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Commercial International Bank (Egypt) reports standalone Q1 net profit of EGP 778.7 million

May 18, 2014

On a standalone basis, Commercial International Bank reported net profit up 18.8 per cent. Consolidated net profit of EGP 805.7 million was up 22.48 per cent.

NBK Capital MENA comments…

In line operating income and loan growth but weakening asset quality

Commercial International Bank (CIB) reported 1Q2014 net profit of EGP 805 million, up 22% YoY and 6% QoQ. The YoY increase in net profit was due to higher operating income.

Operating income in line with our forecasts (2.6% higher), up 21% YoY. Operating income reached EGP 1.9 billion in 1Q2014, driven by net interest income and non-interest income. Net interest income (20% YoY) continued to perform well and came in line with our forecast. However, NIM at 5.50% (versus 5.46% in 4Q2013) came in slightly stronger than our expectations. Non-interest income came stronger than our forecast, increasing 24% YoY on the back of higher investment income (146% YoY) and fee income (+30% YoY).

Loans increased around 2% in 1Q2014 (the highest growth since 1Q2013) and came in line with our view for CIB in FY2014. Deposits grew much faster (6%) resulting in a loans-to-deposit ratio of 41% as of March 2014 (43% as of December 2013).

Asset quality indicators weakened in 1Q2014. NPLs increased 18% in 1Q2014 (higher than our view for FY2014), lifting the NPL ratio to 4.5% by the end of March 2014 compared with 3.9% at the end of December 2013. The NPL coverage ratio, although remained at comfortable levels, declined to 184% in March 2014 from 200% in at the end of 2013. Past due but not impaired loans (PDLs) decreased by EGP 410 million (16%) in 1Q2014 after spiking in 4Q2013. By the end of March 2014, PDLs represented 4.8% of performing loans compared with 6.4% by the end of 2013.  Loan provisioning charges came lower both on a YoY (-18%) and a QoQ (-47%) basis, standing at EGP 184 million and was broadly in line with our view for FY2014.

Overall, the results came in line with our expectations in terms of operating income and loan growth, but asset quality trends disappointed. The key positives are the robust NIM and the higher-than-expected increase in non-interest income, while the key negative is the higher-than-anticipated increase in NPLs. We maintain our fair value per share at EGP 40.60, which is 8% above the last closing price and our "Hold" recommendation on the stock. 

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Source: CPI Financial

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