BEIRUT: Lebanon’s largest 14 banks saw their combined profits in the first quarter of 2014 fall by 2.6 percent while domestic net profits dropped by 5 percent.
According to by Bankdata Financial Services, the profit contraction, within the context of a positive activity growth, drove down return ratios as a whole.
Total profits of the banks – better known as the Alpha Group – in the first quarter of this year stood at $430 million, with both BLOM and Audi making a total profit of $174 million.
In 2013, the consolidated profits of the entire banking sector reached over $1.7 billion.
“The return on average assets dropped from 1.09 percent in the first quarter of 2013 to 0.97 percent in the first quarter of 2014. Likewise, the return on average equity declined from 11.83 percent to 10.63 percent (with the return on average common equity dropping from 13.11 percent to 11.70 percent over the same period),” the report said.
The report argued that the contraction is the result of a drop in asset utilization from 2.97 percent in March 2013 to 2.71 percent in March 2014, coupled with a decline in net operating margin from 36.64 percent to 35.58 percent.
Customer deposits of this group meanwhile exceeded $2 billion in the first quarter.
“Although asset growth was modest at 1.5 percent in the first quarter of this year, the year-on-year activity growth remains sound at 9.2 percent between March 2013 and March 2014. Likewise, the growth of deposits and loans has maintained sound annual growth rates of 8.7 percent and 14.1 percent respectively at the end of March 2014,” the report said.
It added that the annual growth in assets between March 2013 and March 2014 was tied to a 7.4 percent growth in domestic activity, while foreign activity grew by 17.3 percent.
In parallel, customer deposits reported domestic growth of 6.7 percent compared with a growth of 19.4 percent in foreign entities, while loans grew by 6.5 percent domestically and 36.6 percent abroad.
“At the level of domestic activity, customer deposit growth was driven by a 7.3 percent growth in foreign currency deposits, while Lebanese pound deposits grew by 5.6 percent, slightly driving up the deposit dollarization ratio from 63.1 percent in March 2013 to 63.5 percent in March 2014,” the report said.
On the other hand, domestic loans in the Lebanese pound increased much more than foreign currency loans, respectively growing by 15.4 percent and 3.9 percent in the year up to March 2014. As a result, loan dollarization dropped from 77.1 percent in March 2013 to 75.2 percent in March 2014.
“Alpha banks maintained their strong liquid status, with a net primary liquidity as a percentage of customer deposits of 30.4 percent, despite the rise in the loans to deposits ratio from 35.4 percent in March 2013 to 37.1 percent in March 2014,” the report added.