Last spring Hani Houssami, General Manager of the Saudi National Commercial Bank (NCB) in Beirut, was gearing up for a busy summer season ahead. Tens of thousands of Saudis were expected to descend on Lebanon and some $4 billion was earmarked for investment.
“It was a dilemma for me to manage – a nightmare the number of people coming,” recalled Houssami.
The July war changed all those expectations, with Houssami left with a headache of a different kind – a glut in Saudis tourists and investors as Lebanon struggles to get back on its feet amid political instability and a sluggish economic environment.
But NCB, 79% owned by the Saudi government, has no plans to leave.
“We’ve been here 52 years so we’re not going to pack and go – it’s a country we believe will re-emerge,” said Houssami.
NCB’s decision to stay the course is not an exception to the other international banks and institutions operating in Lebanon. The majority have been in Lebanon for decades, weathering the country’s ups and downs, ever optimistic that the country will pick up and rise, as the cliché goes, like a phoenix from the flames once again.
Indicative of this belief is regional investment bank Shuaa Capital’s recent decision to open a branch in Beirut’s downtown in September, and rumors of BNPI’s talks with the Bank of Sharjah about a possible takeover.
Nonetheless, international banks are finding the political environment a constraint on their activities. “Every time we look to expand the number of branches, something happens,” said Charles Hall, Chief Executive Officer at HSBC.
“It is very difficult to plan meaningfully ahead. We tend to operate on a yearly plan in reference to our five year plan.”
HSBC, which has been in Lebanon since 1946, have nonetheless had a good year so far, registering 10% growth. “There was a very conservative framework for this year, but ahead of internal forecasts and historical results, so unless [the situation] deteriorates further, we should make 20% to 30% compared to 2006,” said Hall.
Standard Chartered, which entered the market in 2000, also expects double digit growth this year, said Naji Mouaness, head of consumer banking. “Defaults have been normal, not abnormal, so this is a good sign,” he added.
NCB has also achieved growth, “but not hit the ground yet” and has no plans for new products. “We cannot anticipate the future. Some friends in other banks spent a fortune a few years ago on products they couldn’t use,” said Houssami.
The situation has not dampened Standard Chartered’s plans, diversifying into private banking for high net worth individuals. But instead of shelling out for new branches, the bank has introduced a payment mechanism through Liban Post, a 24-hour deposit service, and soon, internet banking services.
“The war [last summer] didn’t affect our strategy for new products; we are going ahead with aggressive plans to grow our portfolio,” said Mouaness.
Driving growth for both HSBC and Standard Chartered are credit cards, with both banks in the top five in terms of issuance of plastic. HSBC has some 41,570 credit cards out of the 277,000 credit cards currently issued, according to a January statement by the Central Bank, while HSBC Visa cards account for 22,000 of the 97,000 visa cards nationwide.
HSBC are also looking to expand their presence when the time is ripe.
“We had one or two approaches for mergers, but the environment is not quite right,” said Hall.
Although Lebanon is well catered for in terms of banks, foreign and national, there is the possibility of more Arab banks entering the market.
“The big Saudi or Jordanian banks, the big three players, will establish a presence here. Bank Audi is present in their markets, so why not in ours?” said Tarek Khalife, Chairman-General Manager of CreditBank.
Expansion is not likely for NCB, however. “We are not investing in expansion, as we are not sure if tomorrow we can cross the street,” said Houssami. “One day we might move activities out of the country if the current situation continues.”
Hall also suggested that banks should exercise caution.
“International banks that want to enter should consider private and corporate banking, or takeover or acquisition. The cost of setting up in a heavily banked area is too expensive,” he said.
Equally, the country’s instability could also shy off potential investors that are not already committed. Remarking on the slated growth figures for this year, Hall added: “the major caveat is if the situation doesn’t deteriorate.” As NCB and other banks found out last year, projections for Lebanon can all too quickly go belly up.
