Banks operating in Egypt are predicted to face further pressure on operating profitability during 2021 on lower interest rates and higher loan impairment charges, Fitch Ratings said in a report.
The international credit ratings agency does not “expect this to lead to capital erosion, but capitalisation remains a credit weakness given banks’ high exposure to the sovereign and large individual obligors.”
The quality of banks’ assets has deteriorated as borrower support measures adopted by the Central Bank of Egypt (CBE) ended.
“However, the sector could benefit from growth and revenue opportunities, with Egypt’s lockdowns less stringent than those in many jurisdictions, and consumer consumption and public investment more resilient.”
Fitch expects the ratio of stage three loans to rise to 4 percent by the end of 2021, compared to 3.4 percent in the third quarter (Q3) of 2020.
“Banks’ foreign-currency liquidity has recovered from the large sell-offs and portfolio outflows in March and April 2020 but remains vulnerable to foreign investors’ confidence in emerging-market debt and exchange-rate fluctuations.”
