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"Going into countries where the competition is cut-throat or the taxes are high is good for your prestige, but is not nearly as rewarding"
Adnan Kassar, Fransabank |
Some Lebanese banks have reacted to the fragile political situation at home by growing their businesses in more stable Middle Eastern countries. But the strategy of Fransabank, which has nearly 100 branches in Lebanon, is to exploit its wartime experiences by growing, primarily in retail, in other countries at the lower end of the political risk spectrum.
It is, for example, in the final stages of acquiring Golden Taler Bank in Belarus. The US says Belarus is Europe’s sole "outpost of tyranny". But Kassar says some banks enjoy more than 40% annual growth in the country’s retail market. With just one branch, Golden Taler Bank is among the smallest banks in Belarus. Nevertheless, Kassar, who was once Lebanon’s minister of economy and trade, claims his bank has already received an offer for Golden Taler Bank that is four times the price Fransabank had agreed to purchase it.
Northern Iraq, then, begins to seem less adventurous. Fransabank is hoping to have a positive response by the end of the summer to its application to open a representative office in Irbil. The institution already has a thriving business supporting imports to northern Iraq through letters of credit.
Kassar, who together with his brother Adel holds a 70% stake in Fransabank, says it is still too early for a move into Baghdad. But, he says: "The opportunity lies in the special developing markets where being first gives you an advantage. Going into countries where the competition is cut-throat or the taxes are high is good for your prestige, but it is not nearly as rewarding."
Far from shying away from Lebanon in its troubles, last year Fransabank bought Banque Libanaise pour le Commerce (BLC), which has 35 branches, for $153 million.
With total shareholders’ equity of some $500 million, Fransabank is hoping to conclude the sale of about $100 million in tier-one capital preference shares in July. But one of the most interesting aspects of the bank’s growth into frontier markets is its collaboration with France’s Caisse d’Epargne, an institution with a large domestic network but not widely known as an emerging-market bank.
Caisse d’Epargne acquired 40% of Fransabank’s Paris subsidiary last year. According to a spokesperson for the French bank, this was part of the international expansion strategy of Caisse d’Epargne and its overseas commercial banking arm, Oceor.
Through Oceor, Caisse d’Epargne has already begun to invest in retail banking in emerging markets. The first stage of this has been in north Africa, with the acquisition in 2006 of a 23% stake in Morocco’s Crédit Immobilier et Hôtelier (which has 212 branches) and the acquisition last autumn of a 60% stake in Banque Tuniso-Koweitienne, a Tunisian institution with four branches and a number of business-specific subsidiaries.
Caisse d’Epargne’s spokesperson says that the bank intends to expand further in the Maghreb region. Potentially, says the spokesperson, this could be done through partnerships with the World Bank, with the states of Tunisia or Kuwait, with Moroccan state pension fund Caisse de Dépôt et de Gestion, or with private partners – which could include Fransabank.
The spokesperson confirms an assertion by Kassar that Caisse d’Epargne is considering taking a stake in Fransabank’s Algerian operation.
Kassar also tells Euromoney – unconfirmed, this time, by Caisse d’Epargne – that the French bank is interested in taking 20% to 25% stakes alongside Fransabank in acquisitions the Lebanese bank is considering in Libya and Senegal. He says Caisse d’Epargne is keen for Fransabank to raise the capital of its Syrian subsidiary from $35 million to about $100 million so that the two banks can collaborate more closely in the country, where Fransabank is opening three branches this summer.
Kassar claims Charles Milhaud, chief executive of Caisse d’Epargne, intends to come to Beirut in October to hold a press conference to confirm that the two banks have formed a partnership for their international development.
Kassar says: "[Caisse d’Epargne] trusts us anywhere we want to go. It is counting on us to develop its international network."
Among other esoteric markets, Fransabank opened a representative office in Libya in January; it also maintains an office in Cuba.
In Sudan, Fransabank is considering enlarging the operation it began in 2006 through one of two acquisitions it has been offered in the country. One of these potential acquisitions is a bank with 39 branches. If Fransabank bought that institution, it would become one of the largest players in the banking industry of a country where the economy is growing annually by about 10%, but where rebels reached the capital in May, and conflict in the south is flaming up again too.
In Algeria, another country that has barely dragged itself out of civil war, Fransabank has opened new branches in Algiers and Oran this year. It plans to add seven more in Algeria by the end of 2009, taking its branch network in the country to 10.
Kassar also has his eye on such countries as Mali and Côte d’Ivoire, as well as territories that are more common tarets for Lebanese banks, such as Saudi Arabia and Egypt.