By: Walid Abd al-Adzeem, Ayat al-Batawi, Ismaa Nabil
Eight banks have stated they will begin studying measures to decrease their interest rates, following an announcement by the Central Bank of Egypt of a cut in its return rates on government monetary tools.
The banks stated that they would study ways and mechanisms to decrease interest rates on triple term savings certificates, in order to reduce the cost of funds after intense declines recently seen in income derived from government debt and central bank tools.
The bank’s Monetary Policy Committee decided on Thursday to cut overnight interest rates on deposits and loans by 50 base points, from levels of 9.75% and 10.75%, to 9.25% and 10.25%, respectively.
It also decreased credit and deduction rates by a total of 50 base points to 9.75% from 10.25% previously, in addition to the price of re-purchase to 9.75% from its previous level of 10.25%.
The following banks have announced that they would be considering the possibility of decreasing interest rates: Bank of Alexandria, Egyptian Arab Land Bank, Industrial Development and Workers Bank of Egypt, Arab Banking Corporation, Suez Canal Bank, Egyptian Gulf Bank, Housing Development Bank and Misr Iran Development Bank.
These announcements came one day after the NBE, Banque Misr and Banque du Caire, decreased their interest rates on deposits by 1%, a direct response to the central bank’s decision to decrease returns on monetary policy instruments by 50 base points.
Haitham Abd Al-Fatah, chairman of the treasury department within the Industrial Development and Workers Bank of Egypt, said the bank’s ALCO committee is soon set to hold a meeting for the purpose of deciding whether to decrease return rates. Increases in the cost of funds for banks have pushed most to decrease their return rates, especially considering that rates for government debt instruments have decreased over the past month and a half.
Khalid al-Salawi, chairman of the credit division within the Bank of Alexandria, said that the bank was still in the process of considering whether or not to decrease return rates on savings deposits, saying however that nothing had yet been implemented. He said that despite the fact that government banks had taken to decreasing their return rates, that prevailing market trends were still not yet clear, as circumstances differed from bank to bank, according to its policies, levels of liquidity and cost of funds.
Interest rates on government debt tools witnessed strong decreases following the removal of former president Mohamed Morsi, and the subsequent increase in optimism, in addition to the pumping of upwards of $12bn of economic aid from Arab countries into the economy, which led to an in increase in the subscription to bills and bonds issued by the government.
Translated from Al-Borsa