BEIRUT: The Lebanese banking sector grew by 2.8 percent in the first quarter of 2011 in spite of the prolonged political stalemate, said Bank Audi’s Lebanon Weekly Monitor.
However, the report said that the growth witnessed during this year’s first quarter was slower than that observed in the first quarter of 2010.
Measured by the aggregate domestic assets of banks, banking activity grew by 2.8 percent over the first quarter of 2011, moving from $128.9 billion at end-December 2010 to $132.5 billion at end-March 2011, the report added.
This $3.6 billion rise in total assets compares to a higher $ 4.7 billion rise in the same period of 2010, which was marked by relatively stable political conditions favoring economic buoyancy.
The report noted that banking activity in Lebanon continued to be favored by customer deposits, which remain the backbone of banks’ balance sheets and the major source of funding, accounting for as much as 82 percent of total assets as at end-March 2011.
It said that customer deposits managed to pull out an overall $941 million progression between December 2010 and March 2011 (equivalent to a small 0.9 percent quarterly rise).
From a currency angle, the 2011 first quarter’s deposit growth is attributed to a $3.4 billion rise in foreign currency denominated deposits, while those in local currency retreated by $2.5 billion mostly as a result of contained conversions that took place in January.
As a result, the deposit dollarization ratio increased from 63.2 percent at end-December 2010 to 65.9 percent at end-March 2011, a level nonetheless much lower than the highs prevailing in the middle of the past decade marked by adverse politico-security conditions.
The report said that while such conditions are not generally conducive to a strong lending environment, lending activity continued to expand this year at a considerable pace, registering a 4.3 percent progression during the first quarter of 2011.
This was mostly due to banks’ strong financial flexibility allowing them to extend funding to the economy at a time when a number of peers in the region were seeking to maintain their liquidity levels amid growing political unrest.
It added that in the three months to March 2011 bank credits grew by $1.5 billion, 80 percent of which was driven by a rise in foreign currency denominated loans, which kept the loan dollarization ratio hovering around the 80 percent mark.