BEIRUT: Lebanese banks have started to feel the impact of the economic crisis in Lebanon and the turmoil in neighboring Syria as profits fell by 12 percent in the first nine months of this year.

According to the last consolidated balance sheet of all commercial banks in Lebanon, the profits of these banks up to October of this year reached $965 million compared to $1.095 billion in the same period last year, registering a drop of $132 million.

This is probably the first time in years the Lebanese commercial banks see a drop in profits, although most bankers remain upbeat about the prospects of growth in the future.

Bank assets and customer deposits saw growth in 2011 but still remained a bit lower than the 2010 performance.

Most of the listed banks on the Beirut Stock Exchange reported a slight rise in profits in the first nine months of this year.

But a close look at the balance sheets of some banks shows clearly that profits actually fell in the third quarter compared to the third quarter of last year.

“These results are due to the overall performance of the Lebanese economy. When we have an economic slowdown, banks usually take higher provisions and this impacts profits,” Joe Sarrouh, the adviser to the chairman of Fransabank, told The Daily Star.

The other factor which dragged down profits this year was the political unrest in both Egypt and Syria, countries with strong presence of leading Lebanese banks.

None of the Lebanese banks operating in Syria, for example, explicitly say that the political turmoil in the country has affected the operation of these banks.

There was also no information about any withdrawal of deposits from the Lebanese banks in Syria.

However, Lebanese banks are not willing to turn their back on countries which opened their doors for them, arguing that whoever rules Arab countries, banks will always find a window of opportunity in these states.

Sarrouh even saw an opportunity to expand in some of the countries that were the scene of bloody wars.

“Lebanese banks did not have any presence in Libya but with the regime change we see an opportunity to expand to this country in the future,” Sarrouh said confidently.

The Central Bank said that customer deposits in the first nine months of this year reached $112.9 billion, recording an increase of $5.7 billion compared to the same period last year.

But these results remained lower than the first nine months of 2010 when total deposits jumped by $6.9 billion.

Sarrouh said that total remittances from Lebanese expatriates in the Gulf region have also shrunk, leading to a fall in the growth of deposits this year.

Economists say that the delicate economic conditions in some of the Gulf states have directly affected Lebanese expatriates, and this was clearly evident by the drop in money they send to their relatives and families back in Lebanon.

But ironically, bank loans to the private sector have seen a growth of 1.51 percent in the month of October and 17.10 percent in the first nine months of this year.

Banks, and especially the leading banks, are currently very careful in lending amid a severe economic crisis and an uncertain political future.

To weather any unforeseen problems in the future, banks make provisions that are equal to the loans they give to their clients.

But despite the gloomy economic picture and never-ending political bickering in Lebanon, Central Bank governor Riad Salameh remained upbeat about the future of the commercial banks, predicting a growth of 7 to 8 percent at the end of this year.

The governor obviously is counting on the highly regulated banking sector and the strict measures enforced by the Central Bank to ensure that deposits are safeguarded all the time.

BLOM also assessed positively the performance of the three leading Lebanese banks in the first nine months of this year despite major difficulties.

“Despite political tensions and disturbances in Lebanon and the region and the ensuing economic slowdown, the three largest Lebanese banks (BLOM, Audi and Byblos) maintained their profitability and orderly growth.

“What reinforces this performance is that these three banks are banks with the widest regional expansion among Lebanese banks, especially in countries currently undergoing major political change. This indicates the three banks’ successful operational management and control over risk under difficult conditions characterized by higher risk and uncertainty,” BLOM said in the report.