ANNUAL REPORT 06 - BLOM Bank Lebanese domestic scene has been characterized by uncertainty and...

ANNUAL REPORT 06>

BLOM LEBANON INSIDE#1 (C) 9/12/07 9:40 AM

The BLOM BANK Beirut Marathon has,

over the past few years, quickly

become a symbol of unity, peace and life in Lebanon. BLOM

BANK has associated its name with the Beirut Marathon in order

to further highlight BLOM BANK’s patriotic mission and its social

corporate responsibility. At BLOM BANK we are joining our

efforts in the continuous run for a better future for Lebanon.

>I N T R O D U C T I O N

BLOM LEBANON INSIDE#1 (C) 9/12/07 9:40 AM

Chairman’s Letter 07

BLOM BANK Customer Deposits Evolution 09

2006 Major Highlights 10

2006 Financial Ratios 11

Strong and continuous Growth 12

BLOM BANK’s Board of Directors 13

Group Chart 15

BLOM BANK’s Major Shareholders and General Management 17

BLOM BANK’s Organization Chart 19

Management Discussion and Analysis 21

Operating Environment 21Overview 24Evolution of Total Assets 25Sources of Funds 26Uses of Funds 29Liquidity 38Profitability 39Dividend Distribution and Preferred Shares Revenues 48Capital Adequacy Ratio 48Interest Rate Risk 49Universal Banking Services 50Information Systems and Technology 51People Development 54Bank’s Operational Efficiency 54Regional Expansion 55

Auditor’s Report to The Shareholders 57

Consolidated Statement of Income 61

Consolidated Balance Sheet 62

Consolidated Statement of Cash Flows 64

Consolidated Statement of Changes in Equity 66

Notes to the Consolidated Financial Statements 68

BLOM BANK’s Worldwide Correspondents 130

Group Directory 131

Sum

mar

y

BLOM LEBANON INSIDE#1 (C) 9/12/07 9:40 AM Page 4

The Lebanese domestic scene has been characterized by uncertainty and turmoil during 2006, andthe Israeli 34-day war and blockade on Lebanon in July-August 2006. Gross Domestic Product(GDP) did not register any growth in 2006, and the political tension after November significantlydown from an expected 6% and down from an overall 1% growth recorded in 2005. Inflation wasat around 4%, while the country’s public debt stood at $40.5bn, or at 175% of GDP, slightly up from173% in 2005.

Despite the difficult environment, Lebanon showed evidence of solid economic resilience andbenefited from strong international support. The country was also fortunate to rely on thestrength of its financial system and the high level of foreign reserves at the Central Bank to witheraway the consequences of the latest war. As such, commercial banks’ consolidated balance sheetshowed a yearly increase of 3.7% in assets to $70.3bn, thus reinforcing its upward trend. Customerdeposits and loans rose by 3.9% and 3.3% to $57bn and $19bn respectively. In parallel, capital fundsof Lebanese banks improved by 36% in 2006 after registering a 10.4% growth in 2005 as banks areanticipating the implementation of Basel II starting 2008.

The Central Bank sustained its policy of pegging the value of the Lebanese currency to the dollarat a fixed rate of LP/$1507.5 in light of persisting confidence in BDL’s efficiency in witheringdangers on the national currency. Activity on the Beirut Stock Exchange (BSE) improved in 2006in terms of value traded, although prices of most stocks dropped after the hike witnessed inJanuary, mainly due to the political uncertainty looming over the country after the July-Augustwar. Nevertheless, the total market turnover reached $2.03b, up 119% from 2005.

2006 was an exceptional year for BLOM Bank, despite the summer war in Lebanon. Our Bank hassuccessfully proven itself as a solid financial institution with the adequate strategies that enableit to effectively absorb severe economic shocks. This strong stand has won unanimousaccreditations from international specialized rating and ranking institutions as BLOM BANKreceived in 2006 all awards granted to a Lebanese bank: Best Bank in Lebanon from The Banker,Best Bank in Lebanon and Best Investment Bank in Lebanon from Euromoney and Best Bank inLebanon from Global Finance.

In addition, BLOM BANK won Best Bank in Lebanon from Global Finance for 2007 and receivedthe Best Use of Technology in the Middle East award from The Banker Middle East. It is worthnoting that such an award was given for the first time to a Lebanese Bank. BLOM BANK alsomaintained the highest financial strength rating among Lebanese banks from Capital Intelligence,a regional rating agency.

Despite the slowly recovering economic conditions in Lebanon, BLOM BANK total assets rose toa total of USD 14.2 billion in 2006, up 19% year-on-year, while customer deposits grew 15.5%

07

Chairman’s Letter

06

Dr. Naaman AZHARI - Chairman & General Manager


reaching a total of USD 11.7 billion. In line with the implementation of Basel II’s standardizedapproach in 2008, all Lebanese banks, including BLOM BANK have been increasing their capitalfunds to better reflect adjusted risk weightings. As such, our Bank’s capital funds rose 33% to USD1,279.59 million. In addition, the Bank pursued its regional expansion strategy in an aim to enhancemarket accessibility. Within that context, we opened two new branches in Amman, Jordan, as wellas four new branches in Syria for our subsidiary, BANK OF SYRIA AND OVERSEAS (BSO), andexpanded BLOM BANK EGYPT’s network in its domestic market by opening two new branches inCairo. BLOM BANK EGYPT plans to open 10 new branches in Egypt during the course of 2007. Asfor new licensing, BLOM BANK applied for a licence to establish a corporate bank in Qatar andreceived the approval to open a representative office in Abu-Dhabi, while BLOM BANK FRANCEapplied for a bank licence in Algeria and BLOMINVEST BANK, our rlebanese investment bankingsubsidiary, applied for a Private and Investment Banking license in Saudi Arabia. In Lebanon, threenew branches of BLOM BANK sal in Mansourieh, Zouk Mosbeh, and a retail branch in Verdun wereopen and there are plans to open four new branches in the coming year in Achrafieh, Jbeil, Hamra(Retail Branch), and Mina El Hosn.

BLOM BANK’s continuous emphasis on maintaining high levels of liquidity and strong asset qualitywas reflected in the rise of immediate liquidity in foreign currencies to 78.26% of foreign currencydeposits from 71.52% in 2005. The Bank pursued its conservative lending strategy to preserve itshigh asset quality loan portfolio, a criterion considered essential in the current economicsituation. Therefore, and as a direct application of this strategy, we maintained a low net loansand advances to total deposits ratio of 16.44%, which has been constant for two consecutiveyears.

Despite the difficult economic situation looming over Lebanon in 2006, and BLOM BANK’songoing conservative strategy, 2006 net profits increased by 32% year-on-year to USD 180.688million. The return on average assets increased to 1.38% in 2006, up from 1.20% in 2005. Earningsper share increased to USD 7.29 in 2006 from USD 6.09 in 2005. As such, the yield on the marketvalue of BLOM BANK’s GDR based on its closing price at the end of 2006 was at 12.65%. Theincrease in profits is mainly attributed to the 48.89% increase in net interest income and thesuccessful cost containment policy of the bank. For instance, we registered one of the lowestcost-to-income ratio in the industry, which stood at 35.10% at the end of 2006. The Bank’s GeneralAssembly of shareholders held on April 12th, 2007 approved the distribution on 2006 profits ofUSD 15 for each series 2002 preferred share, USD 8.5 for each series 2004 preferred share, and USD9.5 for each series 2005 preferred share. In addition, the Assembly approved the distribution of aLBP 5,000 dividend per common share and GDS.

BLOM BANK’s strategic goals continue to focus on the maximization of shareholders’ value, theconsolidation of the Bank’s financial strength, the pursuing of our regional expansion strategy andthe development of our universal banking services that cater to all customers needs .

Chairman’s Letter

1991

19971998199920

0020

01

2005

2006

2002

2003

2004

19921993199419951996

11,735

10 ,16 1

8,992

7,000

6,215

5,5255,056

4,330

3,861

3,3332,886

1,8051,259

871595504

14000

12000

10000

8000

6000

4000

2000

0

Years

Customer Deposits Evolution in millions of USD

1951 196119711980

5864731

Dep

osi

ts (

in m

illio

ns o

f U

SD)

Customer Deposits Evolution

0908


10 11

TOTAL ASSETS

LBPUSD

CUSTOMER DEPOSITS

LBPUSD

TOTAL NET LIQUIDITY

LBPUSD

SHAREHOLDERS’ EQUITY

LBPUSD

CAPITAL FUNDS

LBPUSD

TOTAL LOANS & ADVANCES

LBPUSD

NET INCOME AFTER TAX

LBPUSD

EVOLUTION OF MAIN INDICATORS

14,219.784

21,436,325

11,734.913

17,690,381

10,578.37

15,946,895

1,255.60

1,892,813

1,279.58

1,928,970

1,987.86

2,996,698

180.69

272,388

11,918.23017,966,731

10,160.8615,317,489

9,143.5513,783,905

894.251,348,089

957.801,443,883

1,670.302,517,982

136.85206,298

19.31 %

19.31 %

15.49 %

15.49 %

15.69 %

15.69 %

40.41 %

40.41 %

33.6 %

33.6 %

19.01 %

19.01 %

32.04 %

32.04 %

2006 2005 Change 05/06

LIQUIDITY RATIOS

Net liquidity in LBPNet immediate liquidity in foreign currencyLiquid assets over total assets

LOANS TO DEPOSITS RATIOS

LBPF/CTotal

ASSET QUALITY - NOT INCLUDING GENERAL PROVISION

Net doubtful loans over total loansProvision over doubtful loansProvision over total loansGross doubtful loans / Gross total loans

CAPITAL ADEQUACY RATIOS

Before dividend distributionAfter dividend distribution

PROFITABILITY RATIOS

Return on average equityReturn on average assetsEarnings per share USDDividend per common share USD Dividend payout ratioRetention RatioNet asset value per common share USD

FINANCIAL RATIOS

78.26 %

74.39 %

109.8 %

18.96 %

16.94 %

7.96 %

82.35 %

8.85 %

10.25 %

2.02 %

36.35 %

39.50 %

1.38 %

7.29 %

3.32 %

45.98 %

54.02 %

44.41

16.81 %

71.52 %76.72 %

105.63 %

6.62 %19.48 %16.44 %

87.72 %10.71 %11.22 %

1.40 %

33.23 %36.36 %

1.20 %6.09 %2.65 %

49.55 %50.45 %

48.34

17.21 %

2006 2005

2006 Financial Ratios

( in % or USD) O62006 Major Highlights

(in millions)


Board of Directors and General Management

Dr. Naaman AZHARI

Mr. Saad AZHARI Mr. Samer AZHARI

13

1400

1200

1000

800

600

400

200

0

Tier I & Tier II capital in millions of USD

2002 2003 2004 2005 2006

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

8,786

10,83511,918

14,220

Total assets in millions of USD

100

50

0

Net profits in millions of USD

150

16,000

7,146

2002 2003 2004 2005 2006

88.3 91.15136.85

180.69

83.60

200

638.38790.61

957.8

1,279.6

569.35

2002 2003 2004 2005 2006

Strong and Continuous Growth during the last 5 years

(in millions of USD)

12

Chairman & General Manager>

Vice-Chairman & General Manager> Group

Secratary General>

Directors>H.E. Sheikh Ghassan SHAKER,

Grand Officier de la Légion d’Honneur H.E. Mohamed JAROUDI

H.E. Fouad EL- BIZRI Mr. Joseph Emile KHARRAT

Mr. Nicolas Nicolas SAADESheikh Salim Boutros EL- KHOURY

Me. Youssef Selim TAKLA Banorabe Holding s.a.


BLO

MBA

NKS.

A.L.

Head

Off

ice:

Bei

rut

Bran

ches

: Leb

anon

(50

Bran

ches

) Cy

prus

Da

mas

cus F

ree

Zone

Jo

rdan

(3 b

ranc

hes i

n Am

man

)

BLOM BANK FRANCE S.A.

Head Office: ParisBranches: London Dubai Sharjah

99.99% BLOM BANK (SWITZERLAND) S.A.

Head Office: Geneva

100%

BLOM BANK EGYPT S.A.E.

Head Office: CairoBranches: Egypt (12) Romania (5)

99.37%

BLOMINVEST BANK S.A.L.

Head Office: Beirut

99.88% BLOM DEVELOPMENT BANK S.A.L.

Head Office: Beirut

99.98%

AROPE INSURANCE S.A.L.

Head Office: BeirutBranches: Lebanon (4)

AROPE SYRIASyria International Insurance

Head Office: DamascusBranches: Aleppo

88.56%

10%

BANK OF SYRIA & OVERSEAS S.A.A.

Head Office: DamascusBranches: Damasc us (4) Hama Aleppo (2) Latakia Tartous Homs

39.00%

34%

5%

Group Chart

BLOM EGYPT SECURITIES S.A.E

Head Office: Cairo

100%

071514

BLOM BANK’s General managementDr. Naaman AZHARI, surrounded by (to his right) Mr. Saad AZHARI, Mr. Amr AZHARI, Mr. Fawaz KAYAL, Mr. Fahim MOADAD and (to his left) Mr. Samer AZHARI, Mr. Georges SAYEGH, Dr. fadi OSSEIRAN and Mr. Habib RAHAL


Major Common Shareholders

* Total common shares: 21,500,000** Starting 1998, and after the issuance of Global Depositary Receipts (GDR) by BLOM Bank Shareholders, the Bank of New York as Depositary,became shareholder on the Bank’s register.*** The major shareholders of Banorabe Holding are the same as in BLOM Bank (except Bank of New York and AZA Holding).

General Management

Chairman and General Manager Dr. Naaman AZHARI

Vice-Chaiman and General Manager Mr. Saad AZHARI Group Secretary General Mr. Samer AZHARI

General Manager Mr. Habib RAHALAssistant General Manager Mr. Amr AZHARI

Chairman’s Advisors

Mr. Fawaz KAYAL Sheikh Fahim MOADAD**Mr. Elias ARACTINGI Planning & Organization Department, Retail Banking Department

(** Fomerly Vice Governor of the Central Bank of Lebanon)

General Management Consultants

Mr. Georges SAYEGHMr. Adnan SALLAKH

BLOM BANK’s Major Shareholders and General Management

Bank of New York** Banorabe Holding*** AZA Holding (Azhari Family over 50%)Azhari FamilyActionnaires Unis (Azhari Family over 50%) Shaker Holdings S.A.L. (Shaker Family)Mrs. Nada Aoueini Jaroudy Family Saade FamilyKhoury Family Others

11.4 %

9.33 %

2.86 %

34.37 %

5.39 %

5 %

4.91 %

1.68 %

2.29 %

20.85 %

1.92 %

% of Total Common Shares*

1716

BLOM BANK’s and BLOMINVEST BANK General management


Board of Directors

Chairman and General Manager Dr. Naaman AZHARI

Vice-Chairman and General Manager Mr. Saad AZHARI Group Secretary General Mr. Samer AZHARI

Directors H.E. Sheikh Ghassan SHAKER,

Grand Officier de la Légion d’Honneur

H.E. Mohamed JAROUDI H.E. Fouad EL- BIZRI

Sheikh Salim Boutros EL- KHOURY Mr. Joseph Emile KHARRAT Mr. Nicolas Nicolas SAADE

Me Youssef Selim TAKLA Banorabe Holding s.a.

Senior Managers*

Dr. Pierre ABOU EZZE Human ResourcesMr. Grégoire AZAR International Relations/TreasuryMr. Talal BABA AccountingMrs. Jocelyne CHEHWAN Retail MarketingMr. Moustapha GHALAYINI CreditMr. Samir KASSIS Corporate UnitMr. Mekhael KAZZI Back Office - OperationsMr. Antoine LAWANDOS Chief Information OfficerMr. Elias MOKHACHEN Regional MarketingMr. Naoum RAPHAEL Internal Audit / Group InspectionMr. Jacques SABOUNGI Trade FinanceMr. Fouad SAID Overseas MarketingMe Aimée SAYEGH LegalMr. Mohamed SOUBRA IT OperationsMr. Riad TABBARAH Credit Follow UpMr. Ramzi TARABICHI Internal AuditMr. Samih ZEINEDDINE Administration

Managers*

Mr. Mohamed BIZRI EngineeringMr. Michel GHANEM MarketingMr. Imad KADI Retail & CreditMr. Wassim KHODOR Foreign ExchangeMr. Gerard RIZK Risk ManagementDr. Gladys YOUNES Communication & Investor Relations

BLOM BANK’s Board of Directors and General Management BLOM BANK’s Organization Chart

SHAREHOLDERS

BOARD OF DIRECTORS

CHAIRMAN & GENERAL MANAGERS

Consulting Committee Internal & IT Auditors

Chairman’s Advisors Group Inspection

Inspection & Control Strategy Committee

Accounting

Administration

Anti-Money Laundering Unit

Back Office Operations

Communication & Investor Relations

Corporate Unit

Credit

Engineering

Group Inspection / Internal Audit

Human Resources

Information Systems

International Affairs & Treasury

IT Security Unit

Legal Affairs

Marketing

Planning & Organization

Recovery & General Managemenet Secretariat Unit

Retail Banking

Risk Management

Trade Finance

Anti-Money Laundering

Asset-Liability Management

Board Audit

Exceptional Credits

Credit Files Rating

Credit No.1

Credit No.2

Executive

Follow-up Credit Risk

Human Resources

Information Technology

Internal Audit

Investment & Treasury

Islamic Bank

IT Security

Legal

Marketing

Purchasing & Maintenance

Operations & Internal Procedures

Risk Management

EXTERNAL AUDITORS SOLICITORS

Ernst & Young - Semaan, Gholam & Co. H.E. ME. Mohamad JAROUDIMe. Georges ABOUZAMEL

Me. Antoine MERHEB

BRANCH MANAGERS

50 in Lebanon1 in Cyprus

1 in Damascus Free Zone3 in Jordan

07

* By alphabetical order

1918

DEPARTMENTS / UNITS COMMITTEES


21

MANAGEMENT DISCUSSION & ANALYSIS 2006

1. OPERATING ENVIRONMENT

The Lebanese economy was severely hit during 2006, as the repercussions of the assassination of former PrimeMinister Rafik Hariri in February 2005 were aggravated by the Israeli 34-day war and blockade on Lebanon inJuly-August 2006 and the subsequent political turmoil that has characterized the domestic scene ever since.Consequently, the huge negative impact of the war on the country’s political, economic and social aspectswiped out the significant growth registered in the first half of 2006. However, Lebanon’s solid economicresilience and the strong international support, which materialized with the success of the Paris III Donors’Conference, had the overwhelming effect of offsetting the huge losses incurred during the summer 2006 war.Lebanon was also able to rely on the strength of its financial system (reflected by the banks’ significantliquidity) and the high level of foreign reserves at the Central Bank to wither away the consequences of thelatest war. The latter were boosted by deposits totaling USD 1.5bn from the Kingdom of Saudi Arabia and theState of Kuwait, which through their acts, demonstrated the strong implicit support enjoyed by Lebanon,particularly in times of need.

Real Gross Domestic Product (GDP) growth estimates for 2006 were revised from an expected 6% to anestimated contraction of 5%, later revised upwards to 0%, down from an overall 1% growth recorded in 2005.Inflation was at around 4% and private consumption and investment weakened as Israel inflicted an embargothat persisted for several weeks even after the cessation of its military attacks on Lebanon. The total numberof tourists has declined by 6.7% year-on-year to 1.06 million, when Lebanon was expecting no less than 1.5million tourists in 2006. The trade deficit decreased by 5% to $7.1bn, mainly due to a rise in exports in early2006 and a drop in imports as the Israeli blockade took effect.

The country’s balance of payments registered an overall surplus of $2.8bn, up from $748m in 2005 mainly drivenby the surpluses registered before July 2006, as during this month alone, the balance of payments recorded adeficit of $1.2bn which was offset by Saudi and Kuwaiti deposits at the Central Bank worth $1.5bn to replenishthe latter’s foreign currency reserves. Accordingly, the net foreign assets of the Central Bank rose by $1.3bnduring the year, accompanied by a rise of $2.3bn in commercial banks’ net foreign assets. The ratio of currentaccount deficit to GDP showed a slight deterioration, increasing from 11.8% in 2005 to 13.0% in 2006.

The country’s budget deficit rose by 64% to $3.04bn in 2006, or some 13% of GDP up from 8% in 2005. The fiscalstance deterioration is mainly attributed to the Israeli July-August war, which caused a $1.2bn increase in thegovernment’s budget deficit.

Lebanon’s public debt stood at $40.5bn by the end of 2006, or at 175% of GDP, slightly up from 173% in 2005.The debt denominated in foreign currency (external debt) stood at 50% of total debt in 2006, and waspractically unchanged compared to 2005. Similarly, the non-market debt (held by the Central Bank, publicinstitutions, foreign governments and international agencies) as a ratio of total debt only slightly decreasedfrom 33% in 2005 to 30% in 2006.


effective way for the country to resolve its fundamental economic problems” needs political consensus andstability in order to be thoroughly implemented.

22 23

GDP Growth RateEstimated Inflation Balance of PaymentsTrade Deficit Budget DeficitLP/USDGross Public DebtGross FX ReservesBanks’ Assets

KEY INDICATORS

0.0 % 1.0 % - 100 b.p.4.0 % 2.4 % 160 b.p.

$ 2,749.5 $ 747.6 273.9 %$ 7,117 $ 7,459 (4.6 %)

$ 3,040 $ 1,856 63.8 %$ 1,507.5 $ 1,507.5 0.0 %$ 40,466 $ 38,506 5.1 %$ 12,975 $ 11,657 11.3 %$ 76,179 $ 70,325 8.3 %

2006 2005 % Change

USD Millions or %

Notes: Data included in “BLOM’s Environment” are based on several sources.

- Public finance, public debt, interest payments, cost of debt and trade balance are based on the Ministry of Finance’s publications.

- Tourists, FX reserves, cleared checks, banking sector’s performance and balance of payments are based on Banque du Liban’s publications.

- GDP figures are based on Moody’s estimations.

- Stock market data, interbank rate, domestic interest spread and average eurobonds yield are based on calculations performed by

the Economic Research Department at BLOMINVEST Bank s.a.l.

MANAGEMENT DISCUSSION & ANALYSIS 2006 MANAGEMENT DISCUSSION & ANALYSIS 2006

The Central Bank sustained its policy of pegging the value of the Lebanese currency to the dollar at a fixed rateof LP/$1507.5 in light of persisting confidence in BDL’s efficiency in withering dangers on the national currency.The average interbank rate, which is a sound indicator for the pressure on the local currency, increased by 169b.p. to reach an average of 5.45% in 2006, mainly affected by a temporary rise to 8.34% and 6.79% in July andAugust 2006 respectively, levels which remain way below the rise to 10.14% and 8.60% witnessed in March andApril 2005 following former PM Hariri’s assassination. Although the BDL had to intervene in the foreignexchange market during the period of the Israeli attacks, the pressure diminished in the subsequent months,supported by external deposits of foreign currency at BDL and by the rise in foreign exchange reserves to reach$13bn at the end of 2006, from $11.7bn in 2005.

Commercial banks’ consolidated balance sheet showed a yearly increase of 8.3% in assets to $76bn, thusreinforcing its upward trend. Customer deposits and loans rose by 6.5% and 12.5% to $61bn and $21bnrespectively. In parallel, capital funds of Lebanese banks improved by 36% in 2006 after registering a 10.4% in2005, mainly due to banks’ increases in capital with the approaching application of the Basel II Accord inLebanon by 2008.

Domestic interest rates moved in opposite directions as the average deposit rate on the LBP went down by 15basis points from 7.64% in 2005 to 7.49% in 2006, whereas the average US dollar deposit rate rose by 112 basispoints to 4.71%. The average LBP-US differential or exchange rate risk decreased from 4.05% to 2.78% and theaverage LBP-Libor differential or sovereign risk dropped from 4.08% to 2.29%. The value of cleared chequesdecreased by 3.5% in 2006, and the dollarisation rate increased to 76% of deposits by the end of 2006compared to 73% in 2005.

Activity on the Beirut Stock Exchange (BSE) improved in 2006 in terms of value traded, although prices of moststocks dropped after the hike witnessed in January, mainly due to the political uncertainty looming over thecountry after the July-August war. As such, the total market turnover reached $2.03b, up 119% from 2005. Themarket capitalization increased by 69% to $8.3bn; although the BLOM Stock Index, the Lebanese benchmarkindex, dropped by 9.6% to 1,184.15 after it rose by 106% to 1,309.40 in 2005. The political atmosphere in thecountry similarly affected the Lebanese Eurobond market, which witnessed a drop in most paper prices mainlyafter the assassination of former Minister of Industry Pierre Gemayel late November. As such, sovereign andcorporate paper ended the year on low demand across the maturity spectrum, with the average yield on alltraded bonds increasing year-on-year by 183 b.p. to reach 7.96% at end-2006.

The Lebanese government presented a 5-year (2007-2011) “Recovery, Reconstruction, And Reform” program tothe Paris III Donor Conference that was held in support for Lebanon on January 25, 2007 and in which regionaland international donors pledged $7.6bn to the country. The program consists of five pillars ofgrowth–enhancing structural reform, social sector reforms, fiscal adjustment, privatization, and monetary andexchange rate policies, which are inevitable if Lebanon is to be back on track in terms of sustainable economicand social development. However, this program described by some observers as “by far the best and most


24 25

2006 saw a significant expansion in Insurance as AROPE Lebanon, 88.56% owned by BLOM BANK, expanded itsservices and opened AROPE Syria. Arope Syria, which is now 49 % owned by BLOM BANK sal. The company isamong the first private insurance companies to get a license for conducting operations in the Syrian market.Arope Syria offers a wide range of Insurance and Bank insurance products ranging from medical insurance, termlife insurance on personal accidents, motor, workmen’s compensation, travel, marine, property, and generalthird party liability.

3. EVOLUTION OF TOTAL ASSETS

Despite the slow recovering economic conditions in Lebanon, 2006 has witnessed an interesting increase in theBank’s assets. As such, total assets rose by 19.31% by USD 2,301.6 million to reach a total of USD 14,219.8 billionin 2006.

Moreover, BLOM BANK sal was successful in gradually increasing its market share in terms of total assets from16% at the end of 2004, to 16.96% at the end of 2005, and to 18.67 % at the end of 2006.

4000

2000

0

Evolution of total assets in millions of USD

6000

2002 2003 2004 2005 2006

14,220

7,146

2001

6,285

8000

10000

12000

14000

16000

8,786

10,83511,918


2. OVERVIEW

2006 was an exceptional year for the bank, despite the summer war in Lebanon. BLOM BANK sal hassuccessfully proven itself as a solid financial institution with the adequate strategies that enable it tosuccessfully absorb severe economic shocks. This strong stand has won unanimous accreditations frominternational specialized institutions. As such, BLOM BANK sal received in 2006 all awards granted to aLebanese bank:

- Best Bank in Lebanon from The Banker - Best Bank in Lebanon from Euromoney - Best Investment Bank in Lebanon from Euromoney - Best Bank in Lebanon from Global Finance- Highest Financial Strength Rating among Lebanese banks according to Capital Intelligence

BLOM BANK sal also remained the largest bank in Lebanon in terms of assets and the most profitable bank.As at year end 2006, the bank’s total assets increased by 19.31% to reach USD 14.22 billion, with customerdeposits increasing by 15.5% to reach USD 11.73 billion and net profits increasing by 32.04% to reach USD 180.69million. On the other hand, the bank continued its strategy of strengthening its capital funds with the issue ofUSD 276 million worth of GDRs in 2006, the consequence of which was a 33.6% rise in capital funds.

This strong stance is the direct result of the bank’s conservative and lending policy, its professional approach,and most of all the trust of its customers. As in 2005, BLOM BANK’s strategy remained focused onconsolidating financial strength, through a strong profitability and excellent asset quality. High liquidity levelsand comfortable capital adequacy ratios were easily maintained while we remained ranked number one interms of profitability and total assets among all Lebanese banks.

2006 was another year of strong regional expansion. Through its subsidiaries the bank opened new branchesin various countries in the region. BLOM BANK EGYPT opened two new branches in Cairo while BANK OF SYRIAAND OVERSEAS opened four new branches in Hamah, Tartous, Mezza, and Homs. In Lebanon, BLOM BANK salalso opened three new branches in Mansourieh, Zouk Mosbeh and Verdun (retail Branch), as well as in Jordanin Wahadat and Souwaifieh. The regional expansion enhanced our global presence, which encompassesLebanon, France, UK, UAE, Romania, Egypt, Jordan and Syria, while diluting any country specific risk. BLOMBANK has been the fastest growing Lebanese bank in its regional expansion as it has 40% market share of theLebanese banks’ consolidated customer deposits outside Lebanon.


4.1 Customer Deposits

In 2006, customer deposits grew by USD 1,574.058 million, or by 15.49% in percentage terms reaching a total ofUSD 11,734.913 million by year end 2006, as compared to a growth of 13% and a total of USD 10,160.855 millionin 2005.

Deposits in foreign currency represented 82.38% of total deposits for the year 2006 as compared to 76.35% atthe end of 2005 and to 73.19% in 2004. This was partly due to our group expansion outside Lebanon.

The fact that BLOM BANK’s customer deposits grew by 15.49%, which is much larger than the 6.50% growth formarket, is evidence of BLOM BANK’s sal continuous outgrowing of the market. The Bank’s share of totalconsolidated sector deposits increased from 17.83% in 2005 to 19.33% in 2006.

Fiduciary deposits increased by 86.46% in 2006 reaching USD 1,840.371 million as compared to a growth of 53.81% and a total amount of USD 987.009 million in 2005.

26 27

4000

2000

0

Evolution of customer deposits in millions of USD

6000

2002 2003 2004 2005 2006

11,735

6,215

2001

5,525

8000

10000

12000

14000

7,686

8,992

10,161


4. SOURCES OF FUNDS

Sources of funding are grouped into four main categories: customer deposits, capital funds (Tier I & Tier II),banks and financial institutions and other liabilities. It is apparent from the graph below that customerdeposits accounted for 82.53% of total funds as compared to 85.25% in 2005, while capital funds represented9% compared to 8.04% in 2005, and Banks and financial institutions accounted for 6.11% of total funding at yearend 2006 as compared to 3.92% in 2005. Other liabilities accounted for the smallest part of total funds at 2.37%in 2006 (2005: 2.79%).

Sources of Funds

Customers Deposits

Tier I & Tier II Capital

Banks & Financial Institutions

Other Liabilities

2006

82.53%

9.00%

6.11%2.37%

85.25%

8.04%

3.92% 2.79%

2005


5. USES OF FUNDS

With Basel II’s standardized approach to be fully implemented by Lebanese banks in 2008, risk assessmentbecomes even more of a crucial factor when considering investments and asset allocation. Therefore, thegroup is keen to stresses on its strategy of maintaining high asset quality and strong sustainable investmentportfolios. The bank’s return on assets (ROA) in 2006 stood at 1.38%.

As a result of the bank’s strategy to reduce the Lebanese sovereign country risk in its books, the share ofLebanese pound Treasury bills and other Lebanese government debt securities in foreign currencies(Eurobonds) to total assets was decreased in 2006 to 16.21% from 19.70% in 2005 and 19.91% in 2004. Similarly,the percentage of cash and deposits at the Central Bank decreased to 29.14% from 31.18% for the same period,while the share of bonds and financial instruments with fixed income decreased to 1.80% in 2006 from 2.42%in 2005. On the other hand, loans granted to customers remained almost the same amounting to 13.98% oftotal assets in 2006 compared to 14.01% in 2005.

The above-mentioned decreases were offset by an increase in our placements with banks and financialinstitutions, which amounted to 36.17 % of total assets in 2006 as compared to 29.48% in 2005. This assetallocation switch is in line with one of our main strategies to maintain high liquidity levels especially in periodsof crisis.

Uses of Funds

28 29

Lebanese Treasury Bills and

other governmemtal bonds

Cash and Central Banks

Banks and Financial

Institutions

Bonds and Financial

Instruments with Fixed

Income

Loans to Customers

Others

2006

29.14%

13.98%

1.80%

36.17%

2.70%16.21%

31.18%

14.01%

2.42%

29.48%

3.21%19.70%

2005


4.2 Capitalization (TIER I & TIER II CAPITAL)

Tier I capital increased by 40.41% reaching USD 1,255.597 million in 2006 as compared to an increase of 28.39%for a total amount of USD 894.255 million in 2005. The rise in the Tier 1 capital was due to the:

- Issuance of GDRs for the total amount of USD 276 million in February - A rise in the reinjected net profits for the year 2006. It is worth noting that net profits rose to USD 180.69

million before dividend distribution at year-end 2006.

Tier II Capital in 2006 decreased by 62.26% to reach USD 23.985 million, as compared to a 32.47% decrease in2005. This drop in 2006 Tier II capital is due to the decrease in the cumulative change in fair values of the banksecurities portfolio by 73.57%.

300

150

0

Tier I & Tier II in millions of USD

450

2002 2003 2004 2005 2006

1255.60

23.98

484.85

84.50

2001

356.67

84.34

600

750

900

1050

1200

1350

553.73

84.65

696.51

94.10

894.25

63.55

Tier I Tier II


Distribution of the Treasury Portfolio

30 31

(in USD Millions)

Investments Held for Trading:

Treasury Bills and BondsAccrued Interest

Available for sale investments:

Treasury Bills and BondsAccrued InterestUnrealized PremiumsUnrealized Discounts

Total

DISTRIBUTION OF THE TREASURY PORTFOLIO (LEBANESE & GOV. BILLS AND BONDS)

32.8430.688

2,305.088

At December 31, 2006

11.5640.079

33.531 11.643

2,271.557 2,336.512

2,240.045 2,324.55347.080 41.240

1.868 0.335(17.436) (29.615)

2,348.155


Lebanese Treasury Bills

Other Governmemtal Bonds

in Foreign Currencies

2006

57.50%

42.50%

56.46%

43.54%

2005


5.1 Cash and CEntral Bank

Cash and central bank reserves increased by 11.151% to USD 4.144 million in 2006 from USD 3.716 million in 2005.The share of our subscription in Central Bank certificates of deposits to total cash and central banks is 57.91%in 2006 as compared to 54.61% in 2005.

The Cash and central bank category includes non-interest bearing balances held by the Bank at the Central Bankof Lebanon (Banque Du Liban) in compliance with the required reserves obligation on commitments inLebanese Pounds of all banks operating in Lebanon (calculated on the basis of 25% of sight and 15% of termcommitments). This requirement also applies to interest bearing placements at the rate of 15% on foreigncurrency deposits and certificates of deposits issued by the Lebanese Banque Du Liban.

5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds

The bank’s portfolio of Lebanese Treasury bills and other government debt securities decreased by 1.83% toUSD 2.305 million in 2006 from USD 2.348 million in 2005, in compliance with the Bank’s more conservativestrategy regarding its exposure to Lebanon’s sovereign risk. The Lebanese pounds and foreign currencydenominated government bills and bonds accounted for 57.50 % and 42.50% of the total portfolio as comparedto 56.46% and 43.54% in 2005 respectively.

The table below highlights the distribution of the Treasury portfolio in accordance with the new IFRS(International Financial Reporting Standards) classification:

Cash Central BanksCertificate of DepositsTotal

DISTRIBUTION OF CASH AND CENTRAL BANKS

621,682

2,4002,400

1.4940.60

57.91100.00

Amount

in USD Millions%

End of Year 2006

551,632

2,0303,717

1.4943.9154.61

100.00

Amount

in USD Millions%

End of Year 2005


5.4 Banks and Financial Institutions

The Bank’s deposits with banks and financial institutions increased by 46.39% in 2006 to reach USD 5.144 billionas compared to USD 3.514 billion in 2005. These deposits represented 36.17 % of total assets in 2006 ascompared to 29.48% in 2005. This significant increase is mainly attributed to the Bank’s strategy of maintaininghigh liquidity levels especially in periods of crises.

Time deposits accounted for 96.12% of total deposits with banks and financial institutions as compared to95.82% in 2005. It is worth noting that 99.19% of the current and time deposits are in foreign currencies.

5.5 Loans and Advances to Customers

The Bank follows a conservative lending strategy that preserves its high asset quality loan portfolio. Thisstrategy allows BLOM BANK to preserve high liquidity ratios, which are considered essential in the currenteconomic situation. Therefore, and as a direct application of this strategy, the Bank maintained a low net loansand advances to total deposits ratio of 16.44% in 2006, which has been constant for two consecutive years.

Our outstanding loans increased by 19.01% year-on-year to reach USD 1.988 billion in 2006, up from USD 1.670billion in 2005, an increase mainly attributed to the growth of the Bank’s loans and advances portfolio outsideLebanon. Consequently, the Bank has outgrown the market, which witnessed a 12.46% year-on-year growth inloans and advances to customers. The Bank’s market share of loans and advances in the Lebanese bankingsector reached 9.28% in 2006, up from 8.77% in 2005.

32 33

1000

500

0

1500

2000

2500

2002 2003 2004 2005 2006

1,988

996

2001

1,198 1,1641,352

1,670

Evolution of total loans and advances in millions of USD


5.3 Bonds and Financial Instruments with Fixed Income

Bonds and financial instruments with fixed income decreased by 11.08 % year-on-year to reach to USD 256.120in 2006 million, down from USD 288.029 million in 2005.

This category includes bonds and certificates of deposit that are classified as follows:

- Held for trading- Available for sale- Held to Maturity- Loans and receivables

(in USD Millions)

Held for Trading:

BondsAccrued Interest

Available for sale:

BondsLess: provision for ImpairmentAccrued Interest

Held to Maturity:

BondsAccrued Interest

Loans & Receivables:

Certificates of DepositAccrued InterestT

Total

DISTRIBUTION OF BONDS AND FINANCIAL INSTRUMENTS WITH FIXED INCOME

00

256.120


00

0 0

92.538 116.876

91.450 114.9380

0

00

163.582

159.7553.826

(0.251)

0

00

171.153

167.8093.344

1.088 2.189

288.029



34 35

Non-performing accounts:

Cover loans which display most or all of the following:

- A significant drop in the client’s profitability- A drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting in repetitive

delays in repayment exceeding a period of 3 months. - A noticeable depreciation in the value of the collateral provided and repetitive delays in repayment for a

period not exceeding three months. - Credit facilities are not used – partially or in whole – for the purpose specified in the loan agreement.

The credit risk committee will review the repayment schedule with the client and will keep the account underclose observation. However, interest and commissions will be classified as unrealized until the account isregularized.

Doubtful accounts:

Represent loans which display all of the conditions of a non-performing account in addition to having acomplete lack of credit movement into the account for a period of 6 months and a delay in payments of therescheduled loan which exceeds 3 months from the date of maturity. The Bank will make a partial provisionfor the loan and consider interest and will commission as unrealized.

Bad debt accounts:

Include all “Doubtful Accounts” considered unrecoverable due to the lack of collateral or loss of contact withthe client. In this case, interest will cease to be accrued and a provision of 100% of the principal amount ofthe loan will be made. The account is under litigation until a ruling by the court is made, after which it iswritten-off.

The Bank’s ratio of gross doubtful debt to gross total loans decreased in 2006 to 10.25% from 11.22% in 2005.The provision for doubtful accounts decreased to 98.04% in 2006 from 103.38% in 2005 .

Provisions and unrealized interest on doubtful debts and non-performing accounts decreased by USD 1,403 million to

reach USD 232,288 million at the end of 2006. The amount includes provisions for commercial loans not classified at

the end of 2006 after deducting the amount of USD 12.275 million of provisions for doubtful loans no more required,

transferring USD 7.443 million to an off-balance sheet item related to bad debts and provisions written-off

amounting to 5.341 million in 2006.


The above loan classification is in accordance with that of the Central Bank of Lebanon (Banque Du Liban)under decree N0 7159 dated November 10th, 1998 and the decree related to bad debt classification datedDecember 2001. Below is a definition of each of the net loan portfolio classification.

Regular accounts:

A- Unconditional: Cover accounts which display regular movements sufficient to repay the loan in accordancewith the repayment schedule. The latest financial statements should be available and adequate collateralshould be taken to cover the loan.

B- Incomplete file: as in point (A), adequate collateral is provided and repayment is expected to be on schedule.However, the file is considered incomplete due to the lack of up to date financial statements.

Special attention accounts:

Display signs of irregular movements or exceed the credit limit on a continuous basis. Recent financialstatements are unavailable and adverse economic conditions may affect the borrower’s ability to repay thedebt. Collateral has not been evaluated for the last 3 years. Such an account may be considered recoverable.

However, such accounts should be closely monitored for a year, at the end of which any account that does notmeet the previously mentioned conditions will be reclassified.

(in USD Millions)

Regular AccountsSpecial Attention AccountsNet Non-Performing AccountsNet Doubtful AccountsNet Provisions for Commercial Loans not ClassifiedBad Debt AccountsTotal

CREDIT RISK CLASSIFICATION OF TOTAL NET LOAN PORTFOLIO

59.9728.50

1,987.66

End 2006

58.4627.70

40.16 27.42

1,894.94 1,584.37

(35.71) (27.65)0.00 0.00

1,670.30

End 2005

The table below highlights the credit risk classification of the Bank’s Net Loan portfolio:


36 37

An examination of the breakdown of our loan portfolio by type of collateral clearly shows that Overdraftsunderwent the largest decrease. This comes in line with our conservative lending policy that was tightenedduring periods of crises in an aim to preserve our asset and loan portfolio quality. In 2006, Overdraft decreasedto 16.636% of the total loans portfolio from 25.85% in 2005. On the other hand, commercial loans secured bymortgages increased to 29.30%, up from 22.84% in 2005 while retail loans increased to 15.99% from 12.10%.Similarly, advances against personal guarantees increased to 16.78%, up from 15.47% for the same period whileLC Financing dropped to 1.62%, down from 2.79%. Advances against cash collateral decreased to 19.78% from20.53%. The share of syndicated loans dropped to nill, down from 0.13% in 2005. Loans to members and staffdecreased to 0.13% from 0.20%, while loans to directors and related parties decreased to 0.04% from 0.08% in2005.

Distribution of loans by type of collateral:

Commercial Loans Secured

by Mortgages

Advanced Against Personal

Guaranties

LC Financing

Advances Against

Cash Collateral

Syndicated Loans

Retail Loans

Loans to Members of Staff

Loans to Directors and

Related Parties

Overdraft

2006 2005


16.60%

0.04%

15.99%

1.62%

0.13%

19.78%

0.00%

0.13%

12.11%

16.36%29.30%

2.79%

25.85%

0.20%

15.47%

0.08%

20.53%

22.84%

The ratio of foreign currency loans to total loans increased in 2006 to 91.72% up from 90.48% in 2005. On the other hand, the ratio of foreign currency loans to foreign currency deposits decreased to 18.86%in 2006, down from 19.48% in 2005.

Medium and Long term loans with maturities exceeding one year constituted 17.57% of the bank’s outstandingnet commercial loans in 2006 as compared to 19.19% in 2005.

The breakdown of our loan portfolio by economic sector reveals the following: an increase in loans toconsumers and to the services sector and a slight decrease in loans to the trade and liberal profession sectors.Loans granted to the agriculture sector stayed almost the same in 2006 and constituted 0.60% of our loanportfolio as compared to 0.63% in 2005. Loans granted to the manufacturing sector increased to 13.01% in 2006from 11.71% in 2005. Loans to Trade decreased from 33.64% in 2005 to 30.37% in 2006 with 4.82% of ourportfolio granted to trade retail and 25.55% to trade wholesale. Loans granted to the services sector witnesseda big increase as they constituted 20.21% of our 2006 portfolio, up from 13.32% of our 2005 portfolio. Loansgranted to freelance professions decreased to 12.65% in 2006, down from 20.03% in 2005. Loans to theconstruction sector decreased to 7.19% in 2006 from 8.57% in 2005, while consumer loans increased to 15.99%in 2006, up from 12.10% in 2005.

Distribution of Loans by Economic Sector

Trade

Services

Construction

Freelance Professions

Consumer Loans

Agriculture and Forestry

Manufacturing

2006

20.21%

0.60%

15.99%

7.19%

12.65%

13.01% 30.37% 33.64%

13.32%

0.63%

12.10%

8.57%

20.03%

11.71%

2005


38 39

7. PROFITABILITY

Net profits in 2006 increased by 32.04% year-on-year to USD 180.688 million, compared to 136.848 million in2005, up 50.13% from the year before.

Return on average equity slightly decreased in 2006 to 14.12%, down from 14.58% in 2005, due to the largerincrease registered in the shareholders’ equity of 40.41%, compared to a 32.04% rise in net profits. On the otherhand, return on average assets increased to 1.38% in 2006, up from 1.20% in 2005, as total assets increased by 19.31%.

Earnings per share increased to USD 7.29 in 2006 from USD 6.09 in 2005. As such, the yield on the market valueof BLOM BANK’s GDR based on its closing price at the end of 2006 was at 12.65%.

40.00

20.00

0

Evolution of net income in millions of USD

60.00

2002 2003 2004 2005 2006

180.69

83.60

2001

80.2080.00

100.00

120.00

140.00

160.00

180.00

200.00

88.3091.15

136.85


6. LIQUIDITY

BLOM BANK continuously aims at maintaining high levels of liquidity, minimizing risks and ensuring high assetquality . The Lebanese pound liquidity ratio, including Lebanese government treasury bills in 2006 stood at109.80%, compared to 106.74% in 2005 . The immediate liquidity (cash & banks) in foreign currencies increasedto 78.26% of foreign currency deposits from 71.52% in 2005.

BLOM BANK sal, along with all Lebanese banks, witnesses mismatches in maturities. The gap is negative formaturities of up to one month and from 1 to 3 months, USD 3,555 million and USD 1,141 million respectively. It turns back positive for maturities of 3 to 6 months, at USD 49 million. The positive gap reaches a maximumof USD 3,191 million before becoming negative again, standing at USD 233 million for maturities over 5 years.

(in USD Millions)

Total AssetsTotal Liabilities & Shareholder’s Equity2006 Liquidity Gap

2006 Cumulative

Maturity Gap

ASSET-LIABILITIES MATURITY GAP

Up to

1 month

1 to 3

months

3 to 6

months

6 months

to 1 year

1 to 2

years

2 to 5

years

Over

5 years

Total

(3,555)

6,250

9,805(3,555)

(4,696)

1,201

2,342(1,141)

(4,647)

507

45849

(4,252)

672

276395

(2,958)

1,299

51,294

233

3,191

03,191

0

1,099

1,333(233)

14,220

14,220

0


40 41

When we compare the proportions of average interest earning assets in 2006 to those in 2005, we do notnotice any significant change. Lebanese and other government bills constituted 21.13% of total average interestearning assets in 2006 as compared to 20.43% in 2005. Deposits with banks and central banks only slightlydecreased in 2006 to 42.25%, down from 43.30% in 2005. Bonds and other financial instruments with fixedincome, including certificates of deposit, represented 20.57% of the total in 2006, practically unchanged from20.23% of the total a year before. Loans and advances maintained a ratio of 16.04% of the total average interestearning assets for the second year in a row.

The above detailed average interest earning assets affected the Bank’s interest and similar income breakdownas follows:

Upon considering each component of interest income we can see that in 2006 the portion generated fromLebanese treasury bills and other government bills decreased to 25.52% in 2006 down from 26.45% in 2005.An increase of 32.46% in deposits with banks and central banks in addition to an increase in LIBOR rates resultedin a 29.69% increase in income generated from these deposits, up from a 25.46% in the previous year. Interestincome from bonds and other financial instruments fixed income, including certificates of deposit, decreasedto 25.67% in 2006 down from 31.12% in 2005. Income generated from loans and advances to customersincreased to 19.11%, up from 16.95% in 2005, due to the 19.01% yearly increase in loans and advances tocustomers. It is to note that the 2005 consolidated profit and loss account does not include the results ofBLOM BANK EGYPT.

(in USD Millions)

Lebanese Treasury Bills andOther Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instruments with Fixed Income Including Certificates of DepositLoans and Advances Including Related PartiesTotal

BREAKDOWN OF INTEREST AND SIMILAR INCOME

214,092

249,140

839,021

25.52

29.69

100.00

Amount % of Total

End of Year 2006

163,55

157,470

618,436

26.45

25.46

215,388 25.67 192,474 31.12

160,401 19.12 104,941 16.97100.00

Amount % of Total

End of Year 2005


7.1 Net Interest Income

Interest and similar income increased by 35.67% year-on-year to reach USD 839.02 million in 2006, whileinterest charges rose by 30.18% to reach USD 568.867 million. Therefore net interest received increased by48.89% year-on-year to USD 270.153 million .

On the other hand, net interest revenue after provisions for doubtful loans, increased by 47.51% year-on-yearto reach USD 269.620 million in 2006.

Below is an elaboration of each contributing factor and an independent discussion of its trend.

7.1.1 Interest and Similar Income

Interest and similar income increased by 35.67% in 2006 after registering a slight increase of 13.19% in 2005.Average interest earning assets rose by 17.35% to reach USD 11,507 million in 2006 up from an increase of 15.35%in 2005, equivalent to USD 9,806 million.

The table below illustrates the breakdown of average earning assets by currency at the end of 2006:

(in USD Millions)

Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central Banks Bonds and Other Financial Instruments with Fixed Income Including Certificates of DepositLoans and AdvancesTotal

BREAKDOWN OF AVERAGE INTEREST EARNING ASSETS AT THE END OF 2006

LBP Total

2,324 9,183 11,507

1,41379

702130

1,0194,783

1,6651,716

2,432

4,862

2,367

1,846

Foreign

Currencies


42 43

Deposits and similar accounts from banks and financial institutions decreased to 1.56%, from 2.60% in 2005,while deposits from customers and other credit balances including related parties increased to 98.44%, upfrom 96.30% last year. Finally charges from bonds and other fixed income financial instruments dropped tozero as subordinated loans matured on December 12, 2005.

(in USD Millions)

Deposits & Similar Accounts from Banks & Financial InstitutionsNotes & Financial Instruments with Fixed IncomeDeposits from Customers Including Related PartiesTotal

BREAKDOWN OF INTEREST AND SIMILAR CHARGES

8,851

0

568,868

1.56

0.00

100.00

Amount % of Total

End of Year 2006

11,353

4,834

436,987

2.60

1.11

560,017 98.44 420,800 96.30100.00

Amount % of Total

End of Year 2005

Deposits and Similar Accounts

from Banks and Financial

Institutions

Notes and Financial Instruments

with Fixed Income

Deposits from Customers

Including Related Parties

2006

98.44%

1.56% 0.00%

96.30%

2.60% 1.11%

2005

Breakdown of interest and similar charges:


Breakdown of interest and similar income:

7.1.2 Interest and Similar Charges

Interest and similar charges increased by 30.18% to USD 568.867 million up from USD 436.987 million in 2005.Average interest earning liabilities rose 17.49% in 2006 to USD 11,011 million, compared to USD 9,37 in 2005.Deposits from customers including related parties constituted most of the average interest bearing liabilitiesand amounted to 97.77 %, up slightly from 97.45% in 2005.

Lebanese Treasury Bills

and Other Governmental Bonds

Deposits with Banks

and Central Banks

Bonds and Other Financial

Financial Instruments

with Fixed Income Including

Certificates of Deposits

Loans and Advances

2006

29.69%25.67%

19.12% 25.52%

25.46%31.12%

16.97% 26.45%

2005

(in USD Millions)

Deposits and Similar Accounts from Banks and Financial InstitutionsDeposits from Customers Including Related PartiesTotal

AVERAGE INTEREST BEARING LIABILITIES AT THE END OF 2006

LBP Total

2,257 8,754 11,011

32,254

2428,512

245

10,766

Foreign

Currencies


44 45

7.1.4 Net Provisions for Doubtful Loans

The net provisions for doubtful loans decreased by 140.21% to reach a positive balance of USD0.536 million.

67.00%

66.00%

65.00%

Interest cost / Interest Income Ratio in percent

68.00%

2002 2003 2004 2005 2006

67.80%

2001

69.00%

70.00%

71.00%

72.00%

73.00%

70.40%

72.50%

70.91%71.25%

70.66%


7.1.3 Interest Margin (Before Provisions for Doubtful Loans)

Net Interest Income before provisions for doubtful loans increased by 48.89% year-on-year to reach USD270.156 in 2006. Similarly, net interest margin before provisions for doubtful loans (i.e. net interest incomedivided by average interest earning assets) increased to 2.13% in 2006, up from 1.85% in 2005, mainly due to theconsolidation of BLOM BANK EGYPT profit & loss account in 2006.

The ratio of interest charges to interest income decreased to 67.80% from 70.66% in 2005. This was mainly dueto a larger increase in interest income as compared to that of interest charges.

100.000

50.000

0

150.000

200.000

250.000

2002 2003 2004 2005 2006

270.15

148.00

2001

137.00

300.000

153.00 157.09181.45

Net interest income (before provisions) in millions of USD

2.00%

1.00%

0.00%

3.00%

2002 2003 2004 2005 2006

2.13%2.49%

2.16%

Net interest margin in percent

1.85%1.85%


7.3 Staff and Operating Expenses

Staff and operating expenses ( general and administrative expenses) increased by 39.24% in 2006 to reach USD121.551 million.

Staff (salaries and related benefits) and operating expenses increased by 38.92% and a 39.76% respectively afterthe consolidation in 2006 of BLOM BANK EGYPT profit & loss account. In terms of breakdown, staff andoperating expenses constituted 61.34% and 38.66% of total staff and operating expenses respectively,compared to 61.48% and 38.52% respectively in 2005.

BLOM BANK sal maintains a lower-than-industry average cost to income ratio, due to the Bank’s cost-containment policy and efficiency-driven benefits to employees. The cost to income ratio in 2006 was 35.10%,slightly higher than that 34.11% in 2005.

46 47

35%

30%

25%

40%

45%

50%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

55%

Cost to Income Ratio

(in USD Millions)

Staff ExpensesOperating ExpensesTotal

DISTRIBUTION OF STAFF AND OPERATING EXPENSES

74.5646.99121.55

61.3438.66

100.00

Amount % of Total

2006 % Change

53.6733.6287.29

61.4838.52

38.9239.7639.24100.00

Amount % of Total

2005

47.34%

42.56%

38.37%36.80%

38.09% 38.58%39.77% 40.93%

34.11% 35.10%


7.2 Non-Interest Income

Non-interest income increased by 4.23% year-on-year to reach USD 75.960 million in 2006, up from USD 72.877million in 2005.

Net Commissions rose 44.04% year-on-year. As such, their share out of the total non-interest income was72.22% in 2006. Net income from financial operations decreased by 47% in 2006 to reach USD 17.775 million.Other net income constituted only 4.37% of the total non-interest income.

(in USD Millions)

Net CommissionNet Income from Financial OperationsOther IncomeTotal

BREAKDOWN OF NON-INTEREST INCOME

54.861

17.775

75.958

72.23

23.40

100.00

Amount % of Total

2006 % Change

38.087

33.537

72.879

52.26

46.023.322 4.37 1.255

44.04

(47.00)

4.22

164.71.7100.00

Amount % of Total

2005

Constituents of non-interest income:

Net Commissions

Net Income from

Financial Operations

Other Income

2006

72.23%

23.40%4.37%

52.27%

46.03%1.70%

2005


10. INTEREST RATE RISK

Interest rate risk arises from changes in interest rates, which affect interest earning assets and liabilities of thebank. The bank manages the underlying risk by the continuous repricing of assets and liabilities. The majorityof the bank’s assets and liabilities are repriced within one year given that variable interest rates are applied onmost loans and deposits.

Interest rate risk continued to be concentrated within the 3 months interval in 2006, as the major part of ourdeposits are repriced within this period, while a major part of our treasury bills and government bondsportfolio are repriced after the 3 months period. The Asset-Liability committee monitors regularly interest raterisks based on forecasted evolution of interest rates’ movements in national and international markets.

The bank’s interest rate sensitivity position based on contractual re-pricing arrangements as at December31,2006 is as follows:

48 49

(in USD Millions)

Total AssetsTotal Liabilities andShareholder’s EquityInterest Rate Sensitivity Gap for 2006Cumulative interest Rate

Sensitivity Gap

11. RISK MANAGEMENT AND BASEL II PREPARATIONS

In accordance with the Lebanese Banking Control Commission Circular no. 242 relating to the principals forrisk management at banks and financial institution operating in Lebanon, BLOM BANK’s Risk ManagementDepartment aids Executive Management in controlling and actively managing the Group’s overall risk. The department mainly ensures that :

- Risk policies and methodologies are consistent with the Group’s risk appetite.- Limits and risks across banking activities are monitored throughout the Group.

INTEREST-RATE SENSITIVITY POSITION AT THE END OF 2006

Up to

1 month

1 to 3

months

3 to 6

months

1 to 2

years

2 to 5

years

Over

5 years

Non-Sensitive to

interestrate risk

(3,091)

5,186

8,277

(4,368)

935

2,213

(3,792)

1,282

706

(2,513)

1,282

4

551

3,065

0

1,343

792

0

0

1,678

3,021

(3,091) (1,278) 576 1,279 3,065 792 (1,343)


8. DIVIDEND DISTRIBUTION & PREFERRED SHARES REVENUES

Based on the terms of the Issuance of Preferred Shares series 2002, Preferred Shares series 2004, and PreferredShares series 2005, the Bank’s General Assembly of shareholders held on April 12th, 2007 approved thedistribution of USD 15 for each series 2002 preferred share, USD 8.5 for each series 2004 preferred share, andUSD 9.5 for each series 2005 preferred shares from 2006 profits of USD 180.69 million. In addition, the assemblyapproved the distribution of a LBP 5,000 dividend per common share and GDS.

9. CAPITAL ADEQUACY RATIOS

The capital adequacy ratio at the end of 2006 stood at 39.50% for tier I and Tier II (before dividenddistribution). For Tier I capital alone, the capital adequacy ratio stood at 38.73% for the same period. This ismore than four times the international ratio of 8% and more than 3 times the 12% ratio required by the CentralBank of Lebanon. After dividend distribution, the capital adequacy ratio was at 36.35% in 2006 compared to33.25% in 2005.

25.00%

20.00%

15.00%

30.00%

35.00%

40.00%

2002 2003 2004 2005 2006

Capital Adequacy Ratios (after dividend distribution ) in percent

26.60% 28.02% 27.34%

30.71%

35.58%29.886% 29.76% 28.22%

33.23%

36.35%

Tier I Capital Tier I + Tier II Capital


50 51

- BLOM BANK offers a savings program dedicated to child’s education: “WALADI”. This program is coupled with

a life insurance that guarantees continuity in case of death or total permanent disability.

- BLOM BANK offers “DAMANATI” which is an all purpose saving program (in US Dollar) coupled with life and

total permanent disability insurance policy.

- BLOM BANK offers phone banking services, such as “ALLO BLOM”, in addition to internet banking services

which are differentiated by their high security level. Moreover, customers can benefit from SMS ALERT services

that enable them to receive mobile messages whenever the account drops or exceeds a predefined value and

whenever a transaction is performed on BLOM cards.

- Also, the retail banking services include BLOM Call Center which is present to help customers around the

clock (24 hours a day 7 days a week) by providing them with general information on BLOM BANK’s products

and services as well as cancelling a lost or stolen card.

BLOM BANK Group provides all types of insurance policies through its subsidiary, AROPE Insurance s.a.l.

which has recently established a private insurance company in Syria named AROPE SYRIA; among the first

private insurance companies to operate in Syria.

BLOM BANK follows a strategy based on continuous diversification of its banking services in order to

maximize customers’ satisfaction.

13. INFORMATION SYSTEMS AND TECHNOLOGY

BLOM BANK has been putting Information Technology, Finance and Relationship management in partnership

using leading-edge technology deployments to address the challenges of rapidly adapting to the changing face

of the Banking Business in the 21st century.

In that context, BLOM BANK has kept capitalizing on their advanced multi-channel, on-line, real-time systems

and delivery infrastructure to enable the constant development of advanced electronic customer relationship

management (eCRM) suite and services, under the name of “eBlom”, and to continue in parallel launching more

initiatives aimed at:

Streamlining more processes by transforming them into STP (Straight Through Processing) mode,

Enhancing customers’ experiences


With respect to Basel II capital adequacy ratio calculations, the Risk Management Department started, since

December 2004 consolidated balances, to issue internal reports to Executive Management and the Board

revealing multiple scenarios of capital charges’ calculations for credit and market risks under the Standardized

approaches and for operational risk under the Basic Indicator approach.

In relation to credit risk, the Risk Management Department is responsible for monitoring the risk profile of the

Bank’s loan portfolio, producing internal reports highlighting any exposure of concern in corporate,

commercial and consumer lending, as well as examining collateral coverage, past due loans and provisioning

needs. In January 2007, the Bank acquired, through a group-wide license, the Moody’s KMV Risk Advisor, a state-

of-the-art credit analysis and rating system for corporate and commercial lending clients, in order to aid the

Bank in moving to internal rating-based measurements under Basel II.

12. UNIVERSAL BANKING SERVICES

BLOM BANK provides universal banking services that cater to all customers needs:

Commercial banking.

Private and investment banking.

Corporate banking services.

Retail banking that offers the following services and products:

- Insurance-covered personal and car loans.

- Housing loans either directly or in cooperation with the Institution for Public Housing.

- BLOM BANK provides a wide variety of payment cards that are designed to fit all purposes and budgets.

Whether classic, Gold, Platinum, Black Platinum, Transparent, Corporate, Mini or Internet, BLOM cards enable

the cardholder to select his mode of payment as direct debit, charge or credit in a convenient, simple, safe and

flexible manner. BLOM cards are accompanied by a rich portfolio of spending rewards under the “Golden

Points” and “ BLOM Gifts” programs. At the beginning of 2007, BLOM was a pioneer in launching the Alpha

BLOM MasterCard, a first of its kind in the Middle East. The card offers its user free talk time on its Alpha

classic line.


52 53

Moreover, given the need for a high level of trust in e-Commerce transactions, the Bank has been using a public

key infrastructure (PKI), to enable the issuance of digital certificates to their Internet Banking customers. These

certificates serve the purpose of securly authenticating the customers and protecting them from online

identity theft. They are also used as enablers for customers electronic signatures to guarantee the non-

repudiation of their internet banking transactions.

On the other hand, and based on the recently deployed EFT SWITCH the bank has completely in-sourced their

ATM driving, management and monitoring activities, and is adding more connections between its SWITCH and

other national SWITCHES and International Interchanges. This has allowed the bank to reduce and fix their

costs and to transform them into a fixed cost model. This has also given the bank more flexibility in adding

services to their ATMs such as mobile cards top-up, as it has helped in achieving EMV and 3-DES compliance.

To be noted that the bank’s fleet of ATMs has been completely renewed after installing the latest generation

of ATMs which are ready for advanced services delivery such as notes acceptance and checks deposits. In that

context, the bank is also finalizing the preparations needed for starting their Point of Sales acquiring activities.

On the cards issuing side, the bank continued to develop its Information Systems infrastructure in order to

keep adding more features to their existing cards products and loyalty programs, in addition to introducing

new types of payment cards including Visa prepaid cards with online refill capability, Visa EURO Cards, Credit

cards with grace period, BLOM MasterCard cards, Co-branded cards, etc. The bank also completed with Visa

the EMV certification process for issuing EMV cards, and, have now reached a stage where they have started

issuing EMV cards.

At the same time, through its centralized IT services and infrastructure in Lebanon, the bank kept expanding

its branches network locally and in Jordan, where a third branch was opened in Amman, and where the three

branches started operating in online, real-time mode connected with the HO in Beirut. To that end, a

connectivity gateway was established between their Jordan regional H.O. and their Lebanon H.O. This gateway

also facilitated the deployment of ATMs in Amman connected to the CSC in Lebanon. A similar gateway has

been also been set up with Cyprus.

In addition to the above, the bank is finalizing the preparations needed for implementing systems for corporate

and commercial credit risk rating, Assets and Liabilities management and Funds Transfer Pricing which are

required for Basel 2 compliance. Also on the agenda, there are initiatives related to on-line fraud monitoring

for credit and debit cards transactions, budgeting and forecasting, expenditures management, in addition to

the implementation of systems related to the management of Islamic banking activities newly introduced

through BLOM DEVELOPMENT BANK.


Enriching products and services portfolio and features set

Addressing compliance and regulatory requirements (such as Basel 2 and other...)

Improving systems availability and reliability

The eBlom architecture has been designed to take advantage of the BLOMNET infrastructure (the bank’s

enterprise wide Intranet linking all the branches together with the head office) in order to assure that

customers and transactions data are shared online in real-time across the various customer touch-points, and

that the resulting information is gathered and aggregated in a central Knowledge base or Data Warehouse.

As part of the eBlom initiative, the Bank is providing a suite of integrated electronic banking delivery channels

consisting of:

eBlom – ALLO BLOM – the Bank’s Interactive Voice Response system.

eBlom – Internet Banking – Introduced since 1H-2002.

eBlom – SMS Alerts – A real-time alert system which delivers messages to the customers’ mobile

phones, informing them instantly about events pertaining to their accounts or cards - Introduced in

2H-2002.

eBlom – Contact Center – Started in 1Q-2002, with continuous enhancements based on CTI

(Computer Telephony Integration) and IP telephony to achieve seamless integration with the Bank’s

CRM application.

eBlom – Self Service – Using the bank Network of ATMs deployed all over Lebanon and where

additional services are being constantly planned and added.

eBlom – Live information Broadcasting System – A system recently introduced (in 2006) that enables

the bank to broadcast in real-time over large LCD screens deployed at the branches live and updated

information covering stock quotes, foreign exchange quotes, news feeds etc...

Through the eBLOM initiative, which fully integrates the traditional branch concept, BLOM BANK has been

responding to the challenge of creating a customer-centric business environment, while interacting with their

customers, however, wherever and whenever they desire, providing them with the same consistent experience

regardless of the Delivery Channel being used. In this environment, all customer related information including

behavior, preferences and interactions, are made available in a Central Knowledge Base (or Data Warehouse)

that is used for enabling efficient marketing campaigns’ management, as well as cross and up-selling activities.


54

16. RE-BRANDING THE GROUP’S AFFILIATES

In 2006, BLOM Bank re-branded the names of its affiliate banks and that in an aim to put in the spotlight theimportance of the group, to highlight its unity and to benefit from the excellent brand image that the parentbank enjoys locally, regionally and internationally. Consequently, Banque Banorabe, Banque Banorient and MisrRomania Bank were re-branded BLOM BANK FRANCE, BLOM BANK (SWITZERLAND) and BLOM BANK EGYPT.

17. REGIONAL EXPANSION

In line with our regional expansion policy, BLOM BANK group continued opening new branches within its

existing international network in an aim to enhance market accessibility.

In Lebanon, the bank opened three new branches in 2006 in Mansourieh, Zouk Mosbeh, and a retail branch

in Verdun. Four new branches are planned for the coming year in Achrafieh, Jbeil, Hamra (Retail Branch), and

Mina El Hosn. BLOM BANK also applied for a licence to establish a corporate bank in Qatar and got the

approval to open a representative office in Abu-Dhabi.

In Jordan, BLOM BANK opened two new branches in Amman located in Wahadat and Swayfieh, and we expect

to open in 2007 two additional branches in Amman too.

As for our sister banks, BLOM BANK FRANCE applied for a bank licence in Algeria and BLOM BANK EGYPT

expanded its network in Egypt and opened two new branches in Cairo and is going to open 10 additional

branches in the Egypt in 2007.

BSO is also expanding its network in major cities in Syria, four new branches located in Hamah, Tartous,

Mezza and Homs were opened. A new branch will be opened in Aleppo during the second half of 2007.

In 2007, BLOMINVEST BANK applied for a license to establish a Private and Investment Bank in Saudi Arabia.

BLOM BANK sal will continue to expand its operation in other Arab countries.

MANAGEMENT DISCUSSION & ANALYSIS 2006

Finally, it is worth noting that, while deploying their IT infrastructure and systems the bank have constantly in

mind their information security and availability, where they are looking very closely at:

Insuring the highest possible availability of their systems by enhancing or putting the appropriate continuity

plans in place.

Raising employees’ awareness through the development of Information Security Policies and Procedures as

well as through appropriate training and awareness programs.

Addressing security threats and systems failure incidents pro-actively through implementing advanced

preventive and detective controls and monitoring systems and procedures.

14. PEOPLE DEVELOPMENT

The Bank continued its policy of organizing intensive in-house and external training sessions for its personnel

at all levels, in order to train and develop their capabilities. Following the Bank’s expansion plans, the Bank’s

employees reached 2216 in 2006 compared to 1627 in 2005.

15. BANK’S OPERATIONAL EFFICIENCY

In 2006, the net profit per branch increased by 14% to reach USD 2,053,273 while the net profit per employee

decreased to USD 81,538 as compared to USD 94,313 in 2005.

Number of EmployeesNumber of BranchesUSD Net Profit per Employee USD Average Assets per EmployeeUSD Average Assets per BranchUSD Net Profit per BranchTotal

BANK’S OPERATIONAL EFFICIENCY INDICATORS

2216 1,45188 76

81,538 94,3136,416,773 7,713,816

161,586,009 147,272,9952,053,273 1,800,628

2006 2005

55


57

AUDITORS’ REPORT TO THE SHAREHOLDERS OF BLOM BANK SAL


O6Notes to the ConsoliatedFinanacial Statements

Notes to the ConsoliatedFinanacial Statements

Consolidated Income Statement

Consolidated Balance sheet

Consolidated Cash Flow

Consolidated Statement of Changes in Equity1. Activities2. Significant accounting policies3. Business Combination4. Net Provisions Less Recoveries on Loans and Advances5. Net Commissions6. Other Operating Income7. Salaries and Related Benefits8. General Operating Expenses9. Depreciation and Amortization of Tangible Assets 10. Earning Per Share11. Cash and Balances with the Central Banks12. Lebanese and Other Governmental Treasury bills and Bonds13. Bonds and Financial Assets with Fixed Income14. Shares, Securities and Financial Assets with Variable Income15. Banks and Financial Institutions – Debit16. Loans and advances to customers17. Bank/ Engagements by Acceptances18. Investments and Loans to Related Parties19. Tangible Fixed Assets20. Intangible Fixed Assets21. Other Assets22. Regularization Accounts and Other Debit Accounts23. Goodwill24. Banks and Financial Institutions – Credit25. Customers’ Deposits26. other Liabilities27. Regularization Accounts and other Credit Accounts28. Provisions For Risks and Charges29. Share Capital30. Reserves for General Banking Risks31. Reserves and Premiums32. Cumulative changes in Fair Values33. Treasury Shares34. Paid and Proposed Dividends35. Cash and Cash Equivalents 36. Related Parties Transactions37. Derivatives38. Commitments and Contingent Liabilities39. Segmental Information40. Credit Risk41. Concentration of Assets, Liabilities and Off Balance Sheet Items42. Market Risk43. Interest Rate Risk44. Currency Risk45. Liquidity Risk46. Fair Value of the Financial Instruments47. Fiduciary Deposits, Assets under Management and Custody Accounts48. Commitments and contingencies49. Comparative Amounts

“L’é

chec

ne

prév

audr

a ja

mai

s si

votr

edé

term

inat

ion

à ré

ussir

est

plu

s for

te” -

Og M

andin

o


61

CONSOLIDATED INCOME STATEMENTYear ended 31 December 2006

Interest and similar income

Lebanese and other governmental treasury bills and bondsDeposits and similar accounts with banks and financial institutionsBonds and other financial assets with fixed incomeLoans and advances to customersLoans and advances to related parties

Interest and similar charges

Deposits and similar accounts from banks and financial institutionsDeposits from customers and other credit balancesDeposits from related partiesBonds and other financial assets with fixed income

Net provisions less recoveries on loans and advances

Provisions for loans and advancesRecovery of provisions for loans and advances

Net interest received

Revenues from shares and financial assets with variable income

Net commissions

Commissions receivedCommissions paid

Profit from financial operations

Profit from trading investmentsProfit from non-trading investmentsProfit from foreign exchange operations

Loss on financial operations

Loss on trading investmentsLoss on non-trading investmentsLoss on foreign exchange operations

Net profit from financial operations

Other operating income

Other operating expenses

General and administrative expenses

Salaries and related benefitsGeneral operating expenses

Depreciation and amortization of tangible and intangible assets

Net provisions less recoveries on financial fixed assets

Net provisions less recoveries on off balance sheet items

Profit before tax

Income tax

Profit for the year

Basic/ diluted earnings per share attributable to equity holders of the parent for the year (in LL)

Attributable to:Equity holders of the parent Minority interestTotal

CONSOLIDATED INCOME STATEMENT

4

5

6

7

8

9

26

10

322,7441,264,824

375,578324,698241,703

101

(857,569)

(13,342)(838,657)

(5,570)-

(808)

(19,660)18,852

406,447

1,123

82,703

88,248(5,545)

45,505

10,38110,03725,087

(18,706)

(3,796)(514)

(14,396)

26,799

16,680

(11,675)

(183,238)

(112,399)(70,839)

(16,143)

395

(1,458)

321,633

(49,247)

272,386

10,997.08

270,186

2,200

272,386

246,552932,292

237,386290,155158,022

177

(658,758)(17,115)

(630,570)(3,786)(7,287)

2,009(10,741)12,750

275,543

345

57,41662,048(4,632)

50,7453,123

30,75916,863

(190)-

(66)(124)

50,555

8,362

(6,470)

(131,597)(80,909)(50,688)

(11,561)

(348)

(17)

242,228

(35,929)

206,299

9,187.27

202,1884,111

206,299

Notes 2006LL million

2005LL million

BLOM LEBANON INSIDE#2 (Rec) 9/12/07 9:42 AM Page 1

62 63

ASSETSCash and balances with the Central Banks

Lebanese and other governmental treasury bills and bonds

Bonds and financial assets with fixed income

Shares, securities and financial assets with variable income

Banks and financial institutions

-Current accounts-Time depositsLoans and advances to customers (*)

-Commercial loans-Other loans to customers-Overdraft accounts-Net debtor accounts against creditor and cash collateral accounts-Advances to related parties-Doubtful debts (net)Bank acceptances

Investments and loans to related parties

Tangible fixed assets (including revaluation variance approved by the Bank of Lebanon)

Intangible fixed assets

Other assets

Regularization accounts and other debit accounts

GoodwillTotal Assets (**)

* Of which substandard loans

** After deduction of:

Provision for doubtful debts and provision for commercial loans not classified at the balance sheet date

Unrealized interest on:

-Substandard loans-Doubtful debts

OFF-BALANCE SHEET ITEMSOther engagements received

Bad loans totally provided for

Foreign currencies to deliver against foreign currencies to receive

CONSOLIDATED BALANCE SHEET

11

12

13

14

15

16

17

18

19

20

21

22

23

16

16

16

16

16

37

6,246,406

3,474,920

386,100

8,403

7,754,284

300,7897,453,4952,996,698

2,388,501521,241

8,19010,8267,400

60,540173,260

3,220

231,086

2,845

33,715

61,408

63,98021,436,325 17,966,731

34,456

262,582

87,593

13,89973,694

5,467,773

43,905

2,144,617

5,601,5473,539,845

434,20321,557

5,297,127221,174

5,075,9532,517,9822,124,209

338,5979,0353,7382,374

40,029200,155

3,081209,200

3,95223,78652,53861,758

41,759

263,81888,47219,395

69,077

4,548,43436,231

2,205,835


2005LL million

CONSOLIDATED BALANCE SHEETAt 31 December 2006

CONSOLIDATED BALANCE SHEETAt 31 December 2006

LIABILITIES AND EQUITY

LIABILITIES Banks and financial institutions

-Current accounts-Time depositsCustomers' deposits

-Sight deposits-Time deposits-Saving accounts-Credit accounts and cash margins against debit accounts-Related parties’ accountsEngagements by acceptances

Other liabilities

Regularization accounts and other credit accounts

Provisions for risks and chargesTotal Liabilities

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF PARENTShare capitalRevaluation variance recognized in the complementary shareholders' equityReserve for general banking risksReserves and premiumsCumulative changes in fair valuesTreasury sharesRetained earnings Profit for the year

Minority interest Total Equity

Total Liabilities and Equity

OFF-BALANCE SHEET ITEMS Financing commitments given to:

-Financial intermediaries-CustomersBank guarantees given to:

-Financial intermediaries-CustomersCommitments on term financial instruments

Fiduciary deposits, assets under management and custody accounts

Foreign currencies to receive against foreign currencies to deliver

CONSOLIDATED BALANCE SHEET

24

25

17

26

27

28

29

30

31

32

33

38

38

37

47

37

1,308,844

159,3621,149,482

17,690,381

1,897,7657,874,1967,180,465

662,69675,259

173,260

128,641

129,86976,360

19,507,355

240,000

14,727

59,324

1,162,790

21,430

(52,108)

133,450

270,186

1,849,799

79,1711,928,970

21,436,325

1,443,885

17,966,731

307,186

13,051294,135689,528

96,098593,430

17,659

2,774,360

2,146,755

704,121108,870595,251

15,317,4891,554,0266,265,8156,819,377607,62570,646

200,155136,22094,871

69,99016,522,846

210,00014,72750,719

725,78381,067

-99,238

202,1881,383,722

60,163

239,44310,242

229,201480,957

90,164390,793

3,4561,487,917

2,204,201


2005LL million

Remark related to the next page:

(1) Non cash transactions in the investing activities include an increase in certificates of deposit-Central Banks in the amount of LL 800,784 million againsta decrease in Lebanese and other governmental treasury bills and bonds not held for trading for the same amount during 2006.(2) Non cash transactions in the investing activities include a decrease in Lebanese and other governmental treasury bills and bonds not held for tradingfor an amount of LL 11,600 million against a decrease in regularization account and other credit accounts in the operating activities for the same amountduring 2005.


64 65

INVESTING ACTIVITIESLebanese and other governmental treasury bills and bonds not held for trading (1) (2)Central Banks (term accounts and certificates of deposit) (1)Investments and loans to related partiesPurchase of tangible and intangible fixed assetsShares, securities and financial assets with variable income not held for tradingBonds and other financial assets with fixed income not held for tradingCash proceeds from the disposal of tangible and intangible fixed assetsPurchase of an additional equity interest in a subsidiaryAcquisition of subsidiaries, net of cash acquired Net cash used in investing activities

FINANCING ACTIVITIESIssuance of common shares Issuance of preferred sharesPurchase of treasury sharesPremium from issuance of common sharesPremium from issuance of preferred sharesGain on sale of treasury sharesDividends paidRedemption and maturity of subordinated notesMinority interest share in capital increase of subsidiaries Share in a subsidiary’s equity before consolidation Net cash from financing activities

Effect of exchange rate changes

Increase in cash and cash equivalents

Cash and cash equivalents as of 1 JanuaryCash and cash equivalents as of 31 December

CONSOLIDATED CASH FLOW STATEMENT

33&34

35

(815,611)

423,038(144)

(49,576)

12,855

37,981

16,792(4,031)

-(378,696) (506,536)

-

30,000

(52,108)

374,059

-

64(117,002)

-

15,267

219

250,499

22,672

1,703,363

7,221,5498,924,912 7,221,549

19,086(796,621)

114(22,827)

55,826(47,524)

2,271-

283,139

-10,000

--

140,720-

(75,763)(82,850)

24,486-

16,593(18,113)

398,0346,823,515


2005LL million

CONSOLIDATED CASH FLOW SATATEMENTFor the year ended 31 December 2006

CONSOLIDATED CASH FLOW SATATEMENTFor the year ended 31 December 2006

OPERATING ACTIVITIESProfit before tax

Adjustments for:

Depreciation and amortization of tangible and intangible fixed assetsAcquisition discountProvision for assets taken in recovery of debtsWrite-back of provision for assets taken in recovery of debtsProvision for end of service indemnityWrite back of provision for end of service indemnityVarious provisions for risks and charges, netProvision for outstanding claims and IBNR reservesProvision (write-back of provision) for doubtful loans and advances, netProvision (write-back of provision) for impairment of investment in a non consolidated subsidiary Profit from sale of shares, securities and financial assets with variable income held for trading Profit from sale of shares, securities and financial assets with variable income not held for trading Unrealized profit (loss) on shares, securities and financial assets with variable income held for tradingUnrealized profit on investments related to unit-linked contractsProfit on sale of certificates of deposit – Central BanksProfit from sale of Lebanese and other governmental treasury bills and bonds not held for tradingProfit from sale of Lebanese and other governmental treasury bills and bonds held for tradingLoss (profit) on disposal of tangible and intangible fixed assets

Changes in operating assets and liabilities:

Lebanese and other governmental treasury bills and bonds held for tradingShares, securities and financial assets with variable income held for tradingBonds and other financial assets with fixed income held for tradingLoans and advances to customersBanks and financial institutions-debitOther assetsRegularization accounts and other debit accountsBanks and financial institutions-creditCustomers' depositsOther liabilitiesRegularization accounts and other credit accounts (2)Cash from operations

Taxes paidEnd of service indemnities paidProvision for risks and charges paid Net cash from operating activities

CONSOLIDATED CASH FLOW STATEMENT

9

3

28

28

28

28

28

28

21

28

28

321,633

13,725

-

2,418(3,620)

5,498

-

3,024

169

808

5

-

-

299

(902)

(9,125)

(484)

-

80

333,528

(32,996)

-

-(479,524)

(339,099)

(9,027)

(8,881)

(4,224)

2,372,892(12,097)

34,998

1,855,570

(45,515)

(703)(464)

1,808,888

242,228

10,197(622)1,365

-1,473(443)

357417

(2,009)(112)(541)(418)(213)

(2,846)(24,243)

(1,556)(923)(137)

221,974

(5,385)(11,967)

240(151,177)

(103,808)(42)

(1,236)(6,713)

960,63014,38725,159

942,062(35,233)

(566)(173)

906,090


2005LL million

3


66 67

At 1 January 2005

Dividends’ distributions (note 34)Appropriation of 2004 profitsIssuance of preferred shares (note 29)Transfer to reserve for revalued fixed assets soldShare of a subsidiary equity before obtaining control (note 3)Minority interest in share capital increase of subsidiariesNet movement in cumulative changes in fair values (note 32)Currency translation differenceTotal income and expenses for the period recognized directly in equity

Profit for the year- 2005

Total income and expenses for the period

At 31 December 2005

Dividends’ distributions (note 34)Appropriation of 2005 profitsIssuance of common shares net of issuance costs (note 29)Transfer to non-distributable reserve (note 31)Purchase of treasury shares, netGain on sale of treasury sharesTransfer to reserve for increase in share capitalDecrease in minority interest due to acquisition by the bankOtherMinority interest in share capital increase of subsidiariesDividends on treasury sharesNet movement in cumulative changes in fair values (note 32)Currency translation differenceTotal income and expenses for the period recognized directly in equity

Profit for the year- 2006

Total income and expenses for the period

At 31 December 2006

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

--------

--

30,000----------

185,000

-

-

-

185,000

-

-

-

215,000

--

10,000-----

-------------

15,000

-

-

-

25,000

-

-

-

25,000

---

(127)----

-------------

14,854

-

-

-

14,727

-

-

-

14,727

-8,050

-

---

(538)

-8,350

----------

255

43,207

(538)

-

(538)

50,719

255

-

255

59,324

-------

(14,880)

------------

18,718

27,917

(14,880)

-

(14,880)

13,037

18,718

-

18,718

31,755

-12,450

--

378---

-18,323

----------

10

82,093

-

-

-

94,921

10

-

10

113,254

-13,140

------

-20,982

-(44,613)

--

(6)------

236,872

-

-

-

250,012

-

-

-

226,375

---

127----

-3,331

---

646------

4,876

-

-

-

5,003

-

-

-

8,404

----

2,707--

(1,226)

---

44,613----

607---

913

9,426

(1,226)

-

(1,226)

10,907

913

-

913

57,040

--

140,720-----

-------------

211,183

-

-

-

351,903

-

-

351,903

--------

--

374,059----------

-

-

-

-

-

-

-

-

374,059

------

36,910-

-----------

(59,637)-

44,157

36,910

-

36,910

81,067

(59,637)

-

(59,637)

21,430

--------

----

(52,108)--------

-

-

-

-

-

-

-

-

(52,108)

-28,147

--

711---

-32,979

------

(386)-

1,221-

398

70,380

-

-

-

99,238

398

-

398

133,450

(75,763)(61,787)

------

(118,223)(83,965)

-----------

137,550

-

202,188

202,188

202,188

-

270,186

270,186

270,186

(75,763)-

150,720-

3,796-

36,910(16,644)

(118,223)-

404,059-

(52,108)64

--

221-

1,221(59,637)20,294

1,082,515

20,266

202,188

222,454

1,383,722

(39,343)

270,186

230,843

1,849,799

-----

29,4158

144

-------

(2,334)(2)

15,278-

(19)3,885

26,485

152

4,111

4,263

60,163

3,866

2,200

6,066

79,171

(75,763)-

150,720-

3,79629,41536,918

(16,500)

(118,223)-

404,059-

(52,108)64

-(2,334)

21915,278

1,221(59,656)

24,179

1,109,000

20,418

206,299

226,717

1,443,885

(35,477)

272,386

236,909

1,928,970

Common

shares

Preferred

shares

Revaluation

variance

Reserve for

general

banking risks

Reserve for

translation

difference

Legal

reserve

General

reserve

Reserve for

increase of

share capital

Non-

distributable

reserves

Premium on

issuance of

preferred

shares

Premium on

issuance of

common

shares

Cumulative

changes in

fair value

Treasury

shares

Retained

earnings

Profit for

the year Total

Attributable to Equity Holders of the Parent

Reserves and PremiumsShare Capital

MinorityInterest

TotalEquity

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2006 (in LL million)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2006 (in LL million)


68 69

1. ACTIVITIES

BLOM Bank SAL (the "Bank"), a Lebanese joint stock company, was incorporated in 1951 and registered under No 2464at the commercial registry of Beirut and under No 14 on the banks’ list published by the Bank of Lebanon. Theheadquarters of the Bank are located in Verdun, Rashid Karameh Street, Beirut, Lebanon.

The Bank, together with its subsidiaries, BLOM INVEST Bank SAL, Arope Insurance SAL, BLOM Bank France SA, BLOMBank (Switzerland) SA, Bank of Syria and Overseas SA, BLOM Bank Egypt SAE, BLOM Development Bank SAL, SyriaInternational Insurance (Arope Syria) SA and BLOM Egypt Securities SAE (the Group), provide all banking activities(commercial, investing and private), as well as insurance and brokerage activities.

On 1 January 2006, the Bank’s branch in Cyprus started to be treated as a local branch and not as an internationalbanking unit.

During the year, the Central Bank of Lebanon approved the Bank’s request to open a representative office in Sharjah –UAE provided that the Bank obtains the approval of the Central Bank of the United Arab Emirates.

BLOM Bank SAL signed on 29 August 2006 a Memorandum of Understanding with a Saudi holding company to establisha company in the Kingdom of Saudi Arabia to deal in financial instruments. The two parties agreed to obtain a licensefrom the corresponding authorities in the Kingdom of Saudi Arabia to establish a Saudi joint stock company under thename of “BLOM Invest- Saudi Arabia”, to be located in Riyadh to deal in financial instruments in the Kingdom of SaudiArabia, with a capital of around 100 million Saudi Riyal allocated 60% between BLOM Bank SAL and BLOM Invest BankSAL and 40% to the Saudi party. The Bank is still in the process of obtaining the license from the correspondingauthorities up to the date of this report.

2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the consolidated financial statements are set outbelow:

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial ReportingStandards (IFRS) and general accounting plan for banks in Lebanon and the regulations of the Bank of Lebanon and theBanking Control Commission.

The consolidated financial statements are prepared under the historical cost convention as modified for therestatement of certain tangible real estate properties purchased prior to 1 January 1994 for the changes in the generalpurchasing power of the Lebanese Lira according to the provisions of law No 282 dated 30 December 1993, and for themeasurement at fair value of derivatives, Lebanese and other governmental treasury bills and bonds, bonds andfinancial assets with fixed income, and shares, securities and financial assets with variable income held for trading andavailable for sale, and investments related to unit-linked contracts (fair value through profit or loss).

The accounting policies used in the preparation of the consolidated financial statements are consistent with those usedin the previous year.

The consolidated financial statements have been presented in million of Lebanese Lira (LL million), which is thefunctional currency of the Bank. Balances denominated in other currencies have been presented in thousands.

New and amended standards and interpretations issued but not yet effective

Amendments to IAS 1 – Capital Disclosures:

Amendments to IAS 1 Presentation of Financial Statements were issued by the IASB as Capital Disclosures in August2005. They are required to be applied for periods beginning on or after 1 January 2007. When effective, theseamendments will require disclosures of information enabling evaluation of the Group’s objectives, policies andprocesses for managing capital.

IFRS 7 Financial Instruments Disclosures

IFRS 7 Financial Instruments Disclosures was issued by the IASB in August 2005, becoming effective for periodsbeginning on or after 1 January 2007. The new standard will require additional disclosure of the significance of financialinstruments for the Group’s financial position and performances and information about exposure to risks arising fromfinancial instruments.

IFRS 8 Operating Segments

IFRS 8 Operating Segments was issued by the IASB in November 2006, becoming effective for periods commencing onor after 1 January 2009. The new standard may require changes in the way the Group discloses information about itsoperating segments.

Management do not expect these standards to have a significant impact on the Group’s financial statements whenimplemented in 2007 and 2009.

Basis of consolidation

The consolidated financial statements comprise the financial statements of BLOM Bank SAL and its controlledsubsidiaries drawn up to 31 December each year. The financial statements of subsidiaries are prepared for the samereporting year as the Bank, using consistent accounting policies.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-grouptransactions are eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Control is achievedwhere the Bank has the power to govern the financial and operating policies of an entity so as to obtain benefits fromits activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated incomestatement from the date of acquisition or up to the date of disposal, as appropriate.

Minority interests represent the portion of profit or loss and net assets not owned, directly or indirectly, by the Groupand are presented separately in the income statement and within equity in the consolidated balance sheet, separately

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2006



70 71

from parent shareholders’ equity. Acquisitions of minority interests are accounted for using the parent entity extensionmethod, whereby, the difference between the consideration and the fair value of the share of the net assets acquiredis recognized as goodwill. If the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. adiscount on acquisition) the difference is recognized directly in the income statement in the year of acquisition.

The consolidated financial statements include the financial statements of BLOM Bank SAL and the subsidiaries listed inthe following table:

NAME

BLOM Bank France SA

previously known as Banque Banorabe SABLOM Bank (Switzerland) SA

previously known as Banque Banorient (Suisse) SA(100% owned by BLOM Bank France SA)BLOM INVEST Bank SAL

BLOM Development Bank SAL

(99.98% owned by BLOM Invest Bank SAL)Bank of Syria and Overseas SA*

Arope Insurance SAL

Syria International Insurance (Arope Syria) SA**

BLOM Bank Egypt SAE

previously known as Misr Romanian Bank SAEBLOM Egypt Securities SAE

(99.37% owned by BLOM Bank Egypt SAE)

(*) Effective 1 January 2004, the Group obtained control, by virtue of agreement with other investors, over Bank of Syria andOverseas SA, and consequently, the financial statements of Bank of Syria and Overseas SA have been consolidated with those ofthe Group.(**) Effective to 1 January 2006, the Group obtained control, by virtue of agreement with other investors, over Syria InternationalInsurance (Arope Syria) SA, and consequently, the financial statements have been consolidated with these of the Group.

Business combinations and goodwill

Business combinations are accounted for using the purchase method of accounting. This involves recognizingidentifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilitiesbut excluding future restructuring) of the acquired business at fair value. Any excess of the cost of acquisition over thefair values of the identifiable net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fairvalues of the identifiable net assets acquired, the discount on acquisition is recognized directly in the incomestatement in the year of acquisition.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the businesscombination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilitiesacquired. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwillis reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carryingvalue may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefitfrom the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assignedto those units or groups of units. Each unit or group of units to which the goodwill is allocated:

- represents the lowest level within the Group at which the goodwill is monitored for internal management purposes;- and is not larger than a segment based on either the Group’s primary or secondary reporting format determined inaccordance with IAS 14 Segment Reporting.

When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translationdifferences and unamortized goodwill is recognized in the income statement.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generatingunits), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognized.

99.996

99.996

99.875

99.980

39.000

88.560

49.000

99.370

99.370

99.996

99.996

99.875

-

39.00088.560

-

96.770

67.740

France

Switzerland

Lebanon

Lebanon

SyriaLebanonSyria

Egypt

Egypt

Banking activities

Banking activities

Banking activities

Islamic Banking activities

Banking activitiesInsurance activitiesInsurance activities

Banking activities

Brokerage activities

Country of

incorporation

Activities % Equity interest

2006 2005



% %


72 73



Derecognition of financial assets

A financial asset (in whole or in part) is derecognized either (a) when the Group has transferred substantially all therisks and rewards of ownership or (b) when it has neither transferred nor retained substantially all the risks and rewardsof the assets but has transferred control over the asset or a proportion of the asset.

Trading investments

Trading investments include:- Lebanese and other governmental treasury bills and bonds,- Shares and securities and financial assets with variable income.

These are initially recognized at cost (being the fair value given) and subsequently remeasured at fair value. All relatedrealized or unrealized gains or losses are included in the consolidated income statement. Interest earned is includedin interest and similar income while dividends received are included in revenues from shares and financial assets withvariable income.

Non-trading investments

These are classified as follows:- Available for sale,- Investments carried at fair value through profit or loss,- Investments carried at amortized cost (loans and receivable).

Non-trading investments include:- Certificates of deposit,- Lebanese and other governmental treasury bills and bonds,- Bonds and financial assets with fixed income,- Shares and securities and financial assets with variable income,- Investments and loans to related parties,- Investments related to unit-linked contracts.

All investments are initially recognized at cost, being the fair value of the consideration given including acquisition costs.

Premiums and discounts on non-trading investments are amortized using the effective interest rate method and aretaken to interest income.

Investments carried at amortised cost

Debt instruments which do not meet the definition of held to maturity and which have fixed or determinable paymentsbut are not quoted in an active market are carried at amortised cost, less provision for impairment in value.

Available for sale

Available-for-sale financial investments are those investments which are designated as such or do not qualify to beclassified as designated at fair value through profit or loss, held-to-maturity or loans and receivables.

After initial recognition, investments which are classified “available for sale” are normally remeasured at fair value. Ifthe Group is not able to estimate the fair value, available for sale investments are then carried at cost, less provisionfor impairment in value. Fair value changes which are not part of an effective hedging relationship, are reported as aseparate component of equity until the investment is derecognized or the investment is determined to be impaired.On derecognition or impairment, the cumulative gain or loss previously reported as “cumulative changes in fair value”within equity, is included in the consolidated income statement for the period.

That portion of any fair value changes relating to an effective hedging relationship is recognized directly in theconsolidated income statement.

Investments carried at fair value through profit or loss

Investments are classified as fair value through profit or loss account if the fair value of the investment can be reliablymeasured and the classification as fair value through profit or loss account is as per the documented strategy of theGroup. Investments classified as “Investments at fair value through profit or loss” upon initial recognition areremeasured at fair value with all changes in fair value being recorded in the consolidated income statement.

Fair values

For investments and derivatives quoted in an active market, fair value is determined by reference to quoted marketprices. Bid prices are used for assets and offer prices are used for liabilities.

For unquoted financial instruments, fair value is determined by reference to the market value of similar investments,or is based on the expected discounted cash flows, or by using other techniques.

The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is theamount payable on demand.


74 75

Depreciation is calculated on a straight line basis over the estimated useful lives of all the assets, except for freeholdland, as follows:

Buildings 2.5%Vehicles 15%Furniture, office installations and computer equipment 9-20%

The carrying values of tangible fixed assets are reviewed for impairment to determine whether events for changes incircumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carryingvalues exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being thehigher of the fair value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of tangible fixed assets that is accounted for separately iscapitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditureis capitalised only when it increases future economic benefits of the related item of tangible fixed assets. All otherexpenditure is recognised in the income statement as the expense is incurred.

Collateral pending sale

The Group occasionally acquires real estate in settlement of certain loans and advances. Such real estate is stated atthe lower of the amount of the related loans and advances and the current fair value of such assets based on theinstructions of the Control Authorities. Gains or losses on disposal, and revaluation losses, are recognized in theconsolidated income statement for the period.

Intangible fixed assets

Key money and software development are recorded at cost less accumulated amortization and any impairment invalue. Amortization is calculated on a straight line basis over the useful lives as follows:

Key money: the lesser of lease period or 5 years Software development cost: 2-5 years



Due from banks and financial institutions

These are stated at fair value of consideration given less any amounts written off and allowance for impairment.

Loans and advances to customers

Loans and advances are stated at fair value of consideration given, net of suspended interest, provisions for doubtfuldebts, any amounts written off, and allowance for impairment.

Investments in associates

The Group’s investments in associates are accounted for using the equity method of accounting. An associate is anentity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the balance sheet at cost plus post-acquisitionchanges in the Group’s share of net assets of the associate. Losses in excess of the cost of the investment in an associateare recognized when the Group has incurred obligations on its behalf. Goodwill relating to an associate is included inthe carrying amount of the investment and is not amortized. The income statement reflects the Group’s share of theresults of operations of the associate. Where there has been a change recognized directly in the equity of the associate,the Group recognizes its share of any changes and discloses this, when applicable, in the statement of changes in equity.Unrealized profits and losses resulting from transactions between the Group and the associate are eliminated to theextent of the interest in the associate.

The reporting dates of the associate and the Group are identical and the associate’s accounting policies conform tothose used by the Group for like transactions and events in similar circumstances.

Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation and any impairment in value. Certain of tangiblereal estate properties purchased prior to 1 January 1994 were restated for the changes in the general purchasing powerof the Lebanese Lira according to the provisions of law No 282 dated 30 December 1993. The net surplus arising onrevaluation is credited to the account of revaluation variance recognized in shareholders’ equity.


76 77

Customer deposits

All customer deposits are carried at the fair value of the consideration received, less amounts repaid.

Taxation

Taxation is provided for in accordance with the fiscal regulations of the respective countries in which the Bank and itsbranches and subsidiaries operate.

The Bank’s profits from operations in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interestreceived according to Law no. 497/2003 dated 30 January 2003.

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date.Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when theasset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted at the balance sheet date.

Current tax and deferred tax relating to items recognized directly in equity are also recognized in equity and not in theincome statement.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it isno longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to beutilized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extentthat it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Provisions for risks and charges

Provisions are recognized when the Group has a present obligation (legal or constructive) arising from a past event andthe costs to settle the obligation are both probable and able to be reliably measured.

Employees’ end-of-service benefits

The Group provides end of service benefits to its employees. The entitlement of these benefits are based upon theemployees’ final salary, length of services and other local regulations where the Group operates. The expected costsof these benefits are accrued over the period of employment.

With respect to employees based in Lebanon, the Group makes contribution to the National Social Security Fundcalculated as a percentage of the employees’ salaries. The Group’s obligations are limited to these contributions, whichare expensed when due.

Treasury shares

Own equity instruments which are acquired (treasury shares) are deducted from equity and are accounted for atweighted average cost. No gain or loss is recognized in the income statement on the purchase, sale, issue orcancellation of the Bank’s own equity instruments.

Derivatives

Derivatives are stated at fair value.

For the purposes of hedge accounting, hedges are classified into three categories:

(a) fair value hedges which hedge the exposure to changes in the fair value of a recognized asset or liability; (b) cash flow hedges which hedge exposure to variability in cash flows of a recognized asset or liability or a forecastedtransaction, and(c) hedges of the net investment in a foreign subsidiary bank.

In relation to effective fair value hedges any gain or loss from remeasuring the hedging instrument to fair value, as wellas related changes in fair value of the item being hedged, are recognized immediately in the consolidated incomestatement.

In relation to effective cash flow hedges, the gain or loss on the hedging instrument is recognized initially in equity andis transferred to the income statement in the period in which the hedged transaction impacts the income statement,or included as part of the cost of the related asset or liability.

In relation to effective hedges of the net investment in a foreign subsidiary bank, any gain or loss from remeasuring thehedging instrument to fair value is recognized immediately in equity and is transferred to the income statement oncethe investment is sold.

For those hedges which do not qualify for hedge accounting, any gains or losses arising from changes in the fair valueof the hedging instrument are taken directly to the consolidated income statement for the period.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longerqualifies for hedge accounting or is revoked by the Group. For effective fair value hedges of financial instruments withfixed maturities any adjustment arising from hedge accounting is amortised over the remaining term to maturity.

For effective cash flow hedges, any cumulative gain or loss on the hedging instrument recognized in equity remains inequity until the hedged transaction occurs. If the hedged transaction is no longer expected to occur, the netcumulative gain or loss recognized in equity is transferred to the consolidated income statement.




78 79

Fiduciary assets

Assets held in a fiduciary capacity are not treated as assets of the Group and accordingly are recorded as off balancesheet items.

Off balance sheet items

Off balance sheet balances include commitments which may take place in the Group’s normal operations such ascommitments for loan granting, letters of guarantees, and letters of credit, without deducting the margins collectedand related to these commitments.

Offsetting

Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there isa legally enforceable right to set off the recognized amounts and the Group intends to either settle on a net basis, orto realize the asset and settle the liability simultaneously.

Revenue recognition

Interest income and fees that are considered part of the effective interest is recognized using the effective yieldmethod unless there is doubt of uncollectibility. The recognition of interest income is suspended when loans becomeimpaired, such as when overdue by more than 90 days.

Notional interest is recognized on impaired loans and other financial assets based on the rate used to discount futurecash flows to their net present value. Other fees receivable are recognized as the services are provided. Dividendincome is recognized when the right to receive payment is established.

When the Group enters in interest rate swap contracts to change the interest rate from fixed to variable (or vice-versa),interest income or expense is adjusted by the net difference resulting from the swap.

Foreign currencies

The consolidated financial statements are presented in Lebanese Lira which is the Bank’s functional currency. Eachentity in the Group determines its own functional currency and items included in the financial statements of eachentity are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange ruling at thedate of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated into Lebanese Lira or other functionalcurrencies at rates of exchange prevailing at the balance sheet date. Any gains or losses are taken to the consolidatedincome statement.

Translation gains or losses on non-monetary items carried at fair value are included in equity as part of the fair valueadjustment on securities available-for-sale, unless part of an effective hedging strategy.

Translation of financial statements of foreign entities

The assets and liabilities of foreign branches and subsidiaries are not deemed an integral part of the head office’soperations and are translated at rates of exchange ruling at the balance sheet date. Income and expense items aretranslated at average exchange rates for the period. Any exchange differences are taken directly to a foreign currencytranslation adjustment reserve.

Cash and cash equivalents

Cash and cash equivalents comprise balances with original maturities of a period of three months including: cash andbalances with the Central Banks, deposits with banks and financial institutions, deposits due to banks and financialinstitutions, and treasury bills.

Repurchase and resale agreements

Assets sold with a simultaneous commitment to repurchase at a specified future date (repos) continue to be recognizedin the balance sheet. Amounts received under these agreements are treated as liabilities and the difference betweenthe sale and the repurchase price is treated as interest expense using the effective yield method. Assets purchasedwith a corresponding commitment to resell at a specified future date (reverse repos) are not recognized in the balancesheet. Amounts paid under these agreements are treated as assets and the difference between the purchase and resaleprice is treated as interest income using the effective yield method.

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that financial assetsmay be impaired. If such evidence exists, any impairment loss is recognized in the consolidated income statement.

Impairment is determined as follows:

(a) for assets carried at amortised cost, impairment is based on estimated cash flows that are discounted at the originaleffective interest rate;(b) for assets carried at fair value, impairment is the difference between cost and fair value less any impairment losspreviously recognized in the consolidated income statement; and(c) for assets carried at cost, impairment is the present value of future cash flows discounted at the current market rateof return for a similar financial asset.

For available for sale equity investments, reversal of impairment losses are recorded as increases in cumulative changesin fair values through equity.




80 81

Trade and settlement date accounting

All “regular way” purchases and sales of financial assets are recognized on the trade date, i.e. the date that the Groupcommits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets thatrequire delivery of assets within the time frame generally established by regulations.

Accounting policies of subsidiary-insurance companies

The financial statements of the subsidiary insurance companies have been prepared in accordance with InternationalFinancial Reporting Standards and the requirements of the local regulations related to insurance and reinsurancecompanies in Lebanon and Syria. The key accounting policies are as follows:

Premiums earned

Net premiums and accessories (gross premiums) are taken to income over the terms of the policies to which they relateusing the prorata temporis method for non-marine business and 25% of gross premiums for marine business. Unearnedpremiums reserve represent the portion of the gross premiums written relating to the unexpired period of coverage.

If the unearned premiums reserve is not considered adequate to cover future claims arising on these premiums apremium deficiency reserve is created.

Commissions earned and paid

Commissions earned are recognized at the time policies are written.

Commissions paid are expensed over the terms of the policies to which they relate using the pro-rata temporis methodfor non-marine business and 25% of commissions paid for marine business. Deferred acquisition costs represent theportion of commissions paid relating to the unexpired period of coverage.

2 a. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

Judgments

In the process of applying the Group’s accounting policies, management has made the following judgements, apartfrom those involving estimations, which have the most significant effect in the amounts recognised in the financialstatements:

Classification of investments

Management decides on acquisition of an investment whether it should be classified as held to maturity, held fortrading, carried at fair value through profit or loss account, or available for sale.

The Group classifies investments as trading if they are acquired primarily for the purpose of making a short term profitby the dealers.

IClassification of investments as fair value through profit or loss account depends on how management monitors theperformance of these investments. When they are not classified as held for trading but have readily available reliablefair values and the changes in fair values are reported as part of profit or loss in the management accounts, they areclassified as fair value through profit or loss.

All other investments are classified as available for sale.

mpairment of investments

The Group treats available for sale equity investments as impaired when there has been a significant or prolongeddecline in the fair value below its cost. In addition, the Group evaluates other factors, including normal volatility inshare price for quoted equities and the future cash flows and the discount factors for unquoted equities.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date,that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within thenext financial year are discussed below:

Impairment losses on commercial loans and advances

The Group reviews its problem commercial loans and advances on a regular basis to assess whether a provision forimpairment should be recorded in the consolidated income statement. In particular, considerable judgement bymanagement is required in the estimation of the amount and timing of future cash flows when determining the levelof provisions required. Such estimates are necessarily based on assumptions about several factors involving varyingdegrees of judgment and uncertainty, and actual results may differ resulting in future changes to such provisions.

Impairment losses on consumer loans

An estimate of the collectible amount of consumer loans is made when collection of the full amount is no longerprobable. This estimation is assessed collectively and a provision applied according to the length of time past due,based on historical recovery rates.




82 83

3. BUSINESS COMBINATION

Arope Insurance SAL

On 31 May 2005, the Group acquired an additional 58.56% of the voting shares of Arope Insurance SAL, an unlistedcompany based in Lebanon specializing in the insurance activities, for a total consideration of LL 9,836 million. Prior to31 May 2005, the Group held 30% of the voting shares.

The fair value of the identifiable assets and liabilities of Arope Insurance SAL as of 31 May 2005 were as follows:

Balances with Blom Bank SALCash and balances with other banksEquity shares and similar securitiesUnit-linked investment contractsAccounts receivable and other assetsRe-insurers share in technical reservesDeferred acquisition costsTangible fixed assetsTotal assets

Technical reserves Provisions for risks and chargesAccounts payable and accrualsTotal liabilities

Fair value of net assetsGroup’s interest (58.56%)Cost associated with the combinationAcquisition discount

The excess of the Group’s interest in the fair value of net assets over cost was recognized in the consolidated incomestatement.

The cash inflow on acquisition was as follows (in LL million):

Net cash acquired with the subsidiary 13,909Cash paid (9,836)Net cash inflow 4,073

From the date of acquisition, the above entity has contributed LL million 1,846 to the net profit of the Group during 2005.

The fair value of net assets of Arope Insurance SAL at the date of acquisition of the 30% voting shares, before obtainingcontrol, was detailed as follows:

Fair value of net assets

Group’s interest (30%)Cost associated with the acquisition

Difference

The Group’s 30% share of Arope Insurance SAL’s equity before obtaining control comprised of the following :

Legal reserve 378Non distributable reserve 2,707Retained earnings 711Total 3,796

4,073

The above amounts were taken directly to the consolidated statement of changes in equity.

BLOM Bank Egypt SAE (previously known as Misr Romanian Bank SAE)

On 30 November 2005, the Group acquired 96.77% of the voting shares of BLOM Bank Egypt SAE (previously known asMisr Romanian Bank SAE), for a total consideration of LL 147,338 million. The fair value of the identifiable assets andliabilities of BLOM Bank Egypt SAE (previously known as Misr Romanian Bank SAE) as of 30 November 2005 were as follows:

Cash and balances with Central bankGovernmental treasury bills and bondsBonds and financial assets with fixed incomeBanks and financial institutionsLoans and advancesShares, securities and financial assets with variable incomeTangible fixed assetsOther assetsRegularization accounts and other debit accountsTotal assets

Provisions for risks and chargesHead office, branches, mother company and foreign sister companiesCustomers’ depositsBanks and financial institutions Other liabilitiesRegularization accounts and other credit accountsSubordinated loanTotal liabilities

Fair value of net assetsGroup’s interest (96.77%)Goodwill arising on acquisition (note 23)Cost of acquisition

Recognized on acquisition

LL million

Carrying value

LL million

13,90916,369

1,53013,1583,6969,898

9582,432

61,950

38,4832,0753,533

44,091

17,85910,458

13,90916,369

1,53013,1583,6969,898

9582,432

61,950

38,4832,0753,533

44,091

17,85910,458

(9,836)622

Recognized on acquisition

LL million

Carrying value

LL million

5,375 5,375

Recognized on acquisitionLL million

Carrying valueLL million

228,735215,561

8,861197,669326,091

16,45454,685

1,3917,155

1,056,602

39,249388

818,10010,74720,221

3,13575,404

228,735209,515

8,861197,669372,09116,45454,685

1,3917,155

1,096,556

22,426388

818,10010,74720,221

75,404967,244 950,421

89,358 146,13586,471

60,867147,338

1,612 1,612(1,612)

-



3,135

LL million


84 85

The cash inflow on acquisition was as follows (in LL million):

Net cash and cash equivalents acquired with the subsidiary 426,404 Cash paid (147,338)Net cash inflow 279,066

Additionally, in 2006, the Group acquired an additional 2.6% of the voting shares of BLOM Bank Egypt SAE for a totalconsideration of LL 4,031 million with effective date 30 November 2005 (in LL million):

Group’s interest (2.6%) 2,323 Goodwill arising on acquisition (note 23) 1,708Cost of acquisition (net cash outflow) 4,031

In 2006, BLOM Bank Egypt SAE increased its ownership in BLOM Egypt Securities SAE from 67.74% to 99.37%. The totalcost of acquisition is approximately LL 174 million. Net cash inflow on acquisition amounted to LL 219 million. The Bankconsolidated BLOM Egypt Securities SAE with effect from 1 January 2006.

During 2006, BLOM Bank and two of its subsidiaries subscribed in 979,313 shares representing 49% of the voting sharesof Syria International Insurance (Arope Syria) SA, a newly established insurance company in Syria with a total investmentamount of LL 14,559 million.

4. NET PROVISIONS LESS RECOVERIES ON LOANS AND ADVANCES

Provision for doubtful loans and advances and other contingencies:

Provision for doubtful loans and advancesProvision for doubtful credit cardsProvision on commitments by signatureTotal

Less:

Recoveries on loans and advancesRecoveries on commitments by signatureTotal

5. NET COMMISSIONS

Commissions received:

Letters of credit, guarantees and acceptancesLoans and advances to customersAsset management Checking accounts and transfersCustomers’ depositsCredit cardsOther servicesTotal

Less:

Commissions paid on correspondent’s accounts

Net commissions received

6. OTHER OPERATING INCOME

Premiums earned on insurance contractsDiscount on acquisitionOther miscellaneous incomeTotal

7. SALARIES AND RELATED BENEFITS

Salaries and wagesSocial security contributionsProvisions for end of service indemnitiesAdditional indemnities paidOther allowances (including bonuses)Total

2006LL million

2005LL million

(19,651) (9,240)(9) (1,491)

- (10)(19,660) (10,741)

(808) 2,009

18,689 12,750163 -

18,852 12,750

2006LL million

2005LL million

22,084 13,896

2006LL million

2005LL million

10,541 4,076

2006LL million

2005LL million

58,667 50,07610,692 7,7275,498 1,473

10,628 31726,914 21,316112,399 80,909

- 6226,139 3,664

16,680 8,362

17,931 18,6377,907 6,2619,832 3,099

11,950 6,7235,446 4,635

13,098 8,79788,248 62,048

(5,545) (4,632)

82,703 57,416




86 87

8. GENERAL OPERATING EXPENSES

Board of directors’ attendance feesTaxes and feesFee for guarantee of depositsRent and related chargesElectricity and fuelProfessional feesPostage and telecommunicationsMaintenance and repairsTravel expensesInsurance Marketing and advertising Stationery and printingsFiscal stampsOthersTotal

9. DEPRECIATION AND AMORTIZATION OF TANGIBLE AND INTANGIBLE ASSETS

Tangible fixed assets (Note 19)Intangible fixed assets (Note 20)Provision against real estate taken in recovery of loans and advances (Note 28)Total

10. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equityholders of the parent by the weighted average number of ordinary shares outstanding during the year.The following reflects the income and share data used in the basic earnings per share computation:

Net profit for the year LL millionLess:

Proposed dividends on preferred shares (note 34) LL millionMinority interest LL millionNet profit attributable to equity holders of the parent LL millionWeighted average number of common sharesBasic earnings per share LL

No figure for diluted earnings per share has been presented as the Bank has not issued any instruments which wouldhave an impact on earnings per share when exercised.

11. CASH AND BALANCES WITH THE CENTRAL BANKS

Cash

Central Banks:

Current accountsTime depositsAccrued interest at 31 December

Certificates of deposit – loans and receivablesAccrued interest at 31 December

Total

Cash and balances with the Central Banks caption include non-interest bearing balances held by the Group at the Bankof Lebanon in coverage of the obligatory reserve requirements for all banks operating in Lebanon on deposits inLebanese Lira as required by the Lebanese banking rules and regulations. This obligatory reserve is calculated on thebasis of 25% of sight commitments and 15% of term commitments.

In addition to the above, all banks operating in Lebanon are required to deposit with the Bank of Lebanon interest-bearing placements at the rate of 15% of total deposits in foreign currencies regardless of nature.

Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to thebanking rules and regulations of the countries in which they are located.

12. LEBANESE AND OTHER GOVERNMENTAL TREASURY BILLS AND BONDS

Investments held for trading:

Treasury bills and bondsAccrued interest

Investments not held for trading:

Available for sale treasury bills and bondsAccrued interest

Total

As of 30 December 2005, the Group reclassified treasury bills and bonds denominated in Lebanese Lira and in foreigncurrencies from investments held to maturity to investments available for sale. Accordingly, the Group is not allowed

2006LL million

2005LL million

2006LL million

2005LL million

1,077 8812,875 2,4175,494 5,0684,259 3,4972,469 1,6765,986 5,0907,028 4,6246,175 4,4723,262 1,997

764 5137,904 4,6304,670 3,3382,129 1,269

16,747 11,21670,839 50,688

13,328 9,753

2006 2005

272,386 206,299

(40,890) (32,223)(2,200) (4,111)229,296 169,965

20,850,721 18,500,00010,997.08 9,187.27

397 4432,418 1,36516,143 11,561

2006LL million

2005LL million

92,767 82,160

884,505 732,4801,630,300 1,711,166

21,300 16,0532,536,105 2,459,699

3,534,441 2,994,64883,093 65,040

3,617,534 3,059,688

2006LL million

2005LL million

49,5111,037 120

50,548 17,552

3,353,399

17,432

3,460,12470,973 62,169

3,424,372 3,522,293

3,474,920 3,539,845

6,246,406 5,601,547




88 89

to classify investments as held to maturity before 1 January 2008, according to IAS 39. Consequently, held to maturityinvestments were carried at fair value and reclassified as available for sale as at 31 December 2005. This reclassificationresulted in an increase in the fair value of the available for sale investments as at 31 December 2005 with acorresponding increase in cumulative changes in fair values in the consolidated statement of changes in equity.

Available for sale investments include unquoted governmental bonds in the amount of LL 243,668 million (2005:LL 35,395 million) that are stated at cost, which approximately equal to fair value.

13. BONDS AND FINANCIAL ASSETS WITH FIXED INCOME

Available for sale:

BondsLoans and receivables:

Certificates of depositTotal

Remark related to the next page:

Included in bonds and financial assets with fixed income, accrued interest up to 31 December 2006 amounting toLL 7,408 million (2005: LL 8,341 million).

As of 30 December 2005, the Group reclassified bonds and financial assets with fixed income from investments held tomaturity to investments available for sale. Accordingly, the Group is not allowed to classify investments as held tomaturity before 1 January 2008, according to IAS 39. Consequently, held to maturity investments were carried at fairvalue and reclassified as available for sale as at 31 December 2005. This reclassification resulted in an increase in thefair value of the available for sale investments as at 31 December 2005 with a corresponding increase in cumulativechanges in fair values in the consolidated statement of changes in equity.

Bonds and financial assets with fixed income include unquoted available for sale investments in the amount of LL 44,213million (2005: nil) and unquoted certificates of deposit in the amount of LL 38,023 million (2005: LL 776 million) thatare stated at cost, which approximately equal to fair value.

Bonds and certificates of deposit are detailed as follows:

BONDS

Available for sale

The Export Import Bank of KoreaHousehold Finance CorporationDresdner Bank AGDaimler Chrysler HoldingDaimler Chrysler HoldingTelecom ItaliaDeutsche TelekomFrance TélécomBayerische LandesbankDaimler CoSociété des Ciments Libanais SALMisr Iran BankTelecom EgyptTelecom EgyptTelecom EgyptOrascom Hotel HoldingSociété GénéraleLandesbankDeutsche TelecomDeutsche BankBayerische LandesbankGeneral MotorsCiti BankBank Med SALSociete des Ciments Libanais SALs

CERTIFICATES OF DEPOSIT

Loans and receivables

Bank Med SALBank Med SALCrédit Libanais SALBank Med SALFransabank SALFirst National Bank SALAudi Saradar Invest Bank SALAl Ahli International Bank SALBank Med SALBank Med SALCredit Libanais SALBBAC SALReal Estate BankReal Estate BankReal Estate BankReal Estate BankReal Estate Bank

Total

2006LL million

2005LL million

139,501 176,190

246,599 258,013386,100 434,203

Interest Maturity USD (000) LL million2006

USD (000) LL million2005

4.25% 20084.125% 20086.00% 20084.05% 20084.75% 20084.00% 20083.875% 20087.50% 2008

LIBOR + 1.07% 20096.40% 2006

10.00% 20069.5% 2007

10.70% 201010.95% 2010

9.7% 201013.00% 2007

LIBOR + 1% 2008LIBOR + 1.7% 2010

5.88% 20067.00% 2009

LIBOR + 1.07% 20096.13% 2007

10.50% 2006

10% 2006

6.25%6.375%

2007

6.88%2006

6.25%2008

8.50%2007

6.875%2007

10.75%20072010

6.375% 20077.625% 20107.625% 20126.875% 2008

7% 20089% 2007

9.5% 20089.5% 200810% 20099% 2007

9,873 14,8839,752 14,7021,950 2,9404,910 7,4025,066 7,6372,938 4,4297,967 12,010

10,7987,16215,571 23,474

- -- -

84 127- -

478 721460 693

4,577 6,8996,588 9,9314,996 7,531

- -2,636 3,9744,996 7,5312,534 3,819

- -- -- -

- -- -

6,723 10,13416,565 24,972

3,013 4,5415,149 7,762

20,312 30,6215,133 7,739

45,610 68,75636,066 54,369

- -510 769

10,466 15,7762,010 3,0304,020 6,0613,976 5,9954,029 6,074

163,582 246,599

9,844 14,8399,805 14,7811,986 2,9934,882 7,3595,073 7,6483,029 4,5667,949 11,983

10,1156,71015,477 23,332

1,017 1,5349,635 14,525

84 126968 1,460

- -- -

4,414 6,6556,047 9,1175,020 7,5673,097 4,6693,308 4,9865,020 7,5672,387 3,598

411 6207 11

10,706 16,139

170 25720,299 30,600

6,342 9,56116,401 24,7253,013 4,5415,148 7,760

20,312 30,6215,146 7,758

45,605 68,74941,482 62,5356,723 10,134

512 772- -- -- -- -- -

171,153 258,013

288,029386,100256,120 434,203

92,538 139,501 116,876 176,190




90 91

14. SHARES, SECURITIES AND FINANCIAL ASSETS WITH VARIABLE INCOME

For trading

SharesInvestment fund

Available for sale

SharesTotal

SHARES AND INVESTMENT FUND HELD FOR TRADING

Solidère SAL (category A) Solidère SAL (category B)Ciments de Sibline SALBank Audi SAL – Audi Saradar GroupCasino du Liban SALOrascom for Construction and Industry (OCI)Egypt’s Ezz steel Sidi Krir CoAlex Co. for Mineral Oils (AMOC)Oriental Weavers Co.Arab Co. for Cotton GinningOrascom for Hotels and DevelopmentNasr City for HousingUnited Co. for HousingCairo Co. for HousingMobinilVodafon – EgyptTelecom - EgyptOrascom Telecom HoldingCommercial International Bank (CIB)EFG Hermes HoldingEgypt Development Investment FundCapoEgyptian Investment Growth FundTotal

2006LL million

2005LL million

4,073 9,672

Number ofshares or units

2006LL million

105,150

2005LL million

2,7502,5363,500 -84

161,464 158243592 151

1,745 8027378,000 460-1,200 91163,000 560904,000 10382

12,000 298-25,000 20471

3,000 204334,680 132-

73,890 410-20,000 71-10,445 550-

25,000 663-28,855 146-

1,500 238-20,524 316-10,066 1,515106

401,436,195 5,424-25,000 -2456,201 -875

15,0964,948

875 5,4244,948 15,096

3,455 6,4618,403 21,557

SHARES AVAILABLE FOR SALE

Unquoted

Societe d'Amélioration Foncière SALBanque Al Mashrek SAL (Intra)Societe Financière du Liban SALSociété de Guarantie des Prêts aux Petites et Moyennes Entreprises SALSWIFTInter Arab Trade Finance ProgramMind Bank (Romania)Egypt Romanian Company for International TradingRomanian Co. for Fund Transfer Payment (Transfund)Egyptian Bank Credit BureauMaster CardMisr for Central, Clearing, Depositary and Central RegistryThe Egyptian Liquidity Facility CompanyOtherTotal unquoted

Quoted

Holcim (Liban) SALSociete des Ciments Blancs SALBank of Beirut SAL (preferred shares – category B)Misr Money ChangeTotal quoted

Total

Available for sale investments include unquoted investments in the amount of LL 2,198 million (2005: LL 5,154 million)that are stated at cost due to the unpredictable nature of future cash flows and lack of suitable other methods forarriving at a reliable fair value.

Number ofshares

2006LL million

2,337

2005LL million

2929104 --

8,000 40402,800 280280

18 748254 407404

16,695,282 4,133-7,000 4848

166 7296267,857 71188

781 -36250 -7200 -524

3,000 -4645,1542,198

25 --7,932 1212

52,500 958910125,000 337335

1,3071,257

6,4613,455




92 93

15. BANKS AND FINANCIAL INSTITUTIONS – DEBIT

Current accounts

Current accountsChecks for collectionAccrued interest at 31 December

Time deposits

Term depositsGranted financial loansAccrued interest at 31 December

Total

Included in banks and financial institutions – debit, time deposits is an amount of USD 840,000 thousand (2005: USD351,000 thousand), being guarantees against short term borrowings in the amount of Euro 525,000 thousand (2005: Euro255,000 thousand) reflected under banks and financial institutions – credit. According to the contracts entered intowith these banks, the Bank can withdraw these term deposits upon the settlement of the short-term borrowings.

16. LOANS AND ADVANCES TO CUSTOMERS

Commercial loansOther loans to customersOverdraft accountsNet debtor accounts against creditor and cash collateral accountsAdvances to related partiesDoubtful debts

Provision for doubtful loansProvisions for commercial loans not classified as doubtful debts at the balance sheet dateProvision for consumer loans Unrealized interest – substandard loansUnrealized interest – doubtful loansTotal

2006LL million

2005LL million

231,257 170,48569,352 50,606

180 83300,789 221,174

2006LL million

2005LL million

2,442,417 2,185,759535,053 347,350

8,190 9,03510,826 3,7387,400 2,374

342,987 322,016

(208,753) (212,910)(40,017) (42,155)(13,812) (8,753)(13,899) (19,395)(73,694) (69,077)

2,996,698 2,517,982

3,346,873 2,870,272

7,359,698 4,977,29270,335 89,15923,462 9,502

7,453,495 5,075,953

7,754,284 5,297,127

BREAKDOWN BY ECONOMIC SECTOR

Agriculture and forestryManufacturingTrade retailTrade wholesaleServicesConstructionFreelance professionsConsumer loansTotal

Commercial loans as at 31 December 2006 include substandard loans amounting to LL 34,456 million (2005: LL 41,759 million).

The movement of provision for doubtful debts is summarized as follows:

Balance at 1 January

Add:

Charge for the yearForeign exchange differenceProvision of acquired subsidiary - Blom Egypt Securities SAE

Less:

Provisions written-offRecoveriesTransfer to off-balance sheetTransfer of provision related to discounted billsto unrealized interest of substandard loansForeign exchange difference

Balance at 31 December

2006LL million

2005LL million

17,90920,187336,087435,275

TotalLL million

TotalLL million

115,042263,818

10,72319,660-1,566

152,46741278,232285,085

(3,400)(5,885)(3,123)(8,882)(5,326)(7,401)

(2,511)(335)(14,414)(22,503)

263,818262,582

Provision fordoubtful loans

and unclassifiedcommercial loans

LL million

Provision forconsumer loans

LL million

20052006

8,753255,065

6,26613,394-1,566-41

15,019270,066

-(5,885)(1,207)(7,675)

-(7,401)

-(335)(54)---

(1,207)(21,296)

13,812248,770

412,895161,188552,706855,142382,262676,259246,012240,496574,989423,264347,412535,062

2,870,2723,346,873




94 95

The movement of unrealized interest is summarized as follows:


Add:

Unrealized interest for the yearTransferred from doubtful debtsUnrealized interest of acquired subsidiary – Blom Bank Egypt

Less:

Recoveries of unrealized interestAmounts written-off Transferred to off-balance sheetForeign exchange difference


As required by Bank of Lebanon regulations, doubtful loans fulfilling certain conditions have been transferred tooff-balance sheet, together with the related provisions and unrealized interest.

The movement of provisions on totally provided bad loans included in off balance sheet accounts is summarized as follows:


Add:

Charge for the yearTransferred from balance sheet Foreign exchange difference

Less:

RecoveriesAmounts written-offForeign exchange difference


2006LL million

2005LL million

88,472 70,832

14,062 12,897- 54- 20,843

102,534 104,626

2006LL million

2005LL million

13,795 11,563

- 87,401 5,489

138 -

(400) (1,513)(732) (1,562)

- (190)(1,132) (3,265)

20,202 13,795

21,334 17,060

(9,224) (7,942)(1,831) (2,152)(3,821) (5,990)

(65) (70)(14,941) (16,154)

87,593 88,472

The movement of unrealized interest included in off balance sheet accounts is summarized as follows:


Add:

Unrealized interest for the yearTransferred from balance sheetForeign exchange difference

Less:

RecoveriesAmounts written-offUnrealized interest written-backForeign exchange difference


Total provisions and unrealized interest included in off balance sheet accounts

In July and August 2006, Lebanon encountered military acts which caused destructions in public and private properties aswell as in factories and commercial establishments. As a consequence, a deterioration in the economic situation took place.

These events had direct and indirect impact on some of the Bank’s clients, and accordingly, on the portfolio of loansand advances. According to the memo number 7 issued by the Banking Control Commission, management prepared astudy about the situation of the debtors who were affected by the military acts in order to estimate the losses thatwere incurred by the Bank for which a provision was made in these financial statements.

17. BANK / ENGAGEMENTS BY ACCEPTANCES

Acceptances as of 31 December

Acceptances resulted from letters of credit opened for accounts of customers, with deferred payments.

2006LL million

2005LL million

22,436 21,109

2006LL million

2005LL million

173,260 200,155

1,697 1,9203,821 5,827

161 -28,115 28,856

(183) (172)- (6,038)

(4,229) -- (210)

(4,412) (6,420)

23,703 22,436

43,905 36,231




96 97

18. INVESTMENTS AND LOANS TO RELATED PARTIES

Investments in nonconsolidated subsidiaries and associates

BLOM Services SARLSociété de Services d’Assurances et de Marketing SALInternational Payment Network SALArope services SAL

Investments available for sale

Misr for Central, Clearing, Depository and Central RegistryBanque de l’Habitat SALBLOM Real Estate SALSwift

Investment property

Immobilière Foch 65 SARLLess: Provision for impairment

Total

The carrying values of the investments in subsidiaries which were not consolidated because they are immaterial to theconsolidated financial statements as at 31 December are detailed as follows:

BLOM Services SARL (*)Société de Services d’Assurances et de Marketing SAL

Arope Services SAL is a dormant company. Accordingly, the carrying value of this investment was not consolidatedbecause it is immaterial to the consolidated financial statements as at 31 December 2006 (2005: the same).

(*) The partners in their meeting dated 3 May 2005 resolved to liquidate the company and appointed a liquidator. On 29 May 2006, the Ordinary Meeting of Partners approved the completion of the liquidation process which wasannounced in the Official Gazette on 8 March 2007.

Country ofincorporation

2006 2005

Ownership percentage

Shareholders’ equity

LebanonLebanonLebanonLebanon

EgyptLebanonLebanonFrance

France

99.70%99.92%23.50%

90%

0.46%2.85%7.23%0.01%

100%

99,70%99,92%23.50%

90%

-2.85%7.23%0.01%

100%

14950

752-

481,431220

31

922

14950

752-

951 951

-1,431220

271,730 1,678

830(383) (378)

539 452

212 212102 93

3,220 3,081

2006LL million

2005LL million

2006LL million

2005LL million

19. TANGIBLE FIXED ASSETS

Cost

At 1 January 2006Additions from the acquisition of subsidiariesAdditionsDisposalsTransfersTranslation differenceAt 31 December 2006

Depreciation

At 1 January 2006Accumulated depreciation from the acquisition of subsidiariesCharge for the yearRelating to disposalsTransfersTranslation differenceAt 31 December 2006

Net carrying value at 31 December 2006

Freehold landand buildings

LL millionVehiclesLL million

Furniture, officeinstallations and

computerequipment

LL million

Advances onacquisition

of fixed assets & construction

in progressLL million

Fixed assetstaken in

recovery ofdebts

LL millionTotal

LL million

147,457 2,929

- -6,654 1,025(970) (499)1,365 -1,525 9

23,528 1,483

- -3,652 605(243) (450)

201 -223 2

156,031 3,464

27,361 1,640

128,670 1,824

97,086 17,560

101 -15,480 22,378(1,411) (387)7,106 (8,483)

997 (19)

70,887 -

77 -9,071 -

(1,210) -- -

627 -

119,359 31,049

79,452 -

39,907 31,049

40,066 305,098

- 1012,875 48,412

(13,187) (16,454)12 -

(130) 2,382

- 95,898

- 77- 13,328- (1,903)- 201- 852

29,636 339,539

- 108,453

29,636 231,086




98 99

Cost

At 1 January 2005Additions from the acquisition of subsidiariesAdditionsDisposalsTransfersTranslation differenceAt 31 December 2005

Depreciation

At 1 January 2005Accumulated depreciation from the acquisition of subsidiariesCharge for the yearRelating to disposalsTranslation differenceAt 31 December 2005


A provision of LL 11,714 million as of 31 December 2006 (2005: LL 12,957 million) against real estate in settlement ofcertain loans and advances is reflected under provisions for risks and charges (note 28).

Certain freehold land and buildings purchased prior to 1 January 1999 were restated for the changes in the generalpurchasing power of the Lebanese Lira giving rise to a net surplus amounting to LL 14,727 million, which was creditedto equity under “revaluation variance recognized in the complementary shareholders’ equity”.

Freehold landand buildings

LL millionVehiclesLL million

Furniture, officeinstallations and

computerequipment

LL million

Advances onacquisition

of fixed assets & construction

in progressLL million

Fixed assetstaken in

recovery ofdebts

LL millionTotal

LL million

131,655 1,724

16,549 1,1054,060 306

(3,729) (196)2 (1)

(1,080) (9)

17,444 912

5,150 5732,783 195

(1,683) (195)(166) (2)

147,457 2,929

23,528 1,483

123,929 1,446

72,625 6,194

19,066 7,5839,642 5,625

(4,679) -1,453 (1,835)

(1,021) (7)

58,161 -

11,439 -6,775 -

(4,669) -(819) -

97,086 17,560

70,887 -

26,199 17,560

8,135 220,333

29,978 74,2811,794 21,427

(61) (8,665)220 (161)

- (2,117)

- 76,517

- 17,162- 9,753- (6,547)- (987)

40,066 305,098

- 95,898

40,066 209,200

20. INTANGIBLE FIXED ASSETS

Cost

At 1 January 2006AdditionsDisposalsTranslation differenceAt 31 December 2006

Amortization

At 1 January 2006Charge for the yearRelating to disposalsTransfersTranslation differenceAt 31 December 2006


Cost

At 1 January 2005AdditionsDisposalsTranslation differenceAt 31 December 2005

Amortization

At 1 January 2005Charge for the yearRelating to disposalsTranslation differenceAt 31 December 2005


Softwaredevelopment

LL millionKey money

LL million

Advanceson acquisition

of intangible fixed assets

LL millionTotal

LL million

4,004254

8,908886

(121) (2,097)306

3,696217

(121)

6084,443 8,305

-286

(201)-

1805,488

3584,078 5,825

365 2,480

224-

13,1361,140

(224) (2,442)- 914- 12,748

Softwaredevelopment

LL millionKey money

LL million

Advanceson acquisition

of intangible fixed assets

LL millionTotal

LL million

4,445131

8,5501,044

(62) -(510) (686)

4,004 8,908

-224

12,9951,399

- (62)- (1,196)

224 13,136

--

(201)644

- 9,903

- 2,845

29,636--29,636--29,636--

339,5399,184397

339,539(121)

4,024197

(44)(481)

-246

5,803

(561)3,696 5,488

308 3,420

--

(44)(1,042)

- 9,184

224 3,952

29,636--29,636--

9,827339,539443




100 101

21. OTHER ASSETS

Compulsory deposits (i)Precious metals and stampsInvestments related to unit-linked contracts- fair value through profit or loss (ii)Other assetsTotal

(i) Compulsory deposits represent amounts deposited with local authorities based on local regulations of the countriesin which the subsidiaries are located, and are detailed as follows:

BLOM Invest SALBank of Syria and Overseas SABLOM Development Bank SALSyria International Insurance (Arope Syria) SABLOM Egypt Securities SAETotal

(ii) The unrealized profit on investments related to unit-linked contracts amounted to LL 902 million for the year ended31 December 2006 (2005: LL 2,846 million).

22. REGULARIZATION ACCOUNTS AND OTHER DEBIT ACCOUNTS

Customers’ transactions between head office and branchesPrepaid expensesSundry debtorsOther revenues to be collectedRevaluation variance on foreign exchange forward contracts hedging operations related to the Group’s customers (note 37)Revaluation variance on foreign exchange forward contracts hedging a net investment in a foreign subsidiary bank (note 37)Reinsurers’ share of technical reservesOther accountsTotal

15,511512

9,953453

16,751 11,949941 1,431

33,715 23,786

2006LL million

2005LL million

1,5008,690

1,5008,453

4,500 -738 -83 -

15,511 9,953

2006LL million

2005LL million

8,3087,785

6,03614,510 12,941

11,1563,557 3,605

- 1,15710,501 10,29615,846 7,193

901 154

61,408 52,538

2006LL million

2005LL million

Sundry debtors:

Sundry debtorsLess: Provision against sundry debtorsTotal

The movement of provision against sundry debtors is summarized as follows:

Balance at 1 January Write off of provision during the yearTranslation differenceBalance at 31 December

Revaluation variance on foreign exchange forward contracts

“Revaluation variance on foreign exchange forward contracts hedging operations related to Group’s customers”represents operations in which the Group is engaged to hedge foreign exchange operations for its clients. As at 31December 2006, the revaluation of these contracts resulted in unrealized gains which were included in “regularizationaccounts and other debit accounts” (note 27).

23. GOODWILL

Cost:

At 1 JanuaryAcquisition of a subsidiaryExchange differenceAt 31 December

Impairment testing of goodwill

Goodwill acquired through business combinations with indefinite lives have been allocated to two individual cash-generating units, which are subsidiaries of the Bank, for impairment testing as follows:

- BLOM BANK Egypt SAE- BLOM BANK (SWITZERLAND) SA

9,740(1,264)

12,409(1,253)

8,476 11,156

2006LL million

2005LL million

-1,253

11(38)

1,306

(15)1,264 1,253

2006LL million

2005LL million

1,708514

60,86761,758 1,024

(133)63,980 61,758

2006LL million

2005LL million




102 103

The carrying amount of goodwill to each of the subsidiaries is as follows:

BLOM Bank Egypt SAEBLOM Bank (Switzerland) SATotal

Key assumptions used in value in use calculations

The recoverable amount of BLOM Bank Egypt SAE has been determined based on a value in use calculation, using cashflow projections based on financial budgets approved by senior management covering a ten-year period. The followingrates are used by the Bank.

Discount rateProjected growth rate (average during the first 5 years)Projected growth rate beyond the five year period

The calculation of value in use for BLOM Bank Egypt SAE is most sensitive to the following assumptions:- Interest margins;- Discount rates;- Projected growth rates;- Gross domestic product of the country where the subsidiary operates;- Local inflation rates.

Interest margins

Interest margins are based on average values achieved in the 13 months proceeding of the budget period. These areincreased over the budget period for anticipated market conditions.

Discount rates

Discount rates reflect management’s estimate of return on capital employed. Discount rates are calculated by using theweighted average cost of capital.

Projected growth rates, GDP and local inflation rates

Assumptions are based on management analysis and published industry research.

Sensitivity to changes in assumptions

Management believes that reasonable possible changes in key assumptions used to determine the recoverable amountwill not result in an impairment of goodwill.

62,989991

60,867891

63,980 61,758

2006LL million

2005LL million

9,15300

2006%

24. BANKS AND FINANCIAL INSTITUTIONS - CREDIT

Current accounts

Term:

TermAccrued interest at 31 December

Total

25. CUSTOMERS' DEPOSITS

Sight depositsTime depositsSaving accountsCredit accounts and deposits against debit accountsRelated parties’ accounts Total

Customers' deposits include coded deposit accounts in BLOM Bank SAL and BLOM Invest Bank SAL amounting to LL73,182 million as of 31 December 2006 (2005: LL 61,516 million).

26. OTHER LIABILITIES

Margins on letters of creditIncome tax dueOther taxes dueSundry creditorsDividends payableTotal

Margins on letters of credit represent deposits by the clients on account of documentary credits opened by the Groupon their behalf.

159,362 108,870

1,147,370 594,2102,112 1,041

1,149,482 595,251

1,308,844 704,121

17,690,381 15,317,489

2006LL million

2005LL million

1,897,765 1,554,0267,874,196 6,265,8157,180,465 6,819,377

662,696 607,62575,259 70,646

2006LL million

2005LL million

128,641 136,220

64,046 70,33428,079 23,561

9,354 7,19226,978 35,022

184 111

2006LL million

2005LL million




104 105

The relationship between taxable profit and accounting profit of BLOM Bank SAL and its foreign branches and thesubsidiary bank, BLOM Invest SAL, is as follows:

Profit before income taxLess:

Taxes on interest paid during the yearResults of foreign subsidiariesResults of the subsidiary insurance companies located in Lebanon and SyriaAccounting profit before income tax

Add:

Provisions non tax deductibleOther non tax deductible chargesTaxes on interest revenue paid during the year

Less:

Dividends received and previously subject to income taxProvisions no more required and previously subject to income tax4% of a subsidiary’s capital eligible to be tax deductibleWrite-back of provisions previously subject to income taxWrite-back of provision for impairment of trading securitiesNon taxable incomeAccumulated losses related to the Jordan branch

Taxable profit

The effective income tax rate of the Group is approximately 15.31% (2005: 14.8%).

Up to 31 December 2002 the Branch in Cyprus was taxed according to Section 28A of the Cyprus Income Tax Laws 1961to 2002 at the rate of 4.25%. New tax legislation enacted as of 1 July 2002 has resulted in the tax rate for the year tobe increased to 10% as from 1 January 2003. International Business Companies have been given the option to apply thetransitional provision, and be taxed for the years of assessment 2003, 2004 and 2005 at the rate of 4.25% provided thatan irrecoverable election is made and that they will continue to derive income from sources exclusively outside Cyprus.The Branch in Cyprus opted for the transitional provisions.

321,635 242,226

(22,793) (24,036)(51,636) (31,445)(4,874)

6,299

(2,548)

4,32115,054 14,03622,793 24,036

(329) (345)(6,645) (6,500)

(400) (400)(4,732) -

- (2,424)(830) (212)

- (1,356)

286,478 226,590

242,332 184,197

273,542 215,353

2006LL million

2005LL million

Income tax payable is detailed as follows:

Income tax payable as at 31 December Tax expense for the year Tax paid during the year Exchange differenceTax payable written backTax payable as at 31 December

Income tax expense in the consolidated income statement is detailed as follows:

5% tax paid on interest revenue during the yearIncome tax on profit for the year Income tax payable written back related to the year 2004 (*)Total

Income tax expense is detailed as follows:

Income tax-BLOM Bank SALIncome tax-foreign subsidiariesIncome tax-subsidiaries in LebanonTotal

(*) As the Bank of Lebanon issued during prior years certificates of deposit which mature during 2005, 2006 and 2007,and which are payable entirely at maturity plus accrued interest for the whole period from issuance date to maturitydate, and as an exchange operation took place in early 2005, which exchanged some of these certificates by othercertificates with longer maturities, and as the Bank of Lebanon paid the nominal amount of these exchangedcertificates in addition to their accrued interest up to the exchange date, and after deducting the 5% tax on interestaccording to article 51 of law no 497 dated 30 January 2003, and as this accrued interest include interest related to 2003(partially) and 2004, which were included in the Bank’s revenues for the years stated above, exceptionally, the Bankobtained the approval of the Ministry of Finance on 14 May 2005 to deduct the 5% tax on interest revenue during 2004from the income tax expense for that year. Accordingly, the Bank wrote back the provision for income tax amountingto LL 10,465 million, which was included in the consolidated income statement for the year ended 31 December 2005,against the 5% tax on interest paid for the year 2004 and was recorded among the tax expense of the year 2005.

23,561 22,86526,454 22,359

(22,722) (11,198)786 -

- (10,465)28,079 23,561

49,247 35,929

2006LL million

2005LL million

22,793 24,03626,454 22,358

- (10,465)

2006LL million

2005LL million

49,247 35,929

37,377 27,6309,568 6,4952,302 1,804

2006LL million

2005LL million




106 107

27. REGULARIZATION ACCOUNTS AND OTHER CREDIT ACCOUNTS

Accrued expenses and other regularization accountsRevaluation variance on foreign exchange forward contracts hedging a net investment in a foreign subsidiary bank (note 37)Revaluation variance on foreign exchange forward contracts hedgingoperations related to the Group’s customers (note 37)Transactions pending between branchesUnearned premiums and liability related to unit linked insurance contractsTotal

“Revaluation variance on foreign exchange forward contracts hedging a net investment in a subsidiary bank” representsthe fair value of these contracts as at 31 December 2006. As at 31 December 2005, the revaluation of these foreignexchange forward contracts resulted in unrealized gains which were included in “regularization accounts and otherdebit accounts” (note 22).

28. PROVISIONS FOR RISKS AND CHARGES

Provision for risks and chargesProvision for outstanding claims and IBNR reserves related to subsidiary-insurance companiesProvision for foreign currency fluctuation (regulatory provision)Provision for end of service indemnitiesProvision against real estate taken in settlement of loans and advancesProvision for liabilities related to a subsidiary bankProvision for contingencies of correspondents’ operationsrelated to a subsidiary bankProvision for unusual commitments related to a subsidiary bankTotal

Provisions for risks and charges

Balance at 1 JanuaryProvision from acquisition of a subsidiary-insurance companyCharge for the yearProvision paid during the yearProvision written-back during the yearExchange differenceBalance at 31 December

32,684 26,673

3,566 -

- 3,1521,342 3,767

92,277 61,279129,869 94,871

2006LL million

2005LL million

3,374 3,288

6,903 6,734681 507

26,432 21,66411,714 12,957

24,136 22,867

852 1,0022,268 971

76,360 69,990

3,374 3,288

2006LL million

2005LL million

3,288 1,782- 1,502

759 357(464) (173)(325) -

116 (180)

2006LL million

2005LL million

Provisions for outstanding claims & IBNR reserves related to subsidiary-insurance companies

Balance at 1 JanuaryProvision for outstanding claims and IBNR reserves from the acquisition of the subsidiary insurance companyProvision for outstanding claims and IBNR reserves charged for the yearBalance at 31 December

Provisions for end of service indemnities

Balance at 1 JanuaryCharge for the yearIndemnities paidProvisions written-backProvisions for end of service indemnities from the acquisition of a subsidiary companyProvisions for end of service indemnities from the acquisition of a subsidiary bankExchange differenceBalance at 31 December

Provision against real estate taken in settlement of loans and advances

Balance at 1 JanuaryCharge for the yearProvisions against real estate taken in settlement of loansand advances from the acquisition of a subsidiary bank Provisions written-back during the yearExchange differenceBalance at 31 December

Provision for liabilities related to a subsidiary bank

Provision for liabilities from the acquisition of a subsidiary bank represents accruals for various expenses incurred andpayable to governmental institutions and third parties.

6,734 -

- 6,317169 417

6,903 6,734

26,432 21,664

2006LL million

2005LL million

21,664 14,9905,498 1,473(703) (566)

- (443)- 572- 5,675

(27) (37)

2006LL million

2005LL million

11,714 12,957

12,957 2,8582,418 1,365

- 8,734(3,620) -

(41) -

2006LL million

2005LL million




108 109

29. SHARE CAPITAL

21,500,000 common shares (2005: 18,500,000 common shares) of LL 10,000 per share750,000 preferred shares (2002 issue) of LL 10,000 per share750,000 preferred shares (2004 issue) of LL 10,000 per share1,000,000 preferred shares (2005 issue) of LL 10,000 per shareTotal

a)

The Extraordinary General Meeting of Shareholders held on 30 December 2005, resolved to increase the Bank’s capitalfrom LL 210,000 million to LL 240,000 million by the increase of LL 30,000 million through the issuance of 3,000,000new common shares, of LL 10,000 per share. The subscription in these shares is limited to Bank of New York to be fullysettled in cash. The issuance and subscription in these common shares was based on the following conditions:

Number of issued sharesPar value of issued shares (LL 10,000 per share)Premium (denominated in US$)

On 16 February 2006, the Extraordinary General Assembly of Shareholders approved the subscription of these commonshares amounting to 3,000,000 shares, which were approved to be issued and fully paid in the amount of LL 30,000million plus a premium amounting to US$ 256,033 thousand (equivalent to LL 385,970 million) based on US$ 85.34443per share. The commission and the issuance costs amounted to US$ 7,590 thousand (equivalent to LL 11,911 million)which was deducted from the issuance premium.

It is to be noted that the Board of Directors decided on 7 February 2006 to list the GDSs in the Beirut and LuxembourgStock Exchanges in parallel with the current GDRs of the Bank.

Accordingly, the Bank’s capital amounts to LL 240,000 million divided into 24,000,000 shares with a par value of LL10,000 as of 31 December 2006 (2005: LL 210,000 million divided into 21,000,000 shares with a par value of LL 10,000).

b)

According to the provisions of Law no 308 dated 3 April 2001, the Extraordinary General Assembly Meeting ofShareholders held on 11 October 2002, and then the Extraordinary General Assembly Meetings of Shareholders held on4 June 2004 and 17 September 2005, resolved to issue preferred shares at the following conditions:

215,000 185,0007,500 7,5007,500 7,500

10,000 10,000

3,000,000 LL 30,000 millionUS$ 85.34443 as determined by the Extraordinary GeneralAssembly of Shareholders held on 13 February 2006.

240,000 210,000

2006LL million

2005LL million

Number of sharesPar value of issued shares (LL 10,000 per share)Premium (denominated in USD)

Non cumulative benefits

These preferred shares (2002, 2004 and 2005 issues) are redeemable 60 days after the annual general assemblies dealingwith the accounts for the years 2007, 2009 and 2010 respectively at the discretion of the Bank at issue price (LL 10,000per share plus paid premium) in addition to any dividends declared but not paid during the years prior to theredemption year.

In the event of any liquidation, dissolution or winding-up of the Bank, the holders of series 2002, 2004 and 2005preferred shares shall be entitled to be paid out of the assets of the Bank available for distribution to its shareholderson a pro rata basis, before any payment shall be made to common shareholders.

c)

On 12 May 2006, the Extraordinary General Assembly of shareholders decided to list 750,000 preferred shares (2002issue), 750,000 preferred share (2004 issue), and 1,000,000 preferred shares (2005 issue), in addition to 7,166,667common shares in the regulated markets in Lebanon and / or abroad.

The Extraordinary General Assembly of shareholders noted that the shares benefiting other than their owners shouldbe approved in writing by the beneficiary in order to be traded in active markets.

The Beirut Stock Exchange Committee decided on 24 August 2006 to list, trade and value one third of the commonshares and all the preferred shares (2002, 2004 and 2005 issues) issued by BLOM Bank SAL as detailed above in theofficial market of the Beirut Stock Exchange. These four types of shares became listed on 25 August 2006.

750,000 750,000 1,000,000

LL 7,500 million

LL 105,593 million(USD 70,045 thousands)

LL 7,500 million LL 10,000 million

An annual amount equal to11.25% of the net consolidatedprofits of the Bank, with aminimum of USD 10 per shareand not in excess of USD 15 pershare, (subject to the approvalof the Shareholders’ GeneralAssembly Meeting and theavailability of a non-consolidated distributable netincome for the year).

An annual amount for eachshare equal to USD 8.5 based onthe exchange rate on the dateof the General AssemblyMeeting, (subject to theapproval of the Shareholders’General Assembly Meeting andthe availability of a non-consolidated distributable netincome for the year).

2005 distributions to be basedon a fixed amount of USD 3.75per share and thereafter at anannual amount equal to 6% ofthe net consolidated profit ofthe Bank, with a minimum of7.5% and a maximum of 9.5% ofthe issue price, (subject to theapproval of the Shareholder’sGeneral Assembly Meeting andthe availability of a non-consolidated distributable netincome for the year).

LL 105,590 million (USD 70,043 thousands)

LL 140,720 million(USD 93,347 thousands)

2002 issue 2005 issue2004 issue




110 111

Accordingly, the shares of the Bank listed on the Beirut and the Luxemburg Stock Exchanges are detailed as follows:

GDSCommon sharesPreferred shares (2002 issue)Preferred shares (2004 issue)Preferred shares (2005 issue)Total

30. RESERVES FOR GENERAL BANKING RISKS

According to the Bank of Lebanon regulations, banks are required to appropriate from their annual net profit aminimum of 0.2 percent and a maximum of 0.3 percent of total risk weighted assets and off-balance sheet accountsbased on rates specified by the Bank of Lebanon to cover general banking risks. The consolidated ratio should not beless than 1.25 percent of these risks at the end of year ten (2007) and 2 percent at the end of year twenty (2017). Thisreserve is part of the Bank’s equity and cannot be distributed as dividends. This reserve is based on the denomination(Lebanese Lira and US Dollars) of the risk weighted assets and off-balance sheet accounts.

31. RESERVES AND PREMIUMS

Legal reserve

According to the Lebanese Code of Commerce and to the Money and Credit Act, banks and companies operating inLebanon have to transfer 10% of their annual net profit to a legal reserve. This reserve cannot be distributed asdividends.

General reserve

The Group appropriated general reserves from its retained earnings to strengthen its equity. This reserve amounting toLL 226,375 million as at 31 December 2006 (2005: LL 250,012 million) is available for dividends distribution.

Special reserve for increase of share capital

The balance amounting to LL 8,404 million (2005: LL 5,003 million) represents a reserve equivalent to the provisions ofcircular no. 167 issued by the Banking Control Commission. This reserve cannot be distributed as dividends.

7,389,601 4,389,6017,166,667 -750,000 -750,000 -

1,000,000 -17,056,268 4,389,601

2006Number of shares

2005Number of shares

Details of the special reserve for increase of share capital are as follows:

Recoveries of provisions for doubtful debtsRevaluation reserves for fixed assets soldGain on sale of treasury sharesTotal

Premium on issuance of preferred shares

2002 issue (note 29)2004 issue (note 29)2005 issue (note 29)Total

Non distributable reserves

During the year, a subsidiary increased its share capital partially from a transfer of LL 44,613 million from generalreserves.

32. CUMULATIVE CHANGES IN FAIR VALUES

The cumulative changes in fair values related to available for sale investments are as follows:

Balance at 1 January Realized during the yearNet changes in fair values during the yearDifference on exchangeBalance at 31 December

3,331 -438 438

4,635 4,5658,404 5,003

2006LL million

2005LL million

105,593 105,593105,590 105,590140,720 140,720

351,903 351,903

2006LL million

2005LL million

81,067 44,157(458) 3,824

(59,607) 33,086428 -

21,430 81,067

2006LL million

2005LL million




112 113

33. TREASURY SHARES

Movement of treasury shares recognized in the balance sheet is as follows:

At 1 January Acquisition of treasury shares during the year (net of sales)At 31 December

The Bank refunded the distribution of dividends on the treasury shares (300,000 common shares) amounting to LL 1,221million resulting from the distribution of dividends for all ordinary shares in 2005.

34. PAID AND PROPOSED DIVIDENDS

According to the resolutions of the General Assembly Meetings held during the years 2006 and 2005, dividends paidwere as follows:

Preferred shares – 2002 issue: LL 22,612.50 per share(2005: LL 20,611.27 per share)Preferred shares – 2004 issue: LL 12,813.75 per share(2005: LL 6,406.88 per share)Preferred shares – 2005 issue: LL 5,653.125 per shareCommon shares: LL 4,000 per share (2005: LL 3,000 per share)Total

In their meeting held on 20 March 2007 and 20 March 2006, the board of directors proposed the distribution ofdividends for 2006 and 2005 as follows:

Common shares

Preferred shares – 2002 issue Preferred shares – 2004 issue Preferred shares – 2005 issue

Total

- -514,400 52,108514,400 52,108

16,959 15,458

9,610 4,8055,654 -

86,000 55,500118,223 75,763

No. of common shares

AmountLL million

2006

35. CASH AND CASH EQUIVALENTS

Cash and balances with the Central BanksTreasury bills held not for trading (whose original maturities are less than 3 months)Deposits with banks and financial institutions (whose original maturities are less than 3 months)

Less:

Due to banks and financial institutions(whose original maturities are less than 3 months)Total

Balances with the Central Banks include term placements with the Bank of Lebanon, which are considered as cashequivalent based on a contractual agreement with the Bank of Lebanon.

36. RELATED PARTIES TRANSACTIONS

The Group enters into transactions with major shareholders, directors, senior management, and their related concerns,and entities controlled, jointly controlled or significantly influenced by such parties in the ordinary course of businessat commercial interest and commission rates. All the loans and advances to related parties are performing advancesand are free of any provision for possible credit losses.

The transactions with related parties are as follows:

DepositsLoans and advancesIndirect facilitiesInterest received from loans and advancesInterest paid on depositsAccounting services’ revenues from a non-consolidated subsidiary

The board of directors and senior management remunerations are as follows:

Board of directors and senior management remunerations (short term)

2,916,938 2,658,950

- 63,736

7,301,537 5,183,47910,218,475 7,906,165

(1,293,563) (684,616)8,924,912 7,221,549

2006LL million

2005LL million

54,038 19,2101,265 -

- -101 -

3,901 1,577

- -

2,011 75,2596,135 7,400

25 25- 101

92 5,570

217 217

70,6462,374

25177

3,786

224

Majorshareholders

LL million

Board of directors and top

managementLL million

Other related parties

LL million 2005

LL million 2006

LL million

19,197 15,835

2005LL million

2006LL million

2006LL million

2005LL million

107,500 86,000

16,959 16,9599,610 9,61014,321 5,654

40,890 32,223

148,390 118,223

2006LL million

2005LL million




114 115

37. DERIVATIVES

The following schedule shows the positive and the negative fair values of the derivatives and their notional amountsaccording to maturity. The notional amount is the amount of a derivative’s underlying asset, reference rate or indexand represents the basis for measuring the change in the derivatives value. The notional amounts show the volume ofoperations at year end and do not reflect either market or credit risk.

31 December 2006

Forward contracts on foreigncurrencies for hedging purposesForward contracts on foreigncurrencies for trading purposesTotal

31 December 2005

Forward contracts on foreigncurrencies for hedging purposesForward contracts on foreigncurrencies for trading purposesTotal

Additionally, the Group holds or issues currency options for trading purposes that are primarily related to the Group’scustomers operations. The notional amount of these contracts is as follows:

Currency options

All these contracts mature during 2007 that are primarily related to the Group’s customers’ operations.

Derivative held or issued for hedging purposes

As part of its asset and liability management, the Group uses derivatives for hedging purposes in order to reduce itsexposure to currency risk.

The Group uses forward foreign exchange contracts to hedge against specifically identified currency risks.

The Bank uses forward foreign exchange contracts (to sell Euros and buy US Dollars) to hedge its net investment in aforeign subsidiary denominated in Euro and amounting to Euro 107,904 thousand (2005: Euro 40,404 thousand). Theforward foreign exchange contracts were revalued as of 31 December 2006 and resulted in unrealized losses of LL 3,566million (2005: unrealized gain of LL 1,157 million). The contracts mature on 5 March 2007 at latest.

38. COMMITMENTS AND CONTINGENT LIABILITIES

Credit – related commitments

Credit-related commitments include commitments to extend credit, standby letters of credit, guarantees andacceptances which are designed to meet the requirements of the Group's customers.

Letters of credit, guarantees (including standby letters of credit), and acceptances commit the Group to make paymentson behalf of customers contingent upon the failure of the customer to perform under the terms of the contract.

Commitments to extend credit represent contractual commitments to make loans and revolving credits. Commitmentsgenerally have fixed expiration dates, or other termination clauses. Since commitments may expire without beingdrawn upon, the total contract amounts do not necessarily represent future cash requirements.

The Group has the following credit related commitments:

Commitments on behalf of customers:

Letters of creditLetters of guaranteesAuthorized but unutilized facilitiesTotal

Please refer to note 17 for acceptances outstanding as of 31 December 2006 and 2005 respectively.

4,397 210,793 210,793 - -

Negativefair valueLL million

Total notionalamount

LL million

831

3,549 1,935,962 676,561 1,259,401 -4,4507,946 2,146,755 887,354 1,259,401 -5,281

Positivefair valueLL million

Less than 3 monthsLL million

3 to 12 months

LL million

1 to 5Years

LL million

Notional amount by maturity

- 72,079 72,079 - -

Negativefair valueLL million

Total notionalamount

LL million

1,157

2,901 2,132,122 718,281 1,413,841 -3,4462,901 2,204,201 790,360 1,413,841 -4,603

Positivefair valueLL million

Less than 3 monthsLL million

3 to 12 months

LL million

1 to 5Years

LL million

Notional amount by maturity

17,659 3,456

2006LL million

2005LL million

307,186 239,443689,528 480,957986,641 747,5491,983,355 1,467,949

2006LL million

2005LL million




116 117

Capital and operating lease commitments

The commitments on capital expenditures and operating lease commitments at the balance sheet date, which were notprovided for, were as follows:

Capital commitments

Tangible fixed assets purchases

Operating lease commitments

Minimum payments for future lease contracts:- During one year- More than 1 year and less than five years- More than five yearsTotal operating lease commitments at the balance sheet date

Operating lease commitments are related to the Group’s branches in Lebanon, Cyprus, the Free Zone in Damascus, andShmaysani and Wahadat in Amman, Bank of Syria and Overseas SARL and BLOM Bank (France) SA.

39. SEGMENTAL INFORMATION

The Group operates in two geographic markets, the local market and the international market, which comprises theMiddle East, Europe, Far East and the United States. The following table shows the distribution of the Group’s grossincome, total assets and capital expenditure by geographical segment:

Net interest receivedNet commissionsRevenues from shares and financialassets with variable incomeNet profit from financial operationsOther operating incomeGross income

Operating expenses andamortization and depreciationNet provisions less recoverieson financial fixed assetsNet provisions less recoveries on off balance sheet itemsProfit before income tax

Total assets

Total liabilities

Capital expenditure

The Group’s major business segment is banking. Insurance activities represent 1% of profit before income tax and 0.82%of total assets.

40. CREDIT RISK

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the otherparty to incurr a financial loss. The Group attempts to control credit risk by monitoring credit exposures, limitingtransactions with specific counter parties, and continuously assessing the creditworthiness of counter parties.

The Group manages credit risk by setting limits for individual borrowers and groups of borrowers and for geographicaland industry segments. In addition the Group obtains security where appropriate.

For more details of the composition of the loans and advances portfolio refer to note 16.

48,513 2,487

2,362 1,8739,015 5,8608,649 4,644

20,026 12,377

2006LL million

2005LL million

158,755 141,458 116,788 406,447 275,543

2005LL million

2006LL million

264,98939,615 43,565 17,801 82,703 57,41639,138

345 794 - 1,123 34532944,052 13,893 6,503 26,799 50,55512,906

6,397 5,464 1,965 16,680 8,36211,216249,164 205,174 143,057 533,752 392,221328,578

135,423 127,904 106,805 321,633 242,228193,729

10,353,923 10,478,627 7,612,808 21,436,325 17,966,73110,957,698

10,760,858 8,274,482 5,761,988 19,507,355 16,522,84611,232,873

14,410 31,482 65,535 49,576 79,94518,094

(113,724) (76,210) (35,904) (211,056) (149,628)(134,846)

- 395 (348) 395 (348)-

(17) (1,455) - (1,458) (17)(3)

2006LL million

2005LL million

2006LL million

2005LL million

Domestic International Total




118 119

41. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS

Concentrations arise when a number of counter parties are engaged in similar business activities or activities in thesame geographic region, or have similar economic features that would cause their ability to meet contractualobligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate therelative sensitivity of the Group’s performance developments affecting a particular industry or geographic location.

The distribution of assets, liabilities, and off-balance sheet items by geographic region was as follows:

Geographical Location

LebanonOutside LebanonTotal

42. MARKET RISK

Market risk arises from fluctuations in interest rates, foreign exchange rates and equity prices. The Board of Directorsof the Bank has set limits on the value of risk that may be accepted. This is monitored periodically by the Asset andLiability committees of the Bank and its subsidiaries.

43. INTEREST RATE RISK

Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair valuesof financial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricingof assets and liabilities and off-balance sheet items that mature or reprice in a given period. The Group manages thisrisk by matching the repricing of assets and liabilities through risk management strategies.

The effective interest rate (effective yield ) of a monetary financial instrument is the rate that, when used in a presentvalue calculation, results in the carrying amount of the instrument. The rate is a historical rate for a fixed rateinstrument carried at amortized cost after the deduction of premium and discount and a current market rate for afloating rate instrument or an instrument carried at fair value.

The effective interest rates by major currencies for each of the monetary financial instruments are as follows:

ASSETS

Central banks and other banksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeLoans and advances to customers

LIABILITIES

Banks and financial institutionsCustomers’ deposits

The Group’s interest rate sensitivity position based on contractual repricing arrangements or maturity as at 31December 2006 has been shown in the table below. The expected repricing and maturity may differ significantly fromthe contractual date particularly with regard to the maturity of customers’ demand deposits amounting to LL 1,554,026million (2005: LL 1,086,677 million).

LiabilitiesLL million

Off-balance sheetLL million

AssetsLL million

AssetsLL million

LiabilitiesLL million

Off-balance sheetLL million

2006 2005

11,232,873 1,719,322 10,353,923 10,760,858 1,412,31010,957,6988,274,482 4,216,166 7,612,808 5,761,988 3,003,66510,478,62719,507,355 5,935,488 17,966,731 16,522,846 4,415,97521,436,325

3.50 - 4.50 4.50 - 5.50

8.25 - 9.25 7.75 - 8.75

11.50 - 12.50 8.00 - 8.50

12.50 - 13.50 8.00 - 8.50

6.00 - 7.00 4.50 - 5.00

7.50 - 8.50 4.00 - 5.00

LL % Other Currencies %




120 121

ASSETS

Cash and balances withthe Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts andother debit accountsGoodwillTOTAL ASSETS


Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesShareholders' equityTOTAL LIABILITIES AND EQUITY

Total interest rate sensitivity gap

Cumulative interest rate sensitivity gap

Up to1 monthLL million

1 to3 monthsLL million

3 months to1 year

LL million

1 year to2 years

LL million

2 years to5 years

LL million

Over5 years

LL million

Not interestsensitiveLL million

TotalLL million

301,500 467,325 888,805 2,401,613 707,941 1,426,090 6,246,40653,132

12,173 591,076 612,917 1,822,301 338,574 74,353 3,474,92023,526

77,995 28,639 51,940 152,442 54,133 5,876 386,10015,075

- - - - - 8,403 8,403-769,183 191,821 183,161 - 6,301 299,760 7,754,2846,304,058

248,809 653,964 196,263 243,461 86,925 145,403 2,996,6981,421,873- - - - - 173,260 173,260-

- - - - - 3,220 3,220-- - - - - 231,086 231,086-- - - - - 2,845 2,845-- - - - - 33,715 33,715-

- - - - - 61,408 61,408-- - - - - 63,980 63,980-

13,808 12,390 - - - 159,316 1,308,8441,123,3303,321,788 1,051,578 5,287 - - 1,958,233 17,690,38111,353,495

- - - - - 173,260 173,260-- - - - - 128,641 128,641-

- - - - - 129,869 129,869-- - - - - 76,360 76,360-- - - - - 1,928,970 1,928,970-

1,409,660 1,932,825 1,933,086 4,619,817 1,193,874 2,529,399 21,436,3257,817,664

3,335,596 1,063,968 5,287 - - 4,554,649 21,436,32512,476,825

(1,925,936) 868,857 1,927,799 4,619,817 1,193,874 (2,025,250)(4,659,161)

(6,585,097) (5,716,240) (3,788,441) 831,376 2,025,250 -(4,659,161)

ASSETS



Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesSubordinated notesShareholders' equityTOTAL LIABILITIES AND EQUITY

Total interest rate sensitivity gap

Cumulative interest rate sensitivity gap



3 months to1 year

LL million

1 year to2 years

LL million

2 years to5 years

LL million

Over5 years

LL million

Not interestsensitiveLL million

TotalLL million

190,589 614,937 769,124 2,187,837 686,729 895,515 5,601,547256,816

53,673 864,840 450,611 1,969,127 67,918 59,079 3,539,84574,597

8,861 70,320 154,516 130,719 62,311 7,476 434,203-

- - - - - 21,557 21,557-432,771 72,706 30,150 - 7,000 227,992 5,297,1274,526,508

369,440 425,273 233,715 165,254 63,725 12,851 2,517,9821,247,724- - - - - 200,155 200,155-

- - - - - 3,081 3,081-- - - - - 209,200 209,200-- - - - - 3,952 3,952-- - - - - 23,786 23,786-

- - - - - 52,538 52,538-- - - - - 61,758 61,758-

12,163 15,684 - - - 108,466 704,121567,8083,538,656 775,152 8,183 93 - 867,253 15,317,48910,128,152

- - - - - 200,155 200,155-- 2 - - - 136,218 136,220-

- - - - - 94,871 94,871-- - - - - 69,990 69,990-- - - - - - --- - - - - 1,443,885 1,443,885-

1,055,334 2,048,076 1,638,116 4,452,937 887,683 1,778,940 17,966,7316,105,645

3,550,819 790,838 8,183 93 - 2,920,838 17,966,73110,695,960

(2,495,485) 1,257,238 1,629,933 4,452,844 887,683 (1,141,898)(4,590,315)

(7,085,800) (5,828,562) (4,198,629) 254,215 1,141,898 -(4,590,315)

The Group’s interest rate sensitivity position based on contractual repricing arrangements or maturity as at 31 December 2005 was as follows:




2006 2005

122 123

ASSETS


OFF-BALANCE SHEET ITEMS

Other engagements receivedBad loans totally provided forForeign currencies to deliver againstforeign currencies to receive

LIABILITIES

Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesTOTAL LIABILITIES

NET EXPOSURE

LL millionUS Dollars in

LL millionEuro in

LL million

ForeignCurrencies in

LL millionTotal

LL million LL million


LL millionTotal

LL million

3,987,084 211,877 683,538 6,246,406 1,858,379 3,743,168 5,601,5471,363,907

1,161,781 89,860 225,339 3,474,920 1,998,555 1,541,290 3,539,8451,997,940

329,926 10,797 45,377 386,100 - 434,203 434,203-

6,437 82 1,523 8,403 361 21,196 21,5573615,347,351 1,888,249 455,889 7,754,284 16,763 5,280,364 5,297,12762,7951,647,814 228,707 872,094 2,996,698 239,690 2,278,292 2,517,982248,083

73,451 91,611 8,198 173,260 - 200,155 200,155-

- 569 49 3,220 2,603 478 3,0812,6029,263 573 89,552 231,086 122,876 86,324 209,200131,698

- 128 2,717 2,845 - 3,952 3,952-18,514 273 8,542 33,715 1,714 22,072 23,7866,386

14,336 9,753 19,089 61,408 18,277 34,261 52,53818,230

4,524,189 71,793 296,171 5,467,773 521,150 4,027,284 4,548,434575,62028,498 2,996 - 43,905 8,087 28,144 36,23112,411

812,936 36,257 1,295,424 2,144,617 - 2,205,835 2,205,835-

- 991 62,989 63,980 - 61,758 61,758-

125,162 1,081,544 100,025 1,308,844 6,454 697,667 704,1212,11311,739,074 992,995 1,841,361 17,690,381 3,623,095 11,694,394 15,317,4893,116,951

73,451 91,611 8,198 173,,260 - 200,155 200,155-60,447 9,642 31,831 128,641 25,556 110,664 136,22026,721

6,451 3,520 9,744 129,869 75,740 19,131 94,871110,1546,551 3,560 35,565 76,360 26,136 43,854 69,99030,684

12,595,957 2,533,470 2,474,896 21,436,325 4,259,218 13,707,513 17,966,7313,832,002

5,365,623 111,046 1,591,595 7,656,295 529,237 6,261,263 6,790,500588,031

12,011,136 2,182,872 2,026,724 19,507,355 3,756,981 12,765,865 16,522,8463,286,623

584,821 350,598 448,172 1,928,970 502,237 941,648 1,443,885545,379

The following consolidated balance sheet as of 31 December 2006 and 2005, is detailed in Lebanese Lira (LL) and foreigncurrencies, primarily US$, translated into LL.



44. CURRENCY RISK

Currency risk arises when the values of a financial instrument fluctuates due to changes in foreign exchange rates. The Bankprotects its capital and reserves by holding a foreign currency position in US Dollars representing 60% of its shareholders’equity after adjustment according to specific requirements set by the Bank of Lebanon. The Bank is also allowed to holda net trading position not to exceed 1 percent of its net shareholders’ equity, as long as the global foreign position doesnot exceed, at the same time, 40 percent of its net shareholders’ equity (Bank of Lebanon circular number 32).


124



2006 2005

OFF-BALANCE SHEET ITEMS

Financing commitments given to :

- Financial intermediaries- CustomersBank guarantees given to :

- Financial intermediaries- CustomersCommitments on term

financial instruments

Fiduciary deposits, assets under

management and custody accounts

Foreign currencies to receive against

foreign currencies to deliver

LL millionUS Dollars in

LL millionEuro in

LL million


LL millionTotal

LL million LL million


LL millionTotal

LL million

- 10,242 10,242-- 239,443 239,443-

217,32812,411

229,739

- 229,201 229,201-

64,628 448 89,716 90,164447274,922 23,227 457,730 480,95725,819

210,294 22,779 368,014 390,79325,372

- - 3,456 3,456-

1,375,658 11,033 1,476,884 1,487,91712,410

584,713 - 2,204,201 2,204,201-

11755,503

21,421523

21,944

55,386

15,11015,913288,257100,530

273,14784,617

-17,659

1,133,979252,313

1,262,506299,536

13,051307,186

294,135

96,098689,528

593,430

17,659

2,774,360

2,146,755

2,465,032 725,541 2,706,686 5,935,488 34,260 4,381,714 4,415,97438,229

125

ASSETS

Cash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts andother debit accountsGoodwillTOTAL ASSETS

LIABILITIES

Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesTOTAL LIABILITIES

NET LIQUIDITY GAP

615,949 501,454

37,203 361,9731,478 62,400

- -769,183 191,821

248,809 653,964123,717 -

- -- -- -

6,144 -

7,787 5,469- -

13,808 12,3903,321,788 1,051,578

123,717 -55,213 34,926

15,345 8,934- -

1,810,270 1,777,081

3,529,871 1,107,828

(1,719,601)

889,808

618,26970,940

-183,161

196,263-----

152-

-5,287

--

2,968-

1,958,593

8,255

1,950,338

764,869

429,46654,132

8,4036,301

86,925-

3,220231,086

2,8456,029

20663,980

----

3,67376,360

1,657,462

80,033

1,577,429669,253

2,401,613

1,986,939178,830

--

243,461-----

16-

----

43-

4,810,859

43

4,810,816

6,246,406

3,474,920386,100

8,4037,754,2842,996,698

173,2603,220

231,0862,84533,715

61,40863,980

1,308,84417,690,381

173,260128,641

129,86976,360

21,436,325

19,507,355

1,928,970

1,072,713

41,07018,320

-6,603,8181,567,276

49,543---

21,542

47,778-

1,282,64613,311,728

49,54338,502

98,906-

9,422,060

14,781,325

(5,359,265)

45. LIQUIDITY RISK

Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due. Liquidity risk can becaused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately.To limit this risk, management has arranged diversified funding sources, manages assets with liquidity in mind, andmaintaining a healthy balance of cash and cash equivalents, and readily marketable securities.

The table below summarizes the maturity profile of the Group’s assets and liabilities based on contractual repaymentarrangements and does not take account of the effective maturities as indicated by the Group’s deposit retention history.

The maturity profile of the Group’s assets and liabilities as at 31 December 2006 is as follows:



3 months to1 year

LL million

1 year to2 years

LL million

2 years to5 years

LL million

Over5 years

LL millionTotal

LL million

BLOM LEBANON INSIDE#2 (Rec) 9/12/07 9:42 AM

ASSETS

Cash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts andother debit accountsGoodwillTOTAL ASSETS

LIABILITIES

Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesSubordinated notesTOTAL LIABILITIES

NET LIQUIDITY GAP

229,269 641,122

72,955 890,6769,740 72,833

11,387 5,068434,269 72,833408,799 422,310

111,763 4,477- -- -- -

940 6

5,492 12,322- -

12,163 15,6843,547,266 777,277

111,763 4,47754,373 46,001

10,791 11,618- -

1,284,614 2,121,647

3,736,356 855,057

(2,451,742)

769,124

450,611154,516

-30,150

232,165-----

--

-8,208

--

3,807-

1,636,566

12,015

1,624,551

686,729

67,91862,311

5,1027,000

87,039-

3,081209,200

3,9521,617

1,36561,758

----

8755,451

1,197,072

55,538

1,141,5341,266,590

2,187,837

1,969,127130,719

--

163,908----

39

6,243-

-93

--

59,28014,487

4,457,873

73,860

4,384,013

5,601,547

3,539,845434,203

21,5575,297,1272,517,982

200,1553,081

209,2003,952

23,786

52,53861,758

704,12115,317,489

200,155136,220

94,87169,990

17,966,731

16,522,846

1,443,885

1,087,466

88,5584,084

-4,752,8751,203,761

83,915---

21,184

27,116-

676,27410,984,645

83,91535,846

9,28852

- - - -- --

7,268,959

11,790,020

(4,521,061)

The maturity profile of the Group’s assets and liabilities as at 31 December 2005 is as follows:



3 months to1 year

LL million

1 year to2 years

LL million

2 years to5 years

LL million

Over5 years

LL millionTotal

LL million

126



46. FAIR VALUE OF THE FINANCIAL INSTRUMENTS

The fair values of the financial assets and liabilities are not materially different from their carrying amounts in theconsolidated financial statements except for the following:

a) At 31 December 2006

Financial Assets

Cash and balances with Central Banks

Certificates of deposits-loans and receivablesBonds and financial assets with fixed income

Certificates of deposits-loans and receivablesNet difference between fair value and carrying value

b) At 31 December 2005

Financial Assets

Cash and balances with Central Banks

Certificates of deposits-loans and receivablesBonds and financial assets with fixed income

Certificates of deposits-loans and receivablesNet difference between fair value and carrying value

“Shares, securities, and financial assets with variable income” include unquoted available for sale investmentsamounting to LL 2,198 million as of 31 December 2006 (2005: LL 5,154 million) (Note 14). These unquoted investmentsare carried at cost as their fair values cannot be reliably estimated.

47. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS

Fiduciary deposits

Fiduciary accounts include notes, checks, policies, treasury bills/bonds, shares and documents for collection held bythe Group to the order of third parties.

3,761,064 3,617,534 143,530

245,113 246,599 (1,486)142,044

Fair ValueLL million


DifferenceLL million

3,247,917 3,059,688 188,229

262,918 258,013 4,905193,134

Fair ValueLL million


DifferenceLL million

2,774,360 1,487,917

2006LL million

2005LL million

127


128

48. COMMITMENTS AND CONTINGENCIES

a) Due to the nature of its business, the Bank is a defendant in various legal proceedings. Management, after discussingwith its counselors all such cases and proceedings against the Bank, considers that the aggregate liability or loss, if any,resulting from an adverse determination would not have a material effect on the consolidated financial position of theBank.

b) The Bank’s books in Lebanon have not been reviewed by the tax authorities since 2002. The ultimate outcome ofany review on the Bank’s books from 2003 to 2006 cannot be presently determined.

c) The Bank’s books in Lebanon have not been reviewed by the National Social Security Fund (NSSF) since 1998. Theultimate outcome of any review by the NSSF on the Bank’s books from 1998 to 2006 cannot be presently determined.

49. COMPARATIVE AMOUNTS

Commissions received have been reclassified from “Other operating income” to “Net commission”. Comparativeamounts totaling LL 10,137 million have been reclassified accordingly.



GROUP DIRECTORY

132

134

135

135

135

136

136

136

136

136

WORLDWIDE CORRESPONDENT BANKS

COUNTRY

COUNTRY

United Arab Emirates, DubaiAustralia, SydneyBahrain, ManamaCanada, TorontoCanada, TorontoDenmark, CopenhagenSwitzerland, GenevaSwitzerland, ZurichSwitzerland, ZurichGermany, Frankfurt am MainGermany, Frankfurt am MainGermany, Frankfurt am MainSpain, MadridSpain, BarcelonaNetherlands, AmesterdamFrance, ParisBelgium, BrusselsItaly, MilanItaly, RomeJapan, TokyoJapan, TokyoKuwait, KuwaitNorway, OsloSweden, StockholmUnited Kingdom, LondonUnited Kingdom, LondonU.S.A, New YorkU.S.A, New YorkSaudi Arabia, RiyadhSaudi Arabia, Jeddah

AUD

BHD

CAD

CAD

AED

CHF

CHF

CHF

EUR

DKK

EUR

EUR

EUR

EUR

EUR

EUR

EUR

EUR

JPY

EUR

KWD

NOK

SEK

GBP

GBP

USD

USD

SAR

SAR

JPY

Commonwealth Bank of AustraliaNational Bank of Bahrain

Royal Bank of CanadaImperial Bank of Commerce

BLOM BANK France SA

Danske Bank A/SBLOM BANK (Switzerland) SA

Credit SuisseUBS-AG

Commerzbank AG

Deutsche Bank AGBanco Bilbao Vizcaya Argentaria

Banco de Sabadell SAABN Amro Bank NV

BLOM BANK FRANCE SA

DRESDNER Bank AG

Intesa San Paolo SPABanca Nazionale del Lavoro SPA

Bank of Tokyo-Mitsubishi Ltd

Fortis Bank NV/SA

Gulf Bank KSCDnB NOR Bank ASA

Skandinaviska Enskilda Banken AB (Publ)BLOM BANK FRANCE SA

National WESTMINSTER BANK PLCThe Bank of New York

JP Morgan Chase Bank N.ARiyad Bank

The National Commercial Bank

JP Morgan Chase Bank N.A

CURRENCY CORRESPONDENT BANK

130

WORLDWIDE CORRESPONDENT BANKS

BLOM EGYPTSECURITIES


LEBANON

General Management

Verdun – Rachid Karami St, BLOM BANK bldg P.O. Box: 11-1912 Riad El-Solh, Beirut 1107 2807,LebanonPhone: (961-1) 743300 – 738938Fax: (961-1) 738946Telex: Electronic Telex in London: 94015829Answerback BLOM GReuter: BLOMSwift Code: BLOMLBBXE-mail: [email protected]: http://www.blom.com.lbCall Center: (961-1) 753000

BEIRUT & SUBURRBS

Main Branch

Verdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 738938 – 743300Fax: (961-1) 738946Email: [email protected] Manager / Branches: Mr. Walid ARISS

Achrafieh

Sassine SquarePhone: (961-1) 200147/8 – 320949Fax: (961-1) 320949Email: [email protected] Manager: Mr. Ara BOGHOSSIAN

Ain El-Mreisseh

Ibn Sina StPhone: (961-1) 372780 – 370830 – 373103Fax: (961-1) 370237Email: [email protected] Manager: Mr. Mahmoud MARRACH

Ain El-Remaneh

Chiyah District, Lamaa St, Next to KasarjianBarracks Phone: (961-1) 386750/1/2/3/4Fax: (961-1) 386750Email: [email protected] Branch Manager: Mr. Farid ZOUGHBI

Aley

Al Balakine, Property of Faysal Sultane WahabPhone: (961-5) 556612/13Fax: (961-5) 556614Email: [email protected] Manager: Mr. Kamal SLIM

Antelias

Next to the Armenian PatriarchatePhone: (961-4) 411472 – 520210 – 410123 –411418Fax: (961-4) 523666Email: [email protected] Manager: Mr. Laurent CHIBLI

Aramoun

Choueifat – Al Koba, Aramoun Road, Zaynab Center Phone: (961-5) 808591/2/3/4Fax: (961-5) 808594Email: [email protected] Manager: Mrs. Nawal Merhi ABOU DIAB

Badaro

Badaro Main StPhone: (961-1) 615818/19/20/21Fax: (961-1) 615825Email: [email protected] Manager: Mr. Fadi NADER

Bliss

Bliss St, opposite Hobeish Police StationPhone: (961-1) 363732/34/42Fax: (961-1) 363732Email: [email protected] Manager: Mr. Amer KAMAL

Burj Abi Haidar

Burj Abi Haidar St, Salam TowerPhone: (961-1) 310687 – 310677/8/9Fax: (961-1) 310679Email: [email protected] Manager: Mr. Mahmoud BAYDOUN

Burj Al-Barajneh

Ain El Sekka StPhone: (961-1) 450381/2/3/4Fax: (961-1) 450384Email: [email protected] Manager: Dr. Hassan JABAK

Burj Hammoud

Harboyan CenterPhone: (961-1) 262067 – 266337/8 – 268936Fax: (961-1) 268939Email: [email protected] Manager: Mr. Jean HOMSI

Chiyah

Chiyah Blvd, next to Ministry of Public WorksPhone: (961-1) 270172/3/4 Fax: (961-1) 270174Email: [email protected] Manager: Mr. Abbas TLEISS

Dora

Bawchrieh, Tripoli Road, Banking Center bldgPhone: (961-1) 256527/28/32/37/38/39/41Fax: (961-1) 256522Email: [email protected] Manager/ Branches: Mrs. Marlène DOUMIT

Elissar

Beit El Kiko, Antelias - Bickfaya RoadPhone: (961-4) 916111/2/3/4Fax: (961-4) 916115Email: [email protected] Manager: Mr. Joseph GHOUSOUB

Rmeil

Ashrafieh, Orthodox Hospital St, Medica Center Phone: (961-1) 565252 – 565454 – 567140 – 567141Fax: (961-1) 565252Email: [email protected] Manager: Mrs. Salma ACHKOUTY

Ghobeiri

Chiah BlvdPhone: (961-1) 825509 – 825870 – 821895 –856219Fax: (961-1) 820153Email: [email protected] Manager: Mrs. Magida MIKATI

Hamra

Abdel Aziz St, Daher bldgPhone: (961-1) 346290/1/2/3 – 341955Fax: (961- 1) 744407Email: [email protected] Manager: Mr. Sami FARHAT

132 133

Saifi

Al Arz StreetPhone: (961-1) 449899 – 581683 – 586340Fax: (961-1) 449899Email: [email protected] Manager: Dr. Ousama CHAHINE

Sanayeh

Chamber of Commerce & Industry bldgPhone: (961-1) 346042/3 – 748339Fax: (961-1) 346043Email: [email protected] Manager: Mrs. Nahida WEHBE

Sin El-Fil

Horsh Tabet, Charles De Gaulle St, Tayar CenterPhone: (961-1) 485270/1/2Fax: (961-1) 485273Email: [email protected] Manager: Mr. Fadi EL MIR

Tabaris

Gebran Tueini Square- Sursock Tower Phone: (961-1) 203142//3/4Fax: (961-1) 203145Email: [email protected] Marketing Manager: Ms. Claire ABOUMRADBranch Manager : Mr. Raoul CHERFANE

Tariq Al-Jedideh

Al Malaab Al Baladi SquarePhone: (961-1) 818620/1Fax: (961-1) 818620Email: [email protected] Manager: Mr. Khodr MNEIMNEH

Verdun

Verdun St, opposite F.S.I. BarracksPhone: (961-1) 788412/3 – 800081 Fax: (961-1) 800032Email: [email protected] Manager: Mr. Hani BAWAB

Verdun - Retail

Verdun, Rachid Karami St, BLOM BANK bldg Phone: (961-1) 750160/1/2/3 Email: [email protected] Manager: Mr. Marwan PHARAON

GROUP DIRECTORYGROUP DIRECTORY

Hamra - Retail

Abdel Aziz St, Daher bldgPhone: (961-1) 747752 /59 /60Fax: (961-1) 747749Email: [email protected] Manager: Mrs. Zeina KHATTAB

Haret Hreik

Al Abiad Area, Sayyed Hadi NasrallahHighway, Abou Taam & Hoteit bldgPhone: (961-1) 543662 – 543658 – 543659Fax: (961-1) 543661Email: [email protected] Branch Manager: Mr. Ali CHRIEF

Hazmieh

Damascus Road, Joseph Chahine CenterPhone: (961-5) 955240/1/2/3/4/5Fax: (961-5) 955240Email: [email protected] Manager: Mr. Ziad KAREH

Istiklal

Istiklal St, Karakol El-Druze Area, next toKettaneh PalacePhone: (961-1) 738050/1 Fax: (961-1) 748337Email: [email protected] Branch Manager: Mr. Mouhamad SIDANY

Jbeil

Voie 13 – Near Mar Charbel JunctionPhone: (961-9) 943701/2/3/4Fax: (961-9) 943701Email:[email protected] Manager: Mr. Sakhia SARKIS

Jnah

Bir Hassan Area, United Nations St, next toBeirut HospitalPhone: (961-1) 855903/4/5Fax: (961-1) 855906Email: [email protected] Manager: Mr. Samer BOHSALI

Jounieh

Facing ‘Palais de Justice’Phone: (961-9) 638011/12/13/14Fax: (961-9) 638011Email: [email protected] Manager: Mr. Rachad YAGHI

Kaslik

Kaslik Main St, Debs CenterPhone: (961-9) 640273 – 640095 – 636998/9 Fax: (961-9) 831112Email: [email protected] Manager: Mr. Charles AOUDE

Maarad

Emir Bechir St, Hibat el Maarad bldg Phone: (961-1) 983230/1/2/3/4Fax: (961-1) 983230Email: [email protected] Manager: Mr. Jules HAIDAR

Mansourieh

Mansourieh el Maten, Dar El Ain PlazaPhone: (961-4) 532856/7/8Fax: (961-4) 532854Email: [email protected] Manager: Mr. Walid LABBAN

Mar Elias

Corniche El MazraaPhone: (961-1) 818616/7 – 818009 – 818038Fax: (961-1) 818618Email: [email protected] Branch Manager: Mr. Mohamad Al TABSH

Mazraa

Corniche El Mazraa, Barbir SquarePhone: (961-1) 648020/1/2 Fax: (961-1) 648020Email: [email protected] Branch Manager: Mr. Mohammad MAWASS

Mina El Hosn (under establishment)

Beirut Tower

Noueiri

Al Noueiri StationPhone: (961-1) 630309– 658611Fax: (961-1) 630319Email: [email protected] Manager: Mr. Yehia ORFALI

Raouché

Raouche BlvdPhone: (961-1) 812603/4/5/6Fax: (961-1) 801634 Email: [email protected] Manager: Mr. Mohamad MARRACHE


General Management

GENEVA

1, Rue de la Rôtisserie, Geneva, SwitzerlandP.O.Box: 3040 – CH 1211 Geneva 3 – SwitzerlandPhone: (41-22) 81771 00 (General) Fax: (41-22) 8177190SWIFT: BLOMCHGG Website: www.blombank.chE-mail: [email protected]

General Management

BEIRUT

Verdun , Rachid Karami St BLOM BANK bldg – 2nd floor

P.O. Box: 11-1540, Riad El Solh, Beirut 11072080 Lebanon

Phone: (961-1) 738938 – 743300 – 348246Fax: (961-1) 738916E-mail: [email protected]

(BLOM BANK, Largest Shareholder)

General Management

DAMASCUS

Damascus – Al Harika – Bab Barid Lawyers’ Syndicate BuildingPhone: (963-11) 2460560 Fax: (963-11) 2460555P.O. Box: 3103 Damascus – Syria E-mail: [email protected]: BSOMSYDA

Zalka

Zalka St, Blom BANK bldgPhone: (961-4) 713074/5/6Fax: (961-4) 713077Email: [email protected] Branch Manager: Mrs. Denise JALKH

Zouk Mousbeh

Zouk Mousbih,Main St, Le Paradis Centre Phone: (961-9) 226991/2/3/4/5/6Fax: (961-9) 226990Email: [email protected] Manager: Mr. Joseph KILADJIAN

NORTH LEBANON

Tripoli Abi-Samra

Al-Dinnawi Square, Khaled Darwiche bldgPhone: (961-6) 423565/6/7/8/9Fax: (961-6) 423565Email: [email protected] Manager: Mr. Adel THAMIN

Tripoli - Azmi

Azmi StPhone: (961-6) 433064 – 443550/1/2Fax: (961-6) 443550Email: [email protected] Manager: Mr. Edmond HAMATI

Tripoli - Al Tall

Abdel Hamid Karameh SquarePhone: (961-6) 430153 – 628200/2Fax: (961-6) 628200Email: [email protected] Manager: Mr. Shina ASSI

Tripoli - Zahrieh

Al Tall StPhone: (961-6) 430150/2 – 423415Fax: (961-6) 430151Email: [email protected] Manager: Mr. Fouad El HAJJ

BEKAA - LEBANON

Chtaura

Main StPhone: (961-8) 540078 – 542504 – 544329/30Fax: (961-8) 542504Email: [email protected] Manager: Mr. Elie FREIJI

Zahleh

Manara CenterPhone: (961-8) 807680/1/2/3/4 Fax: (961-8) 807680Email: [email protected] Manager: Mr. Ziad SROUJI

SOUTH LEBANON

Nabatieh

Nabatieh That, Hassan Kamel Al Sabbah St,Office 2000 bldgPhone: (961-7) 767854/5/6Fax: (961-7) 767857Email: [email protected] Manager: Mr. Hany HAMOUD

Saida

Riad Solh StPhone: (961-7) 724866 – 723266 – 722801 –739276Fax: (961-7) 722801Email: [email protected] Branch Manager: Mr. Moufid NAJJAR

Tyr

Main StPhone: (961-7) 740900 – 741649 Fax: (961-7) 348487Email: [email protected] Manager: Mrs. Mayssa RAHAL

BRANCHES ABROAD

SYRIA

Damascus Free Zone, Al-BaramkehPhone: (963-11) 2133170/1 Branch Manager: Mr. Joseph HAYEK

CYPRUS

P. Lordos Center, Roundabout LimassolP.O. Box 53243 – 3301 Limassol, CyprusOr P.O. Box 53493 – 3303 Limassol, CyprusPhone: (357-25) 376433/4/5 Fax: (357-25) 376292Swift code: BLOMCY2IE-mail: [email protected] Manager: Mr. Ziad EL MURR

JORDAN

Regional Management - Jordan

Amman – Al-Charif Abdel Hamid Sharaf StP.O. Box 930321 Shmeisani ,Amman 111 93Phone: (962-6) 5001200Fax: (962-6) 567 71 77Reuter: BLMJSwift Code: BLOMJOAME-mail: [email protected]: http://www.blom.com.lbGeneral Manager: Dr. Adnan AL AARAJGeneral Management Consultant: Mr. AdnanSALLAKH

BRANCHES - JORDAN

Shmeisani - Amman

Amman- Al-Charif Abdel Hamid Sharaf StP.O. Box 930321 Shmeisani- Amman 111 93Phone: (962-6) 5001200Fax: (962-6) 567 71 77E-mail: [email protected] Manager: Mr. Omar ABOU ASSAF

Wihdat - Amman

Amman – Al Amir Hassan St, Oum Heiram Amman P.O. Box 110061 Amman 111 10Phone: (962-6) 4750050 Fax: (962-6) 4750055Email: [email protected] Manager: Mr. Mahmoud SADAKA

Soueifieh - Amman

Abed Al Rahim Al Hajj Mohammad StP.O. Box 852112 Amman 111 85Phone: (962-6) 5865527 Fax: (962-6) 45865346Email: [email protected] Manager: Mohanad YOUNES

Mekka Street - Amman

Under Establishment

134 135

BRANCHES

DAMASCUS

Harika

Damascus – Al Harika, Bab BaridLawyers’ Syndicate BuildingP.O. Box 3103 Damascus – Syria Phone: (963-11) 2460560Fax: (963-11) 2460555Email: [email protected]: Mr. Samir BASSOUS

Al Nejmeh Square

Damascus- Nejmeh SquareFacing Dar As Salam SchoolP.O. Box 3103 Damascus – SyriaPhone: (963-11) 3344001Fax: (963-11) 3344021 E-mail: [email protected] Manager: Mr. Fadi ISTWANI

Al Kassa

Damascus, Kassa – Brj Al Russ,Facing National ParkP.O. Box 3103 Damascus – SyriaPhone: (963-11) 5431350Fax: (963-11) 5431360E-mail: [email protected] Manager: Mr. Omar HAMMOUD

Mezzeh

Damascus, next to Al Razi HospitalP.O. Box 3103 Damascus – SyriaPhone: (963-11) 6132411Fax: (963-11) 6132409E-mail: [email protected] manager: Mr. Tarek CHEHAB

ALEPPO

Al Azizieh Aleppo

Aleppo – Azizia, Saad el Dine Al Jabiri StP.O. Box 9966 Aleppo – SyriaPhone: (963-21) 9960Phone: (963-21) 2258570Fax: (963-21) 2249800Email: [email protected] Manager: Mr. Eddy BECHARA


General Management

PARIS

38-40 Avenue des Champs Elysées 75008 Paris – FrancePhone: (33-1) 44 95 06 06Telex 644401 F BANOPAR- Forex

644456 F BANOPAR – ForexFax: (33-1) 44 95 06 00 Swift: BANO FRPPE-mail: [email protected]: www.banorabe.com

BRANCHES ABROAD

UNITED KINGDOM

London

193-195 Brompton Road London SW3 1 LZ – England

Phone: (44-20) 75907777 - 00 Fax: (44-20) 78 23 73 56Swift: BANO GB 2LEmail: [email protected] Manager: Mr. Amr TURK

UNITED ARAB EMIRATES

Dubai

Deira, Al Maktoum St Sheikh Ahmad Ben Rached Al Maktoum bldg

P.O. Box 4370 Dubai – United Arab Emirates Phone: (971-4) 2284655 – 2 278196 General

(971-4) 2224 812 – ForexFax: (971-4) 2 236260Telex: 45801 BANO EM – General

48836 BANO FX EM – ForexSWIFT: BANO AE ADEmail: [email protected] Manager: Mr. Bassem ARISS Branch Manager: Mr. Samir B. HOBEIKA

Sharjah

Khaled Lagoon, Corniche Al Buhairah Sheikh Nasser Bin Hamad Al Thani bldgP.O. Box: 5803 – Sharjah – United ArabEmirates Phone: (971-6) 5736700 – 5736100Fax: (971-6) 5 736 080 Telex: 68 512 BANO EMEmail: [email protected] Manager: Mr. Mokhtar KASSEM


EGYPT

General Management

54 Lebanon St, Mouhandeseene, Giza, EgyptP.O. Box 144 Al MouhandeseenePhone: (202) 3039825Fax: (202) 3039804Swift Code: MBBA EGCXE-mail: [email protected] Website: www.blombankegypt.com

BRANCHES

CAIRO

Mohandessin

Main Branch – 54 Lebanon St AlMouhandessin, Giza, EgyptPhone: (202) 3039825Fax: (202) 3039806Branch Manager: Mr. Mohamed ABDEL KADER

Cairo

15 Abu El Feda St – Zamalek – CairoPhone: (202) 7353292 – 7368045Fax: (202) 7370481 Branch Manager: Mr. Fawzy El Goioshy MOHAMED

Heliopolis

31 El Hegaz St, Heliopolis, CairoPhone: (202) 2592030 – 2583120Fax: (202) 4553517Branch Manager: Mr. Gamal DIAA EL DIN

Opera

6 Abdel El Hak Sanbati St Opera Square, CairoPhone: (202) 3927885 - 3959617Fax: (202) 3927002Branch Manager: Mr. Ali Ezzat KHAFAGY

Maadi

4 St no. 269, El Basateen El Maad

Nasr City

El Akkad Mall, El Nasr Road, CairoPhone: (202) 6906807 – 6906806Fax: (202) 6906805 Branch Manager: Mrs. Haneen FAHMYi

Cluj

9-11 Piata Ciparium, Block iB1Phone: (4026) 4450593Fax: Phone: (4026) 4450594Branch Manager: Mr. Dan BRICIU

General Management

BEIRUT

Abdel Aziz St, Daher bldg, Beirut, LebanonPhone: (961-1) 751090/1/2/3Fax: (961-1) 751094Email: [email protected]

INSURANCE COMPANIES OF THE GROUP

General Management

BEIRUT

Verdun – Rachid Karami St, BLOM BANK bldg P.O. Box 113-5686 Beirut 1103-2060 – LebanonPhone: (961-1) 747 444 (961-1) 759999 Fax: (961-1) 344012Call Center: (961-1) 747555 (01) or ( 03) 1219E-mail: [email protected]: http://www.arope.com

BRANCHES

Dora

Main Road – Cebaco Center – Bloc BPhone: (961-1) 262222

Saida

Riad Solh Street – Fakhoury bldgPhone: (961-7) 725 303

Tripoli

Zehrieh – Al Tall Street – Byssar bldgPhone: (961-6) 446 877

Zahlé

Zahlé Entrance – Manarah CenterPhone: (961-8) 818640

General Management

DAMASCUS

Damascus Al Rawda, Zuhair Ben Abi Salma st. Bldg N18P.O. Box: 33015Phone: (963-11) 9279Fax: (963-11) 3348144 E-mail: [email protected]

ALEPPO

Aleppo Planet HotelP.O.Box: 1293Phone: (963-21) 9279Fax: : (963-21) 4665214

General Management

7 Abdel, hadi salah st.El Nasr Building, GizaPhone : (202 ) 37617682 -37617683Fax : (202) 37617680

Hurghada

7 El Menaa St, Holiday Center, Block 1, Sakala Square, HurghadaPhone: (065)3448516 – 3448519Fax: (065)3447834Branch Manager: Mr. Ahmed Sabry ABDEL REHEM

Mansoura

35 Sadd Basha, Zaghloul St, Al MansouraPhone: (050) 2309120/24/25Fax: (050) 2309122 Branch Manager: Mr. Mohammad Al Doador

ALEXANDRIA

Stadium

1, Nerotsis St, Greek District, Eastern Gate,facing Alexandria StadiumPhone: (203) 4951637 – 4951641Fax: (203) 4951635 Branch Manager: Mr. Mohamed Hussein GABR

El Shatby

17 port Said St El

Sporting

273 Horia Road, Sporting, AlexandriaPhone: (203) 4270211 – 4200098Fax: (203) 4200094Branch Manager: Mr. Ibrahim ABAZA

BRANCHES UNDER ESTABLISHMENT

Abbasia

109 El Abbasia- Cairo

El Mansheya

6 A Ahmad Orabi Square

Shoubra

232 Shoubra street – Cairo

New Cairo

101 city commercial center - Street no. 90 El Tagamaa El Khames

Damietta

1 Cornish El Nile

136

Heliopolis

20 Khalifa El Maamoun St

Ismailia

Polt No. 13-144 street - El Ray predg

Dokki

64 Mohy El Din Abu El Ezz street

Sixth of October

Unit No 1- City Commercial Center

Sharm El Sheikh

Moray Mall - Neama Bay

ROMANIA

General Management

66 Boulevard Unirii, Block K3, Sector 3, BucharestP.O.Box 1-850 BucharestPhone: (4021) 3027206 – 3027201Fax: (4021) 3185214-3185203

BRANCHES

Bucharest

66 Boulevard Unirii, Block K3, Sector 3, BucharestP.O.Box 1-850 BucharestPhone: (4021) 3027206 – 3027201Fax: (4021) 3185214-3185203Branch Managers: Mr. Catalin Orban

Bucharest Hotel

Prel. St, 4 Georges Enescu , Bucharst HotelPhone: (4021) 3122751 – 3122752Fax: (4021) 3122753Branch Manager : Marios VOICULET

Constanta

25 Bis Boulevard Mamaia, ConstantaPhone: (40241) 510950 – 510951Fax: (4021) 510952Branch Manager: Mr. Mihai BUTCARU

Brasov

48 Boulevard Koghlniceanu, BrasovPhone: (40-268) 477383Fax: (40268) 477690Branch Manager: Mr. Hisham HOSNI


Al Madina -Aleppo

Sabeh Bahrat str. Phone: (963-21) 3335277 – 3335266-3335244Fax: (963-21) 3335377

LATTAKIA

Lattakia

Lattakia – Al Kamilia, 8th March StP.O. Box 371 Lattakia , Syria Phone: (963-41) 3010- 452516/9Fax: (963-41) 452573E-mail: [email protected] Manager: Mr. Basem MERHEJ

HAMA

Hama

Hama – Kouwatly StP.O. Box 820 Hama ,Syria Phone: (963-33) 213818- 9960Fax: (963- 33) 213833E-mail: [email protected] Branch Manager: Mr. Hussein OBEID

TARTOUS

Tartous

Tartous- Al Sawra StP.O. Box 824 Tartous – Syria Phone: (963-43) 9960 - 227474Fax: (963-43) 226869E-mail: [email protected] Manager: Mr. Chamel MAKARI

HOMS

Homs

Homs, City Center Bldg.P.O. Box 1377 Homs, SyriaPhone: (963-31) 9960 - 453925Fax: (963-31) 453936E-mail: [email protected] Manager: Mrs. Anna DIBE

BRANCHES UNDER ESTABLISHMENT

Souweida

Daraa

137



JORDAN

139

Regional Management - JORDAN

General Manager- Jordan Dr. Adnan AL AARAJConsultant for General Management in Lebanon Mr. Adnan SALLAKH

Managers

Internal Auditor Mr. Said OBEIDALLAHTreasury Manager Dr. Mohamad AMER Accounting Mr. Mohamad BALBISSICorporate Manager Mr. Yaccoub EL ALIM Customer Relations Mr. Darar AL KOURDY Back Office Operations Mr. Baker HADDADINEOperation Manager Mr. Mohammad ALLANIT Manager Ms. Nahla ALLOUSH Rizk Management Mr. Nabil AL OUWAILIHuman Resources Ms. Mona KHOUZAICompliance Mr. Maan AL ZOUGHBISales Mr. Ihab KHALILLegal Mr. Hani DIRANI


140 141

Honorary Chairman of the Board Dr. Naaman AZHARI

Board of Directors

Chairman of the Board Mr. Saad AZHARIVice-Chairman of the Board Mr. André CATTINDirectors Dr. Werner FREY

Me. Peter DE LA GANDARAMr. Ahmad G. SHAKER

Management Committee

General Manager Mr. Antoine MAZLOUMManager Mr. Thierry OTT

BOARD OF DIRECTORS AND MANAGEMENT

Honorary Chairman of the Board Dr. Naaman AZHARIPermanent Representative of BLOM BANK

Board of Directors

Directors Mr. Samer AZHARISE Cheikh Ghazi Ibrahim CHAKER

SE Cheikh Ghassan Ibrahim CHAKERGrand Officier de la Légion d’Honneur

Mr. Christian de LONGEVIALLEMr. Jean Paul DESSERTINE

Mr. Marwan JAROUDI

Management

Deputy General Manager Mr. Michel ADWANSenior Manager Mr. Gilbert MOINEManager Mr. Iskandar ARMAN

Senior Manager - London Mr. Amr TURK

Regional Manager - UAE Mr. Bassem ARISS


142 143

Board of Directors

Chairman Dr. Rateb AL SHALLAH Vice-Chairman Mr. Amr AZHARIDirectors Dr. Ehsan BAALBAKY

Mr. Ibrahim Sheikh DIBMr. Ramzi Mohamad SHAABANI

Mr. Mohran KHAWANDAMr. Habib BEYTINJENI

Mr. Samer AZHARIMr. Saad AZHARI

Board’s Advisor Mr. Mohamed Adib JOUDSecretary General Mr. Georges SAYEGH

General Management

General Manager Mr. Georges SAYEGH

Managers

Credit Mr. Bashir YAKZANInternal Audit Mr. Georges HADDADAdministration Mr. Samir ASMARInternational Affairs Ms. Inaya SOUBRAHuman Resources Ms. Rima JAWAD ZEINRetail Banking Mr. Mohamad Yehya KHALEDInformation Technology Mr. Salem MAHMOUDOperations Mr. Michel AL MANIAccounting Mr. Chadi DEIRBAKLY

Board of Directors

Chairman Mr. Saad AZHARI Directors Mr. Alaa el Din Ahmad SAMAHA

Mr. Elias ARACTINGIDr. Fadi OSSEIRAN

Mr. Chaker ABBDALLAHMr. Samir KASSIS

General Management - Egypt

Managing Director & General Manager Mr. Alaa el Din Ahmad SAMAHA Credit & Chairman Advisor Mr. Hani DANARetail & Planning Manager Mrs. Maya EL KADYOperations & Administrative Manager Mr. Talal IBRAHIMSenior Managers Mr. Tarek METWALLY

Mr. Belal FAROUKMr. Talaat ABED EL AAL

Mr. Ahmad YOUSSEFMr. Ousama MEYZOUNA

Mr. Abdel AZIZ MOHAMEDRegional Manager Mr. Khaled ABDEL HAMID

General Management - Romania

General Managers Mr.Jean-Pierre BAAKLINI Mr. Samir MAHDI

Manager Mr. Gheorghe BARBULESCU


144 145

Board of Directors

Chairman & General Manager Mr. Saad AZHARI Directors Mr. Nicolas SAADE

Dr. Fadi OSSEIRAN

(Representative of BLOMINVEST BANK)

General Management

General Manager Mr. Mouataz NATAFGI Main Branch Manager & Head of Retail Department Mr. Tarek HOUSSAMI

Islamic Bank

Board of Directors

Chairman & General Manager Mr. Saad AzhariDirectors Messrs., BLOM BANK sal

Mr. Joseph Kharrat Mr. Samer Azhari

Mr. Marwan Jaroudy Mr. Habib Rahal

Management

General Manager Dr. Fadi OSSEIRAN

Senior Manager

Administration Mr. Elie CHALHOUBPrivate Banking Mr. Georges TABET

Manager

Operations Mr. Khodor BDEIR Investment Banking Mr. Nicolas PHOTIADES Organization and Business Development Mr. Phillipe DAGHER

Heads

Deputy Manager– Head of Capital Markets Mr. Rami SAYEGHHead of Corporate Finance Mr. Bechara BARDAWIL


146

Board of Directors

Chairman & General Manager Mr. Habib RAHALDirectors Mr. Samer AZHARI

Mr. Serge OSOUFMr. Patrick LOISY

(Representing SCOR – FRANCE)Mr. Rami HOURIE

Mr. Marwan JAROUDIMr. Fateh BEKDACH

Management

General Manager Mr. Fateh BECKDACH Deputy General Manager Ms. Faten DOUGLAS

Managers

Claims Manager Mr. Chawki MEZHERSales Manager Mr. Georges FEGHALIFinance Controller Mr. Ghassan LABBANTechnical Manager Ms. Souheila BEYROUTILife Manager Mr. Nicolas HADDADLife & Medical Mr. Elie ASSAFDirect Sales Broker Ms. Nada KOUBEISYAdministrative Manager Ms. Rosy ZWEINMedical Claim Manager Ms. Hoda FATHALLAH

Board of Directors

Chairman Mr. Amr AZHARI Vice-Chairman Mr. Fateh BECKDACHEDirectors Mr. Habib BATINJANA

Mr. Ibrahim SHEIKH DIB Mr. Samer AZHARI

Mr. Marwan JAROUDI Mr. Hassan BAALBAKI

General Management

General Manager Mr. Firas AL AZEM

Board of Directors

Chairman Mr. Alaa ELDEEN SAMAHA Deputy Chairman & Managing Director Mr. Ahmed GEMEI Directors Mr. Belal Farouk TAWFEK

Mr. Tarek Ibrahim MATWALY Mrs. Maya TAWFEK EL KADY

Mr. Khaleed MOHAMED

General Management

Deputy Chairman & Managing Director Mr. Ahmed GEMEI E.Trade Proj. Manger Mr. Ayman EL GENDY Compliance Officer Mr. Mahmoud EL GAMMALFinancial Control Mr.Ahmed A. RAHMAN Head of Institutional Desk Mr. Emam WAKED

147



ANNUAL REPORT 06 - BLOM Bank Lebanese domestic scene has been characterized by uncertainty and...

Documents

Transcript of ANNUAL REPORT 06 - BLOM Bank Lebanese domestic scene has been characterized by uncertainty and...