Moody’s keeps negative outlook on local banks
Solid liquidity still supports overall stability
The outlook for Lebanon's banking system remains negative as it has been since 2011, said Moody's Investors Service in its recently published ‘Banking System Outlook: Lebanon’. The outlook reflects Moody's expectations of weak economic growth, modest capital buffers considering high sovereign exposures, and declining profitability due to higher provisioning and subdued operations.
The rating agency said the ongoing conflict in Syria and factious domestic politics will continue to adversely affect key sectors over the 12 to 18 month outlook period.
It expected the local banking sector to record subdued credit growth in 2013, between eight and ten percent, against projected inflation of 5.7 percent. High exposure to sovereign risk (B1 stable), estimated at 42 percent of the sector’s assets at end-2012, will remain a major source of credit risk for banks.
Moody's predicted further asset-quality deterioration for local banks, with total non-performing loans (NPLs) expected to rise above 6.5 percent of gross loans, from 4.4 percent in 2011.
However, Moody's said that solid liquidity buffers and depositor-based funding will continue to support the banking system's overall stability.
Date Posted: Apr 30, 2013