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ANNUAL REPORT 2014

Management Discussion And Analysis

2.0. Strategy

Within a persisting challenging operating environment in the Bank’s markets, particularly in the MENA region, the fundamentals of the Bank’s diversification and expansion strategy launched more than a decade ago have not changed. Overall, Management remains focused on the key objective of further developing the Bank as a fully integrated, pan‑regional group which will continue to rank among the largest regional players.

Since 2004, the Bank has pursued a regional expansion strategy capitalising on the region’s economic growth and wealth potential. As a result, the Group has enjoyed a wide regional presence in Lebanon and in Egypt, Syria, Jordan, Qatar, Saudi Arabia and Sudan, and benefits from operations in France, Switzerland and Monaco. In addition, the Bank launched operations in Turkey on November 1, 2012 through the establishment of Odea Bank.

Since then, the Group’s performance has demonstrated the strength and the resilience of the business model, notably in Arab Countries in Transition (ACTs), efficiently driving a sustained growth and enhancing the Group’s competitive positioning. Capitalising on its robust balance sheet growth and high financial flexibility, the Group is now able to pursue its strategy of profitable growth, relying on the compelling customer-driven business prospects and leveraging synergies across businesses and countries.

The current medium-term development strategy is based around the following strategic aims:
  • Lebanon: the Bank’s strategy aims to consolidate and reinforce its leading position in Lebanon, in particular, by strengthening existing corporate and SME client relationships, as well as by taking advantage of growth opportunities in the retail segment.
  • Egypt: Management plans to reinforce its market position, in particular, through non-organic growth opportunities available in the Egyptian market. In late 2013, the Bank launched a 3-year growth plan for its Egyptian operations, which aims to significantly increase the Bank’s franchise in Egypt with a corollary positive impact on earnings growth. This growth plan was launched as a result of Bank Audi Egypt’s strong resilience since 2010, including a growth in assets and net profits by respectively 10% and 26% while consolidating the quality of assets, despite challenging politico-economic conditions in the country, but not to the detriment of macro and banking aggregates growth.
  • Turkey: Turkey is a key growth market for the Bank, as witnessed by the achieved robust growth since the launch of operations in 2012, as well as the expected growth of trade, financial and human flows between Turkey and Arab countries where the Bank has operations. Focusing on actively growing the middle corporate segment and developing value‑added SMEs and consumer lending segments, the strategy underscores a continued growth trend over the medium term, exceeding that of the overall growth of the Turkish banking sector, which has grown on average by 11% per annum (in terms of assets) over the last five years. The plan would also be supported by a strong emphasis on leveraging synergies across the wide footprint in the MENA region.
  • Private Banking: the Group intends to leverage co-operation and synergies across its Private Banking entities in Europe, the Near East and the GCC, benefitting from the recent restructuring of the Private Banking entities, with the ultimate objective of further growing the AUMs franchise and its contribution to the consolidated revenues.

In addition, in the medium term, Management is exploring further regional expansion opportunities, including a presence in:
  • London to service the Bank’s Private Banking clients.
  • Sub-Saharan Africa, capitalising on an existing franchise turnover of USD 1.9 billion at end-September 2014 from a total of 30 countries in the region (of which most importantly Nigeria, Ivory Coast, Equatorial Guinea, Gabon, Senegal, Angola, Cameroon and Congo), and the presence of a large Lebanese, Turkish and broader MENA region diaspora in those countries. Over and above Africa’s growing importance in the global economy, establishing a presence in Sub-Saharan Africa would offer Odea Bank an advantage over its competitors as the Turkish market becomes more interested in Africa.
  • Latin America, in order to capitalise on and provide Private Banking services to the large Near Eastern diaspora in the region. Such a platform is expected to build upon the business currently generated by the Bank’s Latin America desks in Lebanon and Switzerland, which generated a turnover of USD 2.1 billion from Latin American clients in 2014.