Friday, December 05, 2008

Lebanese Banks Solid, But ...

The Financial Times reports on another solid performance from Lebanese banks, but highlights the potential for "aftershocks" from the real-estate and financial meltdown in the Gulf (and the rest of the World):
If there is one circumstance with which Lebanon is familiar, it is crisis...

... The same applies to the financial sector, where banks are enjoying a boom in deposits, driven by Lebanese expatriates seeking a haven from the global financial crisis.

“Lebanese banks are flush with liquidity,” says Semaan Bassil, general manager of Byblos Bank, one of Lebanon’s top three lenders.

Deposit inflows at Byblos grew by 11 per cent, or $788m, in the nine months to September. Of that, almost $175m was from overseas remittances, more than double the amount for the same period last year.

Like other Lebanese banks, Byblos is conservatively managed – its loan to asset ratio is only 25 per cent – and is prohibited from investing in the structured products that have caused mayhem in the US and Europe.

“Lebanese banks do basic banking, we are not involved in sophisticated banking and we do not want to invest in instruments if we don’t know the risk. We are very pragmatic,” Mr Bassil told the Financial Times. Byblos reported a 30.5 per cent increase in net profits to $79m in the first nine months of this year.

Analysts say Lebanese banks are coping well with the financial crisis ...

... But Lebanon is likely to suffer from after-shocks next year, analysts say. The Economist Intelligence Unit has revised down its forecast for growth next year from 4.6 per cent to 3.1 per cent, largely due to the global slowdown.

The crisis will be most keenly felt in a decline in overseas remittances, which are at record levels. There are 4m Lebanese people at home but three times as many abroad, and they are on track to repatriate more than $5.5bn this year.

With the vast majority of Lebanese working in white-collar jobs, such remittances are almost certain to fall sharply given the redundancies in the financial sectors in the US, Europe and particularly in the Gulf.

About two-thirds of remittances come from Lebanese people working in the Gulf, but government figures show that as many as 4,000 Lebanese have been moving home from the Gulf each month since June.

“As there is a slowdown in the GCC [Gulf Co-operation Council] economies, it is possible these remittances will be affected,” said Paul-Henri Pruvost of Standard & Poor’s, although he added that remittances had remained relatively strong even during troubled times.

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