Business News recently announced the results of its twelfth edition of the Banking Performance Index in Egypt, where HSBC was crowned Bank of the Year. Despite cautious performance in the past year, HSBC prioritized risk-free tools, leading to its selection as the Bank of the Year.
HSBC’s Risk-Averse Strategy Pays Off
Despite a 38% financial position growth in 2022, HSBC opted to deploy its assets away from loans, representing only 27% of deposits—the second-lowest ratio in the sector, a notable feat for a major bank. The economic challenges in Egypt in 2022, stemming from foreign currency shortages due to the war in Eastern Europe, heightened global monetary tightening, two significant pound devaluations, inflation spikes, and substantial interest rate hikes, making it an unfavourable year for borrowers. However, the high interest rates at the central bank on government debt created opportunities for banks to achieve record returns without risking capital.
HSBC capitalized on this environment, recording a net interest margin of approximately 6.1%. The bank’s risk-averse policy maintained a high capital adequacy ratio of 24% for the tier-1 capital, an uncommon level in the Egyptian banking sector in recent years. Despite the cautious approach, the bank increased its market share by about 4%, standing out among the few banks that expanded their market shares.
The bank’s robust performance in the customer satisfaction index is evident, receiving the highest positive votes from companies participating in the current index evaluation, surpassing 500 companies.
Methodology of Banking Performance Index
Business News’ main index, “Bank of the Year,” comprises four key indicators measuring banks’ performance in 17 sub-indicators: Most Efficient Bank, Fastest Growing Bank, Customer Satisfaction, and Corporate Social Responsibility.
AlexBank Tops Most Efficient Bank Index
AlexBank leads Business News’ Most Efficient Bank index due to its loan-to-deposit utilization rates exceeding 53%, among the highest in the market. Additionally, the bank achieved a high net interest margin of 6.5%, with the tier-1 capital tier adequacy rate reaching 23.9%. The bank narrowly surpassed HSBC in the Most Efficient Bank index.
Credit Agricole Bank followed as the second Most Efficient Bank, boasting the highest return on average assets last year at approximately 3.55%. Its lending rates were high, constituting around 56.9% of deposits.
Egyptian Banks Prioritize Safety in Turbulent Year
Generally, Egyptian banks prioritized safety in a turbulent year. The central bank and government employment provided a refuge from the pressures of the local currency’s over 25% depreciation against the dollar, significant interest rate hikes, and increased customer default rates. This approach spared them from more extensive asset deterioration and the need for large provisions.
CIB Leads Customer Satisfaction Index
Commercial International Bank (CIB) tops Business News’ Customer Satisfaction Index, recognized for its reputation among companies. It secured second place in the “Net Promoter Score” sub-index, with a 29% approval rate, following HSBC. The bank continued its strong technology spending, constituting 50% of its total capital expenditure (CapEx) in the past year. It boasts robust communication channels and one of the highest coverage levels of ATMs in branches in the market.
The National Bank of Egypt secured the second position in the Customer Satisfaction Index, favoured for its widespread presence, the largest ATM network in the market, and strong relationships with companies. It received positive votes in the “Net Promoter Score” sub-index with a 27.7% approval rate, having the highest number of votes due to its extensive customer base.
In the third position is the National Bank of Kuwait, garnering good votes in the “Net Promoter Score” sub-index and the second-highest technology spending rate as a percentage of total investment.
Fastest Growing Banks in Egypt
Abu Dhabi Commercial Bank (ADCB) was the fastest-growing bank in Egypt in the past year, according to Business News. The bank increased its assets by 78% and its market share by 35%, becoming a major player in the Egyptian banking sector.
Arab Investment Bank (AIB) ranked second in the growth index after it transformed into a private bank with the majority of its shares acquired by the Hermes Financial Group. AIB achieved an impressive 85% growth in loans, 74% growth in net income, and 159% growth in net profits.
Arab African International Bank (AAIB) came third in the growth index, with a remarkable performance in net income (89% growth), loans (46% growth), profits (64% growth), and market share (3% increase).
CSR Spending in Egypt
In terms of corporate social responsibility (CSR) spending, NBE led the way by allocating 4% of its previous year’s net profits to various social and environmental causes. Banque Misr followed closely with 3.7% of its profits spent on CSR, while the Housing and Development Bank and the Export Development Banks each dedicated 2% of their profits to CSR initiatives.