Cedrus Invest Bank S.A.L Increases Capital to $211.63M March 17, 2017

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1 Page 1 of 11 LEBANON BRIEF Dear Reader, Your weekly guide to the latest economic and financial news in Lebanon is here. Enjoy our e-newsletter and access our new RESEARCH BLOG by clicking on the headline of your choice. You can still view the traditional PDF version of "The Lebanon Brief" by clicking on the link below. Issue March Week 2 Economic Digest Cedrus Invest Bank S.A.L Increases Capital to $211.63M According to a released statement by Midclear, Cedrus Invest Bank increased its capital through the issuance of new ordinary shares. The bank increased its capital from LBP 138,309,707,250 ($91.75M) to LBP 319,032,834,975 ($211.63M) through the issuance of 162,561 ordinary shares with a nominal value per share of LBP 1,111,725 ($119.88M). Cedrus Invest's shares are not listed on the Beirut Stock Exchange (BSE). Profits of Bank Audi's Egyptian Subsidiary Up to $103.71M in 2016 According to the statement of income of Bank Audi's Egyptian subsidiary, net profit for the year 2016 rose from $32.28M in 2015 to $103.71M in Net interest income and net income from fees and commissions both rose by annual rates of 36% and 49% to reach $82.12M and $23.78M in 2016, respectively. The subsidiary's balance sheet revealed a 48% annual surge in total assets to $3.04B with loans and facilities to customers rising by a yearly

2 Page 2 of % to $1.65B. Customers' deposits increased by an annual 42.08% to $2.51B while total equity rose by an annual 55.45% to $255.98M. Construction Activity Begins 2017 with a Positive Performance March 16, 2017 According to the Orders of Engineers in Beirut and the North, the number of permits rose by 3.52% year-on-year (y-o-y) to 1,175 during the first month of 2017, versus 1,135 during the same period in In details, the rise in the number of permits in the North Region, by a yearly 37.23% to 188 permits in January, was the main driver behind the overall increase in total number of construction permits. This proves the positive impact of the stable security situation on the construction activity in the area, the region's share of total construction permits increased from 12% by January 2016 to 16% by January Nonethless, the other regions, constituting the remaining 84%, witnessed a yearly drop of 1.10%. On a different note, the total construction area authorized by permits (CAP) slightly rose from 811,183 sqm by January 2016 to 832,317 sqm by January Nonetheless, data revealed that investors' preferences are shifting towards smaller construction projects as the average area per transaction fell from 715 sqm/permit in January 2016 to 708 sqm/permit in January Number of Construction Permits Source: Orders of Engineers in Beirut and North Number of Registered Cars Down by 4.82% by February 2017 March 15, 2017 According to the Association of Lebanese Car Importers (AIA), the number of newly registered commercial and passenger cars deteriorated during the first 2 months of 2017 by 4.82% year-on-year (y-o-y) to 5,317 cars. This was triggered by the 4.27% yearly drop in the number of newly registered passenger cars to 4,982 and the 12.30% fall in newly registered commercial vehicles to 335.

3 Page 3 of 11 In terms of brands, Kia kept on holding the largest share of the total newly registered cars (18.97%), followed by a 13.25% stake for Toyota. Hyundai came next in the ranking, as it grasped 12.77% of newly registered cars and was followed by Nissan that took 7.93% of the total. In terms of sales per importer, Natco acquired the biggest bulk with a 18.34% of the total, followed by BUMC (13.26%), and Century Motors (12.77%). Breakdown of Passenger and Commercial Cars by February Source: AIA Gross Public Debt Rose to $74.87B in January 2017 March 14, 2017 According to the Association of Banks in Lebanon (ABL), the Lebanese gross public debt reached $74.87B in January 2017, a 6.51% year-onyear (y-o-y) increase and a 1.72% uptick from that of December Debt in LBP, accounting for 62.99% of total gross debt, increased by 10.35% y-o-y to reach $47.98B, while foreign currency (FC) debt, grasping the remaining 37.01%, rose by 3.89% annually to stand at $28.19B. The Net Public Debt, which excludes the public sector deposits at the commercial banks and BdL, stood at $65.33B in January 2017, increasing by a yearly 5.80%. Commercial banks were the largest subscribers of local currency debt with a share of 43.8% of the total followed by a 41.5% stake for the Central Bank (BDL) and 14.7% for the non-banking system. Local Currency Debt by Type of Holder

4 Page 4 of 11 Source: ABL Port of Beirut's Revenues Up to $37.25M by February 2017 March 13, 2017 Activity at the Port of Beirut (PoB) witnessed a slight improvement by February 2017 as the port's revenues recorded a 0.27% yearly increase to $37.25M. Total container activity including transshipment (TEU+TS) grew by an annual 10.99% to 189,059 twenty-foot equivalent unit (TEU) by February In details, container activity excluding transshipment increased by 6.91% y-o-y to 130,152 TEU, and transshipment activity alone rose by an annual 21.20% to 58,907 TEU by the second month of the year. MSC, one of the two major shipping/logistic firms operating at the port, witnessed a yearly increase in transshipment activity of 52.79% to 36,752 TEU, while CMA CGM observed a yearly drop in transshipment activity of 10.78% to 18,975 TEU. Details of the port's activity by February 2017 compared to the same period in 2016 were as follows: The number of ships that docked at the PoB dropped from 313 in February 2016 to 291 in The total volume of imported and exported merchandise rose from 1,335 thousand tons in 2016 to 1,341 thousand tons in The number of imported cars also registered an upturn from 16,933 cars by February 2016 to 18,005 cars during the same period in PoB Revenues by February of Each Year (In $M)

5 Page 5 of 11 Source: Port of Beirut Editors' Picks Lebanon s Macroeconomic Outlook Check out the latest presentation prepared by the Research department of BLOMINVEST Bank on Lebanon's macroeconomic outlook : Lebanon's Macroeconomic Outlook Egypt s Macroeconomic Outlook Check out the latest presentation prepared by the Research department of BLOMINVEST Bank on Egypt's macroeconomic outlook : Egypt s Macroeconomic Outlook

6 Page 6 of 11 New Waves Shaping Commercial Real Estate A version of this article appeared in the print edition of The Daily tar on March on page 4 Shortly after major political breakthroughs materialized by the end of 2016, all eyes turned on the effects of these events on the future performance of the Lebanese real estate market. As one of the core sectors of the Lebanese economy, real estate and construction activities constituted a considerable 20% share of Lebanon's nominal Gross Domestic Product (GDP) in This explains the importance of the sector amidst the spreading waves of optimism regarding the country's economic prospects following the election of a president, after more than 2 years of political void, and the formation of a new cabinet. As a matter of fact, following a 26% decline in the total number of built real estate transactions between 2011 and 2015 to a record-low of 41,784 transactions, recovery began in 2016 with a marginal yearly growth of 2%, which can be attributed to the stabilization of the security situation and the major achievements on the political front. As the commercial real estate sector in Lebanon is a barometer of investment appetite, tackling the trends impacting this market's performance will provide an insight on the impact of the relatively improving political climate. Commercial real estate performance can be considered as a gauge trailing the activity of different economic sectors whether corporate, food & beverages or clothing. Hence, despite the existing slowdown in this market, new trends are emerging and affecting each of the retail and office sub-divisions. Starting with the office market in Lebanon, the sector has been witnessing a slowdown in the past few years. In fact, office vacancy levels are estimated at an average of 26% inside Beirut and 33% outside Beirut. Commenting on the sluggish performance of Lebanon's office market, Mr. Karim Makarem, Partner and Director at RAMCO, explained that "besides the negative impact of local political obstacles and worldwide economic volatility, there is currently a limited office demand as much of it has already found its supply. For instance, many large local institutions such as banks have already identified their headquarters." With an existing oversupply of office buildings, the remaining demand became more oriented towards very specific locations. For instance, office demand is high in new locations like Corniche el Nahr, whereas Hazmieh became the new hub for insurance companies. This came at the expense of vital office areas like the Beirut Central District (BCD), and mostly the Nejmeh Square, where rents have substantially dropped due to the strict security measures resulting from its proximity to the Lebanese Parliement. On a similar note, Mr. Emile Sabbagha, Managing Partner at Sabbagha Development, revealed that "Uruguay Street, which was a major nightspot and a location for several office buildings, lost its momentum due to the poor economic and political conditions. Before, we used to lease an office at around $450/sqm per year, nowadays rentals can go as low as $300/sqm per year". Moreover, developers were enticed to offer high-end offices with various amenities. According to Infopro, while some of the existing office buildings offer retail space, the amenities differ depending on the date of construction. In fact, most of the projects initiated after 2014 leaned towards grade-a office premises offering unique amenities such as Building Management Systems (BMS), secure underground parking, chilled water system, etc. Looking more at the prices, office developers are drifting their projects to more affordable locations in Beirut's suburbs. Given that the concentration of businesses remains in Beirut (estimated by Infopro at

7 Page 7 of 11 42% of the total), the key locations are Verdun, Hamra and Charles Malek (Achrafieh). After compiling data from different market players, the sale price of an office at Hamra could touch the $6,000/sqm, while it hovers between $3,500/sqm and $5,000/sqm in Achrafieh. Similarly, yearly rental prices in Hamra average $250/sqm and could hit the $300/sqm in Achrafieh. However, prices outside Beirut tend to be reasonable with the main locations being Dora, Zalka, Jal el Dib, Sin el Fil and Dbayeh. For instance, sale prices in Dora average $2,500/sqm. As for rental fees in this area, they depend on the location of the office, being more expensive on the highway at around $140/sqm/year but can go as low as $90/sqm/year in nearby neighborhoods. In the same context, the office sector is adhering to the new drift towards mixed-use projects and clustered office zones. According to RAMCO, the number of under-construction office buildings reached 34 across Municipal Beirut in 2016, compared to 37 office buildings in While some of these projects were initiated before 2016, several others remain in the pipeline. RAMCO says that currently one third of office projects under construction are mixed-use developments, signifying a growing trend. Mr. Mouhamad Rabah, President of Beirut Digital District (BDD), believes that "developers nowadays have to differentiate their products and offer added-value services to attract demand given the abundance of office buildings. In particular, clustering is beneficial for companies of the same industry as they can interconnect, share ideas and grow organically". In fact, the BDD, considered the "Sillicon Valley of Lebanon", was launched in 2012 to empower the digital and creative industries in one location over the coming 10 years. After the completion of the first phase in 2016, average yearly rentals varied between $200/sqm and $230/sqm depending on the office size and status. Likewise, Dbayeh will host the $1.8B Waterfront City project, which includes residential units, hotels, retail space, in addition to 60,000 sqm of office space. The project is expected to be delivered in 2018 with average prices hovering around $4,300/sqm. Moving to the retail real estate segment, the proliferation of malls, and the serial "hopping" of dynamism from a nightspot to another, marked the past 10 years. While Monot lost its vigor after the boom of Gemmayze, the latter tasted its own medicine when the relatively cheaper Mar Mikhael thrived. In Verdun, the situation is expected to worsen on the outdated existing shopping galleries once ABC Verdun opens its doors in Hamra Street remained resilient to the waves of change with a full occupancy stretching between Costa Cafe and Roadster. According to Mrs. Lara Abi Abdallah Kanj, Blominvest Bank's Head of Real Estate Unit, "Hamra is home to Beirut's main universities and hospitals which make it an all-time fully occupied area characterized by a high rental turnover. However, will it be seriously impacted by the opening of ABC in the neighboring Verdun? That remains a big question mark." Even though malls remain the principal enablers of retail activity, these commercial properties also had to evolve in order to preserve their clientele. When malls started their journey in Lebanon more than 30 years ago, retail shops and restaurants rushed to lease spaces in these premises to benefit from unprecedented brand awareness. However, modernizing malls was necessary to preserve footfall through the provision of a variety of leisure amenities and services such as kids' areas, movie theatres and spas. In order to reach a wider scope of clientele, malls had also worked on carefully choosing their tenants to preserve a well-defined tenant-mix in terms of available types of shops and cuisines/restaurants. Among other strategies, malls are trying to have one or more anchor tenants (one whose prestige and name recognition attracts other tenants and increases the footfall), even if they have to reduce rental fees to these occupiers. While clothing stores still largely depend on malls to benefit from the highest footfall possible, the Food & Beverages (F&B) segment succeeded to thrive away from malls thanks to the new move towards F&B clusters. In this context, Mr. Wassim Hneine, the managing director of Emerging Investment Partners (EIP), revealed that: "In the past, the F&Bs main market players used to choose spots characterized by high footfall such as shopping streets or areas near office buildings. Our experience with the Backyard Hazmieh revealed that F&B clusters with their brand-mix were the secret recipe to cover a wider spectrum of clients". Similar to malls, these clusters usually lease at a fixed rent or as a percentage of revenues, whichever is higher, with all provided amenities (security, electricity, etc.) billed to the tenant.

8 Page 8 of 11 Another $10M food cluster project (Restos Saint Nicolas) between Venture Group and Sabbagha Development will be brought to light in September 2017 at Charles Malek - Achrafieh. By all appearances, it seems like commercial real estate in Lebanon is undergoing a period of slow down with developers struggling to weather the country's frequent instabilities by sticking to new trends and locations. In a strained buyers' market, this is a good-news/bad-news situation as some commercial streets are bearing fruits of these new tendencies, while others are struggling to persist. In the end, the fortunes of the commercial real estate market depend on the fortunes of the economy and status of the country as an investment destination, which in turn naturally depend on sustained economic growth and political stability - things that are probably more urgently needed now than ever before. Below is the pdf version of the article: New waves shaping commercial real estate You can also find this article on The Daily tar website: 16/ new-waves-shaping-commercial-real-estate.ashx Financial Markets Ministry of Finance (MoF) Raises LBP 262B through its March 9th Auction During the week ending March 2, Broad Money M3 increased by a weekly LBP651B ($432M) to reach LBP 201,456B ($133B). Moreover, M3 recorded a 8.16% annual increase and a 1.21% rise since the start of the year. demand deposits. M1 expanded by LBP 416B ($278M) over the same period to LBP 9,482B ($6.29B). The rise is mainly attributed to the respective increases of LBP 288B ($191M) and LBP 128 ($85M) in money in circulation and in Total deposits (excluding demand deposits) rose by LBP 235B ($156M) during the week, as term and savings deposits denominated in local currency dropped by LBP 6B ($4M) and deposits denominated in foreign currencies grew by $166M. Over the above mentioned periaod, the broad money dollarization rate slightly dropped from 59.18% to stand at 59.11% on March 2. According to the Central Bank, the overnight interbank rate remained stable at 3% between November and December In the Treasury Bills auction held on March 9, 2017, the Ministry of Finance (MoF) raised LBP 262B ($174M), through the issuance of bills maturing in 3 months (3M) and 12M and notes maturing in 60M. The highest demand was achieved on the 60M notes, which held a 38.79% share of total subscriptions, while the 3M and 12M bills accounted for the remaining shares of 30.98% and 30.23%, respectively. The discount rate on the 3M and 12M bills stood at 4.39% and 5.08% respectively while the coupon rate on the 60M notes registered 6.74%. Existing maturities exceeded new subscriptions by LBP 59B ($39M).

9 Page 9 of 11 Dollar Weakens after Fed's Disappointing Announcement Lebanese Forex Market Demand for the dollar on the Lebanese forex market stabilized at $/LP 1, within the range $/LP 1,514-1, Foreign assets (excluding gold) at the Central Bank reached $40.04B at the end of January 2017 compared to $37.02B in the same period last year. The dollarization ratio of private sector deposits rose from 64.67% in January 2016 to 65.84% in January By Friday, the euro appreciated against the dollar-pegged LP going from /LBP 1,599.91on March 10 to /LBP 1,624.03, this week. As for the Nominal Effective Exchange Rate (NEER) of the LBP, it dropped by 1.01% over the past week to stand at points. International Forex Market: The euro/dollar rose by 1.51% to /$ over the past week ahead of the G-20 meeting this weekend and mainly due to the Fed's cautious message this week on the outlook for interest rate hikes. Moreover, the euro strengthened this week on the back of Wilder's far right party defeat in the Dutch elections. Commodities: Over the week, gold prices rose from $1, on March 10 to $1, this week. BLOM Stock Index Loses Some of Last Week's Gains The BLOM Stock Index (BSI) ended the week at 1, points, 0.04% down compared to last week's 1, The average traded volume and value were also down by a weekly 31.61% and 30.47% to reach 51,650 and 398,893 this week. The market capitalization also dropped from last Friday's $10.582B to $10.578B this week. The S&P Pan Arab Composite LargeMidCap Index and the S&P AFE40 were also down this past week with respective declines of 0.24% and 0.11%. However, the MSCI Emerging Markets Index rose by a weekly 4.36%. Regionally, the Turkish and Egyptian stock exchanges were up by 1.42% and 1.02% while the Oatari and Abu Dhabi bourses slipped by 1.01% and 0.73%, respectively. In Lebanon, the banking sector accounted for 77.35% of the total traded value on the Beirut Stock Exchange.

10 Page 10 of 11 Bank Audi's GDR and listed shares rose by 0.30% and 0.15% to $6.77 and $6.81, respectively. Byblos Bank's listed shares also gained 0.57% to $1.75. BLOM Bank's listed shares slid by 1.26% to $11.75 and Bank BEMO's listed shares fell by 0.59% to $1.69. As for the BLOM Preferred Shares Index (BPSI), it rose by a weekly 0.04% to points mainly on account of the 0.39% uptick in the price of Byblos Preferred 2008 shares to $ In the real estate sector, which accounted for 22.4% of total traded value this week, Solidere A shares gained 0.11% to $9.11 while Solidere B shares lost 0.77% to $9.00. In the industrial sector, Holcim's listed shares and Ciments Blanc's Bearer shares rose by 3.51% and 8.28% to end the week at $11.50 and $3.14, respectively. On the London Stock Exchange (LSE), the GDR shares of BLOM, Audi and Solidere all increased by 0.39%, 1.95% and 0.76% to $12.75, $6.79 and $9.23, respectively. The positive vibes generated by the election of a president and the formation of a cabinet might now start to fade as the increase in various taxes and the pending upturn in the wages of public sector employees cause nation-wide controversy. US Treasury Yields Plunge after Fed Raises Interest Rates The BLOM Bond Index (BBI) increased by a weekly 0.70% to reach points; nonetheless, it lagged behind the JP Morgan Emerging Markets' Bond Index which registered a weekly rise of 0.71% to points. Demand for Lebanese Eurobonds maturing in 5 and 10 years escalated this week. As such, the 5Y yields dropped from 5.96% to 5.73% and the 10Y yields fell from 6.93% to 6.86%. Moreover, demand for US treasuries maturing in 5 years and 10 years also witnessed a rise during the week with their yields dropping from 2.13% and 2.60% to 2.05% and 2.53%, respectively. US Treasury yields plummeted after the Federal Reserve raised interest rates by 25 bps for the second time in three months and has signalled that there will be no increase in the pace of monetary tightening. Moreover, despite the fact that the Fed increased interest rates, the Lebanese Central Bank's Governor, Riad Salemeh, stated that Lebanon will not follow the US's lead as a 1% increase in interest rates will lead to a $1.3B hike in the public debt's level. The 5 year spread between the Lebanese Eurobonds' yields and the US treasuries shrank by 15 bps to stand at 368 bps, while that of the 10 year treasuries remained stable at 433 bps.

11 Page 11 of 11 rnhtrnl:file://c:\users\daour\appdata\local\microsoft\windows\ternporary Internet... Copyright 2015 BLOM Bank Unsubscribe Best Regards, Economic Research Department Blominvest Bank sal T F www blominvestbank com