Back to the complete issue
Thursday, 21 January 2021

Egypt’s banks to remain stable in 2021 -Moody’s

The Egyptian banking system will remain stable in 2021 even as bottom lines “come under pressure” from rising loan losses and lower interest income, Moody’s Investors Service said in a report yesterday. Bank bottom lines will compare favorably to peers, in part due to the central bank’s decision to freeze cash dividends which will be “enough to absorb growth in risk-weighted assets and keep capital ratios stable.”

Prepare for a rise in bad loans: Disruption in tourism and construction, a slowdown in industrial production and weaker consumer demand will cause a rise in non-performing loans, which typically average 3.9%.

Many banks have already taken precautions in anticipation of problematic loans, ramping up loan loss provisions out of caution.

Lower rates = compressed NIMs: The central bank’s decision to reduce interest rates by 400 bps in 2020 will narrow net interest margins, bringing banks’ incomes under pressure, the ratings agency said.

Liquidity + lending won’t be a problem: Some 20% of bank assets are held in cash and interbank balances and a further 39% in government bonds, though state-owned banks will still face tighter FX liquidity. Banks also have “ample” customer deposits with which to fund lending.

OTHER BANKING & FINANCE NEWS- Some 22 companies are seeking licenses to provide non-bank financial services, Financial Regulatory Authority head Mohamed Omran said, reports Al Mal. The regulator expects to issue the licenses for eligible companies in 1Q2021.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.