Yesterday, we initiated coverage on Credit Agricole – Egypt (CIEB) with an Overweight / Moderate Risk rating. We note that for several years now, Egyptian banks have been relatively unfazed by the country’s tough economic variables. Notably, the sector’s operating performance was among the least disrupted by local and global negative spells. This was coupled by a number of policy gifts on the macro level (e.g. high interest rates), benefiting private-sector banks’ profitability. However, with performance normalization gradually filling the horizon, banks are now gearing up for a new sense of reality. We believe Egyptian banks will respond differently to such a transition, depending on each bank’s internal and external positions. We think the resulting disruption will generate value for some names, one of which is CIEB.
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