Cairo – Mubasher: Pharos Research said that the Central Bank of Egypt’s (CBE) decision to raise reserve requirement on banks will have a short-term negative impact on net interest margin (NIM).
This decision will devour 5% of the fair value (FV) of listed banks, Pharos added in a recent report.
The CBE will raise the cash reserve ratio to 14% from 10% starting from 10 October 2017.
Pharos indicated that banks will tend to protect profitability through lowering interest rates paid on deposits to compensate for the lost yield and requesting higher rates of return in treasury auctions.
The required reserves ratio settled at 14% between 2001 and 2012, and was gradually lowered since January 2011 by 4%, until it reached 10% to support the Egyptian banking sector.
Pharos noted further that Commercial International Bank - Egypt (CIB), Credit Agricole Egypt, Export Development Bank of Egypt (EBE) will be the least affected by the CBE’s decision because of the local deposits these banks have.
