Lebanese bank workers let go as currency crash bites

Special Lebanese bank workers let go as currency crash bites
A man walks past the Central Bank of Lebanon, Kantari Street, Beirut, Lebanon, Nov. 12, 2020. (Reuters)
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Updated 09 November 2021

Lebanese bank workers let go as currency crash bites

Lebanese bank workers let go as currency crash bites
  • Union president: ‘2021 very hard for employees in Lebanon’
  • Almost 5,000 quietly dismissed, firms offering incentives to quit

BEIRUT: Lebanese banks are quietly letting employees go as they seek to close branches and reduce operational costs amid the collapse of the local currency, the Lebanese pound.

The moves come after the country’s central bank tightened the exchange rate used to withdraw cash in Lebanese pounds from US dollar accounts from domestic banks in the absence of a comprehensive plan to boost the economy, which has been in crisis since 2019.

Since autumn 2019, the central bank has imposed currency restrictions, which currently mean that savers with dollar accounts have only been able to make withdrawals in Lebanese pounds at an exchange rate of 3,900 pounds to the dollar.

However, the dollar is trading at around four times that on the black market.

The Lebanese pound has been pegged to the dollar since 1997.

While some banks are downsizing domestically, others are opting to sell assets abroad.

The number of branches estimated to have closed ranges between 300 and 400 out of a total of 1,100 in the country. Employees and contractors have been the first to feel the effects of the decisions.

George Al-Hajj, president of the Federation of Syndicates of Bank Employees, said that 2021 has been “very hard” for bank employees in Lebanon, adding: “Although no statistics have been conducted to show the exact number of laid-off employees, their number does not exceed 4,500.”

But more bank workers are expected to be dismissed shortly.

“We are in the middle of the storm, and the crisis will persist until Lebanon reaches an agreement with the International Monetary Fund on the restructuring process of the banking sector,” said Al-Hajj.

The number of employees of the banking sector in 2018 was estimated to be about 26,000, working for 61 banks. Since 2019, the sector has lost more than 17 percent of its workforce.

Dr Jassem Ajaka, an economic and strategic expert, warned that “up to 50 percent of bank employees will be laid off.”

He told Arab News: “After the deterioration of the economic situation and the suspension of banking activities due to the decision to block financial transfers, the banking sector is no longer making profits.

“Banks are not charities, and the reality is hard for everyone.”

“The banking sector’s employees constitute a very important share of the middle class in Lebanon and eradicating this group from the economy will further harm Lebanese society.”

Al-Hajj said: “In 2019, the federation saw this crisis coming and urged banks seeking to fire employees to inform the Ministry of Labor of their intentions. Some banks did, but others did not, and thus we do not know the exact number of laid-off employees.”

He added: “The banks’ excuses for mass lay-offs were many. Sometimes it was because the bank was applying an early retirement system, sometimes it was a resignation at a request from the administration, and other times it was the termination of contracts due to economic reasons.”

Many domestic banks are also offering a set of incentives for employees to voluntarily quit.

The average salary of a regular bank employee ranges between 2,000,000 and 2,500,000 Lebanese pounds — equivalent to $100 today but $1,500 before the economic crisis and collapse of the currency.

This year, the Lebanese Federation of Syndicates of Bank Employees issued new protocols on the financial rights of laid-off employees, but Al-Hajj warned that “banks have not been very receptive so far.”

The new rules state that “laid-off employees shall receive 18 monthly salaries as well as a bonus of two months’ salary for every year of employment up until six years; a one-and-a-half-month salary for every year of employment for those who served between six and 12 years; and a one-month salary for every year of employment for those who served more than 12 years and up until 44 years of employment.”

The previous dismissal protocol meant that laid-off employees only received 16 months’ salary in compensation for arbitrary dismissal.

However, some banks have chosen to compensate their employees with 24 months of salary in addition to other incentives, to avoid clashes with laid-off staff.

Al-Hajj said: “In addition to the mass layoffs, another problem that is as serious as the first one has emerged: The devaluation of employee salaries and its tragic repercussions on the living conditions of the Lebanese.

“This problem is only getting worse as the crisis continues and thus, the number of voluntary resignations by highly qualified employees is increasing.

“This will affect the future of the banking sector. Unfortunately, the migration of these people cannot be prevented unless by reconsidering their salaries, which have become worthless.”

Bechara Al-Asmar, head of the General Labor Union, estimated that the number of laid-off employees in Lebanon “since the economic crisis and the beginning of the coronavirus pandemic numbers more than 500,000 people.”

The Lebanese Observatory for Workers and Employees Rights has also said that between 500,000 and 800,000 workers have lost their jobs, forcing the country’s unemployment rate to surge above 50 percent.

It said that of the public sector, military and security employees who have kept their jobs, most have lost about 90 percent of the value of their salaries.

The observatory said that “325 institutions submitted requests to the Ministry of Labor to dismiss employees at the start of 2020.”

It noted the first wave of mass layoffs mainly targeted workers in the tourism sector.

The crisis then extended to small enterprises and the country’s sizable black market.

“The second wave hit the education sector, where more than 2,000 teachers were laid off in 2020, according to the Teachers Syndicate in Private Schools, and their salaries were cut by 40 percent as many students left private education and were enrolled in public schools.”

The observatory said that the mass layoffs also affected “major businesses and institutions that were supposedly solid enough to bear the effects of the crisis, such as the American University of Beirut, which fired more than 1,200 workers, The Coca-Cola Company, which fired 350, and Adidas, which fired 250.”

The multinational retail franchise operator Al-Shaya Group also shut most of its companies in Lebanon and fired employees, the observatory said.

The layoffs also affected “domestic workers and non-Lebanese workers from Asia and Africa, as employers were no longer able to pay them in US dollars.

Vulnerable groups were also affected, such as day laborers and Palestinian refugees, whose numbers are hard to estimate as they are not registered within the social security fund or at the Ministry of Labor,” the observatory added.


Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds
Updated 05 July 2022

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

RIYADH: Brent oil prices were little changed on Tuesday, reversing earlier gains of $1, as investors weighed supply concerns, highlighted by a potential production cut in Norway, and worries about a possible global recession curtailing fuel demand.

Brent crude futures for September settlement edged up 0.2 percent, or 22 cents, to $113.73 a barrel by 0432 GMT.

US West Texas Intermediate crude climbed $1.95, or 1.8 percent, to $110.38 a barrel, from Friday’s close. There was no settlement for WTI on Monday because of the Independence Day public holiday in the US.

Dragon Oil extends Turkmenistan partnership in $1 billion deal

Dubai-based Dragon Oil signed a $1 billion deal to renew its production partnership in Turkmenistan with state-owned Turkmen Oil for 10 years after the current contract expires in May 2025, state news agency WAM said on Monday.

Of the total value, $500 million will be paid in cash while the remaining $500 million will be paid over 13 years.

Ecuador oil output recovers by about 90 percent 

Ecuador’s oil output has recovered by about 90 percent since a deal between the government and demonstrators ended nationwide protests late last week, the ministry of mines and energy said on Monday.

Protests erupted in Ecuador in June to demand lower fuel prices and limits on the expansion of the mining and oil industries. The demonstrations led to at least eight deaths and devastated the country’s oil production.

Last Thursday, the government of President Guillermo Lasso and indigenous leaders signed a pact to end the crisis. At the time, oil output was around 262,000 barrels per day. It has since rebounded to 461,637 bpd, the ministry of mines and energy said in a statement.

“Some 952 oil wells have been reactivated, which means that about 10 percent of the suspended wells still need to be recovered,” Ecuador’s Energy Minister Xavier Vera said in the statement.

State-run oil company Petroecuador on Monday also reported a 90 percent recovery in production.

While the company on Friday estimated it would take a week to recover 90 percent of its output, production had risen to 361,535 bpd as of Sunday, it said.

“Thanks to these efforts, just 82 wells remain closed, of the almost 1,000 that were affected by acts of vandalism,” Petroecuador’s manager Italo Cedeno said in a statement.

The company was forced to issue a wide force majeure declaration across the oil industry on June 18 amid the protests.

The notice, enforced at the end of June, is expected to be lifted on July 7, once the company can assure customers that supply contracts will be fulfilled.

Norwegian oil and gas workers start strike, cutting output

Norwegian offshore workers on Tuesday began a strike that will reduce oil and gas output, the union leading the industrial action told Reuters.

The strike, in which workers are demanding wage hikes to compensate for rising inflation, comes amid high oil and gas prices, with supplies of natural gas to Europe especially tight after Russian export cutbacks.

“The strike has begun,” Audun Ingvartsen, the leader of the Lederne trade union said in an interview.

The Norwegian government has said it was following the conflict “closely.” It can intervene to stop a strike if there are exceptional circumstances.

On Tuesday, oil and gas output will be reduced by 89,000 barrels of oil equivalent per day, of which gas output makes up 27,500 boepd, Equinor has said.

On Wednesday, the strike will deepen the cut to the country’s gas output to a total of 292,000 barrels of oil equivalent per day, or 13 percent of output, NOG said on Sunday. 

From Wednesday oil output will be cut by 130,000 barrels per day, the lobby had said, corresponding to around 6.5 percent of Norway’s production, according to a Reuters calculation.

(With inputs from Reuters) 

 


TASI trades higher, while investors fret about inflation: Opening bell

TASI trades higher, while investors fret about inflation: Opening bell
Updated 05 July 2022

TASI trades higher, while investors fret about inflation: Opening bell

TASI trades higher, while investors fret about inflation: Opening bell

RIYADH: Saudi stocks opened higher on Tuesday’s opening bell, but investors were still worried about the impact inflation will have on the economy.

The main index, TASI, gained 0.18 percent to reach 11,378, while the parallel market, Nomu, started flat at 20,684, as of 10:09 a.m. Saudi time.

This was led by a 1.29 percent rise in Saudi chemicals maker Petro Rabigh and 0.26 percent gain in Saudi Aramco, the largest player on the Saudi oil market.

In the banking sector, Al Rajhi, the Kingdom’s largest valued bank, rose 0.75 percent, and Saudi National Bank climbed 0.30 percent.

Saudi British Bank lost 1.10 percent of its share price in early trading.

Saudi Research and Media Group and Saudi Fisheries Co. led gainers with 2.25 percent and 3.31 percent gains, respectively.

Ataa Educational Co. topped the decliners in the early morning session, shedding 2.68 percent.

In the energy sector, West Texas Intermediate crude was trading at $110.01 per barrel and Brent crude was trading at $113.36 per barrel as of 10:03 a.m. Saudi time.


Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday
Updated 05 July 2022

Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday

RIYADH: Saudi Arabia’s stock market extended losses on Monday as recession and inflation risks continue to bother investors.

The main benchmark index TASI lost 0.9 percent to close at 11,358, hit by a 1.3-percent fall in oil giant Aramco, while the parallel market Nomu dropped 1.9 percent to 20,672.

Likewise, the stock exchanges of Abu Dhabi, Dubai, Qatar, and Kuwait all shed between 0.2 and 1.4 percent.

Bahrain and Oman bucked the downward trend to close 0.5 and 0.2 percent higher, respectively.

Apart from the Gulf, Egypt’s blue-chip index EGX30 continued its losing streak as it slipped 3.6 percent.

Oil prices were slightly changed on Tuesday due to lingering supply concerns and worries over a potential global recession.

Brent crude futures edged down to $113.28 a barrel and US West Texas Intermediate rose almost 1.5 percent to $110.02 a barrel by 9:16 a.m. Saudi time.

Stock news

Petro Rabigh’s rump offering generated a total of SR390 million ($104 million) in proceeds after selling over 23 million shares

Middle East Specialized Cables Co. appointed Yahiya Al-Qunaibit as board chairman and Saad Al-Shammari as vice-chairman

Two substantial shareholders in Wataniya Insurance Co. have executed an off-market deal where SNIC Insurance Co. sold a 2.5 percent stake to E.A. Juffali and Brothers for SR16.5 million

Jadwa Investment Co. sold a property located in Riyadh, namely Raud Al Jenan School, for SR27 million

National Industrialization Co. elected Mubarak Al-Khafrah as its chairman and Talal Al-Maiman as its vice-chairman

Gulf General Cooperative Insurance Co. has signed a one-year deal with Al-Rashid Trading and Contracting Co. to provide medical insurance services

Calendar

July 7, 2022

Saudi Exchange will close for the Eid Al Adha holidays and resume trading on July 13


Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 
Updated 05 July 2022

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

RIYADH: Saudi-listed companies are expected to see mixed earnings in the second quarter of 2022, amid rising oil prices, looming economic slowdown risks, and interest rate hikes, according to Al-Rajhi Capital.

The Riyadh-based financial service firm which has analyzed the performance of all industrial sectors expects the Kingdom’s oil giant Aramco to post SR164.8 billion ($44 billion) in profits in the second quarter of 2022, up 81 percent from a year earlier. It estimates the chemical giant Saudi Basic Industries Corp.’s profit to slightly slip by 1 percent to SR7.6 billion.

Apart from SABIC, petrochemical companies will see pressure on earnings, weighed down by higher feedstock costs amid stable polymer prices, the report added.

In the healthcare sector, Al Rajhi Capital forecasts leaps in performance for two major players on improved capacity utilization, as Dallah Health and Sulaiman Al Habib are expected to see a profit surge of 50 percent and 10 percent respectively.

For the cement sector, however, the outlook is negative. All companies including, but not limited to, Saudi Cement, Southern Cement, and Yamama Cement are expected to see a drop in profit due to lower cement volumes.

The investment bank’s forecast for Saudi Telecom Co., known as stc, revealed an 8-percent increase in net profit, reaching SR3.07 billion.


Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 
Updated 36 min 5 sec ago

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

RIYADH: Saudi Arabia has seen a robust improvement in business conditions across the non-oil sector in June, as the Kingdom steadily advances in its path of economic transition, according to the latest PMI data from S&P Global.

It said new business rose at the sharpest rate for eight months, despite evidence that intensifying cost pressures had led companies to mark up their prices. 

David Owen, Economist at S&P Global Market Intelligence, said: "Saudi Arabia's non-oil economy continued to go from strength to strength in June, with the PMI picking up to an eight-month high of 57.0 and posting well above the 50.0 no-change mark. 

He said the upturn was underlined by a robust increase in new business levels, which encouraged firms to expand their output sharply and make greater input purchases.