Sfeir urges stability for country’s prosperity
Posted on 10/01/2019

The Daily Star talked to Salim Sfeir, the chairman of Bank of Beirut group, on the performance of the bank and his views on Lebanon’s economy and the banking sector.

Q: Can you please tell us about the financial results of the bank this year and how are they compared to last year? A: Bank of Beirut group has been able to achieve positive results in the first nine months of 2018, with total assets reaching $18.5 billion and net profits increasing year-on-year by 14 percent to reach $124 million.

Overall, the bank strengthened its franchise with above-average growth in main growth indicators, underpinned by good performance of its international business and sustained growth within the Lebanese market.

Q: Do you think that Lebanon’s slow economic growth and political paralysis had any impact on the profits of the bank?

A: Many factors impact the profits of the Lebanese banks, including the economic and political situation.

During the last few months, the country has been under pressure, which resulted in a notable increase in interest rate levels in both foreign currency and Lebanese pounds.

This was part of a well-tuned monetary policy led by the Banque du Liban to preserve market stability during a period of uncertainty.

However, this will also lead to a decrease in private sector funding, hence slower economic activity.

We all know the political deadlock continues to have a very negative influence on our monetary, fiscal and economic well-being. That said, I would like to urge our political leaders to work together as one team to achieve the Lebanese people’s aspirations and to focus on resolving our economic problems above all else.

Q: What are the necessary conditions for good growth in the banking sector in general, and for Bank of Beirut in particular? What is required from the new Cabinet to help the economy pick up steam again?

A: Growth in the banking sector needs stability. More specifically, we need political stability. If we have this, our public and private sector players have the capacity to develop economic strategies that will lead our country to prosperity. The new Cabinet has enormous tasks to tackle.

For me, the main issue is the fiscal deficit. No country can survive in the long run with this high level of fiscal deficit, which may reach more than 10 percent of nominal GDP.

To achieve a better fiscal performance, many audacious steps should be taken, starting by resolving the electricity deficit, committing to a medium- and long-term strategy to fight corruption, and putting in practice the PPP [public-private-partnership] projects.

Q: BoB is one of five leading banks in Lebanon. Do you think the fierce competition among the major banks has made it more difficult to maintain solid growth in deposits and assets?

A: It is true that there is fierce competition among major banks nowadays. However, this is normal in any free marketplace.

I am convinced that the Association of Banks in Lebanon can play a better role in managing the competition between all parties in a professional way. The weak growth we are witnessing this year has more to do with the political situation in Lebanon and the region, but hopefully we will once again achieve the growth rates we have been achieving during previous years.

Q: We have noticed some of the major banks have offered high interest on Lebanese pounds in order to beef up their deposits. Do you believe this trend is healthy or should BdL step in to end this phenomenon?

A: I agree that some banks are offering very high interest rates.

However, to put it in the right perspective, the increase in interest rates for Lebanese pound deposits is mainly due to the need to preserve monetary stability and to maintain the peg system. This is a short-term strategy that will change as soon as we have political stability with a strong government, able to properly lead the country.

Here, I would like to take this opportunity to thank [Central Bank Gov.] Riad Salameh for his crucial role during this high-water period.

Q: What is your ambition for the bank now you have expanded into many countries, most notably Australia? Do you plan expand further outside Lebanon in the future?

A: The long-term strategy adopted by Bank of Beirut aims at diversifying its business activities by expanding regionally and internationally in profitable and low-risk countries. We are now operating in 10 countries, of which three are AAA-rated countries (Australia, the U.K. and Germany).

Our expansion plan will continue during next year, specifically toward Europe and Africa.

Q: Do you believe that there is room for more bank consolidation and mergers in Lebanon?

A: I believe the consolidation is needed due to the high regulatory standards imposed by the international and local regulators. However, I don’t foresee any significant merger operations in Lebanon during this period of uncertainty.

Q: What challenges is the bank facing in Lebanon and abroad?

A: In Lebanon, again, it is the political situation that is delaying economic prosperity.

I truly believe we can achieve miracles if we only have political stability. Abroad, the main challenge is the regulatory environment that continues to put enormous pressure on banks all over the world.

Q: What is the role of the Lebanese diaspora in the future of the country’s economy, and how can we benefit from their presence?

A: The diaspora has a very important role. Just imagine our balance of payment situation without the remittances and without nonresident Lebanese deposits in the local banks. In addition to their contribution to the banking sector and financial markets, we benefit from their talent and know-how acquired in their host countries.

Q: How can banks make a bigger contribution to the growth of the economy and are you willing to help finance some of the infrastructure projects in line with the public-private-partnership program?

A: Our role as banks is to provide financial intermediation services to the economic players. That said, financing the private sector should be our main focus during the next period of economic recuperation.

We are more than ready to provide our financial means and advisory services to help PPPs succeed.

I would like to stress the following: While maintaining monetary stabilization and managing interest rates to control inflation, and adopting a policy to encourage mergers, a sound expansion policy should focus on expanding banking activities to cater to the Lebanese diaspora.

We have a vibrant banking sector that has proved its resilience and can serve as a vehicle to regain the confidence of the diaspora. We need to put pressure on our government to accelerate reforms in order to create a friendly environment to investors

Only the private sector can lead the way to regain the growth momentum, provided that the political stability is prevailing. Stability and honest public servants, and the private sector led by the banking sector, can pave the way to prosperity.

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