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Pound flotation posed challenges for banks' financial positions in 2016: Business News Index - Daily News Egypt

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Pound flotation posed challenges for banks’ financial positions in 2016: Business News Index

SAIB, Audi, NBE recorded the lowest ratios of unregulated loans portfolios

The decision of the flotation of the pound towards the end of last year affected all banks in the banking sector in one form or another. A large number of banks achieved large profits as a result of currency shifts, while also many capital adequacy rates were affected as a result of assets inflation following the flotation. Other banks were in a better financial position because of their small assets sizes and strong capital coverage rates.

This left small banks, those that did not have large deposits in foreign currencies last year, in a better financial position after the flotation of the pound in terms of capital adequacy rates.

The adequacy of the first tranche of capital decreased in 20 of 24 banks that were being monitored by Business News last year, while a number of banks fell under the regulatory limits required by the Central Bank of Egypt (CBE), which prompted them to inject last year’s profits into its reserves or to their directly paid capitals to ensure compliance with the regulations.

Assets quality has also been affected by the rise in non-performing loans over the past year, in the opposite direction compared to the situation in 2015, which witnessed a marked decline in the ratio of these loans to total banks’ portfolios.

Ahli United Bank (AUB), Barclays, NBK, Emirates NBD, Credit Agricole, and Blom Bank occupied the top six positions in the Business News Index for the most efficient banks.

AUB topped the efficiency index, thanks to the increase in the first tranche of its capital adequacy standard, the high return on average total assets, and the return on equity and loan-to-deposit placements.

The bank managed to increase the size of the first tranche of capital, unlike most of the banks following the flotation of the pound exchange price in the last quarter of 2016.

The net income on its total average assets represented 7%, equity 46%, and loan-to-deposits ratio 63%.

Barclays occupied the second position in terms of efficiency last year as it recorded the highest rate of tier I capital adequacy among banks and the highest net income on average total assets.

The first tranche of Barclays capital adequacy standard reached 15.46%, while the net income from the return compared to the total average of total assets reached 7%. Loans-to-deposits recorded 48%, while the costs of income increases registered 33%.

Al Ahli bank of Kuwait (ABK) occupied the third position, supported by the highest return on total assets average by 11%, and return on equity at 67%.

The Commercial International Bank (CIB) occupied the fourth position in the sub-index of return on equity at 39%.

The Export Development Bank Of Egypt (EBE) outperformed the National Bank of Egypt (NBE) and Banque Misr, the largest state-owned banks, to rank 13th, while NBE and Banque Misr banks occupied the 15th and 16th place respectively.

The government banks obtained the support of the CBE through a subsidised loan worth EGP 3bn last summer before the flotation of the pound.

The flotation of the pound did not affect the largest governmental banks’ balance sheets because they are lists according to the fiscal year, but the CBE provided a loan before the flotation to support their capital.

In terms of unregulated loans, the data index showed an increase at seven banks with growth rates ranging between 25% and 200%. However, the Egyptian Gulf Bank, Union National Bank, Blom bank, NBE, Banque Misr, Audi bank, Barclays, EPE, the Industrial Development & Workers Bank of Egypt, Misr Iran Development Bank (MIDB), SAIB, and Arab Banking Corporation (ABC) managed to reduce the proportion of the portfolio of unregulated loans during the past year.

The NBE, Audi, and ABC banks occupied the top three positions in the sub-index of non-performing loans in terms of the lowest proportion, ranging between 0.6% and 2%.

The results showed lower costs to revenues in most of the banks in the banking sector. Last year witnessed high rates of loan-to-deposit placements. The Industrial Development & Workers Bank of Egypt topped the list with a 144.13% ratio.

The Housing and Development Bank (HDB) occupied the second position, achieving a growth rate of 76.68%. The NBK occupied the third position with a growth rate of 69.5 %.

Audi Bank occupied the fourth position with a growth ratio of 67.11%. The value of loans granted by the bank in 2016 is estimated at EGP 30.561bn compared to EGP 18.769bn in 2015.

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