Commercial International Bank
- Although Egypt’s external position could be affected by the regional conflict, economic reforms and mitigation efforts cushion the impact
- We expect the regional war to delay monetary easing, which supports banking sector profitability in 2026; CIB stands out, in our view
-
HC Brokerage research department released their evaluation of CIB stock expecting Egypt’s banking sector profitability to benefit from a delayed easing cycle and a lower RRR
Economist and financial analyst at HC, Heba Monir commented: “Egypt’s economy remains resilient amid geopolitical tensions; however, the easing cycle would be delayed, in our view: Egypt’s external position showed resilience at the beginning of the year prior to the outbreak of the US-Israeli war against Iran, as demonstrated by net international reserves exceeding a record USD52bn by the end of February, and the banking sector’s net foreign asset (NFA) position surpassing USD29bn by the end of January. However, the war triggered net foreign outflows of around USD7.09bn from Egypt’s T-bill secondary market since 19 February to date, leading to a c11% depreciation of the EGP against the USD to EGP53.6/USD, showing exchange rate flexibility. The war also led to a c43% surge in oil prices to USD102/bbl, which pushed the government to increase diesel, LPG cylinders, and octane gasoline domestic prices by an average of c19% to keep the budget deficit close to its target of 7.3% of GDP since the FY25/26 budgeted oil price was USD75/bbl and the budgeted exchange rate was EGP50/USD. Therefore, we upwardly revised our estimate for the annual headline inflation in March to 14.3% y-o-y and 2.4% m-o-m, and to an average of c14–15% y-o-y over 2026 from c10–11% y-o-y before the outbreak of the conflict, which could delay the easing cycle in our view. Having said that, we believe that the Egyptian economy is in a stronger position than at the beginning of the Russia-Ukraine war in February 2022, which triggered USD21bn of net foreign treasury outflows, as its external situation is now stronger with an NFA position of USD29.5bn as of January 2026 versus USD0.62bn in January 2022 and Egypt now has a flexible exchange rate with no FX parallel market, unlike the situation in 2022. However, the implications for Egypt would depend on the war’s duration, as its USD sources, including tourism, the Suez Canal, and worker remittances, could be significantly affected, especially remittances from Egyptian expats working in the GCC countries. We based our view on an assumption that the war would end before the end of 2Q26.”
“We expect Egypt’s banking sector profitability to benefit from a delayed easing cycle and a lower RRR: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) began its first meeting in the year with a 100 bps rate cut, bringing the total policy rate cuts to 825 bps since the beginning of 2025 to date, compared to total hikes of 1,900 bps since the CBE began its tightening policy in 2022. The CBE also reduced the required reserve ratio (RRR) by 200 bps to 16% on 12 February, to stimulate liquidity and lending activity in the banking sector. Given resilient banking parameters and the banking sector’s total assets growing by c24% y-o-y to EGP24.0trn as of June 2025, representing c132% of GDP in FY24/25, we expect this growth to continue. Following the outbreak of the war, we updated our inflation estimates and revisited our expectations for rate cuts for the rest of 2026, to 200 bps at best, pending a resolution to the regional conflict by 2Q26. Over the past twelve months, large banks lowered the interest rates on their three-year certificates of deposit (CDs) to 16–17%, from more than 20% after the March 2024 EGP devaluation, which we still see as attractive, as it translates into a positive real interest rate of 4-5%, based on our calculations. Accordingly, we forecast customer deposits to grow by c12% y-o-y to EGP17.9trn by December 2026, versus an estimated increase by c17% y-o-y for December 2025. Over the past five years, private sector loans to total market loans dropped to c43% in June 2025, from c62% in June 2020, amid successive global and domestic economic challenges. For the time being, we do not expect this ratio to improve before 2Q27, as the conflict is delaying Egypt’s monetary easing. In 2025, working capital loans showed healthy growth, which we expect to continue in 2026, also impacted by the c11% EGP devaluation y-t-d. Hence, we expect the total sector’s loans to increase by c17% y-o-y to EGP11.6trn by December 2026, versus an estimated increase of c19% y-o-y for December 2025. We forecast the loans-to-deposits ratio to increase to c65% in December 2026 from c62% in June 2025. As for the sector’s profitability, we expect the average NIM to decrease to 5.5% from 5.8% in June 2025, given relatively lower y-o-y treasury yields, despite their recent post-war increase. Similarly, we expect the sector’s ROA and ROE to decrease to an average of 2.2% and 33%, respectively, from 2.6% and 39.0% in June 2025. Regarding the banking sector’s asset quality, we believe banks are well-provisioned; however, we expect a 100–200 bps decrease in the capital adequacy ratio (CAR) due to the EGP devaluation.” Heba Monir added.
HC’s economist concluded: “We forecast CIB’s net income to grow at a 5-year CAGR of c12%: We forecast CIB’s net income to increase moderately at a CAGR of c12% from 2025–30e, compared to the 5-year historical CAGR of c52% from 2019–24 (inflated by the EGP devaluation), driven by the bank’s ambitious investment strategy and expansion through launching a digital bank and its commercial banking operations. In this regard, we estimate the bank’s deposit market share to increase to a 5-year average of 7.57% from 2026–30e, up from 6.58% from 2020–24, driven by more CASA accounts, which currently represent more than c60% of its deposits. Similarly, we forecast CIB to expand its loan market share to a 5-year average 6.734% from 2026–30e, from 5.19% from 2020–24. Thus, we forecast net interest income to increase at a 5-year CAGR of c14% from 2025–30e, with an increase in the 5-year average NIM to 8.45% from 2026–30e from 7.55% from 2021–25, driven by the forecasted pickup in CAPEX lending by 2H27, and translating into a 5-year average ROE of 34.1% from 2026–30e compared to an average of 33.9% from 2021–25. We expect CIB’s asset quality to remain strong with a 5-year average NPLs of 1.35% of gross loans over 2026–30e, down from the 5-year historical average of 3.70% and a 5-year average coverage ratio of 313% over 2026–30e, higher than the 5-year historical average of 289%. For 2026e, we forecast the bank to book EGP2.09bn in provisions, following the recalibration of its Expected Credit Loss (ECL) model, implying a 5-year average of 0.2% of gross loans over 2026–30e, lower than its 5-year historical average of 0.7%.”
About HC Brokerage
HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt, Dokki 12311
