© Reuters.
Investing.com – Beginning Sunday morning, banks operating in the Egyptian market will begin implementing the central bank’s decision to raise the interest rate on bank transactions announced Thursday by the Monetary Policy Committee.
The state-owned banks, led by the two largest government banks, Al-Ahly Bank of Egypt and Misr, are awaiting the convening of the Asset and Liabilities Committee (ALCO) to set new interest rates on certificates and individual loans. According to local media, the date of the meeting of the ALCO committees has not yet been set, but it could be this week, amid expectations of the issuance of new savings jars with a yield that could exceed 20%.
The ALCO committees specialize in setting the interest rate and calculating its effects within each of the 38 banks operating in Egypt; Determination of the interest rate on the banking products it issues, both on the loan side and on the savings side, in implementation of the mandates of the Central Bank of Egypt.
Mixed expectations
A bank source said the National Bank of Egypt and the National Bank of Egypt would not issue a savings bond with 20% annual interest in the coming period, according to local media, as monetary policy seeks to check inflationary pressures and the continuation of the issuance of an 18% certificate.
On the other hand, market experts predict that banks will issue new funds to address the negative interest rate crisis, in light of high inflation rates in Egypt.
Central Egypt decision
And last Thursday the central bank decided to raise interest rates by 300 basis points on deposits and loans, and the central bank’s main operating rate to reach 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 had raised the interest rate by 2%, in the penultimate extraordinary meeting on October 27, 2022, to issue investment certificates with a yield of 17.25 % for a period of 3 years.
Then Banque du Caire issued an investment certificate with the same yield, followed by Nasser Social Bank, which issued an investment certificate with a yield of 17.50%.
Evolution of interest and testimonials
Banking products include savings bonds, passbooks and miscellaneous deposits, as well as loan limits, loans to individuals, legal entities and companies
And after the decision of the Central Bank of Egypt at the last meeting of the Monetary Policy Committee, the interest rate on bank transactions, including the setting of the deposit repayment rate at 16.25%.
Taking the total interest rate raised during the current year to nearly 8%, the latest being 3% last Thursday.
Soon 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 three-year and five-year savings certificates with fixed and variable yields, to achieve a minimum of 19% and a maximum of 20.25% for triple certificates.
20%
Banking experts expected government banks to issue new investment certificates with a yield of no less than 20%, provided that the Banque du Caire started 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, in order to protect clients’ money from inflation, which reached 21.5% in late November, among expectations that it will continue to rise further.
Mohamed Badra, a banking expert, said it was necessary for banks to issue investment certificates with a yield of more than 20% to obtain an adequate return for customers and protect them from inflation risks.
Badra added that clients were earning negative yields despite issuing high certificates with a value of 17.25%, but the inflation rate continues to rise due to the global crisis and soaring invested prices.
Very high yield
Hani Genena, an economist, said that in the light of the decisions of the Central Bank, we expect the issuance of savings bonds with a very high yield, which exceeds the barrier of 18% and reaches 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 was the case for the 18% certificates, with the aim of obtaining returns bank materials.
Genena added that the decision to link the savings bonds to FK is one of the important factors in preserving the value of the pound, as the customer converts the foreign currency into the Egyptian pound and then invests it in the certificate.
