According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 3.70% (LBP 10,499 billion) during the first half of the year 2021 to LBP 272,975 billion ($181.08 billion), down from LBP 283,474 billion ($188.04 billion) in December 2020. On an annual basis, moreover, the combined assets of the resident banking sector came in 9.95% lower than the LBP 303,150 billion ($201.09 billion) reading reported at end of June of last year. The monthly drop in assets may be explained by the ~$1.04 billion contraction in banks’ deposits with the Central Bank.

On the funding side of the balance sheet, customer deposits fell by 3.50% (LBP 7,624 billion) during the first half of 2021 to LBP 210,392 billion ($139.56 billion) bearing in mind that they dropped by $28.61 billion since the onset of October’s social uprising up until end of year 2020. 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. More specifically, deposits of the resident private sector fell by 3.55% (LBP 5,977 billion) to LBP 162,542 billion ($107.82 billion), coupled with a 3.44% contraction in deposits of the non-resident private sector to LBP 39,817 billion ($26.41 billion). In addition, public sector deposits fell by 2.79% (LBP 231 billion) during the first six months of 2021 to LBP 8,033 billion ($5.33 billion). From a currency denomination standpoint, deposits in Lebanese Pounds contracted by 2.99% (LBP 1,477 billion) by June 2021 to LBP 47,968 billion ($31.82 billion), while foreign currency deposits dropped by 3.65% (LBP 6,147 billion) to LBP 162,423 billion ($107.74 billion). In this context, the deposit dollarization rate stood at 80.27% as at end of June in comparison with 80.37% in December 2020 and 79.83% in June 2020. On an annual basis, total customer deposits narrowed by 6.55% from LBP 225,134 billion ($149.34 billion) at end of June 2020.

On the lending front, loans to the private sector (residents and non-residents) receded by 11.90% (LBP 6,486 billion) during the first half of 2021 to LBP 48,037 billion ($31.87 billion), down from LBP 54,523 billion ($36.17 billion) in December 2020. 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 23.06% on an annual basis, resulting in a ratio of net loans to customer deposits of 22.83% at end of June 2021, compared to 25.01% at end of 2020 and 27.73% in June 2020. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 41.63% in June 2021, in comparison with 44.55% at year-end 2020 and 44.34% at end of June 2020. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 17.28% at end of June 2021 from 19.28% at end of December and 22.84% in June 2020.

The consolidated capital accounts of commercial banks operating in Lebanon dropped by $3.55 billion in the first six months of 2021 to LBP 24,690 billion ($16.38 billion), mainly owing to the losses incurred by the sector during the year 2020 and first half of 2021.