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Increased max ratio of loan premiums increases bank profits, may affect asset quality: Beltone CIB, QNB, Credit Agricole, and ADIB are the main beneficiaries of the decision
Beltone Financial said that the Central Bank of Egypt (CBE) is raising the value of consumer loan premiums to 50% of the borrower's income instead of 35%. This is predicted to have positive effects on the growth of local banks' lending portfolio, which includes a strong retail client base. Beltone explained in a research note today that Commercial International Bank (CIB), QNB Al Ahly, Credit Agricole – Egypt, and Abu Dhabi Islamic Bank (ADIB) – Egypt, along with consumer finance companies such as GB Capital, Hermes Financial Group, and CI Capital will be benefiting greatly from this decision. It expects the profitability of banks to grow following the rise in loan employment rates, the largest contribution to commission income, and the increase in asset terms. At the same time, Beltone pointed out that the quality of assets could be negatively affected by high debt burdens, especially if income levels show limited growth. Beltone noted that the debt service coverage ratio for real estate financing has been maintained at 40%, which means that the real estate finance arms of GB Capital, EFG Hermes, and CI Capital will not be affected. Loan instalments granted to individuals for consumer purposes are now at 50% of their total monthly income, include personal loans, credit cards, and loans for the purpose of purchasing cars for personal use. The CBE decided to keep the maximum personal housing loans at 40% of total monthly income.
