Solid pick-up in loan growth in public & private corporate sectors
System loan growth picked up to 4.7% M-o-M in Jan-17, up from 0.5% M-o-M in Dec-16, thanks to strong loan growth in the corporate segment (both public and private sector corporate sectors). The Jan-17 loan growth number was the strongest in several years if we exclude months when the EGP devalued vs the USD. Y-o-Y, loan growth of 51.4% remains distorted by the EGP float in Nov-16. Barring currency movements, we expect the improved availability of USD at banks to drive a pick-up in loan growth this year, and CIB in particular is bullish on the outlook for loan growth, guiding c30% in 2017. Top picks in Egypt are CIB, CAE and HDBK.
 
FX deposits drive total deposit growth M-o-M
Total deposits rose 2.5% M-o-M in Jan-17, from 2.0% in Dec-16, driven by an acceleration of FX deposit growth in both the households and business sectors. Growth in EGP denominated deposits slowed to 1% M-o-M. The share of FX deposits to total deposits rose to 30% in Jan-17, from 29% in Dec-17.  Y-o-Y deposit growth rose to 44.9% in January, compared to 41.7% in December. The share of demand deposits to total deposits was unchanged M-o-M at 17%.
 
CBE's NFA position improved, gov’t lending under control
System’s net foreign liability position significantly improved, reaching USD6.5bn in Jan. from USD10.8bn in Dec, with the CBE’s improving to USD2.0bn in Jan. from USD4.4bn in Dec thanks to some debt repayments as well as a pick-up in foreign portfolio inflows. Meanwhile, lending to the government by the CBE was at a steady share of money supply (29%), signaling adherence to the lower deficit monetisation target as agreed with the IMF. Broad money supply (M2) growth accelerated marginally to 41.5% Y-o-Y in Jan. from 39.5% Y-o-Y in Dec., driven largely by the improvement in the NFA position. On the liability side, a 3% M-o-M jump in foreign currency deposits (based on current FX rates), equivalent to cUSD1bn, was a big driver of M2 acceleration in January.

Elena Sanchez-Cabezudo, CFA
Mohamed Abu Basha
Rajae Aadel
Lina Abdelfattah