Osama Habib
Daily Star staff

After receiving approval from the Banque du Liban, the Bank of Beirut is now the full owner of Beirut Riyad Bank, a leading banker said Thursday.
“The general managers of both banks signed the agreement on Tuesday under the watchful eyes of Central Bank officials,” the banker said.
The banker said the Bank of Beirut apparently paid no direct cash to the main shareholders of Beirut Riyad Bank:  “The shares of Beirut Riyad Bank simply changed hands.”
The Central Bank, which supervised the deal, is encouraging small- and medium-sized banks that are allocating big provisions for bad loans to either merge with other banks or sell all their shares.
The banker added that the Bank of Beirut decided to directly manage the bank and handle its nonperforming loans.
Sources said that Beirut Riyad Bank, which has assets of more than $700 million, has about $100 million in bad loans.
Beirut Riyad Bank, which has not reported a profit for three years, was forced to increase its provisions for the bad loans, which in turn affected its performance to some extent.
This acquisition will make the Bank of Beirut the seventh-largest bank in Lebanon in terms of assets. The Bank of Beirut reported assets of more than $2.4 billion at the end of 2001 and recorded a profit of $19 million.
“This is a very big step by the Bank of Beirut, which saw its shares jump to $7.8 last week from $7.56,” a broker said.
He added that bankers and brokers have been calling for bank consolidation in order to face any future competition from foreign banks.
“The Bank of Beirut will appoint a temporary general manager to run Beirut Riyad Bank as of Friday,” an official at the Bank of Beirut said.
He added that the general
assembly of the Bank of Beirut
met on Thursday to discuss the new acquisition which will “increase its market share considerably.” He said the bank would have a network of 43 branches in the country.
The Bank of Beirut acquired another medium-size bank, Transorient Bank, three years  ago. Analysts believe that other small- and medium-size banks will have to look for new partners if they want to survive in a competitive market.
At present, there are 76 bank operating in the country, with 20 banks controlling 80 percent of the market share.
“Sooner or later the number of banks will shrink to 20 or 15,” one analyst said. He added that many banks are finding it hard to increase their capital and meet the conditions of the Basil Committee, which called for the increase in the capital adequacy ratio of all commercial banks.

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