The performance of banks registered in the Egyptian Exchange (EGX) during the first quarter of 2016 was higher than the market’s expectations, as a result of controlling provisions and achieving a strong performance in the income sectors, other than non-interest income sectors, according to the research sector in Beltone Financial.
These are the operations through which the bank obtains commissions and fees, including operations like opening accounts, and commercial financing like opening letters of credit and issuing letters of guarantees.
Beltone explained that the interest margins in banks have had good support from assets recording higher incomes, in addition to controlling the funding cost.
The report noted that Credit Agricole bank recorded the highest net interest among small banks in the local market. The margins of net interests have slightly declined due to the increase in funding costs. They are facing some pressure in terms of asset yields, despite the exceptional growth of loans in Al Baraka Bank of Egypt and the Egyptian Gulf Bank (EGB).
The growth of business in the banks lost its ground during the first quarter, with the exception of some small banks, such as Al Baraka Bank of Egypt, Abu Dhabi Islamic Bank (ADIB), the EGB due to the higher risk appetite.
The banks’ strategies are clearly demonstrated in the results of the first quarter’s work. For example, the Commercial International Bank (CIB) continued to focus on expanding its market share of deposits without commencing high-yield investments.
Credit Agricole Bank did not develop its deposits base due to the slower credit growth.
On the other hand, Beltone said the lack of foreign currency and its impact on the weakness of trade finance operations—such as opening letters of credit and letters of guarantee—negatively influenced commissions and fee growth rates, which happened in the CIB and Credit Agricole.
Beltone believes that there are doubts about the banks’ ability to achieve exceptional growth rates in terms of profits.
The banks will face a challenge while developing the loans during the second and third quarters of 2016. Foreign currency shortages and low business volume in Ramadan and throughout the summer will also affect this.
Beltone said banks will continue to employ excess liquidity in the treasury bills and bonds to restore the scenario of 2012 and 2013.