Project detail - LEBANON AND GULF BANK

LEBANON AND GULF BANK

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Who is our client

Established in 1963 under the name of Banque de Credit Agricole s.a.l., LGB BANK adopted its current name and shareholders’ form in 1980. LGB BANK is a well-established bank with a strong legacy, solid financials and potential for growth. During 2016, LGB BANK outperformed the Lebanese banking sector ranking 2nd in terms of deposits growth, 3rd in terms of assets and 6th in terms of net profit. This growth in financial records is reflected in the Bank’s expansion strategy, while maintaining a conservative risk approach, which resulted in a network of branches across Lebanon, a branch in Cyprus and a representative office in Dubai.

Funding objective

Our funding will be used to on lend to the SME segment in Lebanon representing 97% of all formal enterprises in the country. The sector is identified as one of the most underserved markets offering the largest potential in terms of volume and combatting the high unemployment rate (‘16: 7%; 22% amongst youth), partially caused by the large influx of Palestine and Syrian refugees. By providing SMEs access to finance, LGB Bank can indirectly contribute to job creation. Additionally, SME sector growth increases economic activity leading to higher tax income.

Why we fund this project

LGB Bank fits with FMO Financial Institutions' country strategy for Lebanon to focus on the top 14 banks in the country (i.e. Alpha Banks). Of these banks, LGB Bank has one of the highest exposures to the SME sector (>50% of the loan portfolio). Additionally, it has the fifth highest loan to deposit ratio at circa 40%, which is remarkable in Lebanese context. Our loan will encourage LGB Bank to increase this further.

Environmental and social rationale

E&S categorization B based on the low exposure to high risk sectors (less than 10% in industrial manufacturing, mining, electricity/gas/water and agri/fishing/forestry). LGB Bank did not work with the Exclusion List before, but has no exposure to any of the items on the list. Hence, current E&S risk in LGB Banks loan portfolio is deemed limited. The large corporate exposures are in residential, commercial construction and contractors. Moreover, it has three IFS PS triggered transactions in the portfolio, also in residential construction and real estate services. This equals to one IFC PS triggered transaction per year.

Region
Asia
Country
Lebanon
Sector
Financial Institutions
Signing date
12/20/2017
Total FMO financing
USD 32.50 MLN
Fund
FMO
Risk categorization on environmental and social impacts, A = high risk, B+ = medium high risk, B = medium risk, C = low risk Environmental & Social Category
(A, B+, B or C)
B