AMID THE POLITICAL storms that have swept across Lebanon in the past two years, the country’s banking sector has not only been a pillar of stability; it has enjoyed a veritable boom.
Lebanon lacked a president and a functioning government for more than 18 months; economic growth stuttered to a standstill after the 2006 war between Hizbollah and Israel; and street-fighting in Beirut earlier this year almost plunged the country back into sectarian civil war.
Nevertheless, Lebanon’s renowned banks have thrived. Assets are up by double digits as the main players expand into the wider region, profits have soared across the sector and loan books are expanding briskly at a time when the credit crunch still stalks western markets.
More important, there is also evidence that some banks are beginning to look beyond their traditional role as buyers of sovereign paper and financiers of the government’s perennially enormous debt. Although government debt is a lucrative investment, still accounting for about half of banking assets, some bankers hint that they might gradually reduce their government exposure in favour of further corporate and retail lending.
The extent to which banks can achieve this will depend, however, on whether the Lebanese state finds alternative ways to finance its chronic debt problem – something that remains far from certain, despite ambitious pledges made to donors in the Paris III conference held last year.