According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 0.65% (LBP 1,647 billion) during the first month of the year 2023 to LBP 253,205 billion ($167.96 billion), down from 254,853 billion ($169.06 billion) in December 2022. On an annual basis, moreover, the combined assets of the resident banking sector came in 3.61% lower than the LBP 262,684 billion ($174.25 billion) reading reported at end of January 2021.

On the funding side of the balance sheet, customer deposits increased by 0.26% in Jan (LBP 504 billion) to LBP 197,078 billion ($130.73 billion) bearing in mind that they dropped by $42.83 billion since the onset of October’s social uprising up until end of year 2022. 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 increased by 0.11% (LBP 169 billion) to LBP 154,418 billion ($102.43 billion) while deposits of the non-resident private sector dropped by 0.23% (LBP 83 billion) to LBP 35,188 billion ($23.34 billion). In addition, public sector deposits rose by 5.92% (LBP 418 billion) in January 2023 to LBP 7,472 billion ($4.96 billion). From a currency denomination standpoint, deposits in Lebanese Pounds rose by 1.59% (LBP 833.23 billion) in January 2023 to LBP 53,261 billion ($35.33 billion), while foreign currency deposits dropped by 0.23% (LBP 328.89 billion) to LBP 143,816 billion ($95.40 billion). In this context, the deposit dollarization rate sustained its downturn to reach 75.85% as at end of January 2023 in comparison with 76.06% in December 2022 and 79.29% in January 2022. On an annual basis, total customer deposits narrowed by 2.37% (LBP 4,782 billion) from a reading of LBP 201,860 billion ($133.90 billion) at end of January 2022.

On the lending front, loans to the private sector (residents and non-residents) receded by 2.36% (LBP 713 billion) during the month of January 2023 to LBP 29,515 billion ($19.58 billion), down from LBP 30,228 billion ($20.05 billion) in December 2022. 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 ratio of loans to deposits pursued its downturn attaining 14.98% by January 2023 compared to 15.38% at end of 2022 and 20.16% in January 2022. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 32.24% in January 2023, in comparison with 32.85% at year-end 2022 and 44.54% at end of January 2022. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 10.26% at end of January 2023 from 10.63% at end of December 2022 and 14.77% in January 2022.

The consolidated capital accounts of commercial banks operating in Lebanon contracted by (36.73%) (LBP 10,126 billion) in January 2023 alone to reach LBP 17,443 billion ($11.57 billion). This drop most likely owes to banks’ acceleration of ECL provisioning on their Eurobonds portfolios and foreign currency placements with the Central Bank to meet the regulatory thresholds before the adjustment of the official exchange rate to LBP 15,000 per USD in February 2023, and thus book the losses arising thereof at the LBP 1,507.5 per USD exchange rate.