UK-based financial institution Standard Chartered has been given a nod from the Central Bank of Egypt to launch a department within the North African nation. That is the primary European-based financial institution to announce plans to set foot in Egypt after numerous European, Canadian and US-based lenders have exited the native market since 2012.
Economists say the Egyptian authorities are betting on a affluent banking sector, regardless of the coronavirus pandemic, to lure overseas traders and enhance refined monetary options on the native market.
Commonplace Chartered has mentioned on its web site that it’s at present continuing in accordance with central financial institution’s necessities to be able to get hold of the final approval for the department’s institution.
Central Financial institution of Egypt Deputy Gov. Gamal Negm mentioned Jan. 25 that Commonplace Chartered would adjust to licensing regulations for branches of overseas banks in Egypt, noting that the lender’s capital wouldn’t be lower than $150 million.
Negm mentioned the London-based lender would launch its first department in Cairo in September, and one other one in Alexandria in 2023.
“This can be a win-win scenario, the place the British financial institution would put money into Egypt and make income. For Egypt, it means extra inflows of overseas direct funding. After all, the lender will make increased earnings,” Rashad Abdo, head of the Egyptian Discussion board for Financial and Strategic Research, advised Al-Monitor.
Abdo defined how a rising bankable inhabitants in Egypt has grow to be a horny issue, citing that the native market has been rising attributable to monetary and momentary reforms for the reason that Egyptian pound flotation in 2016.
In 2019, the central financial institution rolled out plans to license overseas banks in Egypt in a bid to boost competitiveness and improve the native banking providers.
Between 2012 and 2017, two French banks — BNP Paribas and Nationwide Societe Generale Financial institution (NSGB) — and a British lender — Barclays — offered off their belongings in Egypt. Greek-based Piraeus Financial institution and Canadian Scotiabank additionally exited.
In the meantime, Egypt’s banking sector has attracted Gulf lenders like QNB and Emirates NBD to accumulate European associates, which prospered within the North African nation for many years. A lot of acquisition offers have been made since 2012 in Egypt. QNB and Emirates NBD acquired NSGB and BNP Paribas in 2012 and 2014, respectively.
Industrial Worldwide Financial institution, Arab African Worldwide Financial institution and Al Ahli Financial institution of Kuwait took over Citibank‘s retail portfolio, Canadian Scotiabank‘s Egyptian unit and the Greek Piraeus Bank in 2015.
In 2017, Morocco’s Attijariwafa Financial institution acquired Barclays Egypt.
“The European banks that exited Egypt had inside issues following the 2007-2008 monetary disaster. Promoting off their models didn’t imply there have been issues on the Egyptian market. They solely needed to reshuffle their enterprise portfolios in a bid to cope with the worldwide disaster again then,” Abdo mentioned.
He famous, “International banks make enormous income from the Egyptian market. For instance, QNB Alahli, which acquired NSGB, posted 7.6 billion Egyptian kilos [$483 million] in 2021. With the repercussions of the pandemic, banks need to churn out extra income from promising markets like Egypt. That explains why Gulf lenders have been increasing right here.”
Profits of Egyptian banks jumped by 57% to 80.1 billion kilos ($5.1 billion) between January and September 2021, in comparison with 51 billion kilos ($3.2 billion) between January and June 2021.
In 2021, First Abu Dhabi Financial institution acquired Lebanese-based Financial institution Audi’s unit in Egypt, whereas Bahrain’s Financial institution ABC bought a 99.4% stake in Blom Financial institution Egypt.
Looking for enlargement in Egypt’s funding banking area, First Abu Dhabi Bank mentioned Feb. 9 it will purchase a 51% stake in funding financial institution EFG Hermes.
The British financial institution’s plans additionally replicate the nation’s improved macroeconomic place and a greater enterprise atmosphere, one other economist mentioned.
“Egypt’s accelerating progress charges, regardless of the unfavorable impacts of the worldwide coronavirus pandemic, are attracting foreign investors. The financial system is forecast to develop by 5.7% of gross home product in 2022. Which means good alternatives for enterprise,” Yomn el-Hamaky, professor of economics at Cairo-based Ain Shams College, advised Al-Monitor.
She mentioned a brand new participant on the banking scene would carry funding charges on the whole and improve worldwide commerce.
“Furthermore, it’s going to enhance monetary inclusion and entice bankable inhabitants to have financial institution accounts. There’s additionally one other key goal that’s monetary expertise. It should contribute to the boosting of on-line banking options. To this finish, the state ought to present extra incentives to localize digitization within the banking sector,” Hamaky mentioned, citing the Supreme Council for Funds, which was launched in 2017 to bolster cashless and e-payment options.
Moenes Amin, founder and CEO of Wize Monetary Consultancy, agrees with Abdo that Egypt’s strong banking sector has the potential to lure foreign lenders in search of enlargement.
He has made it clear that the native banking sector has been affluent regardless of the repercussions of the pandemic, which has fettered progress worldwide since March 2020.
“Egypt’s banking sector is likely one of the largest within the rising markets. The presence of a European lender like Commonplace Chartered merely means extra overseas direct funding inflows into Egypt,” Amin advised Al-Monitor.
Egypt’s bank deposits stood at an all-time excessive at 6.191 trillion kilos ($394.2 billion) in October 2021, up from 5.374 trillion kilos ($342.3 billion) in February 2021, in accordance with central financial institution information.
The combination monetary place of banks elevated by 10.2% within the July-October interval to eight.75 trillion kilos ($556 billion), central financial institution information confirmed. The mortgage portfolio of native banks rose to 2.99 trillion kilos ($190 billion) in October 2021.
“Definitely, like several profit-driven enterprise, the British lender is in search of extra earnings. It has a possibility to make beneficial properties by offering the Egyptian market with state-of-the-art banking providers,” Amin mentioned.
He concluded, “I feel Commonplace Chartered will bolster digitization on this nation. It should additionally gas competitors among the many native lenders. This will likely be optimistic for the market as an entire.”
