Lebanese lenders are cutting their exposure to war-torn Syria, says Lebanon's central bank governor.
Lebanese act to stem losses from Syrian war
Lebanon's big banks have cut their lending exposure to war-ravaged Syria by as much as 60 per cent in a bid to limit the economic contagion.
Lebanese lenders have collectively reduced the size of their loan portfolio from US$5 billion (Dh18.36bn) to $2bn, said the central bank governor Riad Salameh in an interview with The National.
"Since the beginning of the Syrian crisis we have run stress tests on the Lebanese banks and the Syrian economy," he said.
"The necessary general provisions were constituted and their exposure there has also diminished by 60 per cent. Some of the banks closed the loan books because clients have paid their dues, some of the banks have sold the loans to others - all of which has contributed to reduction in their exposure."
Profits from Lebanese banks operating in Syria fell by more than 45 per cent last year to 14.5 billion Syrian pounds (Dh752.9 million), according to an economic report published by Byblos Bank.
Bank of Syria and Overseas registered a 92 per cent decline in annual profits for 2012. Syria Gulf Bank posted a 97 per cent drop in net income, while Byblos Bank said its profits fell 94.7 per cent.
Bank Audi Syria and Fransabank Syria said profits fell 95.1 per cent and 62.1 per cent respectively, while Banque Bemo Saudi Fransi registered a 13.4 per cent decline in profit.
"We have seen a rise in defaults," said Sultan Al Zobi, the chief executive of the International Bank for Trade and Finance (IBTF), whose majority shareholder is Jordan's Housing Bank for Trade & Finance.
"At our bank, it counts for about 15 per cent. The slowdown in the economic sectors have had a profound impact on the banks. Many of Syria's factories have been closed. We will have collective impairements, general provisions, for the sake of being conservative for the future."
Mr Al Zobi said he did not expect IBTF to register a profit at the end of the year.
Syria's 14 private lenders, considered the crown jewels of the president Bashar Al Assad's economic modernisation plan, are struggling with a mismatch of assets and liabilities following a 25 per cent decline in the value of the country's currency since May 2011.
Banking transactions such as trade finance or corporate lending have taken a big hit, and deposits and withdrawals continue.
Before the uprising that began two years ago, many Lebanese banks operating in Syria were hoping to expand operations, Nassib Ghobril, the chief economist at Byblos Bank, said last November. "But since the turmoil, their focus has become risk management. Lenders are in wait-and-see mode, and paying attention to how they can minimise the damage and losses until the conflict ends."
Trading on the Damascus Securities Exchange (DSE) has almost halted in recent months as violence escalated in the capital and other cities across Syria. But exchange officials say they remain committed to offering investors a place to trade their holdings.
There are 20 stocks listed on the DSE, 12 of which are banks, with the rest from the insurance, services, industrial and agriculture sectors.
The DSE General Index has lost more than half of its value since the uprising began. It traded at 1,523.14 points on March 15, 2011, the start of the uprising, and has since fallen to 784.92.
The IMF has not provided figures on the Syrian economy since the start of violence.