Lebanese private banks operating in Syria have reported a significant jump in first-half earnings as foreign currency gains offset falling revenues from banking activities.
Bank of Syria and Overseas, the Damascus-based subsidiary of Lebanon's Blom Bank, swung to a net profit of 214.47 million Syrian pounds (Dh7.4m) in the six months ended June 30, from a loss of 1.17m pounds last year, according to a filing posted on the Damascus Securities Exchange's (DSE) website last week.
Interest income declined to 527.14m pounds in the first half, from 655.6m pounds last year.
However, profit from foreign currency revaluation jumped from 449.6m pounds to 3.8 billion pounds as bank balances abroad surged from 10.9bn pounds to 66.3bn pounds.
Fransabank Syria, a subsidiary of Lebanon's Fransabank SAL, reported a profit of 3.86bn pounds in the first six months of this year, from 424.2m pounds last year.
Operating income stood at 430m pounds in the first half, compared with 414m punds last year. But profit from revaluation of currency rose to 92.7m pounds, from 1.95m pounds. Unrealised profits from the currency revaluation surged to 5.7bn pounds, from a loss of 151.1m pounds last year.
"Because of the crisis we are going through, operating profits are diminishing," said Mamoun Hamdan, the chief executive at the DSE. "But the banks with the biggest foreign reserves are doing better than the ones with smaller reserves."
The revaluation in bank reserves comes after the Syrian currency fell to a record low of 200 pounds per dollar in June, compared with 47 pounds before the crisis.
Syria's 14 private lenders, considered the crown jewels of the president Bashar Al Assad's economic modernisation plan, are weathering more than two years of unrest thanks to an improvement in their forex holdings in the wake of a mismatch of their assets and liabilities.
Restrictions on the use of foreign currency have been increased recently with a decree issued by Mr Al Assad last month. The decree forbade "the use of anything other than the Syrian pound as payment for any type of commercial transaction or cash settlement" punishable by up to three years in jail and a fine equivalent to double the value of the payment.
The weakness and volatility of the local currency has pushed up inflation and left many shopkeepers struggling to price their goods.
"Having dollars, depositing them and using them as a currency of savings has never been outlawed but even before the crisis, dealing with dollars in domestic commercial transactions was banned," said a chief currency dealer in a Damascus bank.
"This is a law that imposes more penalties," he said. "Syrians can get transfers in dollars and importers can still price their goods in dollar but they cannot put dollar price tags on goods sold," he said.
Lenders have fallen victim to a surge in robberies and lootings, prompting them to close branches in hot spot areas, such as Homs.
* with Reuters