Forcasts: Lebanon’s new normal

Robust economic growth in Lebanon came to a halt last year as domestic political uncertainty and regional turmoil took their toll on key sectors such as trade, tourism and real estate. This year is not shaping up to look much different as challenges translate into weaker bank profitability: slower capital inflows will moderate asset funding, softer trade and loan activity will impact fee generation, and regional unrest will drive loan loss provisions in subsidiaries that were meant to be the engine for growth. This subdued level of profitability for Lebanese banks could represent a ‘new normal’ in the near term. Management teams are prudently placing their expansion plans on hold in order to preserve balance-sheet quality in the face of slower economic activity, heightened political uncertainty and an increase in regulatory capital. This new normal contrasts with previous years during which the banking sector nearly doubled its profits, from $850