Turbulence can’t touch Lebanon's Blom Bank

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Olivier Holmey
Published on:

Saad Azhari has quietly ushered in a new era at Blom Bank. The outwardly conservative firm has embraced technology and pulled off a transformative acquisition for its wholesale business. But prudence remains the watchword in such a tempestuous market.

Saad-Azhan-Storm-illo-780
Illustration: Pete Ellis


Blom Bank is conservative – and it wants you to know it. 

Speak to anyone working in the upper echelons of the bank and they will stress, first and foremost, Blom Bank’s aversion to risk. Even as bankers around the world proclaim disruption as their guiding principle, Blom displays a distinctly traditionalist streak.

Led for 56 years by one family, the Azharis, it emphasizes its constancy over its ability to evolve. As Elias Aractingi, one of four general managers of Blom, tells Euromoney: “We like stability.”

Part branding, part genuine philosophy, the implication is clear: Blom may operate in one of the world’s most turbulent markets, but its enduring caution enables it to withstand all that comes its way. That is how, its management argues, Blom has survived Syria’s civil war, the Egyptian revolution, a lack of political leadership in Lebanon and the collapse of the oil price in recent years. 

The second implication, evident to those familiar with the Lebanese banking sector, is just as important if more nuanced: Blom is nothing like its main rival, Bank Audi. Where Blom is prudent, the internal thinking goes, Audi is rash.

Such is Blom’s public show of conservatism that it is perceived by some in the country as more orthodox even than the Banque du Liban. This view is not without foundation. On occasion, Euromoney understands, Blom management has cautioned the Lebanese central bank against a loosening of banking rules – an astonishing reversal of roles between regulator and regulated. 


Definitely we are aggressive in terms of modernizing the bank, aggressive in terms of controlling the costs, aggressive in terms of being innovative 
 - Saad Azhari

Needless to say, Blom takes a negative view of aggressive banking. In the words of Saad Azhari, the son and successor of former Blom head Naaman Azhari: “Peace of mind is very important to us.” 

He adds: “By nature, we are a conservative bank.”

Still, just as it would be wrong to overstate Audi’s appetite for risk, so would it be misguided to overstate Blom’s aversion to it. While there is some truth to the comparison drawn between the two banks, the distinction is far less clear cut than Blom would have you believe. 

In reality, Blom owes its success as much to its newfound willingness to adopt modern technologies and enter previously unexplored markets as it does to its historical prudence. Had the bank not found a compromise between the way it used to operate and the way banks are expected to do business in the 21st century, it would never have reached the dominant position it holds today in Lebanon’s financial sector.

It would not have expanded abroad, particularly in Egypt. It would not be pushing to become a leader in Lebanese digital banking. And it would probably not have seen its listed share price rise 10% in 2017, nor have recorded the highest operational net profit – $485 million – in the country’s banking sector the same year. 

This is the story of how a once small Lebanese bank tweaked its conservative mindset to achieve its ambitions.

Clear message

When Euromoney visits Beirut in late June, the 2018 World Cup has hit fever pitch. Cars decorated with the colours of Brazil, Germany and Argentina queue through thick Beiruti traffic, while everywhere fans sport their favourite player’s shirt. With hundreds of thousands of football enthusiasts in front of their televisions, advertising segments in between games represent prime real estate for firms wishing to communicate a message to the country. 

None is investing in this opportunity more heavily than Blom. The bank has ordered an avalanche of advertising spots, all of them to promote its digital banking offering. Using the fictional cartoon character of Tante Wadad, an elderly client with little grasp on new technology, Blom’s ads aim to show how easy Blom’s mobile application is to use, regardless of age or ability. Blom is rolling out a clear message at peak viewing time: it has embraced new technology and its customers should do so too. 

This is a step change for a bank that has rarely been noted for its innovation. And it is one that has Blom management excited, as Euromoney discovers over two days of interviews with the bank’s executives in Beirut. 


Jocelyne-Chahwan-400
Jocelyne Chahwan
Jocelyne Chahwan, head of retail banking at Blom, is particularly enthusiastic about these changes and about the promotional campaign, which she helped conceive. She is fond of Tante Wadad and eagerly shows Euromoney the next instalment in the ad campaign ahead of its release on Lebanese television.


She meets us just days after having been promoted to deputy general manager, from assistant general manager – reflecting the bank’s support for her efforts to modernize Blom’s offering and customer service. But Chahwan has had to fight hard to get to her position and to make her mark on the institution. 

“I’m the only woman, by the way, at this level,” she says.

When she joined Blom from Bank of Montreal in 1996, there was no retail banking division as such at the bank. That began only the following year under the leadership of Aractingi, and even then was limited in scope. 

“It was a bank with no products,” she says of the early 2000s, when she was at the forefront of delivering Aractingi’s retail banking vision. “I changed the culture to a sales culture.”

Her efforts to expand Blom’s horizons quickly proved fruitful. 

“I can tell you one thing: a few years after we started the retail banking, we took the leadership,” Chahwan says.

Blom is now first in Lebanese retail, with a 27% market share in car loans and a 15% share in housing loans. Blom has 400,000 clients in the country, most of them in retail.

Now Chahwan is further developing the bank’s retail offering – and digital technology is central to those efforts. Already, Blom has launched Blom Pay, an electronic payment service, and UberBlom, a prepaid card for use with the ubiquitous US ride-hailing firm. It has also introduced so-called ‘smart ATMs’, which can, among other services, take deposits and recharge phone credit.

Meanwhile, Blom’s English-language mobile application eBlom – the one being promoted in the ad campaign – may not have the most sophisticated design, but it has the advantage of being tailored to the needs of the Lebanese public, with features for making wedding gifts and for the payment of Port of Beirut bills of charges. 

Blom has no intention of abandoning bricks-and-mortar banking, but the bank’s clients are now five times more likely to access Blom’s services through eBlom than in a branch – a testament to the app’s appeal, although take-up is still hindered by the absence of an Arabic version. 


Elias-Aractingi-160x186
Elias Aractingi
Even branch employees encourage clients to use online services instead of coming to the branch. As Aractingi puts it: “We’ve converted a lot of our sales force to become missionaries for digital.”


The technological transformations help keep the bank’s cost-to-income ratio low and expand the range of services for customers. But Chahwan also hopes to reach the unbanked. 

“This is the segment I’m after today,” she says. “What we can do for all these workers who want to transfer money abroad – how we can make it simple, how we can make it cheaper, more convenient for them?” 

“I’ve started a conversation with the regulator, telling them: ‘We have to do something for the unbanked, and I want you to be more lenient about the KYC [know-your-customer rules].’ We need to have a light KYC for those people.”

This embrace of innovation is also evident elsewhere in the bank. Blom, for example, welcomed the central bank’s Circular 331, a programme announced in August 2013 to boost investment in startups. Banque du Liban committed itself to guaranteeing 75% of hundreds of millions of dollars’ worth of bank investment into Lebanon’s knowledge economy. 

Of the $354 million raised so far through the programme by the country’s financial institutions, $237 million was raised by Blom; the bank has directly invested $54 million of its own money.

“We have embraced Circular 331 more than any other bank, trying to get as much money to tech startups and tech venture capital as possible,” says Fadi Osseiran, head of Blominvest, Blom’s investment bank.

The programme, although considered insufficient by a number of Lebanese entrepreneurs, has certainly helped grow the sector, as central bank governor Riad Salamé noted at Euromoney’s recent conference in Beirut. 

“We were surprised positively because, in two years, Lebanon has created a sector that represents 1.5% of its GDP,” he said.

Investment banking

Blominvest has also found success in other areas. Although it is not thought of as a big force in investment banking, its efforts there have also yielded positive results and it is now the leading bank in Lebanon for brokerage. 

The bank advised on the largest M&A transaction in Lebanon over last year, namely, the sale by Saudi Arabian investment firm Kingdom Holding of its stake in Beirut’s Four Seasons Hotel for $115 million. Osseiran says that Blominvest obtained the mandate thanks to the existing lending relationship Blom had with Kingdom. 

“We are trying to be active more and more in the investment banking area,” says Osseiran, adding that Blominvest has several mandates this year to advise on mergers and acquisitions as well as restructurings.

The bank still has much to do to catch up with rivals in areas such as private banking and asset management. But Blom’s position in investment banking will likely improve as a result of another bold move by the bank: the acquisition of HSBC’s Lebanese operations. 

Amine-Awad-160x186
Amine Awad

Amine Awad, a general manager of Blom responsible for risk within the bank and for relations with regulators, was in charge of this takeover. He says the deal was important to Blom’s development. 

“For a long time,” he says, “Blom used to be very active in the retail business, while the commercial business, covering corporate and small and medium-sized enterprises, was important but we were not really at the forefront in this area.” 

Now Blom wishes to create more of a balance between retail and commercial, hence the HSBC acquisition. 

“HSBC used to be well-known as a very active commercial bank, financing large corporates and SMEs,” says Awad. “We’re really very proud of this deal because not only did we get a very high-quality commercial portfolio but also we benefit from a very high quality of staff. Blom Bank learned from the HSBC method of working in the commercial business.”

As a result of the acquisition, Blom adopted HSBC’s model of corporate service, developing a large team of relationship managers to cater to its clients’ needs, replacing Blom’s earlier branch-centric model. 

Departure

Blom typically likes to grow organically – part of its conservative DNA – so this is, again, something of a departure for the bank. The only other bank takeover by Blom was of Egyptian-Romanian firm Misr Romanian Bank in 2005. 

That had a difficult start, as Blom quickly removed the banker it had appointed to lead the Egyptian business owing to his excessive spending, according to Aractingi. But since then, the Egyptian business has grown to become the most important foreign part of the group – more important than markets such as Jordan, Syria and Europe, where Blom has been active for longer.

Egypt now accounts for 6% of Blom’s balance sheet and 8% of its profits, has a higher return on equity than any other part of the bank, a higher growth rate and one of the largest branch networks, equivalent to half of Blom’s branch network in Lebanon.

But the acquisition of Misr Romanian was primarily about buying an Egyptian banking licence. As the bank had weak financials, its main appeal was as a way to enter the Egyptian market. By contrast, the HSBC acquisition was about improving Blom’s expertise in the areas in which HSBC excels and growing Blom’s client base by retaining as many HSBC customers as possible. 

Awad says Blom successfully added around 40 large corporates and many SMEs to its client list thanks to the takeover.

Osseiran adds that Blominvest also managed to convince most of HSBC’s custody clients to stay after the takeover.

The former HSBC staff, meanwhile, have been retained in full and, Awad says, are being encouraged to play a big part in the management of Blom. For example, HSBC’s former head of corporate in Lebanon, Jihad Achkar, is now Blom’s head of corporate. 

Saad-Azhari-R-780
Saad Azhari, chairman of Blom Bank


“The person that we believe is a good manager or a good director can have a bigger role,” Azhari says. “It could be a Blom or an ex-HSBC [employee], whoever we believe is better takes the post.”

Blom also made the most of the takeover by developing an online platform, inspired by the experience of the HSBC staff, for use by corporate clients.

These are just some examples of how Blom Bank is changing: by adopting new technology, moving into new markets and expanding the range of the talent at its disposal.

Underpinning all of these developments is the vision of Azhari, the bank’s chair and general manager. While he will happily talk for hours about how conservative the bank is – a reassuring message to the bank’s shareholders – it is clear that innovation is also key to his outlook.

“Definitely we are aggressive in terms of modernizing the bank, aggressive in terms of controlling the costs, aggressive in terms of being innovative,” says Azhari.

Slow and safe

The Azhari approach to the bank has not always been like that.

The Azharis began their association with Blom in 1962, when the patriarch of the family, Naaman Azhari, the then finance and economy minister of a turbulent Syria, agreed to manage Banque du Liban et d’Outre Mer (Blom), a small financial institution founded a decade earlier in the burgeoning financial capital of the Middle East, Beirut.

Syrian-Lebanese Naaman Azhari has strong banking credentials: a PhD in economics from the Sorbonne and founder and chair of Syrian bank, Banque de l’Orient Arabe. He decided to devote the rest of his career to Blom. Now 90, he is still chair of the group and occupies the largest office on Blom’s executive floor. His philosophy of slow, safe growth influences management thinking to this day.

Blom employees praise his experience and ability to steer the ship through difficult times. Awad, who first worked with Naaman in the 1980s, says “stable growth” and “a very conservative policy” were always at the forefront of his mind, enabling the bank to maintain low levels of non-performing loans, even during Lebanon’s 15-year civil war. 

But many also say, off the record, that Naaman’s approach to banking was too old-fashioned. 

Long wary of retail banking, he at first only agreed to a few million dollars of retail lending – a tiny amount considering the market’s potential. As for technology – be it cards or ATMs – he was known to view it as “a game” rather than as “real banking”. 

“At the time he was very, very conservative,” one source says. “So, yes, there were some growing pains.”

As a result, Blom fell behind competitors such as Audi and Byblos Bank. For a time, the situation seemed the reverse of that depicted in Blom’s ad campaign – Blom was led by a Tante Wadad figure and its clients were the ones clamouring for change.

As one Blom banker says of Saad Azhari’s father: “The father is a very smart man, very energetic, but the father has an older mentality.” 


Nobody is expecting to have zero corruption. Definitely there will still be corruption. But they can take decisions to improve the situation 
 - Saad Azhari

Two changes brought about a shift in Blom’s mindset. First, Naaman Azhari, faced with the tremendous results generated by the introduction of retail banking and new technology, had to recognize the benefits of change. The bank’s retail loan portfolio now totals $3.2 billion – a far cry from the few million he originally authorized.

Second, Saad Azhari eventually took over from his father. His relative youth, as well as his early years working in futures and options in the Swiss banking sector, equipped him with a more modern vision. Once in charge he sought to accelerate the bank’s transformation.

“When I came here, definitely I played an important role in trying to grow the bank,” Saad Azhari says. “We were known to be a conservative bank, but we were not known to be strong in lending, strong in retail, we didn’t have marketing for loans. We started growing the lending, the retail, and I also played an important role in terms of expansion, especially with the Egyptian market. I was personally involved in trying to acquire a bank there, in the negotiation process. I wanted us really to be a strong Middle Eastern bank, and that was a push in that direction.”

He summarizes his two main objectives: “To modernize the bank here and to grow in the region to be a regional bank”.

Azhari père and Azhari fils have much in common, but there is a sense that the son’s generation is driving the bank forward in a more decisive way than the father’s generation did. 

Other Azharis at the helm include Saad’s younger brother, Amr, who is a general manager in charge of compliance and credit, and his older brother Samer, who chairs Blom Bank France. The only sibling of their generation not involved in the bank’s management is Saad’s older sister.

Fadi-Osseiran-160x186
Fadi Osseiran

To Blominvest’s Osseiran, who has known both generations for many years, this continuity in leadership is reassuring to staff and shareholders alike. But just as importantly, he says, the younger Azharis have understood the need to stretch the original Blom mindset in such a way as to achieve higher ambitions. 

“You can feel the continuity of the Azhari concept,” says Osseiran. He calls Naaman “a great leader” and “a mentor”, but he adds: “Saad is also more versed in the capital markets. He’s more active in this area. If it wasn’t for Saad, we wouldn’t have moved in this direction. Egypt was Saad’s idea. HSBC was Saad’s idea. Saad is pushing fintech, the digital economy. We have the same values [as under Naaman] but he [Saad] is open to what is going on in the world. He wants to make sure he’s not bypassed by others. That’s the difference.”

Conservative philosophy

Saad Azhari is aware of how much Blom can appear to be changing. So he is eager to impress upon Euromoney that the bank has maintained its conservative philosophy – one that has enabled it to weather every storm. 

“The way we have been raised and taught, we are not exactly the same – people have different views – but none of us like to take excessive risk,” he says of the Azhari upbringing. “In that sense we have the same mentality: being prudent.”

Caution makes sense in Lebanon, a country that seems permanently on edge. First among the troubles at hand is the crisis in Lebanese government. For two and a half years until October 2016, divisions among the political parties meant that the country went without a president. The power vacuum was eventually filled with the appointment of Michel Aoun as president, who in turn named Saad Hariri as prime minister

This reassured the country’s banks, which had long hoped for an end to the political crisis and a period of much-needed reform. And indeed, parliament promptly passed an important petroleum tax law, enabling the country to execute its first offshore licensing round, as well as an electoral bill that introduced proportional representation. 

But following the May 6 general election this year, the first held in the country for nine years, no government has been formed, suggesting Lebanese politics remain just as intractable as ever.

Political polarization along community lines, combined with widespread corruption, conspire to thwart even the most basic and necessary government actions. During Euromoney’s time in Beirut, there were daily power outages – a year-round problem for locals, who, if they can afford it, buy generators to ensure a continuous source of power.

Saad Azhari is the first to point out that this state of affairs is damaging. Without naming them, he says some banks too fall foul of this polarization, catering to certain communities and not to others. Blom makes sure it treats every client with equal consideration, he says, before adding of the community-centric mentality: “Unfortunately, until today in this country, you find this problem.” 

He tries to remain optimistic about the chances of reforms being implemented, but he doubts that politicians will stamp out corruption. 

“Nobody is expecting to have zero corruption,” he says. “Definitely there will still be corruption. But they can take decisions to improve the situation.”

Reform is a vague term and not everyone may agree with the changes Azhari would like to see implemented – among them the retraining of teachers as tax collectors.

But some reforms appear vital as Lebanon’s economy is now growing by only about 2% annually and the government’s deficit was around 7.3% of GDP last year. 

Still, despite political instability and economic slowdown, Blom and the broader financial sector have remained stable

“Frankly speaking, the banking sector is holding up the country,” says Azhari. 

At the Cedar Conference, an international gathering held in Paris in April this year, Lebanon won aid pledges exceeding $11 billion, which could help the country pick itself up. But that inflow is contingent on the implementation of reforms, including the reduction of Lebanon’s deficit. So while Blom sees it as an encouraging development in theory, many bankers wonder if Lebanon will ever see these investments realized.

The pace of reform and the general economic state of Lebanon are of importance to Blom because, although the bank has built a presence or stake in 12 foreign countries and is hoping to grow further in Egypt and the United Arab Emirates, it has not yet sufficiently diversified its geographical risk. Lebanon still represents by far the largest share of its business, with more than 80% of the bank group’s total assets. 

Such exposure to Lebanese risk, in all its guises, heightens the need for a cautious approach and an acceptance of the slow pace at which things happen in the country. 


If at the next generation, the Azharis manage, then it is fine. If not, we’d have the same problems as all the other banks 
 - Fadi Osseiran

Blom is due to have additional headquarters six years from now, for example, but one of the bank’s senior executives says it will likely take a decade to happen.

Likewise, Chahwan tells Euromoney that it took five years for Lebanese General Security, a branch of government, to adopt Blom’s point-of-sale terminals so that visitors to the country could pay for their entrance visas by card, instead of cash. Bureaucracy delayed implementation for what should have been an easy process, she says.

There are also external factors that have slowed Blom’s growth and continue to justify the avoidance of risk. The halving of the price of oil in 2014 caused a reduction in foreign direct investment and remittances from Lebanon’s expatriate community – many of whom live and work in oil-rich countries. It also affected tourism, again primarily from the region’s oil-rich states. 

Since 2011, the civil war in neighbouring Syria has also had a direct impact on Lebanon. An estimated 1.5 million Syrians have sought refuge in Lebanon – a large number for a country of just six million, with poor infrastructure and an ineffective political class.

“We still have a huge amount of Syrian refugees, who are a burden on the infrastructure,” says Azhari. “We don’t have tourism like we used to have before due to the crisis in Syria. Still we cannot export through Syria to the Gulf because the land is closed.”

The Syrian war has also affected Blom in an even more direct way, as Syria used to be one of the bank’s most promising markets. The Lebanese bank owns 49% of Bank of Syria and Overseas (BSO), a large bank in Syria, where business was booming until the start of the conflict in 2011. 

BSO has substantially reduced its activity because of the conflict, although it has not shut down. From a portfolio of several hundred million dollars in outstanding loans at the start of the conflict, the bank has only a few million today. Eight of BSO’s 28 branches are closed because they are either damaged or inaccessible as a result of fighting. 

In order to avoid any risk of falling foul of the international sanctions imposed upon Syria, Blom last year deconsolidated its Syrian operations from its results and officially cut all ties to the bank, although it retains its shareholding. 

To put this separation into effect, Georges Sayegh, founding general manager of BSO, retired from his position as Blom’s representative on BSO’s board only to rejoin it as an independent board member. 

Sayegh, who is also an adviser to Blom management, tells Euromoney that he never speaks with Azhari about BSO – an extraordinary statement considering the tense situation in Syria and BSO’s strong historical connection to Blom, but one that serves to highlight Blom’s assurances that it no longer has any interest in Syria. 

Likewise, Osseiran says that Blominvest avoided taking part in Kingdom Holding’s sale of the Four Seasons Damascus in March this year, although the bank has a good relationship with the seller, as shown by its work on the sale of the Four Seasons Beirut. Still, Blom hopes to one day participate, through BSO, in the reconstruction of Syria.

Finally, the political and economic upheavals in Egypt in the aftermath of the Spring Revolution hurt Blom’s development there, at least for a time.

Being in a region that generates so much international compliance trouble also hinders the development of Lebanon’s banking sector in general and Blom’s in particular. As the central bank’s Salamé acknowledges: “We have certain limitations. We cannot grow as freely as other countries for compliance reasons.”

This list of woes in Lebanon, and the region more broadly, would put off most bankers. But, as Aractingi puts it, for Lebanese bankers: “It’s a way of life, going from crisis to crisis.”

Caution

It is a reflection of this tough environment that Blom moves into new areas of business with a level of caution that would, in other markets, be considered excessive.

This caution is, in Blom’s reckoning, what differentiates the bank from its primary rival, Audi. Freddie Baz, Audi’s vice-chair of the board, general manager and group strategy director, is certainly more willing to embrace risk than his peers at Blom. 

“Our job is to take risks, day in day out,” he tells Euromoney. “We are bankers.”

Baz is not admitting to recklessness, far from it, but his words suggest a higher tolerance to risk in the interest of speedy growth. That may explain Audi’s decision to enter Turkey in 2011 – a bold move in such a competitive and volatile market.

Blom could also have entered Turkey. Around the time when Audi moved in, Turkey’s then deputy prime minister, Ali Babacan, told Azhari that Turkey would happily provide Blom with a banking licence to work in the country. 

But the bank opted not to enter such a “high-risk” country, which would require, in its view, large and disproportionate amounts of equity for a financial institution in Lebanon. 

“If I’m going to go there with a big portion of my equity, for my shareholders that could be a problem,” says Azhari.

Blom’s management points to Audi’s decision to move into Turkey as a prime example of that bank’s overly aggressive attitude to risk. They say that Audi’s balance sheet gain was its capital loss. “They thought they could make it in Turkey when no one else could,” one Blom manager says of Audi’s decision.

Baz defends the move, saying Audi has quickly managed to build a strong business in the country. But aware of the short- and medium-term difficulties in that market, he prefers to focus on the country’s long-term prospects, which he views optimistically. 

“There will come a time when we will see a reversion of the situation in Turkey,” he says.

Regardless, Blom clearly feels that it dodged a bullet when, out of prudence, it declined a Turkish banking licence.

Still, there are moments when Blom’s professed conservatism can seem to revert to its rigid early form and the bank goes too far to avoid danger. One recent example concerns the implementation in Lebanon of a bill passed by the US Congress in opposition to Hezbollah, a Lebanese Shi’ite political party viewed by the US as a terrorist organization.

The bill aimed to cut off Hezbollah’s access to the financial sector. Lebanon’s banks were initially left to interpret the law as they deemed fit. Blom went much further in its interpretation than most of its peers, reportedly removing from its client list Shi’ite charitable entities – including hospitals – deemed to be linked to Hezbollah. 

BLOM-BANK-building-780
Blom Bank's headquarters in Beirut


A Blom banker confirms that its implementation of the US bill was overly drastic. A bomb was set off on the evening of June 12, 2016, outside the Beirut headquarters of Blom, in what was widely understood as a warning shot from Hezbollah – not to kill, as the bombing occurred when the offices were empty, but to warn the bank there would be dire consequences if it did not reel back its policy.

The attack prompted the Lebanese central bank to clarify the rules, which Blom in turn adhered to without overdue zeal. 

The Blom source tells Euromoney the bank initially went too far and that some within the institution deemed Saad Azhari responsible. 

US proximity

Beyond his position at Blom, Azhari is also vice-president of Lebanon’s banking association. In that capacity he frequently leads Lebanese banking delegations to Washington DC and lobbies on behalf of Lebanon’s banks with US lawmakers.

The source suggested that this proximity to the US, while generally positive, in this case made him overly wary of how the US might react if Blom did not go above and beyond what the bill imposed. The source says he expected a reaction from Hezbollah: “[The bombing] did not come as a surprise. I think we went a bit too aggressively in complying, in interpreting the new rules. We went the extra mile.”

Azhari says his role was in fact positive, as he worked with US lawmakers to make sure the bill was not so excessive as to hurt relations between Lebanese and US banks.

There is at least one other recent area where Blom’s continued aversion to risk can be brought into question: Blom’s response to the presence of Syrian refugees in Lebanon. 

Chahwan tells Euromoney the bank deliberately avoids dealing with Syrian refugees, to avoid being caught in the middle of the political debate over their presence in the country. Chahwan says she would rather focus on the needs of the Lebanese people and of workers from countries such as Egypt, the Philippines and Sri Lanka. 

“Some of the Lebanese, they perceive them [Syrians] as refugees, some of them they perceive them as terrorists in the country, because it’s debatable,” she says. “It’s a topic that people talk a lot about. We don’t want to go there. We have enough to serve before them: the unbanked Lebanese and the worker non-Lebanese. Let’s start with those first.”

Considering the situation most Syrian refugees find themselves in, Blom’s professed commitment to serving the unbanked and the Azhari family’s Syrian roots, the bank’s decision not to serve them seems contrary. 

A smaller Lebanese bank – Banque Libano-Française (BLF) – has taken upon itself to service refugees, distributing electronic vouchers to tens of thousands of them.

Chahwan recognizes BLF’s efforts in this area, calling the bank “very brave” for catering to the needs of Syrians. Some might have hoped that Blom would display similar courage. 

Balance

The bank's response to the Hezbollah bill and to the Syrian refugee crisis serve as reminders that the right balance between caution and risk remains hard to strike in Lebanon – certainly harder than in most countries. 

Still, beyond these examples, it remains true that Blom Bank has over time managed to strike a finer balance than most and has reaped the benefits of that success.

Many in Blom believe the bank owes its success in large part to the Azhari family, which has been in charge for close to six decades. With the transfer of leadership from one generation of Azharis to another, Blom runs the risk of being seen as ‘the Azhari bank’. But management seeks to dispel that perception, highlighting that the Azharis are minority shareholders – together owning just 13% of the bank – and so could always be removed by other shareholders.

Saad Azhari says that this system is “an ideal situation”. 

“If I look at other banks, if the management of the bank don’t have an important stake, they are looking at sometimes very short-term successes, not looking at the medium- and long-term successes,” he explains. “If your fortune is in the bank, you are looking at medium- and long-term successes. At the same time, if you own more than 50% of the bank, if you have bad management, smaller shareholders cannot change you.”

If that is a key part of Blom’s success, as Azhari and other top managers believe, what will happen once Saad Azhari, who is in his mid 50s, takes a step back from the executive management of the bank? He is reserved when asked if any of his children might take up the mantle, wary no doubt of overstepping his authority and giving the impression Blom is under dynastic control. (Naaman Azhari has 13 grandchildren, none of whom work at Blom.) 

Still, Azhari mentions a son who works for UBS in Switzerland – as Saad himself did some 30 years ago before joining Blom. Asked if history may be repeating itself, he says with a smile: “We’ll see.”

Others are more openly positive. Asked if younger Azharis may be next in line, Osseiran says: “You never know. I don’t think he [Saad] makes it a condition, but he is open to that. If they are as good as the parents, why not?”

Of Blom’s uniquely successful model of conservative growth led by a single family, Osseiran adds: “If at the next generation, the Azharis manage, then it is fine. If not, we’d have the same problems as all the other banks.”