Confidence returning to the Egyptian banking sector? - IFN

Confidence returning to the Egyptian banking sector?

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EGYPT: Since the ousting of former president Mohamed Morsi, Egypt has seen a cautious improvement in the economy with GDP growth of 3.2% predicted for 2014, despite the tentative political situation. The upgrading of Egypt’s sovereign rating by Fitch at the start of the year to ‘B-’ with a stable outlook, reflects the improved view of two international banks based in Egypt, offering Shariah compliant banking. Abu Dhabi Islamic Bank – Egypt and AlBaraka Bank Egypt (AlBaraka Bank) have both reported profits in 2013 with AlBaraka Bank pledging to increase its capital to EGP1 billion (US$143.8 million) over the next two years, in line with the bank’s plans to expand operations in the Egyptian market. AlBaraka Bank announced net gains for the first nine months of 2013 totaling EGP119.3 million (US$17.15 million), a 17% increase from EGP101.8 million (US$14.63 million) for the first nine months of 2012. Ashraf El Gamrawy, the bank’s vice-chairman and CEO, said: "The [decision] to expand in the Egyptian market over 2014 is based on [a plan to increase] the terms of activity by 15%, including deposits, employment, retail banking, syndicated loans and opening new branches.” The CEO last year announced the bank’s plans to grow its corporate financing portfolio by 20% and its retail portfolio by 25-30% in 2014. Despite these positive results, the country’s economic situation remains precarious; Fitch’s upgrade to Egypt’s rating was premised, among other things, on the continued financial support of GCC countries. Kuwait, Saudi Arabia and the UAE have pledged more than US$12 billion in support of Egypt’s interim government, following the return of funds by the Central Bank of Egypt (CBE) to Qatar. This week the CBE has reportedly said that US$3 billion invested in bonds would be returned to Qatar by the end of 2014, with repayment being made in two installments – US$500 million in October and US$2.5 billion in November. Talks with Qatar last year regarding a portion of the US$7.5 billion in funds deposited with the CBE during Morsi’s presidency, ended with the CBE returning US$3 billion to Qatar in the final half of 2013. Qatar was a supporter of the former president and Egypt’s subsequent banning of the Muslim Brotherhood reflects the change of emphasis by the interim government on the country’s implementation of Shariah law and Islamic finance – as evidenced by the announcement by the Egyptian Financial Supervisory Authority earlier this month that the Sukuk law gazetted in May last year, would be subsumed into the country’s existing securities law.