificates of deposit Unquoted & quoted Equity Securities & Preferred Shares Certificates of deposits issues by the Central BankTotal investment and marketable securities


millions LBP

millions LBP

0.00%0.00%0.00%11.28%1.00%-0.68%7.13%5.47%4.22%10.53%4.38%

11.09%

16.18%3.19%8.99%

Shareholders’ equityShare capital - common sharesShare capital - preferred sharesShare premium - preferred sharesCapital reservesRetained earningsFair value reserveOther reservesProfit for the yearTotal equity attributable to equity holders of the BankNon-controlling interestTotal equity

Financial Assets at amortised cost (including Lebanese government securities) Deposits with banks Loans and Advances to Customers Total

257,400 11,000

139,750 209,666 125,714 34,139 240,329 94,546

1,112,544 27,757

1,140,301

346,648

138,234297,822782,704

Percentage Change

Percentage Change

31 December

31 December

2016

2016

2016 2016

2015

2015

2015 2015Cash and banksTreasury bills and EurobondsMarketable securitiesNet loans and advancesFixed assetsOther debtors and receivablesTotal Assets

Liabilities & EquityAssets As at 31 December As at 31 December



Interest on Financial Assets at amortised cost represents interest earned primarily on Lebanese treasury bills denominated in Lebanese Pounds and Government and corporate Eurobonds issued in foreign currencies (including principally US Dollars and Euro) Lebanese treasury bills continued to comprise the substantial majority of the Group’s portfolio of Financial Assets classified at amortized cost in 2016 and 2015, reflecting the Group’s significant portfolio of liquid assets that is largely financed by customer deposits gathered through the Group’s branch network.

The overall yield on the portfolio of Lebanese treasury bills held by the Group in Lebanese Pounds was 7.02% as at 31

Interest ExpenseThe following table sets out the principal components of the Group’s interest expense, by amount and as a percentage change therein, for each of the years ended 31 December 2016 and 2015, respectively:

Non-interest incomeThe following table sets out the Group’s non-interest income deriving from commissions, fees and other operating income for each of the years ended 31 December 2016 and 2015, respectively:

Net Interest IncomeThe following table sets out the Group’s net interest income and net interest margin for each of the years ended 31 December 2016 and 2015, respectively:

The Group’s interest expense is principally comprised of interest paid on customer deposits, as these constitute the primary source of funding for the Group and aggregate to 83.58% of total assets at 31 December 2016.

The Group’s net interest income increased by 8.03% in 2016 to LBP 247.18 billion for the year ended 31 December 2016 from LBP 228.81 billion for the year ended 31 December 2015

Total net commissions, increased by 4.57% to LBP 57.76 billion for the year ended 31 December 2016, compared to LBP 55.24 billion for the year ended 31 December 2015. Net commissions, consisting primarily of commissions and fees on accounts, fees for issuances of letters of credit and letters of guarantee, origination and commitment fees on loans and transaction-processing, development of retail services, electronic banking products and other non-interest generated revenues such as fees from its plastic card businesses, including the sponsoring and processing of debit and charge cards such as Visa, MasterCard and Amex, the processing of transactions made through its network of point-of-sale (“POS”) terminals installedat different locations throughout the country and the cross-selling of related financial services, including bancassurance products through the Group’s insurance subsidiary Credit Libanais d’Assurances (CLA).

Net gain on Trading and Financial Investments amounted to LBP 33.40 billion in 2016, compared to LBP 19.16 billion in the preceding year.

The Group’s non-interest income increased by 22.08% to LBP 95.75 billion at 31 December 2016, from LBP 78.44 billion at the end of the preceding year. It contributed to 29.68% of the Group’s net financial income at 31 December 2016, compared to 26.60% at 31 December 2015.

Net Operating IncomeThe group increased the provisions allocated for loan losses by 94.57% at 2016. Allowances for loan losses amounted to LBP 28.51 billion for the year ended 31 December 2016, compared to LBP 14.65 billion for the preceding year.

Provisions written-back on loans increased to an amount of LBP 8.23 billion for the year ended 31 December 2016, compared to LBP 2.18 billion for the year ended 31 December 2015.

As a result of the combined effects of the foregoing, the Group’s net financial income for the year ended 31 December 2016 amounted to LBP 320.67 billion, compared to LBP 292.86 billion for the year ended 31 December 2015, reflecting a year-on-year increase of 9.5%. Other operating income is the result of activities and operations incurred by the Group outside the normal course of banking business. It is constituted of Income received on sale of assets held in recovery of bad debts amounting to LBP 1.64 billion, rental income amounting to LBP 0.15 billion and other income amounting to LBP 0.82 billion.

overcoming the diminishing returns of sovereign investments amidst the global economic downturn and the regional turmoil as well as the competitive market in terms of attracting deposits.

The total amount of interest paid on customer deposits increased in 2016, compared to 2015, by 9.25% as a result of the increase in total Group’s customer deposits by 5.95% as at 31 December 2016 compared to 31 December 2015.

December 2016, compared to 6.97% as at year-end 2015, and the average yield on Lebanese government Eurobonds issued in foreign currencies was 6.54% as at 31 December 2016 and 6.53% as at 31 December 2015.

Interest income on the Group’s loans portfolio increased by 3.19% during the year 2016 primarily due to the extension of additional loans to retail and corporate customers during the year 2016 which increased by LBP 361.93 billion or 8.09%.

Accordingly, total interest income for the year ended 31 December 2016 increased by 8.99% compared to total interest income for the year ended 31 December 2015.

6,704588,1643,3247,632

605,824

109,289(51,531)57,758

31,9591,4432,6101,980

95,750

852,999(605,824)247,1751.65%

millions LBP

millions LBP

millions LBP

40.64%9.25%7.65%-0.02%9.38%

10.05%16.92%4.57%

97.16%-51.04% 26.76%-0.21%22.08%

8.99%9.38%8.03%

Loan from Central Bank of Lebanon Customer deposits Deposits from banks Subordinated Debt Issued Total

Fees and Commissions income Fees and Commissions expense Net Commissions

Net trading income Net gain on financial investments Other operating income Share of profit of investments in equity accounted investeesTotal Non-interest Income

Interest earned Interest paid Net interest income Net interest margin (%)

4,767538,4083,0887,633

553,896

99,312(44,076)55,236

16,2102,9472,0591,984

78,436

782,704(553,896)228,8081.65%

Percentage Change

Percentage Change

Percentage Change

31 December

31 December

31 December

2016

2016

2016

2015

2015

2015



Staff Expenses and Related ChargesThe following table sets out the principal components of the Group’s staff expenses and related charges for each of the years ended 31 December 2016 and 2015, respectively:

General Operating ExpensesThe following table sets out the principal components of the Group’s general operating expenses for the years ended 31 December 2016 and 2015, respectively:

Profit before TaxThe following table sets out the Group’s pre-tax profit for the years ended 31 December 2016 and 2015, respectively:

Total staff expenses and related charges amounted to LBP 115.05 billion for the year ended 31 December 2016, compared to LBP 107.73 billion for the year ended 31 December 2015, reflecting a year-on-year increase of 6.80%.

General operating expenses increased by 12.95% to LBP 67.69 billion for the year ended 31 December 2016, compared to LBP 59.93 billion for the year ended 31 December 2015.

The Group’s pre-tax profits for the year 2016 amounted to LBP 125.72 billion (or the equivalent of US$ 83.40 million), compared to LBP 116.61 billion (or the equivalent of US$ 77.35 million) for the year 2015, a year-on-year increase of 5.60%.

This is despite the political instability in the region especially the extremist movement and turmoil in surrounding countries namely our closest neighbours Syria and Iraq where our operations have suffered significantly.

Return on shareholders’ equity (before tax) stood at 11.46% at year-end 2016, compared to 11.18% at year-end 2015. Return on average assets stood at 0.81% same as the end of the preceding year.

The Group’s overall cost-to-income ratio improved to 57.43% as at 31 December 2016 compared to 58.01% as at 31 December 2015.

The increase in staff expenses was largely attributable to year-on-year salaries increase and its implication on the related personnel charges and social security contribution.

80,2882,54611,3745,66815,170115,046

7,4586,2015,3756,4063,6622,7504,5233,6982,3992,3622,8747,5392,6881,3732,381718

1,91664,323

millions LBP

millions LBP

7.30%0.00%4.68%40.20%-1.78%6.80%

32.52%7.36%-3.92%31.95%10.61%-1.23%-6.03%17.29%-5.59%0.60%3.61%5.62%2.17%-9.85%0.30%3.31%

164.85%12.95%

Wages and salaries Allowances to the Board of Directors Compulsory social security obligations Employee benefits obligation Other personnel expenses Total staff expenses and related charges

Taxes Premiums for the guarantee of deposits Rental charges and related expenses Lawyers, audit and consultancy fees Data processing services Mail and telecommunication (PTT, Swift) Maintenance and repairs Electricity, water and heating Travel and entertainment Transportation charges Insurance premiums Advertising and public relations expenses Computer maintenance and charges Office stationery and printing Board of directors attendance allowances Training, documentation and services fees Other expenses Total general operating expenses

74,8262,54610,8664,04315,445107,726

5,6285,7765,5944,8553,3112,7844,8133,1532,5412,3482,7747,1382,6311,5232,374695

1,99459,932

Percentage Change

Percentage Change

31 December

31 December

2016

2016

2015

2015

125,719(19,684)106,035

millions LBP

7.82%21.61%5.60%

Profit before income tax Income tax Net profit for the year

116,605(16,187)100,418

Percentage Change31 December 2016 2015

Profit AppropriationThe Group’s consolidated profits for the year ended 31 December 2016 are generated from the following entities:

millions LBP

Profit from Credit Libanais SAL Profit from Credit Libanais Investment Bank SAL Profit from Credit International (Senegal) Profit from Credilease SAL Profit from Lebanese Islamic Bank SAL Eliminations of the inter-group dividend distributions

Profits deriving from the Group’s banking activities Group’s share in profits of subsidiaries and affiliated companies

Net profit for the year

103,65715,4131,46629824

(9,277)

111,58114,138

125,719

(17,483)(1,800)

(12)(53)——

(19,348)(336)

(19,684)

86,17413,6131,45424524

(9,277)

92,23313,802

106,035

Net ProfitsProfits Before Tax Income TaxAs at 31 December 2016

92 - 93


Independent auditors’ report

Report on the Audit of the Consolidated Financial Statements

OpinionWe have audited the consolidated financial statements of Credit Libanais S.A.L. (the “Bank” or “Group”), which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Bank as at 31 December 2016, and its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Bank in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Lebanon, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of MatterWithout qualifying our opinion, we draw attention to Note 23 of the consolidated financial statements, concerning the surplus amounting to LBP 60,045 million (net of tax) as at 31 December 2016, derived from sales transactions of Lebanese Treasury Bills in Lebanese Pounds designated at amortised cost concluded in conjunction with the acquisition of BDL Certificates of Deposit and Lebanese Republic Eurobonds in U.S. Dollars with longer maturity designated at amortised cost.

According to Intermediary Circular number 446 issued by the Central bank of Lebanon on 30 December 2016, this surplus which is regulated in nature shall be appropriated, among other things, after deducting the relevant tax liability to collective provision for credit risks associated with the loan book at a minimum of 2% of the weighted credit risks, and that in anticipation of implementation of IFRS 9 for impairment, when qualified effective on 1 January 2018.

Key Audit MattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of loans and advances to customersImpairment of loans and advances to customers is a key audit matter due to the significance of the balances, and complexity and subjectivity over estimating timing and amount of impairment. The risk is that the amount of impairment may be misstated.

The estimation of the impairment loss allowance on an individual basis requires management to make judgements to determine whether there is objective evidence of impairment and to make assumptions about the financial condition of the borrowers and expected future cash flows.

The collective impairment loss allowance relates to retail and corporate loans and losses incurred but not yet identified (IBNR loss allowance) on other loans. The audit matters include controls over the models used, accuracy of input and appropriateness of model overlays. The model overlays are required to address certain known data and system issues and to reflect economic conditions at the year end.

To the shareholders of Credit Libanais S.A.L.


The General Assembly of Shareholders of Credit Libanais SAL met on 23 of May 2017 and approved the consolidated financial statements of Credit Libanais Group as at 31 December 2016, showing net profits (after tax) amounting to LBP 106.04 billion, and resolved the appropriation of the profits for the year 2016 deriving from Credit Libanais SAL and amounting to LBP 86.17 billion as follows:

To transfer an amount of LBP 8.52 billion representing 10% of these profits to a legal reserve account as per the requirements of article 132 of the Code of Money and Credit.

To allocate an amount of LBP 13.83 billion to a special reserve for unspecified banking risks, computed on the basis of 2% of the total risk weighted assets and off balance sheet commitments as at the end of each financial year, as per BDL Circ. 1439.

To allocate 606.76 million in reserves for Real Estate acquired in recovery of bad debts not yet disposed of, at the rate of 5% of their book value as per BCC memo 4/2008 dated 14/01/2008.

To allocate an amount of LBP 524.44 million representing unrealized profit on revaluation of financial instruments classified as FVTPL as per BCC circular No 270 dated September 19, 2011.

To allocate an amount of LBP 10.55 billion representing dividends on preferred shares for the period between 01/01/2016 and 31/12/2016, at an annual return of 7% of the USD 100 million preferred shares issued; and to deduct the amount of tax charged by the bank as a result of the distribution of these dividends amounting to LBP 527.63 million.

To allocate an amount of LBP 1.64 billion in reserve for Property acquired in settlement of debts.

To transfer the remaining profits, after the allocations and distributions listed above, to the retained earnings which will aggregate an amount of LBP 49.98 billion and to distribute out of these retained earnings an amount of LBP 35.10 billion to common shareholders of Credit Libanais SAL.

In closing, the Board of Directors of Credit Libanais SAL would like to express its gratitude for the continuous enthusiasm, confidence and support of our Shareholders and customers, and for the efforts and devotion of the Group’s senior management and employees.

Yours Sincerely,

Dr. Joseph Torbey Chairman General Manager


Our procedures in this area included:assessing the trends in the local credit environment, considering their likely impact on the Bank’s exposures and using this information to focus our testing on the key risk areas;assessing and testing the design and operating effectiveness of the controls over the Bank’s loan impairment process — for example:

controls over the model process, including building, monitoring, periodic validation and approvals; controls over the completeness and accuracy of data input into models; for the principal underlying system generating credit data, IT controls such as access, data management, and change management; controls over the identification of which loans and advances were impaired. For individually significant loans this included controls over credit grading and the monitoring process; andthe management review process over the calculations;

re-performing certain credit procedures as follows:for individually significant loans: - performing a credit assessment of a sample of loans in credit risk grades 5 and 6 to determine whether their grading was appropriate and assess the reasonableness of the amount and timing of estimated recoverable cash flows, including realisable value of collateral and how forbearance was considered; and - performing a credit assessment of a sample of loans graded 1 to 4 to determine whether their grading was appropriate; and for retail loans: - testing the accuracy of key inputs into the models; - for a selection of models, assessing the appropriateness of the impairment calculation methodology; and - re-performing certain calculations; and

assessing whether disclosures in the consolidated financial statements appropriately reflect the Bank’s exposure to credit risk.

Regulatory restricted contributionDuring November and December of 2016, the Central Bank of Lebanon issued regulations applicable to all banks operating in Lebanon with respect to the use of the contribution derived from the special and non-conventional securities arrangement deals with the regulator. This is a key audit matter in relation to the use, accounting and taxability of the benefit earned.

Our procedures in this area included reviewing the regulatory restricted contribution derived from the special and non-conventional securities arrangement deals with the regulator, after deducting the relevant tax, in line with the conditions for the designated purpose setup by the regulator.

Other InformationManagement is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the consolidated financial statements and our auditors’ report thereon. The Annual Report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.Those charged with governance are responsible for overseeing the Bank’s financial reporting process.

94 - 95


Auditors’ Responsibilities for the Audit of the Consolidated Financial StatementsOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern.If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.

Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Mr. Jean Sfeir for KPMG and Mr. Alfred Nehme for DFK Fiduciaire du Moyen-Orient.8 May 2017

Beirut, LebanonKPMG

DFK Fiduciaire du Moyen-Orient

DFK Fiduciaire du Moyen OrientSin El Fil – Fouad Chehab BlvdGeahchan Bldg – 1st FloorP.O.Box: 110-167Beirut – LebanonTel: 961 1 480917 / 723Fax: 961 1 496682

Beirut Central DistrictLazarieh Building Block 01- 6th FloorP.O.Box: 11-8270Beirut – Lebanon

Tel: 961 1 985 501 / 502Fax: 961 1 985 503


Note

7 8 9 40

10 11 12 13 14 15 16 17

18 19 20 40

21 22 23 24

Assets

Cash and balances with Central Banks

Balances with other banks and financial institutions

Loans and advances to customers

Loans and advances to related parties

Debtors by acceptances

Financial assets at fair value through other comprehensive income

Financial assets at fair value through profit or loss

Financial assets at amortised cost

Investments in equity-accounted investees

Property and equipment

Intagible assets

Assets held for sale

Other assets

Total assets

Liabilities

Loans and deposits from Central BanksDeposits from other banks and financial institutionsDeposits from customersDeposits from related partiesEngagement by acceptancesSubordinated debt issued Tax liabilitiesOther liabilitiesProvisions for risks and chargesTotal liabilities

20152016

3,459,720

1,073,739

4,458,356

16,525

75,737

92,273

54,757

5,324,095

18,440

232,907

6,723

37,156

127,763

14,978,191

576,312

93,188

12,233,922

439,856

75,737

120,376

18,161

238,345

41,993

13,837,890

4,057,836

1,081,279

4,820,687

16,124

81,069

96,922

80,457

5,407,179

16,374

240,421

8,076

36,694

123,276

16,066,394

739,858

114,400

12,837,938

589,545

81,069

120,376

31,332

313,101

48,602

14,876,221

In millions of Lebanese Pound

As at 31 December As at 31 December

Credit Libanais S.A.LConsolidated statement of financial position

96 - 97


Note

25 25 25 26

27 28

Shareholders’ equity

Share capital - common shares

Share capital - preferred shares

Share premium - preferred shares

Capital reserves

Retained earnings

Fair value reserve

Other reserves

Profit for the year

Total equity attributable to equity holders of the Bank

Non-controlling interest

Total equity

Total liabilities and equity

20152016

The notes on pages 103 to 153 are an integral part of these consolidated financial statements.

The consolidated financial statements were approved by the Board of Directors on 28 April 2017.

257,400

11,000

139,750

209,666

125,714

34,139

240,329

94,546

1,112,544

27,757

1,140,301

14,978,191

257,400

11,000

139,750

233,310

126,961

33,908

257,455

99,711

1,159,495

30,678

1,190,173

16,066,394

Dr. Joseph TorbeyChairman and General Manager


Note

29 29

30 30

31 32

33

34 14, 15

35

13

36

27

Interest income

Interest expense

Net Interest income

Fee and commission income

Fee and commission expense

Net fee and commission income

Net trading income/gain on financial investments

Other income

Total operating income

Net impairment on loans and advances

Net reversal of impairment losses on financial investments

Net operating income

Personnel expenses

Depreciation and amortisation

Other provision

Other expenses

Total operating expenses

Share of profit of investments in equity-accounted investees

Profit before income tax

Tax expense

Profit for the year

Other comprehensive income, net of tax

Items that will not be reclassified to profit or loss

Fair value reserve (financial assets at fair value through other comprehen-

sive income)

Net change in fair value

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

20152016782,704

(553,896)

228,808

99,312

(44,076)

55,236

19,157

2,059

305,260

(12,479)

78

292,859

(107,726)

(10,580)

–

(59,932)

(178,238)

1,984

116,605

(16,187)

100,418

6,395

6,395

106,813

852,999

(605,824)

247,175

109,289

(51,531)

57,758

33,402

2,610

340,945

(20,280)

–

320,665

(115,046)

(14,192)

(3,365)

(64,323)

(196,926)

1,980

125,719

(19,684)

106,035

(231)

(231)

105,804


Credit Libanais S.A.LConsolidated statement of profit or loss and other comprehensive income

98 - 99


Note

Profit attributable to:

Equity holders of the Bank


Profit for the year

Total Comprehensive income attributable to:

Equity holders of the Bank



20152016

The notes on pages 138 to 150 are an integral part of these consolidated financial statements.

94,546

5,872

100,418

100,941

5,872

106,813

99,711

6,324

106,035

99,480

6,324

105,804

for the year ended 31 December for the year ended 31 December


257,400

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

257,400

11,000

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

11,000

139,750

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

139,750

209,666

–

–

–

–

–

–

–

23,694

–

–

–

–

–

–

(50)

23,644

23,644

233,310

25

25

Note

Balance at 1 January 2016


Profit for the year


Net change in fair value of financial assets at fair value through

other comprehensive income

Total other comprehensive income


Transactions with owners recorded directly in equity

Contributions by and distributions to owners of the Bank

Transfer to retained earnings

Transfer to reserves

Dividend to preferred shareholders

Dividends to common shareholders

Other movements

Prior year adjustment

Tax on previous year inter group dividends

Allowances to directors

Translation difference

Total contributions by and distributions to owners of the Bank

Total transactions with owners recorded directly in equity

Balance at 31 December 2016

Capital Reserves

Share Premium-preferred Shares

Share capital-preferred Shares

Share capital-common Shares


Credit Libanais S.A.LConsolidated statement of changes in equityfor the year ended 31 December 2016

100 - 101


125,714

–

–

–

–

–

–

94,546

(36,932)

(11,080)

(42,095)

(24)

(90)

(810)

(2,268)

–

1,247

1,247

126,961

34,139

–

–

–

(231)

(231)

(231)

–

–

–

–

–

–

–

–

–

–

–

33,908

240,329

–

–

–

–

13,234

–

6,271

(2,663)

–

–

–

284

17,126

17,126

257,455

94,546

–

99,711

–

–

–

99,711

(94,546)

–

–

–

–

–

–

–

–

(94,546)

(94,546)

99,711

1,112,544

–

99,711

–

(231)

(231)

99,480

–

(4)

(11,080)

(35,824)

(2,687)

(90)

(810)

(2,268)

234

(52,529)

(52,529)

1,159,495

27,757

–

6,324

–

–

–

6,324

–

4

–

(3,267)

–

–

–

(140)

–

(3,403)

(3,403)

30,678

1,140,301

–

106,035

–

(231)

(231)

105,804

–

–

(11,080)

(39,091)

(2,687)

(90)

(810)

(2,408)

234

(55,932)

(55,932)

1,190,173

Profit for the YearOther ReservesFair Value Reserve

Retained Earnings

Total EquityNon-controlling Interest

Total

The notes on page 146 are an integral part of these consolidated financial statements.



257,400

–

–

–

–

–

–

–

–

–

–

–

–

–

–

257,400

11,000

–

–

–

–

–

–

–

–

–

–

–

–

–

–

11,000

139,750

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

139,750

186,183

–

–

–

–

–

23,530

–

–

–

–

–

–

(47)

23,483

23,483

209,666

25

25

Note



Profit for the year


Net change in fair value of financial assets at fair value through

other comprehensive income

Total other comprehensive income


Transactions with owners recorded directly in equity

Contributions by and distributions to owners of the Bank

Transfer to retained earnings


Dividend to preferred shareholders

Dividends to common shareholders

Other movements

Prior year adjustment

Tax on previous year inter group dividends


Translation difference

Total contributions by and distributions to owners of the Bank

Total transactions with owners recorded directly in equity


Capital Reserves

Share Premium-preferred Shares

Share capital-preferred Shares

Share capital-common Shares

Credit Libanais S.A.LConsolidated statement of changes in equityfor the year ended 31 December 2015

102 - 103


117,880

–

–

–

–

91,253

(38,155)

(11,080)

(30,391)

692

(1,183)

(798)

(2,504)

–

7,834

7,834

125,714

27,744

–

6,395

6,395

6,395

–

–

–

–

–

–

–

–

–

–

–

34,139

221,688

–

–

–

–

–

14,601

–

7,204

(2,012)

(1,412)

–

–

260

18,641

18,641

240,329

91,253

94,546

–

–

94,546

(91,253)

–

–

–

–

–

–

–

–

(91,253)

(91,253)

94,546

1,052,898

94,546

6,395

6,395

100,941

–

(24)

(11,080)

(23,187)

(1,320)

(2,595)

(798)

(2,504)

213

(41,295)

(41,295)

1,112,544

23,741

5,872

–

–

5,872

–

24

–

(3,264)

1,544

–

–

(160)

–

(1,856)

(1,856)

27,757

1,076,639

100,418

6,395

6,395

106,813

–

–

(11,080)

(26,451)

224

(2,595)

(798)

(2,664)

213

(43,151)

(43,151)

1,140,301

Profit for the YearOther ReservesFair Value Reserve

Retained Earnings

Total EquityNon-controlling Interest

Total

The notes on page 146 are an integral part of these consolidated financial statements.



Cash flows from operating activities

Profit for the year

Adjustments for:

- Depreciation and amortisation

- Allowance for financial instruments

- Net impairment loss on loans and advances to banks and financial insitutions

- Net impairment loss on loans and advances to customers

- Net impairment loss on loans and advances to related parties

- Net interest income

- Net (gain) loss on sale of property and equipment

- Net gain on assets held for sale

- Tax expense

- Share of profit of investments in equity-accounted investees

- Other movements

Changes in:

- cash and balances with Central Banks

- balances with other banks and financial institutions

- loans and advances to customers

- loans and advances to related parties

- other assets

- deposits from other banks and financial institutions

- loans and deposits from Central banks

- deposits from customers

- deposits from related parties

- other liabilities

- provisions for risks and charges

20152016

106,035

14,192

300

–

19,726

254

(247,175)

(2)

(1,638)

19,684

2,066

(2,781)

(89,339)

(544,412)

20,334

(380,539)

148

4,487

25,448

161,591

598,386

148,895

74,756

6,609

26,364

100,418

10,580

–

1,914

10,429

136

(228,808)

13

(225)

16,187

1,372

(3,939)

(91,923)

(238,130)

(12,022)

(198,584)

19,294

(5,756)

4,078

176,372

988,774

9,391

(12,063)

2,908

642,339

Credit Libanais S.A.LConsolidated statement of cash flows


Interest received

Interest paid

Income taxes paid

Net cash from operating activities

Cash flows from investing activities

Net change in investment securities

Acquisition of property and equipment

Proceeds from the sale of property and equipment

Acquisition of intangible assets

Proceeds from the sale of intangible assets

Net change in assets held for sale

Net cash used in investing activities

Cash flows from financing activities

Dividends paid


Changes in non-controlling interest

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of exchange rate

Cash and cash equivalents at 31 December

20152016841,885

(599,249)

(6,513)

262,487

(111,366)

(19,100)

61

(4,018)

–

2,100

(132,323)

(47,714)

(2,268)

(3,403)

(53,385)

76,779

1,667,710

234

1,744,723

766,807

(544,126)

(14,742)

850,278

(661,125)

(16,313)

1,026

(2,752)

9

(300)

(679,455)

(35,065)

(2,504)

(1,856)

(39,425)

131,398

1,536,099

213

1,667,710

104 - 105

For the year ended 31 December


Credit Libanais S.A.LNotes to the consolidated financial statements31 December 2016

1. Reporting entityCredit Libanais S.A.L. (the “Bank” or the “Group”) is a Lebanese joint stock Company registered since 1961 in Lebanon under no. 10742 in the Beirut register of Commerce, and under no. 53 on the Bank’s list at the Central Bank of Lebanon. The address of the Bank’s registered office is Achrafieh, Kornich Nahr-Adlieh, Credit Libanais Headquarter Building, Beirut, Lebanon. The consolidated financial statements of the Bank as at and for the year ended 31 December 2016 comprise the Bank and its subsidiaries (together referred to as the Group and individually as Group entities). The Group primarily is involved in retail, commercial and investment banking activities through their headquarters as well as their branches and subsidiaries located in Lebanon, Cyprus, Bahrain, Iraq and Senegal.

2.Basis of preparation(a) Basis of accountingThe consolidated financial statements have been prepared in accordance with IFRS. Details of the Group’s accounting policies are included in Note 3.

(b) Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

financial instruments at fair value through other comprehensive income are measured at fair value,financial instruments at fair value through profit and loss are measured at fair value.

(c) Functional and presentation currencyThese consolidated financial statements are presented in Lebanese Pounds (LBP), which is the Bank’s functional currency. All amounts have been rounded to the nearest million.

(d) Use of estimates and judgementsIn preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

3. Significant accounting policiesThe accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, and have been applied consistently by Group entities.(a) Basis of consolidation(i) Non-controlling interestsNon-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(ii) SubsidiariesSubsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investees. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases.

(iii) Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency(i) Foreign currency transactionsTransactions in foreign currencies are translated into the respective functional currencies of the operations at the spot exchange rates at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the


reporting date are translated to the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the spot exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the spot exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Foreign currency differences arising on translation are generally recognised in profit or loss. However, foreign currency differences arising from the translation of financial assets at fair value through other comprehensive income are recognised in other comprehensive income.

(ii) Foreign operationsThe assets and liabilities of foreign operations are translated to LBP at spot exchange rates at the reporting date. The income and expenses of foreign operations are translated to LBP at spot exchange rates at the dates of the transactions. Foreign currency differences are recognised in Other Comprehensive Income, and accumulated in the foreign currency translation reserve (translation reserve), except to the extent that the translation difference is allocated to NCI.

(c) InterestInterest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability.

When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes all transaction costs and fees paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability.

Interest income and expense presented in the statement of comprehensive income include interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest rate basis.

Interest income and expense on all trading assets and liabilities are considered to be incidental to the Group’s trading operations and are presented together with all other changes in the fair value of trading assets and liabilities in net trading income.

(d) Fees and commissionFees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment management fees, sales commission and placement fees, are recognised as the related services are performed.

Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.

(e) Net trading income / gain on financial investmentsNet trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences. Net gain on financial investments relates to non-trading derivatives held for risk management purposes that do not form part of qualifying hedge relationships and financial assets and liabilities designated at fair value through profit or loss. It includes interest, dividends and net gain from exchange of financial assets at amortised cost.

106 - 107


(f) DividendsDividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities and preferred shares. Dividends are presented in net trading income / gain on financial investments.

(g) Income taxIncome tax comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

(i) Current taxCurrent tax comprises the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.

(ii) Deferred taxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; andtemporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional taxes that arise from the distribution of dividends by the Group are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally in profit or loss.

(h) Financial assets and financial liabilities(i) RecognitionThe Group initially recognises loans and advances, deposits and subordinated debt issued on the date that they are originated. Regular way purchases and sales of financial assets are recognised on the trade date at which the Group commits to purchase or sell the asset. All other financial assets and liabilities (including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

(ii) ClassificationFinancial assetsThe Group classifies its financial assets as measured at amortised cost or fair value.See Notes 3(i), (j), (k) and (l).

A financial asset qualifies for amortised cost measurement only if it meets both of the following conditions:

the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; andthe contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.If a financial asset does not meet both of these conditions, then it is measured at fair value.


The Group makes an assessment of a business model at a portfolio level as this reflects best the way the business is managed and information is provided to management.In making an assessment of whether an asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, the Group considers:

management’s stated policies and objectives for the portfolio and the operation of those policies in practice;how management evaluates the performance of the portfolio;whether management’s strategy focuses on earning contractual interest revenues;the degree of frequency of any expected asset sales;the reason for any asset sales; andwhether assets that are sold are held for an extended period of time relative to their contractual maturity or are sold shortly after acquisition or an extended time before maturity.

Financial assets held for trading are not held within a business model whose objective is to hold the asset in order to collect contractual cash flows.

The Group has designated certain financial assets at fair value through profit or loss in either of the following circumstances:

The assets or liabilities are managed, evaluated and reported internally on a fair value basis.The designation eliminates or significantly reduces an accounting mismatch, which would otherwise arise.

The Group has made an election to present in other comprehensive income changes in the fair value of certain investments in equity instruments that are not held for trading – see accounting policies 3(l).

Financial assets are not reclassified subsequent to their initial recognition, except when the Group changes its business model for managing financial assets.

Financial liabilitiesThe Group classifies its financial liabilities as measured at amortised cost. See Note 3(q).

(iii) DerecognitionFinancial assetsThe Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset

expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised), and the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that has been recognised in other comprehensive income is recognised in profit or loss. Any interest in such transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability.

The Group enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such case, the transferred assets are not derecognised. Examples of such transactions are securities lending and sale and repurchase transactions.

When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale and repurchase transactions as the Group retains all or substantially all the risks and rewards of ownership of such assets.

In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract, depending on whether the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the servicing.

108 - 109


Financial liabilitiesThe Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

(iv) OffsettingFinancial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity.

(v) Amortised cost measurementThe amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

(vi) Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition

differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

(vii) Identification and measurement of impairmentAt each reporting date the Group assesses whether there is objective evidence that financial assets carried at amortised cost are impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

Objective evidence that financial assets are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group.


The Group considers evidence of impairment for loans and advances and investment securities measured at amortised costs at both a specific asset and collective level. All individually significant loans and advances and investment securities measured at amortised cost are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances and investment securities measured at amortised cost that are not individually significant are collectively assessed for impairment by grouping together loans and advances and investment securities measured at amortised cost with similar risk characteristics.

In assessing collective impairment, the Group uses statistical modelling of historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, and makes a judgment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than is suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.

Impairment losses on assets measured at amortised cost are calculated as the difference between the carrying amount of the financial amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and advances or investment securities at amortised cost. If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

The Group writes off certain loans and advances and investment securities, when Group Credit determines that there is no realistic prospect of recovery.

(i) Cash and cash equivalents Cash and cash equivalents include cash on hand, unrestricted balances held with central banks and highly liquid financial assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.Cash and cash equivalents are carried at amortised cost in the statement of financial position.

(j) Trading assets and liabilitiesTrading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position taking. Trading assets are measured at fair value with changes in fair value recognised as part of net trading income in profit or loss.

(k) Loans and advancesLoans and advances are non-derivative financial assets with fixed or determinable payments, other than investment securities, that are not quoted in an active market and the Group does not intend to sell immediately or in the near term. Subsequent to initial recognition loans and advances are measured at amortised cost using the effective interest method.

(l) Investment securitiesSubsequent to initial recognition investment securities are accounted for depending on their classification as either amortised cost, fair value through profit or loss or fair value through other comprehensive income. Investment securities are measured at amortised cost using the effective interest method, if:

they are held within a business model with an objective to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest; andthey have not been designated previously as measured at fair value through profit or loss.

The Group elects to present changes in fair value of certain investments in equity instruments held for strategic purposes in other comprehensive income. The election is irrevocable and is made on an instrument-by-instrument basis at initial recognition.

Gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognised in profit or loss. Dividends are recognised in profit or loss unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognised in other comprehensive income. Cumulative gains and losses recognised in other comprehensive income are transferred to retained earnings on disposal of an investment.Other investment securities are measured at fair value through profit or loss.

110 - 111


(m) Property and equipment(i) Recognition and measurementItems of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

If significant parts of an item of property or equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised within other income/other expenses in profit or loss.

(ii) Subsequent costsSubsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.

(iii) DepreciationDepreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line basis over their estimated useful lives, and is generally recognised in profit or loss.

The estimated useful lives of significant items of property and equipment are as follows:

Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate.

(n) Intangible assetsSoftwareSoftware acquired by the Group is measured at cost less accumulated amortisation and any accumulated impairment losses.

Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Software is amortised on a straight line basis in profit or loss over its estimated useful life, from the date that it is available for use. The estimated useful life of software for the current and comparative periods is three to ten years. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(o) Assets held for saleProperties acquired through the enforcement of security over loans and advances to customers are accounted for in accordance with the Directives issued by the Banking Regulators.

These assets are initially measured at fair value at the date of enforcement of the security. A reserve is constituted for assets not disposed of within two years of the date of enforcement at a rate of 20% or 5%.

The accumulated reserve is classified under “Other reserves” in equity.

(p) Impairment of non-financial assetsAt each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell.

Impairment losses are recognised in profit or loss.An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(q) Deposits and subordinated debt issuedDeposits and subordinated debt issued are the Group’s sources of debt funding.Deposits and subordinated debt issued are initially measured at fair value minus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method.

buildings installations and improvements furniture and equipment vehiclespower generators

50 years16.67 years12.5 years10 years12.5 years


(r) ProvisionsA provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined using management’s best estimates to the risk specific to the liability.

(s) Share capital and reserves(i) Share issue costsIncremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(ii) Dividends on ordinary sharesDividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s shareholders.

Dividends for the year that are declared after the date of the balance sheet are dealt with in the subsequent events note.

(t) Deferred restricted contributionsRestricted contributions derived from special and non-conventional deals arrangement with the regulator are deferred until designated conditions for recognition are met. At the time income is received, it is deferred under “regulatory deferred liability” and applied to the designated purpose according to the regulator’s requirements.

(u) Standards issued but not yet effectiveA number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016 and earlier adoption is permitted; however, the Group has not early applied the following new or amended standards in preparing these consolidated financial statements. The new standards which may be relevant to the Group are set out below. (i) IFRS 15 Revenue from Contracts with CustomersIFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.IFRS 15 is effective for annual reporting periods on or after 1 January 2018, with early adoption permitted.The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

(ii) IFRS 9 Financial instrumentsIFRS 9 Financial instruments as issued in July 2014. The Group currently applies phase I of IFRS 9 as issued in November 2009 which only addressed the classification and measurement of financial assets and did not provide a new impairment model. The currently applied version of the standard established only two primary measurement categories for debt instruments. The complete version as issued in 2014 establishes three primary measurement categories for financial assets that are debt instruments: amortised cost, fair value through other comprehensive income and fair value through profit and loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities, the only change was the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The new IFRS 9 also replaces the hedge effectiveness tests with a requirement for an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. The complete version of the standard is effective for accounting periods beginning on or after 1 January 2018. Early application is permitted. The Group is currently assessing the impact of the complete version, more specifically the requirements of the new impairment model.

(iii) IFRS 16 LeasesAt the simplest level, the accounting treatment of leases by lessees will change fundamentally. IFRS 16 eliminates the current accounting model for lessees, which distinguishes between on-balance sheet finances leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice – i.e. lessors continue to classify leases as finance and operating leases. IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 16 but is not expected to have a significant effect.The Group has not early adopted any standard, interpretation, or amendment that has been issued but is not yet effective.

112 - 113


4. Financial risk management(a) Introduction and overviewThe Group has exposure to the following risks from financial instruments:

credit riskliquidity riskmarket risksoperational risks.

This note presents information about the Group’s exposure to each of the above risks, the Bank’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Risk management frameworkThe Bank’s Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board of Directors has established the Board Risk Committee, Credit Policy Committee and the Asset and Liability Management Committee (ALCO), which are responsible for developing and monitoring Bank risk management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board Risk Committee, the Credit Policy Committee and the Asset Liability Management Committee (ALCO) oversee how management monitors compliance with the Group’s risk management policies and procedures, and review the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(b) Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations, and arises principally from the Group’s loans and advances to customers and other banks, and investment debt securities. For risk management reporting purposes the Group considers and consolidates all elements of credit risk exposure.

For risk management purposes, credit risk arising on trading assets is managed independently by the market risk management function. The overall objective of managing market risk is to avoid unexpected losses due to changes in market prices and to optimise the use of market risk capital. The Group manages these potential exposures on a daily basis within predefined limits for each of the major types of market risk established within the Group’s policies and commensurate with the risk appetite defined by the Board of Directors.

Management of credit riskThe Board of Directors has delegated responsibility for the oversight of credit risk to its Risk Management Committee, Credit Policy Committee and allocated Credit Committees. An independent Credit Risk Management function, reporting to the Chief Risk Officer (CRO), is responsible for management of the Group’s credit risk, including:

Formulating credit policies covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements.Establishing the authorisation structure for the approval and renewal of credit facilities.Reviewing and assessing credit risk. The Credit Committee assesses all credit exposures in excess of designated limits, prior to facilities being committed to customers by the business unit concerned. Renewals and reviews of facilities are subject to the same review process.Limiting concentrations of exposure to counterparties, geographies and sectors. The Group’s approach to controlling this concentration of exposure is by the diversification of its commitments and by setting limits at level of aggregate of products, economic sectors, region and segments.Developing and maintaining the Group’s credit risk rating system. This system is a summary indicator of the Group’s individual credit exposure. An internal rating system categorises all credits into various classes on the basis of underlying credit quality.


A well-structured credit rating framework is an important tool for monitoring and controlling risk inherent in individual credits as well as in credit portfolios of the Group or a business line. The importance of internal credit rating framework becomes more eminent due to the fact that historically major losses to banks stemmed from default in loan portfolios. While the Group already has a system for rating individual credits in addition to the risk categories prescribed by the Central Bank of Lebanon, the Group established an internal rating framework. The internal rating framework benefits the Group in a number of ways such as: credit selection, amount of exposure, tenure and price of facility, frequency or intensity of monitoring, analysis of migration of deteriorating credits and more accurate computation of future loan loss provision; and deciding the level of approving authority of loan.Reviewing compliance with agreed exposure limits, including those for selected sectors, geography and product types. Regular reports on the credit quality of portfolios are provided to the Credit Policy Committee who may require appropriate corrective action to be taken.Providing advice, guidance and specialist skills to promote best practice throughout the Group in the management of credit risk.

Each Credit Officer is required to implement Group credit policies and procedures, with credit approval authorities delegated from the Group Credit Committee. Each Credit Officer reports on all credit related matters to management and the Group Credit Committee.

Each Credit Officer is responsible for the quality and performance of his/her credit portfolio and for monitoring and controlling all credit risks in his/her portfolios, including those subject to central approval.

Regular audits of Group Credit processes are undertaken by Internal Audit.

Analysis of credit qualityThe tables below set out information about the credit quality of financial assets and the allowance for impairment/loss held by the Group against those assets. Allowance for impairment held against assets classified within credit grades 1 to 6 is in respect of losses incurred but not yet specifically identified. The carrying amount of assets with credit grades 1 to 6 that are collectively impaired represents the estimated proportion of the total assets within these grades (rather than individually identified assets) to which such allowance is estimated to relate.

114 - 115


Investment Debt Securities

Loans and Advances to Related Parties

Balances with Central Banks, Other Banks and

Financial InstitutionsLoans and Advances

to Customers

16,525

–

–

3,638

3,638

(3,035)

(512)

91

639

639

15,793

–

2

15,795

16,525

5,069,644

–

9,543

–

9,543

(9,411)

–

132

–

–

5,026,105

–

43,407

5,069,512

5,069,644

4,469,706

–

9,578

129

9,707

(9,540)

–

167

–

–

4,433,429

–

36,110

4,469,539

4,469,706

5,487,636

–

–

–

–

–

–

–

–

–

5,397,678

–

89,958

5,487,636

5,487,636

5,378,852

–

–

–

–

–

–

–

–

–

5,291,192

–

87,660

5,378,852

5,378,852

16,124

–

–

3,809

3,809

(3,147)

(653)

9

725

725

15,387

–

3

15,390

16,124

4,458,356

61,308

139,174

48,812

249,294

(63,807)

(72,976)

112,511

175,742

175,742

4,173,064

(19,147)

16,186

4,170,103

4,458,356

4,820,687

97,757

131,110

44,666

273,533

(58,048)

(78,171)

137,314

158,138

158,138

4,539,881

(32,350)

17,704

4,525,235

4,820,687

Carrying amount

Individually impaired

Grade 4: Substandard

Grade 5: Impaired

Grade 6: Impaired

Gross amount

Allowance for impairment

Unrealised interest

Carrying amount

Past due but not impaired

Grade 3: Low-fair risk

Carrying amount

Neither past due nor impaired

Grades 1-2: Low-fair risk

Allowance for collective impairment

Interest receivable

Carrying amount

Total carrying amount

2016 2016 2016 2016

2016

2015 2015 2015 2015

2015

Lending commitments and financial guarantees

864,207

663,996

200,211

864,207

769,669

580,365

189,304

769,669

Amount committed/guaranteed

Off balance sheet

Maximum exposure

Lending commitments

Grade 1-3: low-fair risk

Financial guarantees

Grade 1-3: low-fair risk

Total exposure



31 December

31 December



Impaired loans and investment debt securitiesThe Group regards a loan and advance or a debt security as impaired where there is objective evidence that a loss event has occurred since initial recognition and such loss event has an impact on future estimated cash flows from the asset. In addition, a retail loan is considered impaired if it is overdue for 90 days or more except for housing loans. Loans that are

Past due but not impaired loans and investment debt securitiesPast due but not impaired loans and investment debt securities are those for which contractual interest or principal payments are past due, but the Group believes that impairment is not appropriate on the basis of the level of security / collateral available and / or the stage of collection of amounts owed to the Group.

Write-off policyThe Bank writes off a loan or an investment debt security balance, and any related allowances for impairment losses and suspended interest, when Group Credit Committee determines that the loan or security is uncollectible. This determination is made after considering information such as the occurrence ofsignificant changes in the borrower’s / issuer’s financial position such that the borrower / issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure.

The Group believes that no impairment allowance is necessary with respect to investment debt securities.

subject to a collective provision for losses incurred but not yet identified are not considered impaired. Impaired loans and advances are graded 4 to 6 in the Bank’s internal credit risk grading system.Set out below is an analysis of the gross and net (of allowances for impairment) amounts of individually impaired assets by risk grade.

Loans and Advances to Customers

Gross Gross GrossNet Net Net


Balances with Central Banks, Other Banks and Financial Institutions

97,757

131,110

44,666

273,533

61,308

139,174

48,812

249,294

75,301

62,013

–

137,314

46,486

66,025

–

112,511

–

–

3,809

3,809

–

–

3,638

3,638

–

–

9

9

–

–

91

91

–

9,543

–

9,543

–

9,578

129

9,707

–

132

–

132

–

167

–

167

31 December 2016

Grade 4: Individually impaired



31 December 2015




116 - 117


The Group typically does not hold collateral against balances with other banks and financial institutions and against investment securities, and no such collateral was held at 31 December 2016 or 2015.

The Group did not obtain non-financial assets during the year by taking possession of collateral held as security against loans and advances.

The Bank’s policy is to pursue timely realisation of the collateral in an orderly manner. The Group generally does not use the non-cash collateral for its own operations.

Collateral heldType of credit exposureThe Group holds collateral against certain of its credit exposures. The table below sets out the principal types of collateral held against loans and advances to customers and related parties.

Principal type of collateral held for secured lending

Engagement by signature received

Personal guarantees received

Mortgages and real securities received

Mobilisation bills received as guarantee

Bills received as guarantee

Commitment and contingencies received

20152016

49,950

3,838,456

4,905,043

47,596

3,395

67,634

8,912,074

38,082

3,603,144

4,561,560

92,345

3,459

80,614

8,379,204



Concentration of credit riskThe Group monitors concentrations of credit risk by sector and by geographic location. An analysis of concentrations of credit risk from loans and advances and investment securities is shown below:

Concentration by location for loans and advances to customers, related parties and banks and financial institutions are based on the country of domicile. Concentration by location for investment securities is based on the country of domicile of the issuer of the security. At 31 December 2016, the lending commitments and financial guarantees, classified within credit grade 1 to 3, amounted to LBP 864,207 million (2015: LBP 769,669 million).

Investment Debt Securities


Balances with Central Banks, Other Banks and

Financial InstitutionsLoans and Advances

to Customers

4,820,687

2,053,822

1,376,614

613,295

695,047

14,625

67,284

–

–

–

4,820,687

4,687,306

110,629

18,952

3,800

4,820,687

4,458,356

1,909,417

1,229,165

595,219

641,884

15,232

67,439

–

–

–

4,458,356

4,336,002

104,538

16,270

1,546

4,458,356

16,124

3,076

4,152

–

8,896

–

–

–

–

–

16,124

16,118

6

–

–

16,124

16,525

1,691

2,679

–

10,358

1,198

599

–

–

–

16,525

16,518

7

–

–

16,525

5,069,644

–

–

–

–

–

–

1,081,279

–

3,988,365

5,069,644

4,032,726

261,728

572,216

202,974

5,069,644

4,469,706

–

–

–

–

–

–

1,073,739

–

3,395,967

4,469,706

3,457,090

320,588

512,571

179,457

4,469,706

5,487,636

–

–

–

–

–

–

73,086

2,727

5,411,823

5,487,636

5,426,134

60,732

770

–

5,487,636

5,378,852

–

–

–

–

–

–

76,317

12,059

5,290,476

5,378,852

5,325,393

45,291

8,168

–

5,378,852

Carrying amount

Concentration by sector

Retail

Trade and services

Industries

Construction and real estate

Brokerage

Agriculture

Banks and financial institutions

Corporate

Government

Concentration by location

Lebanon

Middle East and Africa

Europe

Other



2016 2016 2016 20162015 2015 2015 2015

Trading assets An analysis of the credit quality of the maximum credit exposure, based on the median rating of the three eligible rating agencies as per Basel II (Moody’s, Standard & Poor’s and Fitch) where applicable, is as follows:

FromA+ to A-

FromB+ to B-

From BBB+ to BBB-

From BB+ to BB-

From CCC+ to CCC- or NR

3,770

3,737

–

4,263

784

1,625

–

–

80,457

54,757

75,903

45,132

31 December 2016Financial assets at fair value through profit or loss31 December 2015Financial assets at fair value through profit or loss

Total

31 December31 December

118 - 119


Settlement riskThe Group’s activities may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities or other assets as contractually agreed.

For certain types of transactions the Group mitigates this risk by conducting settlements through a settlement/clearing agent to ensure that a trade is settled only when both parties have fulfilled their contractual settlement obligations. Settlement limits form part of the credit approval/limit monitoring process described earlier. Acceptance of settlement risk on free settlement trades requires transaction specific or counterparty specific approvals from Group Risk.

(c) Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Management of liquidity riskThe Group’s Board of Directors sets the Group’s strategy for managing liquidity risk and delegates the responsibility for the oversight of the implementation of this policy to the Risk Committee and ALCO. ALCO approves the Group’s liquidity policies and procedures. Central Treasury manages the Bank’s liquidity position on a day-to-day basis and reviews daily reports covering the liquidity position of both the Bank and foreign branches.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The key elements of the Group’s liquidity strategy are as follows:

Maintaining a diversified funding base consisting of customer deposits (both retail and corporate) and maintaining contingency facilities;Carrying a portfolio of highly liquid assets, diversified by currency and maturity;Monitoring liquidity ratios, maturity mismatches, behavioural characteristics of the Group’s financial assets and liabilities, and the extent to which the Group’s assets are encumbered and so not available as potential collateral for obtaining funding.

In addition, the Group maintains statutory deposits with Central Banks. As per Lebansese banking regulations, the Group must retain non-interest bearing balances with the Central Bank of Lebanon equivalent to 25% of the sight deposits and 15% of term deposits denominated in Lebanese Pounds. As for foreign currencies, the Group must retain with the Central Bank of Lebanon interest bearing statutory investments equivalent to 15% of all deposits regardless of their nature.

The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. The Group maintains a solid ratio of highly liquid net assets in foreign currencies to deposits and commitments in foreign currencies taking market conditions into consideration. In accordance, with the Central Bank of Lebanon circulars, the ratio of net liquid assets to deposits and commitments in foreign currencies and Lebanese Pounds should not be less than 10% and 40% respectively. The highly liquid net assets consist of cash and balances with Central Banks, balances with other banks and financial institutions less deposits from banks and financial institutions and deposits that mature within one year. Deposits and commitments are composed of total deposits from customers in addition to acceptances and loans that mature within one year.

When a branch is subject to a liquidity limit imposed by its local regulator, the branch is responsible for managing its overall liquidity within the regulatory limit in co-ordination with Central Treasury. Central Treasury monitors compliance of all foreign branches with local regulatory limits on a daily basis.

Exposure to liquidity riskThe key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as including cash and cash equivalents and investment debt securities for which there is an active and liquid market less any deposits from banks and financial institutions, other borrowings and commitments maturing within the next month.

A similar, but not identical, calculation is used to measure the Group’s compliance with the liquidity limit established by the Central Bank of Lebanon and the Banking Control Commission. Details of the reported Group ratio of net liquid assets to deposits from customers at the reporting date was as follows:


At 31 December

2016 201534.37% 35.88%

Maturity analysis for assets and liabilitiesThe tables below set out the remaining contractual maturities of the Bank’s assets and liabilities.

31 December 2016

Amount Without Maturity

1-3 Months

3-6 Months

6 Months to 1 Year

More Than 5 Years1-5 Years

AssetsCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesDebtors by acceptancesFinancial assets at fair value through other compre-hensive incomeFinancial assets at fair value through profit or lossFinancial assets at amortised costInvestments in equity-accounted investeesProperty and equipmentIntangible assetsAssets held for saleOther assetsTotal assetsLiabilitiesLoans and deposits from Central BanksBalances from other banks and financial institutionsDeposits from customersDeposits form related partiesEngagement by acceptancesSubordinated debt issuedTax liabilitiesOther liabilitiesProvision for risks and chargesShareholders’ equityTotal liabilities and shareholders’ equityLiquidity gapCumulative gap

In millions of Lebanese Pound Total

112,795 215

122,668 12 –

63,736

1,032 88,927 16,374

240,421 8,076

36,694 123,276 814,226

(9)

(689) (75,565) (3,836)

– (7,313) (6,311)

(276,193) (48,602)

(1,190,173) (1,608,691) (794,465) (794,465)

934,638 1,079,854 1,602,906

16,112 47,559

–

527 329,503

– – – – –

4,011,099 (31,183)

(47,257) (10,575,497)

(538,950) (47,559)

– (16,074) (36,908)

– –

(11,293,428) (7,282,329) (8,076,794)

152,259 –

101,893 –

30,887 –

– 328,325

– – – – –

613,364 (12,799)

(51,627) (1,052,764)

(26,128) (30,887)

– (8,947)

– – –

(1,183,152) (569,788)

(8,646,582)

215,572 –

137,293 –

2,623 –

3,015 496,112

– – – – –

854,615 (26,854)

(3,184) (753,052)

– (2,623)

– – – – –

(785,713) 68,902

(8,577,680)

855,072 1,210

822,004 – – –

39,760 1,546,877

– – – – –

3,264,923 (284,101)

(11,643)

(380,777) (20,631)

– (113,063)

– – – –

(810,215) 2,454,708

(6,122,972)

1,787,500 –

2,033,923 – –

33,186

36,123 2,617,435

– – – – –

6,508,167 (384,912)

– (283)

– – – – – – –

(385,195) 6,122,972

–

4,057,836 1,081,279 4,820,687

16,124 81,069 96,922

80,457

5,407,179 16,374

240,421 8,076

36,694 123,276

16,066,394 (739,858)

(114,400) (12,837,938)

(589,545) (81,069)

(120,376) (31,332)

(313,101) (48,602)

(1,190,173) (16,066,394)

– –

120 - 121


The above tables show the undiscounted cash flows on the Group’s assets and liabilities on the basis of their earliest possible contractual maturity.The Group’s expected cash flows on some assets and liabilities vary significantly from the contractual cash flows. For example, demand deposits from customers are expected to maintain a stable or increasing balance.

As part of the management of its liquidity risk arising from financial liabilities, the Group holds liquid assets comprising cash and cash equivalents, compulsory reserves with Central Banks and investment securities for which there is an active and liquid market so that they can be readily sold to meet liquidity requirements. In addition, the Bank maintains agreed lines of credit with banks.


Liquidity reserves

1,515,549 1,447,6791,515,549 1,447,679Cash and balances with Central Banks

Carrying Amount Carrying AmountFair Value Fair Value

(d) Market risksMarket risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of the Group’s market risk management is to manage and control market risk exposures within acceptable parameters in order to ensure the Group’s solvency while optimising the return on risk.

Management of market risksOverall authority for market risk management is vested in ALCO. ALCO sets up limits for each type of risk in aggregate and for portfolios, with market liquidity being a primary factor in determining the level of limits set for trading portfolios. The Group Market Risk is responsible for the development of detailed risk management policies (subject to review and approval by ALCO) and for the day-to-day review of their implementation.

The Group employs a range of tools to monitor and limit market risk exposures.

2016 2015


31 December 2015

Amount Without Maturity

1-3 Months

3-6 Months

6 Months to 1 Year

More Than 5 Years1-5 Years

AssetsCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesDebtors by acceptancesFinancial assets at fair value through other compre-hensive incomeFinancial assets at fair value through profit or lossFinancial assets at amortised costInvestments in equity-accounted investeesProperty and equipmentIntangible assetsAssets held for saleOther assetsTotal assetsLiabilitiesLoans and deposits from Central BanksBalances from other banks and financial institutionsDeposits from customersDeposits form related partiesEngagement by acceptancesSubordinated debt issuedTax liabilitiesOther liabilitiesProvision for risks and chargesShareholders’ equityTotal liabilities and shareholders’ equityLiquidity gapCumulative gap

In millions of Lebanese Pound Total

99,722 308

109,550 94 –

63,499

721 86,940 18,440 232,907 6,723 37,156 127,763 783,823

(6) (541)

(69,935) (3,042)

– (7,313) (6,371)

(213,942) (41,993)

(1,140,301) (1,483,444) (699,621) (699,621)

852,253 1,060,954 1,534,369

14,264 75,401

–

– 167,935

– – – – –

3,705,176

(24,702) (60,519)

(10,259,688) (400,855) (75,401)

– (3,923) (24,403)

– –

(10,849,491) (7,144,315) (7,843,936)

170,347 –

84,950 –

336 –

602 212,553

– – – – –

468,788

(9,645) (10,056)

(1,028,076) (15,895)

(336) –

(7,867) – – –

(1,071,875) (603,087)

(8,447,023)

194,468 12,477 97,571

153 – –

15 390,853

– – – – –

695,537

(20,059) (8,856)

(665,749) (20,064)

– – – – – –

(714,728) (19,191)

(8,466,214)

503,505 –

937,088 – – –

31,975 2,124,612

– – – – –

3,597,180

(174,048) (13,216) (210,474)

– –

(113,063) – – – –

(510,801) 3,086,379

(5,379,835)

1,639,425 –

1,694,828 2,014

– 28,774

21,444 2,341,202

– – – – –

5,727,687

(347,852) – – – – – – – – –

(347,852) 5,379,835

–

3,459,720 1,073,739 4,458,356

16,525 75,737 92,273

54,757

5,324,095 18,440

232,907 6,723

37,156 127,763

14,978,191

(576,312) (93,188)

(12,233,922) (439,856) (75,737)

(120,376) (18,161)

(238,345) (41,993)

(1,140,301) (14,978,191)

– –

122 - 123


31 December 2015

Carrying amount

Less than 3

months

3-6 Months

6-12 months

More Than 5 Years

Non interest bearing

1-5 Years

AssetsCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesDebtors by acceptancesFinancial assets at fair value through other compre-hensive incomeFinancial assets at fair value through profit or lossFinancial assets at amortised costInvestments in equity-accounted investeesProperty and equipmentIntangible assetsAssets held for saleOther assetsTotal assetsLiabilitiesLoans and deposits from Central BanksDeposits from other banks and financial institutionsDeposits from customersDeposits from related partiesEngagements by acceptancesSubordinated debt issuedTax liabilitiesOther liabilitiesProvisions for risks and chargesShareholders’ equityTotal liabilities and equityInterest rate sensitivity gapCumulative gap


3,459,720 1,073,739 4,458,356

16,525 75,737 92,273

54,757

5,324,095 18,440

232,907 6,723

37,156 127,763

14,978,191

(576,312) (93,188)

(12,233,922) (439,856) (75,737)

(120,376) (18,161)

(238,345) (41,993)

(1,140,301) (14,978,191)

– –

940,710 654,233

1,534,369 14,264

– – –

167,935 – – – – –

3,311,511

(19,926) (32,028)

(9,042,930) (373,760)

– – – – – –

(9,468,644) (6,157,133) (6,157,133)

98,741 –

84,950 – – –

– 212,553

– – – – –

396,244

(9,645) (10,056)

(1,028,076) (15,895)

– – – – – –

(1,063,672) (667,428)

(6,824,561)

167,332 12,477 97,571

153 – –

– 390,853

– – – – –

668,386

(20,059) (8,856)

(665,749) (20,064)

– – – – – –

(714,728) (46,342)

(6,870,903)

– –

937,088 – – – –

2,124,612 – – – – –

3,061,700

(174,048) (13,216)

(210,474) – –

(113,063) – – – –

(510,801) 2,550,899

(4,320,004)

1,639,425 –

1,694,828 2,014

– –

– 2,341,202

– – – – –

5,677,469

(347,852) – – – – – – – – –

(347,852) 5,329,617 1,009,613

613,512 407,029 109,550

94 75,737 92,273

54,757 86,940 18,440

232,907 6,723

37,156 127,763

1,862,881

(4,782) (29,032)

(1,286,693) (30,137) (75,737) (7,313)

(18,161) (238,345) (41,993)

(1,140,301) (2,872,494) (1,009,613)

–


Exposure to interest rate riskThe principal risk to which portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. A summary of the Group’s interest rate gap position is as follows:

31 December 2016

Carrying amount

Less than 3

months

3-6 Months

6-12 months

More Than 5 Years

Non interest bearing

1-5 Years

AssetsCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesDebtors by acceptancesFinancial assets at fair value through other compre-hensive incomeFinancial assets at fair value through profit or lossFinancial assets at amortised costInvestments in equity-accounted investeesProperty and equipmentIntangible assetsAssets held for saleOther assetsTotal assetsLiabilitiesLoans and deposits from Central BanksDeposits from other banks and financial institutionsDeposits from customersDeposits from related partiesEngagements by acceptancesSubordinated debt issuedTax liabilitiesOther liabilitiesProvisions for risks and chargesShareholders’ equityTotal liabilities and equityInterest rate sensitivity gapCumulative gap


4,057,836 1,081,279 4,820,687

16,124 81,069 96,922

80,457

5,407,179 16,374 240,421 8,076 36,694 123,276

16,066,394

(739,858) (114,400)

(12,837,938) (589,545) (81,069) (120,376) (31,332) (313,101) (48,602)

(1,190,173) (16,066,394)

– –

1,954,855 580,235

1,602,906 16,112

– – –

329,503 – – – – –

4,483,611

(24,455) (23,150)

(9,380,104) (513,407)

– – – – – –

(9,941,116) (5,457,505) (5,457,505)

1,270,481 –

101,893 – – – –

328,325 – – – – –

1,700,699

(12,799) (51,627)

(1,052,764) (26,128)

– – – – – –

(1,143,318) 557,381

(4,900,124)

179,392 –

137,293 – – –

– 496,112

– – – – –

812,797

(26,854) (3,184)

(753,052) – – – – – – –

(783,090) 29,707

(4,870,417)

– 1,210

822,004 – – –

– 1,546,877

– – – – –

2,370,091

(284,101) (11,643)

(380,777) (20,631)

– (113,063)

– – – –

(810,215) 1,559,876

(3,310,541)

15,075 –

2,033,923 – – –

– 2,617,435

– – – – –

4,666,433

(384,912) –

(283) – – – – – – –

(385,195) 4,281,238 970,697

638,033 499,834 122,668

12 81,069 96,922

80,457 88,927 16,374

240,421 8,076

36,694 123,276

2,032,763

(6,737) (24,796)

(1,270,958) (29,379) (81,069) (7,313)

(31,332) (313,101) (48,602)

(1,190,173) (3,003,460) (970,697)

–

124 - 125


The following table presents the breakdown of assets and liabilities by currency:

LBP Other Total Other TotalLBP

1,936,562 32,900

2,038,111 1,248

– 4,660

47,690

3,500,141 16,327

232,515 7,683 6,367

105,546 7,929,750

736,219 10,710

6,221,456 120,433

– –

22,873 101,688 43,547

917,607 8,174,533 (244,783)

2,121,274 1,048,379 2,782,576

14,876 81,069 92,262 32,767

1,907,038 47

7,906 393

30,327 17,730

8,136,644

3,639 103,690

6,616,482 469,112 81,069

120,376 8,459

211,413 5,055

272,566 7,891,861 244,783

4,057,836 1,081,279 4,820,687

16,124 81,069 96,922 80,457

5,407,179 16,374

240,421 8,076

36,694 123,276

16,066,394

739,858 114,400

12,837,938 589,545 81,069

120,376 31,332

313,101 48,602

1,190,173 16,066,394

–

1,387,134 40,369

1,852,740 1,347

– 4,660

28,120

3,621,836 18,393

223,328 6,341 6,747

108,850 7,299,865

572,556 12,394

5,821,562 123,656

– –

7,558 90,490 40,568

880,992 7,549,776 (249,911)

2,072,586 1,033,370 2,605,616

15,178 75,737 87,613 26,637

1,702,259

47 9,579 382

30,409 18,913

7,678,326

3,756 80,794

6,412,360 316,200 75,737

120,376 10,603

147,855 1,425

259,309 7,428,415 249,911

3,459,720 1,073,739 4,458,356

16,525 75,737 92,273 54,757

5,324,095

18,440 232,907

6,723 37,156

127,763 14,978,191

576,312 93,188

12,233,922 439,856 75,737

120,376 18,161

238,345 41,993

1,140,30114,978,191

–

AssetsCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesDebtors by acceptancesFinancial assets at fair value through other comprehensive incomeFinancial assets at fair value through profit or lossFinancial assets at amortised costInvestments in equity-accounted investeesProperty and equipmentIntangible assetsAssets held for saleOther assetsTotal assetsLiabilitiesLoans and deposits from Central BanksDeposits from other banks and financial institutionsDeposits from customersDeposits from related partiesEngagements by acceptancesSubordinated debt issuedTax liabilitiesOther liabilitiesProvisions for risks and chargesShareholders’ equityTotal liabilities and equity

31 December

The Group is subject to currency risk on financial assets and liabilities denominated in currencies other than the Group’s functional currency, which is the Lebanese Pound (LBP). Most of these financial assets and liabilities are denominated in US Dollars or Euros.

Since the LBP is pegged to the USD since 1999 in a band of LBP 1,500 and LBP 1,515, the net exposure is minimal.

In millions of Lebanese Pound 2016 2015


The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s financial assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include a 100 basis point (bp)

Exposure to currency riskThe Group monitors any concentration risk in relation to any individual currency in regard to the translation of foreign currency transactions and monetary assets and liabilities into the functional

currency of the Group, and with regard to the translation of foreign operations into the presentation currency of the Group.

Overall interest rate risk positions are managed by Risk Management, which uses investment securities, advances to banks, deposits from banks to manage the overall position arising from the Group’s activities.

parallel fall or rise in all yield curves. An analysis of the Group’s sensitivity to an increase or decrease in market interest rates, assuming no asymmetrical movement in yield curves and a constant financial position, is as follows:

+100+50+25

+100+50+25

(72,894)(19,452)(1,209)

(70,647)(15,947)

(893)

31 December 2016LBPUSDEUR31 December 2015LBPUSDEUR

Change in bp Sensitivity of Net Interest IncomeIn millions of Lebanese Pound

126 - 127


The resulting equivalent amounts are then weighted for risk using the same percentages as for on-balance-sheet assets.The Group’s regulatory capital comprises two tiers:

Tier 1 capital, which includes ordinary share capital, share premium, retained earnings and NCI after deductions for intangible assets, and other regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes; andTier 2 capital, which includes qualifying subordinated liabilities, and the element of the fair value reserve relating to unrealised gains and losses on equity instruments measured at fair value through other comprehensive income and real estate revaluation reserve.

(f) Capital managementRegulatory capitalThe Group’s lead regulator, the Central Bank of Lebanon, sets and monitors capital requirements for the Group as a whole. The Group’s regulatory capital adequacy ratio at 31 December was as follows:

14.09%14.75%

14.45%15.47%

Capital adequacy ratio - Tier 1 capitalCapital adequacy ratio - Total capital

To monitor the adequacy of its capital, the Group uses ratios established by the Bank for International Settlements (BIS). In line with Basel III and Central Bank of Lebanon Basic Circular no. 44 amended by Central Bank of Lebanon Intermediary Circular no. 282, the minimum requirements for capital adequacy ratios are set at 8% by the BIS and 14% by the Central Bank of Lebanon. These ratios measure capital adequacy by comparing the Group’s eligible capital with its statement of financial position, off-balance-sheet commitments and market and other risk positions at weighted amounts to reflect their relative risk.

The market risk approach covers the risk of open positions in currencies and debt and equity securities. Assets are weighted according to broad categories of notional risk, being assigned a risk weighting according to the amount of capital deemed to be necessary to support them. Six categories of risk weights (0%, 20%, 35%, 50%, 75%, 100%) are applied; for example cash and LBP placements with the Central Bank have a 0% risk weighting which means that no capital is required to support the holding of these assets.

Off-balance-sheet credit instruments are taken into account by applying different categories of conversion factors, designed to convert these items into statement of financial position equivalents.

The results of the capital adequacy computation exercise are presented to Senior Management and the Group’s Risk Committee for regular review and monitoring of the Group’s overall capitalisation levels.

2016 2015


(e) Operational risksOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks, such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations.The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and innovation. In all cases, the Group policy requires compliance will all applicable legal and regulatory requirements.The Board of Directors has delegated responsibility for operational risks to management which is responsible for the development and implementation of controls to address operational risk. This responsibility is supported by the development of overall Bank standards for the management of operational risk in the following areas:

requirements for appropriate segregation of duties, including the independent authorisation of transactions;requirements for the reconciliation and monitoring of transactions;compliance with regulatory and other legal requirements;documentation of controls and procedures;requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;

requirements for the reporting of operational losses and proposed remedial action;development of contingency plans;training and professional development;ethical and business standards; andrisk mitigation, including insurance where this is cost effective.

Compliance with Group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management, with summaries submitted to the Audit Committee and senior management of the Group.

An analysis of the Group’s sensitivity to a change in currency rates, assuming all other variables remain constant, is as follows:

93(4)309---

290(1)334---

1%1%1%1%

1%1%1%1%

3,461---------

3,341---------

31 December 2016USDEURBHDXOF

31 December 2015USDEURBHDXOF

Effect on Profit Before TaxIncrease in Currency Rate Effect on EquityIn millions of Lebanese Pound

128 - 129


Collective allowance for groups of assets that are individually significant but that were not found to be individually impaired cover credit losses inherent in portfolios of loans and advances, with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired loans and advances, but the individual impaired items cannot yet be identified.

Investments in equity securities were evaluated for impairment on the basis described in Note 4(i)(vii).

An assessment as to whether an investment in sovereign debt (see Note 5(b)) is impaired may be complex. In making such an assessment, the Group considers the following factors.

The market’s assessment of creditworthiness as reflected in the bond yields.The rating agencies’ assessments of the creditworthiness.The ability of the country to access the capital markets for new debt issuance.The probability of debt being restructured resulting in holders suffering losses through voluntary or mandatory debt forgiveness.

See Note 5(b) for the Group’s assessment of whether there is objective evidence of impairment of its investments in sovereign debt, based on the above factors.

6. Fair values of financial instrumentsThe fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

(a) Valuation models The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, bond and equity prices and foreign currency exchange rates.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like interest rate and currency swaps that use only observable market data and require little management judgment and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple over the counter derivatives such as interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determining fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.


The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

The Bank and its individually regulated operations have complied with all externally imposed capital requirements.

The Bank’s regulatory capital position under Basel III at 31 December was as follows:

6,393,324121,546519,936

7,034,806

6,873,758119,206548,206

7,541,170

Risk weighted assetsCredit riskMarket riskOperational riskTotal risk weighted assets

Tier 1 capitalTier 2 capitalTotal regulatory capital

1,062,354

49,681

1,112,035

1,016,572

71,683

1,088,255

5. Use of estimates and judgementsThe preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Management discusses with the Audit Committee the development, selection and disclosure of the Group’s critical accounting policies and their application, and assumptions made relating to major estimation uncertainties. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year and about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is disclosed below.These disclosures supplement the commentary on financial risk management (see Note 4).

ImpairmentAssets accounted for at amortised cost are evaluated for impairment on a basis described in Note 4(i)(vii).

The specific component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the recoverable amounts that are expected to be received. In estimating these recoverable amounts, management makes judgements about a debtor’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of amounts considered recoverable are independently approved by the Credit Risk function.

A collective component of the total allowance is established for:

groups of homogenous loans that are not considered individually significant; andgroups of assets that are individually significant but that were not found to be individually impaired.

2016

2016

2015

2015



31 December

130 - 131


(b) Financial instruments measured at fair value – fair value hierarchyThe following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchy into which the fair value measurement is categorised.

The amounts are based on the values recognised in the statement of financial position.

72,880 784

3,000 3,023 770

7,955 53,897 35,070 177,379

– – – – – –

– – – – – –

– – – – –

– – – –

4,057,836 1,081,279 4,820,687

16,124 5,407,179 15,383,105

– – – – – –

– – – – –

– – – –

– – – – – –

(739,858) (114,400)

(12,837,938) (589,545) (120,376)

(14,402,117)

Financial assets measured at fair valueFinancial assets at fair value through profit or loss Lebanese government treasury bills and eurobonds Other sovereign bonds Financial international sukuk Certificates of deposits issued by banks Other debt instruments Financial assets at fair value through other compre-hensive income Unquoted equity securities Quoted equity securities Preferred shares

Financial assets not measured at fair value Cash and balances with Central Banks Balances with other banks and financial institutions Loans and advances to customers Loans and advances to related parties Financial assets at amortised cost

Financial liabilities not measured at fair value Loans and deposits from Central Banks Deposits from other banks and financial institutions Deposits from customers Deposits from related parties Subordinated debt issued

31 December 2016 Designated at Fair Value

Carrying Amount

Amortised Cost Other Financial Liabilities



72,880 784

3,000 3,023 770

7,955 53,897 35,070

177,379

4,057,836 1,081,279 4,820,687

16,124 5,407,179

15,383,105

(739,858) (114,400)

(12,837,938) (589,545) (120,376)

(14,402,117)

25,190 784

3,000 3,023 770

– 53,897 6,104

69,471 – – –

1,779,350

– – – – –

47,690 – – – –

– –

28,966

3,988,365 1,081,279 4,444,278

16,124 3,599,888

(739,858) (114,400)

(12,838,162) (589,549) (120,376)

– – – – –

7,955 – –

– – – – –

– – – – –

72,880 784

3,000 3,023 770

7,955 53,897 35,070

4,057,836 1,081,279 4,444,278

16,124 5,379,238

(739,858) (114,400)

(12,838,162) (589,549) (120,376)

Level 1 Level 2 Level 3Total Total

Fair Value

132 - 133


42,109 5,888 2,969 3,023 768

7,762 53,927 30,584 147,030

– – – – – –

– – – – – –

– – – – –

– – – –

3,459,720 1,073,739 4,458,356

16,525 5,324,095 14,332,435

– – – – – –

– – – – –

– – – –

– – – – – –

(576,312) (93,188)

(12,233,922) (439,856) (120,376)

(13,463,654)

Financial assets measured at fair valueFinancial assets at fair value through profit or loss Lebanese government treasury bills and eurobonds Corporate bonds Financial international sukuk Certificates of deposits issued by banks Other debt instruments Financial assets at fair value through other compre-hensive income Unquoted equity securities Quoted equity securities Preferred shares

Financial assets not measured at fair value Cash and balances with Central Banks Balances with other banks and financial institutions Loans and advances to customers Loans and advances to related parties Financial assets at amortised cost

Financial liabilities not measured at fair value Loans and deposits from Central Banks Deposits from other banks and financial institutions Deposits from customers Deposits from related parties Subordinated debt issued

31 December 2015 Designated at Fair Value

Carrying Amount

Amortised Cost Other Financial Liabilities



42,109 5,888 2,969 3,023 768

7,762 53,927 30,584

147,030

3,459,720 1,073,739 4,458,356

16,525 5,324,095

14,332,435

(576,312) (93,188)

(12,233,922) (439,856) (120,376)

(13,463,654)

13,989 5,888 2,969 3,023 768

– 53,927 6,169

63,753 – – –

1,643,725

– – – – –

28,120 – –

–

– –

24,415

3,395,967 1,073,739 4,361,696

16,478 3,685,656

(576,312) (93,188)

(12,235,760) (439,856) (120,376)

– – – – –

7,762 – –

– – – – –

– – – – –

42,109 5,888 2,969 3,023 768

7,762 53,927 30,584

3,459,720 1,073,739 4,361,696

16,478 5,329,381

(576,312) (93,188)

(12,235,760) (439,856) (120,376)

Level 1 Level 2 Level 3Total Total

Fair Value

134 - 135


In accordance with Central Bank of Lebanon regulations, the Bank is required to constitute mandatory reserves in Lebanese pounds (LBP) of 15% and 25% of the average weekly customers’ term and sight commitment accounts denominated in Lebanese pounds respectively. The Bank is also required to constitute mandatory reserves in foreign currency (FCY) calculated on the basis of 15% of total customers deposit accounts denominated in foreign currency, regardless of their nature.

Foreign branches and subsidiaries with banking operations are also subject to mandatory reserve requirements with varying percentages, according to the banking rules and regulations of the countries in which they are operating. Mandatory reserve deposits are not available for use in the Group’s day-to-day operations. Cash on hand and LBP reserves are non-interest bearing, whereas FCY reserves are floating-rate assets.

7. Cash and balances with Central Banks

8. Balances with other banks and financial institutions

69,471 2,429,492 1,509,693

835 513 600

3,908 43,324

4,057,836

499,619 580,235 1,210 9,543

(9,411) 83

1,081,279

63,753 1,912,319 1,440,087

2,239 553 600

4,200 35,969

3,459,720

406,721 654,232 12,478 9,707

(9,540) 141

1,073,739

CashUnrestricted balances with Central BanksMandatory reserves with the Central Bank of LebanonMandatory reserves with the Central Bank of IraqMandatory reserves with the Central Bank of CyprusMandatory reserves with the Central Bank of BahrainMandatory reserves with the Central Bank of SenegalInterest receivable

Current accountsTerm depositsLoans and advances to banksImpaired loans to banks and financial institutionsLess specific allowance for impairmentInterest receivable



2016

2016

2015

2015


9. Loans and advances to customers


129,088 1,726,750

45,515 39,424

285,561

2,313,543

43,157 65,144 63,775 17,178

114,981 32,613 67,335 27,488

– 17,704

4,989,256

– – – – –

–

– (16,818) (23,162) (8,215)

– (5,638)

(14,129) (10,209)

– –

(78,171)

– – – – –

–

– –

(14,688) (8,963)

– –

(17,118) (17,279) (32,350)

–

(90,398)

129,088 1,726,750

45,515 39,424

285,561

2,313,543

43,157 48,326 25,925

–

114,981 26,975 36,088

– (32,350) 17,704

4,820,687

Regular retail customers:Cash collateralMortgagePersonalCredit cardsOtherRegular corporate customers:CorporateClassified retail customers:WatchSubstandardDoubtfulBadClassified corporate customers:WatchSubstandardDoubtfulBadCollective allowanceAccrued interest receivable

Gross Amount Unrealised Interest Carrying AmountImpairment Allowance

31 December 2016

136 - 137

31 December

31 December



124,385 1,627,854

46,889 40,235 317,489

2,016,212

36,864 42,231 67,484 21,192

138,878 19,077 71,690 27,620

– 16,186

4,614,286

– – – – –

–

– (12,110) (23,570) (9,845)

– (2,712) (12,712) (12,027)

– –

(72,976)

– – – – –

–

– –

(18,091) (11,347)

– –

(18,776) (15,593) (19,147)

–

(82,954)

124,385 1,627,854

46,889 40,235 317,489

2,016,212

36,864 30,121 25,823

–

138,878 16,365 40,202

– (19,147) 16,186

4,458,356

Regular retail customers:Cash collateralMortgagePersonalCredit cardsOtherRegular corporate customers:CorporateClassified retail customers:WatchSubstandardDoubtfulBadClassified corporate customers:WatchSubstandardDoubtfulBadCollective allowanceAccrued interest receivable

Gross Amount Unrealised Interest Carrying AmountImpairment Allowance

Impairment allowance

82,954

23,997 (8,226) (6,206)

(8) (51)

(2,228) 166

90,398

3333

73,529

11,384 (2,175)

– (5) 228 (7) –

82,954

Allowances for impairmentBalance at 1 JanuaryImpairment loss for the year:- Charge for the year- Recoveries and releasesProvision transferred from to off balance sheetTransfer from provisions for risks and chargesDifference of exchangeProvision writen offPrior year adjustmentBalance at 31 December

In millions of Lebanese Pound 2016 2015Note


Unrealised interest

72,976 17,550 (4,255) (2,429) (5,671) 78,171

7,955 53,897 33,186 1,884

96,922

71,890 990

72,880 775

9 784

– – –

2,985 15

3,000 3,015

8

3,023 761

9 770

80,457

59,628 17,005 (3,657)

– –

72,976

7,762 53,927 28,774 1,810

92,273

41,439 670

42,109 – – –

5,869 19

5,888 2,955

14

2,969 3,015

8

3,023 759

9 768

54,757

Balance at 1 JanuaryUnrealised interest on non-performing loansUnrealised interest recoveredUnrealised interest written-offUnrealised interest transferred from / to off balance sheetBalance at 31 December

Unquoted equity securitiesQuoted equity securitiesPreferred sharesAccrued dividend receivable

Lebanese government treasurybills and eurobondsInterest receivable

Other sovereign bondsInterest receivable

Corporate bondsInterest receivable

Financial international sukukInterest receivable

Certificates of deposits issued by banksInterest receivable

Other debt instrumentsInterest receivable




2016

2016

2016

2015

2015

2015

10. Financial assets at fair value through other comprehensive income

11.Financial assets at fair value through profit or loss

31 December 2015

31 December

31 December

138 - 139


Lebanese government treasury bills and eurobondsOther sovereign bondsInterest receivable

Certificates of deposits issued by the Central Bank of LebanonInterest receivable

Certificates of deposits issued by banksInterest receivable

Other debt instruments - Corporate bondsInterest receivable



2016

2016

2015

2015

12. Financial assets at amortised cost

13. Investments in equity-accounted investees

3,547,083 55,479 52,647

3,655,209 1,646,823

36,127 1,682,950

22,587 60

22,647 46,280

93 46,373

5,407,179

3,678,621 41,621 54,163

3,774,405 1,441,401

32,561 1,473,962

22,561 60

22,621 52,951

156 53,107

5,324,095

LebanonLebanonLebanonLebanonLebanonLebanon

LebanonLebanonLebanonLebanonLebanonLebanon

25.86%28.96%20.18%19.10%48.13%45.00%

20166,171 3,087 1,695 278

1,466 3,677

16,374

25.86%28.96%20.18%19.10%48.12%45.00%

20158,295 2,918 1,626 270

1,615 3,716

18,440

Agence Generale de Courtage d’Assurance S.A.L.Credit Card Management S.A.L.International Payment Network S.A.L.Net Commerce S.A.L.Hot Spot Properties S.A.L.Dourrat Loubnan Al Iqaria S.A.L.

Company Agence Generale de Courtage d’Assurance S.A.L.Credit Card Management S.A.L.International Payment Network S.A.L.Net Commerce S.A.L.Hot Spot Properties S.A.L.Dourrat Loubnan Al Iqaria S.A.L.

Country of IncorporationCompany Ownership Interest Ownership Interest


Current assetsNon current assetsCurrent liabilitiesNon current liabilitiesNet assetsIncomeExpensesProfit

In millions of Lebanese Pound 2016 201533,88848,391

(20,151)(10,647)51,48117,580(9,939) 7,641

48,97932,891

(17,707)(10,358)53,80522,776

(14,944) 7,833

The Group’s share of its equity-accounted investees for the year was LBP 1,980 million (2015: LBP 1,984 million).

Summary financial information for equity-accounted investees is as follows.31 December

31 December

31 December

31 December

140 - 141


14. Property & Equipment

Land and Buildings

Installations and

ImprovementsFurniture and

Equipment Vehicles

Advances on Capital

ExpendituresPower

Generators

319,250 (902)

17,215 (2,356)

– 333,207

333,207 19,100 (1,067)

– 351,240

93,163 8,454

(1,317) –

100,300

100,300 11,527 (1,008)

– 110,819

226,087 232,907 240,421

137,422 –

8,023 –

(2,203) 143,242

143,242 16,068

– (153,342)

5,968

– – – – –

– – – – –

137,422 143,242 5,968

2,365 – 43

(47) 33

2,394

2,394 – – –

2,394

1,572 199 (18)

– 1,753

1,753 180 – –

1,933

793 641 461

2,008 –

141 (143)

– 2,006

2,006 244

(143) –

2,107

1,310 151 (85)

– 1,376

1,376 159

(143) –

1,392

698 630 715

50,832 –

7,749 (1,566)

732 57,747

57,747 2,404 (897) 649

59,903

34,417 4,476

(1,214) 62

37,741

37,741 4,980 (847)

– 41,874

16,415 20,006 18,029

52,847 –

1,202 (600) 1,438 54,887

54,887 384 (27)

1,378 56,622

40,019 2,506

– (62)

42,463

42,463 2,061 (18)

– 44,506

12,828 12,424 12,116

73,776 (902)

57 – –

72,931

72,931 – –

151,315 224,246

15,845 1,122

– –

16,967

16,967 4,147

– –

21,114

57,931 55,964 203,132

CostBalance at 1 January 2015Prior year adjustmentAdditionsDisposalsTransfersBalance at 31 December 2015

Balance at 1 January 2016AdditionsDisposalsTransfers


Accumulated depreciation Balance at 1 January 2015Depreciation for the yearDisposalsTransfersBalance at 31 December 2015

Balance at 1 January 2016Depreciation for the yearDisposalsTransfers


Carrying amountsBalance at 1 January 2015Balance at 31 December 2015Balance at 31 December 2016

Total



15. Intangible assets

TotalIn millions of Lebanese Pound

Key Money SoftwareLicenses

1,883 – –

1,883

1,883 – –

1,883

1,631 41 –

1,672

1,672 41 –

1,713

252 211 170

8,346 1,693 (10)

10,029

10,029 1,588

(7) 11,610

4,215 1,200

(7) 5,408

5,408 1,455

(7)

6,856

4,131 4,621 4,754

17,292 1,059

(6) 18,345

18,345 2,430

– 20,775

15,569 885

– 16,454

16,454 1,169

–

17,623

1,723 1,891 3,152

27,521 2,752 (16)

30,257

30,257 4,018

(7) 34,268

21,415 2,126

(7) 23,534

23,534 2,665

(7)

26,192

6,106 6,723 8,076

CostBalance at 1 January 2015AdditionsDisposalsBalance at 31 December 2015

Balance at 1 January 2016AdditionsDisposalsBalance at 31 December 2016

Accumulated amortisationBalance at 1 January 2015Amortisation for the year DisposalsBalance at 31 December 2015

Balance at 1 January 2016Amortisation for the year Disposals


Carrying amountsBalance at 1 January 2015Balance at 31 December 2015Balance at 31 December 2016

142 - 143


16. Assets held-for-sale

17. Other assets

18 .Loans and deposits from Central banks

Balance at 1 JanuaryAdditionsDisposalsBalance at 31 December

Accounts receivable and prepaymentsReinsurers’ share of technical reservesInventories of apartmentsRestricted deposits with the Central TreasuryDeferred chargesOther assets

Current accountLoans from Central BanksAccrued interest payable




2016

2016

2016

2015

2015

2015

36,631 1,538

(1,013) 37,156

8,554 18,649

859 6,015 4,155 89,531 127,763

4,776 571,530

6 576,312

37,156 76

(538) 36,694

9,519 17,694

859 6,015 3,601 85,588 123,276

6,728 733,121

9 739,858

Following the Central Bank of Lebanon basic decision no. 6116 related to basic circular no. 23 and intermediate circular no. 367 issued on 11 August 2014, the Central Bank of Lebanon offered the commercial banks facilities that are subject to an interest rate of 1% per annum payable on a yearly basis. These facilities were given subject to granting mainly loans back to clients at an average interest rate of 5.2%.

During 2010, the Bank issued subordinated bonds for an amount of USD 75,000,000 bearing an interest rate of 6.75% payable annually and maturing on 15 January 2018. These subordinated debts are included in Tier 2 capital as per local regulatory requirements.


19. Deposits from other banks and financial institutions

20. Deposits from customers

21. Subordinated debt issued

22. Tax liabilities

Current depositsTerm depositsLoan from bankFinancial institutionsAccrued interest payable

Term depositsCurrent depositsSavingsOther credit balancesAccrued interest payable

Subordinated debtAccrued interest payable

Income taxTaxes on interestTaxes on salariesDeferred tax liabilitiesOther taxes





2016

2016

2016

2016

2015

2015

2015

2015

28,491 7,484 942

55,730 541

93,188

4,230,997 1,235,032 6,653,221

44,737 69,935

12,233,922

113,063 7,313

120,376

2,393 6,024 1,843 6,371 1,530

18,161

24,107 12,210 40,162 37,232

689 114,400

4,509,532 1,235,452 6,981,384

36,005 75,565

12,837,938

113,063 7,313

120,376

14,524 6,418 2,529 6,311 1,550

31,332

31 December 31 December


31 December

31 December

31 December

144 - 145


23. Other Liabilities

24.Provisions for risks and charges

Margins held against documentary creditsDue to reinsuranceTechnical reserves for insurance companiesAccrued expensesUnearned revenueOther creditorsDeferred surplus (net of tax)*Other payables

Provision for structural exchange position (a)Provision for employee benefits obligations (b)Provision for risks and charges (c)Provision for loss on foreign currency position (d)



2016

2016

2015

2015

24,403 22,936 106,085 5,685 219

28,892 –

50,125 238,345

5,611 33,110 3,002 270

41,993

36,909 19,805 106,998 3,293 8,104 27,785 60,045 50,162 313,101

5,611 36,271 6,450 270

48,602

*During 2016, the Bank entered into sales transactions of Lebanese Treasury Bills in Lebanese Pounds designated at amortized cost securities and having a nominal value of LBP 198 billion concluded in conjunction with the acquisition of BDL CD’s and Lebanese Republic Eurobonds in U.S. Dollars with longer maturity designated at amortised cost with a nominal value of USD 132 million.

An exceptional gain of LBP 60,045 million was resulted on these special swaps which is largely considered as government grant and was deferred within other liabilities and is to be reassessed at the year end to ensure its alignment with:

(i) BDL circular 446 requirements which attach certain conditions with respect to the utilisation of such gains; and

(ii) The accounting requirements of IAS 20 on government grants with respect to the timing of recognition of such gains in the income statement, .i.e. when the conditions of such a grant have been fulfilled.


Balance at 1 JanuaryProvision raised during the yearProvision used during the yearProvision written-off during the yearBalance at 31 December

Balance at 1 JanuaryProvision transferred during the yearProvision raised during the yearProvision used during the yearProvision releasedTransfer to / from collective allowanceDifference of exchangeBalance at 31 December



2016

2016

2015

2015

31,683 3,232

(1,796) (9)

33,110

1,516 1,568 205 (21)

(250) 5

(21) 3,002

33,110 5,155

(1,965) (29)

36,271

3,002 3,682

– (194)

– (34) (6)

6,450

(a) Provision for structural exchange positionThis provision is taken as per the requirement of Central Bank Circular number 32 related to foreign exchange position.

(c) Provision for risks and chargesThe movement in the provision for risks and charges during the year was as follows.

(d) Provision for loss on foreign currency positionAs per local regulatory requirements the Group provides for an amount equivalent to 5 percent of its year-end foreign exchange position.

The provision for employee benefits obligations’ amount recognised in the consolidated financial statements is not materially different from what would be required as per IAS 19 Employee Benefits.

(b) Provision for employee benefits obligationsThe movement in the provision for employee benefits obligations during the year was as follows.

31 December

31 December

146 - 147


25. Share capital and share premiumAt 31 December 2016 and 2015, the authorised and issued share capital comprised 23,400,000 ordinary shares with a nominal value of LBP 11,000. All shares rank equally with regards to the Bank’s residual assets.

The holders of ordinary shares are entitled to receive dividends as declared from time to time. All issued shares are fully paid.

26. Capital reserves

DividendsThe following dividends were declared and paid by the Group during the year:

Issue of preferred sharesIn July 2013, the extraordinary general assembly of shareholders approved the issue of 1,000,000 perpetual non-cumulative preferred shares with a nominal value of LBP 11,000; increasing the share capital of the Bank from LBP 257,400 million to LBP 268,400 million, thus an increase of LBP 11,000 million. The share premium amounted to LBP 139,750 per share.

(a) General banking risks reserveThe Group is required, according to the Central Bank regulations and commencing at 1998, to set-up a reserve for general banking risks at a minimum of 0.2% and a maximum rate of 0.3% of the risk weighted assets and off-balance sheet financial instruments in local and foreign currencies. This reserve should not be less than 1.25% and 2% by the end of the 10th and the 20th years, respectively. This reserve is not available for distribution.

(b) Legal reserveThe Lebanese Commercial Law and the Group’s articles of association stipulate that 10% of the net annual profits be transferred to legal reserve. This reserve is not available for distrbution.

(c) Reserve appropriated to capital increaseIn compliance with Banking Control Commission circular no. 173, the gain realised on the sale of an asset acquired in settlement of debt (note 16) should be appropriated from retained earnings and recorded as “Reserve for capital increase”.

Holders of these shares receive a non-cumulative dividend at the Bank’s discretion, or whenever dividends to ordinary shareholders are declared. They do not have the right to participate in any additional dividends declared for ordinary shareholders. These shares do not have voting rights.

LBP 1,670.56 per ordinary share (2015: LBP 1,130.38)LBP 11,080 per preferred share (2015: 11,080)

General banking risks reserve (a)Legal reserve (b)Reserve appropriated to capital increase (c)



2016

2016

2015

2015

26,451 11,080 37,531

104,103 101,965 3,598

209,666

39,091 11,080 50,171

118,711 110,775 3,824

233,310


27. Fair value reserve

28. Other reserves

29. Net interest income

Fair value reserve

Balance at 1 JanuaryFinancial assets at fair value through other comprehensive incomeBalance at 31 December

Reserve for property acquired in settlement of debtOther reserves

Interest incomeCash and balances with Central BanksBalances with other banks and financial institutionsLoans and advances to customersLoans and advances to related partiesFinancial assets at amortised costTotal interest income

Interest expenseLoans and deposits from Central BanksDeposits from other banks and financial institutionsDeposits from customersDeposits from related partiesSubordinated debt issuedTotal interest expense

Net interest income





2016

2016

2016

2016

2015

2015

2015

2015Note

17,237 240,218 257,455

34,139 (231)

33,908

27,744 6,395

34,139

155,409 5,190

306,895 421

385,084 852,999

(6,704) (3,324)

(564,541) (23,623) (7,632)

(605,824)

247,175

40

40

14,025 226,304 240,329

134,661 3,573

297,019 803

346,648 782,704

(4,767) (3,088)

(513,401) (25,007) (7,633)

(553,896)

228,808

34,139 33,908

31 December

31 December

31 December

31 December

31 December

The movement in fair value reserve is as follows:

148 - 149


30.Net fee and commission income

31. Net trading income/ gain on financial investments

Fee and commission incomeFees on credit cards and ATM transactionsFees on transactions with customersFees on various banking transactionsFees on letters of guaranteeTotal fee and commission income

Fee and commission expenseFees on credit cards and ATM transactionsFees on various banking transactionsTotal fee and commission expenseNet fee and commission income

Net gain on trading portfolioNet gain on sale of investments securities (a)Net gain on foreign currency positionDividend received on quoted securitiesDividend received on unquoted securitiesNet loss/gain from exchange of financial assets at amortised cost (b) Interest paid on islamic banking activities



2016

2016

2015

2015

27,933 26,344 38,728 6,307 99,312

(27,893) (16,183) (44,076) 55,236

3,936 7,113 5,161 2,141 137

2,109 (1,440) 19,157

27,680 28,340 47,158 6,111

109,289

(29,314) (22,217) (51,531) 57,758

5,256 19,040 7,663 2,767 268

(120) (1,472) 33,402

(a) Net gain on sale of investment securitiesDuring 2016, the Bank sold certificates of deposit denominated in LBP issued by the Central Bank of Lebanon with a nominal value of LBP 150,000 million, maturing in July 2017, January 2023, and January 2026 and purchased certificates of deposit denominated in LBP issued by the Central Bank of Lebanon with a nominal value of LBP 150,000 million and maturing in March 2017, January 2023, January 2024 and January 2026. The gain on the transaction amounted to LBP 9,642 million. The amount recognised in 2016 amounted to LBP 1,232 million, given that the remainder of the gain will be recognised in future years based on the maturities of the certificates of deposit that were sold.

In 2016, the Bank also sold certificates of deposit denominated in LBP issued by the Central Bank of Lebanon with a nominal value of LBP 70,000 million, maturing in December 2045.The gain on the transaction amounted to LBP 17,808 millions. During 2015, the Bank sold for matching liquidity purposes Lebanese Treasury Bills issued by the Lebanese Government maturing on November 2019, June 2024, October 2024 and October 2025 amounting to LBP 50,000 million, LBP 10,000 million, LBP 15,000 million and LBP 50,000 million respectively. The gain on these transactions amounted to LBP 1,580 million, LBP 430 million, LBP 615 million and 4,488 million respectively.

The Group derecognises some debt instruments classified at amortised cost due to the following reasons:- Liquidity gap;- Exchange of certificates of deposits by the Central Bank of Lebanon.


32. Other income

33. Net impairment on loans and advances

34. Personnel expenses

Gain on sale of assets held for sale Rental income Gain on sale of property and equipment Other income

Allowance for impairment on loans and advances to customersAllowance for impairment on loans and advances to related partiesDirect write-offsAllowance for impairment on loans and advances to banks and financial institutionsWrite-back of allowance for impairment on loans and advances to customers

Wages and salariesAllowances to the Board of DirectorsCompulsory social security obligationsEmployee benefits obligationOther personnel expenses




2016

2016

2016

2015

2015

2015

Note

225 177 17

1,640 2,059

(11,384) –

(1,356) (1,914) 2,175

(12,479)

74,826 2,546

10,866 4,043

15,445 107,726

1,638 146

4 822

2,610

(23,997) (112)

(4,397) –

8,226 (20,280)

80,288 2,546 11,374 5,668

15,170 115,046

9

9

(b) Net (loss) / gain from exchange of financial assets at amortised costDuring 2016, and following the offer of the Central Bank of Lebanon, the Bank sold certificates of deposit denominated in USD with a nominal value of USD 25 million and USD 25.1 million maturing in March 2017 and March 2022 respectively against Lebanese Republic Eurobonds maturing in April 2024 and April 2031. The loss on the transaction amounted to LBP 120 million.During 2015 and following the offer of the Central Bank of Lebanon, the Bank performed the following transactions:

- BDL Euro Certificate of Deposits maturing in April 2015 were sold against Lebanese Republic Eurobonds maturing in February 2025 and February 2030 amounting to USD 72 million and USD 30 million respectively. The gain on the transaction amounted to LBP 1,918 million.- Lebanese Republic Eurobonds maturing in January 2016 were sold against Lebanese Republic Eurobonds maturing in November 2024 amounting to USD 10.5 million. The gain on the transaction amounted to LBP 191 million.

31 December

31 December

31 December

150 - 151

31 December

31 December


35. Other expenses

Rental and building chargesTaxes and similar disbursementsAdvertising expensesElectricity, water and heating chargesInsurance premiumsInformation technology costsRepairs and maintenance chargesPostage and telecommunication chargesProfessional feesPremiums for the guarantee of depositsTravel and entertainment feesComputer maintenance chargesTransportation chargesBoard of directors attendance allowanceStationery and office suppliesTraining chargesOther expenses

In millions of Lebanese Pound 2016 20155,594 5,628 7,138 3,153 2,774 3,311 4,813 2,784 4,855 5,776 2,541 2,631 2,348 2,374 1,523 695

1,994 59,932

5,375 7,458 7,539 3,698 2,874 3,662 4,523 2,750 6,406 6,201 2,399 2,688 2,362 2,381 1,373 718

1,916 64,323

36. Tax expense

Income tax expense on the Bank’s operationsIncome tax expense on subsidiaries and branches

In millions of Lebanese Pound 2016 2015(14,419) (1,768) (16,187)

(17,255) (2,429) (19,684)


37. Cash and Cash equivalents

Cash and balances with Central BanksBalances with other banks and financial institutionsLoans and deposits from Central BanksDeposits from other banks and financial institutions

Profit before income tax Income tax expenseProfit for the year Current tax liability Less: profit of branches abroad and subsidiaries Non-deductible provisions Non-deductible expenses 5% tax on interest received Less: dividends received Less: tax exempt income Taxable incomeCorporate income tax expense at 15% Add: tax on swaps transactions Less: tax paid on interest received *

Excess of corporate tax over tax paid on interest Effective income tax rate



2016

2016

2015

2015

647,953 1,053,024

(4,776) (28,491)

1,667,710

116,605 (16,187) 100,418

850 (23,803)

7,971 1,512

13,570 (7,377) (177)

92,96413,945

– (12,927)

1,018

13.88%

694,302 1,081,256

(6,728) (24,107)

1,744,723

125,719 (19,684) 106,035

1,800 (20,809) 27,218 1,315

15,455 (16,854)

(148) 114,012 17,102 10,596

(15,293)

12,405

15.66%

Reconciliation of tax expense on the Bank’s operations in Lebanon

* The Bank in Lebanon is subject to a withholding tax of 5% on certain interest income which is considered as a prepayment on corporate income tax due. In case this withholding tax exceeds the calculated corporate income tax expense, the excess is not reimbursable and is considered as a final income tax expense.


31 December

31 December

152 - 153


38. Commitments and contingencies

39. Group entities

Financing commitmentsFinancing commitments given to customersFinancing commitments given to financial institutions

Guarantees Guarantees given to customers

Securities’ commitments

Restricted and non-restricted fiduciary accounts

Commitments of signature received from financial intermediaries

Other commitments received

Assets under management

Credit Libanais Investment Bank SALLebanese Islamic Bank SALCedar’s Real Estate SALSoft Management SALHermes Tourism and Travel SALCredit Libanais d’Assurances et de Reassurances SALBusiness Development Center SARLCapital Real Estate SALCredilease SALCollect SALCredit International SACredit Libanais SAL (Limassol Branch)Credit Libanais SAL (Bahrain Branch)Credit Libanais SAL (Baghdad Branch)Credit Libanais SAL (Erbil Branch)

In millions of Lebanese Pound 2016 2015

514,150 215,956

189,304

80,614

10,627

38,082

8,260,508

558,739

99.86 99.84 99.92 47.00 99.99 66.97 98.62 98.00 99.26 44.94 87.82

BranchBranchBranchBranch

690,757 246,108

200,211

67,634

15,304

49,950

8,794,490

525,773

BankingBankingReal estateIT solutionsTourism and ticketingInsuranceAdvertisingReal estateLeasing servicesCollection services of receivablesBankingBankingBankingBankingBanking

LebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonLebanonSenegalCyprusBahrainIraqIraq

99.86 99.84 99.92 47.00 99.99 66.97 98.62 98.00 99.26 44.94 87.82

BranchBranchBranchBranch

Company Business Activity Country of incorporation

2016 % of control

2015 % of control

During 2015, the Group sold 50,000 shares in Credit International SA reducing its ownership from 92.82% to 87.82%.


40. Related parties

Direct facilities and credit balances- Loans and advances- DepositsIndirect facilities- Letters of guarantees

Short-term employee benefits

Direct facilities and credit balances- Loans and advances- DepositsIndirect facilities- Letters of guarantees




2016

2016

2016

2015

2015

2015

7,736 407,279

440

10,363

8,787 29,535

1,191

8,706 556,272

28

9,958

7,415 29,437

1,175

(a) Transactions and balances with key management personnelKey management personnel and their immediate relatives have transacted with the Group during the year as follows:

Interest rates charged on balances outstanding from related parties are equal to the internally approved rates for employees of the Bank.

No impairment losses have been recorded against balances outstanding during the year with key management personnel, and no specific allowance has been made for impairment losses on balances with key management personnel and their immediate relatives at the year end.

Key management personnel compensation for the year comprised:

(b) Balances with associated companies

31 December

31 December

31 December

31 December

154 - 155


Loans and advances to shareholders, directors and other key management personnel Net loans and advances to associated companies Accrued interest receivable

Interest income on loans and advances to related parties

Term depositsCurrent depositsSavingsAccrued interest payable

Interest expense on deposits from related parties





2016

2016

2016

2016

2015

2015

2015

2015

7,736 8,787

2 16,525

803

8,706 7,415

3 16,124

421

401,910 25,544 158,255 3,836

589,545

23,623

268,159 27,095 141,560 3,042

439,856

25,007

(c) Loans and advances to related parties

(d) Interest income on loans and advances to related parties

(e) Deposits from related parties

In order to comply with the decisions of the Council of Ministers of the Monetary Union of West Africa and to strengthen the regulatory capital of Credit International SA (“CI”), the Board of Directors of Credit Libanais S.A.L approved on 23 January 2017 the increase of CI’s capital up to 2 billion FCFA and

On 28 April 2017, the Board of Directors of the Bank resolved to suggest to the Ordinary General Assembly that is scheduled to be held on the 23rd of May 2017 the issuance of subordinated debt at an amount not exceeding USD 100 million at a return not exceeding 8% including tax.

recommended to Credit Libanais Investment Bank S.A.L (“CLIB”) to subscribe to this increase through the subordinated loan granted to CI by CLIB; in addition to subscribing to any unsubscribed share by other shareholders, with his own funds.

(f) Interest expense on deposits from related parties

41. Subsequent events

05 - 06

31 December

31 December

31 December

31 December

Credit LibanaisInvestment Bank (CLIB) SAL

Board of Directors

Management’s Discussion and Analysis of Results

Statement of Financial Position

Statement of Comprehensive Income

Statement of Cash Flows

Statement of Changes in Equity

158

159

162

164

165

166


Financial Statements (CLIB)


Members

Dr. Joseph Torbey

Board of Directors

H.E Dr. Samir Makdessi

H.E Mr. Jacques Joukhadarian

Dr. Chafic Moharram

Me. Joe Issa El Khoury*

Dr. Michel Khadige

Mr. Moustafa Alaeddine

* Me. Joe Issa EL Khoury resigned on 21. 07 . 2016 and CLIB BOD took note of his resignation in

its meeting dated 15 . 09 . 2016


The following discussion and analysis have been prepared based on the audited consolidated financial statements of Credit Libanais Investment Bank (“CLIB”) as at and for the years ended 31 December 2015 and 2016 and on selected financial information.

Total Liabilities showed a decrease of 10.07% to reach LBP 994.71 billion in 2016 compared to LBP 1,106.04 billion at yearend 2015. The 10.22% decrease in total deposits, which constitute 99.05% of CLIB’s liabilities, was the main driver behind this decrease.

On the equity side, shareholders› equity increased to LBP 167.44 billion in 2016, an increase of 2.22% compared to the LBP 163.80 billion recorded in 2015.

CLIB’s Assets have witnessed a decrease of 8.48% in 2016, particularly in liquid assets which was substantially matched by a decrease in funding consisting primarily of customer deposits.

The following table sketches the changes in major asset classes year-on-year.

Basis of Presentation

Analysis of Financial Position

1) Statement of Financial Position

a) Total Assets

b) Liabilities and Shareholders’ Equity

166,997

405

574,791

343,086

422

18,211

107,861

39,163

1,112

541

15,292

1,961

1,269,841

-17.86

-2.45

-5.19

-6.26

-25.48

-8.03

-23.01

0.00

11.74

-68.90

0.00

5.56

-8.48

137,164

395

544,937

321,623

314

16,749

83,037

39,163

1,242

168

15,292

2,070

1,162,155

Cash and balances with Central Banks

Balances with other banks and financial institutions

Head Office, branches, parent company, sisters, fin. inst. & subs.



Financial assets at fair value/OCI

Financial assets at amortised cost

Investment in associates

Property & equipment

Intangible assets

Assets held for sale

Other assets

Total Assets

% ChangeAs at end of 20152016In millions of Lebanese Pound

158 - 159



The following table sketches the development of the liability and equity accounts during the period 2015-2016:

934 1,846

6 1,074,119

23,281 1,524 2,215 2,115

1,106,039

80,000 41,786

832 11,524 18,453 11,207

163,802 1,269,841

2,036 1,934

- 960,254 24,994 2,483 1,010 2,001

994,711

80,000 44,857

875 11,524 16,574 13,613 167,444

1,162,155

117.904.77

-100.00-10.607.3662.94-54.39-5.37-10.07

- 7.355.190.00

-10.1921.472.22-8.48

% Change

% Change

As at end of

As at end of

2015

2015

2016

2016

Loans and deposits with Central BanksBalances with other banks and financial institutionsHead Office, branches, parent company, sisters, fin. Inst. & subs.Deposits from CustomersDeposits from related partiesCurrent tax liabilitiesOther liabilitiesProvision for risks and chargesTotal Liabilities

Shareholders’ Equity

Share capital-Common SharesCapital reservesAvailable-for-sale financial instruments revaluation reserveRetained EarningsOther reservesResult of the periodTotal Shareholders’ EquityTotal Liabilities & Shareholders’ Equity

The above table clearly states that the entirety of CLIB’s financing is sourced from customer deposits

On the fund’s utilization front, loans and advances to customers, while registering a YOY decrease of 6.28%, were reduced to a 37.14% share of the total fund utilization in 2016 compared to 37.41% in 2015.On the other hand, CLIB’s current account with the Head Office, branches and parent company has witnessed a 5.20% decrease in 2016 to constitute the bulk of CLIB’s funds deployment at a ratio of 62.86% in 2016 compared to 62.59% in 2015.

The following table portrays the evolution of CLIB’s sources and uses of funds during the period 2015-2016:

6 1,074,119

23,281 1,097,406

- 97.46 2.54

100.00

- 960,254 24,994 985,248

% of TotalSourcesAs at end of 20152016Sources of Funds

Head OfficeCustomers’ depositsDeposits from related partiesTotal

Credit Libanais Investment Bank posted after tax net profits of LBP 13.61 billion in 2016, an increase of 21.48% from the LBP 11.21 billion registered in 2015.The following table highlights the yearly change of the major items in CLIB’s statement of income:

2) Statement of Income

65,378 (46,202) 19,176

373 (76) 297

(417) -

2,258 181

21,495 (1,196)

78 20,376 (3,633) (521)

(3,964) (8,118) 12,258 12,258 (1,051) 11,207

(55) 11,152

0.76-0.664.18

1,075.131,669.80922.16-99.45

-20.09-24.8120.298.80

-100.0020.500.56

-12.3826.9212.6025.7525.7571.2421.48

177.9622.47

65,875 (45,897) 19,978 4,382

(1,350) 3,032

(2) -

2,712 136

25,856 (1,301)

- 24,554 (3,653) (457)

(5,031) (9,141) 15,414 15,414 (1,800) 13,614

43 13,657

Interest and similar incomeInterest and similar expense Net Interest incomeFees & commissions incomeFees & commissions expenseNet Fees & commissions income / (loss)Net gain (loss) on trading portfolioNet gain on disposal of subsidiaryNet gain on financial investmentsOther operating incomeTotal operating incomeCredit loss expenseNet reversal of impairement losses on financial investmentsNet operating incomeStaff costsDepreciation and amortizationOther operating expensesTotal Operating ExpensesOperating ProfitProfit before taxIncome Tax expenseProfit for the yearOther comprehensive incomeNet gain on available-for-sale financial assetsTotal comprehensive income for the year, net of tax

% Change20152016

Profits of CLIB are stated on an individual basis and do not include the share of the bank in the companies in which it holds a direct interest.

After consolidating the share of CLIB in the profit of affiliated companies, Net profits for the year 2016 would aggregate LBP 18.22 billion compared to LBP 15.60 billion in 2015.

CLIB’s Pre-tax consolidated return on average equity and on average assets reached 12.43% and 1.64% respectively in 2016, compared to 10.76% and 1.39% respectively in 2015.




In millions of Lebanese Pound as at 31 December

160 - 161

574,791 343,086

422 918,299

62.86 37.10 0.04

100.00

544,937 321,623

314 866,874

% of TotalUseAs at end of 20152016Uses of Funds

Head Office, branches, parent company, sisters, fin. Inst. & subs.Loans & advances to customersLoans & advances to related partiesTotal




20152016

Assets

Cash and balances with the central bank


Head office, branches, parent company, foreign sister financial institutions & subsidiaries



Financial assets at Fair value through other comprehensive income

Financial assets at amortized cost

Investments in associates


Intangible assets

Assets acquired in recovery of bad debts

Other assets

Total Assets

Liabilities

Loans and deposits with Central Banks


Head office, branches, parent company, foreign sister financial institutions & subsidiaries

Customers’ deposits

Related parties’ deposits

Current tax liabilities

Other liabilities

Provision for risks and charges

Total Liabilities

137,164

395

544,937

321,623

314

16,749

83,037

39,163

1,242

168

15,292

2,070

1,162,155

2,036

1,934

-

960,254

24,994

2,483

1,010

2,001

994,711

166,997

405

574,791

343,086

422

18,211

107,861

39,163

1,112

541

15,292

1,961

1,269,841

934

1,846

6

1,074,119

23,281

1,524

2,215

2,115

1,106,039

Statement of financial position

20152016

Shareholders’ Equity

Share capital - Common shares

Legal reserves

General Banking risks reserve

Capital reserve

Other reserves

Reserve for property acquired in settlement of debt

Special Reserves Against doubtful debts

Fair value reserve

Retained Earnings

Profit for the year

Total Equity Attributable to Equity Holders of the Bank

Non-Controlling Interest

Total Shareholders’ Equity

Total Liabilities & Shareholders’ Equity

80,000

24,495

14,483

2,807

11,091

6,064

1,298

832

11,524

11,207

163,802

-

163,802

1,269,841

80,000

25,616

16,434

2,807

7,294

7,981

1,298

875

11,524

13,613

167,444

-

167,444

1,162,155

162 - 163

In millions of Lebanese Pound In millions of Lebanese Pound as at 31 December as at 31 December



20152016

Interest and similar income

Interest and similar expense

Net interest income

Fees and commission income

Fees and commission expense

Net fees and commission income

Net gain/loss on financial investments

Net gain/loss on disposal of subsidiaries

Net gain on FVTPL financial instruments

Other operating income

Total Operating Income

Credit losses(gains)

Net reversal of impairement losses on financial investments

Net Operating Income

Staff expenses

Depreciation and Amortisation

Other operating expenses

Total Operating Expenses

Profit Before Tax

Income Tax Expense

Profit for the Period

Change in Fair Value of Financial Instruments through OCI


65,875

(45,897)

19,978

4,382

(1,350)

3,032

2,712

-

(2)

136

25,856

(1,301)

24,554

(3,653)

(457)

(5,031)

(9,141)

15,413

(1,800)

13,613

43

13,657

65,378

(46,202)

19,176

373

(76)

297

2,258

-

(417)

181

21,495

(1,196)

78

20,376

(3,633)

(521)

(3,964)

(8,118)

12,258

(1,051)

11,207

(55)

11,152


20152016

Cash Flows From Operating Activities

Profit before tax

Adjustments for:

Depreciation and Amortization

Net (recovery) Impairment Loss on loans and advances to customers

Net Provision for End of service indemnity

Gain /Loss on sale of shares in an associate

Financial Assets maturing later than 3 months

Change in loans and advances to customers and related parties

Change in other assets

Change in deposits from customers

Change in deposits from related parties

Change in Current Tax Liabilities

Change in other liabilities

Income tax paid

Settled End of Service indemnity

Net cash flows from operating activities

Cash Flows From Investing Activities

Acquisition of Property and Equipment

Proceeds from investments in associates

Net change in investment securities

Net change in assets acquired in recovery of bad debts

Net cash used in investing activities


Distribution of dividends

Effect of exchange rate fluctuation on cash & cash

Previous years adjustments

Net cash from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

12,258

521

1,196

330

-

14,305

(224,414)

(2,182)

1,181

140,996

575

6 (1,360)

(70,892)

(724)

(37) (71,653)

(90)

(194)

662

111

489

-

289

-

289

(70,875) 152,967

82,092

15,413

457

1,301

233

1

17,405

70,139

20,269

(109)

(113,865)

1,713

210 (1,205)

(5,443)

(1,051)

(346) (6,840)

(216)

-

26,329

-

26,114

(10,000)

71

(86)

(10,015)

9,258 82,092

91,350


164 - 165

In millions of Lebanese Pound In millions of Lebanese Pound as at 31 December as at 31 December




80,000

---

---

---

---

---

---

---

80,000

---

---

---

---

--- ---

---

80,000

23,352

---

1,144

---

---

---

---

---

24,495

---

1,121

---

---

--- ---

---

25,616

12,796

---

1,694

---

(7)

---

---

---

14,483 ---

1,959

---

(8)

---

---

---

16,434

2,807

---

---

---

---

---

---

---

2,807 ---

---

---

---

---

---

---

2,807

3,504

---

7,167

123

296

---

---

---

11,091 (10,000)

6,210

(86)

80

---

---

---

7,294

4,753

---

1,434

(123)

---

---

---

---

6,064 ---

1,917

------

---

---

---

7,981

887

---

---

---

---

---

(55)

(55)832 ---

---

------

---

43

43

875

12,996

(1,472)

---

---

---

---

---

---

11,524 ---

---

------

---

---

---

11,524

11,439

---

(11,439)

---

---

11,207

---

11,207

11,207 ---

11,207

------

13,613

---

13,613

13,613

153,833

(1,472)

---

---

289

11,207

(55)

11,152

163,802 (10,000)

---

(86)71

13,613

43

13,657

167,444

1,298

---

---

---

---

---

---

---

1,298 ---

---

------

---

---

---

1,298


Previous Years adjustments

Profit allocation 2014


Adjustment

Profit for the year

Net Change in fair value of financial assets at fair value through OCI

Total comprehensive income for the year 2015


Distribution of dividends

Profit allocation 2015

Previous year adjustments

Adjustments

Profit for the year

Net Change in fair value of financial assets at fair value through OCI

Total comprehensive income for the year 2016


Share Capital-Common Shares

General Banking Risks ReserveLegal Reserve Capital Reserve

Total EquityFair Value Reserve

Special Reserves Against Doubtful

Debts

Reserve For Property Acquired in Settlement of DebtOther Reserves

Profit For the Year

Retained EarningsIn millions of Lebanese Pound

166 - 167

Financial Statements (CLA)



Members

Mr. Jacques Sehnaoui

Credit Libanais SAL

The Honorable Mr. Said Mirza

Mr. Khaldoun Barakat

H.E. Mr. Jacques Joukhadarian

Agence Générale de Courtage d’Assurances (AGCA) SAL

Mr. Elie Torbey

Board of Directors

05 - 06

Credit Libanais D assuranceset de Reassurances (CLA) SAL

168 - 169

Board of Directors

Statement of the Chairman General Manager


Insurance Activities

Independent Auditors’ Report

Statement of Financial Position




169

170

171

172

173

175

176

177

177



Statement of the Chairman General Manager Management’s Discussion and Analysis of Results

In 2016, CLA total assets increased by 2.91% and amounted to LBP 211.851 billion compared to LBP 206.048 billion in 2015, confirming once again the company’s strength and sustainable growth. After-tax profits increased by 6.46% and amounted to LBP 18.543 billion as compared to LBP 17.417 billion in 2015. The increase is mainly attributed to the growth in the operating and financial income.

Total gross premiums written amounted to LBP 25.033 billion for the year under review, and gross premiums written for the life insurance business amounted to LBP 14.577 billion in 2016 representing 58% of total gross premiums written.

On the other hand, net cash generated from operating activities amounted to LBP 7.262 billion in 2016 compared to LBP 9.214 billion in 2015, recording a decrease of 21.11 %.

A Year in Review

Performance by Class of Business

MOTORThe motor line of business showed a slight decrease in premiums from LBP 3.239 billion in 2015 to LBP 3.183 billion for the year under review. The loss ratio for the motor class of business based on the calendar year, stands at 41.74 % as compared to 48.24 % in 2015.

MARINEMarine business showed a decrease in premiums from LBP 117 million in 2015 to 85 million for 2016.

FIREIn 2016, gross premiums written recorded a 17.78 % decrease in the fire business, which totaled LBP 4.381 billion compared to LBP 5.329 billion in 2015.

LIFEIn 2016, income generated under the life business totaled LBP 14.577 billion as compared to LBP 15.384 billion in 2015 with a percentage decrease of 5.24 %. The loss ratio recorded for the year under review amounts to 21.14% compared to28.49 % in 2015.

CASUALTYCasualty business premium income generated increased by 21.62%, and amounted to LBP 2.807 billion, compared to LBP 2.308 billion in 2015. The Casualty lines of business include Hospitalization, Workmen’s Compensation, Personal Accident, Theft on Property, etc… In 2016, the loss ratio amounts to 43.49% compared to 172.66 % in 2015.

TECHNICAL RESERVESAs at year end 2016, an increase of LBP 1.088 billion in the unexpired risks reserves has been recorded. Those amounted to LBP 98.298 billion compared to LBP 97.210 billion in 2015, including the premium deficiency reserves.

Outstanding claims reserves decreased to LBP 8.700 billion in 2016, down from LBP 8.875 billion in 2015 including IBNR (Incurred But Not Reported) due to a decrease in the number of claims in 2016 especially in the motor business. As a result, CLA recorded an increase of 0.86 % in technical reserves, which amounted to LBP 106.998 billion in 2016 compared to LBP 106.085 billion in 2015.

The loss ratio, all lines of business combined, decreased to 25.20 % in 2016 compared to 46.60% in 2015.

The growth in gross written premiums in the insurance industry for the year under review has been

the lowest due to the economic downturn in the region and market uncertainties. Nevertheless,

the slight industry growth of 5% recorded in 2016 did not affect the solid results of the Company.

Credit Libanais d’Assurances et de Reassurances sal (CLA) maintained its profitability trend upward with an after tax

profits of LBP 18.543 billion for the year 2016 with an increase of 6.46% as compared to 2015. The gross written premiums

recorded in 2016 amounted to LBP 25.033 billion with a very low loss ratio of 25.20%, all lines combined.

For Credit Libanais d’Assurances et de Réassurances sal (CLA) the year 2016 has been another successful year, owing to

the professionalism and expertise of CLA team of underwriters, as well as to the proper evaluation of risks performed by

the Company. Our near term plan is to enlarge our customer base and increase our market share in the years to come,

focusing on maintaining our customers’ loyalty towards the Company by further building on our business retention strategy.

Being part of a large group such as Credit Libanais is one fundamental asset of our Company, and a main contributor

to the positive image, reputation and success recorded over the years. We are looking forward for more growth and

new synergies, to allow us provide more insurance and assurance to private and corporate customers, as well as to the

communities as a whole.

Sincerely,

Jacques J. Sehnaoui


170 - 171



Credit Libanais insurance services are offered in coordination with Credit Libanais d’Assurances et de Reassurances (CLA) SAL, the 66,97% owned bancassurance subsidiary.

OpinionWe have audited the accompanying financial statements of Credit Libanais D’Assurances et de Reassurances S.A.L which comprise the statement of financial position as of 31 December 2016, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Credit Libanais D’Assurances et de Reassurances S.A.L as of 31 December 2016 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the Code of Ethics of the Lebanese Association of Certified Public Accountants that are relevant to our audit for the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged will governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decision of users taken on the basis of these financial statements.

CLA offers a diversified product portfolio and has recently increased the availability to products in the motor, marine, fire and life lines of business.

A comprehensive car insurance scheme

A travel Insurance program providing worldwide emergency medical assistance of up to $200,000.

A travel Insurance, purchase protection and wallet cover service linked to bank cards

A third-party car insurance scheme covering death and total personal disability for the driver and his family

A personal accident insurance service offering worldwide coverage

A long-term savings program, providing children with financial assistance during university education

A personal accident policy, which provides the insured and his/her family with worldwide coverage for personal accidents, including death and disability

Insurance Activities

Insurance Products

SAFEDRIVE

SAFETRAVEL

A LA CARTE

SAFEWAY

SAFEMIND

SAFE STEPS

SAFEGUARD

Independent Auditors’ Report

To the shareholders of Credit Libanais D’Assurances et de Reassurances S.A.L

172 - 173



Statement of financial positionas at 31 December 2016

20152016Assets


Intangible assets

Deferred acquisition costs

Financial assets at amortized cost

Unquoted equity investments

Premium receivables

Receivables from related party

Reinsurance balances receivable

Other receivables

Reinsurance assets

Bank deposits

Cash and cash equivalents

Total assets

Equity and Liabilities

Equity

Capital

Legal reserve

Other reserves

Retained earnings

Total equity

Liabilities

Insurance liabilities

Unearned reinsurance commission

Retirement benefit obligation

Accounts payable

Other payables and accruals

Reinsurance balances payable

Reinsurance deposits

Taxes payable

Total liabilities

Total equity and liabilities

619,459

141,034

9,984,999

7,265,463

5,636,306

2,054,508

6,030,000

3,727,766

41,632

17,693,826

154,764,353

3,892,433

211,851,779

10,005,0003,335,00044,114,31518,542,91075,997,225

106,998,5253,061,6021,421,173

5,785673,532

19,804,7162,689,6641,199,557

135,854,554211,851,779

The financial statements were approved on 2 March 2017, by the Board of directors.

739,731

146,461

10,005,076

7,263,850

5,636,306

1,726,087

7,537,500

3,694,620

39,520

18,648,537

148,100,981

2,509,839

206,048,508

10,005,000

3,335,000

37,009,013

17,417,402

67,766,415

106,085,345

3,188,104

1,328,551

7,782

485,840

22,936,460

3,056,949

1,193,062

138,282,093

206,048,508

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Beirut, Lebanon14 March 2017 DFK Fiduciaire du Moyen-Orient

174 - 175

In Thousands of Lebanese Pound



Statement of comprehensive incomefor the year ended 31 December 2016

20152016Insurance premium revenue

Insurance premium ceded to reinsurers

Net insurance premium revenue

Change in unearned premium revenue

Net earned premium

Net investment income

Reinsurance commission income and profit sharing

Other operating income

Net income

Insurance claims expenses

Insurance claims recovered from reinsurers

Change in outstanding claims

Net insurance claims

Expense for acquisition of insurance contracts

Expense for administration and other expenses

Depreciation and amortization expense

Provision for end of service indemnities

Net foreign exchange loss

Net allowance for provision

Expenses

Profit before tax

Income tax


26,377,076

(8,114,137)

18,262,939

(1,592,639)

16,670,300

9,657,909

2,098,974

44

28,427,227

(5,151,198)

2,676,352

(334,644)

(2,809,490)

(2,917,594)

(4,710,979)

(204,639)

(153,979)

(16,213)

89,444

(10,723,450)

17,703,777

(286,375)

17,417,402

25,033,046

(8,714,928)

16,318,118

233,935

16,552,053

9,849,313

3,163,624

30

29,565,020

(5,934,678)

3,291,705

325,249

(2,317,724)

(2,862,525)

(5,035,604)

(178,365)

(94,043)

(201,208)

(51,507)

(10,740,976)

18,824,044

(281,134)

18,542,910

Statement of changes in equityfor the year ended 31 December 2016

Statement of cash flowsfor the year ended 31 December 2016

Capital Legal Reserve Other Reserve Profit for the Year Total

30,689,07716,684,799

(10,364,863)---

37,009,013

17,417,402(10,312,100)

---44,114,315

16,684,799(16,684,799)

---17,417,402

17,417,402

(17,417,402)---

18,542,91018,542,910

60,713,876---

(10,364,863)17,417,402

67,766,415

---(10,312,100)

18,542,91075,997,225

3,335,000---------

3,335,000

---

---

---3,335,000

10,005,000---------

10,005,000

---

---

---10,005,000

Balance as at 31/12/2014

Allocation of 2014 profits

Dividends and Bonuses distributed

Profit for the year 2015


Allocation of 2015 profits

Dividends and Bonuses distributed

Profit for the year 2016


20152016

18,824,044

178,365

94,043

(10,010,126)

160,813

---

51,507

187,692

(1,997)

(2,112)

954,711

913,180

(126,502)

17,703,777

204,639

153,979

(9,826,874)

168,965

(44)

(89,444)

105,646

(44,515)

(9,329)

(4,098,336)

11,109,768

(159,550)

Operating activities

Profit for the year

Adjusted for:

Depreciation and amortization charges

Provision for end of service indemnities

Interest income

Interest expense and related charges

Gain from sale of property and equipment

Allowance of provision for doubtful debts

Change in other payables and accruals

Change in accounts payable

Change in other receivables

Change in reinsurance assets

Change in insurance liabilities

Change in unearned reinsurance commissions

176 - 177

In Thousands of Lebanese PoundIn Thousands of Lebanese Pound




20152016

20,077

(3,131,744)

11,736

(33,145)

(379,929)

(1,422)

(286,375)

(160,813)

7,262,003

(3,334)

(49,333)

(45,225,000)

---

1,507,500

---

9,832,961

(33,937,206)

(367,284)

(10,312,100)

(10,679,384)

(37,354,587)

86,540,531

49,185,944

(49,231)

(5,287,602)

(172,661)

204,480

(151,791)

(11,136)

(367,230)

(168,965)

9,214,546

(393,817)

(28,190)

(7,594,313)

3,015,000

---

17,713

9,989,519

5,005,912

(276,614)

(10,364,862)

(10,641,476)

3,578,982

82,961,549

86,540,531

Change in deferred acquisition cost

Change in premiums and reinsurance payables

Change in taxes payable

Change in reinsurance balance receivables

Change in premiums receivable

Employees’ end of service benefits paid

Income tax paid

Interest expense paid

Net cash provided from operating activities

Cash flows from investing activities

Acquisition of Property and equipment

Acquisition of Intangible assets

Increase in bank deposits (more than 3 months)

Matured bonds

Subsidized loan granted to Dourat Loubnan

Proceeds from disposal of property and equipment

Interest income received

Net cash (used in) provided from financing activities


Change in reinsurance deposits

Dividends and bonuses distributed

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash & cash equivalents at the beginning of the year

Cash & cash equivalents at the end of the year

178 - 179


Branch Network and Correspondent Banks


Head Office and Branch NetworkCL Network in Lebanon

Branch network and correspondent banks

BeirutCredit Libanais Tower - Corniche El Nahr, Adlieh RoundaboutAshrafieh 1100 2811 - Beirut, Lebanon

P.O.Box: 16-6729Fax: +961 1 608 126 - Phone: +961 1 608 000 Website: www.creditlibanais.comE-mail: [email protected] - [email protected]

Credit Libanais Tower - Corniche El Nahr, Adlieh RoundaboutAshrafieh 1107 2080 - Beirut, Lebanon

P.O.Box: 11-1458Fax: +961 1 425 637 - Phone: +961 1 425 671/2/3/4 - +961 1 608000 Website: www.creditlibanais.comE-mail: [email protected] - [email protected]


P.O.Box: 116-5235 Museum - LebanonFax: +961 1 425 637 - Phone: +961 1 608 400 Website: www.creditlibanais.comE-mail: [email protected] - [email protected]


P.O.Box: 16-6729Phone: +961 1 425 761/2/3/4 Website: www.creditlibanais.comE-mail: [email protected]

Hamra, Roma Street, Liberty Tower 9th Floor - Beirut, Lebanon

P.O.Box: 113/5357 Hamra - BeirutFax: +961 1 755 316/8 - Phone: +961 1 755 310/1/2/3/4/5Website: www.lebaneseislamicbank.com.lbE-mail: [email protected]

Hamra Hamra St., Ghanem Bldg.Fax: (01) 340 390 - Phone: (01) 346 960 - 342 954/5 - 350 293Branch Manager: Mr. Saadeddine Akel

Ashrafieh Zahret Al Ihsan St., Sausalito Bldg.Fax: (01) 204 643 - Phone: (01) 216 540 - 204 641Branch Manager: Mr. Rami Nassif

Adlieh (Main Branch) Credit Libanais Tower Corniche El Nahr, Adlieh Roundabout,P.O.Box: 16-6729Fax: (01) 608 047 - Phone: (01) 608 048/9 - 608 050Branch Manager: Mr. Roger Bridi

Badaro Badaro St., Khatoun CenterFax: (01) 382 145 - Phone: (01) 387 878/9Branch Manager: Ms. Clauda Khoury

Geitawi Facing Geitawi HospitalFax: (01) 582 087 - Phone: (01) 580 715/6Branch Manager: Mr. Costi Saroufim

Gefinor Clemenceau St., Gefinor Center 1st floor, Bloc CFax: (01) 740 168 - Phone: (01) 739 830/1Branch Manager: Ms. Noha Yammout

Liberty Tower Hamra, Rome St., Liberty Tower Bldg. Fax: (01) 740 017 - Phone: (01) 740 017/8/9Branch Manager: Ms. Rana Takieddine

Mar Elias Mousaitbeh, Mar Elias St.Fax: (01) 312 028 - Phone: (01) 819 116 - 312 021Branch Manager: Mr. Houssam El Hajj

Mazraa Corniche El-Mazraa, Salam Blvd., Choueiry Bldg.Fax: (01) 300 937 - Phone: (01) 313 590 - 317435Branch Manager: Mr. Bassam Matta

Raouche In process of relocation

Riad El Solh Beirut Central District, Riad El Solh Square, Asseily Bldg.Fax: (01) 983 141 - Phone: (01) 983 141/2/3Branch Manager: Ms. Lina Dabaghi

Rmeil Nahr St., Zoghbi Bldg.Fax: (01) 445 275 - Phone: (01) 445 684 - 443806Branch Manager: Ms. Marie Ayoub

Sassine Sassine Square, Independance Ave., Credit Libanais Bldg.Fax: (01) 203 007 - Phone: (01) 332 889 - 218 608Branch Manager: Mr. Joseph S. Raad

Sofil Ashrafieh, Charles Malek Ave., Sofil CenterFax: (01) 215 044 - Phone: (01) 200 028/9 - 201 292Branch Manager: Ms. Georgette Abdo

Starco Mina El Hosn, George Picot St., Starco Center, Bloc A, 1st FloorFax: (01) 367 584Phone: (01) 367 582/3Branch Manager: Mr. Ali Berro

Verdun (Unesco) Unesco St., Boubes Bldg.Phone/Fax: (01) 790 511 - 790 289Branch Manager: Ms. Fadia Hammoud

182 - 183



Mount Lebanon Mount Lebanon

Amchit Main Road, Jafoury Bldg.Fax: (09) 621 072 - Phone: (09) 622 781/2Branch Manager: Mr. Paul Ajaltouni

Antelias Rahabneh St., Antelias Square, St. Elie CenterFax: (04) 419 760 - Phone: (04) 418 582/3Branch Manager: Ms. Nohad Torbey

Awkar Main RoadFax: (04) 544 763 - Phone: (04) 544 760/1/2Branch Manager: Ms. Amal El Azar

Bhamdoun Main Road, Bhamdoun Station, Mouttawah CenterFax: (05) 260 247 - Phone: (05) 260 244/5/6/7Branch Manager: Mr. Imad Abdel Nour

Bourj El Brajneh Zein Harb Road, Yassine Bldg.Fax: (01) 450 471 - Phone: (01) 450 470/2Branch Manager: Mr. Nadim Hatoum

Bourj Hammoud Municipality Square, Mukhtarian & Sarkissian Bldg.Fax: (01) 265 299 - Phone: (01) 262 393Branch Manager: Ms. Arpie Tcheboukjian

Broummana Main Road, Tawil Bldg.Fax: (04) 862 105 - Phone: (04) 960 664 - 960 349Branch Manager: Mr. Naoum Labaki

Chehim Main Road, El Chraifeh St., Raiif Abdallah Bldg.Fax: (07) 242 405/6 - Phone: (07) 242 405/6/7Branch Manager: Mr. Ahmad Charafeddine

Dora Dora Roundabout, Bassil Bldg.Fax: (01) 264 813 - Phone: (01) 251 832 - 260 358Branch Manager: Mr. Antoine Kmeid

Dekwaneh Main Road, Rawda RoundaboutFax: (01) 686 903 - Phone: (01) 686 794/5Branch Manager: Ms. Reine Abi Hatab

Beit Mery Notre Dame St., Dr. Sawan Bldg.Fax: (04) 871 176 - Phone: (04) 871 916 - 871 761Branch Manager: Mr. Adib Hamouche

Bauchrieh Industrial City St., Boulghourjian Bldg.Fax: (01) 497 332 - Phone: (01) 497 092- 497 260Branch Manager: Mr. Atef Renno

Haret Hreik Hady Nasrallah Blvd., Diab and Ayad Bldg.Fax: (01) 278 004 - Phone: (01) 278 042/9 - 278 121Branch Manager: Mr. Noureddine Ballout

Haret Hreik Menchieh St., Dabaja Bldg.Fax: (01) 556 784 - Phone: (01) 556 780/1/2Branch Manager: Mr. Alaa Diab

Haret Sakhr Jounieh highway, Credit Libanais TowerFax: (09) 636 842 - Phone: (09) 636 841 - (03) 675 004Branch Manager: Mr. Chakib Khoury

Hadeth Adib Al Chidiac St., Kafaa’t Intersection, Wehbe CenterFax: (05) 466 680 - Phone: (05) 466 681/2Branch Manager: Mr. Chawki El Asmar

Fanar Fanar Roundabout, Samra CenterFax: (01) 902 362 - Phone: (01) 902 360/1/2Branch Manager: Ms. Antoinette Tannoury

Furn El Chebbak Damascus Road, Ghaoui Bldg.Phone/Fax: (01) 281 518/9Branch Manager: Ms. Ghada Bassil

Ghobeiry Airport Blvd., Moucharafieh Square, Wazneh Bldg.Fax: (01) 552 781 - Phone: (01) 552 781/2Branch Manager: Mr. Fawaz Toufeili

Hazmieh Jisr El Bacha Main Road, S & S CenterFax: (05) 952 425 - Phone: (05) 952 426Branch Manager: Ms. Randa Khater

Jbeil Main St., Kordahi & Matta CenterFax: (09) 949 588 - Phone: (09) 942 588 - 949 558Branch Manager: Mr. Antoine Habib

Jal El Dib Main Road, Next to Mar Takla Church, Facing The Public Garden Fax: (04) 721 853 - Phone: (04) 721 850/1/2Branch Manager: Ms. Marie Abi Haidar

Jbeil Fères Collège des Frères, Street 13, Khoury Business CenterPhone/Fax: (09) 540 496/7/8 - 540 534Branch Manager: Mr. Akram Khoury

Jisr Dora Highway, Karantina Bridge, Azar Bldg.Fax: (01) 257 641 - Phone: (01) 257 640/1Branch Manager: Mr. Antoine Saba

Kornet Chehwan Main Road, Forum 600 CenterFax: (04) 913 911 - Phone: (04) 913 911 - 928 240Branch Manager: Mr. Joseph Mallouk

Jounieh Facing La CitéFax: (09) 832 075 - Phone: (09) 832 069/70 - 832 063/5Branch Manager: Mr. Michel Ghalieh

Kaslik Main Road, Kaslik Plaza CenterFax: (09) 640 244 - Phone: (09) 639 945 - 640 794 - 640 118Branch Manager: Mr. Joseph Kmeid

Khaldeh Saida Highway, Credit Libanais Bldg.Fax: (05) 810 893 - Phone: (05) 810 891/2/3Branch Manager: Mr. Mahfoud Ghanem

Jdeideh Nahr El Mott Roundabout, Montelibano Bldg.Fax: (01) 887 780 - Phone: (01) 898 065 - 887 779Branch Manager: Mr. Kamal Zakhem

Mkalles Main Road, Factory CenterFax: (01) 698 753 - Phone: (01) 698 750/1/2/3/4Branch Manager: Mr. Emile Moukarzel

Sin El Fil Fouad Chehab Road, St. Georges CenterFax: (01) 491 899 - Phone: (01) 495 370/1 - 482 368Branch Manager: Ms. Katia Ayoub

Zouk Jounieh Highway, Zeayter Bldg.Fax: (09) 211 556 - Phone: (09) 210 485/7 - 211 542Branch Manager: Mr. Joseph B. Khoury

Zouk Mosbeh Geita Main Road, Near Pizza HutFax: (09) 211 083 - Phone: (09) 211 082 - 210 744 - 210 711Branch Manager: Ms. Amale Araman

184 - 185



Bekaa

North South

Amioun Koura Main Road, Azar Bldg.Fax: (06) 952 714 - Phone: (06) 952 715/6/7Branch Manager: Mr. Esper El Azar

Batroun Main Road, Juliette Adaymi Bldg.Fax: (06) 642 168 - Phone: (06) 742 074/5Branch Manager: Mr. Nidal Farah

Kobbe Kobbe Main Road, Yehya CenterFax: (06) 393 902 - Phone: (06) 393 900/1Branch Manager: Mr. Walid Rima

Abdeh Abdeh Main Road, Haddad Bldg. Fax: (06) 470 650/1/2 - Phone: (06) 470 650/1/2 - (03) 583 586Branch Manager: Mr. Aghiad Dandachi

Tripoli - Tell Abdel Hamid Karame St., Kantara Bldg.Fax: (06) 430 350 - Phone: (06) 430 350/1/2 - 424 434Branch Manager: Mr. Chadi Kalaoun

Zghorta Main Road, Kareh & Mouawad Bldg.Fax: (06) 668 601 - Phone: (06) 668 600/1/2/3Branch Manager: Ms. Elissar Frangieh

Tripoli - Azmi Azmi St., Haytham CenterFax: (06) 215 900 - Phone: (06) 215 900/1/2Branch Manager: Mr. Nazih Naja

Bar Elias Damascus Road, Araji Bldg.Fax: (08) 510 267 - Phone: (08) 510 265/6/7Branch Manager: Mr. Wajih Araji

Machghara Main Road, Albert Karam Bldg.Phone/Fax: (08) 650 250 - 650 297Branch Manager: Mr. Antoine Hajjar

Rachaya - Dahr El Ahmar Dib Mounzer Bldg.Fax: (08) 590 303 - Phone: (08) 591 013/4Branch Manager: Mr. Nidal Abou Hjeili

Zahle Hoch Al Omara, Deir Mar Chaaya Bldg.Fax: (08) 800 459 - Phone: (08) 810 142/3 - 803 200Branch Manager: Mr. Aziz Chamma

Chtaura Damascus Road, Rose Massabki Bldg.Fax: (08) 544 802 - Phone: (08) 540 833 - 543 555/666Branch Manager: Mr. Wassim Rahal

Jeb Jannine Ismaïl Sharanek Bldg.Fax: (08) 660 233 - Phone: (08) 660 233 - 660 710Branch Manager: Mr. Souheil Charanik

Ferzol Main Road, Ordre Salvatoriens Bldg.Fax: (08) 950 540 - Phone: (08) 950 54/12/3/4Branch Manager: Mr. Michel Gerges

Nabatieh Main Road, Sabbagh Bldg.Fax: (07) 767 911 - Phone: (07) 767 909/10/11Branch Manager: Mr. Zahi Jaffal

Saida 1 Riad El Solh St., Zaatary Bldg.Fax: (07) 721 401 - Phone: (07) 721 401/2 - 751 101/2/3Branch Manager: Mr. Samih Kaakour

Tyr Abbassieh Abbassieh, Main Road, Jal Al Baher, Sea CenterFax: (07) 351 094 - Phone: (07) 351 064 - 351 074 - 351 084Branch Manager: Mr. Hussein Saleh

Saida 2 East Blvd., Elia Roundabout, Center Zaatari 2035Fax: (07) 755 793 - Phone: (07) 755 790/1/2Branch Manager: Mr. Mohamad Saad

Tyr Rest House St., Farran Bldg.Fax/Phone: (07) 742 854/5/6Branch Manager: Mr. Riad Chebli

Bint Jbeil Main Road, Charara CenterFax: (07) 450 802 - Phone: (07) 450 800/1 - (03) 675 012Branch Manager: Mr. Ghassan Ghafari

Regional Branch Management

Regional Branch Management - Mr. Michele Cherenti

Deputy General Manager-Retail Banking and Branches

Credit Libanais Tower, Blvd. Pierre Gemayel, Corniche El Nahr, Adlieh

Phone: (01) 609392

Regional Branch Management- Riad el Solh

Asseily Building, Riad El Solh Square, Riad El Solh

Phone: (01) 983 204

Regional Branch Manager: Mr. Fouad Boustani

Regional Branch Management-North Metn and Keserwan

Kaslik Plaza, Kaslik Main Street, Zouk

Phone: (09) 832 893- 639 451

Regional Branch Manager: Mr. Georges Hajj

Regional Branch Management-Hamra

Gefinor center, Clemenceau street, Gefinor

Phone: (01) 350 092 - 345 364

Regional Branch Manager: Mr. Hassan Ali

Regional Branch Management- Bekaa and South

Masabki Building, Chtaura Main Road, Chtaura

Phone: (08) 540 738 - 542 372

Regional Branch Manager: Mr. Antoine Khater

Regional Branch Management-North

Credit Libanais Building, Jounieh Highway, Haret Sakhr

Phone: (09) 638 178 - 638 187

Regional Branch Manager: Mr. Nadim Issa

186 - 187


CL Network Worldwide Correspondent Banks Network


SENEGAL

IRAQ

Credit International, SA (CISA) - Zone Industrielle - Dakar

Credit International, SA (CISA) - Dakar

Manama, Bahrain Branch Representive Office-

Montreal, CanadaLimassol, Cyprus Branch

Baghdad Branch

Erbil Branch

Agence PrincipaleCredit International sa, Immeuble le Goelan, Boulevard Djily Mbaye, Intersection Henri DunanB.P.: 50117 Dakar RPFax: +221 33 822 80 80Phone: +221 33 829 64 64 / +221 33 889 18 18General Manager: Mr. Christian KhalifeWebsite: www.cisenegal.comE-mail: [email protected]

Street No. 14, Selman Al Faek, 904, Credit Libanais Bldg.

P.O. Box: 81018, Abi NawasFax: +964 727 0020385Phone: +964 770 0434434 / +964 750 5000555 Mobile: +964 750 5000111 / +964 770 0000665SWIFT/BIC: CLIB IQ BABranch Manager: Mr. Marwan Abi HanaWebsite: www.creditlibanais.com.lbE-mail: [email protected]

Newroz Street, Worech 44, Credit Libanais Bldg.

P.O. Box: 20 NewrozFax: +964 66 2296690Phone: +964 750 3000111 / +964 770 0000766 /+964 750 3000666 / +964 770 0000103SWIFT/BIC: CLIB IQ BABranch Manager: Mr. Fouad KabbaraWebsite: www.creditlibanais.com.lbE-mail: [email protected]

Chrysalia Court, 1st Floor, 206 Arch. Makarios III Avenue, CY 3303

P.O.Box: 53-492, Limassol CyprusFax: +357 25 376 807Phone: +357 25 376 444 Country Manager: Ms. Hayat HarfoucheE-mail: [email protected] [email protected]

Seef Area, 428, Road 2806

P.O.Box: 5576, Manama Kingdom of BahrainE-fax: +973 17 910 573 - Fax: +973 17 582 224 Phone: +973 17 560 570Mobile: +973 39 912 912 / +973 39 981 981SWIFT/BIC: CLIB BH BBCountry Manager: Mr. Aghar KanafaniE-mail: [email protected]@creditlibanais.com.lb

Montreal, Quebec, Place du Canada, 1010 de la Gauchetière Ouest # 1325, 13th Floor, Montreal, Quebec H3B 2N2 CanadaFax: +1 514 866 6220Phone: +1 514 866 6688 / +1 800 864 5512Office Manager: Mr. Elie AyoubE-mail: info@[email protected]

Zone Industrielle de Dakar, Km 2.8 Boulevard du Centenaire de la commune de Dakar

Fax: +221 33 822 80 80

Phone: +221 33 849 30 80E-mail: [email protected]

Helpline for transfers Central Processing Department Phone : + 961 1 258 106/9 Ext. 100/111 Fax : + 961 1 257 635/6

AustraliaWestpac Banking Corporation - Sydney

GermanyDeutsche Bank AG - FrankfurtCommerzbank AG - FrankfurtStandard Chartered Bank - Frankfurt

ItalyIntesa Sanpaolo SPA - MilanUniCredit SPA - Milan

JapanThe Bank of Tokyo - Mitsubishi UFJ, LTD - TokyoSumitomo Mitsui Banking Corporation - Tokyo

AustriaUniCredit Bank Austria AG - Vienna

BahrainNational Bank of Bahrain - Manama

BelgiumKBC Bank NV - Brussels

CyprusBank of Cyprus Public Company Limited - Nicosia

CanadaNational Bank of Canada - MontrealBank of Montreal - Montreal

DenmarkDanske Bank A/S - Copenhagen

KuwaitThe Gulf Bank KSC - KuwaitThe National Bank of Kuwait SAK - Kuwait

FranceNatixis - Paris

NorwayDNB NOR Bank ASA - Oslo

SpainBanco Bilbao Vizcaya Argentaria SA (BBVA) - MadridBanco de Sabadell - Sabadell

Saudi ArabiaThe National Commercial Bank - Jeddah

Sri LankaBank of Ceylon - ColomboCommercial Bank of Ceylon PLC - Colombo

SwedenSkandinaviska Enskilda Banken - Stockholm

SwitzerlandCredit Suisse - Zurich

TurkeyAkbank - Istanbul

USAJP Morgan Chase Bank NA - New YorkCitibank NA - New YorkStandard Chartered Bank - New YorkThe Bank of New York Mellon - New York

ThailandBangkok Bank Public Company Limited - Bangkok

UKCitibank - LondonStandard Chartered Bank - London

UAENational Bank of Abu Dhabi - Abu DhabiStandard Chartered Bank PLC - Dubai

188 - 189

CONTINUOUS


CL MilestonesA Journey of Continuous Success and Achievements

SUCCESS

1961Establishment of the Bank.

Capital increase of USD 102m.Winning of the Golden Pan Arab Corporate Website Award.Implementation of the employee Stock Ownership Plan for a total consideration of 5.7% of the Bank’s common shares.

Issuance of three-year Euro CD listed on international markets.Launching of Islamic banking operations in Lebanon (LIB).

ISO 9001:2000 Certification for Quality Management System.Issuance of $50m preffered shares.

Acquisition of the operations of American Express Bank, Lebanon.

Launching of the investment banking arm (CLIB).First issuance of Euro CDs listed on international markets by a Lebanese bank.

Acquisition of First Phœnician Bank and Capital Trust Bank.

Acquisition of a Controlling majority by CIH Manama Holding.

Acquisition of Continental Bank.

Opening of Bahrain Branch.Changing of affiliated leasing company Credilease into a Lebanese financial institution.

Increase of CL Tier One capital by 18.28%, through the issuance of $100m preffered shares.JP Morgan Elite “Quality Recognition for Outstanding Achievement” Award.Cross Knowledge Special Award in the Best e-learning Category.World Finance “Best Commercial Bank” Award.World Confederation of Businesses “Peak of Success” Award.First e-payment services for built proprety taxes and first e-payment servicesfor the Order of Engineers and Architects in Beirut.

Winning of prestigious awards by Citibank, Deutsche Bank and Standard Chartered Bank.Opening of Adlieh and Jal el Dib branches.Social Economic Award (SEA): The National and Social Impact Award.

Relocation to the landmark newly built Headquarters Tower in Adlieh.Winning of the prestigious Awards for STP by Citibank and JP Morgan.First bank in Lebanon to be fully compliant with (PA-DSS).Opening of CISA secondbranch in Dakar

Launching of operations in Iraq (Baghdad and Erbil).

Migration to the core banking system, equation, across all branches of the Group.

Best in category: Social Economic Award for Housing Loans.Best Website Awards granted to affiliates: Hermes Travel and CISA (Senegal).PCI DSS compliance for subsidiaries Netcommerce and IPN.

Opening of Credit International sa, Senegal.Acquisition by EFG Hermes Group majority in Credit Libanais.Issuance of USD 75 million Subordinated Bonds maturing in January 2018.

Management with Credit Suisse & Byblos Bank, of the 2009 Republic of Lebanon voluntary exchange transaction for a total consideration of some USD 2.3 bn.

2016 saw a structural change in the shareholders base of the Bank pursuant to the disposal of a majority stake by EFG Hermes CL Holding SAL in the Bank’s Capital, to a network of international, Arab and Lebanese investors comprising sophisticated funds, institutional and individual investors.

190 - 191

Designed by Publimedia sarlConsumer Protection and Corporate Publishing Department – CEO OfficeCredit Libanais Tower | Corniche El Nahr - AdliehP.O.Box: 16 - 6729 Beirut, Lebanon -Tel: +961 1 608122 - Fax: +961 1 [email protected] - www.creditlibanais.com

The Forest Stewardship Council www.FSC.org is an international organization promoting responsible forest management. FSC has developed principles for forest management of forest holdings, and a system of tracing,

verifying and labeling timber and wood products, which originate from FSC-certied forests.

Documents

ANNUAL REPORT 2016 - Credit Libanais€¦ · Annual Report 062016 Credit Libanais Group The Bank also participated in several national loan syndications deals. Moreover, CL adopted