Smaller Lebanese banks are seeking more time to meet an ultimatum set by the central bank to increase their capital by 20 percent by the end of next month.
While some want an extension to the deadline, larger banks have stepped up their “exit strategy” from markets abroad, given the need to strengthen their balance sheets.
Many Lebanese banks have finalised agreements to sell their subsidiaries abroad to meet requirements set by the central bank. If Lebanese banks fail to increase their capital by 20 percent by the end of February, they must exit the market, according to central bank governor Riad Salameh (pictured below).
Lebanese banks are reconsidering their banking strategy at home and abroad, in terms of reducing the number of branches and employees.
A senior banker told Arabian Business: “Many small banks have not yet completed their preparations to meet the capital increase requirements, due to the closure of banks during several lockdowns to contain the surge of Covid-19.
“Therefore, some banks wrote to the central bank requesting an extension of the deadline to increase their capital for a period of no less than two months. The central bank is currently studying these requests,” the banker said.
He added that while large banks have succeeded in generating liquidity by selling foreign units, smaller banks do not enjoy this advantage.
Lebanese banks are currently closed during the extended general lockdown which runs until February 8.
The banker said he expected that the central bank will extend the deadline until June, given the difficult health and economic conditions that Lebanon is currently facing.
BLOM Bank has signed an agreement to sell its Egyptian subsidiary BLOM Bank Egypt to Bahrain’s Bank ABC for $427 million, signalling a wider exit from overseas markets by Lebanese banks.
A total of 18 Lebanese banks were present abroad in 32 countries through a foreign network of 329 branches managing total assets of $37 billion. Lebanese banks expanded in Egypt, Syria, Jordan and Iraq as part of an aggressive regional push before a major financial crisis hit Lebanon in 2019. Since then, many have been forced to close branches, cut jobs and sell its units and assets abroad.
Eight Lebanese banks operating in Iraq have decided to close their operations there.
Lebanese lender Bank Audi finalised a deal on December 29 to sell its businesses in Iraq and Jordan to Jordan’s Capital Bank Group. The bank also signed a deal with Banque Saudi Fransi to sell the remaining 47 percent shares of its subsidiary in Syria for around $25 million.
Bank Audi also signed an agreement in January 2021 to sell its Egyptian unit to First Abu Dhabi Bank. The value of the deal was not disclosed.
Marking the first merger since the financial crisis hit the country in 2019, Bank Audi also announced it is merging the local business operations of its fully-owned subsidiaries Audi Private Bank and Audi Investment Bank into its own business to improve cost efficiency and effectiveness.
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