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French Version

BLC chairman says his independence was key to success

Karam leads bank's turnaround

Shadi Karam is not what you would call a traditional Lebanese banker. After 30 years outside of Lebanon he returned in 2002 to chair BLC Bank at the request of Riad Salameh, the governor of the Central

What makes Karam an "untraditional Lebanese banker" is not just his previous work experience at the cutting edge of international finance, but his financial and political independence.

"It is important in Lebanon as most of my predecessors and people in general in this country, have a weakness from that point of view, and they are attacked because they look for personal benefit. I was protected from that, thank God." This allowed him "to be above those kinds of issues."

"I am equidistant from all political poles in this country. I don't owe anybody anything and accordingly, it was not possible to pressure me or blackmail me into doing things to please pressure groups or politicians in this country simply because they have no leverage on me."

This independence came at a price in a land where connections and reciprocal favors are a central aspect of everyday business dealings.

"I made tons of enemies, and I was the subject of defamation campaigns, unjustified lawsuits, pressure of all kinds, personal threats and all sorts of things. But this did not affect me because courage is part of the everyday recipe to succeed."

Karam concedes that he could never have had this autonomy without the confidence and trust of Salameh. "If he was not as confident in me as he is, and if he did not trust me or allow me to work as I like to work, to not intervene in our work, we would never have achieved what we have." And achieved BLC has.

Prior to the Central Bank taking over 97 percent of BLC in July, 2002 the bank was floundering under $700 million in bad debts and poor management. In the past two and half years, with Karam at the helm, the bank has done the seemingly impossible, closing 2004 with a net income of $15.8 million, up by 30 percent on the previous year, and exceeding growth rates of the top 10 banks in Lebanon.

Karam attributes this to having "budgeted very conservatively," and having a great return on assets. "We have exceeded the alpha group return on assets, the first 10 banks, by an average of over 10 basis points. We have a net return on assets close to 0.9 which by industry standards is a very respectable level," he said.

BLC has also generated an 11-percent net return on investment for its shareholder, the Central Bank and a return on equity of 50 percent. "That is because our equity is a little low," Karam hastily added.

Since taking over, Karam has overseen the introduction of mobile banking, e-banking, micro credit for small- and medium-sized enterprises, and setting up 23 committees to manage the bank in the strictest observance of modern corporate governance.

Karam brought with him a wealth of experience to BLC. He left Lebanon in 1970 for the United States to finish his studies, graduating with a doctorate from Harvard University in 1975. His thesis was on administrative setups needed to funnel development aid into developing countries. This led to his position as a financial adviser to the director general of UNESCO in Paris where he was in charge of project financing for developing countries.

"After that I joined a group of investors with a very diversified set of interests, and my main area was specifically to be a sharpshooter, that is to go and acquire, run and turn around institutions in difficult conditions. I did this in a variety of areas ranging from banking and textiles to metallurgic industries throughout Europe. During this period I learned almost all I know from my father-in-law, Joseph Abdo al-Khoury. He was a remarkable mind and a humanist in the broadest sense of the term".

Between 1993 and 2002, Karam worked for financial giant Merrill Lynch in investment banking and money management, "and every possible business related to the financial world." Karam has also been working as a special adviser to the Syrian government to help restructure the banking sector. "I am involved in trying to help them consolidate the liberalization and the development of the public and private sectors banks but, more specifically, to help public banks bloom. It is a very challenging task and one of the most interesting things I have done in the past three to four years."

Karam is upbeat about this financial year for BLC, believing the bank will be able to acquire further market share through updated and innovative products, and an improved corporate image.

The corporate image of BLC is a central part of the bank's marketing strategy, he said. "Today, the main issue in marketing is that you are no longer selling a product, naturally you have to have a good product or banking services, an arsenal of banking services and products, but the main philosophy in marketing today is selling a story. It is something that the industry of haute couture has taught us, that you are not selling a dress, you are selling the glamor around it."

Karam has taken this fashion marketing strategy into banking. "I think BLC's success is that it has a sexy story, it's interesting. It is one of the oldest banks in the country, it has a long tradition and has gone through tremendous difficulties and as an underdog it has fought its way back to the top. It has done it quickly and brilliantly. Therefore BLC has a story and we have sold that story to the public."

Another avenue of development is the "spectacular and promising growth of our United Arab Emirates branches as we expect to double the balance sheet within two years. Our presence in Dubai, Abu Dhabi, Ras al-Khaimah and Sharjah give us a regional weight that we are trying to maximize efficiently and profitably. To this should be added the rebirth of our Paris subsidiary which we moved to a prestigious location on Avenue Montaigne and which is now regaining its past prestige as the first Arab bank to be granted a banking license in France."

Adding to this, he said, is the average age of management being below 40. "I am the one dragging it upward as it were!"

Karam has friends in high places, and was the only Lebanese among 60 senior policy-makers, financiers, economists and academics asked to comment on the International Monetary Fund and World Bank in an Emerging Markets 60th anniversary supplement on the Bretton Woods twins last year.

Karam called for the financial institutions to introduce a cultural element into definitions of problems and planning, and the mechanisms of implementation - what he calls a "culture to challenge."

"You should challenge everything; we should say is this the right way? The culture of challenge should be introduced in everything, and with more reason for primordial world efforts such as financing development and helping economic stability in developing countries."

Asked if the recent appointment of Paul Wolfowitz to head the World Bank would help this "culture to challenge," Karam said that the decision was a "major error."

"The man is not known to be an advocate of development and understanding countries specificities. But I don't know him, he may have a hidden side, he may be a Dr. Jekyll and Mr. Hyde type of character, and may have an excellent side that is only visible to [President George W.] Bush, who in his infinite wisdom, may see in him qualities that are not obvious to the rest of the financial community."

Karam's position on the IMF and World Bank, along with his impressive financial past, have generated speculation in Beirut that he will be the next governor of the Central Bank. Karam denied such claims, however, saying there was nobody in Lebanon who could adequately replace Salameh.


In the family? Married with three children, one girl and two boys.
Last vacation? From time to time I go to south of France where I have a house.
What book are you reading? “The Incoherent Empire” by Michael Mann.
What car do you drive? I don’t like driving, and I don’t care much for cars.
I prefer to be driven, especially here in Beirut.
What are your hobbies? I am an avid golf player and I like movies

Beirut 18-04-2005
Paul Cochrane
The Daily Star

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