KEY THEMES
Oil prices crossed the USD100/bbl mark once again in a display of fears from overly tight supply. This happened as the new sanctions imposed on Russia included blocking some banks from the SWIFT global payments system. In response, Russian President, Vladimir Putin put nuclear-armed forces on high alert on Sunday.
Elsewhere, yesterday Export Development Bank of Egypt’s [EXPA] 2021 (12M from Jan. to Dec.2021) separate net profits were slashed by 40% y/y to EGP500mn. Earnings slumped despite a 6% y/y growth in net interest income to EGP1.8bn. However, NII growth during 2021 was not enough to absorb the notable upping in the bank’s general and administrative (G&A) expenses. Total G&A grew by 21% y/y to EGP1.3bn in 2021. Furthermore, credit provisions grew significantly, as EXPA nearly did not book credit provisions during 2020. Finally, significantly higher effective tax rate also dented EXPA’s bottom line; its effective tax rate recorded 45% (+15pp y/y). In view of 2021 results, we alter our risk rating from Medium to High on unpredictable efficiency measures and to reflect the risks associated with the upcoming 60% rights issue. While the capital increase will help the bank solve its recurring issue of undercapitalization, given that its CAR has always been at a slim margin above the minimum CBE threshold due to its loan book concentration. However, the scenario for capital increase remains questionable given that the stock is trading below its par value of EGP10/share. Meanwhile, EXPA’s BoD has proposed a 10% stock dividend for the financial period ending December 2021. That said, we maintain our 12MPT at EGP11.1/share (ETR +33%); hence, we maintain our Overweight.