Beirut's banks borrow on the Lebanese resilience
Excessive cash, steady growth in customer deposits and increasing provisions for non-performing loans will allow the Lebanese banks to override the negative effects of the economic slowdown, bankers said Friday.
Local banks had mixed results in the third quarter with some seeing slightly higher profits while other experienced a drop in net income.
Most bankers interviewed by The Daily Star insisted that the sector was still resilient and quite capable of weathering any unforeseen problems.
“There is no cause for concern. Banks are still attracting deposits at rates that are higher than the GDP growth,” Joe Sarrouh, the adviser to the chairman of Fransabank, told the paper. “The banks are expected to register a growth of nearly 7 percent this year compared to a one percent GDP growth,” he added.
Sarrouh said some of the results by the Lebanese banks give a strong indication about the resilience of this sector: Overall, the sector’s performance this year may either be flat or slightly higher than last year.”
Lebanese banks have made heavy investments in war-torn Syria as in the case of BEMO, which saw its profits fall by 74 percent in the third quarter.
BEMO attributed the sharp drop in profits to the heavy provisions it made for non-performing loans.
“The seven or eight largest banks in the country which control more than 80 percent of the market share have made reasonable profits despite the economic slowdown and the Arab Spring,” Sarrouh argued.
Other bankers echoed similar confidence in the banking sector.
Roger Dagher, CEO of Bank of Beirut, told The Daily Star that his bank had achieved relatively higher profits in the third quarter.
“We expect to record a profit growth between 5 and 8 percent at the end of this year,” Dagher said.
He added that part of the bank’s good results are attributed to an expansion in Australia which allowed Bank of Beirut to maintain steady profits.
“We were able to get better results from our foreign entities,” Dagher said.
But Dagher admitted that there would be pressures on the banking sector in general but nevertheless the overall results of this industry would be flat at the end of this year.
Asked about the bank’s appetite for more treasury bills, Dagher said that Bank of Beirut would continue to finance the public debt but this pace would remain constant in order to not expose it more to the public debt.
“We are not pessimistic about the future of the banking sector because we are confident that we can overcome all the challenges facing this sector,” he stressed.
In its last report, BLOM bank said that the three largest Lebanese banks (BLOM, Audi, and Byblos) maintained their growths and saw their profits rise despite difficult operating conditions resulting from political turmoil locally and in other countries where they are located, especially in Syria.
“This can be observed from their unaudited financial results reporting aggregate profits of $682.7 million during the first nine months of 2012, growing by 7.4 percent over 2011. These results are obtained despite the $203 million in net credit loss provisions the three banks have taken, which have grown by 211.3 percent over those taken during the first nine month of 2011. The distribution of net provisions was as follows: $93.9 million by Bank Audi, $75.5 million by BLOM bank, and $33.7 million by Byblos bank,” the report said.
It added that on an individual basis, Bank Audi reported the highest net profit of $309.39 million, growing by 14.06 percent over 2011.
“However, this includes $32.83 million resulting from discontinued operations, reducing the growth rate to 1.96 percent. BLOM bank came second, growing its earnings by 6.08 percent to reach $250.68 million while Byblos Bank’s profits marginally declined by 4.24 percent to $122.64 million,” the report added.
It noted that BLOM bank recorded the highest rate of return on equity at 17.73 percent and the highest rate of return on assets at 1.41 percent. Bank Audi came second with an ROE of 17.6 percent and an ROA of 1.27 percent, followed by Byblos Bank with an ROE of 11.84 percent and an ROA of 0.98 percent.