LEBANON WEEKLY REPORT

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1 ECONOMY Gross public debt increased by a yearly 10% in April 2014 to reach USD 64.8 billion of which 60% in LBP and 40% in foreign currency. Net public debt reaches USD 54.6 billion at end of April 2014 Lebanon s gross public debt stood at USD 64.8 billion at end of April 2014 registering a rise of 2.1% from year-end 2013 (USD billion) and an increase of 10% from end-april 2013 (USD 59.1 billion). Debt in local currency stood at USD 38.7 billion at end of April 2014, accounting for 59.8% of the gross public debt. Debt in foreign currency amounted to USD 26.1 billion in the mentioned period, constituting 40.2% of the total. Moreover, public sector deposits at the Central Bank and commercial banks reached USD 10.2 billion at the end of April. As such, the net public debt, which excludes these deposits from the total debt figure, stood at USD 54.6 billion at end of April 2014 recording a rise of 7.8% from end April 2013 (USD 50.6 billion). 70! 65! Lebanon Gross Public Debt! (USD billion)! 64.8! 60! 59.1! 55! 51.5! 52.6! 55.0! 50! 45! 40! 35! Apr-10! Apr-11! Apr-12! Apr-13! Apr-14! Source: ABL, BankMed Research BankMed - Market & Economic Research Division 1

2 ECONOMY The BOP in the first four months of 2014 is a combination of a USD 1,251 million surplus recorded by the Central Bank and a USD 995 million deficit recorded by banks and financial institutions. The balance of payments records USD 45.4 million deficit in April 2014 The balance of payments (BOP) registered a deficit of USD 45.4 million in April 2014, indicating an deterioration from a USD 44.3 million surplus registered in April In the first four months of 2014, the BOP registered a surplus of USD 256 million, improving from a deficit of USD 18 million recorded in the same period last year. The balance in the first four months of 2014 is a combination of a USD 1,251 million surplus recorded by the Central Bank, and a USD 995 million deficit recorded by banks and financial institutions. It is worth noting that the BOP monthly figures logged deficits in January 2014, April 2014 and all through 2013 with the exception of January, April, September, and December. Balance of Payments first four months of the year! (USD millions)! 1,403! 1,137! 256! -18! -598! -916! 2009! 2010! 2011! 2012! 2013! 2014! The EIB provided Byblos Bank and Fransabank a loan worth USD 122 million, while USD 15 million were granted to First National Bank, and USD 27 million are invested in the Euromena III regional private equity fund. EIB grants Lebanese Banks USD 164 million worth of loans to help support the local The European Investment Bank (EIB) signed four finance agreements totaling USD 164 million (EUR 121 million) with Fransabank, Byblos Bank, First National Bank, and the Euromena III Fund. As per EIB s statement, a USD 122 million (EUR 90 million) loan will help to support local firms and create jobs through credit lines channeled through the networks of Byblos Bank and Fransabank. These funds will be made available to firms in the areas of industry, high-tech and services, including tourism, health and education. The EIB has also provided a USD 15 million (EUR 11 million) loan to First National Bank to support the development of the in Lebanon by helping to finance small and medium-sized enterprises (SMEs) and boosting job creation. Lastly, the EIB invested USD 27 million (EUR 20 million) in the Euromena III regional private equity fund, which targets companies with growth potential that are destined to become regional successes. The EIB s commitments to First National Bank and the Euromena III regional private equity fund are financed by the European Union and the kingdom of Spain (Spanish Agency for International Cooperation - AECID). BankMed - Market & Economic Research Division 2

3 The commercial banks loans to increased by a yearly 11% in April 2014 to USD 42.8 billion, while total private sector deposits jumped by 8% to reach USD billion. Commercial banks total assets record a yearly 8.3% rise in April 2014 The consolidated balance sheet of Lebanese commercial banks for the month of April 2014 recorded a yearly 8.3% increase in assets reaching USD 168 billion. Deposits with the Central Bank increased by 2.6% y-o-y and reached USD billion in April Total claims on resident, which accounted for around 25% of total assets jumped by 11% y-o-y to reach USD 42.8 billion over the same period; this was attributed to a 16% rise of claims in Lebanese pounds and a 9% increase of those in foreign currencies. On the liabilities side, total resident and non-resident deposits grew by 8% to reach USD billion in April The dollarization rate of deposits reached 65.7% in April 2014, rising up from 65.1% in April 2013 but still below its peak of 77.3% in December On a month-on-month basis, the consolidated balance sheet of commercial banks went up by USD 1,542 million in April 2014 from a total of USD billion recorded in March ! Commercial Banks' Assets! (billion USD)! 168.0! 160! 140! 133.8! 144.7! 155.1! 120! 120.6! 100! 99.6! 80! 60! 40! Apr-09! Apr-10! Apr-11! Apr-12! Apr-13! Apr-14! Source: ABL, BankMed Research BankMed - Market & Economic Research Division 3

4 The total balance sheet of Financial institutions reached USD 1,628 million at end-april Claims on the slightly increased by a yearly 0.5%, while claims on the public sector jumped by 184% in April Financial institutions show a 13% annual increase in activity up to April 2014 The consolidated balance sheet of financial institutions in Lebanon reached USD 1,628 million at end-april 2014, going up from USD 1,441 million at end-april 2013, indicating an increase of 13%. Liabilities to the went down by 17% y-o-y to USD 259 million in April 2014, while liabilities to the financial sector jumped by 27% reaching USD 852 million. With respect to assets, cash and banks reached USD 543 million at end-april 2014, going down by 6.8% from USD 582 million in the same period of the previous year. Claims on the amounted to USD 736 million at end-april 2014, slightly going up 0.5% from a year earlier, while claims on the public sector stood at USD 356 million, going up by 184% from USD 125 million in April ! 1600! 1400! Balance Sheet of Financial Institutions! (million USD)! 1,441! 1,628! 1200! 1000! 800! 600! 803! 1,071! 1,077! 1,132! 400! 200! 0! Apr-09! Apr-10! Apr-11! Apr-12! Apr-13! Apr-14! Source: Company Data, BankMed Research BankMed - Market & Economic Research Division 4

5 Term and saving deposits in LBP increased by USD 134 million during the twenty-first week of the year. Deposits denominated in foreign currencies expanded by USD 73 million during the week of May 23-29, 2014 On the monetary front, the overall money supply M4 increased by 0.4% during the week of May 23-29, 2014 to around USD billion, while the non-banking sector treasury bills portfolio increased by USD 31 million over the preceding week. Lebanese Pound denominated deposits and currency in circulation M1 increased by 4.1% (or USD 191 million) during the aforementioned week to around USD 4.9 billion. This is mainly due to an increase in demand deposits by USD 211 million which outweighed a USD 20 million decrease in money in circulation. Moreover, local currency term deposits M2 increased by USD 325 million during the same week and registered a twelve-month increase of 5.67% to stand at USD 46.6 billion. The term and saving deposits denominated in LBP (M2 - M1) went up by USD 134 million during the mentioned week to USD 41.8 billion, while deposits denominated in foreign currencies (M3 - M2) increased by USD 73 million during the week to reach USD 67.4 billion. Money Supply Week of May 23-29, 2014 (billion USD) 22-May May-14 Absolute change over week M M M M M2-M M3-M M1 = Currency in Circulation + Demand Deposits in LBP M2 = M1 + Other deposits in LBP M3 = M2 + Deposits in FX M4 = M3 + TBs held by non banking system including accrued interests The platinum insurance credit card is expected to be free of charge and clients would be able to pay by installments. AXA Middle East and VISA launch the first insurance credit card in the Levant region In order to enable easier transaction and customer service, AXA Middle-East, one of the leading insurance companies in the region, and Visa signed a memorandum of understanding for the issuance of the first insurance credit card in the Levant. This decision followed a trial period of one year after the feasibility of providing this service was verified. As per the company s statement, this step will ensure greater ease of use and security to customers and promote the shift from payment by cash to electronic payment. The platinum visa card is free of charge and is expected to facilitate the policies payment process and clients will be able to pay by installments. It is expected to be officially launched in the coming few weeks. Mazen Soueid, Stephanie Ghanem, Ziad Hariri, Nadine Yamout, and Rita Nehme Disclaimer This material has been prepared by BankMed, sal based on publicly available information and personal analysis. It is provided for information purposes only. It is not intended to be used as a research tool nor as a basis or reference for any decision. The information contained herein including any opinion, news and analysis, is based on various publicly available sources believed to be reliable but its accuracy cannot be guaranteed and may be subject to change without notice. BankMed, sal does not guarantee the accuracy, timeliness, continued availability or completeness of such information. All data contained herein are indicative. Neither the information provided nor any opinion expressed therein, constitutes a solicitation, offer, personal recommendation or advice. BankMed, sal does not assume any liability for direct, indirect, incidental or consequential damages resulting from any use of the information contained herein.