Lebanon’s 14 Leading Banks’ H1 Profits Drop by 6 Percent

Published September 18th, 2019 - 08:30 GMT
It added that customer deposits fell slightly, by just 0.8 percent, up to June.
It added that customer deposits fell slightly, by just 0.8 percent, up to June. (Shutterstock)
Highlights
Domestic profits, which account for 85 percent of consolidated profits, were down by 8.1 percent in the first six months.

Lebanon’s 14 leading banks in terms of assets and deposits saw their total profits shrink by 6.6 percent in the first half of 2019 compared to the same period of last year, Bankdata Financial Services said. It added that for Alpha banks, the net profits contracted within the context of a tough operating environment in Lebanon and in foreign markets of presence.


“Net profits actually declined by 6.6 percent in the first half of 2019 relative to the same period of last year. Domestic profits, which account for 85 percent of consolidated profits, were down by 8.1 percent in the first six months. Despite the fact that operating expenses were down by 3.3 percent within the context of cost control efforts by Alpha banks, operating profit contracted by 8.2 percent, driven by the 11.3 percent drop in net interest income and the 4.3 percent contraction in net fee income,” the report said.

But the report noted that the consolidated assets of Alpha banks in both their domestic and foreign markets reached $263.9 billion at end-June, thus reporting a mild growth of 1.6 percent in the first half of 2019, partly driven by Central Bank financial engineering operations with Lebanese banks, as shown by domestic asset growth of 2.2 percent, while foreign entities of Lebanese banks registered a contraction of 1.8 percent over the period.

The report also indicated that the number of staff in Alpha group banks in general had dropped over this period. “While the branch network of Alpha banks reported a stagnation over the first half-year, the staff count reported a net decrease of 405 employees (Contractions of 304 employees in Lebanon and 101 employees abroad),” it said.

It added that customer deposits fell slightly, by just 0.8 percent, up to June. “Customer deposits have been on a slight contraction over the first half-year while fiduciary accounts reported a growth of 10.5 percent over the period. In fact, consolidated deposits contracted by 0.8 percent over the period, driven by the decline of domestic deposits by 1.3 percent while foreign entities deposits grew by 2.4 percent,” the report said.

It noted that the most important contraction was that of consolidated loans (minus-6.3 percent over the first half-year), with Alpha banks following derisking strategies within the prevailing environment (a 7.5 percent contraction in domestic loans and a 2.6 percent drop in foreign entities loans).

“At the level of currency structure, the first half-year witnessed a further rise in deposit dollarization to almost a decade high. While FC domestic deposits contracted by a mere 0.4 percent, LP [Lebanese pound] domestic deposits dropped by 3.2 percent. In parallel, domestic LP loans contracted by 10.6 percent over the first half-year, boosting the dollarization of loans as well,” the report said.


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