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Tuesday, 22 September 2020

NBE, Banque Misr scrap high-interest savings certificates

NBE, Banque Misr scrap high-interest CDs: State-owned National Bank of Egypt (NBE) and Banque Misr have stopped offering 15% fixed-rate savings certificates launched in mid-March, the institutions told the local press (here and here). The banks started selling the high-interest certificates in March to protect savers and ease pressure on the EGP after the central bank cut interest rates by 300 bps during the early days of the covid-19 pandemic. NBE sold some EGP 280 bn worth of the product during the six-month offering, Deputy Chairman Yehia Aboul Fotouh tells Al Mal, while Banque Misr reeled in EGP 103 bn, Deputy Chairman Akef El Maghraby tells Hapi Journal.

The two banks have been pulling liquidity out of the market with high interest rate products since the float of the EGP in late 2016 as the central bank guided the market away from dollarization. Both Banque Misr and NBE are now offering products more in line with rates offered by other players in the industry, with the highest yielding CDs in the banking system now in the 12-12.25% range, according to a survey by Masrawy.

Scrapping high-interest products could be another way for the central bank to support the economy without having to cut interest rates to keep the country attractive to the carry trade. “Cancelling the 12-month, 15% high-yielding certificates of deposits … [would] be supportive of growth, equities and banks’ net interest margins,” Renaissance Capital’s Ahmed Hafez suggested in a research note last week. EFG Hermes’ Mohamed Abu Basha, meanwhile, wrote yesterday that “the move indicates that monetary authorities are comfortable with the current FX liquidity in the market with a reduced risk of dollarization,” forecasting that the CBE will leave interest rates on hold this coming Thursday.

The National Investment Bank has also scrapped its high-interest certificates as it faces the prospect of compressed net interest margins after losing access to tax breaks on income from treasuries, NIB Managing Director Mahmoud Montasser told Al Masry Al Youm. The bank will instead offer certificates yielding 10-10.75%.

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