Middle East: Beirut: The Suez of Money

MIDDLE EAST

Lying fat and silky beneath the Mediterranean sun, Beirut is an oasis of prosperity in the Arab Middle East.

Tiny Lebanon’s flamboyant capital sprouts new buildings like palm trees, boasts more Mercedeses than mullahs, lures thousands of tourists and happily shares its year-round sunshine with courtesans in bikinis as well as desert Arabs in burnooses. But Beirut’s most beneficent climate is the climate of trade, the heritage of its Phoenician forebears. In the Levantine landscape nothing seems to grow faster or greener than the city’s banks.

Beirut is the world’s newest and fastest-rising financial center. In the last decade it has expanded its banking business by 1,000% — and it shows no signs of slowing. Climbing above its clangorous, double-parked streets are more than 100 banks, including 41 foreign branches and offices as diverse as Moscow’s Narodny Bank and the Bank of America. Since July, Manhattan’s Morgan Guaranty and Irving Trust have both leased offices in Beirut. The First National Banks of Boston and Chicago are negotiating to open outlets, and another 13 banks have recently been incorporated. Says Lebanese Banking Association President Pierre Edde, whose growing Beirut Riyadh Bank is moving into a new ten-story building: “Beirut handles capital like the Suez Canal handles ships.” Saud & Hussein. Because it is both the cosmopolitan gateway to the Middle East and an island of stability in a newly rich but eternally turbulent region, Beirut has become the prudent banker to nervous kings, African smugglers, such huge U.S. oil companies as Aramco, frightened capitalists from socialist Egypt and Iraq—and no fewer than 600 tycoons from booming little Kuwait. Well over half of Beirut’s $800 million in deposits comes from abroad.

Saudi Arabia’s King Saud keeps some $20 million there, and Jordan’s King Hussein has several secret accounts (he signs his checks on one account with a pen name, “The Eagle”). Such depositors appreciate the fact that Lebanon has one of the world’s freest capital markets and a Swiss-like secrecy law so rigid that any loose-tongued banker can be jailed for two years. Beirut’s safety has also impressed some of the usually suspicious sheiks of the Persian Gulf. Sheik Shakhbut of Abu Dhabi, who earns $1,000,000 a week from his oil, insisted on burying his bank notes in his mud-brick palace—until silverfish began drilling through the bundles.

Under Mattresses. As remarkable and diverse as their depositors, Lebanon’s wily bankers come from all levels of a highly mobile society in which poor men get rich quick but seldom vice versa. Though they primarily serve the Moslem world, most are Christians. The giant among them, Yusuf Bedas, 51, began as a moneychanger operating out of two small rooms in 1948; now his Intra Bank has assets of more than $1 billion and branches from New York to Nigeria. He is building another branch on Paris’ Champs Elysées, last week bought a four-story Rome palazzo that will become Italy’s first Lebanese bank, and early next year will move into a 22-story headquarters now going up in Beirut. Another former moneychanger, George Jabbour, 37, set up shop next to the telephone at the bar of the Hotel Saint-Georges during Lebanon’s 1958 civil war, made so much from currency gyrations that he now heads his own Bank of Lebanon and the Middle East.

Many Beirut bankers start with useful political capital. Pierre Edde, for example, went into banking after four terms as Lebanon’s Finance Minister. Others made fortunes overseas and then invested in banking—notably Toufic Assaf, chairman of the Bank of Beirut and The Arab Countries, who earned millions from a wholesale business in Venezuela, and Joseph Saab, who built a bundle in South Asian mining and exporting. Saab’s Development Bank has introduced modern banking to Lebanon’s peasant villages, opened 35 branches in the past three years. Says he: “In even the smallest village, farmers need credit and have money hidden in the ground or under mattresses.”

Quick Turn. Beirut’s bankers prosper partly because they understand the unique needs and foibles of people for whom banking is a fresh experience. Many lavish spenders tell hoteliers and shopkeepers to send their bills directly to their banks, consider it an insult to have to carry credit cards to prove that they are good risks. The beauteous wife of Kuwait Millionaire Bader Almulla scorns checks, prefers to scribble notes on her calling cards (“Give this person $5,000”), which her banker is pleased to honor.

A few customers make demands that try the most patient bankers. One sheik withdrew $6,000,000 overnight because his banker could not procure a belly dancer he had admired. And Kuwait’s skeptical Sheik Abdullah al Mubarak, who stored $25 million in cash and suitcases full of stocks at Yusuf Bedas’ bank, once ordered that his stocks be delivered instantly to his mountain mansion; he carefully counted them one by one, then airily waved them back to the bank. But when he tried to tell Bedas how to run his business, the banker exploded: “Take your money and get out.” Few bankers anywhere can make that statement.

While some sheiks haggle like bazaar veterans for the extra half-percent interest that is paid for whopping deposits (top: 7%), a few devout Moslems refuse to accept any interest at all on their oil millions. In Beirut’s amazingly liquid and fast-moving money market, the bankers quickly pump their funds into short-term loans at up to 12%, finance everything from Pakistani exports and Saudi imports to local ski resorts and new cars. They seek to combine security with the plump profits of quick turnover, shun long-term credits or collateral-free personal loans.

Neither political crises nor financial strains have slowed the hectic advance of Lebanon’s biggest business. Although the government enacted its first banking-control code just this year, only one bank has failed—the small Banque Foncière Libanaise, which went down in February. The failure did not faze Beirut’s flexible, resilient money men. Since it occurred, total deposits have continued to rise, and the freely convertible Lebanese pound is stronger than ever.