Beltone Financial said the consolidated net income of the Commercial International Bank (CIB) increased in the fourth quarter (4Q) of 2019 by 27.6% compared to 4Q2018, and by 2.4% compared to 3Q2019, recording EGP 3.26bn.
This strong growth in profits is mainly due to the increase in net interest income to about EGP 4.8bn, representing 91% of the bank’s core business income. The increase in net interest income is due to the growth of the bank’s financial position, contributing 55% of the total increase. The remaining part was supported by the widening net interest margin (NIM) by about 68 bp annually.
According to Beltone, operating expense witnessed a healthy decline of 9% on an annual basis, which led to a decrease in the cost-to-income ratio of about 585 basis points (bp) to 18.5%, while the decline in credit losses recorded a favourable decrease of 16.3% on an annual basis.
On a quarterly basis, the net interest income saw 12.6% increase supported by NIM (+60 bp), which was mainly due to the decrease in financing costs. In addition, the commission income increased by 3% on a quarterly basis, however, its contribution is still weak despite strong growth in lending during the quarter.
At the same time, the decline in credit losses decreased by 45% on a quarterly basis, which led to a decrease in the cost of risk by 73 bp, registering 76 points, according to Beltone.
Other operating expenses showed a major increase of about EGP 426m due to losses in currency exchange difference and to the increase in assets in foreign currency over liabilities.
Strong recovery in corporate lending and surprising positive performance of asset quality
Regarding the financial position, Beltone Financial said the CIB recorded a total growth of 13% since the beginning of the year, and 3.4% on a quarterly basis, recording EGP 386.7bn in 4Q2019.
It explained that the bank’s financial position growth was supported by an increase in individual deposits to EGP 183bn, in addition to a coherent growth of 63% in correspondent bank balances, while the CIB’s total deposits grew 6.7% on an annual basis, and -1.1% on a quarterly basis, scoring EGP 304.4bn.
At the same time, total loans witnessed positive growth of 9.9% on an annual basis, and 7.3% on a quarterly basis, registering EGP 131.2bn as of December 2019. This is a result of corporate loan growth of 8.1% on an annual basis, and 8.9% on a quarterly basis, recording EGP 26.9bn, according to Beltone.
It pointed out that the loan-to-deposit ratio witnessed a slight increase from 41.9% in 4Q2018 to 43.1% in 4Q2019.
Moreover, Beltone Financial said the CIB managed to increase its investments in treasury bills by 26% since the beginning of the year, despite the negative impact of tax adjustments, while employment in the Interbank declined by 39% since the beginning of the year.
It pointed out that the measures of asset quality witnessed a noticeable improvement, with the rate of non-performing loans declining from 5.3% in September 2019 to 4% in December, and the value of non-performing loans witnessed a decline of 19% on a quarterly basis, registering EGP 5.2bn.
Decrease in financing expenses improves NIM despite the decrease in return on assets
Beltone said the NIM witnessed a strong improvement, as it increased by 68 bp on an annual basis, following a decrease in financing expenses by 164 bp on an annual basis, thanks to a decrease in the interest on deposits by 96 bp, while the return on assets fell by 97 bp year-over-year (YoY).
On a quarterly basis, the NIM witnessed a healthy increase by about 60 bp due to a decrease in the interest on deposits by about 86 bp, but the decrease in return on assets by about 42 bp on a quarterly basis offset partially this surge. Beltone attributed this to the decrease in net interest income (loans) by about 158 bp on a quarterly basis.