Today’s Trading Playbook
Last Thursday, Credit Agricole –Egypt- [CIEB] posted its 2021 preliminary figures. In general, the bank was able to achieve growth in bottom line of EGP1.6bn (+17% y/y), with net interest income growing to EGP2.9bn (+2.3% y/y). While we await the disclosure of the bank’s full financials, here are our main takeaways:
Net interest income grew on lower funding costs: CIEB achieved marginal growth in net interest income of only 2.3% to EGP2.9bn. The main driver for NII growth was lower funding costs, which declined by 2%. On the other hand, interest income for CIEB came mainly flat. CIEB was able to utilize a volume effect, only to the extent that even out weaker yields in 2021, resulting in a tepid net interest income growth.
Non-interest income and lower credit provisions supported earnings growth: Despite faint net interest income growth, net earnings grew in a decent fashion (i.e. double-digit, mid-teens figure). This comes in light of higher net fees & commissions income, besides gains from the sale of a land in 5th settlement for EGP46mn. Furthermore, the bank booked 12% lower credit provisions during 2021, adding around EGP320mn. This occurred as NPLs ratio upped marginally by 27bps y/y to 3.3%. We note that effective tax rate came 160bps lower y/y at 28%.
· Nifty balance sheet growth: CIEB saw total assets grew by 16% y/y. Growth in total assets came accompanied by 17% y/y growth in total deposits to EGP48bn. Meanwhile, CIEB’s loan portfolio grew 15%y/y to reach EGP31bn. Accordingly GLDR didn’t move much at 64% vs. 65% a year earlier. CIEB’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 capital requirements specified by the new banking law. We note that CIEB's ROAE has improved to 20% (+110bps y/y). The bank’s BoD has suggested dividends distribution of EGP0.99/share, pending the approval of CBE and shareholders, and implying 11% in DY. CIEB is currently traded at TTM P/E and P/B of 6.8x and 1.25x respectively.