Lebanese banks maintain growth despite political, regional tensions
The Lebanese banking sector continued to achieve relatively good growth in assets and customer deposits in the first eight months of this year despite the political standoff and regional turmoil. Domestic banking activity grew by 7.1 percent since the beginning of the year to reach $138.1 billion at end-August 2011, a report said.
The report was published by Bank Audi Lebanon Weekly Monitor. It said banking activity in Lebanon continued to be driven by customer deposits. The latter, accounting for over 80 percent of total banks’ balance sheets, reported a satisfactory 5.4 percent growth in the December 2010 to August 2011 period.
Yet, the $5.7 billion rise in the deposit base so far this year remains lower than the $6.9 billion increase recorded over the corresponding period of last year.
The rise in the customer deposit base of banks operating in Lebanon over the first eight months of this year has been mostly accounted for by resident deposits. The latter contributed to 65 percent of the total deposit base growth, posting a $3.7 billion increase over the period of 2011. Non-resident deposits also grew since the beginning of the year by $2 billion, bringing their contribution to the deposit base increase to 35 percent, compared to a lower contribution of 104 percent registered in the corresponding period of 2010. From a currency angle, this year’s rise in bank deposits was driven by foreign currency deposits.
Within the context of non-negligible conversions to the benefit of foreign currencies this year (especially during the month of January), deposits in local currencies retreated by 4.2 percent in the December 2010 to August 2011 period, while those in foreign currencies rose by 10.9 percent over the same period.
Accordingly, the deposit dollarization ratio resumed an upward trend, moving from 63.2 percent at end-December 2010 to 66.6 percent at end-August 2011. The satisfactory increase in banks’ funding base and additional liquidity at hand allowed banks to extend new waves of loans. Banks’ lending activity grew by 11.4 percent over the first eight months of this year to reach $38.9 billion at end-August 2011.
The $4 billion of new loans extended by the sector actually turned 18 percent lower than the corresponding volume of 2010’s first eight months, yet remain noticeable within the context of a domestic political stalemate that lasted throughout most of the first half of this year.
Lending activity growth was mostly accounted for by the resident sector, with a 75 percent contribution to new loans extended by Lebanese banks. Loans to non-residents registered a positive variation by $1 billion over the first eight months of this year.
Foreign currency loans continued to drive lending activity this year (a 71 percent share in lending growth), but Lebanese pound loan growth, supported by BDL’s reserve exemption measures, maintained a contribution to total lending activity growth at about 29 percent of the total, a high compared to the years 2006-2008 (during which that share averaged 10 percent).