Non-performing loans in banks working in the Egyptian market decreased to 3.9% of the total loan portfolio at the end of June 2020, compared to 4.1% at end-March, according to a report by the Central Bank of Egypt (CBE).
The quarterly report monitors the financial health indicators of banks working in the local market.
In addition to the non-performing loans at banks, the CBE report recorded the most important indicators affecting the financial soundness of banks operating in the Egyptian market.
It also covered issues related to the quality of credit, strength of the banks’ financial positions, and the profits achieved by the end of June 2020.
The report indicated that the non-performing loan ratio recorded 2.8% of total loans at the Egyptian market’s 10 largest banks and 2.3% at the top 5 banks.
The CBE reported that banks’ capital allocations recorded 97.2% of their total non-performing loans at the end of June 2020. These provisions reached 100% at both the top 10 and the top 5 largest banks operating in the Egyptian market.
The volume of allocations made by banks to deal with doubtful debts amounted to about EGP 150.079bn by the end of June. The share of those allocations made by the top 10 banks stood at EGP 101.583bn, while the volume of allocations at the 5 largest banks reached EGP 82.930bn.
While banks reserves registered at EGP 319.817bn by the end of June 2020, according to the report. Of this amount, the share at the top 10 banks recorded EGP 239.968bn, while the volume of reserves at the 5 largest banks amounted to EGP 201.307bn.
Loan-to-deposit ratio (LDR) in banks operating in the Egyptian market rose to 47.1% in June, up from 45.9% in March. This ratio reached 45% for the top 10 banks and reached 45.2% for the top 5 banks.
Local currency LDR rose to 42.8% in June, compared to 41.2% in March, the report added. At the same time, this ratio reached 39.4% at the top 10 banks, and 38.8% with the top 5 banks.
While foreign currency LDR decreased to 68.9% in the same period, compared to 69.6% at the end of March. On the other hand, foreign currency LDR in top 10 banks increased to 74.4% and reached 84.8% at the top 5 banks.
The private sector’s share of the total loans declined to 61.9% at end of June, down from 62.7% in March, according to the CBE.
The report noted that the private sector acquired 54% of the total loans at the 10 largest operating banks in Egypt, while it acquired 50.1% of the loans with the 5 largest banks.
The top 10 banks acquired about 77.38% of the total deposits in the Egyptian banking sector by the end of June, the report indicated.
The total deposits at banks amounted to about EGP 4.686trn by the end of June, out of which about EGP 3.626trn were recorded at the top 10 banks.
The volume of deposits in the largest 5 banks amounted to about EGP 3.155trn, equivalent to about 67.333% of the total deposits in banks.
While the ratio of deposits to assets in banks increased to 73.3% in June up from 71.7% at the end of March. This ratio recorded 73.7% in Egypt’s top 10 banks and 73.4% for the top 5 banks.
The CBE indicated that the average liquidity ratio in local currency at banks stood at about 54.3% in June, compared to 49.7% at the end of March. Liquidity measures the short-term ability of the bank to operate and function. Egypt’s top 10 banks recorded 56.9% of liquidity ratio, while the top 5 recorded 56.7%.
While, foreign currency liquidity ratio at banks declined to 70.3% in June, compared to 71.2% in March. This ratio reached 69.5% with the top 10 banks and recorded 68.6% in the top 5 banks.
The CBE said that the securities portfolio of banks, excluding investment in treasury bills (T-bills), reached about 23.1% of their total assets at the end of June, compared to 23.2% at the end of March 2020. This percentage reached 25.6% with the top 10 banks, and 27.3% for the top 5 banks.
According to the CBE, the volume of bank investments in securities and treasury bills amounted to about EGP 2.622trn by the end of June. The volume of these investments at the 10 largest banks amounted to about EGP 1.154trn, and EGP 1.895trn at the top 5 banks.
The CBE revealed that the total financial position of banks in the local market increased to EGP 6.408trn by the end of June.
The financial position at the top 10 banks scored about EGP 4.950trn, and EGP 4.303trn at the big five banks.
According to the CBE, the local total interbank lending reached EGP 923.714bn, while overseas interbank lending balances recorded about EGP 230.051bn by the end of June.
The report added that the capital recorded at banks operating in the Egyptian market amounted to about EGP 173.701bn end June. The share of that at the top 10 banks was about EGP 120.109bn, while the capital at the top 5 banks amounted to about EGP 98.534bn.
While the CBE did not disclose the names of the top banks working in the Egyptian market, the list is known to include: the National Bank of Egypt (NBE); Banque Misr; the Commercial International Bank – Egypt (CIB); Banque du Caire; QNB Al-Ahly; the Arab African International Bank (AAIB); HSBC; the Faisal Islamic Bank; Alex Bank; and Crédit Agricole – Egypt.
Banks operating in the Egyptian market profits increased to EGP 50.049bn at the end of June, compared to EGP 36.902bn at the end of March.
The CBE report revealed that the top 10 banks acquired about 82.79% of total bank profits, amounting to about EGP 41.439bn in June. This compared to about EGP 31.787bn, equivalent to about 86.138%, by the end of March.
The big 5 banks in the market acquired about 71.15% of bank profits, to record about EGP 35.610bn by the end of June 2020. This compared to the EGP 27.837bn, equivalent to 75.43%, recorded by the end of March 2020.
The return on average assets (ROAA) at banks was recorded at 1.8% at the end of June, whilst the return on average equity (ROAE) stood at 23.4%. The net margin of return reached 4.1% at the end of June 2020, which was unchanged from March.
Top 10 banks achieved 1.7% ROAA, and 23.5% ROAE, and the net margin of return reached 4%.
ROAA of the 5 largest banks was 1.5%, while ROAE registered was 21.6%, and the net return margin was 3.8%.
With regards to the banks’ Capital Adequacy Ratio (CAR) – or the Capital to Risk Assets Ratio (CRAR), is the ratio of a bank’s capital to its risk – the report indicated that it rose to 19.8% by the end of June, up from 19% in March. CAR in top 10 banks stood at 19.9%, and 19.8% for the top 5 Banks.
The ratio of the tier-1 capital-to-risk weighted assets increased to 17.7% at the end of June, compared to 16.1% at the end of March. This ratio reached 17.6% for the top 10 banks, and 17.5% for the top 5 banks.
The CBE said that the total of the first tranche, plus the precautionary hedge, should not be less than 6.625% for 2016, 7.25% for 2017, 7.875% for 2018, and 8.5% for 2019.
It added that the ratio of banks’ continuing basic capital to risk-weighted assets was 13.1% at the end of June 2020, compared to 13% at the end of March. This ratio stood at 12.6% for the top 10 banks, and 12% for the top 5 banks.
Tier-1 capital is the capital that is permanently and easily available to cushion losses suffered by a bank without it being required to stop operating.
The CBE’s instructions stipulate that tier-1 capital, plus the precautionary hedge, must not be less than 5.125% for the year 2016, 5.75% for the year 2017, 6.375% for the year 2018, and 7% for the year 2019.
The leverage ratio at banks, which is a measure of the bank’s core capital to its total assets. increased to 7.6% by the end of June 2020, compared to 7.3% in March. This ratio stood at 7.1% in the top 10 banks, and 6.8% in the top 5 banks. According to the CBE, the minimum set for this percentage should not be less than 3%.
Meanwhile, it was revealed that the net open positions of foreign currencies recorded -1.9% of the total capital base of banks operating in the Egyptian market by the end of June, compared to -2.2% in March 2020.
The net open position which analyses the foreign exchange risk, reached -2.8% for the top 10 banks, while the largest 5 banks recorded -3.5%.