CIB fourth quarter 2021 business results

• Calm cost of risk and financial position growth maintain profit growth; non-core business income remains volatile

CIB's net profit increased by about 17% in the fourth quarter of 2021 year-on-year, but fell by 10% quarter-on-quarter to EGP 3.4 billion, according to the Bank's financial lists. Compared to the fourth quarter of 2020, income from the Bank's core banking business increased by 5% year-on-year to EGP 7.4 billion following a 7% year-on-year increase in net income resulting mainly from the expansion of the financial position, despite the fact that Net interest margin shrank by 64 basis points to 6.1%, following maturity of high-yield bonds denominated in local currency.

The impairment from credit losses decreased by about 69% year-on-year to EGP 356 million, reducing the bank's risk cost by 288 basis points to 97 pips. On the other hand, the Bank's operating spending increased by 22% year-on-year, resulting in a 3.4 percentage point increase in the Bank's cost-income ratio to 25%. The tax margin increased by about 4 percentage points to 32% following the impact of tax adjustments.

Quarterly, income from core banking increased by 4% quarter-on-quarter as a result of net income from return growing by about 5% quarter-on-quarter, supported by the positive impact of the size of the financial position along with higher net interest margins, while net commission income decreased by 6% to EGP 620 million. The impairment from credit losses increased by 17% quarter-on-quarter, resulting in a 11 basis point increase in the cost of risk, while other operating losses increased significantly by 1.4 times to EGP 0.6 billion. For 2021 as a whole, profits were EGP 13.3 billion, down 4.8% from our estimate of EGP 13.9 billion, with a return on average shareholders' equity of about 21% in 2021 compared to 19% in 2020.

Shrinking corporate deposits put pressure on financial position growth; change in bank investment rates has not yet alleviated the tax burden

CIB's financial position stabilized almost during the fourth quarter of 2021, rising by 1.1% quarter-on-quarter (+16.5% year-on-year) to EGP 498.2 billion in the fourth quarter of 2021, as a result of weak customer deposits growth of EGP 0.8 billion. The growth in customer deposits was the result of a 3.8% quarter-on-quarter increase in individual deposits (+13.2%), although corporate deposits declined by about 2.4% quarter-on-quarter (+28.2% year-on-year). At the same time, growth of 3.8% quarter-on-quarter and 20.2% year-on-year was EGP 163.9 billion as of the end of December 2021.

Overall loan growth came at both levels, with corporate and individual loans growing well by 3.2% and 5.7% quarter-on-quarter. The bank's loan-to-deposit rate increased to 40.3% in the fourth quarter of 2021 from 39.1% in the third quarter of 2021. On the other employment level, Interbank's balances increased by about 10.9% quarter-on-quarter, while the Bank was able to reduce its investments in government debt instruments by -36.7% quarter-on-quarter, despite a 3.5% increase in the Bank's tax margin of 32%. The bank's capital adequacy rate stabilized at 29.9% during the quarter.

Improved asset quality for the second quarter in a row, while maintaining a healthy coverage rate for allocations 

CIB's asset quality measures were not affected, with the rate of non-operating loans declining for the second quarter in a row to 5.1% from 5.4% in the third quarter of 2021.

The Bank's Board of Directors proposes to distribute EGP 1.36 per share, a return on distribution of 2.6% 

CIB's Board of Directors proposed a cash dividend of EGP 1.36/share of net profit in 2021, bringing total cash distributions to EGP 2.68 billion, indicating a return on distribution of about 2.6% and a distribution payment rate of 19.4% of distributable net profit.  

COMI EY, current price: £51.44, fair value: £55.8, recommendation: retention

-Ends-

Research Department:
research@beltonefinancial.com 

Disclosures

This report was prepared by Belton Securities Brokerage, and all recommendations and opinions on the shares were issued through financial analysts and/or subsidiaries. For more information regarding this report or any share, please contact: research@beltonefinancial.com.

Investment or trading ideas discussed in the report or recommended may be inappropriate for all investors. The user therefore takes all the risks related to the use of information or analysis in this report. The information in this report can be changed without the need for mention, and Beltone reserves the right to make any change or modification when needed. Users can use technical analysis as a source of information and not the only source for making investment and trading decisions. Additional data may be included but are not limited to the follow-up of financial analysis reports issued by the company and/or subsidiaries, as well as the stock's financial situation.

Although efforts have been made in the preparation of this report, this does not guarantee that it gives a full picture of the stock, market or developments discussed in the report, and Beltone does not undertake to accurately, and complete the report. Belton is in no way responsible for any damages or damages that could be caused to anyone as a result of an unintentional error found in the information contained in the report.

Beltone or any of its subsidiaries may be involved in any operations on or for any of the companies covered in the report. You can contact us if you do not wish to receive these reports. Historical performance is also not an indicator of future returns.

This is not an offer or petition for an offer to order or purchase the securities mentioned in the report and it is not an official confirmation of any transactions. Balton and/or its subsidiaries and/or its directors or employees may deal with shares or buy or sell shares mentioned in that report. Any Of The Beltone Affiliates can advise the companies issuing the shares mentioned in that report.

This report targets specific people, and the report should not be reprinted, copied, sold or redistributed without the previous written consent of Beltone. This report is not distributed to the media, transferred or used by the media without the prior written consent of Belton.

This report is not intended to be distributed or used by any person or entity who is a citizen or resident of a place, town, or state, where such distribution or issuance will be contrary to the law, regulations, or whatever belton or its subsidiaries may offer any conditions for registration or licensing in accordance with the law. The shares mentioned in that report may be subject to or are not sellable in accordance with the law or according to certain categories of investors. Therefore, the persons dealing with this report must be obliged to report themselves in order to monitor these restrictions.

© Press Release 2022