Credit rating agency Moody's (Photo: Reuters)
The international credit agency Moody's said on Monday that the Central Bank of Egypt's (CBE) recent measures – which aim to limit retail and consumer loans and reduce the concentration of loans to corporations –are credit positive for banks.
Last week, the CBE said that total instalments of a personal, car or a non-mortgage housing loan are not to exceed 35 percent of the client’s monthly net income, a move that aims to secure debt repayment, according to circulars published on the bank’s website.
Consumer loans in Egypt have come to make up 50 to 60 percent of certain banks’ total lending portfolio, according to the CBE statement.
"These new macro-prudential initiatives are credit positive for Egyptian banks because they will contain the credit risk in banks’ growing retail portfolios and will reduce banks’ asset quality vulnerability from large single corporate customer concentrations," said Moody's.
The CBE gave a three-year grace period for banks to limit their loans to a single client to 15 percent of the bank's Tier One capital down from 20 percent previously. The move aims to expand the banks' client base and mitigate the risks of lending to a select few large clients.
The international credit agency currently rates three Egyptian banks; the publicly listed Commercial International Bank (CIB) and the state-owned National Bank of Egypt (NBE) and Banque Misr.
Both NBE and Banque Misr will be the main beneficiaries of the new regulations since they suffer from a high concentration of loans, while the CIB already fits the regulations.