Rating: Buy
Target Price: EGP90.0
Closing Price: EGP86.5

Earnings up 25% Y-o-Y; taxes and investment income drive slight net income miss
Commercial International Bank (CIB) has reported 2Q17 net income of EGP1,828mn, up 25% Y-o-Y and 5% Q-o-Q, and just 5% below our forecast of EGP1,931mn (4% below Bloomberg consensus of EGP1,897mn). Earnings growth was driven by revenue growth of 26% Y-o-Y (+3% Q-o-Q), with strong Y-o-Y growth in net interest income and fee income. The slight net income miss came on the back of lower-than-expected non-core investment and trading income and a slightly higher-than-expected tax rate. 
 
Strong EGP loan growth; better deposit mix Q-o-Q
Growth in EGP loans was strong, at 14% Q-o-Q (following another 14% Q-o-Q increase in 1Q17). FX loans fell Q-o-Q due to repayments, and total loans increased 5% Q-o-Q, up from 2% Q-o-Q in 1Q17. The loan mix has improved in favour of higher margin EGP loans, which were 52% of total loans in June, up from 48% in March. Corporate and retail loans rose 5% Q-o-Q. The deposit mix also improved, as growth in deposits in 2Q17 was driven by demand deposits, while time deposits fell Q-o-Q. Share of demand deposits to total rose to 29% in June, up from 26% in March. Deposit growth was driven by EGP-denominated deposits.
 
Stable NPLs; past due loans up Q-o-Q
NPL ratio fell marginally to 6.8%, from 7% in March 2017; absolute NPLs were broadly flat Q-o-Q. NPL coverage was also unchanged vs. 1Q17 at 148%. Provisioning costs fell Q-o-Q, as expected: 1Q17 results included exceptionally high provisioning costs, as capital gains from the sale of CI Capital were used as additional provisions. Cost of risk stood at 119bps in 2Q17, down from 206bps in 1Q17. There was an increase in past due loans (to 6.4% of total loans, up from 3.5% in March 2017). This does not necessarily mean an increase in NPLs in the next few months, as it could be a volatile figure.