Proceeds from the new certificates recorded over LE400 billion
Branches of the state-owned National Bank of Egypt and Banque Misr have seen long queues of clients since 21 March, with all of them waiting to buy new one-year deposit certificates offering an 18 per cent interest rate and monthly yield.
The certificates, offer the highest interest rate of all deposit certificates currently on the market, the second-highest being a three-year certificate that offers an interest rate of 11.25 per cent.
The new certificates can be bought by phone or online, but the reason the banks are seeing such a large turnout is that many Egyptians, including many pensioners, have decided to break the seals on their existing deposit certificates to buy the new certificates instead.
The two banks announced that the proceeds from the new certificates have reached over LE400 billion, according to news website Masrawy.
The high-yield certificates were offered after a surprise decision by the Central Bank of Egypt (CBE) to raise interest rates by 100 basis points and a correction of the exchange rate that saw the pound depreciating by around 16 per cent overnight.
The certificates are intended to attract savings in Egyptian pounds and to prevent dollarisation.
Radwa Al-Sweifi, head of research at Al-Ahly Pharos, an investment bank, said most of the proceeds collected by the two banks had originally been invested in other deposit certificates in the same or other banks.
Talaat Harb certificates can be bought for a minimum of LE1,000 and issued to individuals and minors with custodians. Banque Misr allows holders of the certificates to obtain loans at a 20 per cent interest rate and credit cards. It also allows holders to break the seals on their certificates after six months.
Hani Geneina, a lecturer at the American University in Cairo, said the certificates would impact Egypt’s 37 other banks, especially the smaller ones, most of whose clients are individuals, not companies.
How much other banks would be affected would depend on the client base, he said. Some banks have long-term transactions with clients, dealing with salaries, deposit certificates, and saving accounts. These would likely not be affected by the new certificates, Geneina said.
Mohamed Hassan, Managing director and CEO at Blom Egypt Investments, said most of the money put into the new certificates had been invested in other certificates, primarily with the National Bank of Egypt, Banque Misr, and the Banque du Caire, where the majority of clients are individuals.
He expects other banks will announce three-year deposit certificates with an interest rate of 14 to 15 per cent. He also anticipates the National Bank of Egypt and Banque Misr to follow suit following the termination of their one-year 18 per cent certificates.
Al-Sweifi added that in the near future the other banks would announce three-year certificates at an interest rate ranging between nine and 14 per cent.
It is unclear when subscription to the new certificates will end. Geneina expects this to happen within a month or two, depending on the war in Ukraine or on whether Egypt can secure a deal with the International Monetary Fund (IMF) that would cool the rush to the dollar.
Hassan said he expected sales of the new certificates to stop within two weeks.
*A version of this article appears in print in the 7 April, 2022 edition of Al-Ahram Weekly.