On May 17, Lebanon was on top of the world. Literally. A Lebanese flag had been planted at the summit of Mount Everest, the world’s highest point. And what then, according to the Daily Star, did mountaineer Maxim Chaya do?
“He contacted his sponsor, Audi Bank, and thanked them for making his dream come true.”
Call it community outreach, or charity, or Corporate Social Responsibility. Banks’ logos can be seen in the sponsor’s position at athletic contests, concerts and art exhibits, and other cultural events around the country. And they also lend their support (and their brand names) to educational, environmental and development efforts.
Marwan Kheireddine, General Manager of Al Mawarid Bank, rejects the idea that publicity is the primary goal of CSR spending, at least for his bank. “The objective is not really exposure. The objective is community development.”
But Elie Azar of Lebanese Canadian Bank doesn’t see publicity as a bad thing. “When we opened our new branch in Halba,” he says, “we didn’t do an expensive advertising campaign. We gave away 180 boxes of food and provisions to the needy families there. These people were our best publicity.”

No bright lines
Azar does not see a bright line between a bank’s service to the community in its charity spending and its service as a commercial entity. “When we opened our branch in Hermel in 2003,” he says, “we were the first bank in the area, and we gave the people there access to a number of services they needed if there was going to be development, if they were to be able to stay there.” This value notwithstanding, the bank also contributed to a UNDP project bringing clean water to five hundred homes in the province.
This “both-and” approach informs another Lebanese Canadian Bank initiative. At the beginning of May they started to offer a unique loan program, offering loans of up to $5,000 at a 9% interest rate to homeowners in order to install solar water heaters in their homes.
“It’s a win all around for everyone,” says Azar. “The loans are profitable for us, and the customers save much more in heating costs than they pay over the time of the loan. And then you can add in that it saves the environment and reduces the pressure on our electrical and fuel infrastructure.”
LCB has been getting 5-10 applications a day for the loans. “This is the future,” says Azar. “If you look at the other countries in the region, in Israel 80% of the houses are using these heaters – in Greece, it’s 60%.”
In their more traditional CSR spending, Azar says, his bank concentrates on finding “effective projects that will have a positive impact.”

Relying on local knowledge
To identify the projects they wish to fund, banks rely on their local managers’ knowledge of their own communities.
“We work with each branch to discern the needs of each region,” explains Nahla Bou-Diab, assistant general manager of Al Mawarid. “The needs in rural areas are different from major cities. We have a branch in the village of Dmit, in the Shouf mountains. The community there are not well-off – their needs are for assistance in terms of developing a medical center – we helped them with basic necessities, schools, medicine, and so on. In another village in the Shouf area, the community were a bit more affluent, so in that particular area we designed a garden.”
Individual branch managers for Al Mawarid analyze the opportunities in a community and submit recommendations to the central branch. Some ideas come from formal or informal requests by NGOs or other organizations, and others come from the managers themselves. “Our manager in one area knew of a medical center that was crucial to the community – it was a poor area, and people were reliant on it every day. He knew that this center had a number of needs, and proposed to us that we help with them.”
Byblos Bank trusts its managers to decide on much of its educational spending. “In all the regions in Lebanon, our branches have a lot of schools as customers,” says Joumana Chelala, Senior Manager at Byblos Bank. “Our managers each have a budget to use towards educational needs, whether scholarships or something else.”
Banks are eager to get their employees involved. “Social responsibility is not just about contributing money to the community,” says Bou-Diab. “The other part that’s really essential is highlighting that these areas are really important in the eyes of management. One example of that was when we offered to match our employees’ contribution to St. Jude’s Children’s Cancer Care Center. We had 90% participation among our employees.”
“The salary structure in Lebanese companies is not very high,” she adds. “So these employees who contributed are not, financially, very very comfortable.”
The banks’ representatives show the pragmatism of a hardened loan officer in assessing their choices. Khaireddine says that Al Mawarid stopped funding concerts because “they were not doing anything for the community. We financed a few classical concerts in the Shouf, but the people who came, came at night, and didn’t even spend dinner up there. We felt like we were just making the events more profitable for the promoters.”
Chelala came to the opposite conclusion about cultural events, but arrived there by a very similar line of reasoning. Discussing her bank’s support for the Byblos festival, she says, “Before the festival, Byblos was not a destination for Lebanese. But now, even when the festival is not going on, many people from Beirut go up for dinner, or to visit the old souq.”

Focused on tangible outcomes
Perhaps because of their pragmatic approach, banks’ spending tends to be focused on tangible outcomes; medical centers refurbished or trees planted or schools equipped and teachers trained. Buzzwords common among the NGO community, like “civil society” or “dialogue,” don’t come up much.
“The private sector is becoming very active in supporting work in the environment, education, and so forth,” says Gilbert Doumit, who works both in education and in civil society areas. “Lebanon is well ahead of most Arab countries in this. But in more political, civil society, or citizenship-related areas, they are not so eager.”

To identif the projects they wish to fund, banks rely on their local managers’ knowledge of their own communities.

Education is a priority across the board. Kheireddine points to a library and computer training center near Shebaa. “We’ve taught people how to use computers there, and more importantly, we’ve given the young people there, right next to the Shebaa farms, access to the internet. Now they have access to the world.” Azar discusses a new library in Hermel. But it’s Byblos Bank that has taken on perhaps the most ambitious project.

Adopt-a-school
In a partnership with UNICEF, International College, and a large network of NGOs, Byblos Bank launched an “Adopt-a-school” project. The $200,000, three-year project, whose goal is to reduce the drop-out rates at a pair of public schools in Tripoli and Kesrouan, aims at attacking the problem from a number of different angles simultaneously.
There will be physical upgrades to the schools, especially to the bathroom and sanitation facilities. There will be training for teachers and administrators in identifying and helping children with special needs. But possibly the most important factor is literacy classes for the parents of children in danger of dropping out.
With an illiteracy rate as high as 20% in Northern Lebanon, children are “not given the support they need at crucial points in the curriculum,” says Roberto Laurenti, head of the project for UNICEF. “As the curriculum becomes more difficult, illiterate parents are unable to help those children who are already struggling.” As a result, the drop-out rates among 7th and 8th graders in Lebanese public schools are 9% and 11%, respectively, twice as high as at private schools. And once they drop out, they become vulnerable to any number of problems, from child labor to drugs and violence. “It costs much less to invest in keeping these children in school than to pay the social consequences later,” notes Laurenti.

“It costs much less to keep these children in school than to pay the social consequences.”

He emphasizes that all of the resources for the program, from expertise in training to monetary resources, are coming from within the country. “UNICEF is acting as a broker, bringing the people with the monetary resources in contact with the NGOs who can make use of them. We’ve been able to provide an opportunity to narrow the distance between financial and human resources in this country.”
The program differs from much charitable giving, Laurenti says, in that it is focused on dealing with a specific problem through a wide variety of needs, rather than on focusing on physical infrastructure. “We hope to see measurable improvement in the drop-out rate within a year and a half,” he adds.
This focus on a measurable outcome is a major step forward for CSR spending in Lebanon, says Isabelle Naoum, head of PR for Byblos Bank. “It helps us move towards a more formal CSR program, one where we can quantify the results of our action, and better fulfill our responsibility to our shareholders.”

The affinity of Lebanese banks for government Treasury bills and other fixed income securities has always been strong, but the love affair intensified significantly in the early 1990s with the Hariri-inspired Horizon 2000 reconstruction program, which forced the government to resort to domestic and foreign issues of government fixed income securities or bonds to finance the project.

Rebuilding the country and the pound
Back then the country was in tatters. Not only was there an urgent need to rebuild, but the Lebanese pound, which by the fall of 1992 nearly hit LL3,000 to US dollar, also had to be saved. Rafik Hariri was quick to realize that the only way to obtain fast financing was to resort to debt via the issuance of domestic, Lebanese pound denominated Treasury bills. Loans from international banking institutions or supranational organizations such as the World Bank or the IMF would have been too slow to come in, too expensive and insufficient in terms of amount. On the other hand, Treasury bills in local currency, provided they carried a very attractive yield, would be easy to print, issue and place in a large domestic banking sector, which, although under-developed, lacking in significant human resources and strategic guidance, did have sufficient funding that needed optimization.
The banking sector at the time had succeeded in attracting around $6 billion in deposits from expatriate Lebanese but did not have the human resources or managerial quality to employ these new funds efficiently. Banks urgently needed to allocate their funds in such a manner as to boost their stagnating profitability and hence increase their capital base, which at the time was extremely insufficient and well below the international capital adequacy ratio of 8%. By subscribing to high yielding Treasury bills, the banks would not only help finance the government and the reconstruction program, but also buy themselves valuable time for the development of their own banking activities.
The government used the domestic banks to the full and issued significant amounts of Treasury bills, distributing them among the 83 banks from 1992-1996. Although the national debt level was increased significantly and debt service began eating up most of the government’s revenues, the reconstruction program was well under way and would be used as the main marketing tool for the government in its efforts to issue dollar-denominated Eurobonds. The first Lebanese Republic Eurobond of $400 million in 1994 was voted Bond Deal of the Year 1994 by the international bond community and was placed evenly among Lebanese and foreign investors. It would be the first of many to come in subsequent years, although the investor base for this particular instrument became 100% Lebanese (mostly Lebanese banks) as foreign investor enthusiasm waned.

Trading in government securities
Since then the Lebanese banking sector has increased its profitability significantly and boosted its capital adequacy to better cover the risks of the domestic operating environment. Some banks even made it their specialty to trade in government securities, while the sector as a whole started to appear more as a sector of deposit and savings banks rather than a real commercial banking sector.
Until recently, Lebanese banks appeared as financial institutions whose main function is to attract retail deposits and to place such deposits in government Treasury bills and Eurobonds. The diversification of activities, the expansion of typical banking activities such as retail banking, and the diversification of revenues are more recent developments for the Lebanese banking sector, which for a long time relied on the yield of government debt securities to finance and develop traditional commercial banking activities.

For a long time, the lebanese banking sector relied on the yield of government securities

What developed was a tacit understanding between the banks and the government, whereby the government would reward the banking sector with high yields, which would be instrumental in strengthening this vital economic sector, while the banks would use their funding to continuously follow the government in its reconstruction and now debt management efforts, and to support the stabilization of the local currency.
Non-Lebanese investors take part
Non-Lebanese banks and investors also took part in the Lebanese government’s fixed income securities issue drive. Indeed, by the mid 1990s, many Gulf banks and high net worth investors had subscribed to the high yielding Lebanese T-bills and Eurobonds (interest rates on T-bills denominated in LBP had reached 45% by 1995), considering these instruments to be a risk worth taking. The rating of Lebanon for the first time back in 1996 (ratings of B+ by Standard & Poor’s and Ba3 by Moody’s first came out, but were subsequently brought down by four notches to the current level of B-) did not make a difference in terms of yield and certainly did not decrease the appetite of Lebanese and Arab investors. Only Western investors, who are significantly more risk-minded, withdrew, considering Lebanon to be risky over the medium term. For Arab investors, it was a case of being well rewarded for taking on Lebanese risk, while some reciprocation would be reflected by investments in Lebanese real estate and projects.
By the end of the 1990s, more than 35% (35.8% in 1999) of the balance sheet of Lebanese domestic banks was accounted for by government Treasury bills and Eurobonds denominated in both Lebanese pound and foreign currency (mainly in US dollars). At one stage, in the mid 1990s, the proportion of government debt securities to total assets for most banks, including the larger ones, stood well above 50%. The government debt securities to total assets ratio for the banking system has gradually decreased since the mid 1990s, having gone as low as 23.2% in 2003 and 23.6% in 2004, in the aftermath of the Paris II donors’ conference, when interest rates on assets and deposits were decreased significantly by both the government and the banks. By February 2006, the ratio had gone up again to 25.9%, although it remains significantly below the proportions seen in the mid and late 1990s.
Since the Paris II conference, the Lebanese government has changed its attitude toward its borrowing and debt security issues policy. Pressured by international donors and relieved by cheap financing (around $4 billion in subsidized and soft loans), the government and the central bank had to improve the overall liquidity and foreign currency reserves by encouraging local banks to reduce their exposure to government debt securities and by requiring that a certain proportion of deposits (15% of foreign currency deposits for instance) be allocated in regulatory cash reserves at the central bank. By the beginning of 2006, cash reserves and deposits at the Banque du Liban (BDL) accounted for almost 30% of total consolidated assets for the banking sector. Such cash reserves coupled with the stock of government debt securities make up for almost 60% of total consolidated assets, leaving little room for local banks to lend to the private sector. Loans to the private sector accounted for around 23% of total consolidated assets by the end of February 2006.

Government exposure remains high
Coverage of almost 30% of customer deposits remains very high by international standards and the balance sheet of Lebanese banks appears to be reassuringly liquid. However, exposure to the lowly rated Lebanese government remains extremely high. If we add reserves at the central bank to government debt securities, then we can only realize that the banks’ exposure to the government dangerously approaches 60% of total consolidated assets. Furthermore, given the very difficult operating environment in Lebanon that makes lending to the private sector very onerous, any excess liquidity the banks might get is automatically invested or placed in cash reserves at the central bank or in Lebanese Treasury bills or other bonds issued by the government.
Today, the exposure to the government or cash reserves, deposits at the BDL and government debt securities account for around 8.5 times the banking sector’s consolidated shareholders’ equity. This means that any significant devaluation of the Lebanese pound or the US dollar, and/or a drop in the value or yield of government debt securities as a result of a rating downgrade (which remains a constant possibly) by 10% or more, would wipe out the banking sector’s equity base. What is also worth mentioning is that the significant maturity mismatch between funds and assets (in other words deposits carrying an average maturity of around 1.5 months and assets such as Treasury bills carrying a maturity of more than 15 months) makes Lebanese banks very vulnerable to any potential hike in interest rates. Indeed, if Lebanon is downgraded as a result of a failure to carry out economic reforms and privatization, then interest rates on deposits would have to be raised at a time when returns from assets are not yet available. This would erode the banks’ shareholders’ equity and reserves, and affect profitability.

Doomed from the start?
Hariri’s fiscal brainchild would indeed have been perfect were it to be accompanied by economic reforms, privatization, economic diversification, long term strategies, plans to eradicate corruption, racketeering, and so on. In their absence, the state is suffering from over-indebtedness; there is little government revenue and economic diversification and the non-bank private sector is suffocated by insufficient economic growth and inefficient and corrupt public utilities. The banks have had to continue operating in a constraining operating environment and are still heavily exposed to a sovereign which carries one of the lowest ratings on the planet. They also suffer from low revenue and asset diversification, are exposed to interest rate risk, and have low economic capital.

Perhaps it would have been more judicious to privatize public utilities immediately through Built Operating Transfer (BOT) and/or concessions (a longer term form of privatization), or even outright sale rather than borrow significant amounts to rehabilitate a still inefficient infrastructure. Privatization, even on the cheap, would have modernized the country at no expense, left debt levels very low, brought in revenues for the government (in the form of taxation and concession/BOT fees), and created jobs, while simultaneously diversifying the economy. But again, maybe we all lost the plot and confused the end of the shelling with the end of the civil war back in 1990, not realizing during the last sixteen years that the dice were loaded and that our reconstruction funding plans were doomed from the start.

The striking thing about the latest consolidated balance sheet of the Lebanese banking sector is the lack of change in its structure. After a period of ten to twelve years at least, assets are still split between cash reserves and deposits at the Banque du Liban (BDL), Treasury bills and other government debt securities, and loans to the private sector. As at the end of 2005, government securities accounted for 25.2% of total consolidated assets, while cash reserves and BDL deposits accounted for 29.2% and loans to the private sector for 23.1%. Foreign assets, which principally include inter-bank deposits with banks abroad accounted for 18.8% and fixed assets for 3.3%.

Funding, as has always been the case for the last 15 years, came principally from customer deposits, which accounted for 72% of total liabilities or interest-bearing funding. Total customers’ deposits, excluding deposits from non-residents, amounted to almost $48 billion by the end of 2005 and to $48.2 billion by the end of February 2006. The customer deposits figure has not increased significantly in the last three to four years, reflecting a sort of optimization of the consolidated balance sheet. Indeed, banks have slowed down their race to attract deposits by offering high interest rates, as placement of funds opportunities are scarce in a very difficult and deteriorating domestic operating environment. Moreover, the Paris II donors’ conference in November 2002 forced interest rates on both assets and liabilities to be decreased. Today, many of Lebanon’s larger banks are offering interest rates on customer deposits which are almost on par with what’s being offered by large international banks in AAA-rated countries. This is mainly due to the gradual rise in US dollar interest rates since 2002, which have today reached 4.75%.

Dollar accounts lose edge
When Lebanese banks offered 4.75% on US dollar savings accounts, the US dollar Libor (London inter-bank offer rate) was slightly below 4% at around 3.5%-3.75%. When the US Federal Reserve raised the US dollar Libor rate to 4.75%, Lebanese banks did not react and kept their own deposit rates relatively unchanged plus or minus a quarter of a percentage point. The compulsory tax on interest rates of 5%, which is imposed by the Lebanese government on both residents and non-resident depositors, brings any rate offered on deposits with Lebanese domiciled banks down to the same level as international rates.
Given the above considerations, a dangerous conclusion for the banks and the country can be drawn: why would anybody keep his savings in a bank domiciled in a B- rated and volatile country, and pay taxes on his interest receipts, when he or she could easily place his/her savings in an international AAA rated bank domiciled in a AAA rated country, get world class service and the same level of interest rates, and not pay taxes? Were a critical number of depositors to realize such a state of affairs, it would be highly likely that the liquidity of some banks may be tested again.

Relying on customer deposits
Lebanese banks seldom diversify their funding and continue to rely on customer deposits, which are nevertheless recurrent in nature despite having on paper an average maturity of 1.5 months. The maturity mismatch that characterizes the Lebanese banking sector does not appear to be a problem, as banks succeed in maintaining and even increasing their deposit base year in and year out. The only problem is that if the country is downgraded or there is a major external blow, such as last year’s assassination of former Prime Minister Rafik Hariri, then interest rates on both assets and liabilities may go up. Given the maturity mismatch, the higher rates on deposits, which have a much shorter maturity than assets, would then have to be implemented immediately, while valuable time would pass before the higher rates on longer assets are received. The ultimate price for Lebanese banks would be to see their profitability affected in the short term, and to witness depletion in equity and provisions, which would be difficult to compensate at a later stage if the interest rate hike is significant.
Straight, plain vanilla bonds accounted for 0.08% of total assets and amounted at year end 2005 to a measly $58.7 million. This is surprising, given the previous success banks had in the international capital markets when they last issued large size bonds back in the late 1990s. It is worth noting that the fact that the Lebanese government is still a frequent issuer of Eurobonds should make the banks equally attractive amongst local and international investors when issuing bonds. Issues of medium to long-term bonds would improve the maturity mismatch of most banks, while this other form of funding could be placed in new, but badly needed projects and/or products.

Medium and small banks clearly lack sufficient capitalization. They have been warned.

The Lebanese banking sector’s equity base has increased by a little bit more than 10% from the end of 2004 to the end of 2005, reaching a consolidated figure of almost $4.3 billion. The same figure has increased by almost 7% in just two months since the end of 2005 to reach $4.6 billion at the end of February 2006. The reason for this rise in equity is partly due to a frenzy of preferred share issues and to capital increases, which were mostly subscribed to by wealthy Gulf investors. Shareholders’ equity also rose because of better than expected profitability for the larger banks which were able to allow for an organic growth of their equity.

Insufficient capitalization
The consolidated equity figure for the banking sector is still regarded as barely sufficient, as reflected by an equity/assets ratio for the whole sector of 6%. With the implementation of Basel II requirements starting in 2008, the domestic banks’ current economic and regulatory capital would not be enough, as Basel II promises to hike risk weighting on assets significantly. For the moment, risk weightings are excessively generous and do not reflect the reality of credit risk in a volatile country such as Lebanon. It is also worth mentioning that from the consolidated figure of $4.6 billion of February 2006, at least $1 billion was accounted for by one bank, BLOM, which is the largest bank in the country. That particular statistic should be considered alarming for the medium and small banks, which clearly lack sufficient capitalization. They have been warned.

The hey days of the mid to late 1990s in terms of bank profitability are now over for most Lebanese banks. During that period, local banks were able to create significant interest rate margins between deposits and other funding on the liability side, and loans and government debt securities on the asset side. At that time, yields on government debt securities, whether Eurobonds or Treasury bills, were very high and well exceeded the 10% mark for both Lebanese pound and US dollar denominated fixed income securities, while deposits carried average interest rates (albeit, higher than current levels).
Profitability at Lebanese banks has been on a declining trend for some time, as some banks have slowed down their growth, while others find it extremely difficult to lend to viable and creditworthy companies, individuals or projects, given the deteriorating general operating environment. But the main reason for a depleted profitability is the enforced provisioning by the BDL, which requires a certain percentage of customer deposits to be kept in the form of cash reserves and deposits at the BDL, mostly at an interest rate of 0%.

Interest income still accounts for around
80-90% of total banking income

Since Paris II, when interest rates were brought down to more normal levels, banks have been left cogitating about ways to improve their profitability. Additional provisioning requirements to cover for an increasing level of non-performing loans (as the operating environment is still depressed), subdued loan growth and limited options for low-risk profit-generating investments, and escalating costs for IT investments, the expansion of the branch network, product development and foreign acquisitions, are all factors that have contributed to a slowdown in growth, in addition to the enforced over-liquidity of the balance sheet.
Profitability remains at risk, as Lebanese pound operations (mainly Treasury bills denominated in LBP) are in fact subsidizing US dollar operations. If the Lebanese pound devaluates (the risk still exists), the profitability of Lebanese banks could be wiped out. Moreover, interest income still accounts for around 80%-90% of total banking income and the banks are still at a level where earning diversification is still “under study.” Some banks, particularly the larger ones, have acted more swiftly in the issue of earning diversification by establishing operations abroad and expanding retail activities. This explains the rise in profitability in 2005 for most of the larger banks.

Large banks increase profits
For example, Bank Audi, or the Audi-Saradar group as it is currently named, witnessed an increase in net profits of 48% by year end 2005 to around $106 million. This was due mainly to a rise in commission income and to better profits on financial or treasury operations. Bank Audi’s foreign investments are clearly starting to pay off, and the bank’s recent merger with Egyptian investment banking group, EFG Hermes, bodes well for the future. However, a return on assets (net income divided by total assets) of less than 1% (0.9% in Audi’s case) still shows a very average profitability. Truly profitable banks worldwide usually register ROAs of well above 1% and more in the 2% waters.
Byblos Bank’s performance was similar to Audi’s, in the sense that it too had an ROA of 0.9% at year end 2005. Profit growth was less significant, as net profits grew by 28.5% to $69.3 million. Profits would have been higher were it not for a 157% rise in allocations to loan loss provisions. But the bank was able to more or less compensate with more commission income and financial and treasury operations.
BLOM Bank’s profitability rose significantly by 72.2% for the year ending March 2006, to $44.2 million. However, this profitability could have been higher given the size of Lebanon’s largest bank’s balance sheet and equity base. BLOM is known for its conservative and prudent approach to lending, but nevertheless holds the most important franchise in the country.
On an annualized basis, Banque Libano-Francaise shows an ROA of 0.5%, for an annualized net profit for 2005 of $18.9 million. This bank is still considered to be in a transition phase, as its previous French 51% shareholder, Credit Agricole, sold its stake to regional investors a little bit more than a year ago. The bank is currently going through some changes in management, in culture, and in business philosophy, and significant provisioning is also gradually taking place. BLF should be expected in the medium-term to become increasingly more profitable as its new strategy falls completely into place.
Bank of Beirut, one of the best-managed banks, saw a profit growth slightly below the 10% mark. Its ROA is similar to its peer group at around 0.6%. Net interest income and non-interest income were slightly reduced in 2005, and the rise in net profitability to $28.3 million (unaudited accounts) was mainly due to less allocations to loan loss provisions. Given these figures, one can only feel that the bank is currently optimizing its balance sheet.
The only audited accounts for 2006 came from Crédit Libanais, a traditionally well-managed institution, with state of the art systems, policies and procedures. This bank’s profitability also improved in 2006 by 22% to $23.3 million, which is a step closer to its profitability of $25 million+ during the peak period of 1999-2000. However, ROA remains lower than a standard 1% at 0.7%, reflecting a further need to diversify earnings and invest in some form of product and geographical expansion.
Other high growth banks, such as Intercontinental Bank of Lebanon (IBL) and Lebanese Canadian Bank have witnessed significant growth in profitability in the last few years, which was commensurate with their impressive asset and deposit growth. Although IBL did not publish end of year accounts, its June 2005 figures show an ROA of 1.08% and a 65% net profit growth on an annualized basis. Lebanese Canadian, which had grown substantially in the last five years, is showing signs of profit slow down, as the net income increase dropped to 16.8% in 2005 compared to 65% in 2004.

Profitability depends on stability
As seen above, Lebanese bank profitability would highly depend on the stability of the operating environment, which itself depends on the political situation and the ability of the government to implement an efficient economic recovery and debt repayment plan. Given the socio-political mess of the last few months and the desperate lack of light at the end of a very long tunnel, banks are strongly advised to look elsewhere for profitability.