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Lebanese banks: we can weather effects of any future crisis

11 November 2010

BEIRUT: The ongoing talk about a possible security setback if some of Hizbullah’s members are implicated in the assassination of former Prime Minister Rafik Hariri has had little or no effect on the Lebanese banks that are aggressively raising their capitals and expanding to other countries, according to many bankers.

“I don’t think we are going to see security deterioration in Lebanon and to show that the country is still in a good shape, the Lebanese government issued $725 million in eurobonds and this issue was oversubscribed. This demonstrates that investors are not worried about the future of Lebanon,” Joe Sarrouh, the adviser to the chairman of Fransabank , told The Daily Star Wednesday.

Sarrouh stressed that the eurobond issue was three times oversubscribed and the yield on this new issue was only 6 percent.

He added that Lebanese banks have not only seen an impressive rise in profits, assets and deposits up to September but have also started increasing their capitals in a bid to expand in the Middle East, Africa and even Europe.

“There is a consensus among regional and international countries as well as various political parties in Lebanon to spare the economy from any conflict that may arise in the future. No one has an interest to inflict any harm on the economy,” Sarrouh said.

One banker who spoke on condition of anonymity said that Hizbullah realizes the consequences of any attempt to undermine the Lebanese economy.

“They [Hizbullah] know that if banks suffer any loss, the savings of many Lebanese will be damaged as a result,” the banker told The Daily Star.

Jean Riachi, the chairman of FFA Private Bank , told The Daily Star that there are no short-term or even long-term threats facing Lebanese banks.

But Riachi will not take anything for granted. “Of course we are taking precautions. For example all our backup sites are ready in case things go wrong in the future. We can switch all operations in less than one hour into our office in Bsaleem area,” Riachi said.

He added that FFA Private Bank and other banks will ensure continuity in the event of a crisis.

“All our business plans have been tested many times and they are up and running. The second concern is to be very liquid,” Riachi said.

Sarrouh and other bankers say that they are not too concerned about the scenarios reported in some media outlets.

“I am not bothered by what some papers say. All I know is that the economy is performing very well this year despite all the talk of a doomsday scenario,” Sarrouh said.

Central Bank governor Riad Salameh has repeatedly said that the monetary situation has not been influenced by the tense political atmosphere.

Salameh has also noted that the demand for the US dollar in the Lebanese market is very small, noting that the gross foreign currency reserves have reached an all time high of $31 billion.

Echoing similar views, the president of the Association of Banks in Lebanon, Joseph Torbey, emphasized that Lebanese banks are still reaping good profits this year.

“Since 2007 until the end of September 2010, owing to the regained regional and international confidence in the country, and based on the IMF article IV country reports, the current transfers to Lebanon exceeded on a net basis $13.3 billion; the net capital and financial flows have reached more than $ 28.4 billion, allowing our country to finance its large current account deficit of $13 billion for the same period and showing a balance of payments substantial surplus of $16 billion, increasing by the same amount our net foreign assets,” Torbey said.

He added that international reserves of the Central Bank and the banks, all together, are largely adequate.

“They cover 43 percent of the country’s broad money, 70 percent of its total foreign currency deposits and, finally more than 86 percent of Lebanon short term external debt. Our banks play a determining role in making all these flows processed swiftly, timely, and at low cost, through our efficient network of branches outside and inside Lebanon, and through our modern and secure payment systems,” Torbey said.

“Considered the backbone of the economy, the banking sector’s consolidated balance sheet, including the investment banks, exceeded $133 billion as at the end of September 2010, nearing 3.5 times the GDP estimated at $38 billion by the IMF. Moreover, Lebanese banks are directly present in the major cities of the world, namely in 31 Arab and international countries, and deal with a network of correspondent banks throughout 111 cities across the globe,” Torbey said.

He added that the banking industry has recently witnessed a consolidation and a diversification of shareholders’ structure, which attracted large international and Arab investors.

© Copyright The Daily Star 2010.