The performance of the Lebanese banking sector remained clawed by the local and regional political havoc and the country’s slothful economic activity, with Alpha banks’ combined profits falling by 5.52% y-o-y to $2.27 billion in 2018, down from $2.40 billion in 2017. It is worth noting that the Alpha group of banks comprises 16 banks each having customer deposits exceeding $2 billion. The group includes Bank Audi, BLOM Bank, BankMed, Banque Libano-Française, Byblos Bank, Credit Libanais, Bank of Beirut, Bank Beirut & the Arab Countries (BBAC), First National Bank, IBL Bank, Société Générale de Banque au Liban (SGBL), Fransabank, Lebanon and Gulf Bank, CreditBank, Saradar Bank and Lebanese Swiss Bank. In details, the Alpha group reported some 10.45% y-o-y expansion in net interest income to just under $4.52 billion, which was diluted by the 0.49% drop in net commission & fee income to $906.86 million and the 60.57% plunge in other operating income to $205.03 million, coupled with the 49.18% contraction in net gains on financial instruments to $406.38 million. Consequently, net operating income fell by 3.98% on an annual basis to $5.65 billion in 2018, slightly alleviated by a 4.90% drop in total operating expenses to $2.96 billion.

On the balance sheet front, the consolidated assets of Alpha banks (including their foreign affiliates) widened by 11.29% during the year 2018 to nearly $261.54 billion (compared to a 13.48% growth for the resident banking sector, which excludes foreign affiliates), up from $235.02 billion as at year-end 2017, notwithstanding the 4.63% drop in the portfolio of net loans & acceptances (compared to some 0.50% drop for the resident banking sector) to around $63.87 billion. The increase in assets was mainly buoyed by a 34.35% hike in cash and balances with Central Banks. On the other hand, customer deposits at Alpha banks rose by 2.12% in 2018 (in comparison with some 3.23% annual rise in the resident banking sector) to $188.28 billion, from $184.37 billion at end of year 2017. More specifically, domestic deposits at the Alpha group of banks grew by 2.78% to about $163.09 billion, while foreign deposits fell by 1.86% to $25.31 billion. From a currency breakdown perspective, the domestic deposit dollarization rate rose from 67.33% in December 2017 to 69.18% in December 2018, while the domestic loan dollarization rate increased from 69.98% to 70.75% over the same period. In this context, the Alpha group’s ratio of net loans to customer deposits fell to 33.92% by end of 2018 (compared to a resident banking sector ratio of 33.26% when factoring out foreign subsidiaries), with shareholders’ equity inching up by 0.32% to just above $22 billion. From an asset quality standpoint, the ratio of gross doubtful loans to gross loans at Alpha banks increased from 7.63% at end of 2017 to 8.93% by end of 2018. As far as profitability ratios are concerned, the Alpha group reported returns on average assets (ROaA) and average equity (ROaE) of 0.91% and 10.31% respectively. In details, the net interest margin contracted from 2.00% to 1.96% whereas the net operating margin increased from 37.10% to 37.30%. Said rise in the net operating margin came mainly as a result of the contraction in the tax cost from 8.05% to 7.69% outweighing the increase in the cost to income ratio from 48.12% in 2017 to 48.69% in 2018. It is worth noting that the branch network of Alpha banks widened by 7 during the year 2018 to 1,223 branches, while the number of employees dropped by 199 to 31,016.