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Banks flourish despite threat of Resolution 1559 (Daily Star)
Combined assets increase 11.06 percent
Lebanese banks continued to flourish despite the gloomy political atmosphere and the looming threat of UN Resolution 1559. According to the Association of Banks in Lebanon (ABL), the combined assets of commercial banks in the first 11 months of 2004 reached $65.2 billion, an increase of 11.06 percent over the same period in 2003. |
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Customer deposits in the same period jumped by $5.7 billion to $54 billion. Total assets of commercial banks in Lebanon represent over 300 percent of the country's gross domestic product, one of the highest ratios in the world. The profits of banks also reached $423 million in the first 11 months of 2004, an increase of $37 million. There are over 60 local and foreign banks operating in the country with the first 10 top banks controlling over 70 percent of the market share. But the private equity of banks fell by 5.83 percent in the first 11 months of 2004 and this drop is attributed to the rise in the size of assets and deposits. The foreign currency reserves also rose by $871 million to reach $19.7 billion. The association said that U.S. dollar denominated deposits in the first 11 months represented 70.65 percent of total bank deposits compared to 66 percent in the same period of 2003. ABL added that loans to the private sector also rose in the 11 months of 2004. Most of the revenues of banks are mainly derived from interest payments.
Banks are holding between 40 to 60 percent of government treasury bills which carry an average yield of 8 to 9 percent. Interest rates fell by more than 6 percentage points since 2003 after the former government of Rafik Hariri secured $2.5 billion in soft loans from France, Saudi Arabia and other countries to reduce the country's debt servicing. Central Bank governor Riad Salameh earlier predicted that banks would continue to attract more deposits in the coming few years. He added that banks have sufficient deposits and foreign currency reserves to withstand any possible pressure as a result of internal political dispute.
But some analysts fear that banks will be hard hit if the United States and Europe decided to apply economic sanctions on Lebanon if the government failed to implement UN Resolution 1559, which calls for the withdrawal of the Syrian forces and disarmament of all Lebanese and none Lebanese militias. Lebanese banks operating in Syria will also be hurt if the U.S. bans any foreign banks from operating in this country. However, local bankers ruled out any imminent economic measures against Lebanon, arguing that the West does not want to destabilize the situation. Many of the leading banks have also started expanding outside the country because the market in Lebanon is getting smaller.
Beirut
24-01-2005
Osama Habib
The Daily Star
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