Sunday, Mar 23, 2014
Dubai: Deposit growth of the Lebanese banking system is expected to be robust this year due to large amounts of remittances from the Gulf Cooperation Council (GCC) countries, where a large number of Lebanese expatriates live.
Inflows of remittances from the Lebanese diaspora, which are equivalent to 15 per cent to 20 per cent of the annual GDP, largely originate in the Gulf region, and will continue to drive growth in bank deposits.
Potential funding weaknesses for Lebanese banks include the predominance of short-term maturities and a high degree of dollarisation at 66 per cent of deposits. However, risks are mitigated by solid systemic liquidity buffers, with banks’ core liquid assets (cash, placements at the central bank and international placements) amounting to 22 per cent of total assets at end-2013.
Moody’s expects that the system’s solid liquidity buffers and depositor-based funding will continue to support banking sector stability. Lebanese banks’ reliance on market funding is minimal, as customer deposits fund more than 80 per cent of system assets.
Lower supply and demand of credit is expected to adversely impact the profitability of banks this year. “We expect both supply and demand for credit to remain depressed in 2014, leading to credit growth of between six per cent and nine per cent, against forecasted inflation of three per cent. This is relatively unchanged compared with 2013, when credit expanded nine per cent, but is significantly below the 24 per cent average annual credit growth during 2007-10,” said Elena Panayiotou, assistant vice-president and analyst at Moody’s.
By Babu Das Augustine Deputy Business Editor
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