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Bassil projects 17 percent deposit growth in 2010 due to capital inflow

12 December 2009

BEIRUT: The chairman of Byblos Bank said Friday customer deposits in 2010 are expected to grow by 17 percent, as Arab and expatriated investors maintain confidence in the Lebanese banking sector.

“I don’t think we will have a problem drawing deposits from abroad even with the global credit crunch and the current crisis in Dubai. We will probably have the same growth as 2009,” Francois Bassil told The Daily Star.

The fall in interest rates in Lebanon and abroad may affect to some extent the profitability of Lebanese banks, said Bassil, who expressed confidence that the banks can make up the difference from their operations in the Middle East and Europe.

Capital inflows into Lebanon have managed to more than fully cover the country’s trade deficit during the first ten months of 2009.

Capital inflows this year were at a record high when compared to the same period of previous years, reaching $16.506 billion, and rising by a considerable 29.2 percent year-on-year.

“Capital flows into Lebanon through the said period have flown through several channels, namely, non-resident deposit flow, which went up by $3.065 billion, as well as remittances, foreign direct investments (FDI) and cash transfers to tourists visiting Lebanon.

“The latter channel definitely played in favor of capital inflow into Lebanon, in congruence with the upsurge in tourism activity, while FDI did not report a contraction in the first 10 months of 2009 as mirrored by the 12.3 percent surge in imports of investment goods,” Bank Audi’s Weekly Monitor said.

Figures released by the World Bank have indicated that, contrary to previous expectations, inward remittances into Lebanon in 2009 have been fairly steady.

Bassil said that Lebanese banks are making reasonable profits from their branches in the Middle East, such as Syria, Jordan, Egypt and Sudan.

“As for Byblos Bank , we expect our profits in 2009 to rise by 15 to 20 percent more than 2008,” Bassil said.

Deposits from the entire Lebanese banking sector rose from $77.779 billion at end- December 2008 to $92.442 billion at end-October 2009.

Bassil said that smaller banks apparently are not too keen now to merge or be acquired by other major banks. He suggested that Byblos Bank may be working on either a merger or acquisition in the future but without giving more details.

Bassil hailed the formation of the new government headed by Prime Minister Saad Hariri and stressed that the time was ripe to make use of the political and security stability and push ahead with Paris III reforms.

“It seems that all ministers are convinced of the clauses mentioned in Paris III reform paper. One of the first few things the government should do is speed up privatization of the telecom [industry],” Bassil said.

He believes that the entire telecom stake should be sold to the private sector.

“I don’t think the government should keep any share in the telecom. It is better if the government monitor the performance of the companies running the cellular firms though the Telecom Regulatory Authority,” Bassil said.

As for electricity, the former president of the Association of Banks in Lebanon argues that no one is willing to buy a sector which has a deficit of more than $20 billion.

“The best thing to do it have concessions where by companies will offer to sign long term contracts with the government to manage and operate power plants and other utilities associated with it,” Bassil said.

He added that the government can sell some of the electricity facilities to investors once the true value of this installation is determined by an assessment company.

“The first thing the government needs to do is raise the electricity tariff by at least 40 percent. The current rates offered by [Electricity du Liban] are too low,” Bassil said.

He added that the private sector should be involved in other projects such as construction of infrastructure.

© Copyright The Daily Star 2009.