BLOM BANK

Contents

introduction 3

Ratio analysis 4-16

Conclusion 17

References 18

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Data appendix

BLOM BANK is a leading Lebanese bank which has repeatedly and unanimously been

selected as the best Bank in Lebanon by the most recognized, regional and international

institutions. BLOM BANK has always been at the forefront of the country’s banking system. Its

universal banking services revolve around trust and credibility, built with its clients through long

term personal relationships, integrity, and the strong financial fundamentals that has consistently

achieved. Its successful business operations are based on a universal banking model that

includes: commercial banking, corporate banking, private banking, investment banking, asset

management, retail banking, Islamic banking, brokerage services and insurance products and

services. Moreover, BLOM’s operational and managerial efficiency has enabled it to maintain in

2015 the lowest cost to income ratio among its peers at 36.43%, and helped generate a rise in its

net profit to a record $404.66 million , the highest in the Lebanese banking system. BLOM

BANK’s strategy is based on measured regional expansion to markets with strong potential and

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on the continuous modernization and diversification of its universal services. As a result, BLOM

BANK has the widest foreign presence among Lebanese banks and it’s currently present in the

following 13 countries: Lebanon, Syria, Jordan, UAE, France, UK, Switzerland, Romania,

Cyprus, Egypt, Qatar, Iraq and Saudi Arabia. Also, its branches in Lebanon cover most of the

Lebanese regions. BLOM is constantly looking out for growth opportunities, whether in new

markets, new market segments, or new business lines.

Investors and people who wish to deposit their money in a bank or to buy shares to be a

part of this bank, prefer that ROE of this bank to be high, but ROE sometimes can be misleading

for us as it depend on EM and ROA. EM is the measure of how much this bank is risky, in other

words how the bank is operating high debt or high equity. Furthermore, ROA can be

decomposed into many other ratios as we are going to see in the evaluation of BLOM BANK in

the years 2013 and 2014.

year NET EQUITY ROE

INCOME
2013 531,300 3,540,846 15.00%
2014 549,899 3,803,078 14.46%
Table 1: ROE

As we can see in the above table, ROE in 2013 was 15% decreased in the following year to

become 14.46%. This decrease can be due to either a decrease in equity multiplier EM or to a

decrease in ROA IN 2014.

year NET TOTAL ROA

INCOME ASSETS

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2013 531,300 39,419,094 1.35%

2014 549,899 42,171,778 1.30%
Table 2: ROA

year EM
2013 11.1

2014 11.1

Table 3: EM

EM didn’t change from 2013 to 2014 and remained constant at a multiplier of 11.1. However,

ROA (2014) is less than ROA (2013). Therefore, the decrease of ROE is mainly due to low

ROA.

ROA is a broad concept that depends on many factors such as revenues, expenses and taxes.

ROA= TR/TA (assets utilization) – Total Expense/TA (expense ratio) – Taxes/TA (tax ratio)

I. Assets utilization

AU TOTAL YEAR

REVENUES
6.25% 2013

2,464,145
6.11% 2,578,239 2014
Table 4: AU

As we can see in table 4 above, asset utilization decreased from 2013 to 2014 which

partially explains the decrease of ROA and in turn ROE. To see what factor or ratio that

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pushed asset utilization to be low in 2014 and high in 2013, we should decompose it

more.

AU=Int. income/TA +Non int. income/TA + SG/TA.

First: interest income ratio

2014 2013  
5.113% 5.112% interest income/total assets
Table 5: interest ratio

Interest income increased slightly from 2013 to 2014 however AU decreased from 2013 to 2014.

Therefore, it didn’t have any clear impact on AU and then ROA.

To see how the company is operating regarding its interest income, we should evaluate three

factors that influence how much the bank is generating income from his assets, the three factors

are:

 Volume of earning assets= EA/TA

 Yield on earning assets=interest income/TA

 Composition=$amount of asset i/EA

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