Lenders leery of Lebanese banks losses
Byblos Bank chairman François Bassil expects the combined net profits of the Lebanese banking sector to plunge by 5-10 percent at the end of 2012 due to political bickering and the volatile situation in neighboring Syria. “Our growth in assets and deposits will be close to 8 percent this year ... close to last year’s figures. However, the net profits for all commercial banks may fall by 5-8 percent if the economy and political situation continue to deteriorate,” Bassil told The Daily Star Monday in an interview at the bank’s headquarters.
Some leading banks have actually seen their profits fall in the first quarter of this year despite adopting measures which attempt to contain the negative impact of both the economic slowdown and raging war in Syria.
Most of these banks have increased their provisions for non-performing loans since the crisis in Syria started 16-months ago. This measure, which is seen as essential, has apparently affected the profitability of most of the leading banks. But the profits of the leading banks are still considered relatively high in spite of the fragile situation the country is experiencing.
The latest data on Lebanon’s banking sector revealed that the total assets held by Lebanese commercial banks reached $144.86 billion at the end of May 2012, up by 8.07 percent from May 2011 and 3.05 percent from December 2011
Banks claim to have wide cash surpluses, arguing that all they need is stability and more investment opportunities to diversify their revenues.
Bassil also expressed his deep indignation at the government’s impotence and inability to address the crucial economic issues facing the sector. “I don’t feel the presence of the government. The constant bickering between the ministers has driven the national economy to the brink of disaster,” he said. Bassil said that Lebanese banks can easily use portions of their excess cash to finance some of the vital government projects.
“Investment opportunities abroad are scarce these days as a result of the economic recession in some European countries. It is natural we support the idea of investing part of our portfolio in government projects as part of the Public-Private-Partnership,” he said. Bassil painted a bleak picture of the economy in general.
“Some agencies and the International Monetary Fund project a growth of 3 percent at the end of 2012. Frankly speaking I doubt we will have 1 percent growth if the situation does not improve,” Bassil warned. He admitted that the deteriorating situation in Syria had proven devastating to both the Lebanese economy and tourism sector.
“What makes matters worse is the indifference of the government, which has failed to take any steps to contain the consequences of the deteriorating situation in Syria,” Bassil said.
The recent campaign by the U.S. group United Against Nuclear Iran to discredit the reputation of the Lebanese banking sector was at the heart of comments made by Bassil, who vehemently dismissed all accusations of money laundering and terrorist funding.
“All of the U.S. officials who we met have praised the measures taken by Lebanese banks to curb any attempt to deal with Iranian and Syrian banks. We are complying strictly with all U.N. Security Council resolutions,” Bassil said. He stressed that Lebanese banks never received Iranian funds.
“Since the liberalization of the Lebanese economy after the French withdrew from Lebanon, we have never received or dealt with Iranian banks or financial institutions. All of the foreign banks in Lebanon abide by the laws of the Central Bank,” he said.
Some U.S. agencies have questioned how a small country like Lebanon with its relatively low GDP can have high assets and deposits in its banking system, and have suggested that most of these funds have been generated through illicit means.
“All of these reports are pure fabrication. Most of the deposits are from Lebanese expatriates in Africa, South America, Europe and oil-rich Arab countries,” Bassil explained.
The former president of the Association of Banks in Lebanon also denied allegations that U.S. officials threatened to take punitive measures against Lebanese banks. “These reports are false and unfounded. U.S. officials want us to maintain our vigilance and prevent any attempt to launder money.” He pointed out that Lebanese expatriates outnumber the residing Lebanese citizens.
Remittances and capital inflows, which amount to more than $8 billion a year, have buttressed the Lebanese economy and helped improve the balance of payments.
Bassil maintained that all Lebanese banks operating in Syria are refraining from granting new loans to Syrian citizens or accepting any new transactions.
“Naturally, deposits in Lebanese banks in Syria have shrunk since the crisis started. But we have no intention to exit this market – the country will eventually return to normal. Syria is still a promising market for Lebanese banks and for this reason we have no plans to leave it,” he said.