Lebanese banking industry to see profit growth
Leading Lebanese banks’ profit growth will be on the upswing in the first quarter of 2013, according to FFA Private Bank market research.
The FFA report forecasts first quarter year-on-year net income growth of 9 percent, 8 percent and 14 percent respectively for Bank Audi, BLOM and Byblos. The report said earnings growth would gain momentum as pressure from credit-loss provisions ease after the peak level of 2012 as banks have significantly downsized their loan portfolios in Syria.
Byblos Bank is expected to benefit from low interest margins while Bank Audi is forecast to gain from improving visibility and asset quality in Egypt, FFA said.
FFA reiterated its market weight rating of Bank Audi shares with a target price of $7, citing an upside potential in the medium- to long-term on return to a growth expansion strategy mainly attributed to the branch rollout in Turkey.
FFA expects Bank Audi’s net profits to be $103 million the first quarter, up 9 percent year on year.
FFA also kept its rating of BLOM bank shares unchanged with a target price of $10 per share and an overweight rating, while projecting net profit at $91 million in the first quarter, up 8 percent year on year.
Byblos Bank was assigned a market weight rating and a target price of $1.6 per share.
According to FFA research, Byblos could gain from improving low margins and cost efficiencies.
Despite declining confidence levels and softer economic conditions, Lebanese banks weathered 2012 relatively well according to the FFA report, which highlighted that assets, deposits and loans grew at high-single-digit to low-double-digit rates at a respective 8 percent, 8 percent and 10 percent totaling $152 billion, $125 billion and $44 billion respectively.
“The first two months of 2013 pointed to an ongoing moderate growth in key activity indicators in the 1 to 2 percent range year to date for assets, deposits and loans,” the report added.
Bank Audi and BLOM posted profit growth of 5 percent and 1 percent respectively in 2012 while Byblos’ earnings decreased by 6 percent.
According to FFA research, Lebanese banks have been witnessing pressures on earnings due to a low interest rate environment including narrowing yields on Lebanese securities and low Libor levels, with a limited capacity to further decrease the cost of funds, slower fee-income generation and growing provisioning levels as a result of the Syrian unrest.
- Deflation shocks in emerging markets and the GCC currency peg
- Crashing oil: has the time come for GCC countries to tax their citizens?
- Moody indeed: how did Moody's rate the ME's banks for 2015?
- The Middle East's Switzerland? Lebanon's banking secrecy is here to stay
- Precious retirement: why UAE expats are moving their pensions out of the UK