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French Version

First-half profits fall at Lebanese banks

Small- and medium-sized banks struggle while large banks increase revenues.

The slow economic growth and uncertain political future of Lebanon have weakened the banking sector, one of the main pillars of the country's debt-burdened economy. The damage, however has mostly been concentrated among the country's smaller banks, which have suffered as some of the country's giants posted profit surges.

Only the 10 leading banks in Lebanon, which control more than 80 percent of the market share, maintained or increased their profits and assets in the first six months of the year.

Customer deposits and assets of all commercial banks fell to $53.09 billion and $66.272 billion respectively in the first six months of 2005.

According to a recent report on the industry, profits of the 66 banks operating in the country dropped by $22 million and hit $233 million by June of this year.

Lebanon's economic indicators took a downturn following the February assassination of former Prime Minister Rafik Hariri and the ensuing political tension, which saw street crowds force the resignation of former Premier Omar Karami.

Hariri, who was seen as one of the bulwarks of Lebanon's economy, was crucial to assuring foreign investors that Lebanon was a stable and safe place for their money.

Assets in Lebanese banks amount to over 300 percent of the country's $18 billion GDP, one of the world's highest ratios.

The decline in both deposits and capital inflows have contributed to a balance of payment deficit of more than $1 billion in the first six months of 2005 after a surplus of $265 million in the same period of 2004.

But bankers noticed that confidence in Lebanon picked up again in May after the parliamentary elections that led to a landslide victory of the anti-Syrian opposition.

Some deposits and assets returned to Lebanon, especially from Lebanese expatriates and Arab Gulf nationals.

The more than 300,000 Lebanese working in Gulf Cooperation Council countries send annual remittances of over $2 billion a year, most of which are deposited in local banks.

Contrary to the performance of small and medium size banks, some of the large banks have recorded impressive profits in the first six months of the year.

BLOM, the largest bank in Lebanon, recorded a profit of $60 million, an increase of 32 percent compared to the same period of 2004.

The bank's total assets rose by 13.50 percent to reach $10.9 billion while its private equity increased to $781 million.

BLOM has maintained its lead since 1981 thanks to its wise investments abroad and to a conservative lending policy.

Banque Audi-Saradar said its net profits in the first six moths of 2005 jumped to $44.4 million, an increase of 56.5 percent.

Audi acquired Saradar bank last year for more than $100 million, one of the largest bank acquisitions in Lebanon's history.

"The group's results are due to its diversification policy and the significant growth in assets, as Bank Audi acquired Saradar last year to continue a strategy of both organic and non-organic growth," a bank statement said.

Makram Sader, the secretary general of the Association of Banks in Lebanon, told The Daily Star that many banks are investing part of their massive portfolios abroad in an attempt to diversify their revenues.

"The banks are investing in stocks and some fixed funds assets abroad. This is a normal procedure to secure good revenues," Sader said.

He added that banks are less dependent on government treasury bills and Eurobonds, noting that these types of portfolios do not represent more than 22 percent of total assets of all commercial banks.

But some bankers admit that the high return on dollar and Lebanese pound deposits have encouraged more investors to keep their money in local banks.

Beirut 09-08-2005
Osama Habib
The Daily Star

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