CREDIT LIBANAIS S.A.L.

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1 CREDIT LIBANAIS S.A.L. Issue No. 539 February 25 th March 3 rd 2017 Economic Research Unit Credit Libanais Headquarters Adlieh Beirut, Lebanon Tel Fax research@cl.com.lb

2 TABLE OF CONTENTS LEBANON NEWS ECONOMIC INSIGHTS > NON-LIFE PREMIUM COLLECTIONS IN THE LEBANESE INSURANCE SECTOR UP BY 3.1% IN > LEBANON RANKS 129 TH OUT OF 141 COUNTRIES IN INCOME INEQUALITY IN > OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 57% IN JANUARY > INDUSTRIAL EXPORTS DROP BY 14.51% IN 2016 TO $2,526.9 MILLION 4 > LEBANON S BALANCE OF TRADE DEFICIT WIDENS TO $1.37 BILLION IN JANUARY > CONSTRUCTION PERMITS AT 649 THOUSAND SQM IN JANUARY > BANKS SHARE OF LBP-DENOMINATED DEBT AT 41.9% IN DECEMBER > PUBLIC SECTOR SALARIES, WAGES & RELATED BENEFITS NEAR $2.14 BILLION YTD AUGUST > RESERVES AT BDL REACH $52.96 BILLION AS AT END OF FEBRUARY > BSE TRADED VALUE DOWN BY 17% Y-O-Y BY FEBRUARY > TRIPOLI PORT ACTIVITY IMPROVES BY A SHY 1.64% IN > MOF TO REPLACE MATURING EUROBONDS 11 CORPORATE NEWS > ODEABANK A.Ş. POSTS NET PROFITS OF TRY MILLION IN MONETARY PERFORMANCE > MONETARY AGGREGATES 13 > MONEY MARKETS 13 LEBANESE EQUITIES > LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 14 LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 16 LEBANON'S RATINGS 17 NON-LIFE PREMIUM COLLECTIONS IN THE LEBANESE INSURANCE SECTOR UP BY 3.1% IN 2016 Al Bayan Economic magazine unveiled that non-life insurance premium collections in Lebanon rose by 3.1% in the year 2016 to just above $1.09 billion, from around $1.06 billion in LEBANON RANKS 129 TH OUT OF 141 COUNTRIES IN INCOME INEQUALITY IN 2014 According to the Ministry of Finance, the bottom 59% of taxpayers in the private sector earn 22% of total income while the top 2% take over 17% of the total income, displaying as such the huge inequality in labor income in Lebanon. OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 57% IN JANUARY 2017 Beirut s average hotel occupancy rate stood at 56.7% during the month of January 2017, conveying a one percentage-point annual increase according to Ernst & Young. INDUSTRIAL EXPORTS DROP BY 14.51% IN 2016 TO $2,526.9 MILLION According to the Ministry of Industry, industrial exports fell by 14.51% to $2.53 billion during the year 2016, compared to $2.96 billion in LEBANON S BALANCE OF TRADE DEFICIT WIDENS TO $1.37 BILLION IN JANUARY 2017 Lebanon s balance of trade deficit widened by $64 million on an annual basis to just above $1.37 billion in January 2017, up from around $1.31 billion a year earlier. ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX:

3 SYNOPSIS OF TERMS "BDL" "ABL" "MOF" "BOP" "IMF" "Moody's" "BSE" "GDRs" "M1" "M2" "M3" "M4" "CPI" "PPI" "CLASI" "CLFI" "CLCI" EIU EOY "P/E" "P/BV" "YTD" "YTD Price Performance" "Forex" "LBP" "USD" "Yen" "GBP" "CHF" "Y-O-Y" "GDP" "MENA" LE SAR AED BD Banque Du Liban Association of Banks in Lebanon The Lebanese Ministry of Finance Balance of Payment The International Monetary Fund Moody's Investors Service Beirut Stock Exchange Global Depositary Receipts Currency in Circulation + Demand Deposits in LBP M1 + Other Deposits in LBP M2 + Deposits in Foreign Currencies M3+ Treasury Bills Held By Non Banking System, Including Accrued Interests Consumer Price Index Producer Price Index Credit Libanais Aggregate Stock Index Credit Libanais Financial Sector Stock Index Credit Libanais Construction Sector Stock Index Economist Intelligence Unit Year Price to Earnings Multiple Price to Book Multiple Year To Date Yield to Date Price Appreciation Foreign Exchange The Lebanese Pound The United States Dollar The Japanese Yen The British Pound/ Sterling Pound The Swiss Franc Year-On-Year Gross Domestic Product Middle East and North Africa Livre Egyptienne Egyptian Pound Saudi Arabian Riyal United Arab Emirates Dirham Bahraini Dinar ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX:

4 NON-LIFE PREMIUM COLLECTIONS IN THE LEBANESE INSURANCE SECTOR UP BY 3.1% IN 2016 Al Bayan Economic magazine, the specialized banking, insurance & shipping pan-arab monthly magazine, published in its February 2017 issue (Issue No.543) an overview on the non-life insurance premiums collected by the 45 insurance companies operating in Lebanon in the year More specifically, the article unveiled that non-life insurance premium collections rose by 3.1% in the year 2016 to just above $1.09 billion, from around $1.06 billion in Non-life insurance premium collections had widened by 2.4% in 2015, 5.3% in 2014, 5.8% in 2013, 6.8% in 2012, and a much higher 7.5% in the year This slowing pace of growth in non-life premiums over the last couple of years can be explained by the local and regional turmoil, in addition to the increasing illicit black market activities. The ten largest insurance companies operating in Lebanon amassed a stake of 64.5% of non-life premium collections in 2016, preserving the same ranking registered in 2015, with the twenty largest companies controlling a stake of 86.9%. Medgulf detained the lion s share (9.39%) of total non-life insurance premiums in 2016, followed by Bankers (9.12%), AXA M.E. (7.40%), and Libano Suisse (6.76%). The largest increase in non-life insurance premium collections in the year 2016 was reported by LCI (63.4%), followed, and at quite a distance, by UFA (29.5%) and Overseas (28.7%). It is worth noting that 30 out of the aforementioned 45 companies posted a yearly appreciation in non-life insurance premium collections in the year 2016, while 15 companies suffered a contraction in collections. Non-Life Insurance Premium Collections in the 20 Largest Lebanese Insurance Companies (USD Thousands) 2015 Market Share 2016 Market Share Y-O-Y % Change in Premiums Medgulf 100, % 102, % 2.4% Bankers 97, % 99, % 2.6% AXA M. E. 81, % 80, % -1.3% Libano Suisse 73, % 73, % 0.4% Fidelity 66, % 68, % 2.7% Allianz SNA 60, % 63, % 5.2% LIA 59, % 61, % 3.6% Arope 56, % 60, % 5.7% Continental Trust 51, % 53, % 2.5% Al Mashrek 39, % 40, % 4.2% Metlife 31, % 35, % 11.3% Assurex 32, % 33, % 2.6% ALIG 24, % 30, % 22.6% Cumberland 24, % 25, % 2.9% Arabia 20, % 22, % 9.8% UFA 17, % 22, % 29.5% ADIR 20, % 22, % 5.5% Capital 19, % 19, % -3.4% Liberty 16, % 19, % 16.0% UCA 14, % 14, % -3.2% Total 910, % 948, % 4.2% Source: Al Bayan Economic Magazine, Credit Libanais Economic Research Unit Annual Growth Rate in Non-Life Insurance Premiums 8.0% 7.5% 7.0% 6.0% 6.8% 5.0% 4.0% 5.8% 5.3% 3.0% 2.4% 3.1% 2.0% 1.0% 0.0% Source: Al Bayan Economic Magazine, Credit Libanais Economic Research Unit SOURCE: AL BAYAN ECONOMIC MAGAZINE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

5 LEBANON RANKS 129 TH OUT OF 141 COUNTRIES IN INCOME INEQUALITY IN 2014 The Lebanese Ministry of Finance (MoF) published a paper titled Assessing Labor Income Inequality in Lebanon s Private Sector ; a work supported by the United Nations Development Programme (UNDP). The paper aims at measuring the level of income inequality in the Lebanese labor market, identifying the reasons underlying it, and providing recommendations on the suitable measures and regulations that can help minimize it. With respect to the results of the study, and to begin with employee wage distribution, data covering tax declarations of a total of 369,279 employees whose cumulative annual income amounted to $5.5 billion in % of GDP and whose average yearly income thus stood at $14,846, reflected a large degree of inequality with wage levels highly skewed towards low income brackets. In detail, statistics revealed that when income is divided into intervals, the lowest two brackets which add up to 56.8% of total taxpayers had a share of around 22.4% of total wages earned in 2014, while the two uppermost brackets which combine to form a portion of 6.3% of taxpayers controlled 31.8% of total declared wages. Further depicting the disparity come the average annual wages in every bracket (which leveled at LBP 3.2 million for the lowest income bracket and LBP million for the topmost) and the ratios of these averages to the average wage of all private sector employees (LBP 22.4 million), noting that the said ratio stood at 0.1 and 9.9 for the lowest and highest brackets respectively. On the self-employed and proprietors income distribution front, results come no better. The statistics which capture data on 88,040 taxpayers whose cumulative annual income neared $1.3 billion in % of GDP and whose average yearly income therefore settled at $15,148, showed yet again, how unevenly income is distributed. More specifically, 67.3% of taxpayers representing the lowest two brackets held a share of 21.7% of the aggregate profits of self-employed taxpayers; meanwhile, 6.8% of taxpayers, who constitute the highest two brackets, enjoy a share of 46% of total profits. The tables below portray in more details the information presented on each of the two groups respectively: Annual Income Bracket (Million LBP) Share of Taxpayers (%) Employee Wage Distribution Share of Wages (%) Average Annual Wage in the Bracket (Million LBP) Ratio of Average Wage by Bracket to the Average Wage of LBP 22.4 Million < [6-15[ [15-30[ [30-60[ [60-120[ Source: M inistry of Finance, Credit Libanais Economic Research Unit Self-employed and Proprietors' Income Distribution Annual Income Bracket (Million LBP) Share of Taxpayers (%) Going over the full dataset including employees, self-employed, and proprietors, reveals that the bottom 59% of taxpayers in the private sector earn 22% of total income while the top 2% takes over 17% of the total income in a picture that displays the huge inequality in labor income in Lebanon. Moreover, a Gini coefficient is used in order to measure inequality in a large number of countries, assigning each country a level that ranges between 0 (perfect equality) and 100 (perfect inequality). In this context, Lebanon received a Gini coefficient of 50.7 in 2014, placing it in the 129 th position out of 141 nations covered. A comparison with a selected number of countries, most of which are chosen from the MENA region, is sketched below: Gini Coefficient Representing the Relative Measure of Inequality for a Selected Number of Countries Share of Profits (%) < [6-15[ [15-30[ [30-60[ [60-120[ Source: M inistry of Finance, Credit Libanais Economic Research Unit The paper dives deeply into further issues of which we choose to mention the following. Despite the fact that personal income tax is progressive in nature and mainly seeks to reduce gaps among different classes, it seems to do very little in this concern in Lebanon. While the after-tax Gini coefficient drops by 14 points below its pre-tax value in OECD countries, it barely falls by some 2.1 points in Lebanon. The study points out that the inefficiency of taxes in narrowing down inequalities in Lebanon is not the only reason for inequality to remain as high as it is. The paper attributes this fact to three other factors which can be summarized as follows: low institutional quality characterized by a weak regulatory environment (for instance, Lebanon ranked 111 th among 189 countries in ease of doing business index for the year 2014), widespread corruption (Lebanon positioned 136 th out of 174 countries in the corruption perception index in 2014), and the significant size of the informal sector which employs workers at very low wages. To sum up, the paper provides a few recommendations that can trim down income inequality if considered. Introducing new regulations that aim at facilitating the entry of small and medium-sized businesses to the market leads to the creation of new job opportunities, decreasing informality, and limiting the prevalence of monopolies. In addition, the engagement of the government in sustainable public investment can both create employment opportunities and boost activity in rural areas and severely deprived urban districts. Source: Ministry of Finance, Credit Libanais Economic Research Unit SOURCE: MINISTRY OF FINANCE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

6 OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 57% IN JANUARY 2017 Ernst & Young (EY) published its Middle East Hotel Benchmark Survey Report on the performance of 4 & 5 star hotels in the Middle East region, conveying a one percentage-point annual increase in the average occupancy rate in Beirut s hospitality sector to 56.7% during the month of January The average room rate also rose by 0.8% y-o-y to $144, with the average room yield improving by 2.6% to $82. Performance of Beirut's Hospitality Sector During the Month of Jan-2016 Jan-2017 Change Hotel Occupancy Rate (%) pctg point Average Room Rate (USD) % Rooms Yield (USD) % Source: Ernst & Young, Credit Libanais Economic Research Unit The following chart captures the monthly evolution in the occupancy rate in Beirut s 4 & 5 star hotels over the January January 2017 period: 80% Monthly Evolution of Hotel Occupancy in Beirut 70% 66% 63% 70% 65% 64% 60% 50% 56% 57% 51% 55% 63% 54% 57% 40% 44% 30% On a regional basis, Beirut recorded the 5 th highest (56.7%) occupancy rate among covered Middle Eastern (MEA) capitals during the first month of Abu Dhabi-UAE outperformed its regional peers, recording an average occupancy rate of 77.0%, followed by Cairo (70.2%) and Doha (64.9%), only to name a few. In a related note, Kuwait charged the highest average room rate ($232) in the region s 4 & 5 star hotels, right ahead of Manama-Bahrain ($204), Doha-Qatar ($184), Muscat-Oman ($172), Riyadh-Saudi Arabia ($170), Amman-Jordan ($145), Beirut-Lebanon ($144), Abu Dhabi-UAE ($126), and Cairo-Egypt ($91). Middle East Hotel Benchmark Survey for the Month of Source: Ernst & Young, Credit Libanais Economic Research Unit Hotel Occupancy Rates (%) Average Room Rates (USD) Room Yields (USD) Country - Capital Jan-2016 Jan-2017 Change in % Pts Jan-2016 Jan-2017 % Change Jan-2016 Jan-2017 % Change Bahrain - Manama % % Egypt - Cairo City % % Jordan - Amman % % Kuwait-Kuwait % % Lebanon - Beirut % % Oman-Muscat % % Qatar - Doha % % Saudi Arabia - Riyadh % % United Arab Emirates - Abu Dhabi % % Source: Ernst & Young - Middle East Hotel Benchmark Survey, Credit Libanais Economic Research Unit Hotel Occupancy Rate in the Middle East Region in January 2017 Average Room Rate in the Middle East Region in January 2017 (USD) Amman Riyadh Manama Kuwait Beirut Muscat Doha Cairo 37.7% 42.7% 47.0% 48.2% 56.7% 61.1% 64.9% 70.2% Cairo Abu Dhabi Beirut Amman Riyadh Muscat Doha Manama Abu Dhabi 77.0% Kuwait % 20.0% 40.0% 60.0% 80.0% 100.0% Source: Ernst & Young, Credit Libanais Economic Research Unit Source: Ernst & Young, Credit Libanais Economic Research Unit SOURCE: ERNST & YOUNG, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

7 INDUSTRIAL EXPORTS DROP BY 14.51% IN 2016 TO $2,526.9 MILLION According to the Lebanese Ministry of Industry, Lebanon s industrial exports increased by 11.67% monthon-month to $216.3 million in December 2016, compared to $193.7 million in November of the same year. On an annual basis, industrial exports fell by 14.51% to $2.53 billion during the year 2016, compared to $2.96 billion in More specifically, exports of chemical products dropped by 20.68% ($113 million) on a yearly basis to $431.9 million, accompanied by a 13.95% ($95.7 million) contraction in exports of machinery & mechanical appliances to $590.0 million, only to name a few. Concurrently, industrial imports shed 3.25% y-o-y to $235.5 million in 2016, compared to $243.4 million a year earlier. Evolution of Industrial Activity for the Year Y-O-Y (USD Million) % Change Industrial Exports 2, , % Industrial Imports of Equipment & Machinery % Sourc e: Lebanese Ministry of Industry, Credit Libanais Ec onomic Researc h Unit Evolution of Industrial Exports Evolution of Industrial Imports of Equipment & Machinery $ Million 3,500 3, ,955.8 $ Million ,000 2, , , , , Source: Ministry of Industry, Credit Libanais Economic Research Unit Source: Ministry of Industry, Credit Libanais Economic Research Unit Exports of machinery and mechanical appliances accounted for the bulk (23.35%; $590.0 million) of the total exports bill, followed by prepared foodstuffs ($459.4 million <18.18%>) and chemical products ($431.9 million <17.09%>). On the imports front, China led the list of countries exporting to Lebanon ($51.1 million <21.70%>), followed by Italy ($49.2 million <20.91%>) and Germany ($33.4 million <14.19%>) as elaborated in the section below: Breakdown of Industrial Exports by Product During the Year 2016 Product Value ($ Million) Machinery and Mechanical Appliances Prepared Foodstuffs Chemical Products Base Metals and Articles of Base Metal Plastics and Articles Thereof Others Total Industrial Exports 2,526.9 Source: Lebanese Ministry of Industry, Credit Libanais Economic Research Unit Plastics and Articles Thereof 5.58% Base Metals and Articles of Base Metal 10.20% Breakdown of Industrial Exports by Product in 2016 Others 25.60% Chemical Products 17.09% Machinery and Mechanical Appliances 23.35% Prepared Foodstuffs 18.18% Breakdown of Imports of Equipment & Machinery by Country of Origin During the Year 2016 Breakdown of Imports of Equipment & Machinery by Country in 2016 Country Value ($ Million) China 51.1 Others 31.21% China 21.70% Italy 49.2 Germany 33.4 Turkey 14.7 United States of America 13.6 Others 73.5 Total Industrial Imports Source: Lebanese Ministry of Industry, Credit Libanais Economic Research Unit United States of America 5.76% Turkey 6.23% Germany 14.19% Italy 20.91% SOURCE: MINISTRY OF INDUSTRY, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

8 LEBANON S BALANCE OF TRADE DEFICIT WIDENS TO $1.37 BILLION IN JANUARY 2017 On the current account side of the balance of payments, Lebanon s balance of trade deficit widened by $64 million on an annual basis to just above $1.37 billion in January 2017, up from around $1.31 billion a year before, according to statistics published by Lebanon s Higher Customs Council. Said increase in the deficit was triggered by some $110 million y-o-y expansion in imports to over $1.60 billion, which outweighed the sluggish $46 million rise in exports to $232 million. Balance of Trade For the Month of Y-O-Y (US$ Million) Jan-2016 Jan-2017 % Change Exports % Imports 1,495 1, % Trade Balance (1,309) (1,373) 4.86% Source: Higher Customs Council, Credit Libanais Economic Research Unit USD Million 2,000 Balance of Trade Deficit Jan-2016 Jan ,000 Exports Imports Deficit Source: Higher Customs Council, Credit Libanais Economic Research Unit Greece topped the list of countries exporting to Lebanon, with its exports bill reaching $156 million (9.72% of Lebanon s imports). South Africa, on the other hand, led the list of countries importing from Lebanon, with its imports invoice aggregating to $43 million (18.49% of Lebanon s exports). This is further elaborated in the tables below: Major Import Sources (in USD Million) Greece % China % U.S.A % Germany % Russian Federation % Source: Higher Customs Council, Credit Libanais Economic Research Unit Major Export Destinations (in USD Million) South Africa % Switzerland % Syria % U.A.E % Saudi Arabia % Source: Higher Customs Council, Credit Libanais Economic Research Unit Exports of pearls, precious or semi-precious stones and metals accounted alone for 30.91% ($72 million) of total Lebanese exports by end of January 2017, followed by prepared foodstuffs, beverages, & tobacco ($32 million <13.91%>), base metals and articles of base metal ($26 million <11.23%>), and machinery & mechanical appliances and electrical equipment ($24 million <10.15%>). On the other hand, mineral products constituted the lion s share of imported goods ($362 million <22.58%>), trailed, and by far, by chemical products ($175 million <10.93%>), machinery & mechanical appliances and electrical equipment ($156 million <9.73%>), and pearls, precious or semi-precious stones and metals ($149 million <9.27%>). Breakdown of Exports by Product in January 2017 Value Product ($ Million) Pearls, Precious or Semi-Precious Stones and Metals Prepared Foodstuffs, Beverages, Tobacco Base Metals and Articles of Base Metal Machinery and Mechanical Appliances, Electrical Equipment % of Total % % % % Others % Total Exports % Source: Higher Customs Council, Credit Libanais Economic Research Unit Product Breakdown of Imports by Product in January 2017 Value ($ Million) % of Total Mineral Products % Chemical Products % Machinery and Mechanical Appliances, Electrical % Equipment Pearls, Precious or Semi- Precious Stones and Metals % Others % Total Imports 1, % Source: Higher Customs Council, Credit Libanais Economic Research Unit SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

9 CONSTRUCTION PERMITS AT 649 THOUSAND SQM IN JANUARY 2017 Lebanon s construction permits, which reflect the level of future supply in the real estate sector, rose to 648,933 sqm during the month of January 2017, up from 630,666 sqm in December On an annual basis, however, construction permits came in 3.15% lower than the 670,017 sqm level reported in January of last year. Evolution of Construction Permits (Sqm) During the Month of Evolution of Construction Permits (Sqm) Jan ,404 Jan ,975 Jan ,882 Jan ,007 Jan ,323 Jan ,017 Jan ,933 Source: Order of Engineers, Credit Libanais Economic Research Unit 900, , , , , , , , , , , , , , , ,882 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Jan-2017 As far as the geographical distribution of construction permits is concerned, the Mount Lebanon region continued to control the lion s share of total issued permits (300,275 sqm <46.27%>), followed by the South (113,925 sqm <17.56%>), Bekaa (82,752 sqm <12.75%>), and Nabatieh (76,260 sqm <11.75%>) regions. It is worth noting that figures for the North governorate are underestimated since they exclude permits issued by the North Order of Engineers. Geographical Breakdown of Construction Permits in January 2017 Sqm No. of Transactions Average Sqm/Trans. Beirut 64, ,035 Mount Lebanon 300, North* 11, Bekaa 82, South 113, Nabatieh 76, Total 648, * Figures for the North Governorate are underestimated since they exclude South 17.56% Bekaa 12.75% Geographical Breakdown of Construction Permits in January 2017 Nabatieh 11.75% North* 1.78% Beirut 9.89% Mount Lebanon 46.27% Source: Order of Engineers, Credit Libanais Economic Research Unit permits issued by the North Order of Engineers Source: Order of Engineers, Credit Libanais Economic Research Unit Average Sqm/Construction Permit per Region in January 2017 Nabatieh 495 South Mount Lebanon Bekaa 732 North* 823 Beirut 1, ,000 1,200 Source: Order of Engineers, Credit Libanais Economic Research Unit The Beirut governorate enjoyed the highest exploitation coefficient, which stood at 1,035 sqm per construction permit in January 2017, followed by the North (823 sqm/transaction), Bekaa (732 sqm/transaction), and Mount Lebanon (660 sqm/transaction) governorates. SOURCE: ORDER OF ENGINEERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

10 BANKS SHARE OF LBP-DENOMINATED DEBT AT 41.9% IN DECEMBER 2016 According to statistics published by the Association of Banks in Lebanon (ABL), gross public debt widened by 0.45% ($ million) during the month of December 2016 to LBP 112,890 billion ($74.89 billion), up from LBP 112,379 billion ($74.55 billion) in November. The share of Lebanese banks of LBPdenominated debt rose to 41.9% in December (up from 40.9% in November), while the stake of Banque Du Liban fell to 42.8% (down from 43.6% in November) and that of the non-banking sector dropped to 15.3% (down from 15.5% in November). As far as foreign currency-denominated debt is concerned, sovereign debt in the form of Republic of Lebanon Eurobonds constituted 92.6% of total foreign currency debt, followed by lines of credit obtained through multilateral agreements (3.7%), bilateral facilities (3.2%), and funds secured in the aftermath of the Paris II summit (0.1%). (Billion USD) Dec-2015 Nov-2016 Dec-2016 Monthly % Change Y-O-Y % Change Debt in LBP by Holder % 8.18% - Banks % 1.86% - Banque Du Liban % 24.13% - Non-Banking Sector % -2.06% Average Maturity (in years) % 4.18% Weighted Average Interest Rate 6.94% 6.94% 6.92% Debt in FC by Type % 3.83% - Eurobonds % 4.39% - Multilateral % 6.72% - Bilateral % % - Paris II Loans % % - Others % 38.44% Average Maturity (in years) % 1.64% Weighted Average Interest Rate 6.44% 6.45% 6.46% Gross Public Debt % 6.51% Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit Breakdown of Debt in LBP by Holder - as at Year 2016 Non-Banking Sector 15.3% Banks 41.9% Breakdown of Debt in FC by Type - as at Year 2016 Multilateral, 3.7% Bilateral, 3.2% Paris II Loans, 0.1% Others, 0.4% BDL 42.8% Source: ABL, Credit Libanais Economic Research Unit Source: ABL, Credit Libanais Economic Research Unit Eurobonds, 92.6% The average maturity of debt denominated in domestic currency widened from 3.48 years in November to 3.49 years by the end of December, carrying a weighted annual interest rate of 6.92%, compared to 6.94% a month before. On the other hand, outstanding debt denominated in foreign currencies carried an average maturity of 6.19 years at end of December, down from 6.24 years by November, with the weighted average annual interest rate increasing to 6.46%, from 6.45% in November. Years Evolution of Average Maturity and Weighted Interest Rate of Debt Denominated in LBP Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec % 6.96% 6.95% 6.94% 6.93% 6.92% 6.91% 6.90% Years Evolution of Average Maturity and Weighted Interest Rate of Debt Denominated in Foreign Currency Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec % 6.46% 6.44% 6.42% 6.40% 6.38% 6.36% Average Maturity Weighted Interest Rate Average Maturity Weighted Interest Rate Source: ABL, Credit Libanais Economic Research Unit Source: ABL, Credit Libanais Economic Research Unit SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

11 PUBLIC SECTOR SALARIES, WAGES & RELATED BENEFITS NEAR $2.14 BILLION YTD AUGUST 2016 The Lebanese Ministry of Finance recently published its Personnel Cost Monthly Bulletin pertaining to the payments of public salaries, wages, and related benefits for the first eight months of the year Said payments constitute 67% of the government s total primary spending. More particularly, salaries, wages, and related benefits can be broken down into three main constituents, namely basic salaries, indemnities, and allowances. According to the Ministry of Finance, public sector wages & related benefits rose by 6.62% y-o-y to LBP 3,221 billion ($2, million) by August 2016, up from LBP 3,021 billion ($2, million) during that same period in The annual increase in public sector payroll is a result of some 9.52% annual hike in basic salaries to LBP 2,416 billion ($1, million), coupled with a 1.41% increase in indemnities to LBP 144 billion ($95.52 million), which outweighed the 0.24% yearly drop in allowances to LBP 420 billion ($ million) and 5.26% contraction in other benefits to LBP 216 billion ($ million). Cumulative Breakdown of Salaries, Wages & Related Benefits (USD Million) Basic Salaries Indemnities Allowances Other Total For the Period Ending Aug-2015 Aug-2016 Aug-2015 Aug-2016 Aug-2015 Aug-2016 Aug-2015 Aug-2016 Aug-2015 Aug-2016 Military Personnel, of which: , , Army Internal Security Forces General Security Forces State Security Forces Education Personnel Civilian Personnel Employees Cooperative Customs Salaries Unclassified Total 1, , , , Source: Lebanese Ministry of Finance, Credit Libanais Economic Research Unit Basic salaries accounted for 75.59% of total public sector salaries & benefits, with the share of allowances and indemnities standing at 13.14% and 4.51% on a respective basis. Breakdown of Salaries, Wages & Related Benefits YTD August 2015 Breakdown of Salaries, Wages & Related Benefits YTD August 2016 Allowances 14.05% Other 7.61% Allowances 13.14% Other 6.76% Indemnities 4.74% Indemnities 4.51% Basic Salaries 73.61% Basic Salaries 75.59% Source: Ministry of Finance, Credit Libanais Economic Research Source: Ministry of Finance, Credit Libanais Economic Research Unit SOURCE: MINISTRY OF FINANCE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

12 RESERVES AT BDL REACH $52.96 BILLION AS AT END OF FEBRUARY 2017 The Lebanese Central Bank s balance sheet conveys some $ million rise in its foreign assets (foreign currency reserves) portfolio during the second half of February 2017 to $41.40 billion from $40.93 billion as at mid-february. Similarly, the value of gold reserves at BDL appreciated by $ million to reach $11.56 billion as gold prices inched up following the comments of the U.S. Treasury Secretary, who said that the new Trump administration policies will probably have limited impact in 2017; comments that have cooled the Fed rate hike outlook. On an annual basis, foreign assets at BDL came in 11.38% ($4.23 billion) higher than the $37.17 billion reading reported at end of February Similarly, the value of gold reserves appreciated by around $0.22 billion (1.95%) year-on-year when compared to the $11.34 billion figure booked in the same period last year. Overall, total reserves (foreign currency and gold) at BDL rose by $4.45 billion annually to $52.96 billion, up from $48.51 billion a year before. These reserves cover around months of debt service and constitute around 70.72% and 80.95% of Lebanon s gross and net public debt on a respective basis: $ Billion February 2011 February 2012 February 2013 February 2014 February 2015 February 2016 February 2017 Gold Foreign Assets Total Reserves Source: Banque Du Liban, Credit Libanais Economic Research Unit Total Reserves as a % of Gross Public Debt (1) 70.72% as a % of Net Public Debt (1) 80.95% In months of Debt Service (2) (1) As at December 2016 (2) Average Monthly Debt Service as at August 2016 Source: ABL, MOF, Credit Libanais Economic Research Unit USD Billion February 2011 Evolution of Total Reserves at Banque Du Liban February 2012 February 2013 Gold February 2014 Foreign Assets Source: Banque Du Liban, Credit Libanais Economic Research Unit February February February 2017 In a related note, BDL s balance sheet increased by $ million during the second half of February to $ billion as a result of the 1.38% increase in total reserves to $52.96 billion, the 1.15% expansion in the value of other assets to $19.64 billion coupled with the 0.70% rise in fixed assets to $0.22 billion, which altogether outweighed the 1.63% drop in the value of BDL s securities portfolio to $24.99 billion, along with the 2.84% decrease in loans to the local financial sector to $6.12 billion. $ Billion February 2016 Mid February 2017 February 2017 Bi-Weekly (% change) Y-O-Y (% change) Total Reserves % 9.18% Securities Portfolio % 29.47% Loans to Public Sector Loans to Local Financial Sector % 15.01% Valuation Adjustment % 0.00% Other Assets % -6.73% Fixed Assets % 4.07% Total Assets % 10.09% Currency in Circulation Outside BDL % 9.11% Financial Sector Deposits % 11.54% Public Sector Deposits % 8.30% Valuation Adjustment % 4.33% Other Liabilities % % Capital Accounts % 1.67% Total Liabilities % 10.09% Sourc e: Banque Du Liban, Credit Libanais Ec onomic Researc h Unit Loans to Local Financial Sector 5.89% Breakdown of BDL's Balance Sheet as at February 2017 Loans to Public Sector 0.00% Valuation Adjustment 0.00% Securities Portfolio 24.04% Other Assets 18.90% Source: BDL, Credit Libanais Economic Research Unit Fixed Assets 0.22% Total Reserves 50.95% In the same vein, the share of gold & foreign currency reserves at BDL increased to 50.95% of the Central Bank s total assets by the end of February 2017 up from 50.43% by mid-february, yet continue to trail behind the 51.38% level reported as at end of February of the preceding year. SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9

13 BSE TRADED VALUE DOWN BY 17% Y-O-Y BY FEBRUARY 2017 Activity on the Beirut Stock Exchange (BSE) continued to water down for the second consecutive month in the absence of any particular block trades. In fact, volume traded on the BSE fell by 24.26% during the month of February 2017 to just below 3.08 million shares, down from 4.06 million shares a month earlier. Similarly, value traded shed 19.19% to $30.07 million, from $37.21 million in January. Trades mainly consisted of banking stocks, which represented 79.38% of the total traded volume, followed by real estate (20.31%) and industry & trading (0.31%) stocks. As far as market capitalization is concerned, the latter rose to nearly $12.38 billion at end of February, from $12.21 in January and $11.09 billion in February of last year. Allocation of Traded Volume in February 2017 Allocation of Traded Value in February 2017 Industry & Trading Sector, 0.31% Real Estate Sector, 20.31% Industry & Trading Sector 0.34% Real Estate Sector 20.04% Banking Sector, 79.38% Banking Sector 79.62% On a cumulative basis, traded volume on the BSE plunged by 24.37% y-o-y to 7.14 million shares during the first two months of 2017, with value traded dropping by 17.38% to $67.28 million. As far as trading multiples are concerned, the weighted average Price to Earning (P/E) ratio of listed stocks ended the month of February lower at 7.076x, compared to 7.141x a month before, while the weighted average Price to Book Value (P/BV) metric edged slightly higher to 0.925x, from 0.908x in January. Analysis of the BSE Activity For the Month of For the Two-Month Period Ended January 2017 February 2017 Monthly % Y-O-Y % February 2016 February 2017 Change Change Traded Value ($ 000) 37,211 30, % 81,432 67, % Traded Volume (000) 4,063 3, % 9,441 7, % Market Capitalization ($ Million) 12,211 12, % 11,093 12, % Traded Value/Market Capitalization 0.30% 0.24% 0.73% 0.54% Turnover Ratio 0.23% 0.17% 0.54% 0.40% Sourc e: BSE, Credit Libanais Ec onomic Researc h Unit Beirut Bourse Cumulative Trading Activity 100,000 80,000 60,000 81,432 11,093 67,282 12,377 12,500 12,000 11,500 40,000 11,000 20,000 9,441 7,140 10,500 0 YTD Feb-2016 YTD Feb ,000 Traded Value ($ 000) Traded Volume (000) Market Capitalization ($ Million) Overall, trading activity remained rather thin as portrayed by the small turnover ratio (being the number of shares traded divided by total listed shares) of 0.17% in February alone and 0.40% in the first two months of the current year, compared to 0.54% in the equivalent period in SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

14 TRIPOLI PORT ACTIVITY IMPROVES BY A SHY 1.64% IN 2016 Freight activity via the port of Tripoli dropped to 152 thousand tons during the month of December 2016 from around 201 thousand tons in November. On a cumulative basis, Tripoli Port freight activity improved by 1.64% to 1,917 thousand tons in the year 2016 compared to 1,886 thousand tons in According to Al Bayan Economic Magazine, this improvement can be mainly attributed to the fact that the port of Tripoli has become a maritime center for the reception of ship ferries that facilitate imports and exports by truck from and to a number of MENA countries, namely Turkey, Egypt, and Saudi Arabia. Moreover, the relative stability reigning the Northern capital has had positive impact on the activity of its port. On the other hand, the number of vessels fell by 5.79% on an annual basis to 814 at end of year 2016, down from 864 vessels a year before. Concurrently, the number of imported cars via the Tripoli Port shed 1.34% y-o-y to 5,454 compared to 5,528 cars in In this context, port-related revenues (excluding VAT and customs) rose by 2.97% on a yearly basis to $14.51 million by end of 2016, from $14.09 million in Tripoli Port For the Year Indicators Y-O-Y % Change Freight Activity (000 Tons) 1,886 1, % Number of Vessels % Number of Imported Cars 5,528 5, % Port-Related Revenues ($ Million) % Source: Port of Tripoli, Al Bayan Economic M agazine, Credit Libanais Economic Research Unit MOF TO REPLACE MATURING EUROBONDS The Lebanese Ministry of Finance (MOF) has mandated Barclays, JP Morgan, Byblos Bank, and SGBL to lead manage the new Republic of Lebanon (ROL) Eurobonds issue that will replace sovereign bonds that mature in March 2017 for a total consideration of around $1.5 billion. SOURCE: AL BAYAN ECONOMIC MAGAZINE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

15 Millions of TRY CORPORATE NEWS ODEABANK A.Ş. POSTS NET PROFITS OF TRY MILLION IN 2016 Bank Audi s fully-owned Turkish subsidiary Odeabank A.Ş. published its unaudited financial statements for the year 2016 reporting a stellar % increase in net profits to TRY million (around $56.82 million), from TRY million (around $17.26 million). More specifically, the bank s net interest income increased by 17.90% annually to TRY 1, million (around $ million), while net commission & fee income rose by 6.79% to TRY million (around $29.87 million). Concurrently, the bank registered net trading profits of TRY million ($51.57 million) compared to a loss of TRY million (around $74.09 million) in the year Consequently, total operating income surged by 67.80% y-o-y to TRY 1, million ($ million). On the other hand, the bank increased its provisions for loan losses by % to TRY million ($ million). Concurrently, other operating expenses rallied by 23.30% y-o-y to around TRY million (around $ million). On the balance sheet front, the consolidated assets of Odeabank A.Ş. increased by 19.31% in 2016 to just below TRY billion (around $10.86 billion) fueled by a 21.28% rally in loans and receivables to circa TRY billion (around $7.50 billion). On the funding side, customer deposits rose by 15.48% to just above TRY billion (around $8.30 billion). In this context, the bank s ratio of net loans to customer deposits ended the year 2016 higher at 90.41%, with shareholders equity more than doubling to reach TRY 3.44 billion (around $ million) subsequent to some TRY 1.79 billion capital increase to TRY 3,29 billion ($ million). Odeabank A.Ş. In Millions of TRY Y-O-Y % Change Key Balance Sheet Figures Total Assets 32, , % Loans and Receivables 21, , % Customer Deposits 25, , % Shareholders' Equity 1, , % Liquidity Ratios (%) Net Loans to Customer Deposits 86.08% 90.41% In Millions of TRY Y-O-Y % Change Key P&L Figures Net Interest Income , % Net Commission and Fee Income % Net Trading Profit/(Loss) % Other Operating Income (trading gains, dividend income, others) % Total Operating Income , % Provision for Loan Losses % Other Operating Expenses % Net Operating Profit/(Loss) % Net Profits/(Loss) % Source: BSE, Bank Audi, Credit Libanais Economic Research Unit Evolution of Odeabank's Profitability SOURCE: BSE, BANK AUDI, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12

16 MONETARY PERFORMANCE MONETARY AGGREGATES The overall money supply, M4, widened by LBP billion during the week of February 16, 2017 to LBP 211,481 billion partly attributed to the LBP 133 billion increase in the non-banking sector s Treasury bills portfolio. On the other hand, Lebanese-pound denominated deposits and currency in circulation, M1, shed LBP billion week-on-week to LBP 9,163 billion on the back of some LBP 163 billion drop in money in circulation which outweighed the LBP 7 billion increase in demand deposits. Concurrently, local currency term deposits, M2, inched 0.09% lower (LBP billion) on a weekly basis while registering a 3.96% year-on-year increase to settle at LBP 81,915 billion. Consequently, private sector term and saving deposits denominated in LBP ( M2-M1 ) edged slightly higher to LBP 72,752 billion, while deposits denominated in foreign currencies ( M3-M2 ) firmed at LBP 118,723 billion. M o ney Supply LB P B illio n F ebruary 09, 2017 F ebruary 16, 2017 % C hange M1 9,319 9, % M2 81,987 81, % M3 200, , % M4 210, , % M 2-M 1 72,667 72, % M 3-M 2 118, , % Source: Banque Du Liban, Credit Libanais Economic Research Unit 250, , ,000 Money Supply - LBP Billion - 210, , , ,638 February 09, 2017 February 16, 2017 M4 M3 Source: BDL, Credit Libanais Economic Research Unit MONEY MARKETS The February 23 rd Treasury bill auction raised LBP billion ($ million), compared to LBP billion ($ million) in the auction of the previous week. The majority of subscriptions (37.83%) was concentrated in the five-year to maturity T-bonds, followed by the three-month (35.20%) and one-year (26.97%) tenure treasury securities. Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 5.56% in the auction of February 23. The yields on the three-month, one-year, and five-year to maturity Treasury securities remained flat at 4.44%, 5.35%, and 6.74% respectively. Lebanese Treasury Bills February 23, 2017 Face Value Yield (%) (in billions of LBP) % of Total Face Value 3 Months 4.44% % 12 Months 5.35% % 60 Months 6.74% % Total % Source: Reuters, Credit Libanais Economic Research Unit Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months Treasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.08% 7.46% 8.00% On The Run Yield Curve 7.50% 7.00% 84 Months 120 Months 6.50% 36 Months 60 Months 6.00% 24 Months 5.50% 12 Months 5.00% 6 Months 4.50% 3 Months 4.00% 3.50% 3.00% SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13

17 03-Mar Apr Jun Aug Sep Nov Jan Mar Mar Apr Jun Aug Sep Nov Jan Mar-17 Index Value Index Value 03-Mar Apr Jun Aug Sep Nov Jan Mar-17 Index Value LEBANESE EQUITIES LEBANESE EQUITIES Activity on the Beirut Stock Exchange was marked by thin trading and the absence of block trades resulting in a significant drop in the number of shares changing hands to 240,505 shares this week from 614,324 shares last week. Similarly, traded value dwindled to just below $2.40 million, from $6.88 million a week before. The contribution of real estate and construction sector stocks of total weekly traded value stood at around 60%. The average daily trading volume contracted to 48,101 shares this week, from 122,865 shares last week, with the average daily trading value narrowing to just below $0.48 million, from around $1.38 million a week earlier. Credit Libanais Week of Week of Weekly YTD Indices 24-Feb-17 3-Mar-17 % Change % Change Credit Libanais Aggregate Stock Index <.CLASI> Credit Libanais Financial Sector Stock Index <.CLFI> Credit Libanais Construction Sector Stock Index <.CLCI> 1,250 1,200 1, , % 1.66% 1, , % 4.62% % % Credit Libanais Aggregate Stock Index Weekly Performance CLASI Four losers and three gainers were spotted this week, depressing the BSE s market capitalization by 0.14% week-on-week to just above $12.34 billion and trimming the Credit Libanais Aggregate Stock Index ( CLASI ) down by 0.13% to 1, In the real estate sector, trades mainly consisted of Solidere A and B shares (62.18% of total traded volume), with the price of Solidere A falling by 3.59% to $9.13 and that of Solidere B shedding 4.36% to $9.00. The Credit Libanais Construction Sector Stock Index ( CLCI ) ended its week 2.14% lower at In the banking sector, BLOM Bank Preferred shares Class 2011 amassed the highest concentration of trades (13.69% of total traded volume) on a thin turnover ratio of 0.16%. The Credit Libanais Financial Sector Stock Index ( CLFI ) ended its week 0.30% higher at 1, on the back of the 2.08% appreciation in the price of the BLOM Bank GDRs to $12.75 and the 0.43% increase in the price of the BLOM Bank listed shares to $11.70 which together outweighed the 0.60% drop in the price of the Bank Audi GDRs to $ ,150 1,100 1,050 1,000 CLASI 0.13%.CLASI Credit Libanais Aggregate Stock Index Friday, March 03, 2017 Value Daily % Chng Daily Net Chng 1, % 1.03 Yr.High Year Hi.Date Yr.Low Year.Lo.Date 1, Feb-17 1, Jan-17 Life High Life Hi.Date Life Low Life.Lo.Date 1, Jul Mar-09 Credit Libanais Financial Sector Stock Index Weekly Performance CLFI Credit Libanais Construction Sector Stock Index Weekly Performance CLCI 1, , ,550 1, , ,400 1,350 CLFI 0.30% 500 CLCI 2.14% 1, SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

18 LEBANESE EQUITIES BEIRUT STOCK EXCHANGE Closing Weekly %Change Weekly Volume Traded Lebanese Equities % of Weekly Volume Traded % of Weekly Value Traded Solidere A $ % 76, % $697, % 100,000,000 $913, % Solidere B $ % 73, % $669, % 65,000,000 $585, % BLC Bank $ % ,033,333 $70, % BLC Bank Preferred Class "B" $ % % 30, % 550,000 $55,000 n.a n.a 0.00% BLC Bank Preferred Class "C" $ % ,000 $35,000 n.a n.a 0.00% BLC Bank Preferred Class "D" $ % ,000 $75,000 n.a n.a 0.00% Bank Audi - Listed Shares $ % 13, % $87, % 399,749,204 $2,698, % Bank Audi GDR $ % 11, % $76, % 119,924,761 $798, % Bank Audi Preferred "F" $ % ,500,000 $153,750 n.a n.a 0.00% Bank Audi Preferred "G" $ % % $20, % 1,500,000 $153,750 n.a n.a 0.29% Bank Audi Preferred "H" $ % ,000 $76,725 n.a n.a 0.00% Bank Audi Preferred "I" $ % ,500,000 $253,000 n.a n.a 1.20% Bank Of Beirut - Listed Shares $ % 10, % 188, % 17,746,417 $333, % Bank Of Beirut Priority Shares 2014 $ % ,762,000 $100, % Bank Of Beirut Preferred "H" $ % ,400,000 $141,750 n.a n.a 0.00% Bank Of Beirut Preferred "I" $ % ,000,000 $131,250 n.a n.a 0.00% Bank Of Beirut Preferred "J" $ % ,000,000 $78,750 n.a n.a 0.00% Bank Of Beirut Preferred "K" $ % ,000,000 $101,000 n.a n.a 0.00% Byblos Bank - Listed Shares $ % ,515,040 $972, % Byblos Bank Preferred Class 2008 $ % ,000,000 $204,200 n.a n.a -0.49% Byblos Bank Preferred Class 2009 $ % ,000,000 $211,000 n.a n.a 4.15% Byblos Bank GDR $ % ,309,078 $104, % BEMO Bank - Listed Shares $ % ,400,000 $87, % BEMO Bank Preferred Class 2013 $ % ,000 $34,913 n.a n.a 0.50% BLOM Bank GDR $ % 15, % $197, % 73,896,010 $942, % BLOM Bank Listed Shares $ % 3, % $35, % 215,000,000 $2,515, % BLOM Bank Preferred Class 2011 $ % 32, % $339, % 20,000,000 $206,000 n.a n.a 1.98% RYMCO Class "B" $ % ,920,000 $35, % Holcim Liban $ % 4, % $54, % 19,516,040 $245, % Ciment Blancs Bearer $ % ,000,000 $17, % Ciment Blancs Nominal $ % ,000,000 $4, % Note: n.a stands for not applicable Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit Weekly Value Traded Total Listed Shares Market Capitalisation ($000) P/E P/BV Evolution of Beirut Bourse Comparable Benchmarks YTD Price Perf. Activity Analysis Previous Last % Change Value Traded ($) 6,880,641 2,397, % Volume Traded 614, , % Average Daily Trading Value ($) 1,376, , % Average Daily Trading Volume 122,865 48, % Market Cap - BSE ($) 12,353,450,417 12,336,019, % Weighted Average P/E % Weighted Average P/BV % Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit Feb 24, 2017 Mar 3, 2017 P/E P/BV Source: BSE, Credit Libanais Economic Research Unit The weighted average price to earnings (P/E) multiple of listed stocks settled lower at 7.024x while the weighted average price to book (P/BV) metric ended Friday s session slightly higher at 0.923x. SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

19 LEBANON S MAIN INDICATORS Recap of Lebanon's Major Indicators M A C R O EC O N O M IC IN D IC A T O R S GDP ($ Billion) * 50.81* 51.82* 53.37* Real GDP Growth Rate 8.00% 0.90% 2.80% 2.50% 2.00%* 1.00%* 1.00%* 2.00%* GDP Per Capita ($) 8,756 9,144 9,966 10,655 11,067* 11,157* 11,271* 11,497* Net Foreign Direc t Investment ($ Billion) FDI/GDP Ratio 13.05% 8.48% 5.22% 7.97% INDUS TRY Industrial Exports ($ Million) 3,291 3,530 3,567 3,384 3,150 2,956 2,527 Import of Industrial Machinery ($ Million) T O U R IS M Total Number of Tourists 2,167,989 1,655,051 1,365,845 1,274,362 1,354,647 1,517,927 1,688,357 Growth in Tax- Free Spending 21% 10% - 6% 4% 8% 2% - 9% R EA L ES T A T E Value of Real Estate Transac tions ($ Million) 9,479 8,841 9,175 8,708 8,952 8,006 8, (6) Number of Real Estate Sales Transac tions 94,202 82,984 74,569 69,198 70,721 63,386 64,248 4,350 (6) Construc tion Permits (000 sqm) 15,187 13,980 12,362 10,527 11,164 10,294 9, (6) Cement Delivery (000 tons) 5,227 5,550 5,309 5,831 5,517 5,043 5,265 T R A N S P O R T A T IO N Beirut Port: Freight Ac tivity (000 Tons) 6,469 6,677 7,225 8,268 8,281 7,240 8, (6) Beirut Airport: Number of Passengers (million) (4) F O R EIG N T R A D E Imports ($ Million) 17,964 20,158 21,280 21,228 20,494 18,069 18,705 1,604 (6) Exports ($ Million) 4,253 4,265 4,483 3,936 3,313 2,952 2, (6) Trade Balanc e ($ Million) (13,711) (15,893) (16,797) (17,292) (17,181) (15,117) (15,729) (1,373) (6) B A L A N C E O F P A Y M EN T S Net Foreign Assets at the Financial Sector ($ Million) 3,325 (1,996) (1,537) (1,127) (1,407) (3,354) 1,238 Foreign Assets ($ Billion) (8) P UBLIC FINANCE Government Expenditures ($ Million) 11,336 11,675 13,321 13,640 13,952 13,528 9,404 (2) Government Revenues ($ Million) 8,414 9,333 9,396 9,420 10,879 9,576 6,876 (2) Budget Primary Defic it / Surplus ($ Million) 1,203 1,662 (110) (240) 1, (2) Total Defic it ($ Million) (2,894) (2,342) (3,925) (4,220) (3,073) (3,952) (2,528) (2) Defic it / GDP Ratio 7.61% 5.84% 8.90% 8.87% 6.14% 7.26% Debt Servic e / GDP Ratio 10.85% 9.99% 8.21% 7.96% 8.75% 8.60% Net Public Debt ($ Billion) Gross Public Debt/GDP Ratio % % % % % %* %* %* M O N ET A R Y A G G R EG A T ES & IN F L A T IO N M4 ($ Billion) (7) (M2- M1) ($ Billion) (7) Monetization Level (M2/GDP Ratio) % 99.32% 99.44% 95.68% 97.40% % % Change in CPI (%) 6.19% 4.27% 4.68% 2.05% % % 3.14% 4.68% (6) B A N K IN G S Y S T EM Number of Commerc ial Banks (1) Number of Branc hes ,020 1,039 1,044 (1) Total Assets ($ Million) 128, , , , , , ,311 Total Deposits ($ Million) 108, , , , , , ,446 Loans to the Private Sector ($ Million) 34,929 39,375 43,452 47,381 50,899 54,224 57,180 Customer Loans/ Deposits 32.16% 33.45% 34.04% 34.05% 34.48% 34.99% 34.35% Dollarization Rate 63.24% 65.92% 64.82% 66.14% 65.71% 64.88% 65.82% Exc hange Rate (LBP to USD) 1, , , , , , , , * Figures Reflect IM F Estimates (1) As at June, 2016, (2) As at August, 2016, (3) As at September, 2016, (4) As at October, 2016, (5) As at November, 2016, (6) As at January, 2017, (7) As at February 16, 2017, (8) As at February, 2017 SOURCE: BDL, ABL, MOF, IMF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16

20 LEBANON S RATINGS Republic Of Lebanon Sovereign Ratings Rating Agency Tenor Rating Outlook S ta n d a rd & P o o r's G lo b a l R a tin g s L o n g - T e rm B- S h o rt- T e rm B S ta b le M o o d y's In ve sto rs S e rvic e L o n g - T e rm B2 F itc h R a tin g s L o n g - T e rm B- N e g a tive S ta b le S h o rt- T e rm B- Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings Lebanese Banks' Latest Ratings Rated Banks Moody's Investors Service Fitch Ratings S&P Global Ratings Long Term Foreign Currency Financial Strength Outlook Long Term IDR Outlook Long-Term Counterparty Credit Rating Short-Term Counterparty Credit Rating Outlook Bank Audi B2 E+ Negative B- Stable B- C Stable BLOM Bank B2 E+ Negative - - B- - Stable Credit Libanais Byblos Bank B2 E+ Negative B- Stable BBAC Fransabank BankMed B- C Stable Sources: Moody's Investors Service, Fitch Ratings, S&P Global Ratings SOURCE: S&P, MOODY S, FITCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17

21 CONTACTS RESEARCH Fadlo I. Choueiri, CFA EXT: 1280 Jad Abi Haidar, CFA EXT Joelle Samaha EXT Mayda Zaarour EXT Nagham Abdel Ahad EXT MONEY MARKETS DESK Robert Araman EXT This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document does not constitute an offer or invitation to subscribe to or purchase any security, and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable. ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX: