Transcript Slide 1 - The British Syrian Society

Focus on Syria
BANK AUDI SYRIA
Investment and Business Opportunities in a Transformed Market
Getting Established in Syria
Insights on the Banking Sector
London, November 7th 2007
BANK AUDI SYRIA
Contents
 Economic Performance
 Current Banking Conditions
 Potential for Growth in the banking sector
BANK AUDI SYRIA
Economic performance
 GDP has grown 18% the last couple of years ,it reached $35.5
billion at the end of 2006 ,
 Inflation has grown 10% last year from 4.4% in 2004; real
GDP growth rate ranged between 5% and 7% with non-oil
GDP growth ranging between 6%-7%.
 Private investment growth :20% per year
 50% of the loan portfolio of local banks went to the private
sector in the last two years
Current Banking Conditions
BANK AUDI SYRIA

Syrian banking sector was distinguished by the presence of
one commercial bank, and other specialized ones.
 Efforts from the Central Bank of Syria (CBS) to develop the
banking sector have taken place to create the appropriate
environment for the operating banks and to facilitate their
expansion
 The banking sector reforms set the path for development by
focusing on:
1. Opening up to private sector,
2. Building regulatory and supervisory capacity
3. Using a participatory approach, especially in planning financial
sector reforms.
Current Banking Conditions
Market Structure
In $ billion
Total Assets
BANK AUDI SYRIA
2005
2006
Deposits
2005
2006
Loans
2005
Share Capital
2006
2005
2006
Totals
24.4
28.7
13.3
14.6
8
9
1.4
3.8
State Banks
22.7
25.2
12.6
11.9
7.6
8.2
1.2
3.5
1.7
3.5
1.3
2.7
0.3
0.7
0.2
0.3
93%
88%
91%
81%
96%
93%
84%
93%
7%
12%
9%
19%
4%
7%
16%
7%
Private Banks
Market Share
State Banks
Private Banks
BANK AUDI SYRIA
Current Banking Condition
Banking Sector’s Size
Banking Sector’s Deposits
 Banking Sector’s growth : 6.7% from 2003 to 2006.
 Private sector total assets reached $29 billion at the end of
this period,
 Public sector total assets by the end of 2006 stood at $25.2
billion
 Customers’ deposits increased : 9% from 2003 to 2006
reaching $2.7 billion up form $1.3 billion. Deposits in public
banks were lower in 2006 than at 2005 falling from $12.6
billion to $11.9 billion, a decrease of $0.7 billion or 5%.
Current Banking Condition
Banking Sector’s Lending
BANK AUDI SYRIA
 Total loans : $9 billion by a notable 32% on average, every year
from 2003 to 2006.
 In less than three years public banks credit portfolio has witnessed
an increase of around 50% to reach $8.2 billion in 2006 from only
$5.5 billion in 2003.
 Private banks lending’s has gone up to $700 million in 2006 from
$300 million in 2005.
Current Banking Conditions
Banking Sector’s Liquidity & Investment Opportunities
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BANK AUDI SYRIA
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97% of The total balances of liquidity, are placed in local currency.
The Syrian market suffers limited lending and investment
opportunities.
Certificate of deposit (CDs) have emerged as the only opportunity
for banks to invest its excess liquidity with efficient returns.
Banks incur heavy costs in managing SYP liquidity.
Minimum capital requirement in an environment of limited lending
opportunities and increased competition, which may lead to
excessive risk taking or encourage further dollarization.
A new market for T-Bills has recently past with banks being the only
participants in the bills’ primarily market
Allowing public banks to participate in the primary market of the TBills undermine utilizing the full benefit of the T-Bills from the
private banks point of view.
Current Banking Conditions
Bankarization ratio
BANK AUDI SYRIA
 Syria has a branch per 57,000 inhabitants,
 Total number of branches managed by private banks reached
44 at the end of 2006. This is more than a 75% increase from
the previous year level of 25.
BANK AUDI SYRIA
Current Banking Conditions
Dollarization ratio
Deposits’ dollarization rate, defined as the ratio of deposits in
foreign currencies to total deposits increased from 13.1% in
2005 to 19.5% in 2006 indicating an increase in FC deposits
larger than that of local currency deposits. Private banks’
dollarization stands at 55% on average and it is expected to
further increases as a result of the lack of SYP deployment
opportunities and increased competition
BANK AUDI SYRIA
Current Banking Conditions
Employment
 Data available for private banks (excluding the two Islamic
banks) indicates an increase in the number of employees for
this segment of the sector from 700 to 1094 employees.
Potential for Growth in the banking sector
BANK AUDI SYRIA
 The Syrian banking sector is expected to reach $36 billion by
2009 in term of its total assets, an average rate of 8%.
 GDP is expected to grow in nominal terms by a faster pace. A
rate of 17% on average is expected to be materialized in the
coming three years.
Potential for Growth in the banking sector
 Number of factors is promising a positive impact on the sector:
BANK AUDI SYRIA
1) The new law amendment allowed for majority of foreign
ownership (up to 60% from 49%) facilitating entry of non-Syrian
players.
2) 100% foreign ownership of banks is also being discussed
among major stakeholders and regulators
3) The introduction and development of Islamic finance is
another channel to draw in large inflow of money and attract
a pool of investors.
4) The extension of the period given to shareholders to pay the
full value of their capital subscription from six months to
three years
Suggested areas of reforms
 Clear policy guidelines for public banks need to be
established
BANK AUDI SYRIA
 The future status of the CBS, pressured by US sanctions on
its international operations.
 The supervisory process in the Syrian banking system needs
to be reformed.
 The outdated tax system also needs to be efficiently
corrected. Despite recent reforms and simplification of the tax
system, massive tax evasion and lack of disclosure and
inadequacies remain.
 The country payment system need to undergo a real and
rapid development process
Conclusion
BANK AUDI SYRIA
We have presented some insights to the elements of success as
well as obstacles facing the Syrian banking sector in general and
private banks in particular.
The growth of private banks is not surprising yet it is still in its
infancy in many aspects, they are yet to make a significant impact
on the Syrian economy.
The challenges have not been completely abolished, but they are
well recognized and clear. The key to overriding these obstacles
and get easily into the Syrian market are already in place, and with
the open dialogue between the private entities and public
authorities.
BANK AUDI SYRIA
Thank You
We have presented some insights to the elements of success as
well as obstacles facing the Syrian banking sector in general
and private banks in particular.
The growth of private banks is not surprising yet it is still in its
infancy in many aspects, they are yet to make a significant
t
impact on the Syrian economy.
The challenges have not been completely abolished, but they are
well recognized and clear. The key to overriding these
obstacles and get easily into the Syrian market are already in
place, and with the open dialogue between the private entities
and public authorities.