The first Syrian lender to announce 2012 earnings has reported a 95 per cent plunge in profits, as months of violence takes its toll on the banking sector.
Bank Audi Syria said it took out the biggest possible provision to cover bad loans.
The unit of Lebanon's largest lender made just 5.58 million Syrian pounds (Dh289,084) last year, compared with 114.3m pounds in 2011 and 737.5m pounds in 2010.
Syria's 14 private lenders, considered the crown jewels of the 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, and deposits and withdrawals continue. Some banks have started to move deposits to the capital, temporarily closing branches amid crossfire in conflict areas such as Homs and Deir Al Zor.
"The bank has taken all the necessary measures to ensure business continuity and offer the best banking services possible by adapting with the current operational conditions," the chairman, George Al Ashi, said in a release to the Damascus bourse. "This is in addition to maintaining higher cash-flow rates than that decided by the authorities in a way that ensures and provides bank clients with liquidity at any given time and any given currency."
The foreign-backed lender found it necessary to establish a balance between the bank's income and its operational expenses, the statement said. The bank's management was able to reduce costs by 100m Syrian pounds last year, it added.
The IMF has not provided figures on the Syrian economy since the start of violence in March 2011. Nassib Ghobril, the chief economist of Byblos Bank, estimates Syria's GDP has halved since 2010's figure of US$58 billion (Dh213bn).
"The banks are being directly affected by turmoil and continue to be affected as long as the situation persists," Mr Ghobril said.
"All the banks in Syria are being very cautious.They are waiting to see what happens. They are not extending loans to new clients. There is no new business. It's a very difficult situation."
There are 20 stocks listed on the Damascus Securities Exchange, 12 of which are banks, with the rest from the insurance, services, industrial and agriculture sectors.
Trading on the DSE has almost halted in recent months as violence escalated in the capital and other cities across Syria. But exchange officials say they remain committed to offering investors a place to trade their holdings.
The DSE General Index has lost more than half of its value since the uprising began. It traded at 1,523.14 points on March 15, 2011, and has since fallen to 783.18 points.
halsayegh@thenational.ae
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UAE currency: the story behind the money in your pockets
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.”
Medicus AI
Started: 2016
Founder(s): Dr Baher Al Hakim, Dr Nadine Nehme and Makram Saleh
Based: Vienna, Austria; started in Dubai
Sector: Health Tech
Staff: 119
Funding: €7.7 million (Dh31m)
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Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5