Syria’s Banks: Boom or Bubble?

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Al-Akhbar Management

From Beirut, to Syrian revolts

Published Wednesday, August 24, 2011

In the past decade, the private banking sector in Syria grew considerably. Based on a recent report prepared by UK-based consulting firm Deloitte and obtained by Al-Akhbar, total assets in Syrian banks almost doubled between 2007 and 2010. This expansion was the result of the open-economy policy adopted by the regime at the beginning of the new millennium. But the current uprising across Syria has cast fresh doubts over the country's financial future.

A full assessment of the actual impact of the unrest on the banking sector is not possible prior to obtaining performance indicators of the year's second quarter. But figures from the first quarter may give an idea of the way things are heading.

During the previous quarter, private banks continued to expand and grow, but combined total assets decreased. The report states that “Although most of the banks continued to report profits for the three-month period ended 31 March 2011, it has been noted that the combined total assets of the private banks in Syria decreased from 650 billion Syrian pounds (SYP), or US$13.69 billion, at the end of 2010, to SYP624 billion (US$13.14 billion),” a decrease of 4 percent (Graph on the left, page 28 of the Deloitte report).

Revisting the Recession

The movement of deposits which represents an essential indicator of trust in the sector and in the wider economy “decreased by 18 percent and dropped from SYP521 billion [at the end of 2010] to SYP427 billion at the end of the first quarter” of 2011.

Moreover, credit facilities (loans) in the first quarter amounted to SYP273 billion (US$5.75 billion) according to the report. Bank Audi in Syria (BASY) leads other banks in loan grants which amounted to SYP41 billion (US$864 million) followed by Banque Bemo Saudi Fransi (BBSF) with SYP37 billion (US$780 million).

More specific details show that the assets of 8 out of 14 private banks operating in the Syrian market have decreased. For instance BASY underwent the most significant regression with 9 percent decrease in assets. Six other banks managed to achieve growth led by Al Baraka Bank with an increase of 22 percent. (Graph on the right, top of page 29 of the Deloitte report)

Furthermore, eight banks suffered losses in customer deposits, while six other banks achieved growth. The most significant decrease in customers’ deposits was experienced by Fransa Bank – Syria (FSBS) with 19 percent, while Al Baraka Bank (ABS) achieved the highest growth rate, of 63 percent.

A New Era

Restructuring of the Syrian banking sector began in March 2001, with the issuance of Law No.28 which regulates the establishment and operations of private commercial banks. Four years later, another legislative decree was issued to organize operations of Islamic banks. A decade of legislation followed, with the previously mentioned decrees serving as the foundation for the exponential growth of Syria's private banking sector. The number of private banking institutions in the country more than tripled between 2004 and 2010. Last year, the number of private banks reached 14, among which 11 were conventional banks and 3 were Islamic banks.

According to the Deloitte report, the total assets of the sector have grown by 93 percent between 2007 and 2010, amounting to SYP650 billion. The amount of bank loans almost tripled in the same period In 2009 and 2008, total assets increased by 30 percent and 34 percent, respectively. In 2010, the rate of increase fell to 28 percent. Nearly 86 percent of these loans are allocated to businesses, while 14 percent are personal loans.

Non-Performing Loans (NPL)

Unfortunately, the significant growth of loan grants was accompanied by a growth of the percentage of Non-Performing Loans (NPL), loans which payments of interest and principal are past due by at least three months.

At the end of 2010, the total NPL of the private banks in Syria amounted to SYP9.12 billion, compared to SYP4.75 billion in 2009.

Between 2009 and 2010, net profits after tax increased by SYP1.5 million, while losses incurred by several banks in 2009 were almost halved in 2010. According to the report, during 2010, the total net profits of the sector increased by 64.1 percent while losses were reduced by 39 percent.

57 percent

The growth rate of loans granted by private banks in Syria in 2010 compared to the previous year, amounting to SYP263 billion (US$5.5 billion).

SYP10 billion

The minimum capital required for conventional banks to remain solvent as determined by a presidential decree issued last year. Islamic banks require a minimum capital of SYP15 billion.

Islamic Banks Assets

According to the Deloitte report, the assets of Islamic banks represent only 15.3 percent of the total assets of private banks operating in Syria. It amounted to SYP99.3 billion (US$2.09 billion) last year. However, the growth rate of these banks’ assets (33.1 percent) increased faster than the recorded total (28.5 percent). This gap between growth rates has led to an increase of Islamic banks’ share of total assets by approximately 9 percent (as compared to 6.5 percent in 2007).

This article is an edited translation from the Arabic Edition.


Welcome Al-Akhbar in English.

1- Neither the Syrian regime is the master of transparency, nor the Lebanese banks are angels of virtue . I therefore advise reservation and caution when talking about any statistics related to these two parties.
All I see is factories with no or half production , and people withdrawing money from banks (although withdrawals have become less since early July ).
Syria has been in recession since 2009 , and most loans were awarded to big business or for purchases of cars by the middle class , and therefore the outlook for settlement of loans is not high due to the severe present crisis which will continue for months .

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