According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 9.72% (LBP 31,765 billion) during the first eight months of the current year to LBP 295,032 billion ($195.71 billion), down from LBP 326,797 billion ($216.78 billion) in December 2019. On an annual basis, the combined assets of the resident banking sector came in 25.27% lower than the LBP 394,807 billion ($261.90 billion) reading reported at end of August of last year. This drop is partly attributed to banks offsetting their LBP loans extended by BDL with their respective similar maturity LBP placements with the Central Bank associated with financial engineering transactions with the latter in order to conform with International Financial Reporting Standards (IFRS) not to mention the sizeable drop in their loans to the private sector.

On the funding side of the balance sheet, customer deposits fell by 9.57% (LBP 23,620 billion) during the first eight months of 2020 to LBP 223,245 billion ($148.09 billion) bearing in mind that they fell by $3.61 billion in December and by $5.86 billion in November 2019 at the onset of October’s social uprising. This comes on the back of the bank run witnessed in the aftermath of the ongoing social tensions and fear of a haircut on deposits. This YTD contraction came as a result of the 8.80% (LBP 16,777 billion) drop in the deposits of the resident private sector to LBP 173,789 billion ($115.28 billion), accompanied by a 14.47% (LBP 7,079 billion) decrease in the deposits of the non-resident private sector to LBP 41,841 billion ($27.76 billion). However, public sector deposits increased by 3.20% (LBP 236 billion) to LBP 7,615 billion ($5.05 billion). From a currency denomination standpoint, deposits in Lebanese Pounds receded by 22.28% (LBP 14,435 billion) by August 2020 to LBP 50,364 billion ($33.41 billion), with foreign currency deposits also dropping by 5.04% (LBP 9,184 billion) to LBP 172,882 billion ($114.68 billion). In this context, the deposit dollarization rate increased to 80.18% as at end of August in comparison with 76.02% at end of 2019 and 72.01% at end of August of the previous year. On an annual basis, total customer deposits narrowed by 16.46% from LBP 267,239 billion ($177.27 billion) at end of August 2019.

On the lending front, loans to the private sector (residents and non-residents) receded by 20.36% (LBP 15,277 billion) during the first eight months of 2020 to LBP 59,750 billion ($39.64 billion), down from LBP 75,027 billion ($49.77 billion) in December 2019. This drop in the loans portfolio partly owes to the early settlement of some loans from related customers’ deposits through a netting process in fear of a haircut on deposits or a formal devaluation of the currency. The loans portfolio also sank by 28.15% on an annual basis, resulting in a ratio of net loans to customer deposits of 26.76% at end of August 2020, compared to 30.39% at end of 2019 and 31.12% in August 2019. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 45.07% in August 2020, in comparison with 36.23% at year-end 2019 and 31.26% at end of August 2019. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 21.43% at end of August 2020 from 28.31% at end of December and 31.05% in August 2019.

The consolidated capital accounts of commercial banks operating in Lebanon dropped by 9.90% YTD August 2020 to around LBP 28,146 billion ($18.67 billion) and came in lower than the LBP 31,235 billion ($20.72 billion) reading reported at end of August 2019.