Egypt’s banks await an important decision… Egyptians await the 20% certificate By Investing.com


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Investing.com – As of Sunday morning, banks operating in the Egyptian market will start implementing the Central Bank’s decision to raise the interest rate on banking transactions, which was announced last Thursday by the Monetary Policy Committee.

State banks, led by the two largest government banks, Al-Ahly Bank of Egypt and Misr, are awaiting the convening of the Assets and Liabilities Committee (ALCO) to determine the new interest rates on certificates and individual loans. According to local media, the date for the meeting of the ALCO committees has not yet been determined, but it may be this week, amid expectations of the issuance of new savings jars with a return that may exceed 20%.

The ALCO committees specialized in setting the interest rate and calculating its effects within each of the 38 banks operating in Egypt; Determining the interest rate on the banking products it issues, whether on the borrowing or saving sides, in implementation of the mandates of the Central Bank of Egypt.

Conflicting expectations

A bank source said, according to local media, that the National Bank of Egypt and the National Bank of Egypt will not issue a savings certificate with an annual interest of 20% during the coming period, with monetary policy seeking to control inflationary pressures and the continuation of issuing an 18% certificate.

On the other hand, market experts expect that banks will issue new funds to treat the negative interest rate crisis, in light of the high inflation rates in Egypt.

Central Egyptian decision

And the central bank decided to raise interest rates by 300 basis points last Thursday on deposit and lending, and the main operation rate of the central bank to become at the level of 16.25, 17.25 and 16.75%, respectively, and credit and discount at 16.75%.

And the National Bank of Egypt and Egypt had announced, after the Central Bank raised the interest rate by 2%, in the extraordinary meeting before the last on October 27, 2022, to issue investment certificates with a return of 17.25% for a period of 3 years.

Then Banque du Caire issued an investment certificate with the same return, followed by Nasser Social Bank, which issued an investment certificate with a return of 17.50%.

Evolution of interest and testimonials

Banking products include savings certificates, savings books, and various deposits, in addition to financing limits, loans to individuals, legal persons, and companies

And after the Central Bank of Egypt’s decision at the last meeting of the Monetary Policy Committee, the interest rate on banking transactions, including setting the deposit return rate at 16.25%.

Bringing the total interest rate raised during the current year to nearly 8%, the last of which was 3% last Thursday.

Immediately after the Central Bank of Egypt issued its decision to raise the interest rate, both Banque Misr and Al-Ahly Bank raised the interest rate on the three- and five-year savings certificates with fixed and variable returns, to reach a minimum of 19% and a maximum of 20.25% for the triple certificates.

20%

Banking experts expected government banks to issue new investment certificates with a return of no less than 20%, provided that Banque du Caire would start issuing this savings certificate first.

Market experts believe that Banque Misr and Al-Ahly Bank will issue certificates with a value of 23% and possibly higher than that, in order to preserve customers’ money from inflation, which reached 21.5% at the end of November, amid expectations that it will continue to rise again.

Mohamed Badra, a banking expert, said it is necessary for banks to issue investment certificates with a return of more than 20% to achieve an appropriate return for customers and protect them from inflation risks.

Badra added that customers were getting negative returns despite the issuance of high certificates with a value of 17.25%, but the inflation rate continues to rise as a result of the global crisis and the invested rise in prices.

Very high yield

Hani Genena, an economist, said that in light of the Central Bank’s decisions, we expect the issuance of savings certificates with a very high return, breaking the barrier of 18% and reaching 20%.

The banking expert added that these certificates will be offered for a short period ranging from 6 months to a year, and then work on these certificates will be suspended, as happened in the 18% certificates, with the aim of achieving material returns for banks.

Genena added that the decision to link savings certificates to FK is one of the important factors that preserve the value of the pound, as the customer converts the foreign currency into the Egyptian pound and then invests it in the certificate.

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