François Bassil is the chairman and general manager of Byblos Bank and head of the Association of Banks in Lebanon. Bassil sits down with Executive to talk about the bank’s performance in dire economic times and the bank’s strategy for next year.
How do you gauge the performance of the bank in 2013?
In 2013, it wasn’t bad. It was an acceptable year up until now, at least up until last month [October]. We made a [positive step with] the bank’s balance sheet up 8 percent, and deposits increased 7 percent the first nine months of the year. There was a small decrease of profits of 6 percent. We took a lot of provisions because of the situation in Syria. In general, all Lebanese banks worked hard this year but their profits were stagnant. And credits to the private sector increased by 5 percent.
Next year will be difficult because unfortunately there is the security problem in Lebanon, there is the political problem, there is the rift within the political class, which is not able to agree to form a government. The administration is crumbling…banks are not on an isolated island. They will be affected by the economic sector which is on the brink of…well up until now it hasn’t collapsed. There are just difficulties in certain sectors, in tourism which has been affected the most. Up until now banks are not calling upon their dues, neither from the hotels nor the restaurants. They are instead rescheduling debts. This can last one year, two years, but not any longer.
What strategy do you have for 2014 in such an environment?
There is a new development now with the accord between Iran and the international community. That will likely have a positive effect on the whole region. Will it have a direct and immediate impact on Lebanon? That’s a question mark, it all depends. If it has a direct effect and leads to the formation of a new effective government inspired by the Baabda declaration, I think it will be a positive step for the country. Otherwise, we are in the course of establishing the budget and perspectives of the three next years. In any case we have already taken measures to activate our activities abroad.
Of course if Syria’s health improves, we have a lot to do in Syria and it will improve the situation in Lebanon. Everything depends on what is going to happen in Syria. These improvements do not enter our outlook for next year’s budget, for our plan in 2014. Instead we continue to take provisions, and [know we will]stagnate in Syria. We are managing a crisis in Syria.
We are developing our activities in Iraq. There are ways to develop despite certain precarious regions like Baghdad. In Baghdad we don’t have a lot of activity. We have a presence there; we have to be there. We were one of the first banks there. And we have operations in Basra and Erbil that are working well. In 2014 we are going to open in another city in the region of Kurdistan. In Iraq, I am optimistic that we are going to double our numbers.
In [the Democratic Republic of the] Congo (DRC), we bought a bank that belonged to Lebanese. They kept 33 percent, and we bought 66 percent. It is beginning to be profitable [after] three years. The first year we had some losses, but the next year we had small profits, this year was good. And next year I think it will be much better because we have developed relationships with local and foreign companies established in the DRC.
And we are becoming more and more active in Africa, especially in the Congo. We have a team that travels in Africa, looking for business, and we are going to count on our foreign relations for 2014. Of course, if things budge in Lebanon for the better, we are here.
Besides that, the problem for Lebanon is whether the state can continue to pay its personnel.
Is this a real danger?
It’s a real danger because banks do not want to continue to finance the deficit of the state. If you have a client that is gradually going out, and taking no measures to improve his situation, to continue to finance him, to help him, without any effort on his part…he is a big client to the banks. He is continuing to squander the money that he is receiving, and making no effort. Besides this, his revenues are diminishing because his business is diminishing. In the business community, there is a decrease of productive activities, of the taxes paid by individuals, of the taxes paid by businesses. Next year, they will decrease much more.