• Marginal slowdown in total loan growth, but further weakening in private sector lending demand Total loans rose 1.3% M-o-M in May, a slight slowdown from 1.6% M-o-M in April. Y-o-Y loan growth continues to be strong, up 16.1% Y-o-Y in May (vs 16.8% Y-o-Y in April), although this partly reflects the strong boost to corporate loans as a result of the March EGP devaluation. Our view is that higher borrowing costs after the increase in benchmark rates by the CBE (250bps YTD), weakening economic growth and continued shortage of USD will drive a further slowdown in private sector lending demand in 2016. The Y-o-Y slowdown in private corporate loan growth of 11.8% in May 2016, compared to 15.3% Y-o-Y in Dec 2015 is a reflection in our view of the weaker corporate sentiment. • Strong Y-o-Y deposit growth at 19.8% Y-o-Y Total deposits increased 1.8% M-o-M in May, up from 0.5% M-o-M in April, thanks to stronger growth in EGP deposits of 2.1% M-o-M in May (from 0.5% in April). Y-o-Y deposit growth was 19.8% in May, up from 18.8% Y-o-Y in April. The system loan-to-deposit ratio fell slightly to 46.1% in May, versus 46.4% in April. Strong liquidity dynamics in EGP and higher interest rates should have boosted banks’ net interest margins in 2Q16. Deposit dollarization was broadly unchanged M-o-M at 18.6%. • Money supply accelerates on rising lending to government Broad money supply growth accelerated to 18.9% Y-o-Y in May from 18.1% Y-o-Y in April thanks to continuing growth in credit to the government (net claims rose 29% Y-o-Y). The banking system’s net foreign liability position stood at USD9.4bn- a USD0.8bn drop below April’s level. The CBE added USD1.7bn in liabilities, though impact was mitigated due to a USD0.5bn grant from Saudi that boosted CBE's foreign assets, whereas banks’ foreign liabilities fell by USD0.2bn.
Elena Sanchez-Cabezudo, CFA Mohamed Abu Basha Rajae Aadel
This website uses cookies to make the site work, to understand if the site is working well, how it is being used, to connect to social media sites (such as Facebook and Twitter) and to collect information useful to allow us and our partners to provide you with more relevant ads . Some cookies are essential to make the site work, but you can control how we use non-essential cookies at any time by clicking the “ON/OFF” button next to each category. For more information about the cookies used on this site, see Privacy Policy.
Decide which cookies you want to allow.
Strictly Necessary
These cookies are essential in order to enable you to move around our website and use its features, such as accessing secure areas of our website. Without these cookies, any services on our Site you wish to access cannot be provided.
Analytical/performance cookies
Visitors use our website, for instance which pages you go to most often, and if you get error messages from web pages.