Capital Intelligence (CI), the international credit rating agency, announced that it has affirmed Byblos Bank-SAL’s (Byblos) Financial Strength Rating (FSR) at ‘BBB-‘. The Bank’s Foreign Currency (FC) Long and Short-Term Ratings are affirmed at ‘B’, constrained by the Sovereign Ratings of Lebanon.
The Support Level is affirmed at ‘3’, reflecting the high likelihood of official support from Banque du Liban (BdL) in case of need, given Byblos’ systemic importance and BdL’s record of assisting banks.
The Outlook on all Ratings remains ‘Stable’. However, CI notes that ratings would be pressured downwards in case sovereign and/or political risk factors were to deteriorate, or in the event that developments in Syria were to affect the Bank’s net profit, asset quality or capital in a significant way. Declining net interest margins are expected to continue to place downward pressure on the Bank’s income growth and operating profitability. Although the Bank has absorbed the effect of events in Syria and Sudan last year with only a moderate impact on consolidated net profit and capital, greater operating or translation losses could be forthcoming unless the situation in these countries stabilises.
The ratings are supported by Byblos’ stronger than average capital adequacy, sound loan asset quality and a well managed cost base. BB enjoys a strong franchise in Lebanon. The ratings are constrained by risk concentration to the Lebanese sovereign, although it remains more moderate than peers; an increasingly competitive business environment with lower economic growth in Lebanon, and as is the case with other Lebanese banks, exposure to systemic interest rate and liquidity risks.
Despite significant improvement in Lebanon’s sovereign debt metrics over the past years, the trend in the public debt burden is expected to reverse as economic growth stalls leading to a weakening in the sovereign risk profile and increased financial repression on the banking system. More importantly, at times of heightened political risk in Lebanon, systemic factors have affected the banking sector’s deposit base placing pressure on liquidity, margins, asset prices and on the exchange rate peg on which Lebanon’s macroeconomic stability is so crucially dependent.
With end 2011 total assets of $16.6bn, Byblos is the third largest Lebanese bank. The Bank’s shareholder base comprises members of the Bassil family – who established the Bank in 1979 – and other prominent Lebanese entrepreneurs, as well as the IFC and other international shareholders. Byblos Bank follows a universal banking model offering services in commercial and retail banking through one of the largest branch networks in Lebanon and operations in 9 locations abroad.
Press Release
