Issue No. 677
February 1 – February 7, 2020 TABLE OF CONTENTS
LEBANON NEWS
ECONOMIC INSIGHTS LEBANON RANKS LAST AMONGST EMERGING MARKETS IN EXTERNAL DEBT > LEBANON RANKS LAST AMONGST EMERGING MARKETS IN EXTERNAL DEBT RETURN IN JANUARY 2020 RETURN IN JANUARY 2020 1 > INSURANCE PREMIUMS DOWN BY 0.22% Y-O-Y BY SEPTEMBER 2019 2 Lebanon’s return on the external > BDL’ S BUSINESS SURVEY RESULTS SHOW DULL ECONOMIC ACTIVITY sovereign debt stood at a negative IN Q3-2019 3 16.08% in January 2020, poising it to > FINANCIAL SECTOR’S UTILIZED CREDITS REACH $65.41 BILLION occupy the last position among 13 MENA BY SEPTEMBER 2019 4 countries included in Merrill Lynch’s > FINANCIAL SECTOR’S SECURITIES PORTFOLIO AT $3.08 BILLION BY JUNE 2019 5 external debt EM sovereign bond index. > C OMMERCIAL BANKS’ ASSETS AT $216.78 BILLION BY END OF YEAR 2019 6 INSURANCE PREMIUMS DOWN BY > CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.38 BILLION 0.22% Y-O-Y BY SEPTEMBER 2019
BY END OF 2019 7 Written insurance premiums dropped by > COMBINED ASSETS OF INVESTMENT BANKS AT $5.14 BILLION IN DECEMBER 2019 8 0.22% on an annual basis to $1,260.98 ss > THE LEBANESE FINANCIAL SECTOR’S NET FOREIGN ASSETS DROP BY million in the first nine months of 2019, $4.35 BILLION IN 2019 9 down from $1,263.72 million during the > WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 7.36% IN same period in 2018. DECEMBER 2019 9
> THE COINCIDENT INDICATOR DOWN BY 11.57% Y-O-Y IN DECEMBER FINANCIAL SECTOR’S UTILIZED 2019 10 CREDITS REACH $65.41 BILLION BY > CEMENT DELIVERIES DOWN BY 31.88% IN 2019 10 SEPTEMBER 2019 > BDL ISSUES INTERMEDIATE CIRCULARS NO. 542 & 543 11 > OPENED LETTERS OF CREDITS DOWN BY 15.27% IN 2019 12 The financial sector’s utilized credits fell > NUMBER OF PAYMENT CARDS AT 3.04 MILLION AT END OF YEAR 2019 13 by 6.36% y-o-y to nearly $65.41 billion in > TRIPOLI PORT ACTIVITY UP BY 17.48% Y-O-Y BY NOVEMBER 2019 14 the first nine of 2019, down from around $69.85 billion in the same period in 2018. MONETARY PERFORMANCE FINANCIAL SECTOR’S SECURITIES > MONETARY AGGREGATES 15 PORTFOLIO AT $3.08 BILLION BY JUNE > MONEY MARKETS 15 2019
The net value of the securities portfolio LEBANESE EQUITIES on the books of the Lebanese financial > LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 16 sector (banks and financial institutions)
depreciated by 13.48% during the first
half of 2019 to $3.08 billion, from $3.56 LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 18 billion at year-end 2018.
LEBANON'S RATINGS 19 COMMERCIAL BANKS’ ASSETS AT $216.78 BILLION BY END OF YEAR 2019
The combined balance sheet of commercial banks operating in Lebanon contracted by 13.11% during the year 2019 to $216.78 billion, down from $249.48 billion in December 2018 owing to an accounting treatment of netting LBP loans from and placements with the Central Bank.
Weekly Market Watch
ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 SYNOPSIS OF TERMS
"ABL" Association of Banks in Lebanon
"BDL" Banque Du Liban
"BOP" Balance of Payment
"BSE" Beirut Stock Exchange
"CLASI" Credit Libanais Aggregate Stock Index
"CLFI" Credit Libanais Financial Sector Stock Index
"CLCI" Credit Libanais Construction Sector Stock Index
"CPI" Consumer Price Index
“EIU” Economist Intelligence Unit
“EOY” End of Year
"GDRs" Global Depositary Receipts
"GDP" Gross Domestic Product
"IMF" The International Monetary Fund
"LBP" The Lebanese Pound
"M1" Currency in Circulation + Demand Deposits in LBP
"M2" M1 + Other Deposits in LBP
"M3" M2 + Deposits in Foreign Currencies
"M4" M3+ Treasury Bills Held by Non-Banking System Including Accrued Interests
"MENA" Middle East and North Africa
"MOF" The Lebanese Ministry of Finance
"Moody's" Moody's Investors Service
"P/E" Price to Earnings Multiple
"P/BV" Price to Book Multiple
"PPI" Producer Price Index
"TEU" Twenty-Foot-Equivalent Unit
"USD" The United States Dollar
"Y-O-Y" Year-on-Year
"YTD" Year to Date
"YTD Price Performance" Yield to Date Price Appreciation
“LE “
Weekly Market Watch
ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 LEBANON NEWS
LEBANON RANKS LAST AMONGST EMERGING MARKETS IN EXTERNAL DEBT RETURN IN JANUARY 2020
According to the monthly “High Yield & Emerging Market Profiles” report published by Merrill Lynch, the return on Lebanon’s external debt stood at a negative 16.08% during the month of January 2020, compared to 0.58% in December 2019. Said dismal result in January can be attributed to the absence of any tangible reforms and the persistent street riots in spite of the formation of a new government. This poises Lebanon to occupy the last position globally in the external debt EM sovereign bond index in terms of total return. Turkey topped the regional list with a total return of 5.10%, followed by Egypt (2.54%) and Jordan (2.21%) only to name a few. It is worth highlighting that these returns are not risk-adjusted, which explains the fact that countries offering high sovereign yields have high Option Adjusted Spreads (OAS) as sketched in the table below, lowering as such the risk adjusted returns.
When factoring in all emerging economies in the Merrill Lynch index, however, Suriname emerges as the best performer with a sovereign return of 9.69%. Lebanon’s excess return reached a negative 17.70% in January 2020, the lowest among surveyed MENA countries, noting that it recorded the highest OAS of 3,413 basis points (bps) amongst all emerging economies.
The OAS on Lebanon’s External Sovereign debt came higher than the 2,627 bps level reported in December 2019. The weight assigned to Lebanon in Merrill Lynch’s Emerging Markets’ external debt index dropped to 0.85% in January 2020 down from 1.04% in the previous month, as captured in the following analysis:
Lebanon's Sovereign External Debt Month of Month of December January 2019 2020 Returns (%) 0.58 -16.08 Excess Return (%) 0.78 -17.70 Option Adjusted Spreads (bps) 2,627 3,413
Lebanon's Weight in the Index (%) 1.04 0.85
Source: M errill Lynch, Credit Libanais Economic Research Unit
Total Return on Sovereign External Debt in MENA Countries in January 2020 Excess Country Returns (%) MENA Rank OAS (bps) MENA Rank Return (%) Turkey 5.10 1 332 2.73 1 Egypt 2.54 2 424 0.03 2 Jordan 2.21 3 372 -0.82 3 Saudi Arabia 2.16 4 119 -1.38 7 Qatar 1.83 5 105 -2.02 9 U.A.E. 1.43 6 97 -1.79 8 Morocco 1.00 7 137 -1.21 6
Kuwait 0.86 8 71 -0.93 5
Oman 0.40 9 334 -2.11 10 Tunisia 0.09 10 656 -0.86 4 Bahrain 0.05 11 268 -2.34 12 Iraq -1.02 12 544 -2.12 11 Lebanon -16.08 13 3,413 -17.70 13 Source: M errill Lynch, Credit Libanais Economic Research Unit
Weekly Market Watch
1 SOURCE: MERRILL LYNCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT
LEBANON NEWS
INSURANCE PREMIUMS DOWN BY 0.22% Y-O-Y BY SEPTEMBER 2019
The Association of Insurance Companies in Lebanon (ACAL) released its quarterly report on the performance of the Lebanese insurance sector, conveying a 0.22% annual drop in written insurance premiums to $1,260.98 million in the first nine months of 2019, down from $1,263.72 million during the same period in 2018. Said drop was mainly buoyed by an 8% contraction in workmen insurance premiums, coupled with a 7% dip in motor insurance premiums and a 4% drop in life insurance premiums, which altogether outweighed the 9% increase in medical insurance premiums, the 6% rise in cargo insurance premiums and the 1% uptick in fire insurance premiums among others. Concurrently, the report uncovered a rise in the share of non-life insurance premiums to 72.1% by September 2019, from 70.5% a year before. On the other hand, the share of life insurance premiums slightly narrowed to 27.9% of total written premiums, from 29.5% over the same period in 2018.
Performance of the Lebanese Insurance Sector
YTD Sep- YTD Sep- % Change 2018 2019 Gross Written Premium (Million USD) 1,263.72 1,260.98 -0.22% Total Indemnities Paid to Beneficiaries (Million USD) 896.73 766.12 -14.57%
Source: ACAL, Credit Libanais Economic Research Unit
Breakdown of Insurance Premiums as at End of Insurance Premiums Annual Growth by Segment as at end of September 2019 September 2019
Life 9% 6% Insurance 10% 27.9% 8% 6% 1% 4% 2% 0% -2% Life Insurance Medical Fire Insurance Workmen Motor Cargo Insurance Insurance Insurance Insurance Non-Life -4% -4% Insurance -6% -8% 72.1% -8% -7%
Source: ACAL, Credit Libanais Economic Research Unit
Source: ACAL, Credit Libanais Economic Research Unit
“Medical Insurance Premiums” constituted the lion’s share (34.9%) of total written premiums, followed by “Life Insurance” (27.9%), “Motor Insurance” (20.8%), and “Fire Insurance” (6.7%) only to name a few. In parallel, the report indicated that insurance indemnities paid on policyholders’ claims plunged by 14.57% y-o- y to about $766.12 million by end of September 2019, with “Medical Claims” and “Life Claims” accounting for 42.1% and 27.7% of total insurance claims on a respective basis, followed by “Motor” (20.4%) claims among others.
Breakdown of Insurance Claims by Segment as at End of Breakdown of Insurance Premiums by Segment as at End September 2019 of September 2019
Workmen Cargo Insurance Cargo Insurance 0.8% Others Others 3.6% Workmen Insurance 2.8% Insurance 2.2% 4.5% Medical Insurance Fire Insurance Medical 3.0% 2.6% Insurance 34.9% 42.1% Fire Insurance 6.7%
Life Insurance 27.7% Motor Insurance 20.8%
Life Insurance Motor Insurance 27.9% 20.4%
Source: ACAL, Credit Libanais Economic Research Unit Source: ACAL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: ACAL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2 LEBANON NEWS
BDL’S BUSINESS SURVEY RESULTS SHOW DULL ECONOMIC ACTIVITY IN Q3-2019
The Lebanese Central Bank released its “Business Survey” report pertaining to the third quarter of 2019 in which it assesses a set of macroeconomic indicators based on the opinions of corporate managers through a poll addressing the performance of their respective businesses. The assessment of each macroeconomic indicator relies on a balance of opinion, which consists of the difference between the proportion of managers estimating a certain improvement and those perceiving a contraction in the related variable. In details, the report unveiled that the balance of opinion with regards to “industrial production” worsened to -33% in the third quarter of 2019, compared to -27% during the second quarter of 2019 yet was better than the -34% balance reported in the third quarter of the preceding year. Similarly, the report showed some deterioration in the balance of opinion pertaining to “total demand” in the industrial sector to -36% in Q3-2019, from -30% a quarter earlier, with that of “foreign demand” dropping to -24%, from -19% in the second quarter of 2019. The “volume of investments” balance fell to -20% in Q3-2019, from -11% in the previous quarter.
Third Quarter Second Quarter Third Quarter Balance of Opinion of 2018 of 2019 of 2019
Industry Production -34% -27% -33% Total Demand -36% -30% -36% Foreign Demand -15% -19% -24% Volume of Investments -12% -11% -20%
Commerce Volume of Sales -31% -30% -34%
Construction & Public Works General Activity -52% -48% -46% Construction -51% -50% -47% Public Work -42% -36% -51% Source: BDL, Credit Libanais Economic Research Unit
On the commerce front, managers were pessimistic during the third quarter of 2019, with the business survey results showing a widening negative gap between managers whose perceptions are optimistic and those who estimated a slowdown in commerce activity. More specifically, the balance of opinion for “volume of sales” stood at -34% in Q3-2019, in comparison with -30% during the previous quarter. With respect to construction & public works, the negative balance of opinion of managers for “general activity” and “construction” metrics narrowed to 46% and 47% on a respective basis, from negative readings of 48% and 50% in the second quarter of 2019, while that of “public work” widened to -51%, from -36% in Q2-2019.
From a regional perspective, the balances of opinion of interviewed managers surrounding industrial, commercial, and construction & public works activities in the Beirut & Mount-Lebanon, South, and Bekaa regions were entirely negative, while the poll for the North region showed mixed results when it comes to managers working in the industrial sector.
Balance of Opinion - Beirut & Mount- North South Bekaa Third Quarter of 2019 Lebanon
Industry Production -26% -9% -39% -65% Total Demand -27% -9% -42% -75% Foreign Demand -18% 0% -59% -40% Volume of Investments -19% 0% -86% -9%
Commerce Volume of Sales -22% -30% -43% -77%
Construction & Public Works General Activity -39% -8% -75% -86% Construction -39% -13% -50% -95% Public Work -37% -23% -80% -96% Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3 LEBANON NEWS
FINANCIAL SECTOR’S UTILIZED CREDITS REACH $65.41 BILLION BY SEPTEMBER 2019
According to Central Bank statistics, the financial sector’s utilized credits fell by 6.36% y-o-y to nearly LBP 98,605.14 billion ($65.41 billion) in the first nine of 2019, down from around LBP 105,303.45 billion ($69.85 billion) in the same period in 2018. Of the total utilized credits amount, some LBP 1,920.1 billion ($1.27 billion) represent the value of utilized credits benefiting from banks liabilities subject to reserve requirements. The breakdown of utilized credits by type of facility reveals a sizeable concentration in Advances Against Real Estate ($25.57 billion <39.09%>), followed by Overdrafts ($17.77 billion <27.16%>) and Advances Against Personal Guarantees ($11.17 billion <17.08%>) only to name a few. The total number of utilized credit transactions stood at 609,869 as at end of September 2019, implying an average credit balance of around LBP 159.645 million ($107,252) per credit line.
Distribution of Total Utilized Credits by Type as at End of September Distribution of the Financial Sector's Utilized Credits by Type of Credit 2019 September- September- Y-O-Y $ Million Advances Against 2018 2019 % Change Advances Against Other Real Advances Against Cash Guarantees, Financial Values, Collateral/Bank 2.55% 1.79% Advances Against – Advances Against Cash Collateral/Bank Guarantees 8,241.26 8,061.83 -2.18% Guarantees, Real Estate, 12.33% – Advances Against Financial Values 1,319.87 1,169.78 -11.37% 39.09% – Advances Against Real Estate 26,868.17 25,570.43 -4.83% – Advances Against Other Real Guarantees 2,003.14 1,666.38 -16.81% – Advances Against Personal Guarantees 12,313.15 11,174.16 -9.25% – Overdrafts 19,107.45 17,767.15 -7.01% Advances Against Personal Total 69,853.03 65,409.71 -6.36% Guarantees, 17.08% Overdrafts, Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit 27.16%
Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit
From a sectoral breakdown perspective, the Trade & Services sector enjoyed the lion’s share ($22.53 billion <34.44%>) of total utilized credits, followed by loans to Individuals ($19.88 billion <30.40%>) and loans to the Construction sector ($10.55 billion <16.13%>). As for the distribution of utilized credits by number of borrowers, the number of Individual borrowers topped the list of borrowers (84.42% of total borrowers), followed by beneficiaries from the Trade & Services sector (10.48%) and borrowers in the Industrial sector (2.58%). Distribution of Total Utilized Credits by Sector as at End of September 2019 Distribution of the Financial Sector's Utilized Credits by Sector September- September- Y-O-Y $ Million Others, 2.99% 2018 2019 % Change Financial Trade & Intermediation, Agriculture, Services, – Agriculture 835.06 823.79 -1.35% 4.11% 1.26% 34.44% 7,597.34 -8.15% Industry, – Industry 6,977.90 10.67% – Construction 11,150.65 10,553.83 -5.35%
– Trade & Services 23,228.05 22,527.82 -3.01%
– Financial Intermediation 3,344.74 2,689.91 -19.58% Construction, 16.13% – Individuals 21,632.27 19,883.65 -8.08%
– Others 2,064.93 1,952.80 -5.43% Individuals, Total 69,853.03 65,409.71 -6.36% 30.40% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit
Geographically, the Beirut & Suburbs region amassed the highest concentration of utilized credits, detaining a 74.64% share by September 2019, followed by the Mount Lebanon (13.21%) and North (4.45%) regions among others.
Geographical Distribution of Commercial Banks' Credits
September-2018 September-2019 Geographical Distribution of Commercial Banks' Credits as at End of September 2019 – Beirut and Suburbs 74.52% 74.64% North, 4.45% Bekaa, 3.28% – Mount Lebanon 13.25% 13.21% South, 4.42% Mount Lebanon, – South 4.55% 4.42% 13.21% – North 4.49% 4.45% Beirut and – Bekaa 3.19% 3.28% Suburbs, 74.64% Total 100% 100% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit
Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4 LEBANON NEWS
FINANCIAL SECTOR’S SECURITIES PORTFOLIO AT $3.08 BILLION BY JUNE 2019
The Lebanese Central Bank’s quarterly bulletin shows some 13.48% depreciation in the net value of the securities portfolio on the books of the Lebanese financial sector (banks and financial institutions) during the first half of 2019 to LBP 4,641.5 billion ($3.08 billion), from LBP 5,364.8 billion ($3.56 billion) at year-end 2018. On an annual basis, the net value of securities portfolio held by the financial sector plunged by 17.85% from LBP 5,649.8 billion ($3.75 billion) at end of June 2018. In details, the value of equity securities, which constituted 51.32% of the Lebanese financial sector’s net securities portfolio, contracted by 2.15% year-to- date, and by 15.13% annually to LBP 2,382.0 billion ($1.58 billion). Concurrently, long-term debt securities, which represented some 48.12% of the sector’s net securities portfolio, fell by 22.94% since the beginning of the year and by 19.72% y-o-y to LBP 2,233.7 billion ($1.48 billion).
Portfolio Investment of Lebanon's Financial Sector - Net Assets December- YTD % Y-O-Y % (USD Billion) June-2018 June-2019 2018 Change Change Equity Securities 1.86 1.61 1.58 -2.15% -15.13%
Long-Term Debt Securities 1.85 1.92 1.48 -22.94% -19.72%
Short-Term Debt Securities 0.04 0.02 0.02 -18.87% -57.57%
Net Securities 3.75 3.56 3.08 -13.48% -17.85% Source: BDL, Credit Libanais Economic Research Unit
Commercial banks controlled the lion’s share (42.46%) of the financial sector’s placements in equity securities, followed by medium & long-term banks (32.38%) and financial institutions (16.78%). Commercial banks also detained the largest stake (63.35%) of the financial sector’s placements in long-term debt securities, trailed, and by far, by medium & long-term banks (19.88%) and insurance companies (9.28%).
Breakdown of the Long-Term Debt Securities Portfolio of Breakdown of the Equity Securities Portfolio of the the Lebanese Financial Sector by Type of Institution at End of June 2019 Lebanese Financial Sector by Type of Institution at End of June 2019 Insurance Financial Insurance Companies Intermediaries 9.28% Companies 0.00% 8.35% Financial Financial Intermediaries 0.02% Institutions Commercial 7.49% Banks Financial 42.46% Institutions 16.78%
Medium & Long- Term Banks 19.88% Medium & Long- Commercial Term Banks Banks 32.38% 63.35%
From an asset allocation standpoint, the Lebanese financial sector’s securities portfolio was majority concentrated in U.S. equity instruments (34.78%), U.S. long-term debt securities (36.08%), and Australian short-term debt securities (68.60%). The allocation of the investment portfolio by type of instrument across other countries at end of June 2019 is sketched in the table below:
Proportion of Net Assets by Country of Investment Equity Securities Long-Term Debt Securities Short-Term Debt Securities U.S. 34.78% U.S. 36.08% Australia 68.60% Luxembourg 10.37% U.K. 15.72% U.S. 12.79% France 9.37% France 11.48% U.K. 5.04% Jordan 6.44% United Arab Emirates 3.63% European Union 5.04% Bahrain 6.30% Switzerland 2.69% Kuwait 4.65% Others 32.74% Others 30.40% Others 3.88% Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5 LEBANON NEWS
COMMERCIAL BANKS’ ASSETS AT $216.78 BILLION BY END OF YEAR 2019
According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 13.11% (LBP 49,300 billion) during the year 2019 to LBP 326,797 billion ($216.78 billion), down from LBP 376,097 billion ($249.48 billion) in December 2018. This drop comes as a result of banks offsetting their LBP loans from BDL with their respective similar maturity LBP placements with BDL arising from financial engineering transaction with the Central Bank in order to conform with International Financial Reporting Standards (IFRS). Y Y-O-Y % USD Billion 2018 2019 T Change D Total Assets 249.48 216.78 -13.11% Loans to the Private Sector 59.39 49.77 -16.19% Customer Deposits, o/w: 178.56 163.76 -8.29% - Resident Private Sector Deposits 136.56 126.41 -7.43% - Non-Resident Private Sector Deposits 37.72 32.45 -13.98% - Public Sector Deposits 4.28 4.89 14.50% Capital Accounts 20.15 20.72 2.82% Dollarization Rate 70.62% 76.02% Private Sector Loans/Deposits Ratio 33.26% 30.39% - LBP Private Sector Loans/LBP Deposits 32.95% 36.23% - FC Private Sector Loans/FC Deposits 33.40% 28.31% Source: BDL, Credit Libanais Economic Research Unit
Evolution of Commercial Banks' Combined Assets
USD Billion
275.00 249.48
250.00 219.86 216.78 225.00 204.31 200.00 185.99 175.70
175.00
150.00 125.00
100.00 2014 2015 2016 2017 2018 2019
On the funding side of the balance sheet, customer deposits fell by 8.29% (LBP 22,309 billion) in 2019 to LBP 246,865 billion ($163.76 billion), and by 2.16% ($3.61 billion) in December alone, bearing in mind that they also contracted by 3.38% ($5.85 billion) in November. This comes on the back of the bank run witnessed in the aftermath of the protests and resignation of the Lebanese government. This annual contraction came as a result of the 7.43% (LBP 15,293 billion) drop in the deposits of the resident private sector to LBP 190,566 billion ($126.41 billion), accompanied by a 13.98% (LBP 7,950 billion) decrease in the deposits of the non- resident private sector to LBP 48,920 billion ($32.45 billion). On the other hand, public sector deposits increased by 14.50% (LBP 934 billion) to LBP 7,379 billion ($4.89 billion). From a currency denomination standpoint, deposits in Lebanese Pounds receded by 22.53% (LBP 18,843 billion) during the year 2019 to LBP 64,799 billion ($42.98 billion), with foreign currency deposits also dropping by 1.87% (LBP 3,466 billion) to LBP 182,066 billion ($120.77 billion). In this context, the deposit dollarization rate increased to 76.02% by end of December in comparison with 70.62% at end of 2018.
On the lending front, loans to the private sector (residents and non-residents) plunged by 16.19% (LBP 14,497 billion) during the year 2019 to LBP 75,027 billion ($49.77 billion), down from LBP 89,524 billion ($59.39 billion) in December 2018. As a result, the ratio of net loans to customer deposits stood at 30.39%, compared to 33.26% at end of 2018. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 36.23% by end of 2019, in comparison with 32.95% at year-end 2018. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 28.31%, from 33.40% in December 2018.
The consolidated capital accounts of commercial banks operating in Lebanon rose to around LBP 31,240 billion ($20.72 billion) at end of year 2019, compared to LBP 30,382 billion ($20.15 billion) at end of 2018. This can be explained by banks’ continuous reinforcement of their capital base in order to meet BDL’s solvency requirement thresholds.
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6 LEBANON NEWS
CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.38 BILLION BY END OF 2019
According to Banque Du Liban (BDL) statistics, the consolidated balance sheet of financial institutions operating in Lebanon narrowed by 10.18% ($156.75 million) during the year 2019 to $1,382.59 million, down from $1,539.34 million at year-end 2018. This can be mainly attributed to the 9.86% ($73.45 million) contraction in claims on customers to $671.40 million, coupled with some 45.64% ($43.02 million) decrease in claims on the non-resident financial sector to $51.25 million, a 7.57% ($25.11 million) drop in claims on the resident financial sector to $306.68 million and a 19.29% ($21.48 million) decline in the value of the securities portfolio to $89.86 million. It is worth noting that claims on customers and on the resident financial sector are the two largest asset categories on financial institutions’ balance sheet, accounting for 48.56% and 22.18% of total assets on a respective basis. On the liabilities side, liabilities to the resident financial sector plunged by 40.01% ($149.08 million) in 2019 to $223.52 million, with the value of debt securities issued sinking by 24.96% ($37.21 million) to $111.87 million and liabilities to the non-resident financial sector slipping by 12.96% ($18.57 million) to $124.69 million, altogether outweighing the 9.17% ($20.50 million) increase in other liabilities to $244.05 million, the 3.85% ($18.05 million) expansion in financial institutions’ combined capital accounts to $486.39 million, and the 5.66% ($10.08 million) rise in customer deposits to $188.12 million. Financial Institutions' Consolidated Balance Sheet YOY % USD Million Dec-2018 Dec-2019 Change Assets Cash & Deposits with Central Banks 44.61 54.92 23.10% Claims on Customers 744.85 671.40 -9.86% Claims on Resident Financial Sector 331.79 306.68 -7.57% Claims on Non-Resident Financial Sector 94.27 51.25 -45.64% Claims on the Public Sector 4.84 5.14 6.24% Securities Portfolio 111.34 89.86 -19.29% Tangible & Intangible Fixed Assets 190.73 185.86 -2.55% Other Assets 16.92 17.49 3.37% Total Assets 1,539.34 1,382.59 -10.18% Liabilities Customer Deposits 178.05 188.12 5.66% Liabilities to the Resident Financial Sector 372.60 223.52 -40.01% Liabilities to the Non-Resident Financial Sector 143.27 124.69 -12.96% Public Sector Deposits 4.46 3.94 -11.71% Debt Securities Issued 149.08 111.87 -24.96% Other Liabilities 223.55 244.05 9.17% Capital Accounts 468.34 486.39 3.85% Total Liabilities 1,539.34 1,382.59 -10.18% Source: Banque Du Liban, Credit Libanais Economic Research Unit
Breakdown of Financial Institutions' Assets at End of Year 2019
Claims on the Public Sector 0.37%
Other Assets 1.26%
Claims on Non-Resident Financial 3.71% Sector
Cash & Deposits with Central Banks 3.97%
Securities Portfolio 6.50%
Tangible & Intangible Fixed Assets 13.44%
Claims on Resident Financial Sector 22.18%
Claims on Customers 48.56%
0% 20% 40% 60%
Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7 LEBANON NEWS
COMBINED ASSETS OF INVESTMENT BANKS AT $5.14 BILLION IN DECEMBER 2019
According to Banque Du Liban (BDL) statistics, the combined balance sheet of investment banks operating in Lebanon narrowed by 3.14% in 2019 to nearly $5.14 billion, down from $5.30 billion at end of 2018. In details, claims on the private sector (comprising resident and non-resident customers in addition to the resident financial sector) dropped by 5.77% to $2.16 billion, coupled with a 9.17% contraction in the securities portfolio to $910 million eclipsing the 2.50% rise in cash and deposits with central banks to $1.59 billion and some 14.97% rise in tangible & intangible fixed assets to $342 million. On the liabilities side, private sector deposits (resident and non-resident customers, in addition to the resident financial sector) fell by 7.54% in 2019 to around $1.90 billion, accompanied by a sharp 41.80% drop in liabilities to the public sector to $63 million, outweighing the 3.43% increase in investment banks’ capital accounts to $1.73 billion and some 0.63% hike in other liabilities to about $1.22 billion.
Abiding by legislative decree number 50 and subsequent BDL circulars, investment banks operating in Lebanon have managed over the last couple of years to increase their lending activity to the private sector while reducing their exposure to the public sector. As a result, the surplus representing the difference between loans to the private sector and claims on the public sector reached $2.16 billion by end of 2019.
Evolution of Investment Banks' Combined Balance Sheet
In Millions of USD Dec-2018 Dec-2019 % Change
Cash & Deposits with Central Banks 1,554 1,592 2.50% Claims on Private Sector 2,292 2,160 -5.77% Claims on Public Sector 1 1 115.85% Claims on Non-Resident Financial Sector 83 62 -24.71% Securities Portfolio 1,002 910 -9.17% Tangible & Intangible Fixed Assets 297 342 14.97% Other Assets 76 70 -7.97% Total Assets 5,304 5,138 -3.14%
Private Sector Deposits: 2,049 1,895 -7.54% Resident Customer & Financial Sector Deposits in LBP 1,000 904 -9.64% Resident Customer & Financial Sector Deposits in FC 747 736 -1.50% Non-Resident Customer Deposits 302 255 -15.55% Liabilities to the Public Sector 108 63 -41.80% Liabilities to the Non-Resident Financial Sector 239 213 -10.79% Debt Securities Issued 24 18 -25.04% Capital Accounts 1,675 1,733 3.43% Other Liabilities 1,208 1,216 0.63% Total Liabilities 5,304 5,138 -3.14% Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8 LEBANON NEWS
THE LEBANESE FINANCIAL SECTOR’S NET FOREIGN ASSETS DROP BY $4.35 BILLION IN 2019
The Lebanese financial sector’s net foreign assets contracted by $840.8 million in December in comparison with an expansion of $1,142.8 million in November and contractions of $197.9 million in October and $58.5 million in September. December’s contraction can be attributed to the $826.8 million drop in the net foreign assets of the Central Bank coupled with a $14.0 million decrease in the net foreign assets at banks & financial institutions. On a cumulative basis, the financial sector’s net foreign assets plunged by nearly $4.35 billion during the year 2019, in comparison with a $4.82 billion drop in 2018. This result owes to the $1.95 billion contraction in the net foreign assets of banks & financial institutions, which was accompanied by some $2.41 billion drop in the net foreign assets of the Central Bank.
Change in the Net Foreign Assets of the Financial For the Year Sector (USD Million)
2018 2019 % Change At the Central Bank (2,289.5) (2,404.9) 5.04% At Banks & Financial Institutions (2,533.7) (1,946.6) -23.17% Total (4,823.2) (4,351.4) -9.78%
Source: Banque Du Liban, Credit Libanais Economic Research Unit Monthly Change in the Net Foreign Assets of the Financial Sector Cumulative Change in the Net Foreign Assets of the Financial USD Million Sector USD Million 1,237.5 1500.0 1,203.5 1,142.8 1000 921.5 1000.0 0 (155.7) 500.0 236.9 -1000 72.5 (1,128.2) (1,407.6) 0.0 -2000 (75.1) (58.5) (204.3) (146.1) (197.9) (71.6) (363.5) -500.0 (408.1) -3000 (550.1) (548.9) (638.5) (747.5) -1000.0 (575.0) (840.8) -4000 (3,354.6) (953.9) (4,351.4) -1500.0 -5000 (1,379.7) (1,300.0) (4,823.2) (1,881.7) (1,810.4) -6000 -2000.0 2013 2014 2015 2016 2017 2018 2019
2018 2019 Source: Banque Du Liban, Credit Libanais Economic Research Unit Source: Banque Du Liban, Credit Libanais Economic Research Unit
WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 7.36% IN DECEMBER 2019
According to BDL statistics, interest rates fell significantly during the month of December in the light of BDL circular no. 536 that places caps on interest rates paid on USD deposits at 5% and LBP deposits at 8.5% noting that interest payments on USD deposits will be split equally between LBP and USD . In figures, the weighted average interest rate on Lebanese Pound denominated deposits dropped to 7.36% during the month of December 2019, from 9.40% in the previous month and 8.30% a year earlier. In the same vein, the weighted average interest rate on U.S. Dollar denominated deposits dropped to 4.62% in December 2019, down from 6.31% in November and 5.15% in December 2018. Commercial banks’ discount and lending rate on LBP denominated loans came in lower at 9.09% in December of the year 2019, with that on USD denominated loans increasing to 10.84%. Consequently, the average monthly spread between LBP lending and deposit rates stood at 180 basis points in December 2019, while that between USD lending and deposit rates reached 389 bps. De c e mbe r 2 0 18 Nove mbe r 2 0 19 De c e mbe r 2 0 19 Interest Rate Levels LBP USD LBP USD LBP USD Average Rate on Deposits 8.30% 5.15% 9.40% 6.31% 7.36% 4.62% Term Savings & Deposits Rate 9.13% 5.76% 10.43% 7.11% 8.29% 5.31% Discount & Loans Rate 9.97% 8.57% 9.69% 10.64% 9.09% 10.84% Source: Banque Du Liban, Credit Libanais Economic Research Unit
Evolution of LBP Lending & Deposits Yearly Average Rates (%) Evolution of USD Lending & Deposits Yearly Average Rates (%)
10.60 9.77 9.10 8.35 8.29 8.80 8.07 6.96 6.95 7.08 7.25 7.34 7.35 7.27 7.09 7.09 5.88 5.44 5.52 5.58 5.56 5.65 3.92 3.93 3.90 3.69 3.77 3.89 2.92 2.79 4.04 4.30 2.64 3.65 1.91 1.76 1.51 2.00 1.80 3.03 3.16 3.34
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 Average Monthly Spread USD Monthly Average Rate on Deposits USD Discount and Loans Average Monthly Rate Average Monthly Spread LBP Monthly Average Rate on Deposits
LBP Discount and Loans Average Monthly Rate Source: BDL, Credit Libanais Economic Research Unit
Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9 LEBANON NEWS
THE COINCIDENT INDICATOR DOWN BY 11.57% Y-O-Y IN DECEMBER 2019
Banque Du Liban’s coincident indicator fell by 2.96% during the month of December 2019 to 265.9, down from 274 in November. On an annual basis, the coincident indicator plunged by 11.57% from 300.7 in December 2018, portraying a sizeable deterioration in Lebanon’s overall economic activity in the aftermath of the protests and social unrest which started in mid-October of the same year. It is worth noting that the coincident indicator is a gauge used to measure Lebanon’s macroeconomic activity and comprises the import of petroleum derivatives, electricity production, check clearing activity, cement deliveries, foreign passengers, foreign trade, and the M3 monetary aggregate.
Evolution of Lebanon's Coincident Indicator
316.1 320 309.7 304.3 310 300.7 295.9 297.9 297.4 293.1 300 291.6 284.5 290 280.9
280 274.0
265.9 270
260
250
240 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19
Source: BDL, Credit Libanais Economic Research Unit
CEMENT DELIVERIES DOWN BY 31.88% IN 2019
Cement deliveries, the coincident indicator of construction activity, fell by 45.79% during the month of December 2019 to 115,405 tons, down from 212,901 tons a month earlier. On a cumulative basis, cement deliveries plunged by 31.88% in 2019 to 3,203,396 tons, compared to 4,702,315 tons a year earlier. Evolution of Cumulative Cement Yearly Evolution of Cement Deliveries Deliveries (Tons) 2012 5,308,550 Tons 5,830,616 5,516,827 5,148,615 5,308,550 5,263,462 2013 5,830,616 5,042,867 6,000,000 4,702,315 5,000,000 2014 5,516,827 3,203,396 4,000,000 2015 5,042,867 3,000,000 2,000,000 2016 5,263,462 1,000,000 0 2017 5,148,615 2012 2013 2014 2015 2016 2017 2018 2019
2018 4,702,315 2019 3,203,396 Source: BDL, Credit Libanais Economic Research Unit Source: BDL, Credit Libanais Economic Research Unit
Cement deliveries registered a negative compounded annual growth rate (CAGR) of 6.96% over the 2012 - 2019 period, mirroring the lackluster activity of Lebanon’s construction sector amidst the pale economic situation.
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10 LEBANON NEWS
BDL ISSUES INTERMEDIATE CIRCULARS NO. 542 & 543
The Lebanese Central Bank issued on February 3, 2020 intermediate circulars no. 542 and 543 addressed to banks. In details, circular 543 requires banks to abide by the following solvency ratios.
Ca pita l Minimum Capital Conservation Tota l Adequacy Ratio Buffe r Common Equity Tier 1 Ratio 4.50% 2.50% 7.00% Tier 1 Ratio 6.00% 2.50% 8.50% Total Capital Ratio 8.00% 2.50% 10.50% Source: Banque Du Liban, Credit Libanais Economic Research Unit
In addition, the circular tied dividend distributions by banks to the satisfaction of certain thresholds, namely a 7% common equity tier 1 ratio, a 10% tier 1 ratio and a 12% total capital ratio. The circular also stipulates that banks must constitute a Capital Conservation Buffer of 2.5% of Risk Weighted Assets and that banks that fail in achieving said buffer must propose an action plan to the Banking Control Commission to build this threshold within a period of three years. Circular 543 also recommended adjusting the risk weight on Foreign Currency placements with BDL (including Certificates of Deposit) having a maturity of more than one year to 150%. The Central Bank specified in annex 6 of the circular the regulatory expected credit losses (ECLs) that will be applicable by banks in the calculation of the above Capital Adequacy Ratios. More specifically, an ECL of 1.89% will be applied on placements with the Central Bank in USD, 9.45% on USD placements with the government and on corporate loans for resident institutions among others, noting that an ECL of 0% will be applied on LBP placements with the government and with the Central Bank.
On its part, circular no. 542 stipulates that the expected accounting credit loss rates on placements with BDL (including Certificates of Deposit) and on sovereign placements must not exceed the regulatory credit loss rates mentioned above.
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11 LEBANON NEWS
OPENED LETTERS OF CREDITS DOWN BY 15.27% IN 2019
According to Banque Du Liban statistics, opened letters of credit (L/Cs), a measurement tool for trade activity, narrowed by 61.40% during the month of December 2019 to $117.41 million, down from $304.21 million in November. On a cumulative basis, the face value of opened L/Cs came in 15.27% lower y-o-y at $8,511.37 million in 2019, compared to $10,045.45 million in 2018. Evolution of Total Opened L/Cs
Million 10,692.63 12,000 10,229.67 10,045.45 9,354.26 8,934.13 10,000 8,511.37 7,651.94 7,445.64 8,000
6,000 4,000 2,000 - Up to Up to Up to Up to Up to Up to Up to Up to December- December- December- December- December- December- December- December- 2012 2013 2014 2015 2016 2017 2018 2019
Source: BDL, Credit Libanais Economic Research Unit
Documentary L/Cs opened to finance imports activities contracted by 14.34% in 2019 to $5,657.12 million, from $6,604.36 million in 2018. Concurrently, utilized credits for imports fell by 7.46% to $5,546.85 million, down from $5,994.17 million in 2018. Inward bills for collection, another documentary credit form of financing (backed by invoices), fell by 21.97% y-o-y to $814.11 million by end of 2019, from $1,043.33 million in 2018.
Documentary Credits for Imports' Financing for the Period Ended Opened Letters of Credits & Inward Bills for Imports' Financing During the Period Ended December December Y-O-Y $ Million 2018 2019 % Change $ Million 6,604.36 5,657.12 Documentary L/Cs 7,000 6,000 – Opened Credits 6,604.36 5,657.12 -14.34% 5,000 – Utilized Credits 5,994.17 5,546.85 -7.46% 4,000 3,000 1,043.33 – Outstanding Credits 1,008.29 413.20 -59.02% 814.11 2,000 Bills For Collection 1,000 0 – Inward Bills 1,043.33 814.11 -21.97% December 2018 December 2019 – Outstanding Bills 64.01 43.32 -32.33% – Opened Credits – Inward Bills Source: BDL, Credit Libanais Economic Research Unit
In a related note, documentary L/Cs opened to finance exports activities dropped by 17.05% on a yearly basis to $2,854.26 million by end of 2019, from $3,441.08 million a year before. However, utilized credits to finance exports rallied by 3.97% to $2,861.69 million (100.26% of opened L/Cs for exports). Conversely, the value of outstanding bills sank by 21.12% annually to $292.54 million in 2019, with outward bills for collection receding by 33.10% to $905.86 million.
Documentary Credits for Exports' Financing for the Period Ended Opened Letters of Credits & Outward Bills for Exports' Financing During the Period Ended December December Y-O-Y $ Million 2018 2019 % Change $ Million 3,441.08
Documentary L/Cs 3,500 2,854.26 – Opened Credits 3,441.08 2,854.26 -17.05% 3,000 2,500 – Utilized Credits 2,752.34 2,861.69 3.97% 1,354.00 2,000 905.86 – Outstanding Credits 865.27 548.92 -36.56% 1,500 1,000 Bills For Collection 500 – Outward Bills 1,354.00 905.86 -33.10% 0 December 2018 December 2019 – Outstanding Bills 370.88 292.54 -21.12%
Source: BDL, Credit Libanais Economic Research Unit – Opened Credits – Outward Bills
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12 LEBANON NEWS
NUMBER OF PAYMENT CARDS AT 3.04 MILLION AT END OF YEAR 2019
The number of payment cards in Lebanon (debit, credit, charge, and prepaid cards) increased by 9.29% (258,246 cards) during the year 2019 to 3,036,756 cards, up from 2,778,510 cards at year-end 2018. In detail, the number of debit cards rose by 226,279 in 2019 to 1,854,044, with the number of charge cards adding 2,487 to 106,053 and that of prepaid cards increasing by 53,304 to 520,568 cards, outweighing the 23,824 slump in the number of credit cards to 556,091.
2012 2013 2014 2015 2016 2017 2018 2019 Number of Payment Cards, o/w: 1,861,849 2,183,995 2,432,598 2,754,657 2,763,712 2,633,459 2,778,510 3,036,756 - Debit Cards 1,135,102 1,192,364 1,222,757 1,389,390 1,667,527 1,537,633 1,627,765 1,854,044 - Credit Cards 439,839 481,033 520,007 570,038 554,694 571,366 579,915 556,091 - Charge Cards 163,024 181,157 174,190 154,608 152,092 98,811 103,566 106,053 - Prepaid Cards 123,884 329,441 515,644 640,621 389,399 425,649 467,264 520,568 Number of ATMs 1,433 1,516 1,603 1,707 1,793 1,902 1,998 2,003 Number of Electronic POS 23,833 23,820 25,781 27,120 30,181 33,951 35,303 37,931 Source: BDL, Credit Libanais Economic Research Unit Evolution of the Number of Payment Cards
In 000 3,500 3,037 2,755 2,764 2,779 3,000 2,633 2,433 2,184 2,500 1,862 2,000
1,500
1,000 500 2012 2013 2014 2015 2016 2017 2018 2019
Source: BDL, Credit Libanais Economic Research Unit
In a related note, the banking sector’s ATM network sustained its expansionary momentum, spreading over 2,003 machines by December 2019, up from 1,998 at end of 2018. Beirut and Suburbs amassed the highest concentration of ATMs (738 ATMs <36.84%>), followed by the Mount Lebanon (735 ATMs <36.69%>), North (205 ATMs <10.23%>), South (151 ATMs <7.54%>), Bekaa (145 ATMs <7.24%>), and Nabatieh (29 ATMs <1.45%>) regions.
Geographical Distribution of ATMs as at End of Evolution of the Number of ATMs Year 2019
Nabatieh Bekaa South 1.45% 7.24% Mount Lebanon Lebanon 2,200 2,003 7.54% 36.69% 1,998 North 1,902 2,000 Lebanon 1,793 10.23% 1,707 1,800 1,603 1,516 1,600 1,433
1,400
1,200 Beirut and Suburbs 1,000 36.84% 2012 2013 2014 2015 2016 2017 2018 2019 Source: BDL, Credit Libanais Economic Research Unit
Source: BDL, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13 LEBANON NEWS
TRIPOLI PORT ACTIVITY UP BY 17.48% Y-O-Y BY NOVEMBER 2019
Freight activity via the Port of Tripoli rose to nearly 157 thousand tons during the month of November 2019, up from around 139 thousand tons in October. Imported freight accounted for 83.84% of total freight (131,990 tons), while export activity constituted a meager 16.16% (25,445 tons). On a cumulative basis, Tripoli Port freight activity soared by 17.48% y-o-y to 1,939 thousand tons in the first eleven months of 2019, compared to 1,651 thousand tons during that same period in 2018. Conversely, the number of vessels fell by 4.79% annually to 576, with the number of imported cars via the Tripoli Port plunging by 21.99% to 3,080. In this context, port-related revenues (excluding VAT and customs) dropped by 5.91% on a yearly basis to about $13.79 million by November 2019, down from $14.66 million a year earlier.
Tripoli Port For the Eleven-Month Period Ended Y-O-Y % Indicators November 2018 November 2019 Change Freight Activity (000 Tons) 1,651 1,939 17.48% Number of Vessels 605 576 -4.79% Number of Imported Cars 3,948 3,080 -21.99% Port-Related Revenues ($ Million) 14.66 13.79 -5.91% Source: Port of Tripoli, Al Bayan Economic Magazine, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: PORT OF TRIPOLI, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14 CORPORATE NEWS
MONETARY PERFORMANCE
MONETARY AGGREGATES
All monetary aggregates ended the week of January 23, 2020 on a negative note. In fact, the overall money supply, “M4”, narrowed by LBP 1,269.05 billion on a weekly basis and by 5.44% on an annual basis to LBP 210,453 billion, noting that the non-banking sector’s Treasury bills portfolio fell by LBP 64 billion during the concerned week.
Similarly , Lebanese-Pound denominated deposits and currency in circulation, “M1”, receded by LBP 297.31 billion week-on-week to LBP 17,345 billion on the back of some LBP 406 billion contraction in demand deposits, which outweighed the LBP 109 billion rise in money in circulation. Local currency term deposits, “M2”, plunged by LBP 861.78 billion on a weekly basis and by 18.70% year-on-year to settle at LBP 61,394 billion.
Consequently, private sector term and saving deposits denominated in LBP (“M2-M1”) sank by LBP 564.47 billion (1.27%) to LBP 44,049 billion during the week of January 23, with deposits denominated in foreign currencies (“M3-M2”) receding by LBP 342.99 billion (0.25%) to reach LBP 137,812 billion. Money Supply - LBP Billion - Money Supply January 16, 2020 January 23, 2020 % Cha nge LBP Billion
M1 17,642 17,345 - 1.69%
M2 62,256 61,394 - 1.38% 250,000 210,453 211,722 M3 200,411 199,206 - 0.60% 200,411 199,206 M4 211,722 210,453 - 0.60% 200,000 M2 - M1 4 4 ,6 14 4 4 ,0 4 9 - 1.2 7 % M3 - M2 13 8 ,15 5 13 7 ,8 12 - 0 .2 5 % Source: Banque Du Liban, Credit Libanais Economic Research Unit 150,000 January 16, January 23, 2020 2020 M4 M3 Source: BDL, Credit Libanais Economic Research Unit
MONEY MARKETS
The January 30 Treasury bill auction raised LBP 220.526 billion ($146.286 million), compared to LBP 228.730 billion ($151.728 million) during the auction of the previous week.
The majority of subscriptions was concentrated in the three-year (49.89%) to maturity T-bonds, followed by the seven-year (46.71%) and six-month (3.40%) tenure Treasury securities.
Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 8.14% in the auction of January 30. The yields on the six-month, three-year and seven-year to maturity Treasury securities remained flat at 5.85%, 7.50% and 9.00% respectively. January 30, 2020 Lebanese Face Value % of Total Treasury Yield (%) (in billions Face Value Bills of LBP) 6 Months 5.85% 7.503 3.40% 3 Years 7.50% 110.023 49.89% 7 Years 9.00% 103.000 46.71% Total 220.526 100.00% Source: Reuters, Credit Libanais Economic Research Unit
Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months 180 Months Treasury Yield 5.30% 5.85% 6.50% 7.00% 7.50% 8.00% 9.00% 10.00% 10.92%
12.00% On the Run Yield Curve 180 Months 11.00% 120 Months 10.00% 84 Months 9.00%
8.00% 36 Months 24 Months 60 Months 7.00% 12 Months
6 Months 6.00% 3 Months
5.00%
4.00%
3.00% 0 1 2 3 4 5 6 7 8 9 10
Weekly Market Watch
SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15 LEBANESE EQUITIES
LEBANESE EQUITIES
Activity on the Beirut Stock Exchange (BSE) rebounded this week, with the number of shares Credit Libanais Week of Week of Weekly YTD Indices 31-Jan-20 7-Feb-20 % Change % Change changing hands increasing to 473,562, from Credit Libanais Aggregate 642.84 548.07 -14.74% -25.23% 193,507 shares last week. Value traded was no Stock Index <.CLASI> Credit Libanais Financial Sector exception, rallying to $3.36 million, from $1.65 750.10 592.46 -21.02% -36.86% Stock Index <.CLFI> million a week before. Trades were mainly Credit Libanais Construction 465.31 466.60 0.28% 14.94% concentrated in real estate sector stocks, which Sector Stock Index <.CLCI> accounted for 73.94% of weekly traded volume. Credit Libanais Aggregate Stock Index Weekly Performance The average daily traded volume improved to CLASI
94,712 shares this week, from 38,701 shares in the 1,000 previous week. In addition, the average daily traded 950 value increased to $0.67 million, from around $0.33 900 million a week earlier. 850
Four heavily weighed losing and three gaining 800 750 stocks were screened throughout the week, Value Index dragging the BSE’s market capitalization down by 700 11.93% week-on-week to $6.13 billion and the 650 Credit Libanais Aggregate Stock Index (“CLASI”) 600 CLASI 14.74% sizeably lower by 14.74% to an all-time low of 550 548.07. 500
In the real estate sector, trades consisted solely of
13-Jul-19
25-Oct-19
07-Feb-19 06-Feb-20
31-Mar-19
16-Dec-19 03-Sep-19 Solidere “A” and “B” shares (73.94% of weekly 22-May-19 traded volume), with the price of Solidere “A” .CLASI Credit Libanais Aggregate Stock Index dropping by 0.24% on a weekly basis to $8.49 whilst that of Solidere “B” improving by 1.18% to Friday, February 7, 2020
$8.60. Consequently, the Credit Libanais Value Daily % Chng Daily Net Chng Construction Sector Stock Index (“CLCI”) ended its 548.07 -0.890% -4.92 week 0.28% higher at 466.60. Yr.High Year Hi.Date Yr.Low Year.Lo.Date
In the banking sector, Bank Audi listed shares 750.99 8-Jan-20 548.07 7-Feb-20
amassed the highest concentration of trades Life High Life Hi.Date Life Low Life.Lo.Date (15.40% of total BSE traded volume) on a thin 1,801.01 7-Jul-08 548.07 7-Feb-20 turnover ratio of 0.02%. The Credit Libanais Financial Sector Stock Index (“CLFI”) ended Friday’s session down by 21.02% on a weekly basis to an all-time low of 592.46 as a result of the 55.71% tumble in the price of BLOM Bank listed shares to $3.10, the 6.67% contraction in the price of BLOM Bank GDRs to $2.80, the 2.93% decrease in the price of Bank Audi Listed shares to $1.99, which outweighed the 16.02% and 4.35% increase in the prices of the Audi GDR and Bemo Bank listed shares to $2.39 and $1.20 respectively.
Credit Libanais Financial Sector Stock Index Credit Libanais Construction Sector Stock Index Weekly Performance Weekly Performance CLFI CLCI
1,350 530 1,250 490 1,150 450 1,050 410 950
Index Value Index 370 850 Value Index 330 750 CLFI 21.02% 650 290 CLCI 0.28%
550 250
13-Jul-19
25-Oct-19
07-Feb-19 06-Feb-20
31-Mar-19
13-Jul-19
16-Dec-19
03-Sep-19
22-May-19
25-Oct-19
07-Feb-19 06-Feb-20
31-Mar-19
16-Dec-19 03-Sep-19
22-May-19
Weekly Market Watch
SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16 LEBANESE EQUITIES
Lebanese Equities % of Market YTD Weekly Weekly Volume % of Weekly Weekly Weekly Total Listed P/E P/BV BEIRUT STOCK EXCHANGE Closing Capitalisation Price %Change Traded Volume Traded Value Traded Value Shares ($000) Perf. Traded Solidere A $8.49 -0.24% 263,922 55.73% $2,235,586 66.49% 100,000,000 849,000 16.62 0.77 16.30% Solidere B $8.60 1.18% 86,211 18.20% $729,786 21.71% 65,000,000 559,000 16.84 0.78 17.97% BLC Bank $0.93 0.00% - - - - 71,033,333 66,061 11.80 0.46 0.00% BLC Bank Preferred Class "D" $94.00 0.00% - - - - 750,000 70,500 n.a n.a 0.00% BLC Bank Preferred Class "E" $94.00 0.00% - - - - 263,510 24,770 n.a n.a 0.00% Bank Audi - Listed Shares $1.99 -2.93% 72,928 15.40% $145,725 4.33% 399,749,204 795,501 1.74 0.26 -43.14% Bank Audi GDR $2.39 16.02% 100 0.02% $239 0.01% 119,639,761 285,939 2.09 0.31 -32.29% Bank Audi Preferred "H" $77.00 0.00% - - - - 750,000 57,750 n.a n.a 0.00% Bank Audi Preferred "I" $77.95 0.00% - - - - 2,500,000 194,875 n.a n.a 0.00% Bank Audi Preferred "J" $69.95 0.00% - - - - 2,750,000 192,363 n.a n.a 0.00% Bank Of Beirut - Listed Shares $18.80 0.00% - - - - 20,796,417 390,973 6.30 0.96 0.00% Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - - - 4,762,000 100,002 7.03 1.07 0.00% Bank Of Beirut Preferred "H" $25.00 0.00% 4,800 1.01% $120,000 3.57% 5,400,000 135,000 n.a n.a 0.40% Bank Of Beirut Preferred "I" $25.00 0.00% 1,200 0.25% $30,000 0.89% 5,000,000 125,000 n.a n.a 0.20% Bank Of Beirut Preferred "J" $25.00 0.00% - - - - 3,000,000 75,000 n.a n.a 0.00% Bank Of Beirut Preferred "K" $25.00 0.00% - - - - 4,000,000 100,000 n.a n.a 0.00% Byblos Bank - Listed Shares $1.00 0.00% 3,331 0.70% $3,331 0.10% 565,515,040 565,515 6.86 0.39 0.00% Byblos Bank Preferred Class 2008 $60.80 0.00% - - - - 2,000,000 121,600 n.a n.a 1.33% Byblos Bank Preferred Class 2009 $59.90 0.00% - - - - 2,000,000 119,800 n.a n.a -4.92% Byblos Bank GDR $62.00 0.00% - - - - 1,309,078 81,163 8.50 0.49 0.00% BEMO Bank - Listed Shares $1.20 4.35% 16,000 3.38% $19,200 0.57% 51,400,000 61,680 4.78 0.46 4.35% BEMO Bank Preferred Class 2013 $92.00 0.00% - - - - 350,000 32,200 n.a n.a 0.00% BLOM Bank GDR $2.80 -6.67% 12,285 2.59% $33,157 0.99% 73,896,010 206,909 1.27 0.19 -53.87% BLOM Bank Listed Shares $3.10 -55.71% 12,785 2.70% $45,141 1.34% 215,000,000 666,500 1.40 0.21 -56.15% RYMCO Class "B" $3.28 0.00% - - - - 10,920,000 35,818 18.22 1.57 0.00% Holcim Liban $10.00 0.00% - - - - 19,516,040 195,160 - 1.33 2.56% Ciments Blancs Nominal $2.90 0.00% - - - - 9,000,000 26,100 13.14 1.21 11.54% Note: n.a stands for not applicable Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit
Evolution of Beirut Bourse Comparable Benchmarks Activity Analysis Previous Last % Change Value Traded ($) 1,647,294 3,362,164 104.10% 0.570 Volume Traded 193,507 473,562 144.73% Average Daily Trading Value ($) 329,459 672,433 104.10% Average Daily Trading Volume 38,701 94,712 144.73% 0.570 Market Cap - BSE ($) 6,964,890,761 6,134,177,728 -11.93% 0.565 0.554 Weighted Average P/BV 0.570 0.554 -2.83% 0.560 0.555 Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit 0.550 0.545 January 31, 2020 February 7, 2020 P/BV Source: BSE, Credit Libanais Economic Research Unit
The market-cap weighted average price to book value (P/BV) multiple of listed stocks ended its week sizably lower at 0.554 based on the closing prices of Friday’s session.
Weekly Market Watch
SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17 LEBANON’S MAIN INDICATORS
LEBANON’S MAIN INDICATORS
Recap of Lebanon's Major Indicators 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2020 MACROECONOMIC INDICATORS
GDP (Current Prices) ($ Billion) 46.87 48.30 49.97 51.24 53.39 56.37* 58.57* 60.46* Real GDP Growth Rate 2.62% 1.88% 0.42% 1.61% 0.55% 0.25%* 0.20%* 0.86%* GDP per Capita (Current Prices) ($) 8,883* 8,619* 8,540* 8,530* 8,778* 9,251* 9,655* 10,043* Foreign Direct Investment Inflows ($ Billion) 2.7 2.9 2.4 2.6 2.6 2.9 2.6* FDI/GDP Ratio 5.68% 6.03% 4.70% 5.09% 4.93% 5.14% 4.44% INDUSTRY
Industrial Exports ($ Million) 3,384 3,150 2,956 2,527 2,474 2,548 2,095 (2) Import of Industrial Machinery ($ Million) 300 269 234 236 257 266 163 (2) TOURISM
Total Number of Tourists 1,274,362 1,354,647 1,517,927 1,688,357 1,856,795 1,963,917 1,936,320 (4) Growth in Tax- Free Spending 4% 8% 2% - 9% 5% 7% - 2% (4) REAL ESTATE
Value of Real Estate Transactions ($ Million) 8,708 8,952 8,006 8,482 9,954 8,134 6,839 (4) Number of Real Estate Sales Transactions 69,198 70,721 63,386 64,248 73,541 60,714 50,352 (4) Construction Permits (000 sqm) 10,527 11,159 10,294 9,935 9,271 7,144 4,899 (4) Cement Delivery (000 Tons) 5,831 5,517 5,043 5,265 5,149 4,702 3,203 (4) TRANSPORTATION
Beirut Port: Freight Activity (000 Tons) 8,268 8,281 7,240 8,737 8,629 7,985 6,524 (4) Beirut Airport: Number of Passengers (Million) 6.26 6.57 8.22 7.61 8.24 8.84 8.68 (4) FOREIGN TRADE
Imports ($ Million) 21,228 20,494 18,069 18,705 23,130 19,980 19,239 (4) Exports ($ Million) 3,936 3,313 2,952 2,977 2,844 2,952 3,731 (4) Trade Balance ($ Million) (17,292) (17,181) (15,117) (15,729) (20,287) (17,028) (15,508) (4) Current Account Deficit / GDP Ratio 27.44% 28.17% 19.26% 23.14% 25.86% 26.38% BALANCE OF PAYMENTS
Net Foreign Assets at the Financial Sector ($ Million) (1,127) (1,407) (3,354) 1,238 (157) (4,823) (4,351) (4) Foreign Assets at BDL ($ Billion) 35.29 37.86 37.09 40.71 41.99 39.67 37.27 36.66 (6) Foreign Currency Reserves ($ Billion) ------31.57 30.96 (6) Gold Reserves at BDL ($ Billion) 11.10 10.95 9.85 10.71 11.96 11.77 13.94 14.57 (6)
PUBLIC FINANCE
Government Expenditures ($ Million) 13,640 13,952 13,528 14,867 15,381 17,792 13,402 (2) Government Revenues ($ Million) 9,420 10,879 9,576 9,923 11,625 11,546 9,378 (2) Budget Primary Deficit / Surplus ($ Million) (240) 1,307 724 21 1,428 (636) 217 (2) Total Deficit ($ Million) (4,220) (3,073) (3,952) (4,944) (3,756) (6,246) (4,024) (2) Deficit / GDP Ratio 9.00% 6.36% 7.91% 9.65% 7.03% 11.07% Debt Service / GDP Ratio 8.09% 9.07% 9.36% 9.69% 9.71% 9.95% Net Public Debt ($ Billion) 53.18 57.30 61.54 65.42 69.32 75.72 80.55 (3) Gross Public Debt/GDP Ratio 135.44% 137.82% 140.71% 146.15% 148.96% 151.03%* 155.13%* 161.82%*
MONETARY AGGREGATES & INFLATION
M4 ($ Billion) 117.41 124.53 131.17 139.20 145.16 148.31 141.77 139.60 (5) (M2- M1) ($ Billion) 40.56 43.27 46.25 47.95 45.45 42.98 31.16 29.22 (5) Monetization Level (M2/GDP Ratio) 97.17% 100.66% 104.17% 106.25% 98.05% 89.84% Change in CPI (%) 2.05% - 1.66% - 3.40% 3.14% 5.01% 3.98% 6.96% (4)
BANKING SYSTEM
Number of Commercial Banks 56 55 53 50 49 49 49 (1) Number of Branches 985 1,020 1,039 1,056 1,065 1,080 1,080 (1) Total Assets ($ Million) 164,821 175,697 185,989 204,311 219,856 249,484 216,781 (4) Total Deposits ($ Million) 139,166 147,637 154,951 166,446 172,965 178,556 163,758 (4) Loans to the Private Sector ($ Million) 47,381 50,899 54,224 57,180 60,318 59,386** 49,769 (4) Customer Loans/ Deposits 34.05% 34.48% 34.99% 34.35% 34.87% 33.26%** 30.39% (4) Dollarization Rate 66.14% 65.71% 64.88% 65.82% 68.72% 70.62% 76.02% (4) Exchange Rate (LBP to USD) 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 * Figures Reflect IM F Estimates ** Year 2018 loan figures and onwards reflect BDL's reclassification of some balance sheet items to meet IFRS9 requirements.
(1) As at End of M arch, 2019, (2) As at End of October, 2019, (3) As at End of November, 2019, (4) As at End of December, 2019, (5) As at January 23, 2020, (6) As at End of January, 2020
Weekly Market Watch
SOURCE: CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 18 LEBANON’S RATINGS
Republic Of Lebanon Sovereign Ratings
Rating Agency Tenor Rating Outlook
Long- Te rm CCC Ne ga tive Standard & Poor's Global Ra tings S hort- Te rm C
Moody's Investors Service Long- Te rm Ca a 2 RUR Possible Downgrade
Long- Te rm CC - Fitch Ratings S hort- Te rm C
Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings, Credit Libanais Economic Research Unit
Lebanese Banks' Latest Ratings
Rated Banks Moody's Investors Service Fitch Ratings S&P Global Ratings
Long Term Outlook Long Term IDR Outlook Long-Term Short-Term Foreign Counterparty Counterparty Outlook
Currency Credit Rating Credit Rating RD - Withdrawn - SD SD - Bank Audi Caa2 Possible Downgrade
BLOM Bank Caa2 Possible Downgrade - - SD - -
RD - Withdrawn - Byblos Bank Caa2 Possible Downgrade - - -
BankMed - - - - SD SD -
Source: M oody's Investors Service, Fitch Ratings, S&P Global Ratings, Credit Libanais Economic Research Unit
Weekly Market Watch
SOURCE: S&P GLOBAL RATINGS, MOODY’S, FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 19
CONTACTS
RESEARCH
Fadlo I. Choueiri, CFA [email protected] 961-1-608 000 EXT: 1280 Jad Abi Haidar, CFA [email protected] 961-1-608 000 EXT. 1283 Marc Moukarzel [email protected] 961-1-608 000 EXT. 1286
TREASURY & FX
Nabil Aouad [email protected] 961-1-608 000 EXT. 0789
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Weekly Market Watch
ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 20