Banks hold 58 percent of public debt

Continuous growth in all
bank activities

The total consolidated assets of commercial banks expanded to $164.8 billion at the end of 2013, an 8.5 percent yearly increase, according to the Association of Banks in Lebanon (ABL).

“The growth of the consolidated balance sheet of commercial banks last year is mainly attributed to a solid growth in deposits,” said Marwan Barakat, Head of Research at Bank Audi. Deposits grew by $11 billion year-on-year. “This is the highest growth within the last three years. It translates a big confidence in the local banking system,” he said.

Total deposits, including resident and non-resident private sector deposits and public sector deposits grew by nine percent with an equivalent of $139 billion.

The dollarization rate of deposits reached 66.1 percent, slightly above the 2012 level.

Non-resident private sector deposits registered an annual growth of 18.2 percent. The share of non-resident private sector deposits grew to 20.5 percent.

According to Barakat, non-resident private sector deposits doubled, representing 40 percent of total deposits. “The economic crisis in Cyprus is one of the reasons for pushing this growth, since many depositors increased their money transfers from that country,” he said.

Total loans to the private sector progressed by around nine percent to reach $47 billion. Total loans to the public sector expanded by 21 percent. Commercial banks held $37.7 billion, representing 58 percent of total public loan.

“The percentage of growth in loans to the private sector is acceptable and has contributed to the positive growth of the Gross Domestic Product (GDP), while the increase in loans to the public sector is due to the fact that banks bought the portfolio of Eurobonds held by the Central Bank (BDL),” said Barakat. He expects loans to the private sector to go up in 2014 in light of the BDL’s two stimulus packages.

As for the exposure of banks to the public debt, Barakat said: “The default risk usually relies on debt in foreign currencies. Representing only 20 percent of deposits in foreign currencies, financing the public sector through Eurobonds has increased, and this is still an acceptable percentage to keep risk away,” he said.

Deposits at the Central Bank (BDL) increased by 3.5 percent to total $55 billion.

Total consolidated assets of investment banks reached around $4 billion, a decrease by almost one percent.