Egypt's biggest private bank CIB is expected to post net profit growth of 5-10% for the calendar year 2000, despite high provisions and dividend payouts, analysts said.
Their forecasts of net profit for Commercial International Bank (CIB) range from LE369.6 million ($96.20 million) to LE386 million, up from LE350.8 million in 1999.
“CIB's 2000 results are expected to be much better than its 1999 results, despite the poor market conditions last year,” said Nashwa Saleh, an analyst at HC Brokerage.
Economists say Egypt's economy slowed in 2000 due to liquidity shortages that kept interest rates high, amid uncertainty about the government's exchange rate policy. Analysts attributed CIB's forecast profit growth to an aggressive policy of diversification into retail banking and other fee-generating businesses, while keeping costs down.
“CIB had good income growth and tight cost control and that's why their operating income growth is so high,” noted a London-based analyst who asked not to be named.
London-based CSFB's Middle East analyst Ghassan Medawar forecast relatively flat loan growth for 2000 and customer deposit growth of 7% over 1999, implying a year-end loan to deposits ratio of 91M. He forecast LE606 million in pre-tax pre-provision profit and 220 million pounds of provisions and tax charges.
Analysts said they were concerned about the high level of provisions, forecast at LE214 to 224 million.
“Large loan loss provisions are expected for 2000 to maintain coverage of non-performing loans (NPLs) given the deterioration of asset quality… These provisions undercut the bottom line,” said an analyst at HSBC Securities, who forecast net profit of LE386 million.
“Large provisions are not necessarily a bad thing because the bank wants to be on the safe side and maintain high coverage of NPLs,” another analyst said.
Some brokers expressed concern at dividend pay-outs.
Medawar puts CIB's pay out ratio at 65 to 70% of net earnings since it was listed in 1996. “We strongly believe the bank should significantly reduce its pay-out ratio this year. A lower pay-out ratio would boost the bank's book value and improve its valuation outlook considerably,” he added.
This article was first published by Reuters on 26 February 2001.