FFA Private Bank has recently released a report entitled "The Lebanese Banking Sector 2009". The report indicates that the Lebanese banking sector grew robustly in 2009, proving once again its resilience facing the global financial crisis. Triggered by the buoyant economic conditions that prevailed on the local scene throughout 2009, as evidenced by a real GDP growth of 9% according to the IMF latest estimates, a strong performance in key sectors, and a record surplus of US$ 7.89 bn in the balance of payments, the Lebanese banking sector witnessed an exceptional increase in its customer deposits in 2009.
The report notes that customer deposits stemming from commercial banks' domestic operations reached US$ 95.8 bn at the end of 2009, pinpointing a growth of 23.1% for the year and that this increase was mainly boosted by a 44% growth in deposits from the non-resident private sector as compared to a 19.5% progression in residents' deposits. Moreover, the de-dollarization of deposits continued in 2009.
The report highlights that the high liquidity levels boasted by Lebanese banks along with the improved macroeconomic conditions in Lebanon translated into a relevant 13.3% increase in the commercial banks' lending activity throughout 2009. While loans' dollarization remained high at 84%, their distribution by sector for 2009 reveals that those loans comprise 76% of individual loans and that 28% of total loans outstanding were allocated to the trade and services sectors. As for the exposure of the loan portfolio to the property sector, the report notes that loans for construction, housing and rent totaled USD 10.1 bn at the end of 2009, representing a 21.5% increase compared to 2008. Nevertheless, it is stated that the concerns that could rise from this increased exposure are considerably mitigated by the non-speculative nature of the local real estate market, the prudent practices of regulatory authorities and by the marginal size of this exposure when taking into consideration the large asset base of the Lebanese banking sector. Regarding the profitability of the sector, the report indicates that Lebanese banks succeeded in counterbalancing the trend of tightening interest spreads that persisted in 2009 by reporting a solid growth in their earnings as a direct result of strong balance sheet growth, an improvement in cost-efficiency levels and the positive impact of regional expansion. Figures reveal that the consolidated earnings of Lebanese banks totaled USD 1,427 mn in 2009, recording a 17% yoy increase.
Additionally, the report pinpoints that the strong growth of the sector in 2009 was realized without any detriment to the sector's financial standing. Lebanese banks have maintained very high liquidity levels as evidenced by a loans-to-deposits ratio of 29.6% by year-end 2009. Moreover, the sector is well-capitalized and boasted a Capital Adequacy Ratio (CAR) of about 12.5% as per Basel II, according to the ABL statistics.
In this regard, the report states that an increase of 3.8% and 10.8% in commercial banks' deposits and loans, respectively, over the first five months of 2010, a surplus of US$ 1.21 bn in the balance of payments over the same period, as well as a real GDP growth estimate of 6% for 2010 according to the IMF, suggest that Lebanese banks' growth prospects remain encouraging.
