'There were three driving forces behind Byblos' profits last year,' says Alain Wanna, chief executive officer at Byblos. 'The contribution from foreign operations [in Sudan, Syria and Europe], which increased by 13 per cent over 2005, played an important role. Commission income increased by 50 per cent and we have started to benefit from acting as a market maker on government securities and equities.'

Regional expansion has been a driver for the other major banks. Audi acquired a 100 per cent stake in Cairo Far East Bank in early February (MEED 3:2:06). It has also obtained licences to operate in Iraq, where it is planning to launch in the north of the country this year, and in Syria. Audi is also waiting for approval of an investment banking licence to start operations in Saudi Arabia and is looking to start operations in Algeria, Sudan and Yemen.

BLOM purchased a 12.5 per cent stake in Misr Romanian Bank in 2005, and Byblos has operations in Sudan and Syria, with plans to either acquire a stake in a bank in Algeria or open a new bank.

The expansion drive also comes from a need for local banks to diversify their operations. 'In the past, most profits came from Lebanese sovereign paper, which produced high yields. But interest margins are now squeezed,' says Wanna. 'The main sources of income now come from retail, trading and contributions from abroad.'