The total financial position of banks operating in the local market peaked to over EGP 5tn at the end of March 2018, reaching EGP 5.109tn for the first time in the history of the Egyptian banking sector, according to the Central Bank of Egypt (CBE).
In a recent report, the CBE said that the aggregate financial position of Egypt’s top five banks reached EGP 3.359tn, equivalent to about 65.751% of the total financial position of the banking sector. The financial position of the top 10 banks scored EGP 3.885tn, making up 76.056% of the market total.
According to the CBE, banks operating in the Egyptian market had a net profit of EGP 24.376bn by the end of March 2018.
It pointed out that the top five banks acquired about 64.875% of the total profits realised by the banks operating in the Egyptian market, as the value of profits realised by those banks stood at EGP 15.814bn.
The top 10 banks posted profits of EGP 18.16bn, equivalent to about 62.666% of total profits.
According to the CBE, these profits were realised from 1 January 2018 to the end of March 2018 for private banks and sfrom 1 July 2017 until the end of March 2018 for government banks.
The list of the banks is topped by the National Bank of Egypt, Banque Misr, Commercial International Bank, Banque du Caire, and QNB Alahli.
The report stated that net returns achieved by the banks operating in Egypt until the end of March 2018 amounted to about EGP 45.493bn. The share of the top five banks reached EGP 28.877bn, equivalent to 63.475%. The largest 10 banks accounted for EGP 33.094bn, equivalent to 72.745% of total revenues achieved by the banking sector.
It noted that the net operating income of the banks reached EGP 71.03bn, with the top five banks accounting for EGP 47.403bn (66.736%), and the top 10 banks denominating EGP 53.394bn, or 75.171%, of the total.
According to the CBE, the return on average assets (ROAA) for banks operating in the Egyptian market was 1.5% at the end of March 2018, down from 2% at the end of December, September, June, and March 2017. The ROAA for the top 10 banks scored 1.4%, while the top five’s was 1.5%.
Meanwhile, the return on average equity (ROAE) fell to 21.5% in March 2018, down from 30.9% at the end of December, September, June, and March 2017. It scored 20.5% for the top 10 banks and 20.3% for the top five.
In addition, the net profit margin was 3.9% at the end of March 2018, versus 4.6% at the end of December, September, July, and March 2017. The top 10 banks scored an average of 3.6%, while the top five scored 3.5%.
On the other hand, the volume of bank expenses by the end of March 2018 reached EGP 46.654bn, of which about EGP 31.589bn (67.709%) was realised by the top five banks and EGP 35.235bn (75.524%) by the top 10.
That jump in expenses comes alongside a recently mounting interest among banks to modernise their infrastructure, as well spread geographically through mini and regular branches, as well as ATMs and POS machines, in order to reach clients across Egypt, which has weighed on expenses.
The ratio of non-performing loans (NPLs) at banks operating in the Egyptian market fell to 4.5% of their total loans portfolios at the end of March 2018, versus 4.9% in December 2017, according to the CBE.
In a recent report on the financial soundness of banks, the CBE stated that the NPLs ratio amounted to 3.2% of the total loans in the top 10 banks operating in the Egyptian market, while the ratio reached 2.7% among the top five banks.
According to the CBE, the banks made provisions of 98.7% of the total NPLs in March 2018. The ratio of these provisions amounted to 100% in the top 10 banks operating in the Egyptian market.
The report also noted that the total volume of provisions amounted to EGP 114.296bn at the end of March 2018 and the top 10 banks in Egypt had a share of EGP 68.373bn of these provisions, while the top five banks alone accounted for EGP 57.646bn.
Moreover, the CBE stated that the banks set up reserves of EGP 222.875bn at the end of March 2018, with the share of the top 10 banks amounting to EGP 172.498bn, while the volume of reserves at the top five banks reached EGP 146.626bn.
In addition, the CBE noted that the loan-to-deposit ratio (LTD) at banks operating in the Egyptian market increased to 44.7% in March 2018, up from 44.2% in December 2017. The ratio scored 42.3% at the top 10 banks and 43.4% at the top five.
LTD in local currency rose to 37.5% in March 2018 from 36.6% in December 2017. It also rose to 33.3% at the top 10 banks and 33.6% at the top five.
The ratio of loans to foreign currency deposits at banks also increased to 68.5% in March 2018, up from 68.4% in December 2017. The same indicator reached 72.6% at the top 10 banks and 81.7% at the top five.
The CBE explained that the private sector accounted for 61.8% of the total loans granted by banks until the end of March 2018, versus to 63.2% at the end of December 2017.
The private sector also accounted for 53.5% of loans granted by Egypt’s top 10 banks and 50.3% of loans granted by the top five.
“The total deposits at banks up to the end of March 2018 amounted to about EGP 3.467tn, of which the top 10 banks account for about EGP 2.565tn, while the top five banks account for EGP 2.173tn,” the report read.
The CBE added that the deposit to asset ratio (DAR) in March 2018 registered 68.1%, versus 69.2% in December 2017. The ratio stood at 66.2% for the top 10 banks and 64.9% for the top five.
The average bank local liquidity ratio in March 2018 fell to 40.3% from 44.9% in December 2017. It stood at 40.7% at the top 10 banks and 38.2% at the top five.
The average foreign currency liquidity ratio at all banks remained unchanged in March 2018, at 73.5%, from December and September 2017. It scored 75.2% at the top 10 banks and 75.6% at the top five.
On a related note, the CBE said that bank securities portfolios reached 13.3% of total bank assets in March 2018, against 14.2% in December 2017. This ratio was 14.3% for the top 10 banks and 13.8% for the top five.
It also pointed out that banks’ investments in securities and treasury bills amounted to EGP 1.662tn by the end of March 2018. The investments of the top 10 banks in securities and bills amounted to about EGP 1.303tn, and about EGP 1.098tn among the top five.
“The total capital of banks operating in the Egyptian market amounted to EGP 142.292bn at the end of March 2018,” according to the CBE.
The CBE added that the capital of the top 10 banks amounts to about EGP 91.125bn, while that of the top five banks scored EGP 72.994bn.
While the CBE refrained from naming the top five and 10 banks in Egypt, it is known that they include the National Bank of Egypt, Banque Misr, the Commercial International Bank (CIB), the Arab African International Bank, QNB Alahli, HSBC, Faisal Islamic Bank, the Bank of Alexandria, and Crédit Agricole.
Regarding the capital adequacy index, the CBE explained that the capital-to-risk weighted assets ratio (CRAR) at banks rose to 15.7% by the end of March 2018, up from 15.2% in December 2017. This ratio was 15.6% among the top 10 banks and 15.9% at the top five.
The ratio of the tier 1 CRAR rose to 12.5% in March 2018 from 12.1% in December 2017. The ratio was 12% for the top 10 banks and 12.1% for the top five.
According to the CBE, the ratio of banks’ common equity to risk-weighted assets stood at 9.3% in March 2018, compared to 8.8% in December 2017. The ratio was 8.3% for the top 10 banks and 5.5% for the top five banks.
Banks’ leverage ratio also reached 6.1% in March 2018, compared to 6% in December 2017. The ratio stood at 5.7% at the top 10 banks and 5.5% at the top five.
The CBE said that the percentage is recommended starting from the end of September 2015 through 2017 and is obligatory starting from 2018 with a lower margin set at 3%.
