The health of Egypt’s banking sector continued to improve throughout the first nine months of 2024, with the sector’s capital adequacy ratio (CAR) increasing 0.5 percentage points from the end of 2023 to stand at 19.1% by the end of the third quarter of 2024, according to the Central Bank of Egypt’s (CBE) latest financial soundness indicators report.
Capital adequacy ratio
Banks’ CAR remains well above the central bank’s minimum threshold of 12.5%. “These figures indicate the preservation of high and stable liquidity rates,” the CBE said.
The capital adequacy ratio — also known as the capital-to-risk-weighted assets ratio — is a metric that measures a bank’s ability to pay liabilities, absorb potential losses, and respond to credit risks. The metric increases as the ratio of risk-weighted assets to capital falls — marking a healthier banking system overall.
In addition, the indicators showed that liquidity rates in both local and foreign currencies recorded 32.1% and 77.7%, respectively, compared to minimum regulatory requirements of 20% and 25%, respectively.
Notably, Egypt’s local liquidity increased to EGP 11.34 trillion in November, up by EGP 2.46 trillion from the EGP 8.88 trillion recorded in December 2023.
The CBE data also added that by the end of the third quarter of 2024, the loan-to-deposit ratio stood at 61.3% from 54% at the end of 2023.
“These indicators confirmed the preservation of high-profit margins, with a return on equity of 32.2%, by the end of FY2023,” the report noted.
Non-performing loans
The report showed improved loan performance, with the ratio of non-performing loans (NPLs) dropping to 2.4% of total loans by September. Banks increased their provisions coverage ratio for NPLs to 87.4% in September, up from 86.2% in June. The CBE reported that banks allocated EGP 504.897 billion in provisions for doubtful debts by September 2024.
Private sector loans
The CBE reported that the private sector’s share of total loans granted by banks declined to 43.8% in September, down from 45.3% in June 2024 and 46.2% in March.
The private sector received 37.6% of the total loans from Egypt’s 10 largest banks, and 34% from the top five banks.
Egypt’s external debt
The banking sector’s improved performance reflects broader gains in Egypt’s monetary stability. In 2024, the government repaid $38.7 billion in debt, including $7 billion in November and December.
Prime Minister Mostafa Madbouly acknowledged the challenge of repaying such a significant amount but emphasized Egypt’s commitment to its financial obligations, stating that the country has never defaulted. He also confirmed that the debt due in 2025 will be lower than what was repaid in 2024.
The IMF reported a positive development, noting that Egypt’s total debt decreased by around 7% in FY 2023/2024, dropping to 89% of GDP from 95.7% in FY 2022/2023.
Looking forward, the Egyptian government aims to reduce the external debt-to-GDP ratio to around 88% in FY 2024/2025.