Egypt’s banking sector has witnessed remarkable growth in the first half of 2023, according to the latest report by the Central Bank of Egypt (CBE). The total financial position of banks operating in the local market increased to about EGP 13.798 trillion (USD 445 billion) in June 2023, reflecting the resilience and stability of the sector amid the challenges posed by the COVID-19 pandemic.
Banks’ assets and liabilities
The CBE report showed that on the assets side, banks had cash balances of nearly EGP 106.241 billion, and balances in local and foreign banks of EGP 2.326 trillion and EGP 308.623 billion, respectively, in June 2023. Banks also had customer lending and debit balances of EGP 4.798 trillion and securities portfolio and bank investments in treasury bills of EGP 4.855 trillion. The other assets, which CBE did not specify, amounted to EGP 1.402 billion.
On the liabilities side, the report stated that banks’ capital was EGP 323.776 billion, reserves were EGP 492.386 billion, and provisions were EGP 305.455 billion. Banks’ obligations towards each other locally and abroad were EGP 575.767 billion and EGP 450.686 billion, respectively, and the total deposits were EGP 9.450 trillion. The bonds and long-term loans were EGP 541.945 billion, and the other liabilities, which CBE did not detail, reached EGP 1.657 trillion.
Non-performing loans ratio declines
The report also revealed that the ratio of non-performing loans to the total loan portfolio of banks declined to 3.3% in June 2023, compared to 3.5% in March 2023. This ratio was 2.6% at the 10 largest banks and 2.3% at the five largest banks operating in the Egyptian market.
The report indicated that banks covered 91.1% of their total non-performing loans with provisions in June 2023, compared to 93.3% in March 2023. This coverage ratio was 99.9% at the 10 largest banks and 100% at the top five largest banks.
The report added that the total provisions that banks made to deal with doubtful debts were EGP 305.455 billion in June 2023, of which EGP 230.192 billion belonged to the 10 largest banks and EGP 200.667 billion to the five largest banks.
Banks also had reserves worth EGP 492.386 billion, of which EGP 377.942 billion were held by the 10 largest banks and EGP 326.422 billion by the five largest banks.
Loan-to-deposit ratio increases
The report said that the loan-to-deposit ratio in banks increased to 50.9% in June 2023, compared to 48.9% in March 2023. This ratio was 52.8% at the 10 largest banks and 54.6% at the top five banks.
The report explained that the loan-to-deposit ratio in local currency increased to 44.7% in June 2023, compared to 43.1% in March 2023. This ratio was 44.9% at the 10 largest banks and 45.5% at the five largest banks.
The loan-to-deposit ratio in foreign currency in banks also increased to 76.4% in June 2023, compared to 71.5% in March 2023. This ratio was 86.3% at the 10 largest banks and 96.7% at the top five banks.
The report said that the private sector accounted for 53.6% of the total loans granted by banks to their customers in June 2023, compared to 55.3% in March 2023.
Private sector credit growth
According to a recent statement by CBE Governor Tarek Amer, Egypt’s private sector credit growth reached about 20% year-on-year in July-August period of fiscal year (FY) 2022/23, up from about 15% year-on-year in FY 2021/22, which ended on June 30, Daily News Egypt reported.
Amer said that this growth reflects the recovery of economic activity and demand for credit from various sectors, especially small and medium enterprises (SMEs), which are considered a key driver for job creation and inclusive growth.
He added that CBE has taken several measures to support SMEs, such as reducing interest rates, extending grace periods, providing guarantees, and launching initiatives to finance them at preferential rates.
Amer also said that CBE is keen to maintain the stability and soundness of the banking sector, which has proven its ability to withstand shocks and support the national economy during the pandemic.
