The “Lebanon Weekly Monitor” of Bank Audi reported that the Lebanese banking sector witnessed a rise in the assets and deposits made by customers in the six half of 2018 in comparison to its respective figures in the previous year. According to the above mentioned report: “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”.
Moreover, the Lebanese banking sector recorded a “$4.7 billion” worth of growth in customer deposits in during the first six months. This seems to be in line with “average first half growth” when seen in the context of the “previous five years” for arriving at the “$173.3 billion” by the June end. In fact, the report also stated: “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”.
However, the report hinted at the attractive return offers issued by the Lebanese banking sector in a bid to lure the clients for converting “their dollar deposits to pound deposits” while the maturing period ranged from one to five years time. The report said: “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”.
This way, the “pound and foreign exchange deposit rates” began to spread additionally while the rates climbed up by 2.60% by end of May. Further, the report stated:
“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”.
From a combined point of view, the entire Lebanese banking sectors’ assets for commercial banks “went up by 6.71 percent to $234.6 billion” in the first half of 2018. While, the report informed: “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”.