Beltone Financial said Al Baraka Bank Egypt’s financial statements for the second quarter (Q2) of 2019 showed good net income growth of EGP 271m, an increase of 27% year-over-year (y-o-y).
It added that compared to Q2 of 2018, the net income of the bank showed a strong increase of 10.9% to EGP 492m mainly due to the growth in the financial position which was partially offset by the negative interest rate impact on the net interest margin by 12 basis points, scoring 3.4%, while net fees and commissions increased by 10.9%.
Beltone added that the bank’s operating expenditure increased by 11.1%, maintaining the cost to income ratio at 23.1%, while credit impairment losses showed a healthy decline of 47%, which led to a decrease in the cost of risk by 173 basis points to 148 points.
The tax margin rose by 214 basis points to 31% in the first half (H1) of 2019 as government securities income increased its contribution to total income, however, it improved compared to Q1 of 2019.
On a quarterly basis, net income came almost unchanged despite a 51.7% decline in credit losses, offsetting foreign currency translation losses as a result of increased foreign currency assets over liabilities. The bank’s return on average equity increased slightly by 1% y-o-y to 31.6%, due to lower cost of risk despite lower income from core banking and lower leverage.
According to Beltone, Al Baraka’s financial position continued to show good growth, with customer deposits up 8.9% y-o-y, growing 5.2% quarter-over-quarter (q-o-q) to EGP 59.4bn in Q2 of 2019.
Net loans rose 1.5% YTD, down 0.5% q-o-q, to EGP 16.0bn as of the end of June 2019, although it remained almost unchanged from Q1 of 2019.
Like its counterparts, Al Baraka has adjusted its asset placement following the introduction of a new income tax law, which has led to a 61.3% fall in treasury bills since the beginning of the year.
Meanwhile, the bank’s receivables grew 60.9% YTD to EGP 24.0bn in Q2 of 2019, representing 36% of total assets.
It noted that the bank’s asset quality remains a concern as non-performing loans stood at 7.7% as of the end of June 2019, up from 7.3% and 4.3% in Q1 of 2019 and Q4 of 2018, respectively, while the NPL coverage ratio declined by 96.3% compared to 162%.