EFG-Hermes reiterated, in a recent study, Credit Agricole Egypt (CIEB.CA) Buy rating, as we continue to view multiples as attractive, at a 2014e P/E of 6.1x and P/BV of 1.3x, and an estimated ROE of 22%. Credit Agricole reported 3Q2013 net profit of EGP164 million, up strongly by 52% Y-o-Y on solid revenue growth. On a Q-o-Q basis, however, net profit declined by 21% on lower Q-o-Q revenues, which were from a very high base in 2Q2013, mainly at the level of non-interest income, as the shortage of FX liquidity had driven strong increases in the pricing of trade finance. The actual earnings were just 4% below our forecast of EGP171 million, due to lower-than-expected non-interest income. Lending was 3% higher Y-o-Y, but there was a 2% Q-o-Q contraction in 3Q2013. Broadly in line with the trend at the sector level, growth in the retail loan book, at 6% Y-o-Y, was higher than at the corporate book, +3% Y-o-Y. As of September 2013, corporate loans accounted for 75% of the total loan book. Deposits were flat Q-o-Q and up 10% Y-o-Y in 3Q2013. The net interest spread was 32bps higher Y-o-Y in 3Q2013, but there has been a softening on a sequential basis (-20bps) on lower lending yields. Fee income and FX income have fallen from an exceptionally high level in 2Q2013, but still remain above normalised levels, in our view. Non-performing loans (NPLs) increased by 13% Q-o-Q, driving the NPL ratio up slightly to 2.31% in September 2013, from 2.01% in June 2013. However, the NPL ratio is still the lowest amongst the largest private sector banks in Egypt and NPL coverage remains strong at 180% in September 2013.
