Bank deposits
up five percent

Public and private
financial needs are secure

Total private sector deposits in commercial banks grew by five percent to $151.6 billion at the end of 2015, compared with a year earlier, according to data provided by the Association of Banks in Lebanon (ABL). This was the slightest deposit growth rate recorded in the last seven years. The highest deposit growth, 21 percent, was registered in 2009.

Total assets rose over the same period by 5.9 percent to $186 billion.

“Even if the growth in deposits has slowed down compared with earlier years, it is still a healthy growth,” said Fadlo Choueiri, Head of Economic Research at the Credit Libanais Investment Bank. “The banking sector is still highly liquid and there is no risk of a liquidity squeeze,” he said. The increase in deposits could still enable banks to meet the financing needs of the private and public sectors, according to Choueiri.

Loans to the resident private sector climbed 5.9 percent to $48 billion at the end of last year, compared with 2014, according to ABL. Loans to the resident private sector were growing at rates ranging from 11 percent to 25 percent from 2009 to 2013, before slightly decreasing by 0.3 percent in 2014.

“The growth in lending slowed, compared with previous years, as investment opportunities dwindled because businessmen have become more reluctant to launch new projects,” Choueiri said. Foreign Direct Investment is also likely to have dropped in 2015 and the growth in remittances slowed last year, according to Choueiri. The waning business confidence is mainly triggered by the regional turmoil and the local political deadlock. “But the banking sector and the economy at large have become resilient over the years and have learned how to adapt,” he said.

Claims on the public sector edged up 1.2 percent to $37.8 billion. The proportion of claims on the public sector to overall loans has decreased to 44 percent in 2015 from 48 percent in 2013.

The decline in this proportion is due to the fact that commercial banks had promised the international community and donors to reduce their exposure to domestic public debt, according to Choueiri. The Central Bank’s share in the public debt has increased a little but commercial banks still hold the big chunk of it, he said.

Both deposits and loans are likely to grow between four and five percent in 2016, Choueiri said. The World Bank expects the economy to grow by 2.5 percent this year. It is estimated that it grew by two percent in 2015.