Egypts banking sector to be 2nd fastest growing in region

ArabFinance: Egypts banking sector looks set to be the second-fastest-growing across the region during the first quarter (Q1) of 2021, according to a recent report by EFG Hermes.

The review reflects the anaemic bottom-line growth in 2020, as lenders were forced to shore up loan loss provisions in 2020 amid worries over pandemic-linked bad loans.

On a quarterly basis, earnings for eight listed banks leveled up 3% in Q1 2021, the report estimated.

The report noted that higher net interest income driven by higher credit volumes offset lower central bank rates, determined by the Central Bank of Egypt (CBE).

A diminishing need for loan loss provisions as the economy recovers from covid-19 will also drive growth, with the aggregate cost of risk expected to fall to 130 base points in Q1 2021, down from 198 base points in Q4 2020.

Loan activity for Egypts banks is forecast to have grown 9% year on year over the quarter and 2% quarter on quarter.

We expect retail credit and working capital financing to be the key drivers of credit growth during 2021, EFG said in the report.

The report covers Commercial International Bank, Qatar National Bank, Credit Agricole, Al Baraka Egypt, Faisal Islamic Bank, the and Development Bank, Abu Dhabi Islamic Bank, and Egyptian Gulf Bank.