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Tuesday, 9 February 2021

Marked safe from covid: Banque du Caire’s loan book

State-owned Banque du Caire (BdC) hasn’t seen a large rise in defaults despite covid-19, according to figures given by Chairman Tarek Fayed in an interview with the local press this week. The proportion of the bank’s non-performing loans in its total credit portfolio increased only marginally to 3.5% in 2020, up from 3.3% a year earlier.

This comes despite expectations in some quarters that banks would see a wave of defaults on the back of the pandemic. Many banks were forced to ramp up their loan loss provisions last year out of caution and some — including BdC — are preparing to do the same this year in anticipation of a rise in defaults.

No cause for alarm yet: The Egyptian banking system is expected to remain stable despite bank bottom lines being “under pressure” from higher loan losses and declining interest income. The sector has ample liquidity on hand to defend against a rise in defaults.

Also from Fayed:

BdC wants to raise its retail and microfinance loan portfolio to EGP 46 bn by the end of this year, Fayed said, noting that the loan book stood at EGP 18 bn by the end of 3Q 2020. The bank’s microfinance loan portfolio alone has almost tripled in size to EGP 6.2 bn over the past three years, while its syndicated loans stand at EGP 19.8 bn.

Still no news on the IPO: BdC’s plan to float 20-30% of its shares on the EGX will remain on ice while uncertainty over the trajectory of the pandemic continues to linger, he said. The listing was scheduled for last spring but postponed indefinitely due to unfavorable market conditions caused by the pandemic.

The bank’s effective tax rate climbed to 34% by the end of September from 25% in 2019, Fayed said. This was thanks to amendments to the Income Tax Act ratified in 2019 that changed how banks and corporations account for income from investments in government debt.

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