KEY THEMES
We all know that the first of the remaining three Monetary Policy Committee meetings is scheduled for this Thursday, 24 September. We believe the Central Bank of Egypt will maintain policy rates as is, which also happens to be market consensus. We will detail our rationale later this week. But what’s interesting today is that state-owned banks, namely NIB and NBE (please see news and analysis section below), have just decided to cut interest rates on their certificate of deposits maturing mostly in 1-3 years. In essence, NIB looks to be flattening the yield curve of its deposits, which was a bit humped. That said, this does not necessarily foretell an immediate change in the CBE policy, noting that state-owned banks have a different agenda when it comes to setting interest rates on deposits, such as limiting dollarization. However, this means less competition in the retail deposit business (i.e. potentially lower cost of funds), which bodes well for EGX-listed banks’ profitability in general. Elsewhere, the non-banking financial service (NBFS) industry, including fintech, is coming under scrutiny with a new law being drafted, which is positive for the health of this nascent industry.
POSITIVE
Banks, RAYA: We think the banking sector in general should see an improvement in profitability before the end of the year with potentially lower cost of funds. Meanwhile, we like Raya Holding [RAYA] as an indirect play on the fintech trend, but investors need to keep in mind that this comes with a plethora of other diversified businesses.