“As a bank we don’t do politics,” says one senior Lebanese financier. It’s an understandable position given the fractious history of this corner of the Middle East.
Stoicism and resilience have long been important qualities in the Lebanese business world and maintaining a neutral position is often vital if a business is to succeed. But it can be hard to maintain that position in the face of the horrors that are taking place across the border in Syria on a daily basis — a country where most Lebanese banks are active.
“The size of our Syrian operation has shrunk very significantly. Today, it represents around 2 per cent of our consolidated balance sheet and it is likely to become even smaller.”
“What is necessary is for Syria to succeed in its political transition, to improve its political governance,” adds the financier. “Then we can start seeing economic efficiencies and banking assets grow again.”
Lebanese banks were among the earliest and most enthusiastic entrants to the Syrian banking system when Bashar al-Assad started to open up the sector soon after he came to power in 2000. Those early years of his rule were a time of optimism in Syria, with a sense that the reforms he was bringing in would be a spur to economic activity.
Fransabank and Blom Bank were the first to turn up when they opened branches in the Damascus free zone in 2001. From 2004 onwards, Lebanese banks started getting licences to set up new banks in partnership with local shareholders. Blom and Banque Bemo were the first to see their subsidiaries open that year and since then five other Lebanese banks have taken stakes in Syrian operations.
The country became a significant market for the likes of Bank Audi, Blom and Byblos Bank — the three largest Lebanese banks — but smaller institutions like First National Bank and Banque Libano-Francaise also got involved. Banks from other parts of the region also came, including several Gulf and Jordanian institutions, but not to the same extent as Lebanese bankers.
These days, however, the Lebanese banks are scaling back their operations to a bare minimum and just trying to ride out the storm. While banks around the rest of the region have been expanding rapidly, in Syria they have been mothballing branches — a recognition of the dire security situation and the fact that the value of their deposits and loans have been drying up.
“The size of our Syrian operation has shrunk very significantly. Today, it represents around 2 per cent of our consolidated balance sheet and it is likely to become even smaller. We have had to close some branches,” says Sami Haddad, general manager for international banking at Byblos Bank.
It is a similar tale at Bank Audi, where the chief finance officer, Freddie Baz, says the $300 million of assets it now has in the country represent less than 1 per cent of his group’s total assets. At the end of 2010, before the uprising against Al-Assad began, it had $2 billion in assets in the country.
Blom Bank, meanwhile, has closed almost a third of its branch network in Syria and says its loan portfolio has shrunk from $650 million a couple of years ago to about $40 million today and the value of its customers’ deposits have dropped from $1.8 billion to $400 million.
“The size of the bank has fallen sharply in the last couple of years. It is a much smaller bank, but at the same time our exposure went down sharply, because it became very small compared to our balance sheet, so the risks became smaller,” says Saad Azhari, chairman of Blom Bank.
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