Crédit Agricole Egypt (CAE) [CIEB]: Non-Interest Income Saves the Day
Raising our 12MPT; Overweight maintained
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Credit Agricole Egypt [CIEB]
Egypt / Banks / Q4 2021 Results
12M PT: EGP9.9 (+22%)
set on 21 Feb 2022
Investment Rating: Overweight | Risk Rating: Medium
Net interest income grew on lower funding cost
Credit Agricole Egypt’s [CIEB] net earnings grew in a decent fashion to EGP1.6bn in 2021 (+17% y/y), coming in line with our estimates (PRe). However, CIEB achieved a marginal y/y growth in net interest income (NII) of only 2% to EGP2.9bn. The main driver for NII growth was lower funding cost, which declined by 2%. On the other hand, interest income was mainly flat y/y. CIEB was able to utilize a volume effect, only to the extent that evened out weaker yields in 2021, resulting in a tepid NII growth.
Non-interest income and lower credit provisions supported earnings growth
Despite faint NII growth, net earnings growth was very satisfactory. This comes in light of higher net fees & commissions income of EGP571mn (+16% y/y), besides one-off gains from the sale of a land in the Fifth Settlement for EGP46mn, first booked in Q1 2021. Furthermore, the bank booked 12% lower credit provisions during 2021, adding around EGP320mn, resulting in a 30bps y/y lower cost of risk (CoR) to 112bps. This occurred as the NPL ratio upped marginally by 30bps y/y to 3.3%, while NPL coverage ratio declined from 164% to 149%. We note that the bank’s effective tax rate came 157bps lower y/y at 28%.
Nifty balance sheet growth
CIEB saw total assets grow by 16% y/y to EGP60bn, accompanied by a 17% y/y growth in total deposits to EGP48bn. Meanwhile, CIEB’s gross loan portfolio grew 15% y/y to EGP31bn. Accordingly, GLDR did not move much, settling at 63% vs. 65% a year earlier. The bank’s paid-in capital is now EGP5bn, distributed over 1.25bn shares, at a par value of EGP4.0/share. This comes in compliance with the new minimum paid-in capital requirements specified by the New Banking Law. We note that both ROAE and ROAA have improved to 20% (+110bps y/y) and 2.84% (+17bps y/y), respectively.
A return to the high-yield era — Overweight maintained; 12MPT raised
In view of 2021 results, we up our 12MPT to EGP9.9/share (ETR +22%) based on a P/BV multiple of 1.43x. Hence, we maintain our Overweight rating. We note that our latest fair value (FV) was EGP9/share (dated 13 April 2021), but we see room for upgrade in view of the recent results. The bank’s BoD has suggested a DPS of EGP0.99/share, implying a payout ratio of 78%, subject to approval by the Central Bank of Egypt. Going forward, we expect CIEB’s payout ratio to normalize at an average of 60%. CIEB is currently traded at 2022e P/E of 6.2x and P/BV of 1.1x.
Amany Shaaban
Equity Analyst
T +202 3300 5720
ashaaban@egy.primegroup.org