| LBP Accounts % | Oct 2019 | Dec 2019 | Dec 2020 | Dec 2021 | May 2022 |
| 1 Average Interest on Deposits at BDL | 4.22 | 4.22 | 2.22 | 2.22 | 2.22 |
| 2 Weighted Yield on TBs | 7.51 | 7.53 | 7.55 | 7.32 | 7.54 |
| 3 Weighted Lending Rate | 11.12 | 9.99 | 7.77 | 7.27 | 5.57 |
| 4 Weighted Rate on BDL CDs | 8.74 | 8.74 | 8.78 | 8.81 | 8.81 |
| 5 Weighted Rate on Uses of Funds | 9.72 | 9.7 | 6.42 | 5.49 | 5.13 |
| 6 Weighted Rate on Customers’ Deposits | 9.04 | 8.6 | 2.9 | 1.22 | 0.84 |
| 7 Spread = (5 – 6) | 0.68 | 1.11 | 3.52 | 4.27 | 4.29 |
| USD Accounts % | Oct 2019 | Dec 2019 | Dec 2020 | Dec 2021 | May 2022 |
| 1 Average Interest on Deposits at BDL | 5.97 | 6 | 3.93 | 3.92 | 3.94 |
| 2 Average 3-Month LIBOR | 1.98 | 1.91 | 0.23 | 0.21 | 1.48 |
| 3 Weighted Rate on Eurobonds | 6.96 | 7.03 | 0 | 0 | 0 |
| 4 Weighted Rate on Lending | 10.11 | 10.51 | 6.94 | 6.54 | 5.63 |
| 5 Weighted Rate on Uses of Funds | 6.78 | 6.85 | 3.88 | 3.82 | 3.82 |
| 6 Weighted Rate on Customers’ Deposits | 6.46 | 5.85 | 0.98 | 0.21 | 0.15 |
| 7 Spread = (5 – 6) | 0.32 | 1 | 2.89 | 3.62 | 3.67 |
On the eve of the Lebanese crisis in October 2019, Lebanese banks were making small or even meager interest spreads. As can be seen from the table above, for LBP accounts, the spread was 0.68%, as the weighted rate on the uses of funds was 9.72% and the weighted rate on customers’ deposits was 9.04%. The rate on the uses of funds was driven mostly by the lending rate at 11.12% and by the rate on CDs issued by BDL at 8.74%. But as the crisis progressed, the structure of interest rates changed dramatically and more so for the interest spread. The weighted rate on the uses of funds fell to 5.13% by May 2022, mostly as a result of reductions in half to the interest on deposits at BDL which fell to 2.22% and to the lending rate which fell to 5.57%. But it is the weighted rate on customers’ deposits that changed greatly as it fell to 0.84% — a fall by more than 8%. As a result, the interest spread soared to 4.29% or by more than 3.5%.
A somewhat similar story can be told for USD accounts. In October 2019, the spread was 0.32%, as the weighted rate on the uses of funds was 6.78% and the weighted rate on customers’ deposits was 6.46%. The rate on the uses of funds was driven mostly by the lending rate at 10.11% and by the rate on Eurobonds at 6.96% and to lesser extent by interest on deposits at BDL at 5.97%. However, the crisis changed all that. The weighted rate on the uses of funds fell sharply to 3.82% by May 2022, driven by declines in the interest on deposits at BDL from 5.97% to 3.94% and the lending rate from 10.11% to 5.63%, but mostly by the drop in the Eurobond rate that fell to 0% because of the Lebanese government default. Also, the weighted rate on customers’ deposits dropped even more, falling all the way down to 0.15%. In consequence, the resulting interest spread jumped to 3.67%
It is ironic that when banks were stable and crisis-free, the interest spread was almost 0.5% on average, whereas in the midst of the ongoing crisis the spread rose frantically to an average of more than 4%; and all the profits made on these higher spreads are now, understandably, being converted to provisions so as to bolster banks’ capital. Also understandably, banks’ major concern now is not attracting deposits but consolidating their financial position to survive a crisis that, paradoxically, was largely not their making.