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Management Discussion And Analysis

1.0. Introduction

Bank Audi is one of the largest banking institutions in the Middle East. Founded in 1830 in Lebanon, it was incorporated in its present form in 1962 as a private joint stock company with limited liability (“société anonyme libanaise”). Catering to more than 800,000 customers served by more than 6,500 employees, the Bank has a universal banking model based on 3 development pillar markets – Lebanon, Egypt, Turkey – focusing on Corporate and Commercial Banking, Retail and Personal Banking, and Treasury and Capital Markets activities, along with a fourth development pillar defined as the Private Banking business line, working hand in hand through a distinctive network of 11 banks and 3 financial institutions located in 12 countries across the MENA region and Turkey, over and above a historical presence in Europe.

The Group’s main purpose is to achieve quality growth by efficiently meeting the needs of both businesses and individuals in the various countries of presence and ensuring long-term sustainable value to all stakeholders. It ranks first among Lebanese banks and stands among the top Arab banking groups as per major banking aggregates. In addition to its historical presence in Lebanon, Switzerland and France, Bank Audi is present in Jordan, Syria, Egypt, Sudan, Saudi Arabia, Qatar, Abu Dhabi (through a representative office), Monaco and Turkey.

Bank Audi’s shareholders’ base encompasses more than 1,500 holders of common shares and/or holders of Global Depositary Receipts (GDRs) representing common shares. Its shares are listed on the Beirut Stock Exchange. Its GDRs are listed on both the Beirut Stock Exchange and the London Stock Exchange.

The discussion and analysis that follows cover the consolidated performance of Bank Audi in 2014, based on the audited consolidated financial statements of the Bank as at and for the fiscal years ended December 31, 2013 and December 31, 2014. Terms such as “Bank Audi”, “the Bank” or “the Group” refer to Bank Audi sal and its consolidated subsidiaries, principally Audi Private Bank sal, Audi Investment Bank sal, Banque Audi (Suisse) SA, Bank Audi France sa, Audi Capital Gestion SAM, Bank Audi sal - Jordan Network, Bank Audi Syria sa, Bank Audi sae (Egypt), National Bank of Sudan, Audi Capital (KSA) cjsc, Bank Audi LLC (Qatar), Arabeya Online for Securities Brokerage (AoLb) and Odea Bank A.Ş. (Turkey). All references to Lebanon are to all Lebanese entities excluding Audi Private Bank sal, unless otherwise stated.

All figures are presented in US Dollars (“USD”), unless otherwise stated, since the Bank transacts and funds the large majority of its business in US Dollars and functional currencies linked to the US Dollar. US Dollar amounts are translated from Lebanese Pounds (LBP) at the closing rate of exchange published by the Central Bank of Lebanon, (1,507.5 as of each of December 31, 2013 and December 31, 2014). References to foreign currency translation differences or changes reflect the impact of the movement of functional currencies in countries of presence against the US Dollar.

All references to the Lebanese banking sector are to the 53 commercial banks operating in Lebanon, as published by the Central Bank of Lebanon (“BDL”). All references to the Bank’s peer group in Lebanon are to the Alpha Bank Group consisting of 14 banks with total deposits in excess of USD 2.0 billion each, as determined by Bankdata Financial Services WLL (publishers of Bilanbanques). All references to the Bank’s peer group in the MENA region are to the top regional Arab banking groups, as compiled by the Bank’s Research Department.

Lebanon’s economic and banking data are derived from the International Monetary Fund, the Central Bank of Lebanon, various Lebanese governmental entities and the Bank’s internal sources. The region’s economic and banking data are derived from the International Monetary Fund, the Economist Intelligence Unit, Bloomberg, the region’s central banks and the Bank’s internal sources.

This discussion and analysis starts with an overview of the Bank’s strategy, followed by a review of the operating environment and a comparative analysis of the Group’s financial conditions and results of operations for the periods ended December 31, 2013 and December 31, 2014. An overview of risk management comes next, followed by an extensive coverage of share information and dividend policy, resources deployed, investor relations, compliance, environmental and social management system, and corporate and social responsibility.