Episode Details

Egyptian Banks Report Extraordinary 1Q24 Results Amid Surging Interest Rates; Upside Potential Is Hard to Ignore 

As highlighted before, post the recent 600 bps increase in policy rates and the EGP devaluation, we expect another year of exceptional profits with impact starting to appear in 1Q24, spearheaded by COMI and ADIB, supported by:

1) Strong Interest income growth, driven by:

•             Stronger NIMs

•             Balance sheet expansion with the weakness in local currency, high inflation, and FC availability which entices LC lending. 

2) Strong non-interest income growth, driven by:

•             Stronger FX gains.

•             Higher net fees and commission income, associated with improved trade finance activity.

Egyptian banks are delivering ROEs north of 30%, and most of them are trading below book values while being well provisioned.

We believe those banks present the best value, trading at cheap valuations with good fundamentals: ADIB, QNBA, HDBK, EXPA, and CIEB along with COMI.

Suez Canal revenues declined about 57% during January to 12 May, decreasing to USD1.576 billion compared to USD3.66 billion in the same period last year, due to disruptions in the Red Sea.

Three Malaysian companies reportedly intend to pump investments worth USD150 million into the chemical industries and renewable energy sectors in Egypt.

The Abu Dhabi wealth fund ADQ has delivered the second tranche of the USD35 billion Ras El Hekma agreement on Sunday, a government source said. The tranche consists of USD14 billion fresh inflows and USD6 billion in the form of a previous UAE deposit at the CBE.

Kuwaiti real estate player Urbnlanes Developments and the British IHG Hotels & Resorts will set up two new hotels in Egypt with combined investments of USD85 million. The two hotels, which will operate under IHG’s Crowne Plaza brand, are set to open their doors in 2028.

The Sovereign Fund of Egypt will be touring the Gulf next month to drum up investment.

The Planning Ministry is looking into launching an industry-focused sub-fund under the SFE. The Ministry is working with the private sector to identify a number of potential industries for the fund.

Banque Misr and the National Bank of Egypt (NBE) are considering stopping the issuance of one-year high-yield certificates of deposit (CDs) that were issued at the start of the year and replacing them with CDs with a lower return.

FWRY reported positive 1Q24 results: Net profit came in at EGP307 million (+149% YoY, +34% QoQ), . In 1Q24, bottom line performance was attributed to: Strong revenue growth, margin expansion, and higher interest income. FWRY is currently trading at 2024f P/E of 19.9x.

TMGH (FV: EGP73.80, OW) declared EGP0.22/share cash dividends (Dividend Yield of 0.4%). Record date is 27 May 2024. Distribution date of first EGP0.11/share installment is 30 May 2024. Distribution date of second EGP0.11/share installment is 31 July 2024.

ZMID declared EGP0.15/share cash dividends (DY of 2.5%). Record date is 27 May 2024. Distribution date of first EGP0.05/share installment is 30 May 2024. Distribution date of second EGP0.10/share installment is 29 August 2024.

SWDY is to distribute cash dividends of EGP0.50/share on 29 May 2024 for shareholders on record on 26 May 2024. DY is 1.4%.

EGAL raised its selling prices by a range of EGP13-15k per ton in May, according to local media. 

Cleopatra Group plans to kick off operations at its new USD50 million ceramics factory in June, according to local media. The factory will operate six ceramic production lines and aims to export 50% of its output.

CANA (FV: EGP2