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.