EFG-Hermes said in a report on Commercial International Bank (CIB) that the bank reported 2Q2014 net profit of EGP932 million, up 39% Y-o-Y (+16% Q-o-Q), and 8% ahead of its forecast of EGP867 million.
“Growth in net interest income and fee income remained strong both Y-o-Y and Q-o-Q, with fee income, FX income and trading income all coming well ahead of our forecast,” said EFG, “Loan growth has picked up significantly in 2Q2014, with the corporate loan book seeing the strongest Q-o-Q growth of the past three years.”
EFG reiterated its Buy rating on the stock, which it views as a key beneficiary of the better loan growth dynamics it expects in the Egyptian market from 2H2014. The loan book increased by 6% Q-o-Q and 7% Y-o-Y, with corporate loans up by 6% Q-o-Q and retail loans up by 9% Q-o-Q. QNB AlAhly (ex-NSGB) also reported strong 10% Q-o-Q growth in the loan book in 2Q2014. Customer deposits also rose strongly, by 8% Q-o-Q and 22% Y-o-Y, driven by both corporate and retail deposits. The net interest spread fell by just 5bps Q-o-Q, on our calculation, to reach 4.44% in 2Q2014, with funding costs flat Q-o-Q and asset yields declining marginally. Fee income was again very robust this quarter, thanks to trade finance and custody fees. “NPLs increased by 8% Q-o-Q, following an 18% Q-o-Q increase in 1Q2014, with the NPL ratio rising to 4.6% in June 2014 from 4.5% in March 2014. NPL coverage remained strong at 143% in June 2014. The increase in NPLs so far in 2014 after a very resilient past two years is in line with our view of NPLs increasing with a lag relative to the macroeconomic backdrop. While this trend might continue in the coming two quarters, we do not believe it poses a risk to management guidance for earnings growth of 20% in FY2014, as we expect top-line growth to continue to be strong,” said EFG.