S&P expects Egyptian banks to lead the wider MENA region in loan growth this year despite sky-high interest rates. The ratings agency says Egyptian lenders will lead the Middle East, North Africa and Turkey (MENAT) region in 2019 with growth as high as 17% (admittedly from a low base). That far outstrips the regional average of 7-8%, which is dragged down in part because Turkey is projected to deliver 0% loan growth, S&P said in its MENAT Overcast 2019 Outlook report. Egypt also looks set to deliver the highest return on government debt, with investors benefiting from higher bond yields, the report notes.

Overall, it’s not looking good for regional banks: The regional picture is even worse when you factor in inflation, the ratings agency writes. “We consider these figures, if adjusted for inflation, as insufficient to cope with the region's economic development needs in the Middle East, North Africa, and Turkey.” Furthermore, “weak asset quality will continue to weigh on our view of the credit quality of banks in the region, particularly those in Turkey,” the report says. It sees the return on assets for the MENAT region averaging an anemic 1.2%.

Additional downside risks: Political instability and over-reliance on “volatile wholesale external funding,” S&P notes.