It must come as an immense relief for the millions of customers with credit cards in Egypt that many of the country’s banks are reportedly turning a profit despite difficult politically and economically straitened times. And the fact that they now have is surely testament to the robustness of the Egyptian financial sector and a tribute to the expertise now driving the sector forward in the face of prevailing uncertainties.
It’s also good to see how Egypt has quietly disappeared from the radar screens of most of the major international news-gathering organisations, thus allowing a bit of breathing space and a sense of normalcy to take hold now the harsh glare of the media spotlight has dimmed. It almost goes without saying how sad it is that Syria has now taken Egypt’s place.
The positive news about banking profitability was highlighted earlier this month by Independent daily newspaper Daily News Egypt and other news outlets. Faisal Islamic Bank of Egypt reported net profits had risen by 31 percent to around $53 million over the first half of 2013 compared to about $41 million during the same period last year. National Societe Generale Bank had also reported positive news in its second quarter report, with income up just under $7.5 million to over $70.5 million compared to last year’s $63.2 million in the same period. The bank’s total income also surged from $114 million in 2012 to almost $138 million in 2013. Other banks reporting profits included Credit Agricole Egypt and Commercial International Bank.
But no one should really be so surprised given the large under-banked market which exists in Egypt, a point made recently in a report by the highly respected Oxford Business Group (OBG), a global publishing, research and consultancy firm. Indeed, that’s exactly what makes Egypt such an appealing prospect for overseas financial institutions looking for long-term growth, even despite the turmoil seen in the country over the last two years.
According to the OBG report, Egypt holds many attractions for international banks, led by its long-term growth trend. Prior to the domestic revolution and international financial crisis, the economy was achieving growth of around 7 percent per year.
Banks will also be eyeing the large and growing population of 85 million, which includes a sizeable middle class and significant young segment. Other attractions include opportunities to finance the sectors expected to drive growth once greater stability returns, together with an expanding interest among Egyptians in sharia-compliant products.
The OBG report says, “Egypt’s loan-to-GDP ratio stood at 38 percent at the end of the 2010 fiscal year, which, while not unusual for a country of its income level, indicates considerable potential for growth if incomes rise. However, in the immediate term, the country’s difficulties, which include serious pressure on foreign exchange reserves and the state budget, are taking their toll on the banking sector.”
However, the report concludes by saying that the substantial investment from some of the world’s biggest banks – Barclays, HSBC, and the Gulf banks Qatar National Bank and Dubai’s Emirates NBD – can be seen as a vote of confidence in Egypt’s long-term growth trend.