Net profits for the five listed banks on the Beirut Stock Exchange grew by nearly 6% in the first half of 2007 compared to the corresponding period of 2006. This suggests profits for Lebanese banks are expected to increase in 2007, Makram Sader, secretary general of the Association of Banks in Lebanon (ABL), told OBG. Return on equity also increased to reach 12.9% in the first half of 2007, up from12.6% in the same period last year. At the same time, the return on assets slightly decreased a tenth of a percent to 1.1% while the cost/income ratio increased to 51.9%, up from 48.9%.

According to the ABL, the total assets of the consolidated balance sheet of commercial banks in Lebanon increased by 3.8% during the first half of 2007 to reach $79bn at the end of June. Total deposits increased by 3.3% in the same period and reached $63.8bn.

Sader explained that developments in Lebanon and the deterioration of the macro-economic environment have had repercussions on the banking sector. "The activity growth in the first half of 2007 is acceptable despite the slowdown registered when compared to the same period of 2006 [before the July 2006 war], which had recorded a clear improvement with an increase of 6.6 percent."

"In brief, the Lebanese banking sector is performing well [..], and there is nothing strange about that," Sader told OBG. "In fact, the banking sector succeeded in safely overcoming two big crises it had to face in 2005 and 2006, proving its solidity, thanks to the merited confidence of the depositors in the Lebanese banking sector and the high liquidity ratios."

Sader also said that Lebanese banks have stated they are committed to following international industry standards and are preparing for the implementation of the Basel II capital adequacy agreement in the beginning of 2008.

Another sign of the banking sector's good health was Lebanon-based Fransabank's $153m bid for 97.52% of Banque Libanaise pour le Commerce's (BLC) shares, which was recently approved. Fransabank's chairman Adnan Kassar said the acquisition affirmed their confidence in both the banking sector and the Lebanese economy.

BLC is one of Lebanon's oldest banks with a total balance sheet of $1.75bn and 35 branches in operation. Final approval from the Central Bank is expected within a matter of weeks. A Fransabank press release described the acquisition as the "most lucrative" in the bank's history.

Qatar's High Supreme Council for Economic Affairs and Investment, which had bought BLC for $236m in 2005 after outbidding 21 other companies, sold the bank to Fransabank. Under the terms of the deal, the Qatari government will retain ownership of the branches that fall under BLC Dubai and BLC France.

Joe Sarrouh, advisor to the chairman of Fransabank, told OBG the BLC acquisition will not change Fransabank's ranking as the fifth largest Lebanese bank in terms of assets. However, it will rise in terms of total deposits to fourth position. According to Sarrouh, with $1.5bn in terms of deposits and around 50,000 customers, BLC holds great potential as it has not experienced much development in the last four to five years.

Sarrouh said the acquisition fits with Fransabank's strategy of targeting international and internal growth. The bank's international presence includes branches in France, Algeria and Sudan, while a branch in Syria and a representative office in Libya should be added to this list by the end of 2007.

Source: Oxford Business Group