Syrian banks are braced for worst-case scenarios after profits tumbled by between 40 and 90 per cent last year as the civil war further batters an already weakened financial sector.
Byblos Bank Syria, whose major shareholder is Lebanon's third-largest lender by assets, said it had developed a "detailed emergency plan for each of the bank's businesses" in a statement to the Damascus Securities Exchange.
"The necessary requirements, from staff to equipment and communication, were determined to ensure business continuity at an alternative location" in Syria.
Profits at the foreign-backed bank last year tumbled 94.7 per cent from 2011 to 9.93 million Syrian pounds (Dh514,576). Deposits fell 27 per cent to 25.7 billion pounds, as credit facilities dropped to 17.25bn pounds from 23.8bn pounds.
The bank took provisions worth 525.5m pounds for bad loans. Syria's private lenders, considered the crown jewels of president Bashar Al Assad's economic modernisation plan, are struggling with a mismatch of assets and liabilities.
Banking transactions such as trade finance or corporate lending have taken a big hit, while basic banking services continue despite the challenging environment.
Byblos Bank Syria is one of six Syrian foreign-backed banks to have reported a drastic decline in their bottom line last year.
Fransabank Syria, another Lebanese-backed lender, said profits had dropped 62 per cent to 56m pounds last year from a year earlier, according to a regulatory filing.
Jordan's Arab Bank said profits at its Syrian unit fell 44 per cent to 254.89 million pounds from 2011.
Syria Gulf Bank reported a 97 per cent drop in net income to 8m pounds from the year earlier.
The lender, whose biggest shareholder is Bahrain's United Gulf Bank, said it "set up procedures and policies aimed at limiting these risks that include early warning indicators and adequate emergency plans to preserve business continuity".
Syria International Islamic Bank, in which the largest shareholder is Qatar International Islamic Bank, said profit fell 60 per cent to 346.92m pounds from a year earlier.
The bank was put under United States sanctions in June, accused of acting as a conduit for Commercial Bank of Syria, which is also under US and international sanctions.
The IMF has not provided figures on the Syrian economy since the start of violence in March 2011.
"The state of the economy is not a functional one that is witnessing a slowdown," said Ibrahim Saif, an economics export at the Carnegie Middle East Center in Beirut. "It is witnessing a war with the physical destruction of facilities on the ground, which makes any logical analysis of the economy sound irrational.
"This is now to be expected given the crisis and given the government is losing its grip," said Mr Saif. "Honestly speaking, I expected this to happen earlier and to be worse than what it is now."
halsayegh@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
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