The market sold off by midday yesterday in view of rising geopolitical tensions between Egypt and Sudan on one hand and Ethiopia on the other. We believe such sell-offs provide a window of opportunity for investors looking to accumulate on strong names. One of these names is CIB [COMI] which is heralded as Egypt’s market bellwether. It held its Q1 2021 conference call yesterday, of which our banking analyst Shihab M. Helmy gives a thumbnail sketch:
- The bank's CEO said that net interest income was mainly weakened by lower corridor rates, hence the decline in blended NIM level. But local-currency (LC) NIM in particular was eroded by maturing Treasury bonds that were acquired back in 2018. In addition, foreign-currency (FC) NIM was pressured down by weak FC lending.
- The bank preferred to invest heavier in overnight CBE deposits that have less yield than Treasuries but have a better tax shield. National Bank of Egypt (NBE) invested in COMI, mainly to capitalize its excess liquidity acquired in 2017 after issuing the high-yield 20% certificates of deposit (CDs).
- COMI will have a higher exposure to the tourism sector after the CBE extended support to the sector and Russian flights to Egypt resumed.
- The bank's net profit growth in Q2 is expected to be driven by growth in both NII and non-interest income.
- The bank may double its dividends next year, and will seek the CBE’s approval to distribute special dividends.
POSITIVE
EFIC, MFPC: Q1 2021 results indicate strong performance, reflecting a recovery in commodity prices.