Al Baraka Bank Egypt
Higher opex and effective tax rate dampen T-bonds driven NII growth; a deep discount to justified P/BV
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Egypt/ Banks
Net profits decreased marginally
SAUD’s consolidated net profit decreased marginally by 0.8% to EGP264mn in Q1 2020, given a significant increase in operating expenses by 15%, raising the cost-to-income ratio to 26.3% in Q1 2020 vs. 22.1% a year earlier. This was despite 13.7% higher NII which was mainly driven by higher interest income from T-bonds, thanks to a high asset utilization in T-bonds (representing 21.4% of total assets). This coincided with a decrease in interest income from lending and T-bills by 9.5%, and 13.4%, respectively. Meanwhile, ROAE fell to 26.1% in Q1 2020, down from 32.1% a year earlier, due to a higher effective tax rate and lower financial leverage despite cost of risk (CoR) softening by 1.6%. NIM stabilized at 3.5% due to 1.5% lower cost of funding (CoF)
Shihab M. Helmy
Equity Analyst
Tel.: +202 3300 5723