According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 11.17% (LBP 36,502 billion) during the first nine months of the current year to LBP 290,295 billion ($192.57 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 26.56% lower than the LBP 395,260 billion ($262.20 billion) reading reported at end of September 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 10.03% (LBP 24,758 billion) during the first nine months of 2020 to LBP 222,106 billion ($147.33 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 9.23% (LBP 17,584 billion) drop in the deposits of the resident private sector to LBP 172,982 billion ($114.75 billion), accompanied by a 15.46% (LBP 7,563 billion) decrease in the deposits of the non-resident private sector to LBP 41,357 billion ($27.43 billion). However, public sector deposits increased by 5.25% (LBP 388 billion) to LBP 7,767 billion ($5.15 billion). From a currency denomination standpoint, deposits in Lebanese Pounds receded by 22.58% (LBP 14,630 billion) by September 2020 to LBP 50,169 billion ($33.28 billion), with foreign currency deposits also dropping by 5.56% (LBP 10,129 billion) to LBP 171,937 billion ($114.05 billion). In this context, the deposit dollarization rate increased to 80.22% as at end of September in comparison with 76.02% at end of 2019 and 72.89% at end of September of the previous year. On an annual basis, total customer deposits narrowed by 15.82% from LBP 263,848 billion ($175.02 billion) at end of September 2019.

On the lending front, loans to the private sector (residents and non-residents) receded by 22.44% (LBP 16,834 billion) during the first nine months of 2020 to LBP 58,193 billion ($38.60 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 29.17% on an annual basis, resulting in a ratio of net loans to customer deposits of 26.20% at end of September 2020, compared to 30.39% at end of 2019 and 31.14% in September 2019. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 44.65% in September 2020, in comparison with 36.23% at year-end 2019 and 31.85% at end of September 2019. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 20.82% at end of September 2020 from 28.31% at end of December and 30.85% in September 2019.

The consolidated capital accounts of commercial banks operating in Lebanon dropped by 10.82% YTD September 2020 to around LBP 27,860 billion ($18.48 billion) and came in lower than the LBP 31,100 billion ($20.63 billion) reading reported at end of September 2019.