Lebanese banks have registered an estimated profit of
Though the Syrian crisis has taken a toll on the Lebanese economy in the last three years, Lebanese banks managed to make steady progress. In 2011, when the Syrian crisis erupted, Lebanese banks made a
How do banks make their profits? And what are the sources of such profits?
By the end of 2013, the banks' aggregate balance sheet reached
Amounts invested in government bonds jumped to
These figures indicate that banks have been depositing funds into three portals: the central bank, government bonds, and the private sector, totaling
According to the calculations procedure adopted by the
Unfortunately, this doesn't accurately reflect reality, but rather depicts a so called "banking sector model." If we are to disregard the calculation method, it would appear that the sources of banks' profits are actually the most important factors. However, promoters of this "model" have been "neglecting the origins of the profits."
He explained that the share of treasury bonds from the profits decreased in the past year, due to a low interest rate "but banks were able to compensate such decreases through an expansion in funding the economy – the private sector – while it was revealed that the bad debts rate is not that significant."
Some cumulative data may reveal the sources of the banks' 2013 profits. Last year, banks invested 34 billion Lebanese pounds in securities issued by the
Interestingly, banks are benefiting from
Moving from cheap funding to "facilitations," sources revealed that banks received another "gift" from the
This resolution followed a decrease in the prices of stocks and bonds traded in the market to a level lower than their original prices, which meant banks would have to sustain losses. The source explained that an excessive accounting procedure raised the bonds portfolio of some banks by 20 percent.
A knowledgeable banker commented on the source of the profits, saying that real profits used by banks in their daily transactions, are the ones obtained through company and individual lending. Meanwhile, other profits are just on the books between the banks and the state, and the citizens pay the price.
This article is an edited translation from the Arabic Edition.
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