Lebanon’s banks enjoy healthy performance despite challenges

Lebanon's banks enjoy healthy performance despite challenges

Lebanon’s banking sector is proving remarkably resilient in the face of ever-growing political and economic pressures affecting the country, brought about in the main by the civil war raging in neighbouring Syria. Although the current climate surrounding the vibrant finance sector is a tough one, the banking sector appears bang on the money, weathering the instability with a great deal of success, even despite experiencing a slight fall in profits.

According to the Economic Research & Analysis Department of Byblos Bank, Lebanon’s central bank projected real GDP growth in the country at between 2% and 4% in 2013. This compared to average growth rates of 2% between 2011 and 2012 and 8% between 2008-2010.

The ongoing conflict in Syria continued to disrupt trade routes and negatively affect tourism and other sectors, all of which weighed on the country’s overall economic performance. The current regional and domestic political climate had not been supportive of major fiscal initiatives, the central bank declared.

Nevertheless, Byblos Bank says, the central bank indicated that the Lebanese banking sector is still reporting a healthy performance despite the challenging operating environment and the slight decrease in the sector’s profits.

“It considered that Lebanon’s financial sector is not likely to face negative shocks this year despite the domestic economic slowdown and regional instability”, Byblos Bank says in its Lebanon This Week report. “It said that Lebanese banks have been able to weather several internal and external crises in the past, and have so far successfully absorbed the negative repercussions of regional unrest. It noted that Lebanese banks’ high liquidity ratios have allowed them to continue to provide credit to the Lebanese market.”

The upbeat assessment echoes much of the narrative which appeared in a November 2012 article in the Global Finance monthly magazine. In the article, the question is asked how a country with a barely functional government comprising rival political factions and situated in one of the world’s most dangerous neighbourhoods – next to a country descending into civil war – can have such a dynamic banking system.

Lebanon’s financial sector, writes article author Justin Keay, has held up remarkably well, as it did during the civil war of the 1970s and 1980s, the Syrian occupation of the 1990s and the 2008 to 2010 global financial crisis when inflows increased by more than 20%. Recent figures from the central bank show profits of the top 12 banks increased 8% to $837 million in the first half of 2012, and deposits continued to rise, thanks to wealthy Lebanese expatriates who retain trust in their country’s bank system despite all the crises besetting the wider economy.

He quotes Byblos Bank’s Nassib Ghobril as saying, “The Lebanese banking sector remains the backbone of the Lebanese economy and continues to be profitable, highly liquid and well capitalized.”

And they’re well run, too, by families with vested interests in their well-being, suggests Mr Keay. They are also well regulated with a comprehensive regulatory network preventing any large-scale emergence of toxic debt.

Go here to read the full Global Finance article. You can download the Lebanon This Week report here.

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