Egypt’s banks are withstanding the nation’s worst political crisis in three decades after the central bank eased rules on provisions and kept interest rates at a five-year low.

The National Bank of Egypt, the country’s biggest lender by assets, didn’t book any non-performing loans in the first half of this year, Chairman Tarek Amer said. The ratio of non- performing loans to gross loans at the country’s three biggest publicly traded lenders --Commercial International Bank Egypt SAE (COMI), National Societe Generale Bank and Credit Agricole Egypt SAE (CIEB) -- declined or remained unchanged in the second quarter, beating analyst forecasts, according to AlembicHC Securities and Naeem Holding.

“The increase in non-performing loans is less than we expected and the quality of the loan book is deteriorating less quickly than we anticipated,” Jaap Meijer, head of the bank team at Dubai-based AlembicHC, said in a telephone interview Aug. 21. “It’s pretty resilient. Probably the impact on the corporate clients is less than expected.”

Banks in the most-populous Arab nation have resisted deterioration in asset quality even as the economy shrank at an annual rate of 4.2 percent in the first quarter amid the popular uprising that ousted President Hosni Mubarak. The Central Bank of Egypt, which eased provisioning requirements in April, will keep its benchmark interest rate at the lowest level since 2006 tomorrow, according to the forecasts of five economists surveyed by Bloomberg News.

Extending NPL Period

Credit rating companies such as Fitch Ratings have said the outlook of Egypt’s credit and banking industry depends on the outcome of parliamentary elections, set to be held at the end of this year. Fitch lowered Egypt’s credit worthiness in February by one level to BB, two levels below investment grade.

The yield on Egypt’s 5.75 percent dollar bond maturing in 2020 tumbled 152 basis points, or 1.52 percentage points, since peaking at 7.07 percent on Jan. 31 at the height of the anti- Mubarak protests. The average yield on Middle East sovereign bonds dropped 63 basis points in the period to 4.69 percent yesterday, according to the HSBC/Nasdaq Dubai Middle East Conventional Sovereign US Dollar Bond Index.

The central bank extended in April the period to classify a retail loan as non-performing to 90 days from 30 days. It also asked banks to give companies in the tourism industry a grace period of up to a six-month ending in June to make payments on outstanding loans without penalty.

“Extending the period for NPLs helped banks particularly with loans to the hospitality sector, where a lot of operators were operating at less than half of their capacities due to the unrest,” Ryan Ayache, a Dubai-based banking analyst at Deutsche Bank AG, said yesterday in a telephone interview.

Global Arab Network

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