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Zain board approves asset sale to Bharti-sources

The board of Kuwaiti telecoms operator Zain has approved a $9 billion sale of most of its African operations to India’s biggest telecom firm, Bharti Airtel. After two failed attempts to buy South Africa’s MTN, Bharti has succeeded in securing a presence in Africa. Zain’s African businesses were considered a target for Bharti, as they are similar in demographics to the Indian market, characterized by low income, low tariffs and a rural population. According to a London-based telecoms analyst, “Bharti’s way of operating is perfect for Africa.“

Algeria on track for rail network upgrade

Canadian engineering and construction firm Dessau has won a $38.8 million contract to design a railway line in Algeria. This contract is part of a $2.3 billion government project to revamp the country’s rail network. Dessau will carry out the preliminary and final designs for the construction of a 170-kilometer line between Bordj Bou Arreridj and Thenia in northeast Algeria. Dessau will be responsible for designing bridges and drainage structures, as well as the reconstruction of roads and other infrastructure. The railway will operate as a passenger and freight rail network, with trains able to travel at up to 160 kilometers an hour.

IMF says Gulf’s medium term outlook positive

The International Monetary Fund stated that Gulf economies could grow at a faster pace in 2010 than more developed economies. According to the Fund, even as the Gulf Cooperation Council’s short-term economic outlook is clouded by the global crisis and by recent developments in Dubai, the region’s medium-term outlook remains broadly positive, supported by rising commodity prices. Non-oil gross domestic product growth was estimated to have been about 2.8 percent in 2009, and the rebound in overall growth in 2010 is expected to be stronger than that of advanced economies. However, the IMF stated that Gulf policymakers are facing the “immediate priority” of cleaning up their banks’ balance sheets through continued recognition of losses and provisions.

lending bounces back

Central bank figures suggest that regular lending in Lebanon has resumed in 2010 after showing slow growth in 2009 due to the financial crisis. Commercial bank lending saw a 3.5 percent increase (equating to $988 million) from January to last month, reaching a total of $29.36 billion. Perhaps offering evidence of a global economic recovery, much of this growth came from lending to the non-resident private sector. Loans to the non-resident private sector grew by $589 million, far exceeding the $137 million in lending growth to that sector for the whole of 2009, and amounted to a total of $4.7 billion. Lending to the domestic private sector increased by $399 million in January, reaching $24.7 billion. As loan growth leaned heavily toward non-residents, growth in foreign currency lending was six times the growth of Lebanese lira lending, possibly allowing Lebanon’s banks to resume the strategy of regional expansion, which was the case at many banks before the crisis.

Foreign reserves, gold prices push BDL assets over $55 billion

Foreign assets at Banque du Liban (BDL), Lebanon’s central bank, reached $29.78 billion in mid-March, a 0.96 percent increase from the midpoint of February. The $284 million increase contributed to the 5.24 percent year-to-date growth of foreign reserves at BDL. Foreign assets at the central bank have seen a year-on-year increase of 41.85 percent. The Central Bank’s gold reserves appreciated in value as well, reaching $10.2 billion in a 20 percent year-on-year increase, helped by the rebound in gold value earlier this month. Total assets of the Central Bank have grown by 3.73 percent in 2010 to reach $55.75 billion.

Stable banks stung by ratings

The Lebanese banking sector is stable but significantly weighed down by its “codependent” relationship with Lebanon’s public finances, said a March 17 report by Moody’s Investor service. The report touted Lebanon’s weathering of the financial crisis and ability to continue to attract foreign investment. “The stability of the Lebanese banking sector reflects, to a significant extent, its remarkable success in attracting a constant large stream of foreign funding from the Lebanese diaspora and Gulf investors. Indeed, bank deposits have displayed notable resiliencies to political shock throughout the country’s turbulent recent history,” said Stathis Kyriakides, assistant vice president and analyst at Moody’s, and the author of the report. But, as Lebanon’s sovereign rating remains at B2, or junk status, the banking sector is hampered in its efforts to improve further, though the ratings of the banks themselves will most likely remain unchanged, said the report. “Banking and government finances remain codependent in Lebanon: the government relies on ongoing financing of its sizeable debt by domestic banks and the banking sector has embedded interest in preserving monetary stability. Thus, government securities will continue to comprise a large portion of banking assets in the foreseeable future, linking banks’ asset quality to the performance of the government debt rating,” said Kyriakides in the report.

BCC finally finds its head

The board of directors of Lebanon’s Banking Control Commission were finally appointed on March 3 by a unanimous vote of the Cabinet. After more than a month without a board, the BCC will now be led by Chairman Osama Mikdashi. The other four members of the board include Ahmad Safa, Amin Awad, Mounir Elian and Sami Azar. The board remained empty for so long because these appointments were grouped in with numerous other empty government positions waiting for cabinet action. There were also reports of disputes over the qualifications of some of the candidates, as these positions are coveted and require high levels of banking competence. The Banking Control Commission’s main function is to audit the country’s banks to ensure that all Central Bank circulars are properly followed. Central Bank Governor Riad Salameh took control of the commission while the cabinet haggled over the board.

Lira-laden banks try to lose liquidty

The Association of Banks in Lebanon (ABL) made two moves in March to slow the stampede of deposits into Lebanese banks. The first move came on March 5, when the ABL cut interest rates on Lebanese lira (LL) deposits to 6.5 percent. Interest rates on LL deposits were averaged at 6.61 percent for January according to the Central Bank. Interest rates on Lebanese lira deposits have been well above United States dollar rates since August of 2009, leading to massive conversions of deposits from US dollars to local currency and creating an excess of liquidity, which has proved expensive for the country’s banks. On March 10, the ABL also lowered the Beirut Reference rate on lending to 8.32 percent in LL and 5.05 percent in USD. The second effort is the recommendation for a ceiling on US dollar deposit rates. Though USD rates continue to be lower than local currency rates, dollar deposits still earn more interest in Lebanon than on the international stage. The ABL has suggested that dollar deposit rates be capped at 3.25 percent. The average interest rate for USD deposits was 3.04 percent in January. The last time the average rate surpassed 3.25 percent was in  March of 2009, when it hit 3.26 percent.

CIB leaves Kuwait, Abu Dhabi SEs

Egypt’s largest private sector lender announced on March 18 that it will be delisting its shares from both the Kuwait and Abu Dhabi bourses. In a statement on the Abu Dhabi Stock Exchange website, Commercial International Bank (CIB) said that weak trading of the bank’s shares contributed to the decision. The bank also named differences in accounting practices between Abu Dhabi and Egypt as a reason for the change. “CIB’s stock is accessible for trade through both a global depository receipt, or GDR program in London and a level 1 American depository receipt (ADR) program on the New York Stock Exchange, thus meeting the strategic objective of visibility in the global investment community,” said the bank’s statement. The bank concurrently announced that it would boost its capital by 400 percent, raising its authorized capital from $912,500 to $3.65 billion. The capital raise will be achieved through the public sale of new shares to both existing and new shareholders, which will include some private placements.

Iraqi central bank plans to rebase the dinar to improve value

The Central Bank affirms its commitment to its strategic projects, particularly knocking three zeros from the Iraqi dinar,” said a statement by Iraq’s Central Bank. “Despite the technical and logistical preparations for the project we have yet to decide on suitable timing to implement the project.” The Central Bank’s senior advisor Mudher Qasim also told Dow Jones newswires that taking three zeros off of the dinar would improve its value. If the currency is rebased and the zeros knocked off, one US dollar will be equivalent to 1.17 dinars. In order to rebase the currency, the central bank will need to print new notes. This will be the second time in six years that Iraqis have had to trade in their currency, after the US civilian authority in Iraq printed new notes in July 2004 in order to replace the currency bearing the image of Saddam Hussein.

Banks flooded by bad checks in foreign currency

Lebanese are writing more bad checks this year than they did in 2009, according to Central Bank figures. The number of cleared checks in foreign currency is more than double those in Lebanese lira (LL) and foreign currency denominated checks also make up the majority of those that bounce. Bad checks in foreign currency totaled $163 million in February of this year, up from $121 million in 2009, marking a 35 percent increase. The number of bad checks in foreign currency increased further, growing from more than 27,000 checks in February 2009 to almost 39,000 in February of 2010, a 43 percent increase.  However, the number of cleared foreign currency checks increased by only 2.38 percent, leading to the conclusion that though the value of bad checks is increasing on par with the value of cleared checks, the volume of bad checks in foreign currency is increasing much faster. In other words, bad checks in foreign currency are being more frequently written for lower amounts. Regarding checks in LL, the opposite is true. The value of cleared checks in Lebanese lira has increased 27.03 percent in the last year while the volume of LL bad checks has increased by only 4.26 percent.