Back to the complete issue
Wednesday, 6 April 2022

Egyptian banks aren’t likely to be hit by fallout from Russia’s war in Ukraine –S&P

Rated Egyptian banks have little direct exposure to Russian and Ukrainian assets, according to an S&P Global Ratings report looking at the impact of the war on the banking sector in eight Middle East and African markets. “We do not expect the conflict will have significant direct effects on bank asset quality indicators,” the report read.

The impact on banks of the EGP’s depreciation is also set to be limited given that foreign-currency lending accounts for only 20% of the loan books of the banks S&P concerns.

And from the Dept. of the Obvious: Credit losses in the sector could tick up on the back of turbulence in the wider economy given all that’s going on right now, the rating agency suggests.

Local banks face no funding or liquidity challenges, according to the report. Our banking sector has an “ample” local customer deposit base, “where growth has proven resilient even at times of weakened stability,” S&P said, adding that it expects leverage to remain low at a loan-to-debt ratio of around 50% throughout 2022.

The 18% CDs offered by state-owned banks Banque Misr and National Bank of Egypt after the central bank upped interest rates put pressure on banks’ net interest margins, depending on uptake and whether private banks follow suit. Investors had poured some EGP 423 bn into the CDs as of Monday, Al Arabiya reports.

IMF support could help mitigate overall economic risks in Egypt in general and to the banking sector in particular, the report suggests. The government is in talks with the international lender over a fresh round of assistance, following two rounds of funding in 2016 (coinciding with the float of the EGP) and in 2020 (amid the pandemic) totaling USD 20 bn.

ELSEWHERE IN THE REGION- The main risks across the region remain high food and oil prices and a decreased risk appetite in emerging markets among investors, the report notes. Banks in Turkey and Tunisia are most exposed to the impact of Russia’s war, the report read, while Saudi, Emirati and South African banks show little to no vulnerability.

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; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.