The National Bank of Egypt, Banque Misr, and Banque du Caire led the savings certificates market at record interest rates, after the Central Bank of Egypt (CBE) had raised its basic interest by 2%.
The Assets and Liabilities Committees (ALCO) at banks held several meetings last week to adjust the interest rates on their savings and loan products, after the CBE increased its basic rates to 18.25% for deposits, 19.25% for lending, and 18.75% for the credit and discount rates, and the price of the main operation with the Central Bank.
The National Bank of Egypt issued a new platinum certificate for a period of 3 years, with a minimum purchase of EGP 1,000 and its multiples, at a fixed return rate of 19% annually, paid monthly.
The bank also issued another platinum certificate for a period of 3 years, with a minimum purchase of EGP 1,000 and its multiples, with a decreasing return of 22% in the first year, 18% in the second year, and 16% in the third year.
Banque Misr decided to reissue the “Ibn Misr” certificate for a period of 3 years, with a decreasing return starting from 22% in the first year, 18% in the second year, and 16% in the third year, along with another certificate which is issued for a period of 3 years, with a fixed return of 19% annually throughout the period of the certificate, and the return is paid on a monthly basis.
Savings certificate categories start from EGP 1,000 and its multiples and are issued to natural individuals or minors, whether Egyptians or foreigners.
Banque du Caire also announced raising the interest rate on the Primo Gold certificate in pounds, with a fixed return for a period of 3 years, to 19% annually, and the return is paid monthly, and issuing a Primo Gold certificate with decreasing return in pounds for a period of 3 years, at an annual rate of 22% for the first year, 18% for the second year, and 16% for the third year. The return is paid monthly.
The minimum purchase amount for the certificate is EGP 10,000, in multiples of EGP 1,000, without a maximum limit.
Private banks jump on the bandwagon
Private banks also took rapid measures to protect their deposits and preserve their depositor customers by issuing high-yield savings certificates as well.
The Commercial International Bank announced the issuance of a new savings certificate for a period of 3 years, with a return of 22%, to be spent monthly, with a minimum purchase of EGP 3m and multiples of EGP 1,000.
However, it decided to stop this certificate only 4 days after its issuance, after achieving its target.
The bank also raised the return on its triple certificate (premium), whose minimum purchase amount is EGP 1m and multiples of EGP 1,000, at a rate of 3%, to reach 20%, paid monthly instead of 17%, and raised the return on the “Plus” certificate, which has a minimum purchase amount of EGP 200,000 and the multiples of EGP 1,000 to 19%, paid monthly instead of 16.50%, and the bank raised the return on the (prime) certificate, which has a minimum purchase of EGP 10,000, and the multiples of EGP 1,000, to 18% monthly instead of 16%.
QNB Alahli decided to raise the interest rates on triple savings certificates with a fixed return to 19%, monthly, 19.10% quarterly, and 19.25% annually, provided that the minimum purchase is EGP 1,000 and its multiples, with a minimum of EGP 500,000 for the first issuance of the certificate.
The bank also decided to raise the interest on the various savings accounts it offers to reach 14.50% annually.
The Export Development Bank of Egypt offered a new 3-year savings certificate with a fixed return for individuals, with a minimum purchase of EGP 10,000 and multiples of EGP 1,000.
The certificate offers a return of 18% monthly, 18.5% quarterly, 18.75% semi-annual and 19% annually.
The Arab Investment Bank, aiBANK, also offered a new savings certificate for three years, with a fixed return of 17.25% per month, 17.5% every three months, and 18% annually.
The minimum purchase price for the certificate starts from EGP 10,000 and multiples of EGP 1,000.
Al Baraka Bank announced the launch of a new savings certificate for a period of three years, with an annual variable return of no less than 19%, to be disbursed monthly.
The minimum amount for purchasing the certificate is EGP 1,000 and its multiples, as the new certificate targets clients of various categories.
Hazem Hegazi, CEO and Vice Chairperson of Al Baraka Bank, said: “The new certificate confirms the bank’s ability to compete strongly in the Egyptian market, by providing new financial and banking services that are in line with customers’ requirements.”
Abdulaziz Samir, Head of Retail Banking, Branches and Financial Inclusion Sector at the Bank, explained that the launch of this certificate came within the framework of a deliberate strategy that works to enhance and grow the portfolio of retail banking products of Al Baraka Bank, as the certificate allows holders to enjoy many advantages, including the possibility of obtaining financing with its guarantee.
The Agricultural Bank of Egypt also decided to offer a certificate for a period of 3 years, with an annual interest rate of 19%, which is paid monthly, and 19.5%, which is paid semi-annually, and it starts to be purchased from the first EGP 1,000 and its multiples.
The United Bank announced the offering of a certificate for a period of 3 years, compatible with the provisions of Islamic law, with an annual variable return of 19%, which is spent under the settlement account, and investment in it starts from EGP 1,000 and its multiples.
Mohamed Abdel-Aal, a well-known banking expert, believes that raising interest rates to contain the inflation hike is a double-edged sword, as it can leave direct or indirect effects, positive or negative, consistent or conflicting, according to the nature of the interests and the quality of dealing with the business community, producers and all economic activities, as well as savers, owners of deposits and certificates, and borrowers of all kinds.
Abdel-Al explained that if the main goal of raising interest rates, which is reducing inflation and stabilizing prices, is achieved, then this means an increase in power of the pound, and therefore, the income of the citizens, as there is a direct relationship between the rate of inflation and the exchange rate, and therefore in the event of low inflation, inevitably under the flexible policy of the exchange rate, the price of the pound will improve, so the import bill will decrease, and the cost of production and selling prices of goods and services will decrease to consumers.
He added that on the other hand, the family sector benefits from the increase in the interest rate and compensates them for the decrease in their real incomes, and the process of raising interest reduces the negative return as a result of the difference between the yield of treasury bills and bonds and the existing inflation rate, pointing out that small savers, depositors and pensioners benefit from every raise in interest on their savings in banks that enjoy high returns and complete safety from all kinds of risks.
“So the average citizen who does not borrow from banks or non-bank financial companies is the first to benefit from any deflationary policy targeting inflation,” according to Abdel Aal.
He added: “On the contrary, all citizens who borrow from banks or financing companies of all kinds, or loans that finance their real estate or car purchases, or personal loans and credit cards, will be affected, as the cost of interest on loans will automatically rise by the same amount of 2%, and the prices of all types of commodities will also rise, provided that they depend on a large percentage of loans from banks to finance capital and operational needs.”
Abdel Aal believes that micro and micro finance companies will not be harmed relatively, due to the stability of financing prices for their loans within the scope of existing initiatives, and major industrial and agricultural companies can also benefit from the new state initiative for financing at a special rate of 11%, and therefore they will not be affected relatively by the current hike.
He pointed out that for large companies that do not rely on borrowing from banks to finance their production cycle, these companies will improve their price competitiveness, and they will acquire larger market shares.
Abdel-Al also expects an increase in the yield on treasury bills and bonds during the auctions of the coming weeks, which will help anticipate the return of indirect foreign investment in government debt securities, increase foreign exchange balances, provide greater opportunities for opening credits, and achieve the speedy flow of customs releases for commodities, raw materials and grains, which allows lowering their prices, and all of this will leave positive results, whether in price stability or in supporting the exchange rate of the national currency.
According to Abdel Aal, it is not expected that the Egyptian Exchange will be affected by the interest rate hike, because the effect has already occurred pre-emptively, as a result of investors’ anticipation in advance of the decision to raise, in addition to the expected positive impact on the stock exchange with the start of activating the offering program.
He added that with the stability of other factors affecting the price of gold locally, we expect that the increase in interest will be reflected in the price of gold as a result of the increase in its financing costs, as well as changes in the exchange rate.