The financial results of the Lebanese banking sector saw growth in customer deposits and assets in the first six months of 2018 compared to the same period of last year, according to Bank Audi’s Lebanon Weekly Monitor.
“Lebanon’s banking sector witnessed healthy activity and earnings growth in this year’s first half amid sound deposit inflows, higher placements at BDL [Banque du Liban] and rising net interest margins on the back of increased capitalization, while lending activity remains contractionary year-to-date even though it somewhat gained some ground in the last couple of months,” the report said.
Customer deposits grew by $4.7 billion in the first half of this year, in line with average first half growth of the previous five years, to reach $173.3 billion at the end of June.
“This has been favored by a pickup in deposit collection as banks offered enticing returns on deposits in the local currency and amid higher interest rates cross-currencies in general following the further tightening of the U.S. Federal Reserve’s monetary policy,” the report said.
The report was alluding to the fact some Lebanese banks offered their clients attractive returns if they converted their dollar deposits to pound deposits, for maturities ranging from one year to five years.
“Latest banking sector figures suggest a yearly increase in the average Lebanese pound deposit interest rate by 114 basis points between May 2017 and May 2018 to reach 6.71 percent and a yearly increase in the average U.S. dollar deposit interest rate by 49 basis points to reach 4.11 percent,” the report said.
It added the spread between pound and foreign exchange deposit rates rose from to 2.60 percent at end-May 2018.
“In parallel, the spread between the dollar deposit rate and the three-month Libor rate declined from 2.41 percent to 1.79 percent over the same period. So far this year, deposit growth is being driven almost equally by lira and FX deposits (42 percent and 58 percent of total deposit growth respectively) whereas last year the increase in deposits parked at banks was overwhelmingly driven by FX deposits,” the report said.
In addition, the combined assets of all Lebanese commercial banks in the first six months of 2018 went up by 6.71 percent to $234.6 billion.
“Also part of the recent Central Bank swap operation, Lebanese banks’ acquisition of sovereign Eurobonds from BDL resulted into an increase in banks’ sovereign FX bond portfolio by $2 billion (circa 13 percent) year-to-date to reach $16 billion at end-June 2018,” the report said.
The Daily Star