Transcript Slide 1

Overview of the Lebanese Economy and Banking Industry
Presentation to the delegation
of The Banks Association of Turkey
Beirut- December 3, 2010
Dr. Makram Sader
Secretary General
Association of Banks in Lebanon
I- Economic Growth
II- Public Finances
III- External Accounts
IV- Financial Intermediation
2
Real Sector Indicators
Nominal GDP- bill USD
Real growth- %
Inflation rate, CPI per.avg.- %
Exports of goods- bill USD
Imports of goods- bill USD
Investment- bill USD
o/w Private
Public
Investment/ GDP- %
Credits to the private sector- bill USD
2007
25.1
7.5
4.1
2.8
11.8
6.9
6.3
0.6
27.4
20.4
2008
29.9
9.3
10.8
3.5
16.1
9.0
8.5
0.5
30.0
25.0
2009
34.5
9.0
1.2
3.5
16.2
10.4
9.9
0.5
30.2
28.4
2010
39.1
8.0
5.0
4.3
17.9
12.1
11.2
1.0
31.0
34.6
Sources: IMF Article IV- BDL- Economic Accounts of Lebanon- Lebanese customs.
3
Aggregate Demand and Supply
USD billion and %
2007
Share, %
2008
Share, %
Aggregate Demand
Private consumption
Public consumption
Private gross capital formation
Public gross capital formation
Total national expenditure
Exports
Uses
21
4
6
1
31
6
37
55.9
9.8
17.0
1.7
84.5
15.5
100.0
25
4
8
1
39
7
46
54.5
9.6
18.4
1.5
84.0
16.0
100.0
Aggregate Supply
GDP
Imports
Resources
25
12
37
67.5
32.5
100.0
30
16
46
65.0
35.0
100.0
Source: Lebanon's Economic Accounts 2008
4
Public Finances
2007
8,350
33.3
2008
9,922
33.1
2009
11,388
33.0
2010 (10 M)
9,419
24.5
3,278
13.1
3,518
11.8
4,038
11.7
3,467
9.0
Total Revenues (USD million)
% of GDP
5,804
23.2
7,000
23.4
8,428
24.4
8091*
21.1
Overall public deficit (USD million)
% of GDP
2,546
10.2
2,922
9.8
2,960
8.6
1,328
3.5
731
2.9
597
2.0
1,078
3.1
2,139
5.5
Total public debt ( USD million)
% of GDP
42,023
167.7
47,056
157.2
51,142
148.1
51,134
133.2
Claims on public sector (USD million)
% of GDP
21,508
85.8
25,415
84.9
29,062
84.2
28,563
74.4
Total Expenditures (USD million)
% of GDP
o/w debt service
% of GDP
Primary surplus
% of GDP
Sources: MOF, BDL
*Adjusted to include all telecom revenues.
5
Total debt structure
in %
in LBP
in FC
2007
49.5
50.5
2008
55.0
45.0
2009
58.3
41.7
Oct-10
58.9
41.1
Dec-09
58.0
26.3
2.8
12.8
5.8
7.0
100.0
Oct-10
57.3
27.6
3.2
11.9
5.5
6.4
100.0
Source: BDL
Public debt holders*
in %
Banks
BDL & public institutions
Other resident
Non resident
o/w bilateral + multilateral
others
Total
Dec-07
52.9
27.6
2.7
16.7
6.9
9.8
100.0
Dec-08
56.3
25.9
2.6
15.2
6.5
8.7
100.0
* Estimations
6
Balance of Payments
million USD
2007*
2008*
2009*
Oct 2010 Est.
Balance of trade
-7,849
-11,010
-11,179
-11,224
Balance of services
3,197
5,666
5,569
5,244
Net income
-782
-810
-768
-1,465
Net transfers
3,455
3,252
3,027
2,958
Current account balance
-1,979
-2,902
-3,350
-4,487
Capital and financial accounts
4,016
6,364
11,249
7,242
o/w FDI
1,875
2,620
3,678
3,263
Non resident Deposits***
217
1,917
5,068
629
Overall Balance
2,037
3,462
7,899
2,755
*
Estimates - IMF Article IV
** Projections- IMF Article IV
*** For Information
Sources: IMF- BDL- ABL
7
Structure of the Banking Industry
Number of Banks operating in Lebanon
66
17 banks per million inhabitant
Commercial Banks
53
Investment Banks
13
Lebanese Banks with foreign control
15
Foreign Banks
10
Number of Branches
915
Number of Banks abroad
16
(in 32 countries)
Number of correspondant banks
307
(in 111 countries)
Number of ATMs
1,255
318 machines per million inhabitant
Number of Electronic Machines
19,294
5079 machines per million inhabitant
Number of Payment Cards
1,703,126
448 cards per 1,000 inhabitants
Number of checks cleared (000)
12,225 (in 2009)- 10,723 (first ten months of 2010)
Value of checks cleared (million USD)
56,400 (in 2009)- 56,665 (first ten months of 2010)
Number of Employees
19,794
Deposit Dollarization Rate
62.6%
Loan Dollarization Rate
81.5%
Concentration of Banking Activity - in %
First three groups
First five groups
First ten groups
All Banks
Lebanon
39
55
80
100
Turkey
26
35
52
100
8
Lebanese Banking Presence Abroad
Country
1
2
3
4
5
6
7
8
9
10
Algeria
Algiers
Armenia
Yerevan/Vanadzor/Guimri/Gavar/Echmiadzin/Abovyan
Bahrain
Manama
Belarus
Minsk
Belgium
Brussels
Brazil
Sao Paolo
Canada
Montreal
Congo DR
Kinshasa
Cuba
Havana
Cyprus
Limassol/Nicosia/Larnaca/Paphos/Paralimni/
1
Cairo/Alexandria/Hurgada/Damietta/Mansura/Ismalia/
Sherm ElSheikh/Tanta
2
11 Egypt
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
City
Subsidiary
Rep.
Sister
&
Office Associate
Bank
Banks
1
2
1
1
2
1
1
4
1
Paris
Gambia
Banjul
Germany
Frankfurt
Iraq
Bagdad/Erbil/
Ivory Cost
Abidjan
Jordan
Amman/Erbid/Aqaba/Zerka/Madaba
Libya
Tripoli
Luxembourg
Luxembourg
Nigeria
Lagos
Qatar
Doha
Romania
Bucharest/Constantza/Brazov
Russian Federation
Moscow
Saudi Arabia
Riyadh
Senegal
Dakar
Sudan
Khartum/Bahri/Omdurman/Khartum suburbs/
Sultanate of Oman
Muscat/sohar
Switzerland
Geneva
3
Damascus/Aleppo/Tartus/Hama/Lattake/Homs/Dara'/
Suweida/Deir ElZour/Al Hasaka
5
30 Turkey
31 United Arab Emirates
32 United Kingdom
1
4
1
16
1
3
2
1
2
1
3
2
Istanbul (25 other cities)
Abu-Dhabi/Dubai/Sharjah
London
Source: ABL ≈ 92 Cities
8
1
1
Total
6
1
17
1
1
1
35
1
31
Total
1
2
1
1
1
1
2
1
1
9
1
1
France
29 Syria
Branch
Free
Zone
Branches of
Subsidiary,
Associate or
Sister Banks
10
8
2
53
5
1
0
5
1
17
1
0
3
2
0
1
2
1
3
2
3
1
1
16
1
4
9
1
1
6
53
1
1
7
2
85
25
2
3
187
9
Consolidated Balance Sheet of Commercial Banks
million USD - End of period
Cash and Deposits at BDL
Claims on resident private sector
Claims on public sector
Foreign Assets
Fixed assets & other assets
Total Assets
Resident Private Sector Deposits
Non resident Private Sector Deposits
Public Sector Deposits
Non resident financial sector deposits
Capital Accounts
Bonds & unclassified liabilities
2007
19,802
17,752
21,508
20,710
2,483
82,255
57,699
9,588
772
4,052
6,261
3,883
2008
25,946
21,062
25,415
19,127
2,705
94,255
66,274
11,506
883
4,305
7,101
4,186
2009
35,539
24,259
29,062
23,680
2,710
115,250
79,193
16,573
1,055
4,600
7,945
5,884
Oct-10
40,213
29,345
28,563
25,193
3,334
126,648
86,983
17,202
1,268
5,098
9,072
7,025
Share %
31.8
23.2
22.6
19.9
2.6
100.0
68.7
13.6
1.0
4.0
7.2
5.5
Source: BDL
10
Consolidated Balance Sheet of Commercial Banks
change in %
Cash and Deposits at BDL
Claims on resident private sector
Claims on public sector
Foreign Assets
Fixed assets & other assets
Total Assets
Resident Private Sector Deposits
Non resident Private Sector Deposits
Public Sector Deposits
Non resident financial sector deposits
Capital Accounts
Bonds & unclassified liabilities
2008
31.0
18.6
18.2
-7.6
8.9
14.6
14.9
20.0
14.4
6.2
13.4
7.8
2009
37.0
15.2
14.3
23.8
0.2
22.3
19.5
44.0
19.4
6.9
11.9
40.6
Oct-10
13.2
21.0
-1.7
6.4
23.0
9.9
9.8
3.8
20.2
10.8
14.2
19.4
Source: BDL
11
Dollarization
 The net trading position against the Lebanese pound must not exceed
1% of shareholder's equity while the global position cannot exceed 40%
of shareholder's equity .
 A structural position of 60% of shareholder's equity is authorized to
hedge the capital in LBP against fluctuations in the exchange rate .
 Banks are required to maintain at least 10% of their foreign currency
liabilities as net liquid assets and at least 15% as required and
remunerated deposits in FC at BDL .
in %
2007
2008
2009
Oct-10
Deposits
77.3
69.6
64.5
62.7
Credits
86.4
86.6
84.0
81.1
Checks Cleared (value)
78.0
82.2
80.3
80.3
Source: BDL
12
Weighted Average Spread
(LBP and FC Markets)
Weighted return on
uses of funds, %
Weighted average
deposit rate, %
Spread, %
2005
6.85
4.74
2.11
2006
7.42
5.29
2.14
2007
7.30
5.51
1.79
2008
6.58
4.75
1.83
2009
6.11
4.52
1.59
till sep 2010
5.80
4.12
1.69
Source: BDL
13
Indicators of the Lebanese Banking Sector Performance
2007
2008
2009
Latest 2010
ROA
%
1.04
1.16
1.09
1.00
ROE
%
13.42
15.40
15.49
14.50
Cost/ Income
%
55.2
53.1
51.6
Solvency Ratio (Basle 2)
%
12.5
12.1
12.4
Provisions against problem loans/ Problem Loans
%
56.9
61.3
64.4
63.4
Net problem loans/Net total Loans
%
4.7
3.1
2.3
2.1
Loans / Deposits
%
30.4
32.2
29.6
33.0
Overall Liquidity*
%
60.0
57.0
60.0
60.2
Price to BV
1.3
1.2
Price to earnings
9.1
8.0
* Cash and deposits at BDL + Treasury bills in LBP & Eurobonds ( with less than 1 year maturity)
+ foreign assets (excluding claims on non-resident private sector)
14
Key Prudential Practices
Minimum capital for new banks
Minimum capital adequacy ratio
Loans to one borrower
Lending to related parties
Liquidity
ratios
LBP 10 billion for the head office At least 12% of shareholder’s equity to risk- - 20% of the bank shareholder’s Must not exceed 5% of shareholders’ Banks are required to maintain at
of a commercial bank and LBP 500 weighted assets based on Basel II requirements.
equity if the facility is used in Lebanon equity since end 2005.
least
million for each additional branch.
or in countries with sovereign rating
Currency liabilities as net liquid
10%
of
their
Foreign
A+ and above.
assets, and at least 15% as
LBP 30 billion for establishing an
- 10% of the bank shareholder’s
remunerated deposits at BDL.
investment/specialized bank.
equity if the facility is used in
Banks have to hold at the BDL as
required reserves on Lebanese
pound accounts, the sum of 25% of
their demand liabilities in LBP and
15% of their term liabilities in
LBP.
countries with sovereign rating A and
LBP 150 billion for establishing an
below.
Islamic bank.
- The total facilities that each exceeds
15% of the bank’s equity cannot be
larger than 8 times the bank’s equity.
- The total spot operations of clients
Banks must maintain at least 40%
of their shareholders' equity
denominated in the Lebanese
currency as liquid assets.
debit accounts in FC/credit accounts in
FC & LBP cannot exceed 20% of the
bank
Loan Classification and Provisioning
Foreign exchange trading
shareholder’s
equity
(under
revision).
Legal reserve & Provision for
General Banking Risk
Basel II standards for regulation and
Accounting Practices
internal audit
The net trading position against the Rules are in conformity with those defined by the Banks are required to withhold from Banks are requested to establish internal Banks conform to International
Basle Committee on Banking Supervision.
audit and control units in accordance with Accounting Standards (IAS).
Lebanese Pound must not exceed
their annual profits at least 0.2% and at the Principles for the Assessment of
1% of shareholder’s equity while Banks are required to classify their loans into five most 0.3% of total risk weighted assets Internal Control System issued by the
Basle Committee on Banking Supervision.
watch,
substandard, and contra accounts, i.e total
the global position cannot exceed categories.(standard,
doubtful, bad debt).
Banks must establish an audit committee
40% of shareholder’s equity.
As by international accounting standards, all non- denominator according to Basel II, as
the role of which to assist the board of
performing loans (NPLs), have their interest general banking reserves.
directors in fulfilling its supervisory role,
A structural position of 60% of income reserved (unrealized), while provisioning
review internal control regulations, and
shareholder's equity is authorized is partial on doubtful debt and integral on bad
to hedge the capital in LBP against debt (by decision of the Banking Control These reserves are an integral part of supervise internal audit activities (unit and
fluctuations in the exchange rate. Commission - BCC and depending on each shareholders' equity and are not tax auditors).
deductible.
individual file).
Banks must establish a documented
mechanism to evaluate capital solvency
Provisioning is regulated by the monetary Banks must transfer 10% of their
reserve according to Basel II.
authorities and the constitution and freeing of annual profits to a legal
provisions is subject to BCC authorization. before the distribution of dividends.
Banks must establish corporate governance
Provisions constituted under BCC authorization
criteria according to Basel II.
and supervision are tax deductible.
15
Financial Soundness Indicators- Regional comparison
(latest available)
Lebanon
Turkey
Egypt
Jordan
Kuwait
Morocco
Oman
Saudi Arabia
Tunisia
UAE
Bank Regulatory
Capital to RiskWeighted Assets
12.4
19.5
15.1
19.6
18.0
11.8
15.5
16.5
12.4
20.3
Bank Capital to
Assets
6.8
13.4
6.4
11.0
12.1
8.0
13.5
13.3
16.9
Bank
Nonperforming
Loans to Total
Loans
2.1 (1)
4.9
13.4
6.7
9.7
5.2
3.5
3.3
13.2
5.7
Bank Provisions to
Nonperforming
Bank Return on Bank Return on
Loans
Assets 2009, % Equity 2009, %
101.0 (2)
1.1 (3)
14.4 (3)
83.5
2.4
18.2
100.4
0.8
13.0
51.9
1.1
8.8
38.5
0.8
6.8
72.2
1.1
14.5
104.0
1.4
10.0
89.8
1.9
16.4
58.3
1.0
11.7
79.3
1.3
8.3
(1)Latest figure: Net Problem Loans/Net Total Loans- IMF Article IV Oct. 2010.
(2) Includes provisions against problem loans and general provisions.
(3) after taxes.
Source: Global Financial Stability Report/IMF, October 2010.
16
Bank Revenue Composition
in % of total- 2009
Lebanon
Turkey
Bahrain
Egypt
Jordan
Kuwait
Oman
Qatar
Saudi Arabia
Syria
UAE
Interest Income,
%
86
85
79
85
80
72
75
79
76
83
78
Non Interest Income,
%
14
15
21
15
20
28
25
21
24
17
22
Source: R. Ariss' calculations from Bankscope.
17
Selected Indicators on the Size of the Capital Markets, 2009
(In billions of U.S. dollars unless noted otherwise)
GDP
Stock Market
Capitalization
(1)
Debt Securities
(2)
Bank
Assets
(3)
Bonds, Equities,
and Bank Assets
(1+2+3)
In percent
of GDP
World
57,843.4
47,188.9
92,082.4
92,969.5
232,240.8
401.5
European Union (a)
Euro area
15,373.1
12,478.1
10,013.4
6,576.1
33,556.0
27,239.5
41,707.7
29,072.4
85,277.1
62,887.9
554.7
504
North America
Canada
United States
Japan
15,455.1
1,336.1
14,119.1
5,068.9
16,754.1
1,676.8
15,077.3
3,395.6
33,520.1
1,868.1
31,652.0
11,920.9
16,875.2
2,712.2
14,163.0
8,846.9
67,149.4
6,257.1
60,892.3
24,163.5
434.5
468.3
431.3
476.7
Newly industrialized Asian economies (b)
1,603.8
4,308.5
1,786.9
3,569.1
9,664.6
602.6
Emerging market countries
Of which:
Asia
Western Hemisphere
Middle East and North Africa
Sub-Saharan Africa
Europe
17,962.0
9,909.8
7,618.9
15,948.3
33,477.1
186.4
7,876.0
3,964.8
1,974.3
883.4
3,263.5
5,434.6
2,194.8
753.5
559.3
967.6
3,947.5
2,330.8
265.5
178.1
897.0
9,945.2
2,558.8
1,373.7
420.4
1,650.1
19,327.4
7,084.4
2,392.7
1,157.8
3,514.7
245.4
178.7
121.2
131.1
107.7
614.5
39.1
227.4
12.2
223 ?
11.0
962.4
126.7
1,412.8
149.9
230.0 ?
383.4
Turkey
Lebanon- 2010
( c)
Source: Global Financial Stability Report/IMF, October 2010.
a- Includes Euro area countries, Denmark, Sweden and UK.
b- Hong Kong, Korea, Singapore and Taiwan province of China.
c - Commercial banks balance sheet
18
Selected Indicators on the Size of the Capital Markets, 2009
Structure and percentage of GDP
Stock Market
CapitalizationPublic
Debt Securities
(1)
(2)
Bank
Assets
(3)
Bonds, Equities,
and Bank Assets
(1+2+3)
World
% of GDP
20.3
81.6
39.6
159.2
40.0
160.7
100.0
401.5
European Union*
% of GDP
Euro area
% of GDP
11.7
65.1
10.5
52.7
39.3
218.3
43.3
218.3
48.9
271.3
46.2
233.0
100.0
554.7
100.0
504.0
North America
% of GDP
Canada
% of GDP
United States
% of GDP
Japan
% of GDP
25.0
108.4
26.8
125.5
24.8
106.8
14.1
67.0
49.9
216.9
29.9
139.8
52.0
224.2
49.3
235.2
25.1
109.2
43.3
203.0
23.3
100.3
36.6
174.5
100.0
434.5
100.0
468.3
100.0
431.3
100.0
476.7
Newly industrialized Asian economies**
% of GDP
44.6
268.6
18.5
111.4
36.9
222.5
100.0
602.6
Emerging market countries
% of GDP
Of which:
Asia
% of GDP
Western Hemisphere
% of GDP
Middle East and North Africa
% of GDP
Sub-Saharan Africa
% of GDP
Europe
% of GDP
29.6
55.2
22.8
42.4
47.6
88.8
100.0
186.4
28.1
69.0
31.0
55.4
31.5
38.2
48.3
63.3
27.5
29.6
20.4
50.1
32.9
58.8
11.1
13.4
15.4
20.2
25.5
27.5
51.5
126.3
36.1
64.5
57.4
69.6
36.3
47.6
46.9
50.6
100.0
245.4
100.0
178.7
100.0
121.2
100.0
131.1
100.0
107.7
Turkey % of GDP
37.0
36.3 ?
156.6
230 ?
Lebanon
% of GDP
8.1
31.2
7.4
28.1
84.5
324.0
100.0
383.4
Source: Global Financial Stability Report/IMF, October 2010.
*includes Euro area countries, Denmark, Sweden and UK.
* Hong Kong, Korea, Singapore and Taiwan province of China.
19