Issue No. 685...ARCH ss LEBBAANNONN NEWS ECONOMIC INSIGHTS EBANESE S&P REVISES ATINGS FOR SEVERAL LEBANESE BONDS 1 > LOWSLEBANON RANKS 2ND R TERMS OF REMITTANCE F IN > EBANOL N 2 P

Issue No. 685

April 17 – April 30, 2020

ss

LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> S&P REVISES RATINGS FOR SEVERAL LEBANESE BONDS 1

> LEBANON RANKS 2ND REGIONALLY IN TERMS OF REMITTANCE FLOWS

IN 2019 2

> LEBANON 2ND IN THE MENA REGION IN THE 2020 WORLD PRESS

FREEDOM INDEX 3

> GROSS PUBLIC DEBT AT $92.24 BILLION IN FEBRUARY 2020 4

> BANKS’ SHARE OF LBP-DENOMINATED DEBT AT 28.7% IN JANUARY

2020 5

> COMMERCIAL BANKS’ ASSETS AT $208.55 BILLION BY END OF MARCH

2020 6

> CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.26 BILLION

IN MARCH 2020 7

> COMBINED ASSETS OF INVESTMENT BANKS AT $5.03 BILLION BY

MARCH 2020 8

> THE LEBANESE FINANCIAL SECTOR’S NET FOREIGN ASSETS DROP BY

$1.06 BILLION YTD MARCH 2020 9

> WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 5.13% IN

MARCH 2020 9

> BDL GOVERNOR REFUTES LACK OF TRANSPARENCY ACCUSATIONS 10

> OPENED LETTERS OF CREDITS DOWN BY 81.34% Y-O-Y BY FEBRUARY

2020 11

> BDL ISSUES BASIC CIRCULAR 151 CONCERNING CASH WITHDRAWALS

IN FOREIGN CURRENCY 12

> BDL ISSUES INTERMEDIATE CIRCULAR 551 12

> BDL ISSUES CIRCULAR TO BANKS AND FINANCIAL INSTITUTIONS TO

PROVIDE EXCEPTIONAL LOANS IN LOCAL AND FOREIGN CURRENCY 12

> BDL ISSUES CIRCULAR THAT SETS A CAP ON THE USD EXCHANGE RATE

AT MONEY DEALERS 12

> PARLIAMENT PASSES LAWS TO FIGHT CORRUPTION AND TO LEGALIZE THE

CULTIVATION OF CANNABIS 13

> TRIPOLI PORT ACTIVITY DOWN BY 12.85% Y-O-Y BY FEBRUARY 2020 13

MONETARY PERFORMANCE

> MONETARY AGGREGATES 14

> MONEY MARKETS 14

LEBANESE EQUITIES

> LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 15

LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 17

LEBANON'S RATINGS 18

S&P REVISES RATINGS FOR SEVERAL

LEBANESE BONDS

Standard & Poor’s Global Ratings (S&P)

revised the rating of several Lebanese

bonds to “D” (Default) from “SD”

(Selective Default) on missed principal

and coupon payments that were due in

March and April, whilst also revising to

“CC” the ratings of 14 bond issues that

were erroneously changed to “SD” on

March 11.

LEBANON RANKS 2ND REGIONALLY IN

TERMS OF REMITTANCE FLOWS IN 2019

The World Bank in its report titled

“Migration and Development Brief”

estimated remittance flows to Lebanon at

$7.5 billion in 2019, positioning the

country 2nd in the MENA region in terms

of size of remittance inflows.

LEBANON 2ND IN THE MENA REGION IN

THE 2020 WORLD PRESS FREEDOM

INDEX

Lebanon ranked 2nd amongst its Middle

Eastern peers and 102nd in the world in

the 2020 World Press Freedom Index with

a press freedom score of 33.19.

GROSS PUBLIC DEBT AT $92.24

BILLION IN FEBRUARY 2020

Lebanon’s gross public debt rose by

$246.77 million during the second month

of 2020 to $92.24 billion, up from $91.99

billion in January.

BANKS’ SHARE OF LBP-DENOMINATED

DEBT AT 28.7% IN JANUARY 2020

The share of Lebanese banks of LBP-

denominated debt fell to 28.7% in

January 2020, down from 29% in

December.

TABLE OF CONTENTS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

"ABL" Association of Banks in Lebanon "BDL" Banque Du Liban "BOP" Balance of Payment "BSE" Beirut Stock Exchange "CLASI" Credit Libanais Aggregate Stock Index

"CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index "CPI" Consumer Price Index “EIU” Economist Intelligence Unit “EOY” End of Year "GDRs" Global Depositary Receipts "GDP" Gross Domestic Product "IMF" The International Monetary Fund "LBP" The Lebanese Pound "M1" Currency in Circulation + Demand

Deposits in LBP "M2" M1 + Other Deposits in LBP "M3" M2 + Deposits in Foreign Currencies "M4" M3+ Treasury Bills Held by Non-Banking System Including

Accrued Interests

"MENA" Middle East and North Africa

"MOF" The Lebanese Ministry of Finance

"Moody's" Moody's Investors Service "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "PPI" Producer Price Index

"TEU" Twenty-Foot-Equivalent Unit

"USD" The United States Dollar "Y-O-Y" Year-on-Year "YTD" Year to Date "YTD Price Performance" Yield to Date Price Appreciation

“LE

“

SYNOPSIS OF TERMS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

S&P REVISES RATINGS FOR SEVERAL LEBANESE BONDS

Standard & Poor’s Global Ratings (S&P), the international rating agency, revised the rating of several

Lebanese bonds to “D” (Default) from “SD” (Selective Default) on missed principal and coupon payments that

were due in March and April, whilst also revising to “CC” the ratings of 14 bond issues that were erroneously changed to “SD” on March 11. The agency also affirmed the long and short-term foreign currency (FC) ratings at “SD”, and the long and short-term local currency ratings at “CC” and “C” respectively. The outlook is still negative, portraying the risk to local currency commercial debt repayments in light of the continued political, financial, and monetary pressures. S&P kept Lebanon’s transfer and convertibility assessment stable at “CC”.

The rating agency highlighted that the government decided to suspend paying its foreign currency debt obligations, including a $1.2 billion Eurobond payment that matured on March 9, 2020, whilst pointing out that Lebanon’s total outstanding Eurobonds portfolio stands at around $31 billion. According to the report, the new government under Prime Minister Hassan Diab, along with support from external advisors, has started engaging creditors in debt-restructuring negotiations, releasing in parallel a recovery plan that covers reforms on the economic, fiscal, banking sector and exchange rate aspects with the financial consulting firm Lazard

also preparing a draft report that provides more detailed recommendations without setting a timeline for implementation. In this as vein, S&P expects the negotiations to be delayed beyond the year 2020 in the absence of a consensus over the plan coupled with the ramifications of the COVID-19 pandemic. From another

standpoint, the report pointed to the faltering local currency peg to the dollar amid the ongoing foreign currency shortages and the widening gap between the official and parallel exchange rates. The agency further mentioned the recent BDL circular that announced the creation of a foreign exchange unit at the Central Bank in order to regulate the exchange rate used by money exchange dealers, and another circular that grants

small depositors the right to withdraw $3,000 from their bank accounts in Lebanese Pounds at the applicable market exchange rate, indicating a move towards a dual or multiple exchange rate regime. The rating agency stated that it could improve the foreign currency issuer ratings for Lebanon from “SD” at present if a debt exchange or a restructuring agreement between Lebanon and its creditors sees the light. From another angle, the report noted that the government has not yet decided on restructuring its local

currency debt obligations standing at around 110% of GDP, yet stated that the government would have to restructure the said debt if it where to put it on a sustainable path. S&P also highlighted that the report submitted by Lazard Frères stated that the impact of the public debt restructuring on banks’ balance sheet could be addressed through bail-ins from banks’ shareholders, a portion of depositors, and mergers & liquidations. Finally, the agency commented that it could improve the sovereign rating if the probability of a distressed exchange of Lebanon’s local currency debt decreases. S&P stated as well that it could lower the

local currency issuer rating to “SD” if the government signals its intention to restructure its local currency

debt.

LEBANON NEWS

Weekly Market Watch

SOURCE: STANDARD & POOR’S, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

Indicators 2017 2018 2019F 2020F 2021F 2022F 2023F

Nominal GDP ($ Billion) 53 55 53 46 45 46 48

GDP per Capita ($ Thousand) 8.7 8.0 7.7 6.7 6.5 6.7 7.0

Real GDP Growth 0.9% -1.9% -6.9% -15.0% -5.0% 0.5% 1.5%

Real GDP per Capita Growth -0.4% -13.0% -6.8% -15.0% -4.9% 0.6% 1.6%

Real Investment Growth -1.3% -1.8% -7.0% -35.0% -5.0% 1.0% 2.0%

Investment/GDP 21.4% 20.8% 20.4% 14.4% 14.2% 14.1% 14.0%

Savings/GDP -5.9% -7.1% -2.2% 9.3% 0.9% 0.8% 0.9%

Real Exports Growth 3.9% -4.7% 6.0% 1.0% 2.0% 2.0% 2.0%

Current Account/GDP -27.2% -27.9% -22.6% -5.1% -13.3% -13.3% -13.1%

Net FDI/GDP 2.3% 3.7% 1.0% 1.5% 2.0% 2.0% 2.0%

Government Balance/GDP -7.1% -11.4% -11.3% -10.2% -10.0% -9.6% -9.0%

Debt/GDP 138.5% 142.9% 161.9% 195.4% 210.1% 213.6% 214.4%

Net Debt/GDP 119.3% 126.0% 142.2% 172.9% 187.0% 191.1% 192.7%

CPI Growth 4.4% 6.1% 2.9% 25.0% 6.0% 6.0% 6.0%

Source: Standard & Poor's, Credit Libanais Economic Research Unit

Selected Macroeconomic Indicators for Lebanon

LEBANON RANKS 2ND REGIONALLY IN TERMS OF REMITTANCE FLOWS IN 2019

According to the World Bank’s “Migration and Development Brief 32: COVID-19 Crisis Through a Migration Lens” report, the global economy’s remittance flows increased by 2.8% in 2019 to $714 billion yet are

expected to contract by 19.9% to $572 billion in 2020 amid the COVID-19 pandemic which could last for quite some time, noting that the global economy was nearly brought to a standstill in 2020 as a result of the lockdowns, travel bans, and social distancing practices. The report highlighted that host countries are encountering several challenges in some sectors, namely health and agriculture that largely depend on

migrant workers, and added that these migrants are exposed to contagions and could possibly face loss of employment, wages, and health insurance coverage. The report strived to project how these events could affect global trends in international economic migration and remittances in 2020 and 2021. From another standpoint, the bulk (about 77.8%) of global remittance flows is likely to be channelled to low and middle income countries (LMICs) in the year 2020, as has been the case since at least the year 2010. In details, the World Bank foresaw that the majority of these flows will be directed to the East Asia & Pacific ($128 billion;

<28.8%>) and South Asia ($109 billion; <24.5%>) regions. In this context, remittances to LMICs seem to follow a similar pattern to that of global remittances, rising by 4.4% in 2019 to $554 billion and are expected to drop by around 19.7% in 2020 to $445 billion, before rebounding by an expected 5.6% in 2021 to $470 billion. On a regional basis, the World Bank estimated that remittance inflows to the Middle East and North Africa (MENA) region rose by 2.6% in 2019 to $59 billion, and projecting these flows to drop by 19.6% in

2020 to $47 billion. The report added that remittance inflows to the MENA region are expected to slightly recover by 1.6% in 2021 to $48 billion due to a moderate growth in the euro area and weak GCC outflows.

The World Bank attributes the projected slowdown in the pace of growth of remittance inflows to the region to the global economic slowdown stemming from the coronavirus outbreak and the impact of lower oil prices in GCC countries.

Locally, the report estimated remittance flows to Lebanon at $7.5 billion in 2019, positioning the country 2nd in the MENA region in terms of size of remittance inflows, only behind Egypt ($26.8 billion). Concurrently, and

always according to World Bank statistics, Lebanon ranked 2nd in the MENA region in terms of remittance contribution to GDP, which stood at 12.7% in 2019, preceded by the West Bank & Gaza (16.3% of GDP). Furthermore, the World Bank commented that the average cost of sending remittances to Lebanon from high-income OECD nations remains elevated.

LEBANON NEWS

Weekly Market Watch

SOURCE: WORLD BANK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

(USD Billion) 2009 2016 2017 2018 2019e 2020f 2021f

World 437 597 643 694 714 572 602

Low and Middle Income Countries 307 446 487 531 554 445 470

East Asia and Pacific 80 128 134 143 147 128 138

Europe and Central Asia 36 46 55 61 65 47 49

Latin America and the Caribbean 55 73 81 89 96 77 82

Middle East and North Africa 33 51 57 58 59 47 48

South Asia 75 111 118 132 140 109 115

Sub-Saharan Africa 29 39 42 48 48 37 38

Remittance Flows

Source: World Bank, Credit Libanais Economic Research Unit

0.0

5.0

10.0

15.0

20.0

25.0

30.0 26.8

7.5 6.74.5 3.8

2.4 1.9 1.8 1.6 1.3

$ Billion

Estimated Remittance Inflows to the MENA Region by

Country in 2019


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0% 16.3%

12.7%12.6%

10.2%8.9%

5.6% 4.9%

1.9%1.0% 0.3%

Estimated Remittance Inflows to the MENA Region as a

% of GDP by Country in 2019


LEBANON 2ND IN THE MENA REGION IN THE 2020 WORLD PRESS FREEDOM INDEX

Reporters Without Borders (RSF) recently issued the 2020 World Press Freedom Index in which it ranked 180

countries across the globe according to their press freedom levels. More particularly, countries were assigned

scores ranging from 0 to 100, with 0 being the best possible score and 100 the worst. In this vein, RSF indicated that the next ten years will be decisive for press freedom due to five areas of crisis affecting the future of journalism, namely geopolitical, technological, democratic, trust, and economic. The index also added that these areas of crisis were further magnified by a global public health crisis (the coronavirus outbreak) questioning the reliability of related public health information disclosed to the public.

In detail, RSF unveiled that Europe continued to enjoy the freest media, despite some harsh policies in EU and Balkan countries. The region still hosted the world’s top performers though, with Norway topping the list of countries for the fourth consecutive year with a score of 7.84. Finland came second in the world with an index score of 7.93, followed by Denmark (with a score of 8.13), Sweden (with a score of 9.25), and the Netherlands (with a score of 9.96). The Americas (North, Central and South), moreover, reported hostility towards the media, even in the top performers in the region, namely the United States and Brazil. As far as

Africa is concerned, the index reported that the region witnessed arbitrary detentions and online attacks. The Asia-Pacific region witnessed the largest rise in press freedom violations, with Australia experiencing threats to the confidentiality of sources and to investigative journalism, Singapore promulgating with its Orwellian “fake

news” law, and Hong Kong reporting aggressive attacks on journalists during pro-democracy demonstrations. The Middle East and North Africa region remained the worst performer in terms of press freedom and the most dangerous region for journalists, citing the recent detention of RSF’s representative in Algeria, showcasing

how some authority figures took advantage of the Covid-19 pandemic to “settle scores” with independent journalists. Country-wise, Tunisia ranked first in the region for the fifth year in a row and 72nd in the world in the 2020 press freedom index, recording a score of 29.45. Lebanon ranked 2nd amongst its Middle Eastern peers and 102nd in the world with a press freedom score of 33.19 (compared to a score 32.44, an international rank of 101 and the same regional ranking in the 2019 index), followed by Kuwait (global rank: 109; score: 34.30) and Jordan (global rank: 128 score: 42.08), only to name a few.

LEBANON NEWS

Weekly Market Watch

SOURCE: REPORTERS WITHOUT BORDERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

Country

Global

Score

2020

Global

Score

2019

Global

Rank 2020

Global

Rank 2019

MENA

Rank 2020

Norway 7.84 7.82 1 1 -

Finland 7.93 7.90 2 2 -

Denmark 8.13 9.87 3 5 -

Sweden 9.25 8.31 4 3 -

Netherlands 9.96 8.63 5 4 -

Tunisia 29.45 29.61 72 72 1

Lebanon 33.19 32.44 102 101 2

Kuwait 34.30 33.86 109 108 3

Jordan 42.08 43.11 128 130 4

Qatar 42.51 42.51 129 128 5

U.A.E. 42.69 43.63 131 133 6

Morocco 42.88 43.98 133 135 7

Oman 43.42 43.42 135 132 8

Palestine 44.09 44.68 137 137 9

Algeria 45.52 45.75 146 141 10

Iraq 55.37 52.60 162 156 11

Libya 55.77 55.77 164 162 12

Egypt 56.82 56.47 166 163 13

Yemen 58.25 61.66 167 168 14

Bahrain 60.13 61.31 169 167 15

Saudi Arabia 62.14 65.88 170 172 16

Syria 72.57 71.78 174 174 17

2020 World Press Freedom Index

Source: Reporters Without Borders, Credit Libanais Economic Research Unit

GROSS PUBLIC DEBT AT $92.24 BILLION IN FEBRUARY 2020

Lebanon’s gross public debt rose by $246.77 million during the second month of 2020 to $92.24 billion, up

from $91.99 billion in January. On an annual basis, gross public debt widened by $7 billion when benchmarked

to the $85.25 billion reading recorded in February 2019. The share of the Lebanese banking sector of gross public debt dropped to 28.35% in February 2020, down from 29.55% in January. As far as debt in local currency is concerned, the latter increased by 0.22% month-on-month and by 12.96% year-on-year to $58.17 billion. In parallel, debt in foreign currency added 0.36% on a monthly basis, and 0.95% on a yearly basis to $34.07 billion. The share of debt in local currency contracted to 63.07% of total

debt in February 2020, down from 63.10% a month earlier while that in foreign currency rose to 36.93% (up from 36.90% in January). Net public debt, which factors out public sector deposits, came in 7.86% higher on a yearly basis at $82.56 billion in February 2020, noting that public sector deposits rose by 11.26% to $9.68 billion.

The compounded annual growth rate in Lebanon’s net public debt stood at 7.45% over the February 2013 – February 2020 period as captured by the chart below:

LEBANON NEWS

Weekly Market Watch

SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

Feb-2019 Feb-2020 Y-O-Y % Change

Gross Public Debt 85.25 92.24 8.21%

Debt in LBP 51.50 58.17 12.96%

Debt in Foreign Currency 33.75 34.07 0.95%

Public Sector Deposits 8.70 9.68 11.26%

Net Public Debt 76.55 82.56 7.86%

Public Debt (USD Billion)

Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

30.00

40.00

50.00

60.00

70.00

80.00

Feb-2013 Feb-2014 Feb-2015 Feb-2016 Feb-2017 Feb-2018 Feb-2019 Feb-2020

49.92

53.92

58.03

62.14

65.87

70.21

76.55

82.56Billions of USD

Evolution of Net Public Debt

Source: ABL, Credit Libanais Economic Research Unit

Debt in LBP

63.07%

Debt in Foreign

Currency36.93%

Composition of Gross Public Debt

in February 2020


BANKS’ SHARE OF LBP-DENOMINATED DEBT AT 28.7% IN JANUARY 2020

According to statistics published by the Association of Banks in Lebanon (ABL), gross public debt widened by

0.39% ($352.90 million) during the month of January 2020 to LBP 138,682 billion ($91.99 billion), up from

LBP 138,150 billion ($91.64 billion) a month earlier. The share of Lebanese banks of LBP-denominated debt fell to 28.7% in January (down from 29% in December), while that of the non-banking sector rose to 13.1% (up from 12.9% in December), and the share of Banque Du Liban increased to 58.2% (up from 58.1% in December). As far as foreign currency-denominated debt is concerned, sovereign debt in the form of Republic of Lebanon Eurobonds constituted 93.8% of total foreign currency debt, followed by lines of credit obtained through multilateral agreements (4.2%) and bilateral facilities (1.9%).

The average maturity of debt denominated in domestic currency narrowed to 4.84 years in January 2020 from 4.87 years in December 2019, while the weighted average annual interest rate on local currency debt increased from 6.44% to 6.46% during that same period. In parallel, the average maturity of outstanding foreign currency debt contracted to 7.92 years in January, from 8.00 years a month before, with the weighted average interest rate on foreign currency debt remaining flat at 7.38%.

LEBANON NEWS

Weekly Market Watch

SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

(Billion USD) January-2019 December-2019 January-2020Monthly %

Change

Y-O-Y %

Change

Debt in LBP by Holder 51.68 57.90 58.05 0.26% 12.33%

- Banks 18.09 16.79 16.66 -0.78% -7.89%

- Banque Du Liban 25.99 33.64 33.78 0.43% 29.97%

- Non-Banking Sector 7.60 7.47 7.60 1.82% 0.10%

Average Maturity (in years) 4.46 4.87 4.84 -0.62% 8.52%

Weighted Average Interest Rate 6.15% 6.44% 6.46%

Debt in FC by Type 33.64 33.75 33.95 0.60% 0.90%

- Eurobonds 31.46 31.69 31.84 0.49% 1.22%

- Multilateral 1.38 1.38 1.43 3.05% 3.36%

- Bilateral 0.74 0.64 0.64 0.60% -12.86%

- Others 0.07 0.03 0.03 0.60% -49.55%

Average Maturity (in years) 7.74 8.00 7.92 -1.00% 2.33%

Weighted Average Interest Rate 6.81% 7.38% 7.38%

Gross Public Debt 85.32 91.64 91.99 0.39% 7.82%

Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

Banks28.7%

BDL58.2%

Non-Banking Sector13.1%

Breakdown of Debt in LBP by Holder - as at End of January

2020


Eurobonds, 93.8%

Multilateral, 4.2%

Bilateral, 1.9%

Others, 0.1%

Breakdown of Debt in FC by Type - as at End of January 2020


5.90%

6.00%

6.10%

6.20%

6.30%

6.40%

6.50%

6.60%

6.70%

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

5

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2019

Aug-2019

Sep-2019

Oct-2019

Nov-2019

Dec-2019

Jan-2020

Years

Evolution of Average Maturity and Weighted Interest Rate of Debt Denominated in LBP

Average Maturity Weighted Interest Rate


6.50%

6.60%

6.70%

6.80%

6.90%

7.00%

7.10%

7.20%

7.30%

7.40%

7.50%

6.8

7

7.2

7.4

7.6

7.8

8

8.2

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2019

Aug-2019

Sep-2019

Oct-2019

Nov-2019

Dec-2019

Jan-2020

Years

Evolution of Average Maturity and Weighted Interest Rate of Debt Denominated in Foreign Currency

Average Maturity Weighted Interest Rate


COMMERCIAL BANKS’ ASSETS AT $208.55 BILLION BY END OF MARCH 2020

According to BDL statistics, the combined balance sheet of commercial banks operating in Lebanon contracted by 3.80% (LBP 12,409 billion) during the first quarter of the current year to LBP 314,389 billion ($208.55

billion), down from LBP 326,797 billion ($216.78 billion) in December 2019. On an annual basis, the combined

assets of the resident banking sector came in 17.49% lower than the LBP 381,023 billion ($252.75 billion) reading reported at end of March of last year. This drop is partly attributed to banks offsetting their LBP loans from BDL with their respective similar maturity LBP placements with the Central Bank associated with financial engineering operations with the latter in order to conform with International Financial Reporting Standards (IFRS) together with the sizeable drop in the loans portfolio.

On the funding side of the balance sheet, customer deposits fell by 5.79% (LBP 14,295 billion) during the first quarter of 2020 to LBP 232,569 billion ($154.27 billion) bearing in mind that they also fell by $3.61 billion in December and by $5.86 billion in November 2019. This comes on the back of the bank run witnessed in the

aftermath of the social uprising and resignation of the previous government. This YTD contraction came as a result of the 5.11% (LBP 9,730 billion) drop in the deposits of the resident private sector to LBP 180,836 billion ($119.96 billion), accompanied by an 8.69% (LBP 4,249 billion) decrease in the deposits of the non-resident private sector to LBP 44,671 billion ($29.63 billion). In addition, public sector deposits dropped by 4.29% (LBP 316 billion) to LBP 7,063 billion ($4.68 billion). From a currency denomination standpoint, deposits in Lebanese Pounds receded by 12.34% (LBP 7,994 billion) during the first three months of 2020 to LBP 56,805 billion ($37.68 billion), with foreign currency deposits also dropping by 3.46% (LBP 6,302 billion)

to LBP 175,764 billion ($116.59 billion). In this context, the deposit dollarization rate increased to 77.94% by end of March in comparison with 76.02% as at end of 2019 and 70.60% at end of March of the previous year. On an annual basis, total customer deposits narrowed by 12.89% from LBP 266,969 billion ($177.09 billion) at end of March 2019.

On the lending front, loans to the private sector (residents and non-residents) receded by 9.55% (LBP 7,166

billion) during the first quarter of 2020 to LBP 67,860 billion ($45.02 billion), down from LBP 75,027 billion ($49.77 billion) in December 2019. The loans portfolio also sank by 21.48% on an annual basis, resulting in a ratio of net loans to customer deposits of 29.18% at end of March 2020, compared to 30.39% at end of 2019 and 32.37% in March 2019. More specifically, the ratio of LBP-denominated private sector loans to LBP deposits stood at 40.25% by end of March 2020, in comparison with 36.23% at year-end 2019 and 31.46% at end of March 2019. On the other hand, the ratio of foreign currency-denominated private sector loans to foreign currency deposits fell to 25.60% at end of Q1-2020 from 28.31% at end of December and 32.79% in

March 2019. The consolidated capital accounts of commercial banks operating in Lebanon remained almost flat at around LBP 31,234 billion ($20.72 billion) at end of March 2020 yet came in lower than the LBP 33,243 billion ($22.05 billion) reading reported at end of March 2019.

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

USD Billion Mar-19 Dec-19 Mar-20YTD %

Change

Y-O-Y %

Change

Total Assets 252.75 216.78 208.55 -3.80% -17.49%

Loans to the Private Sector 57.33 49.77 45.02 -9.55% -21.48%

Customer Deposits, o/w: 177.09 163.76 154.27 -5.79% -12.89%

- Resident Private Sector Deposits 135.60 126.41 119.96 -5.11% -11.54%

- Non-Resident Private Sector Deposits 36.92 32.45 29.63 -8.69% -19.74%

- Public Sector Deposits 4.57 4.89 4.68 -4.29% 2.49%

Capital Accounts 22.05 20.72 20.72 -0.02% -6.05%

Dollarization Rate 70.60% 76.02% 77.94%

Private Sector Loans/Deposits Ratio 32.37% 30.39% 29.18%

- LBP Private Sector Loans/LBP Deposits 31.46% 36.23% 40.25%

- FC Private Sector Loans/FC Deposits 32.79% 28.31% 25.60%

Source: BDL, Credit Libanais Economic Research Unit

100.00

125.00

150.00

175.00

200.00

225.00

250.00

275.00

2015 2016 2017 2018 Mar2019

Dec-19 Mar-20

185.99

204.31

219.86

249.48252.75

216.78208.55

USD Billion

Evolution of Commercial Banks' Combined Assets


CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.26 BILLION IN MARCH 2020

According to Banque Du Liban (BDL) statistics, the consolidated balance sheet of financial institutions operating in Lebanon narrowed by 9.09% ($125.72 million) during the first quarter of 2020 to $1,256.87

million, down from $1,382.59 million at year-end 2019. This can be mainly attributed to the 10.16% ($68.24

million) contraction in claims on customers to $603.16 million, coupled with some 50.43% ($25.85 million) decrease in claims on the non-resident financial sector to $25.40 million, and a 6.33% ($19.41 million) drop in claims on the resident financial sector to $287.27 million, which outweighed the 0.09% ($0.05 million) increase in cash & deposits with Central Banks to $54.96 million. It is worth noting that claims on customers and on the resident financial sector are the two largest asset categories on financial institutions’ balance sheet, accounting for 47.99% and 22.86% of total assets on a respective basis. On the liabilities side, liabilities to the

resident financial sector plunged by 19.79% ($44.22 million) in Q1-2020 to $179.30 million, with customer deposits slipping by 11.96% ($22.49 million) to $165.63 million and other liabilities dropping by 8.48% ($20.70 million) to $223.35 million, altogether outweighing the 8.38% ($0.33 million) rise in public sector deposits to $4.27 million.

LEBANON NEWS

Weekly Market Watch


USD Million Mar-2019 Dec-2019 Mar-2020YTD %

Change

Assets

Cash & Deposits with Central Banks 39.32 54.92 54.96 0.09%

Claims on Customers 763.45 671.40 603.16 -10.16%

Claims on Resident Financial Sector 312.98 306.68 287.27 -6.33%

Claims on Non-Resident Financial Sector 61.51 51.25 25.40 -50.43%

Claims on the Public Sector 4.57 5.14 4.81 -6.42%

Securities Portfolio 108.54 89.86 84.67 -5.78%

Tangible & Intangible Fixed Assets 189.21 185.86 183.06 -1.51%

Other Assets 16.40 17.49 13.53 -22.62%

Total Assets 1,495.98 1,382.59 1,256.87 -9.09%

Liabilities

Customer Deposits 162.15 188.12 165.63 -11.96%

Liabilities to the Resident Financial Sector 338.32 223.52 179.30 -19.79%

Liabilities to the Non-Resident Financial Sector 105.35 124.69 106.32 -14.74%

Public Sector Deposits 3.86 3.94 4.27 8.38%

Debt Securities Issued 148.24 111.87 108.27 -3.22%

Other Liabilities 239.60 244.05 223.35 -8.48%

Capital Accounts 498.46 486.39 469.74 -3.42%

Total Liabilities 1,495.98 1,382.59 1,256.87 -9.09%

Financial Institutions' Consolidated Balance Sheet

Source: Banque Du Liban, Credit Libanais Economic Research Unit

47.99%

22.86%

14.56%

6.74%

4.37%

2.02%

1.08%

0.38%

0% 20% 40% 60%

Claims on Customers

Claims on Resident Financial Sector

Tangible & Intangible Fixed Assets

Securities Portfolio

Cash & Deposits with Central Banks

Claims on Non-Resident Financial Sector

Other Assets

Claims on the Public Sector

Breakdown of Financial Institutions' Assets at End of March 2020


COMBINED ASSETS OF INVESTMENT BANKS AT $5.03 BILLION BY MARCH 2020

According to Banque Du Liban (BDL) statistics, the combined balance sheet of investment banks operating in Lebanon narrowed by 2.14% during the first quarter of 2020 to nearly $5.03 billion, down from $5.14 billion

at end of 2019. In details, claims on the private sector (comprising resident and non-resident customers)

dropped by 6.74% to $2.01 billion, coupled with a 2.62% contraction in the value of the securities portfolio to $886 million eclipsing the 3.14% rise in cash and deposits with Central Banks to $1.64 billion and some 9.62% increase in claims on the non-resident financial sector to $68 million. On the liabilities side, private sector deposits (resident and non-resident customers, in addition to the resident financial sector) fell by 8.13% in the first quarter of 2020 to just above $1.74 billion, accompanied by a 2.25% drop in other liabilities to $1.19 billion and a 13.40% drop in liabilities to the public sector to $55 million, outweighing the 3.89% increase in

investment banks’ capital accounts to $1.80 billion and the 5.93% rise in the liabilities to the non-resident financial sector to $226 million. Abiding by legislative decree number 50 and subsequent BDL circulars, investment banks operating in Lebanon have managed over the last couple of years to increase their lending activity to the private sector while reducing their exposure to the public sector. As a result, the surplus representing the difference between loans to the private sector and claims on the public sector reached $2.01 billion by end of March 2020.

LEBANON NEWS

Weekly Market Watch


In Millions of USD Mar-2019 Dec-2019 Mar-2020YTD %

Change

Cash & Deposits with Central Banks 1,713 1,592 1,643 3.14%

Claims on Private Sector 2,305 2,160 2,014 -6.74%

Claims on Public Sector 1 1 2 35.87%

Claims on Non-Resident Financial Sector 80 62 68 9.62%

Securities Portfolio 952 910 886 -2.62%

Tangible & Intangible Fixed Assets 316 342 345 0.96%

Other Assets 80 70 70 -0.04%

Total Assets 5,446 5,138 5,028 -2.14%

Private Sector Deposits: 2,051 1,895 1,741 -8.13%

Resident Customer & Financial Sector Deposits in LBP 1,037 904 753 -16.70%

Resident Customer & Financial Sector Deposits in FC 723 736 751 1.96%

Non-Resident Customer Deposits 291 255 238 -6.86%

Liabilities to the Public Sector 104 63 55 -13.40%

Liabilities to the Non-Resident Financial Sector 236 213 226 5.93%

Debt Securities Issued 24 18 18 -0.04%

Capital Accounts 1,791 1,733 1,800 3.89%

Other Liabilities 1,241 1,216 1,188 -2.25%

Total Liabilities 5,446 5,138 5,028 -2.14%

Evolution of Investment Banks' Combined Balance Sheet


THE LEBANESE FINANCIAL SECTOR’S NET FOREIGN ASSETS DROP BY $1.06 BILLION YTD MARCH 2020

The Lebanese financial sector’s net foreign assets contracted by $556.8 million in March 2020 in comparison

with contractions of $347.4 million in February and $157.9 million in January. This can be attributed to the

$551.1 million drop in the net foreign assets of the Central Bank coupled with a $5.7 million decrease in the net foreign assets of banks & financial institutions. On a cumulative basis, the financial sector’s net foreign assets plunged by $1.06 billion during the first quarter of 2020, in comparison with a $2.00 billion drop in the same period in 2019. The said contraction owes to the $2.15 billion drop in the net foreign assets of the Central Bank which outweighed the $1.09 billion increase in the net foreign assets of banks & financial institutions.

WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 5.13% IN MARCH 2020

According to BDL statistics, interest rates fell significantly during the month of March in the light of BDL circular no. 536 dated December 4, 2019 that placed caps on interest rates paid on USD deposits at 5% and

on LBP deposits at 8.5% and the subsequent intermediate circular no. 544 dated March 13, 2020 which

lowered the ceilings paid on new or renewed local and foreign currency denominated deposits to much lower

levels. In figures, the weighted average interest rate on Lebanese Pound denominated deposits dropped to 5.13% during the month of March, from 5.81% in the previous month and 8.75% a year earlier. In the same vein, the weighted average interest rate on U.S. Dollar denominated deposits dropped to 2.53% in March 2020, down from 3.22% in February and 5.69% in March 2019. Commercial banks’ discount and lending rate on LBP denominated loans came in higher at 9.41% in March 2020, with that on USD denominated loans falling to 8.55%. Consequently, the average monthly spread between LBP lending and deposit rates stood at

368 basis points in March 2020, while that between USD lending and deposit rates reached 599 bps.

LEBANON NEWS

Weekly Market Watch


Change in the Net Foreign Assets

of the Financial Sector (USD Million)

March 2019 March 2020 % Change

At the Central Bank (1,105.9) (2,153.0) 94.69%

At Banks & Financial Institutions (899.0) 1,090.9 -221.35%

Total (2,004.9) (1,062.1) -47.02%

During the Three-Month Period Ending


-2500

-2000

-1500

-1000

-500

0

500

1000

March2014

March2015

March2016

March2017

March2018

March2019

March2020

301.4

(850.2) (644.2)

554.8

(198.2)

(2,004.9)

(1,062.1)

USD Million

Cumulative change in the Net Foreign Assets of the Financial

Sector


-1,400.0

-1,200.0

-1,000.0

-800.0

-600.0

-400.0

-200.0

0.0

January February March

(1,379.7)

(550.1)

(75.1)

(157.9)

(347.4)

(556.8)

Monthly Change in the Net Foreign Assets of the Financial Sector

2019 2020

USD Million


LBP US D LBP US D LBP US D

8.75% 5.69% 5.81% 3.22% 5.13% 2.53%

9.45% 6.31% 6.71% 3.80% 5.89% 3.01%

10.58% 9.31% 9.33% 9.11% 9.41% 8.55%Discount & Loans Rate


Term Savings & Deposits Rate

Interest Rate Levels M arch 2019 February 2020 M arch 2020

Average Rate on Deposits

3.68

1.802.002.642.79

1.511.76

5.85

8.80

7.09

5.655.565.585.52

9.5310.60

9.108.298.35

7.097.27

March 2020201920182017201620152014

Evolution of LBP Lending & Deposits Yearly Average Rates (%)

Average Monthly Spread LBP Monthly Average Rate on Deposits

LBP Discount and Loans Average Monthly Rate


5.99

3.893.773.693.903.933.923.25

5.88

4.303.653.343.163.03

9.249.77

8.077.347.257.086.95

March 2020201920182017201620152014

Evolution of USD Lending & Deposits Yearly Average Rates (%)

Average Monthly Spread USD Monthly Average Rate on Deposits

USD Discount and Loans Average Monthly Rate


BDL GOVERNOR REFUTES LACK OF TRANSPARENCY ACCUSATIONS

The Lebanese Central Bank governor Mr. Riad Salameh held a televised press conference on Wednesday

during which he tackled a series of accusations that were recently directed towards BDL and its policies. At

first, the BDL governor refuted recent claims of lack of transparency, clarifying that it publishes its balance sheet on a bi-weekly basis and that its accounts are available in the official gazette. Moreover on this issue, Mr. Salameh pointed out that the Central Bank’s accounts are audited by two renowned international companies and that said accounts are in line with international standards and with those of other central banks. In this vein, Mr. Salameh declared that the Central Bank’s liquidity exceeded $20 billion as of April 24, after deducting some $1.7 billion in payments for the import of raw materials and fuel. As far as the financial

engineering schemes are concerned, Mr. Salameh clarified that such engineering schemes were essential to secure U.S. Dollars for the dollarized Lebanese economy, and to buy some time for the government to start implementing the much needed reforms to unlock CEDRE funds, a thing which failed to materialize. Always in the same vein, the governor pointed out that Lebanon suffers from a twin deficit problem, a current account deficit and a budget deficit, aggregating to $81 billion over the last five years, implying annual financing needs of around $16.2 billion to ensure the stability of the Lebanese economy. Mr. Salameh declared that the Central

Bank has always financed the Lebanese government, frequently at rates much lower than market rates, yet clarified in this regard that the Central Bank is not responsible for the government’s way of spending said funds. Apart from lending the government at below market rates, the Central Bank governor added that BDL

reduced the government’s debt during the Paris 2 conference and that it has also previously used the revaluation of gold reserves to trim the public debt. In response to the accusations of some $5.9 billion in money transferred abroad during the first two months of 2020, Mr. Salameh highlighted that some $3.7 billion were used by customers to settle loans from their deposit accounts with the remaining $2.2 billion being in the

form of cash withdrawals. Mr. Salameh added that the Central Bank it will do its best efforts to prevent the bankruptcy of banks, in order to protect deposits, and that the Central Bank requested banks to raise their capital by 20% by June 2020. The Central Bank governor commented that there is no need for a haircut on deposits, and that talks on such a haircut is worrisome for depositors and accordingly hurts the image of the banking sector. Mr. Salameh also defended the exchange rate peg explaining that the stability of the peg helps tame inflation and serves the best interests of the Lebanese population. Finally, Mr. Salameh stressed on the independency of the Central Bank as per the provisions of the Code of Money and Commerce and

commented that it will pursue its cooperation with the Lebanese government.

LEBANON NEWS

Weekly Market Watch

SOURCE: ANNAHAR NEWSPAPER, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

OPENED LETTERS OF CREDITS DOWN BY 81.34% Y-O-Y BY FEBRUARY 2020

According to Banque Du Liban statistics, opened letters of credit (L/Cs), a measurement tool for trade activity, contracted by 65.87% during the month of February 2020 to $66.87 million, down from $195.89 million in

January. On a cumulative basis, the face value of opened L/Cs came in 81.34% lower y-o-y at $249.62 million during the first two months of 2020, compared to $1,337.51 million a year earlier.

Documentary L/Cs opened to finance imports activities contracted by 83.95% on an annual basis to $187.13 million YTD February 2020, from $1,165.70 million during that same period last year. Concurrently, utilized credits for imports fell by 73.62% to $229.72 million, down from $870.82 million by February 2019. Inward bills for collection, another documentary credit form of financing (backed by invoices), fell by 66.20% y-o-y to $61.16 million by end of February, from $180.96 million a year before.

In a related note, documentary L/Cs opened to finance exports activities dropped by 88.12% on a yearly basis

to $75.62 million in the first two months of 2020, from $636.75 million in the equivalent period last year. Concurrently, utilized credits to finance exports receded by 65.51% to $184.21 million (243.60% of opened L/Cs for exports). In the same vein, the value of outstanding bills sank by 63.63% annually to $62.49 million YTD February 2020, with outward bills for collection slipping by 25.43% to $276.29 million.

LEBANON NEWS

Weekly Market Watch


-

200

400

600

800

1,000

1,200

1,400

1,600

Up toFebruary

2013

Up toFebruary

2014

Up toFebruary

2015

Up toFebruary

2016

Up toFebruary

2017

Up toFebruary

2018

Up toFebruary

2019

Up toFebruary

2020

1,495.02

1,252.41

1,033.30

887.89

1,283.18 1,238.34 1,337.51

249.62

Million

Evolution of Total Opened L/Cs


$ MillionFebruary

2019

February

2020

Y-O-Y

% Change

Documentary L/Cs

– Opened Credits 1,165.70 187.13 -83.95%

– Utilized Credits 870.82 229.72 -73.62%

– Outstanding Credits 1,196.55 278.08 -76.76%

Bills For Collection

– Inward Bills 180.96 61.16 -66.20%

– Outstanding Bills 66.14 38.61 -41.62%


Documentary Credits for Imports' Financing for the Period Ended

0

200

400

600

800

1,000

1,200

February 2019 February 2020

1,165.70

187.13180.96

61.16

$ Million

Opened Letters of Credits & Inward Bills for Imports' Financing During the Period Ended

– Opened Credits – Inward Bills

$ MillionFebruary

2019

February

2020

Y-O-Y

% Change

Documentary L/Cs

– Opened Credits 636.75 75.62 -88.12%

– Utilized Credits 534.13 184.21 -65.51%

– Outstanding Credits 904.81 403.25 -55.43%

Bills For Collection

– Outward Bills 171.81 62.49 -63.63%

– Outstanding Bills 370.48 276.29 -25.43%


Documentary Credits for Exports' Financing for the Period Ended

0

100

200

300

400

500

600

700

February 2019 February 2020

636.75

75.62

171.81

62.49

$ Million

Opened Letters of Credits & Outward Bills for Exports' Financing During the Period Ended

– Opened Credits – Outward Bills

BDL ISSUES BASIC CIRCULAR 151 CONCERNING CASH WITHDRAWALS IN FOREIGN CURRENCY

The Lebanese Central Bank issued on April 21, 2020 basic decision no. 13221 under basic circular 151 to

banks facilitating cash withdrawals from accounts in foreign currency for clients who do not benefit from the provisions of Basic Circular 148 over the next six months. More specifically, the decision entails that banks will have to meet a customer’s cash withdrawal request from his foreign currency account by paying him, after securing his consent, the equivalent amount in Lebanese Pound at the market exchange rate. Banks are also required to inform their clients of the applicable market exchange rate on a daily basis. Furthermore, the

concerned banks are required to sell the foreign currencies obtained from these transactions to the Central Bank, noting that all other US dollar transactions between Lebanese banks and their clients will remain subject to the applicable exchange rate specified by the Central Bank in its daily transactions with banks.

BDL ISSUES INTERMEDIATE CIRCULAR 551

The Lebanese Central Bank issued on April 16, 2020 Intermediate Circular No. 551 in which it announced the amendment of basic decision number 7548 of Basic Circular 69 regarding electronic financial and banking

operations. The circular stipulates that all non-banking financial institutions must settle the equivalent amount of any incoming electronic foreign currency transfers in Lebanese Pounds using the applicable market exchange rate.

BDL ISSUES CIRCULAR TO BANKS AND FINANCIAL INSTITUTIONS TO PROVIDE EXCEPTIONAL LOANS IN

LOCAL AND FOREIGN CURRENCY

The Lebanese Central Bank recently issued intermediate circular no. 552 concerning the facilities provided by the Central Bank to banks and financial institutions which adds additional clauses to intermediate circular 547. The circular requires banks and financial institutions operating in Lebanon to extend on their own responsibility exceptional loans in local or foreign currency to existing clients who already benefit from different types of loans (including subsidized ones) and who are unable to honor their debt obligations for the months of March, April, May and June 2020 due to the current economic situation. The circular added that the exceptional loans

can be used to make loan installments for the aforementioned four months and/or to cover salaries &

operating expenses at concerned companies. The circular requires banks and financial institutions to pay salaries in cash or via transfers to bank accounts, through a bank domiciliation, or through debit cards. Said loans are interest & commission free, and must be repaid in the same currency as the original loan over the course of 5 years, with an optional prepayment without any penalties. The circular further added that businesses that were exempted from the lockdown (pharmacies, bakeries, etc.) will not benefit from these exceptional loans. Always in the same context, the circular pointed out that businesses that went bankrupt can

only benefit from the provisions of the circular to pay employee salaries, loan installments, and some operating expenses. The circular also stipulates that the aforementioned loans will not be subjected to the debt ceilings placed on clients. The source of funds for these loans will be lines of credit in US Dollar extended by the Central Bank to banks & financial institutions over a period of five years and at a zero interest rate for an amount corresponding to the loans provided by these banks to their clients in local and foreign currencies.

BDL ISSUES CIRCULAR THAT SETS A CAP ON THE USD EXCHANGE RATE AT MONEY DEALERS

The Lebanese Central Bank issued on April 27 intermediate circular no. 553 concerning the applicable

exchange rate at money dealers. The circular requires money dealers to abide by a cap of LBP 3,200 per USD or any subsequent exchange rate to be set by the recently issued Directorate of Monetary Operations at BDL pertaining to USD selling transactions. The circular prohibits money dealers from conducting operations that do not adhere to the exchange rates set by BDL and from adopting uncustomary buying/selling spreads. Finally, the circular warned that it would apply sanctions against non-conforming money dealers, bearing in mind that the provisions of the circular will remain effective for 6 months.

LEBANON NEWS

Weekly Market Watch


PARLIAMENT PASSES LAWS TO FIGHT CORRUPTION AND TO LEGALIZE THE CULTIVATION OF CANNABIS

The Lebanese Parliament passed a set of laws during the legislative session it held last week. In details, the parliament ratified the anti-corruption law which calls for the establishment of a national committee to fight

corruption. The law specifies the committee’s duties, functions and legislative powers, entitling the committee

to tackle corruption cases without obtaining any special permissions. The law further specified that prosecutions against concerned persons would not drop in the event the person resigns/retires. In addition, the parliament enacted a law that legalizes the production of cannabis for medical and industrial purposes. The law will regulate cannabis production, calling for the establishment of a regulatory authority that will be overseeing its enforcement in addition to issuing permits for the cultivation, transportation,

production, storage, selling and distribution of the cannabis plant. Only permit holders will be able to work under this new law. The law aims to create an agro-industry in Lebanon in an endeavor to boost its teetering economy. In this regard, it is worth highlighting that a study by the international consulting firm Mckinsey & Co. estimated the country’s production value from cannabis at around $4 billion.

TRIPOLI PORT ACTIVITY DOWN BY 12.85% Y-O-Y BY FEBRUARY 2020

Freight activity via the Port of Tripoli fell to nearly 96 thousand tons during the month of February 2020, down from around 189 thousand tons a month earlier. Imported freight accounted for 66.06% of total freight

(63,709 tons), while export activity constituted a meager 33.94% (32,727 tons). Similarly, on a cumulative basis, Tripoli Port freight activity contracted by 12.85% y-o-y to 285 thousand tons in the first two months of 2020 compared to 327 thousand tons in the same period last year. In addition, the number of vessels fell by 8.08% y-o-y to 91 by February 2020, with no cars imported via the Tripoli Port over the concerned period. In this context, port-related revenues (excluding VAT and customs) dropped by 25.85% on an annual basis to about $2.09 million during the first two months of 2020, down from $2.81 million YTD February 2019.

LEBANON NEWS

Weekly Market Watch

SOURCE: DAILY STAR, PORT OF TRIPOLI, AL BAYAN ECONOMIC MAGAZINE, CREDIT LIBANAIS ECONOMIC RESEARCH

UNIT

13

Tripoli Port

Indicators February 2019 February 2020Y-O-Y %

Change

Freight Activity (000 Tons) 327 285 -12.85%

Number of Vessels 99 91 -8.08%

Number of Imported Cars 485 0 -100.00%

Port-Related Revenues ($ Million) 2.81 2.09 -25.85%

During the Two-Month Period Ended

Source: Port of Tripoli, Al Bayan Economic Magazine, Credit Libanais Economic Research Unit

MONETARY AGGREGATES

The overall money supply, “M4”, narrowed by LBP 328.97 billion during the week of April 16 and by 7.56% on an annual basis to LBP 205,925 billion, noting that the non-banking sector’s Treasury bills portfolio rose by LBP

34 billion during the concerned week.

In parallel, Lebanese-Pound denominated deposits and currency in circulation, “M1”, widened by LBP 196.76 billion week-on-week to LBP 21,142 billion on the back of some LBP 195 billion expansion in money in circulation, coupled with the LBP 2 billion drop in demand deposits. Local currency term deposits, “M2”, plunged by LBP 173.30 billion on a weekly basis and by 23.05% year-on-year to settle at LBP 58,184 billion.

Consequently, private sector term and saving deposits denominated in LBP (“M2-M1”) sank by LBP 370.06 billion (0.99%) to LBP 37,042 billion during the week of April 16, with deposits denominated in foreign currencies (“M3-M2”) receding by LBP 356.72 billion (0.26%) to reach LBP 136,325 billion.

MONEY MARKETS

The April 23 Treasury bill auction raised LBP 624.888 billion ($414.519 million).

The majority of subscriptions was concentrated in the three-year (48.07%) to maturity T-bonds, followed by

the six-month (42.09%) and seven-year (9.84%) tenure Treasury securities.

Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 4.97% in the auction of April 23. The yields on the six-month, three-year and seven-year to maturity Treasury securities remained flat at 4.00%, 5.50% and 6.50% respectively.

CORPORATE NEWS

MONETARY PERFORMANCE

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months 180 Months

Treasury Yield 3.50% 4.00% 4.50% 7.00% 5.50% 6.00% 6.50% 10.00% 10.92%

3 Months6 Months

12 Months

36 Months60 Months

84 Months

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

0 1 2 3 4 5 6 7

On the Run Yield Curve

Mone y Supply

LBP Billion

M1 20,945 21,142 0.94%

M2 58,357 58,184 - 0.30%

M3 195,039 194,509 - 0.27%

M4 206,421 205,925 - 0.24%

M2 - M1 3 7 ,4 12 3 7 ,0 4 2 - 0 .9 9 %

M3 - M2 13 6 ,6 8 2 13 6 ,3 2 5 - 0 .2 6 %


April 9 , 2 0 2 0 April 16 , 2 0 2 0 % Cha nge

150,000

200,000

250,000

April 9, 2020 April 16, 2020

206,421 205,925

195,039 194,509

Money Supply - LBP Billion -

M4 M3


Lebanese

Treasury

Bills

Yield (%)

Face Value

(in billions

of LBP)

% of Total

Face Value

6 Months 4.00% 263.000 42.09%

3 Years 5.50% 300.388 48.07%

7 Years 6.50% 61.500 9.84%

Total 624.888 100.00%

Source: Reuters, Credit Libanais Economic Research Unit

April 23, 2020

LEBANESE EQUITIES

Activity on the Beirut Stock Exchange (BSE) grew

thinner this week, with the number of shares changing hands dropping to 267,986 shares from 324,793 shares last week. Value traded was no exception, falling to $2.71 million, from $3.10

million a week before. Trades were mainly concentrated in real estate stocks, which accounted for 89.55% of weekly traded volume. The average daily traded volume dropped to 66,997 shares this week, from 81,198 shares in the previous week. In addition, the average daily traded

value fell to $0.68 million, from around $0.78 million a week earlier. Four gaining and no losing stocks were screened throughout the week, lifting the BSE’s market

capitalization up by 5.46% week-on-week to just

above $6.53 billion and the Credit Libanais Aggregate Stock Index (“CLASI”) up by 6.86% to 601.42. In the real estate sector, trades consisted of Solidere “A” and “B” shares (87.55% of weekly traded volume), with the prices of Solidere “A” and

“B” soaring by 16.24% and 16.67% to $12.17 and $12.25 respectively. Concurrently, the price of Ciments Blancs Nominal shares increased by 2.58% to $3.18. Consequently, the Credit Libanais Construction Sector Stock Index (“CLCI”) ended its week 14.61% higher at a new year high of 639.04.

In the banking sector, Bank Audi listed shares amassed the highest concentration of trades (7.46% of total BSE traded volume) on a very thin turnover ratio of 0.003%. The Credit Libanais Financial Sector Stock Index (“CLFI”) ended Friday’s session up by 1.82% on a weekly basis at 567.09 as

a result of the 8.33% rise in the price of BLOM bank listed shares to $3.25.

LEBANESE EQUITIES

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

Credit Libanais Week of Week of Weekly YTD

Indices 24-Apr-20 30-Apr-20 % Change % Change

Credit Libanais Aggregate

Stock Index <.CLASI>562.84 601.42 6.86% -17.95%

Credit Libanais Financial Sector

Stock Index <.CLFI>556.94 567.09 1.82% -39.57%

Credit Libanais Construction

Sector Stock Index <.CLCI>557.57 639.04 14.61% 57.41%

500

550

600

650

700

750

800

850

900

30-A

pr-

19

21-J

un-1

9

12-A

ug-1

9

03-O

ct-

19

24-N

ov-1

9

15-J

an-2

0

07-M

ar-

20

28-A

pr-

20

Ind

ex V

alu

e

Credit Libanais Aggregate Stock IndexWeekly Performance

CLASI

CLASI 6.86%

.CLASI Credit Libanais Aggregate Stock Index

Value Daily % Chng Daily Net Chng

601.42 2.419% 14.20

Yr.High Year Hi.Date Yr.Low Year.Lo.Date

750.99 8-Jan-20 530.67 19-Mar-20

Life High Life Hi.Date Life Low Life.Lo.Date

1,801.01 7-Jul-08 530.67 19-Mar-20

Thursday, April 30, 2020

500

600

700

800

900

1,000

1,100

1,200

1,300

30-A

pr-

19

21-J

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9

12-A

ug-1

9

03-O

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24-N

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9

15-J

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0

07-M

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20

28-A

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20

Ind

ex V

alu

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Credit Libanais Financial Sector Stock IndexWeekly Performance

CLFI

CLFI 1.82%

250

290

330

370

410

450

490

530

570

610

650

690

30-A

pr-

19

21-J

un-1

9

12-A

ug-1

9

03-O

ct-

19

24-N

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9

15-J

an-2

0

07-M

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20

28-A

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20

Ind

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Credit Libanais Construction Sector Stock IndexWeekly Performance

CLCI

CLCI 14.61%

P/E P/BV

Solidere A $12.17 16.24% 159,824 59.64% $1,804,835 66.53% 100,000,000 1,217,000 23.83 1.10 66.71%

Solidere B $12.25 16.67% 74,802 27.91% $839,131 30.93% 65,000,000 796,250 23.98 1.11 68.04%

BLC Bank $0.93 0.00% - - - - 71,033,333 66,061 11.80 0.46 0.00%

BLC Bank Preferred Class "D" $94.00 0.00% - - - - 750,000 70,500 n.a n.a 0.00%

BLC Bank Preferred Class "E" $94.00 0.00% - - - - 263,510 24,770 n.a n.a 0.00%

Bank Audi - Listed Shares $1.30 0.00% 20,000 7.46% $26,000 0.96% 588,538,215 765,100 1.13 0.17 -62.86%

Bank Audi GDR $2.00 0.00% - - - - 119,639,761 239,280 1.74 0.26 -43.34%

Bank Audi Preferred "H" $77.00 0.00% - - - - 750,000 57,750 n.a n.a 0.00%

Bank Audi Preferred "I" $50.70 0.00% - - - - 2,500,000 126,750 n.a n.a -34.96%

Bank Audi Preferred "J" $69.95 0.00% - - - - 2,750,000 192,363 n.a n.a 0.00%

Bank Of Beirut - Listed Shares $18.80 0.00% - - - - 20,796,417 390,973 6.30 0.96 0.00%

Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - - - 4,762,000 100,002 7.03 1.07 0.00%

Bank Of Beirut Preferred "H" $25.00 0.00% - - - - 5,400,000 135,000 n.a n.a 0.40%

Bank Of Beirut Preferred "I" $25.00 0.00% - - - - 5,000,000 125,000 n.a n.a 0.20%

Bank Of Beirut Preferred "J" $25.00 0.00% - - - - 3,000,000 75,000 n.a n.a 0.00%

Bank Of Beirut Preferred "K" $25.00 0.00% - - - - 4,000,000 100,000 n.a n.a 0.00%

Byblos Bank - Listed Shares $0.75 0.00% - - - - 565,515,040 424,136 5.14 0.29 -25.00%

Byblos Bank Preferred Class 2008 $60.00 0.00% - - - - 2,000,000 120,000 n.a n.a 0.00%

Byblos Bank Preferred Class 2009 $59.90 0.00% - - - - 2,000,000 119,800 n.a n.a -4.92%

Byblos Bank GDR $62.00 0.00% - - - - 1,309,078 81,163 8.50 0.49 0.00%

BEMO Bank - Listed Shares $1.20 0.00% - - - - 51,400,000 61,680 4.78 0.46 4.35%

BEMO Bank Preferred Class 2013 $92.00 0.00% - - - - 350,000 32,200 n.a n.a 0.00%

BLOM Bank GDR $3.50 0.00% - - - - 73,896,010 258,636 1.59 0.23 -42.34%

BLOM Bank Listed Shares $3.25 8.33% 8,000 2.99% $25,880 0.95% 215,000,000 698,750 1.47 0.22 -54.03%

RYMCO Class "B" $3.28 0.00% - - - - 10,920,000 35,818 18.22 1.57 0.00%

Holcim Liban $9.71 0.00% - - - - 19,516,040 189,501 - 1.29 -0.41%

Ciments Blancs Nominal $3.18 2.58% 5,360 2.00% $17,030 0.63% 9,000,000 28,620 14.41 1.33 22.31%

Lebanese Equities

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Total Listed

Shares

YTD

Price

Perf.

Market

Capitalisation

($000)

BEIRUT STOCK EXCHANGEWeekly

Value Traded

Note: n.a stands for not applicable

ClosingWeekly

%Change

Weekly Volume

Traded

% of Weekly

Volume Traded

% of

Weekly

Value

Traded

The market-cap weighted average price to book value (P/BV) multiple of listed stocks ended its week higher at 0.685 based on the closing prices of Friday’s session.

LEBANESE EQUITIES

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16

Previous Last % Change

Value Traded ($) 3,103,359 2,712,875 -12.58%

Volume Traded 324,793 267,986 -17.49%

Average Daily Trading Value ($) 775,840 678,219 -12.58%

Average Daily Trading Volume 81,198 66,997 -17.49%

Market Cap - BSE ($) 6,193,880,780 6,532,100,780 5.46%

Weighted Average P/BV 0.610 0.685 12.28%

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Activity Analysis

Source: BSE, Credit Libanais Economic Research Unit

0.560

0.580

0.600

0.620

0.640

0.660

0.680

0.700

April 24, 2020 April 30, 2020

0.610

0.685

Evolution of Beirut Bourse Comparable Benchmarks

P/BV

2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2 0 2 0

MACROECONOMIC INDICATORS

GDP (Current Prices) ($ Billion) 46.87 48.30 49.97 51.24 53.39 56.37* 58.57* 60.46*

Real GDP Growth Rate 2.62% 1.88% 0.42% 1.61% 0.55% 0.25%* 0.20%* 0.86%*

GDP per Capita (Current Prices) ($) 8,883* 8,619* 8,540* 8,530* 8,778* 9,251* 9,655* 10,043*

Foreign Direct Investment Inflows ($ Billion) 2.7 2.9 2.4 2.6 2.6 2.9 2.6*

FDI/GDP Ratio 5.68% 6.03% 4.70% 5.09% 4.93% 5.14% 4.44%

INDUSTRY

Industrial Exports ($ Million) 3,384 3,150 2,956 2,527 2,474 2,548 2,497 (2)

Import of Industrial Machinery ($ Million) 300 269 234 236 257 266 190 (2)

TOURISM

Total Number of Tourists 1,274,362 1,354,647 1,517,927 1,688,357 1,856,795 1,963,917 1,936,320 (2)

Growth in Tax- Free Spending 4% 8% 2% - 9% 5% 7% - 2% (2)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 8,708 8,952 8,006 8,482 9,954 8,134 6,839 1,772.76 (4)

Number of Real Estate Sales Transactions 69,198 70,721 63,386 64,248 73,541 60,714 50,352 10,834 (4)

Construction Permits (000 sqm) 10,527 11,159 10,294 9,935 9,271 7,144 4,899 0.141 (3)

Cement Delivery (000 Tons) 5,831 5,517 5,043 5,265 5,149 4,702 3,203 85.19 (3)

TRANSPORTATION

Beirut Port: Freight Activity (000 Tons) 8,268 8,281 7,240 8,737 8,629 7,985 6,524 728 (4)

Beirut Airport: Number of Passengers (Million) 6.26 6.57 8.22 7.61 8.24 8.84 8.68 1.17 (6)

FOREIGN TRADE

Imports ($ Million) 21,228 20,494 18,069 18,705 23,130 19,980 19,239 1154 (3)

Exports ($ Million) 3,936 3,313 2,952 2,977 2,844 2,952 3,731 333 (3)

Trade Balance ($ Million) (17,292) (17,181) (15,117) (15,729) (20,287) (17,028) (15,508) (821) (3)

Current Account Defic it / GDP Ratio 27.44% 28.17% 19.26% 23.14% 25.86% 26.38%

BALANCE OF PAYMENTS

Net Foreign Assets at the Financial Sector ($ Million) (1,127) (1,407) (3,354) 1,238 (157) (4,823) (4,351) (1,062.1) (5)

Foreign Assets at BDL ($ Billion) 35.29 37.86 37.09 40.71 41.99 39.67 37.27 34.68 (7)

Foreign Currency Reserves ($ Billion) - - - - - - 31.57 29.65 (7)

Gold Reserves at BDL ($ Billion) 11.10 10.95 9.85 10.71 11.96 11.77 13.94 15.80 (7)

PUBLIC FINANCE

Government Expenditures ($ Million) 13,640 13,952 13,528 14,867 15,381 17,792 16,901 (2)

Government Revenues ($ Million) 9,420 10,879 9,576 9,923 11,625 11,546 11,065 (2)

Budget Primary Defic it / Surplus ($ Million) (240) 1,307 724 21 1,428 (636) (287) (2)

Total Defic it ($ Million) (4,220) (3,073) (3,952) (4,944) (3,756) (6,246) (5,837) (2)

Defic it / GDP Ratio 9.00% 6.36% 7.91% 9.65% 7.03% 11.07%

Debt Service / GDP Ratio 8.09% 9.07% 9.36% 9.69% 9.71% 9.95%

Net Public Debt ($ Billion) 53.18 57.30 61.54 65.42 69.32 75.72 81.24 82.56 (4)

Gross Public Debt/GDP Ratio 135.44% 137.82% 140.71% 146.15% 148.96% 151.03%* 155.13%* 161.82%*

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 117.41 124.53 131.17 139.20 145.16 148.31 141.77 136.33 (6)

(M2- M1) ($ Billion) 40.56 43.27 46.25 47.95 45.45 42.98 31.16 37.04 (6)

Monetization Level (M2/GDP Ratio) 97.17% 100.66% 104.17% 106.25% 98.05% 89.84% 108.51%

Change in CPI (%) 2.05% - 1.66% - 3.40% 3.14% 5.01% 3.98% 6.96% 10.04% (3)

BANKING SYSTEM

Number of Commercial Banks 56 55 53 50 49 49 49 (1)

Number of Branches 985 1,020 1,039 1,056 1,065 1,080 1,080 (1)

Total Assets ($ Million) 164,821 175,697 185,989 204,311 219,856 249,484 216,781 208,550 (5)

Total Deposits ($ Million) 139,166 147,637 154,951 166,446 172,965 178,556 163,758 154,275 (5)

Loans to the Private Sector ($ Million) 47,381 50,899 54,224 57,180 60,318 59,386** 49,769 45,015 (5)

Customer Loans/ Deposits 34.05% 34.48% 34.99% 34.35% 34.87% 33.26%** 30.39% 29.18%

(5)

Dollarization Rate 66.14% 65.71% 64.88% 65.82% 68.72% 70.62% 76.02% 77.94% (5)

Exchange Rate (LBP to USD) 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50

Recap of Lebanon's Major Indicators

* Figures Reflect IM F Estimates

** Year 2018 loan figures and onwards reflect BDL's reclassification of some balance sheet items to meet IFRS9 requirements.

(1) As at End of M arch, 2019, (2) As at End of December, 2019, (3) As at End of January, 2020, (4) As at End of February, 2020, (5) As at End of M arch, 2020, (6) April 16, 2020, (7) As at M id-April,

2020

Weekly Market Watch

SOURCE: CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17

LEBANON’S MAIN INDICATORS

LEBANON’S MAIN INDICATORS

LEBANON’S RATINGS

Weekly Market Watch

SOURCE: S&P GLOBAL RATINGS, MOODY’S, FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 18

Rated Banks

Long Term

Foreign

Currency

Outlook

Long Term

Local

Currency

Outlook Long Term IDR Outlook

Long-Term

Counterparty

Credit Rating

Short-Term

Counterparty

Credit Rating

Outlook

Bank Audi Ca Stable Caa3 Negative RD - Withdrawn - SD - Withdrawn SD - Withdrawn -

BLOM Bank Ca Stable Caa3 Negative - - SD - Withdrawn - -

Byblos Bank Ca Stable Caa3 Negative RD - Withdrawn - - - -

BankMed - - - - - - SD SD -

Moody's Investors Service

Lebanese Banks' Latest Ratings

Source: M oody's Investors Service, Fitch Ratings, S&P Global Ratings, Credit Libanais Economic Research Unit

Fitch Ratings S&P Global Ratings

Rating Agency Tenor Rating Outlook

Long- Te rm Loc a l Curre nc y CC Ne ga tive

Short- Te rm Loc a l Curre nc y C

Long- Te rm Fore ign Curre nc y SD -

Short- Te rm Fore ign Curre nc y SD

Moody's Inve stors Se rvic e Long- Te rm Ca Sta ble

Long- Te rm Loc a l Curre nc y CC -

Long- Te rm Fore ign Curre nc y RD -

Short- Te rm C

Republic Of Lebanon Sovereign Ratings

Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings, Credit Libanais Economic Research Unit

Sta nda rd & Poor's Globa l

Ra tings

Fitc h Ra tings

CONTACTS

RESEARCH

Fadlo I. Choueiri, CFA

[email protected]

961-1-608 000 EXT: 1280

Jad Abi Haidar, CFA [email protected] 961-1-608 000 EXT. 1283

Marc Moukarzel [email protected] 961-1-608 000 EXT. 1286

TREASURY & FX

Nabil Aouad

[email protected]

961-1-608 000 EXT. 0789

This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document does not constitute an offer or invitation to subscribe to

or purchase any security, and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable.

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 19

mailto:[email protected]

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Issue No. 685...ARCH ss LEBBAANNONN NEWS ECONOMIC INSIGHTS EBANESE S&P REVISES ATINGS FOR SEVERAL LEBANESE BONDS 1 > LOWSLEBANON RANKS 2ND R TERMS OF REMITTANCE F IN > EBANOL N 2 P