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Egyptian loan growth sustained in June 2014

August 17, 2014

Growth in corporate lending in Egypt continued for the sixth consecutive month, reports NBK Capital MENA on analysis of figures from the Central Bank of Egypt. The momentum in loan growth continued in June (+1.5 per cent MoM) resulting in an eight per cent YTD increase. Corporate loans increased by 1.4 per cent MoM. The growth momentum in retail lending also continued (+1.9 per cent MoM) resulting in YoY growth of approximately 14 per cent.

EGP lending grew at a faster pace than FX lending in May. Breaking down the loans in terms of currency, EGP loans grew at a faster pace (+2.1 per cent MoM) than FX loans (+1.0 per cent MoM) in May, the latest month for which data is available. Corporate EGP loans increased quicker (+2.2 per cent) than corporate FX loans (+1.1 per cent), recording the highest rate of expansion since 2011. With the exception of February, FX corporate loans have grown at a slower pace than EGP corporate loans since January, resulting in YTD growth of 5 per cent versus EGP corporate loans at +7 per cent.

Deposits expanded by 2.4 per cent in June 2014, resulting in an 18 per cent YoY increase. In May, the overall loans-to-deposits ratio and the FX-specific ratio maintained their decreasing trend.

The strong momentum in retail deposits was sustained in June, as they increased by 2.3 per cent. From both a YoY and YTD perspectives, retail deposit growth fared better than corporate deposit growth. However, corporate deposit growth improved in June after being muted in May. FX deposits remained broadly flat in June, while EGP deposits recorded the highest rate of increase since the start of the year at 3 per cent. From a YoY perspective, EGP deposit expansion stands at 22 per cent, significantly ahead of the increase in FX deposits. As for retail deposits in particular, EGP-denominated ones have expanded more than FX-denominated ones from a YTD and YoY perspectives. On a different note, the investment-to-assets ratio continued to gradually inch up, standing at around 44 per cent at the end of May. From a YTD perspective, the investment-to-assets ratio has increased by 55 bps while the loans-to-assets ratio has declined by 110 bps.

NBK Capital MENA said the EGP has depreciated by three per cent YTD against the USD, with most of the depreciation (around 70 per cent) happening in May. That said, the EGP has remained stable since the beginning of June. On a different note, the next Monetary Policy Committee meeting is scheduled for 28 August 2014. At the last meeting (17 July 2014), the CBE unexpectedly increased interest rates (discount, lending, and deposit rates) by 100 bps.

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Source: CPI Financial

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