In the past few days, there have been noticeable changes at a number of banks operating in the Egyptian market as they work on increasing their capital to comply with the country’s new banking law.
Banking Law No 194 of 2020 stipulates that the minimum capital for banks operating in the Egyptian market should stand at EGP 5bn, instead of the EGP 500m in the previous law. The capital of foreign bank branches should stand at $150m, instead of $50m.
The increase aims to increase the rigidity and efficiency of the capital base at banks, in order to help them face potential risks and enhance their ability to compete with other banks regionally and globally.
The new Banking Law took effect on the second day of its publication in the Official Gazette on 15 September 2020.
According to Article 4 of the law, banks are obliged to adjust their positions according to the provisions of the law, within one year from the date of its implementation.
The Central Bank of Egypt (CBE) may extend this period for two years at most, ensuring the transitional period ranges from one to three years.
After issuing the law, the CBE has obliged banks operating in the local market not to make cash distributions from the year’s profits or retained earnings that are distributable to shareholders.
In a letter to banks posted on its website, the CBE explained that this measure aims to support the capital base of banks in facing the potential risks due to the continued coronavirus (COVID-19) pandemic.
It pointed out that the distribution will be limited to employees, and that the bonuses of the Board of Directors will be paid for fiscal year (FY) 2019/20 only.
Housing and Development Bank (HDB)
The Board of Directors at the Housing and Development Bank (HDB) agreed to increase the bank’s issued and paid-up capital with a value of EGP 126.5m from distributable profits in 2020.
The bank revealed, in a statement to the Egyptian Exchange (EGX), that the capital will be increased through the distribution of one free share for every 10 shares of the capital indicated in the bank’s commercial registry, amounting to EGP 1.265bn.
The HDB’s results showed a combined profit of EGP 2bn after taxes, while the independent profits of the bank reached EGP 1.8bn at the end of 2020.
National Bank of Kuwait – Egypt (NBK)
Yasser El-Tayeb, CEO and Managing Director of NBK- Egypt, said that the bank is committed to increasing its issued and paid-up capital to the level stipulated by Law No 194 of 2020.
He added that the bank seeks to increase its authorised capital to EGP 10bn, and the issued and paid-up capital to EGP 5bn.
El-Tayeb also pointed out that the bank’s general assembly agreed to use part of the retained earnings according to the bank’s financial statements for the FY ending in December 2020, which is EGP 3.5bn. This would go towards financing the increase of the issued and paid-up bank’s capital to EGP 5bn. This would depend on the approval of the CBE and the extraordinary general assembly.
The balance of retained earnings for previous years is estimated to stand at EGP 4.396bn. In addition, there are the 2020 profits which are estimated to be EGP 776m, after the distributions, according to the proposed list for FY 2019/20.
Faisal Islamic Bank – Egypt
Faisal Islamic Bank of Egypt said that the ordinary general assembly approved the bank’s financial statements for FY 2019/20, and also agreed to increase the bank’s issued and paid-up capital by 20%.
In a statement to the EGX, the bank stated that the capital would increase from $506.22m to $607.471m, an increase of $101.245m.
The bank’s consolidated financial statements showed that it achieved a net profit of EGP 2.247bn in 2020, compared to EGP 2.785bn in 2019.
Suez Canal Bank (SCB)
The Financial Regulatory Authority (FRA) agreed to publish the Suez Canal Bank’s (SCB) disclosure report, by agreeing to proceed with the increase of the bank’s issued capital from EGP 2.2bn to EGP 2.904bn, an increase of EGP 704.326m.
The capital increase is distributed over 70.432 million shares, with a nominal value of EGP 10 per share, as a financing from the retained earnings for the year 2019, in addition to the profits of 2020.
The bank managed to achieve a net profit of EGP 602m in 2020, compared to EGP 542m in 2019, with a growth rate of 11%.
Al Baraka Bank – Egypt
The FRA agreed to increase the authorised capital of Al Baraka Bank – Egypt from EGP 2bn to EGP 10bn.
The authority also agreed to increase the bank’s issued and paid-up capital from EGP 1.855bn. This includes the amounts paid under the capital with free shares from the profits of 2019 (currently being approved), to EGP 2.969bn, an increase of EGP 1.113bn.
The increase in the bank’s capital is distributed on 159.063 million shares, with a nominal value of EGP 7 per share.
Al Baraka Bank Egypt consolidated net profits rose to EGP 1.256bn in 2020, compared to EGP 1.066bn in 2019. The bank’s profits before taxes reached EGP 2.007bn in 2020, compared to EGP 1.520bn in 2019, according to the bank’s consolidated financial statement.
Export Development Bank of Egypt (EBE)
The General Assembly at the Export Development Bank of Egypt (EBE) agreed to increase the bank’s authorised capital from EGP 5bn to EGP 10bn.
The assembly also agreed to increase the issued and paid-up capital of the bank from EGP 2.728bn to EGP 3.273bn, an increase of EGP 545.600m, distributed over 54.560 million free shares.
The bank’s share structure, after the capital increase, is distributed between the National Investment Bank (NIB) by EGP 1.333bn, and Banque Misr by EGP 757.249m. The National Bank of Egypt’s (NBE) share stands at about EGP 378.72m, and other shares worth EGP 803.67m.
The EBE achieved a net profit of EGP 369.3m during the period between July and December 2020, compared to EGP 541.3m during the period from July to December 2019.
The FRA decided to increase the capital at EG Bank to about $453.052m.
The authority highlighted, in a statement, that the bank’s Board of Directors decided at its meeting held on 14 January 2021 to approve the procedures for requesting from its ordinary and extraordinary general assembly.
This would provide its approval to increase the issued and paid-up capital from $422.740m, to $453.052m, reflecting an increase of $30.312m.
This increase is achieved by issuing a number of 30.312 million free shares, by approximately 0.071 shares for each original share funded from the profits shown in the financial statements on 31 December 2020.
The bank’s financial statements revealed that its net profit fell to EGP 625.2m in 2020, compared to EGP 675.3m in 2019, a decrease of 7%.
Crédit Agricole Egypt
The Board of Directors at Crédit Agricole Egypt agreed to increase the issued capital to EGP 5bn, in order to comply with the requirements of the banking law. The capital will be increased by distributing bonus shares, with the approval of the CBE.
The latest results of Crédit Agricole’s business showed a decline in its net profits to EGP 1.3bn during the FY ending in December 2020, compared to a net profit of EGP 2.3bn in 2019.
Abu Dhabi Islamic Bank – Egypt
The extraordinary general assembly at the Abu Dhabi Islamic Bank – Egypt agreed to increase the authorised capital from EGP 4bn to EGP 7bn.
The bank said, in a statement to the EGX, that this increase can only be finalised with the CBE’s approval.
The bank also revealed that the net profit after taxes amounted to EGP 1.196bn, compared to EGP 1.228bn for the year 2019, a decrease of EGP 32m, or 3%. Net independent profits after tax reached EGP 1.151bn, compared to EGP 1.103bn for the year 2019, an increase of EGP 49m or 4%.
Amr El-Garhy, Chairman and Managing Director at MID Bank, revealed that the bank is considering an increase in its capital to EGP 5bn. It is preparing to present this to the CBE, for approval to comply with the new banking law.
He stated that the increase in the bank’s capital will take place over several phases, whether through an increase coming from equity and retained earnings, or direct injection of funds from shareholders in Egypt. Furthermore, the bank enjoys strong financial solvency in line with international standards.