Makram Sader Secretary general, The Association of Banks in Lebanon
We have good trends in terms of increases in our deposit base, in terms of increases in our credit portfolio, in terms of liquidity ratios and even in terms of profits. We hope these trends will continue in 2009. My opinion is that they will continue. It seems logical that these positive trends will continue during 2010 because with the current political stability in the country, due to the newly established government, we hope the level of activity will increase, and maybe we will even see the initiating of some big public projects. Any new activity, either public or private, usually translates into increased activity within the banking industry. I hope that we will have a higher volume of credit. It will be very good for us to continue this year’s poitive trend of a yearly 20 percent increase in deposits.
Marwan Barakat Head of research, Bank Audi
While a large number of governments around the globe have intervened recently to support their banking systems — either in the form of liquidity facilities, emergency lending programs, capital injections or acquisition of toxic asset portfolios, or maybe a combination of all such support initiatives — the Lebanese banking system has been, on the contrary, supporting the State of Lebanon prior to, and in the aftermath of, the eruption of the global financial turmoil. As a matter of fact, the Lebanese banking system has almost doubled in size during the past five years, over a period characterized by erratic political and security developments. Its capacity to finance the government’s borrowing needs has been recently fostered by an outstanding resilience to the external crisis environment, with funding growing at an unprecedented pace within the context of massive capital inflows towards Lebanon’s financial system, encouraged by the domestic regulatory framework and the conservative practices of Lebanese banks themselves.
Within such an environment, I do not personally believe that the Lebanese banking sector will be looking to the new national unity government to support Lebanese banks in 2010, but rather to ensure a sound environment for its own public finances as a step on the road to a fiscal soft landing. It is always important to recall that the observed Lebanese banking resilience to crises is not equivalent to permanent financial immunity in a country that is still suffering from significant structural imbalances. To reinforce the Lebanese resilience to crises, drastic structural reforms need to take place by the Lebanese state in an attempt to ensure a soft-landing scenario for its own public finance conditions that remain shaky and are where the main vulnerability lies. It is then that we can comfortably say that Lebanon and its financial sector could be a unique model of immunity serving as a viable example to a large number of countries in the region, in the emerging countries’ arena and across the globe at large.
Francois-Pascal de Maricourt Chief executive officer, HSBC Lebanon
When you are working in an environment like Lebanon, where you have crises from time to time and where the local banks have proven to be resilient, your first priority is to ensure that you have enough liquidity. A bank doesn’t close because it has made a loss; a bank closes because it is short of liquidity. The top priority for a banker, and this is true across the world, is to ensure that your balance sheet is structured well enough so that you will not have a liquidity crisis. And this is even more prevalent since the beginning of the financial crisis. We saw some major institutions that had to be saved at the very last minute by some governments because they were short of cash. If I were the CEO of a [Lebanese] bank, clearly my priority would be to ensure that it has sufficient liquidity so that in the event of a crisis, it can meet all its commitments. When it comes to profitability, the profitability of local banks is relatively acceptable. Some of them are now able to get a return on liquidity in the region of 20 percent plus, which is quite good, and the profitability is something that you access over the length of a cycle. You can’t just look at the profitability in one year and say, this bank is profitable or not, as there are years when you make more investments than other years, and you have to remember that local banks are investing quite heavily in some markets.
Walid Raphael Deputy general manager, Banque Libano-Francaise
Here [in Lebanon] the system is extremely resilient, given the strong banking sector that has shown its ability to endure over 15 years of war, the assassination of Prime Minister Hariri — which was an earthquake in Lebanon — and the war in 2006. When the crisis came at the end of 2008, the banking system had already been tried several times and the banks’ confidence was extremely strong, so that what we have seen is contrary to what is going on outside of Lebanon. We have seen an inflow of money coming at the end of last year. This in fact has continued this year. The question that some analysts were asking last year was “Will we have the same level of remittances?” and in fact the remittances were not affected. We are expecting to have $7 billion in remittances this year, which is very close to the number we saw last year.
