Cairo - Mubasher: Pharos Research has issued on Tuesday its report evaluating the banking sector in the Egyptian Exchange (EGX), under the title “Banking Sector Review, Oversold or Not?”
The stocks of the Housing and Development Bank (HDB), Al Baraka Bank Egypt, and Export Development Bank (EBE), are highly oversold, and trading close to 9-Year low multiples.
Meanwhile, the stocks of the Commercial International Bank (CIB), QNB, Credit Agricole, and EG Bank, are still trading within historical averages or higher than peer group average, however, the research firm continues to have a positive outlook on that group.
ADIB Egypt, Suez Canal Bank, and Faisal Islamic Bank, are cheap and trading close to 9-year lows but Pharos continues to be concerned with Suez Canal Bank’s low asset quality and tight capital base Capital Adequacy Ratio (CAR) recorded 12.2% as of June 2018 below the minimum level required by the Central Bank of Egypt (CBE) for 2019 at 12.5%, as well as Faisal’s unfavorable asset allocation, and ADIB’s potential rights issue.
The report also showed the expected trends during the third quarter of fiscal year 2018/2019, with corporate lending expected to remain stable and driven by working capital financing.
“We expect to see an increase in asset allocation to treasury investments amid lower foreign participation in sovereign debt instruments,” the report stated.
“A shift in allocation to capital expenditure lending is not expected to happen before further rate cuts,” it added, noting that net interest margin should remain strong supported by high yield on treasury bills coupled with higher size of investment volumes.
The research firm doesn’t expect any surprise in provisioning or non-performing loans (NPLs), while cost-to-income ratio should stabilize, and capital remaining healthy; and meeting the central bank’s requirements.
