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EGP 786bn increase in total financial position of banks in 1Q 2022 Non-performing loans decreased to 3.3% of total portfolio by end of March 2022, compared to 3.5% in December 2021
Last week, the Central Bank of Egypt (CBE) revealed the most prominent indicators of financial viability for banks operating in the Egyptian market by the end of the first quarter (1Q) of this year. According to the CBE's recent report, the total financial position of banks operating in the local market — other than the CBE itself — increased to about EGP 9.413 trillion at the end of March 2022, compared to EGP 8.627 trillion at the end of December 2021 — an increase of about EGP 786bn. The CBE explained that on the assets side, cash balances in banks amounted to EGP 71.189bn, and the balances of some of them locally amounted to EGP 1.509 trillion, while their balances in banks abroad amounted to EGP 289.246bn. It added that the lending and discount balances to customers recorded about EGP 3.419 trillion, while the stock portfolio and banks' investments in treasury bills recorded EGP 3.549 trillion. In terms of liabilities, the CBE stated that the banks' capital amounted to about EGP 229.834bn, reserves recorded EGP 439.217bn, while the balance of allocations amounted to EGP 209.750bn. Furthermore, the obligations of banks towards each other in Egypt amounted to about EGP 316.571bn, while their obligations to banks abroad recorded EGP 201.147bn. Meanwhile, total deposits recorded EGP 6.961tn, and the balances of bonds and long-term loans amounted to EGP 374.778bn. On the other hand, the CBE said that the percentage of non-performing loans decreased to 3.3% of the total loan portfolio of banks operating in the Egyptian market at the end of March 2022, compared to 3.5% at the end of December 2021. It explained that the percentage of non-performing loans amounted to 2.3% of the total loans of the 10 largest banks operating in the Egyptian market and amounted to 1.9% of the five largest banks. The CBE also indicated that banks allocated 92.3% of their total non-performing loans at the end of March 2022, compared to 92.2% at the end of December 2021, and the percentage of these allocations reached 100% at the 10 and five largest banks operating in the Egyptian market. "The volume of allocations that banks formed to deal with doubtful debts amounted to about EGP 209.750bn by the end of March 2022, and the share of the 10 largest banks of those provisions was EGP 149.452bn. Also, the volume of provisions in the five largest banks amounted to EGP 129.621bn," CBE said. He added that the banks formed reserves worth EGP 439.217bn, of which the share of the top 10 amounted to EGP 320.736bn, while the volume of reserves at the five largest banks amounted to EGP 259.343bn. Furthermore, it said that the percentage of loans to deposits in banks operating in the Egyptian market increased to 49.3% at the end of March 2022, compared to 48.3% in December 2021, and this ratio reached 50.4% at the top 10 banks and recorded 51.1% at the five largest banks. The CBE explained that the percentage of loans to deposits in the local currency increased to 46.1% at the end of March, compared to 44.2%, and this ratio reached 46.3% at the top 10 banks and recorded 46.2% at the five largest banks. At the same time, the percentage of loans to deposits in foreign currencies in banks declined to 68.4%, compared to 77%. This percentage recorded 75.9% in the largest 10 banks and 85.7% in the largest five. "The private sector accounted for 57.3% of the total loans granted by banks to their clients until the end of March 2022, compared to 57.6% at the end of December 2021," according to the CBE. It also explained that the private sector acquired 48.8% of the total loans in the 10 largest banks operating in Egypt and 45.3% of the loans in the five largest banks. Furthermore, the CBE said that the total deposits in banks jumped to about EGP 6.961 trillion, compared to EGP 6.433 trillion — an increase of about EGP 528bn — pointing out that about EGP 5.381 trillion belong to the 10 largest banks and about EGP 4.817 trillion in the five largest banks. It added that the ratio of deposits to assets in banks amounted to 74.1% at the end of March 2022, compared to 74.7%, and this ratio reached 73.6% for the top 10 banks and 73.7% for the five largest banks. The CBE also indicated that the average actual liquidity ratio in local currency in banks in March 2022 decreased to 44.7%, compared to 45.4%. This percentage recorded 45.1% in the top 10 banks and 44.6% in the top five. On the other hand, the average effective ratio of foreign currency liquidity at banks increased to 74.6%, compared to 67.9%. This ratio reached 73.9% at the top 10 banks and 71.5% in the five largest banks. Additionally, the CBE said that the volume of investments of banks operating in the local market in securities and treasury bills amounted to EGP 3.549 trillion at the end of March 2022, compared to EGP 3.324 trillion at the end of December 2021 — an increase of about EPG 225bn. The bank indicated that the volume of investments of the top 10 banks in these instruments amounted to EGP 2.819 trillion and about EGP 2.531 trillion in the five largest banks. According to the CBE, the percentage of banks' securities portfolio — excluding treasury bills — decreased to 26.9% of total assets, compared to 28.1%, and this ratio amounted to 29.4% for the 10 largest banks and 30.6% for the five largest banks. The CBE also said that the ratio of the capital base to risk-weighted assets in banks decreased to 21.9%, compared to 22.5%, and this ratio reached 21% for the 10 largest banks and 21% for the largest five. The ratio of the first tranche of bank capital to risk-weighted assets decreased to 17.4%, compared to 18.2%, and this ratio reached 16% for the 10 largest banks and 15.3% for the five largest banks. Moreover, the ratio of the banks' continuous core capital to risk-weighted assets amounted to 13.1%, compared to 12.9%. This ratio reached 12% for the top 10 banks and 10.8% for the top five banks. Additionally, the financial leverage ratio in banks declined to 7%, compared to 7.3%. This ratio reached 6.2% in the 10 largest banks and 5.8% in the five largest banks. According to the CBE, the minimum set for this percentage is 3%. In another context, the CBE revealed that net open foreign exchange positions reached -0.2% of the total capital base of banks operating in the Egyptian market, compared to -1.9%. The CBE explained that this percentage amounted to -0.7% in the top 10 banks and -0.6% in the five largest banks. It also stressed that the total value of the surplus or deficit in foreign exchange positions should not exceed 20% of the capital base. In a different context, the CBE revealed that the net profits of banks operating in the Egyptian market reached EGP 36.831bn during 1Q of 2022. It indicated that the net return of the banks reached EPG 77.394bn by the end of March 2022, while the net activity revenues amounted to about EGP 91.415bn, and total expenses recorded EGP 54.584bn. According to the CBE, the return on average assets in banks reached 1.2%, which is unchanged from December 2021, while the return on average equity increased to 16.1% compared to 14.9%, and the net return margin increased to 4.2% compared to 3.7%.
