How CIB outperforms its peers on EGX in 3Q 2023

Hossam Mounir
6 Min Read

The Commercial International Bank’s (CIB) stock has been making a comeback in the Egyptian stock market in the past week. The bank, which had lagged behind the main index, especially in the petrochemical sector, has regained some of its dominance.

The bank has the largest share in the benchmark index of the Egyptian Exchange (EGX), with a 28% representation. This shows how influential the bank is on the overall performance of the market.

The bank has promising growth opportunities, which drive its stock to catch up with other companies that have seen significant surges in recent months. This is evident in its financial results for the first nine months of the current year.

The market values of the bank’s stock have been positive. After staying around EGP 50, it closed at EGP 60.35 in October. The stock crossed the EGP 60 mark, reaching EGP 70 within the first week of November, with expectations of further increase.

Mohab Ajeena, Head of Technical Analysis at Beltone Financial Holding, advises current market participants to keep the Commercial International Bank’s stock. He says that the stock is likely to continue its upward trend unless there are signs of reversal.

Bassam Abu Ghaneima, Director of Technical Analysis at Arabeya Online, expects the Commercial International Bank’s stock, along with Hermes’ stock, to support the market’s rise. He also predicts that traders will take profits from these stocks.

Research centers on the Commercial International Bank indicate that its market value is higher than its fair value. However, they recommend holding the stock because of the growth opportunities it offers.

Naeem Holding’s research suggests keeping the stock based on a residual income valuation model over the next five years, using a price-to-book ratio of 2.3. The fair value of the stock is estimated at EGP 65, according to a report published on 8 November.

The analysts expect that loan growth will be the main factor for the bank’s expansion. They also anticipate an improvement in capital adequacy ratios, reaching 21%, after a significant decline in the past four quarters. Moreover, the bank is expected to benefit from rising interest rates.

However, the bank faces some risks, such as exposure to further credit rating downgrades for the country and the ongoing challenges of geopolitical events.

Arab African International Securities Research views the positive business results for the Commercial International Bank in the third quarter of this year as a sign of optimism. This encourages maintaining the current view of holding the stock, estimating the fair value at EGP 60.4, according to a report released on 5 November.

The report states that loans to companies, which increased by 33.4% annually to reach EGP 198.8bn, contributed significantly to the total loan growth in the bank. Loans rose by 27% by September 2023 on an annual basis, amounting to EGP 255.4bn.

The increase in total deposits was driven by a 44% annual increase in time deposits. Current and savings accounts decreased to 51.8% of total deposits in September, compared to 56.5% in the same period of the previous year.

According to Mubasher Trade, CIB’s stock trades at a P/E ratio of 6.75 times and a P/B ratio of 2.2 times, based on the trailing twelve-month data. This means that investors are paying 6.75 pounds for every pound of the bank’s earnings and 2.2 pounds for every pound of the bank’s equity. These ratios are higher than the average ratios of 1.94 and 8.67 times, respectively, over the last five years, indicating that investors have become more confident in the bank’s prospects.

CIB’s ratios are also higher than the sector average, which is estimated at 6.72 times the P/E ratio and 3.97 times the P/B ratio, according to the latest data from the Egyptian Exchange and Sigma Capital. The sector average P/E ratio is based on the published earnings of the listed banks, while the sector average P/B ratio is based on their latest financial year-end data as of 10 November. The sector average coupon yield, which measures the annual interest income per share divided by the share price, is estimated at 4.3%.

CIB’s high valuation ratios are justified by its impressive financial results for the first nine months of 2023, which show an 84% year-on-year increase in net profit, reaching EGP 22.4bn compared to EGP 12.19bn during the same period in 2022. The bank’s net interest income, which is the difference between the interest earned from loans and investments and the interest paid to depositors and creditors, also increased to EGP 37.73bn, compared to EGP 21.82bn during the same period of the previous year.

CIB’s strong performance and profitability have made it one of the most attractive stocks in the Egyptian market, as well as one of the largest and most reputable banks in the region.

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