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Egyptian corporate lending very weak in December 2013 but robust deposit expansion

February 16, 2014

NBK Capital MENA reports that loans in Egypt declined 0.6 per cent MoM in December 2013, reflecting the on-going negative operating environment, and resulting in a 6 per cent expansion in 2013. Retail loans increased (1.6 per cent) in December 2013, while corporate loans decreased 1.4 per cent, resulting in around 12 per cent and 4 per cent growth in 2013, respectively.

Analysing data from the Central Bank of Egypt (CBE), NBK Capital MENA said, "As for the loan breakdown in terms of currency, EGP loans decreased in October 2013 (latest available data) while FX loan growth turned positive following the decrease in September 2013. From a YTD and a YoY perspective, FX loans have increased much quicker than EGP loans. As for corporate loans in specific, FX corporate loans showed a positive momentum increasing 1.2 per cent MoM in October 2013, after declining for two consecutive months. Additionally, on a YoY basis, FX corporate loans were up 14 per cent by the end of October 2013, significantly higher than the 4 per cent expansion for EGP corporate loans. The much higher expansion of FX corporate lending as opposed to EGP corporate lending probably indicates that the relatively large corporates have been driving corporate lending.

"Deposit growth remains higher than loan growth, standing at 2.9 per cent in December 2013 to reflect a 6 per cent QoQ increase and a 19 per cent expansion in 2013.

"Corporate deposits increased 6.4 per cent in December 2013, the highest growth rate since March 2013 while retail deposit growth remained steady at close to 2 per cent. In 2013, corporate deposits expanded 23 per cent compared with 18 per cent growth in retail deposits. EGP deposits continued to steadily inch up, increasing 22 per cent in 2013 while FX deposits increased sharply in December 2013 after declining for four consecutive months resulting in a 6 per cent increase in 2013. As for retail deposits in specific, FX deposits grew quicker than EGP deposits in December 2013 although EGP deposit expansion (+19 per cent) surpassed the FX one (+12 per cent) in 2013 as a whole.

"The loans-to-deposits ratio maintained its downtrend standing at 44 per cent by the end of October (48 per cent in December 2010) while the investments-to-assets ratio maintained its uptrend reaching 42 per cent (34 per cent in December 2010) reflecting muted loan growth and comparatively high-yielding government securities. The CBE has left interest rates unchanged at its latest meeting on 16 January 2014, after it had cut rates by 50 bps in each of August, September, and December 2013."

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Source: CPI Financial

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