Egypt: CBE unveils key banking soundness metrics for 2023

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The Central Bank of Egypt (CBE) has disclosed the principal financial soundness indicators for banks within the Egyptian market as of year-end 2023.

According to a recent report, CBE noted a decrease in the ratio of non-performing loans to 3% at the close of 2023, down from 3.3% in the preceding two quarters and 3.5% in the initial quarter.

For the 10 largest banks in Egypt, non-performing loans constituted 2.4% of total lending, while the top five banks reported a lower div of 2.2%.

The report further highlighted that banks set aside provisions covering 88.7% of their total non-performing loans by December 2023, a marginal increase from 88.6% at September’s end. The coverage ratio was higher among the 10 largest banks at 95.2%, reaching 100% within the five largest banks.

CBE stated: “Banks allocated EGP 346.922bn for potential loan losses by year’s end, with the 10 largest banks accounting for EGP 264.464bn of this amount. The five largest banks set aside EGP 231.231bn.”

Additionally, banks have built up reserves totaling EGP 476.473bn. The top 10 banks hold EGP 376.826bn of these reserves, while the five largest banks have amassed EGP 324.416bn.

Private Sector Loans

CBE reports that the private sector held 51.9% of the total loans provided by banks up to the end of 2023, a slight decrease from 52.2% at the end of September. The private sector’s share of loans at the 10 largest banks was 44.5%, and 41% at the top five banks.

The loan-to-deposit ratio in banks rose marginally to 52.4% at the close of December, consistent with the end of September. This ratio was higher at the largest banks, reaching 55.6% at the 10 largest and 57.6% at the top five.

For loans in local currency, the ratio to deposits increased to 47.1% from 46.1%. At the 10 largest banks, this ratio was 47.7%, and at the top five, it was 48.4%.

The loan-to-deposit ratio for foreign currencies climbed to 84% from 78.3%. Among the largest banks, this ratio was 91% at the 10 largest and exceeded 100% at 102.1% in the top five.

Customer Deposits

According to CBE, total customer deposits at banks surged to nearly EGP 10.137trn by December 2023, up from EGP 9.765trn at the end of September, marking an increase of EGP 372bn. The 10 largest banks held EGP 7.885trn of these deposits, representing 77.78% of the total, while the five largest banks accounted for 68.41% with EGP 6.935trn.

The deposit-to-asset ratio in banks was 71.5% at year’s end, up from 66.3% at the end of September. This ratio stood at 70.9% at the 10 largest banks and 70.8% at the five largest.

CBE noted a decrease in the average actual liquidity ratio in local currency to 36.8% in December from 38.5% in September. At the 10 largest banks, this ratio was 35.4%, and at the top five, it was 34.3%.

The actual liquidity ratio in foreign currencies also fell to 67.5% from 69.9%. At the 10 largest banks, this ratio was 66.4%, and at the five largest, it was 63.5%.

Investments in Securities and Treasury Bills

CBE states that investments in securities and treasury bills by banks in the local market totaled EGP 5.183trn at the end of December 2023, up from EGP 5.018trn at the end of September, an increase of approximately EGP 165bn.

The 10 largest banks invested EGP 4.051trn in these instruments, with the five largest banks accounting for about EGP 3.632trn.

The five largest banks’ securities portfolio, excluding treasury bills, constituted 24.3% of total assets, up from 22.3%. At the 10 largest banks, this percentage was 26%, and at the five largest, it was 28%.

Capital Base of Banks

CBE reported an increase in the capital base to risk-weighted assets ratio, reaching 18.6% at the end of December 2023, up from 18.1% at the end of September. This ratio was consis10t at 18.6% among the 10 largest banks and stood at 18% for the five largest banks.

CBE noted an uptick in the first tranche of banks’ capital to risk-weighted assets ratio, climbing to 15.5% at the close of December, from 14.9% in September. Among the 10 largest banks, this ratio was 15.1% and 14.4% for the five largest banks.

Banks’ ongoing core capital to risk-weighted assets ratio also rose, reaching 13% at year’s end, compared to 10.5% in September. For the 10 largest banks, the ratio was 12.6%, and 11.6% for the five largest banks.

The financial leverage ratio saw an increase to 6.9% in December, up from 6.6% in September. The 10 largest banks reported a ratio of 6.3%, and the five largest banks had a ratio of 6%. CBE’s minimum requirement for this ratio is 3%.

Additionally, CBE disclosed that net open positions in foreign currencies remained stable at -1.6% of the total capital base for banks in the Egyptian market as of December 2023. This div was -2.4% for the 10 largest banks and -2.3% for the five largest banks, emphasizing that the total surplus or deficit in foreign currency positions should not surpass 20% of the capital base.

Total Financial Position

CBE unveiled that the total financial position of banks in the local market is projected to hit approximately EGP 14.2trn by the end of 2023.

On the asset side, cash balances totaled EGP 116.385bn, local bank balances were EGP 2.606trn, and balances with foreign banks stood at EGP 323.372bn. Loans and debit balances to customers reached EGP 5.462trn, while the securities portfolio and investments in treasury bills were EGP 5.183trn. Other assets, not detailed by the CBE, amounted to EGP 508.073bn.

Liabilities included bank capital at EGP 410.877bn, reserves at EGP 476.473bn, and allocations balance at EGP 346.922bn. Local interbank obligations were EGP 781.917bn, obligations to foreign banks were EGP 429.275bn, and total deposits stood at EGP 10.137trn. Bonds and long-term loan balances were EGP 566.388bn, with other liabilities not specified in detail by the CBE.

Net Profit

Banks in the Egyptian market reported robust activity in 2023, culminating in net profits of EGP 283.388bn. The top 10 banks accounted for approximately 74.92% of this total, amassing about EGP 212.315bn, while the five largest banks held about 61.24%, totaling EGP 173.557bn.

Leading the list of these banks were NBE, CIB, Banque du Caire, QNB Alahli, Credit Agricole – Egypt, Faisal Islamic Bank of Egypt, and HDB.

The CBE stated that net bank revenue was EGP 582.497bn, net activity revenue was EGP 686.161bn, and total expenses were EGP 402.773bn.

For the 10 largest banks, net revenue was EGP 448.143bn, net activity revenue was EGP 521.588bn, and total expenses were EGP 309.273bn.

The five major banks reported a net revenue of EGP 376.799bn, net activity revenue of EGP 436.413bn, and total expenses of EGP 262.856bn as of the end of December.

Return on Average Assets

CBE reported that the return on average assets (ROAA) in banks was steady at 1.2% at the end of December 2023, maintaining the same rate since June 2020. The return on average equity (ROAE) stood at 17.7%, and the net interest margin (NIM) was 3.8%.

For the 10 largest banks, the ROAA was consistent at 1.2%, the ROAE was higher at 19.5%, and the NIM was slightly lower at 3.6%.

The CBE noted that for the five largest banks, the ROAA was slightly less at 1.1%, the ROAE was 18.7%, and the NIM was 3.4%. These divs reflect a stable financial performance among the leading banks in the market.