Banks allocate EGP 122bn to face doubtful debts until June 2019: CBE

Slight increase in non-performing loans at banks in 1H 2019, reaching 4.2% of total loan portfolio compared to 4.1% at end-March, says CBE

The Central Bank of Egypt (CBE) said that the ratio of non-performing loans reached 4.2% of the total loan portfolio of banks operating in the Egyptian market at the end of June 2019, compared to 4.1% at the end of March 2019.
In its quarterly report on the financial soundness of banks, the CBE pointed out that non-performing loans accounted for 3% of the total loans offered by the top 10 banks operating in the Egyptian market and 2.4% of the top five banks.
The CBE pointed out that banks made allocations of 97.8% of their total non-performing loans at the end of June 2019, and the percentage of these allocations reached 100% in the top 10 banks and the five largest banks operating in the Egyptian market.
Meanwhile, the allocations formed by banks to face doubtful debts amounted to about EGP 122.272bn by the end of June 2019. The share of the top 10 banks of these allocations was EGP 77.666bn, while the top five banks' share reached EGP 61.876bn, according to the CBE.
The CBE added that the banks' reserves reached EGP 236.065bn by the end of June 2019, with the share of the top 10 banks being EGP 186.712bn, and the top five banks' share is EGP 153.668bn.
According to the CBE, the loan-to-deposit ratio in banks operating in the Egyptian market fell to 46.5% at the end of June 2019, compared to 47.5% in March 2019, and 47.8% in December 2018. This ratio reached 45.3% in the top 10 banks and 46.1% in the top five banks.
The CBE said that the loan-to-deposit ratio in the local currency stood at 40.1% at the end of June, unchanged from March, reaching 37% in the top 10 banks and 36.5% in the top five banks.
The ratio of loan-to-deposit in foreign currency at banks dropped to 71% at the end of June, compared to 73.7% in March. The ratio was 78.8% in the top 10 banks and 90.1% in the top five banks.
The private sector accounted for 61.5% of the total loans granted by banks to their customers until the end of June 2019, compared to 59.9% at the end of March 2019, and 58.7% at the end of December 2019, according to the CBE.
The CBE added that the private sector accounted for 54.2% of the total loans offered by the top 10 banks operating in Egypt, while it represents 50.7% of the loans presented by the top five banks.
The total deposits at banks amounted to about EGP 3.992tn at the end of June, compared to EGP 3.914tn at the end of March 2019. About EGP 2.959tn of the total deposits went to the top 10 banks, and about EGP 2.512tn for the top five banks, according to the CBE.
The CBE added that the ratio of deposits-to-assets at banks was 72.6% at the end of June 2019, compared to 69.3% at the end of March. The ratio was 71.6% at the top 10 banks, and 71.4% at the top five banks.
The average liquidity ratio in local currency in banks declined to 41.9% in June 2019, compared to 43.4% in March. This ratio was 43.7% in the top 10 banks and 43.2% in the top five banks.
The average foreign currency liquidity ratio at banks rose to 68.6% in June from 65.7% at the end of March, reaching 67.7% in the top 10 banks, and 67% in the top five.
The CBE said the bank's securities portfolio, excluding treasury bills (T-Bills), reached 16.6% of the total assets of banks at the end of June 2019, compared to 15.8% at the end of March, reaching 18.2% at the top 10 banks, and 19.6% at the top five banks.
According to the CBE, the value of banks' investments in securities and T-Bills reached EGP 1.765tn by the end of June 2019, while the top 10 banks' investments in securities and T-Bills amounted to EGP 1.381tn, and EGP 1.190tn in the top five banks.
The total capital of banks operating in the Egyptian market amounted to EGP 152.661bn by the end of June 2019, according to the CBE.
The bank explained that the capital of the top 10 banks is about EGP 100.378bn, while the capital of the top five banks is about EGP 82.733bn.
While the CBE did not disclose the names of the five or ten largest banks, it is known that they include the National Bank of Egypt (NBE), the Commercial International Bank – Egypt (CIB), Banque Misr, QNB Alahli, Banque du Caire, the Arab African International Bank (AAIB), HSBC, Faisal Islamic bank of Egypt, Alexbank, and Credit Agricole Egypt.
Regarding the capital adequacy index of banks, the CBE pointed out that the ratio of capital base to risk-weighted assets increased to 16.9% at the end of June 2019, compared to 16.5% at the end of March.
The tier 1 capital to risk-weighted assets increased to 14% at the end of June, compared to 13.5% at the end of March.
The CBE said that the going concern capital including conservation buffer should not be less than 6.625%, 7.25%, 7.875%, and 8.5% in 2016, 2017, 2018, and 2019, respectively.
According to the CBE, the ratio of the bank's common equity to risk-weighted assets of 10.4% at the end of June, compared to 10.3% at the end of March. This ratio was 9.7% at the top 10 banks and 9.1% at the top five banks.
The CBE said the common equity including conservation buffer should not be less than 5.125%, 5.75%, 6.375, and 7% in 2016, 2017, 2018, and 2019, respectively.
The leverage ratio in banks rose to 6.7% in June 2019 from 6.6% in March. This percentage amounted to 6.2% in the top 10 banks and 6% in the top five banks.
According to the CBE, the minimum set for this percentage is 3%.
In a related context, the CBE revealed the total financial position of banks operating in the local market increased by about EGP 436.2bn in one year to reach EGP 5.516tn by the end of June 2019, compared to EGP 5.08tn by the end of June 2018.
The financial position of the top 10 banks increased to EGP 4.1trn at the end of June 2019, compared to EGP 3.788trn at the end of June 2018.
The top 10 banks accounted for about 75% of the total financial position of banks operating in the Egyptian market.
This comes at a time when the financial position of the top five banks increased to EGP 3.527trn at the end of June 2019, compared to EGP 3.249trn at the end of June 2018.
In a related context, the CBE said the net profits of banks operating in the Egyptian market rose to about EGP 62.489bn at the end of June 2019, compared to EGP 45.843bn at the end of June 2018, with a growth rate of about 36.3%.
The rise in the bank profits came in the context of the increase in net interest to about EGP 131.413bn at the end of June 2019, compared to EGP 78.612bn at the end of June 2018, an increase of EGP 52.8bn, a growth rate of 67%.
Banks' operating income rose to EGP 159.02bn at the end of June 2019, compared to EGP 120.9bn at the end of June 2018, an increase of EGP 38bn (31%).
On the other hand, banks' total expenses recorded about EGP 96.525bn at the end of June 2019, compared to EGP 75.046bn at the end of June 2018, a growth of 28.6%.
The 10 largest banks operating in the Egyptian market achieved a net profit of EGP 50.909bn at the end of June 2019, compared to EGP 33.326bn at the end of March 2019, according to the CBE.
At the top of this list comes the NBE, Banque Misr, CIB-Egypt, QNB Alahli, Credit Agricole-Egypt, Faisal Islamic Bank of Egypt, and the Housing and Development Bank.
According to the CBE, the net interest achieved by these banks until the end of June 2019 amounted to EGP 105.489bn, compared to EGP 66.647bn by the end of March.
The CBE added the net operating income of these banks reached about EGP 126.138bn at the end of June 2019, compared to EGP 83.613bn at the end of March. In addition, their total expenses reached EGP 75.229bn by the end of June, compared to EGP 50.287bn by the end of March.
The CBE said the five largest banks operating in the Egyptian market achieved a net profit of EGP 42.424bn by the end of the first half (1H) of 2019, compared to EGP 29.264bn at the end of the first quarter (1Q).
According to the CBE, the net interest achieved by these banks amounted to about EGP 91.983bn until the end of June 2019, compared to about EGP 60.461bn in March 2019.
The CBE added that the net operating income at these banks reached about EGP 109.846bn at the end of June, compared to EGP 75.563bn at the end of March.
On the other hand, the expenses of the five largest banks operating in the Egyptian market rose to about EGP 67.42bn during 1H 2019, compared to about EGP 46.3bn during 1Q of the year.
The expenses of banks are increasing year after year, as they are spent on upgrading and supporting their technological structure and geographical expansion, through small and large branches or automated machines and POS, to reach their customers in different regions of the country.
In another context, the CBE revealed that the net open positions in foreign currencies reached 0.4% of the total capital base of the banks operating in the Egyptian market by the end of June 2019.
The same ratio was also recorded in the top 10 banks, while it rose to 0.5% in the top five banks, according to the CBE.
This is the first time that the CBE has added banks' net open positions in foreign currencies in this report.
The CBE stressed that the total net open (short or long) positions for all foreign currencies shouldn't exceed 20% of the capital base.
Earlier documents of the International Monetary Fund (IMF) revealed that CBE will not allow exceed the limits of open positions in foreign currencies in the upcoming period, in the framework of reducing the risk of exposure to exchange rate fluctuations.
In November 2017, the CBE adjusted the limits of currency positions at banks operating in the local market with respect to the surplus or deficit in foreign currency positions of any bank, including branches of foreign banks. Accordingly, the surplus or deficit in the position of any currency would not exceed 10% of the capital base.