GUMHOURIA BANK
A new giant in Libyan banking was formed in 2008 by the merger of Al Ummah and Gumhouria banks as part of the bank modernisation programme, and the new Gumhouria Bank represents the transformation taking place in all aspects of banking in the country. Not only is it the largest domestic bank with a combined network of 146 branches, it is also one of the top 10 banks in the Arab Maghreb and is witnessing significant growth in size and profitability.
From a combined balance sheet of Ld15bn ($12.2bn) at the end of 2007 the new bank's balance sheet jumped by 78% to reach Ld27bn by the end of 2008. Nureddin Galuta, Gumhouria deputy manager of banking operations, says increased confidence in the new bank led to significantly increased customer deposits which were used to buy Central Bank of Libya certificates of deposit (CDs), which have proved extremely profitable. As a result, profits rose 82% from Ld270m in 2007 to Ld490m in 2008.
While loan growth was not significant last year with specialised banks still playing a key lending role, Gumhouria is diversifying its lending and, with the real estate and non-oil boom, Mr Galuta expects all sectors to grow and retail banking to increase significantly. Gumhouria is estimated to have a 45% market share, well ahead of its nearest rivals.
Mr Galuta adds: "There is also big potential in Islamic banking, as demand for Islamic instruments is huge and it is consistent with our culture." Sharia-compliant instruments are not yet in the market but, with most people having bank accounts and attitudes changing positively towards banks, the outlook for retail banking is bullish especially with Islamic and internet banking arriving soon.
Gumhouria has about 100 ATMs at present and has plans for another 80 through supplier NCR. It is also introducing pre-paid cards for fuel through a programme with Visa. Training remains key for the bank's 6000 employees, of whom more than 25% are women, and a modernisation programme for all the bank's branches is under way.
Other key structural changes are also taking place to prepare for further growth and real banking competition. The bank's Tier 1 capital is being addressed to deal with the expected significant growth over the next few years and the capital adequacy ratio at end-June 2009 reached a healthy 15.9%.
Also, following the merger last year, an important initial public offering (IPO) was introduced earlier this year and now 15% of the state-owned giant is held by the private sector and bank employees, while shares in the bank began trading on the Libyan Stock Market in August adding much greater depth to the infant exchange.
SAHARA BANK
Established in 1964, Sahara Bank became the first financial institution in Libya in 2007 to enter into a strategic partnership with a foreign bank. Following the central bank's partial privatisation strategy, France's BNP Paribas Group was selected to take a 19% stake in Sahara, as well as the management contract for the bank, and has an option to raise its stake to 51% in September 2012.
Claude Rufin, chief executive of Sahara, says: "For a country closed up for so long, things are happening. It is a calculated process and it takes time but the authorities are taking the necessary actions to make things happen." Sahara, which has an overall 17% market share, is seen as Libya's second largest bank and, according to Mr Rufin, had 21.7% of deposits, 20.5% of total assets and 18.2% of total loans in the banking sector at the end of 2008.
Sahara has previously been focused on institutions and corporates, but is now moving into retail. "Libyans are rediscovering banks," says Mr Rufin, "and there are a lot of opportunities, the global financial crisis has not hit Libya so there is money to pay for projects." Sahara has a national network of 50 branches with 1500 employees. However, Mr Rufin readily admits: "Libya's biggest challenge is human resources." Nevertheless, Sahara's approach under BNP Paribas management is to train young Libyans and develop sales people for much-needed retail products with limited use of expatriates. The bank only maintains 20 expatriates.
Describing itself as a Libyan bank with an international profile, Sahara hopes to make full use of the BNP Paribas global network, connections and regulatory experience. With BNP's ties to BNL Banca Commerciale in Italy and strong links with banks in Turkey and Tunisia, Sahara intends to utilise its partner's strong regional links as well as important international trading ties with India, Malaysia, China and South Korea. Also key links with major French corporates, such as Total and Alstom, create strong opportunities. In addition, BNP Paribas has a long history in Islamic banking, and while no products have been launched yet, Mr Rufin believes there is strong demand for non-interest products in the market and Sahara is well placed when the central bank authorises such products.
Meanwhile, Sahara plans to issue Visa cards by the end of the year and is in the process of introducing new consumer products such as leasing. The process of bank transformation and genuine bank competition in Libya is emerging.
WAHDA BANK
In April 2008, Wahda Bank, an institution established in 1970, followed the privatisation strategy initiated by Sahara Bank the previous year, when the Central Bank of Libya announced that Jordan-based Arab Bank would pay €210m for a 19% stake in the Benghazi-based bank. Like the Sahara partnership with BNP Paribas, Arab Bank would also acquire the management contract for the bank and have the right to increase its shareholding in Wahda to 51% in three to five years.
Arab Bank, which has a global network of more than 400 branches, beat off four international banks that had pre-qualified for the deal. These were Italy's Intesa Sanpaolo, Bahrain's Arab Banking Corporation, Morocco's Attijariwafa Bank and France's Société Générale.
Wahda, which is described as having the second largest customer base after Gumhouria Bank, has 810,000 accounts spread across 75 branches with 3000 employees and an estimated 25% overall market share. Mohamed Zakarnah, head of the retail banking group, believes there are strong opportunities in all areas from retail to corporate, and especially in deposits, and Wahda was planning to introduce a new car loan scheme in September.
Like other banks, Wahda is interested in introducing an Islamic window and is planning to increase its branch network aligned to Arab Bank's core branch design. At present Wahda has 43 ATMs, but plans to reach 100 in 2010.
For Wahda, the role of Arab Bank and its technologies and expertise appears to have brought immediate results. From a net profit of Ld29m for the whole of 2008, the bank achieved profit of Ld27m for the first half of 2009 and Mr Zakarnah is optimistic about further growth.
NATIONAL COMMERCIAL BANK
With its paid-up capital recently increased to Ld500m, National Commercial Bank, based in ElBeda, east of Benghazi, is another of Libya's big banks undergoing significant modernisation and change. Established in 1970, NCB has a 64-branch network, 500,000 clients and 2500 staff and in 2009 embarked on a new strategy.
According to general manager, Said Rashwan, NCB is now focusing on the private sector and concentrating on individual customers and small and medium-sized enterprises (SMEs). Mr Rashwan believes NCB accounts for 16% of total bank assets and 17% of bank deposits. Like other banks, business is taking off and gross profits are rising, reaching Ld83m in 2008, well up from Ld47 in 2007, while profits for the first half of 2009 already hit Ld75m and are expected to well exceed the target of Ld100m for this year.
Following similar approaches to other banks, NCB is upgrading its branch network with a particular emphasis on increasing its number of ATM machines. Mr Rashwan explains that while NCB has only 36 ATMs now, it will have 50 by the end of the year and not less than 100 by the end of 2010. Also, NCB was expected in August to be the first Libyan bank to join Visa International and is keen to develop a broad card infrastructure, incorporating pre-paid, debit and credit cards and allowing Libyans to travel overseas with cards.
In addition, NCB's vision of the future is an expanded branch network, which will reach 82 branches in two years, and a significant use of Islamic financial products. NCB has requested permission for two specific Islamic branches and is keenly waiting for central bank regulations on such products. It is also keen to diversify its revenue stream by increasing income from commissions and fees; such income reached Ld30m in the first half of 2009 compared with Ld31m for the whole of 2008.
Like others, NCB's structure is changing and moving towards a privatised model. The bank is waiting for the central bank to announce a 15% initial public offering (IPO) by the end of this year. Somewhat like the recently completed 15% IPO at Gumhouria Bank, the upcoming NCB IPO will bring more change, but there have been no links with foreign partners yet.
FIRST GULF LIBYAN BANK
Established as a fully fledged commercial bank in Tripoli in September 2007, First Gulf Libyan Bank is the country's first foreign-owned bank with shareholding divided equally between First Gulf Bank of Abu Dhabi and Libya's Economic and Social Development Fund (ESDF), each with a 50% stake.
Fully managed by First Gulf Bank with a paid-up capital of $200m, the bank started operations in November 2008 with a clear focus to be a corporate bank. "We want to be a local bank developing the local economy," explains Driss Al Habib, chief executive of FGLB. While the initial priority is to build a corporate bank, Mr Al Habib does not rule out moving into retail in the future as the economic fundamentals are there with Libya having the highest GDP per capita in north Africa, and, in his view, strong potential in retail.
The economy has been closed and isolated for a long time, Mr Al Habib explains, and Libya faces stiff challenges in transforming its practices into those acceptable in an open market. He believes the private sector is emerging and needs support, especially in areas such as previous fully secured lending that he feels has hindered development. Also he notes accounting standards need more rigour. But he sees clear niches in areas such as energy, construction, services and industry, where opportunities abound from housing to basic products.
FGLB, he believes, is well positioned to mediate between Libya and Abu Dhabi in key areas such as tourism and real estate, as well as energy projects. With banks constrained by capital limits to lend to major projects, Mr Al Habib thinks there is a definite need for loan syndications which are just starting to emerge. The bank is also keen to use First Gulf Bank's international presence in China, Malaysia, Singapore and India to help intermediate business in Libya.
For Mr Al Habib, Libya has moved away from a directed economy to an open market where people are genuinely competing against one another. He believes that, with the economy booming, banks have huge potential to bring in new products that did not exist before. "It is a good time to be here," he stresses.
LIBYAN FOREIGN BANK
Established in 1972 in Tripoli as the country's first offshore banking institution licensed to operate internationally, this bank acted for decades as Libya's financial window to the outside world through a period of isolation and sanctions. Known as the Libyan Arab Foreign Bank until November 2005, the bank is owned 100% by the Central Bank of Libya, and played a key role for the government in opening letters of credit (LCs) during the sanctions period and having participations with banks in more than 30 countries across the world.
As a specific offshore entity, LFB had an important role for Libya but now, with the sanctions era gone and major efforts to modernise the overall banking system in place, the bank's focus is not that clear. Its size and profitability are also in decline, with total assets dropping to $16.6bn at the end of 2008 compared with $18.0bn at the end of 2007, and net operating income falling to $184.8m in 2008 from $321.9m in 2007.
In this new era what is the LFB expected to do? While it can continue to operate opening LCs for the central bank and fulfil other international operations, its previous core functions appear to be no longer necessary. The bank owns a significant stake in London-based British Arab Commercial Bank and other institutions abroad, but is expansion abroad of this nature the type of strategy it is looking for? Does it have a domestic role or could it be privatised or sold to the Libyan Investment Authority, the country's sovereign wealth fund? It is not yet clear which direction the LFB will take in the future.
