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<h2 style='mso-margin-top-alt:7.5pt;margin-right:0in;margin-bottom:0in;
margin-left:0in;margin-bottom:.0001pt'><span style='font-size:13.5pt;
font-family:"Arial","sans-serif";color:black'>Lebanese banks provide welcome
stability<o:p></o:p></span></h2>
<p style='margin:0in;margin-bottom:.0001pt'><span style='font-size:8.0pt;
font-family:"Arial","sans-serif";color:black'>By Anna Fifield in Beirut<o:p></o:p></span></p>
<p style='margin:0in;margin-bottom:.0001pt'><span style='font-size:8.0pt;
font-family:"Arial","sans-serif";color:black'><a
href="http://www.ft.com/cms/s/0/6ca4f2b0-9ec8-11dd-98bd-000077b07658.html?nclick_check=1">http://www.ft.com/cms/s/0/6ca4f2b0-9ec8-11dd-98bd-000077b07658.html?nclick_check=1</a>
<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'><img border=0 width=470 height=314 id="Picture_x0020_1"
src="cid:image001.jpg@01C9377F.0157DF00"
alt="Lebanese traders at Bank Audi in Beirut"></span><span style='font-size:
9.0pt;font-family:"Arial","sans-serif";color:black'><o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>As the financial crisis sends shock waves through global markets,
Lebanon’s banks are bucking the trend as the beneficiaries of an
unprecedented flow of remittances from overseas.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Unlike their counterparts in many western financial centres,
Lebanese banks find themselves in the enviable position of having excess
capital – bank deposits are on course to grow by almost 50 per cent this
year from 2007.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“Contrary to what is happening in the rest of the world,
Lebanon has seen a very significant increase in deposits over the past few
weeks,” says Marwan Barakat, head of research at Bank Audi, the
country’s largest lender.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“This is due to the confidence that Lebanese have in their
banking system, which is conservatively managed and very well regulated,”
Mr Barakat says.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>The inflow into bank deposits totalled $7.7bn in the first eight
months of this year, according to central bank figures, easily surpassing the
2007 full-year total of $6.6bn, itself a record.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>The increase in deposits has been driven by an increase in
overseas remittances, which are set to top the $5.5bn total recorded last year.
There are 4m Lebanese at home but about 12m abroad, many of whom retain strong
ties to their country, sending money home and investing in local real estate.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Many analysts expect deposit growth to reach $10bn by the end of
this year, putting banks on track to improve on a 27 per cent growth in profits
they recorded last year.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>This strong cash base – deposits comprise 85 per cent of
Lebanese banks’ assets, making them among the most liquid in the world
– and experience of survival through times of turbulence mean that
Lebanese lenders are still confident enough to expand aggressively across the
Middle East. They say that they are almost entirely unaffected by the
international financial crisis.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Banks are prohibited from having more than half of their equity
outside the country, and from investing in real estate or derivative products.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“Lebanese banks have very little room to place bets –
they are not allowed to invest in or lend to non-investment grade entities, and
that protects the system,” says Jean Riachi, chairman of FFA Private
Bank, Lebanon’s biggest investment bank.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“Some banks might have some exposure to Lehman Brothers
because it was an AA-rated company, but because of the limitations, the
exposure cannot be big. The banking system in Lebanon is quite immune,”
he says.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Lebanese banks were already enjoying an improving domestic
economy, after three years of sluggish growth due to political disasters that
included the assassination of Rafiq Hariri, the former prime minister, and the
2006 war with Israel.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Private sector economists expect Lebanese gross domestic product
to increase by about 5 per cent this year, partly thanks to a peace agreement
signed between rival Lebanese factions in Doha in May that has ushered in a
period of relative stability.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>That deal, coupled with investors from the Gulf looking for places
to invest their oil profits, has contributed to a sudden jump in capital
inflows into Lebanon, which has one of the most advanced banking systems in the
region.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>This has led to an unusual situation where banks dwarf the real
economy – Lebanese banks have total assets of $100bn in a country with a
GDP of $25bn.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“You don’t find that in any other part of the world,
except maybe Switzerland,” says Mr Barakat.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>This environment means Lebanese banks will be able to continue to
expand around the Middle East. In just three years, Bank Audi has gone from
having no branches in the region to having operations in Syria, Jordan, Egypt,
Saudi Arabia, Qatar and Sudan.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Meanwhile, Blom, Lebanon’s second-largest bank, will start a
corporate and private banking business in Qatar before the end of this year,
and will move into the Saudi Arabian financial sector soon after, says Saad
Azhari, chairman.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“There are a lot of companies in Saudi Arabia that need to
do IPOs [initial public offerings]. The stock market there is very important,
so we are going to have a brokerage and do fund management,” Mr Azhari
tells the Financial Times.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>Blom has businesses in five Arab countries, including Egypt, Syria
and Jordan.<o:p></o:p></span></p>
<p style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:15.6pt;
margin-left:0in'><span style='font-size:9.0pt;font-family:"Arial","sans-serif";
color:black'>“In the future, our plan is to grow our network in the
countries where we already are, and to enter into new Arab countries,” he
says, adding that these were likely to be in the Gulf but declining to specify
target markets.<o:p></o:p></span></p>
<p class=copyright style='mso-margin-top-alt:0in;margin-right:0in;margin-bottom:
11.25pt;margin-left:0in'><span style='font-size:8.0pt;font-family:"Arial","sans-serif";
color:black'><a href="http://www.ft.com/servicestools/help/copyright"><span
style='color:#003399'>Copyright</span></a><span class=apple-converted-space> </span>The
Financial Times Limited 2008<o:p></o:p></span></p>
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