The capital adequacy ratio of the Egyptian banking sector decreased in 2022 due to the inflation of risk-weighted assets caused by the increase in the exchange rate of the dollar. However, several banks managed to maintain high levels of tier-1 capital adequacy, which measures the core capital of banks relative to their risk-weighted assets. The Central Bank requires banks to have a minimum tier-1 capital adequacy ratio of 7%, while the average for the sector was 12% by the end of 2022.
Top six banks in tier-1 capital adequacy
According to the Central Bank data, the top six banks in terms of tier-1 capital adequacy in 2022 were:
Faisal Islamic Bank: The bank had the highest tier-1 capital adequacy ratio of 27.5%, with risk-weighted assets representing 42% of its total assets. The bank invested mainly in foreign currency assets and government debt, and had a low loan portfolio of 8.4%.
HSBC: The bank had the second highest tier-1 capital adequacy ratio of 24%, supported by strong profits that boosted its core capital. The bank had a low exposure to foreign currency risks, with foreign currency assets constituting 37% of its total assets. The bank also invested heavily in the central bank and government securities, and had a low loan-to-asset ratio of 20.8%.
AlexBank: The bank had the third highest tier-1 capital adequacy ratio of 23.9%, supported by the low percentage of foreign assets to total assets at 12%, and individuals’ ownership of about half of its loan portfolio. The bank had a balanced distribution of its assets among the central bank, financial investments, and loans, making a total of EGP 133bn in assets.
First Abu Dhabi Bank Egypt: The bank had the fourth highest tier-1 capital adequacy ratio of 23.44%, supported by obtaining a support loan of $200m by the end of 2022, in addition to $60m obtained before the return acquisition deal. The bank had a moderate exposure to foreign currency risks, with foreign currency assets representing 28% of its total assets. The bank had a relatively high loan-to-asset ratio of 36.4%.
QNB Alahli: The bank had the fifth highest tier-1 capital adequacy ratio of 22.4%, benefiting from its low exposure to foreign currency assets, representing 18% of its assets. The bank was robust in government debt instruments, holding EGP 173.6bn in addition to EGP 3.1bn in investments in external government debts. The bank had a moderate loan-to-asset ratio of 31.6%.
Arab African International Bank: The bank had the sixth highest tier-1 capital adequacy ratio of 20.8%. The bank had a high ratio of risky assets to total assets, reaching 74%, but also benefited from the dollar component of its capital and the large size of the first tranche. The bank had a high loan-to-asset ratio of 46.4%.
Banque du Caire had the lowest tier-1 capital adequacy ratio of 10.9%, which was slightly above the central bank’s minimum requirement of 7%. The bank relied on its loan portfolio and supported deposits to boost its capital adequacy ratio through its second tranche, which measures the supplementary capital of banks.
