Provisions take shine off solid CIB results

02 August 2002

Net profits at Commercial International Bank (Egypt - CIB) fell by 7.6 per cent in the first half of 2002 to£E 178.9 million ($39.7) million, compared with£E 193.6 million ($42.9 million) in January-June 2001. The main reason for the decrease in net income was a 35 per cent rise in provisions to£E 137.1 million ($30.4 million). Some 60 per cent of the provisions were for doubtful loans, reflecting the tough operating conditions in the market this year. Most of the remaining provisions were for income tax.

'The provisions are a normal reaction to the difficulties in the local and the global economy,' says a senior CIB executive. 'The good news is that our core income is still growing.' Net interest income was up 16 per cent over the period, and fee income rose by 5 per cent. Net income before provisions was up by just over 7 per cent.

The most notable aspect of the balance sheet figures is a 7.5 per cent increase in customer deposits since the start of 2002. The CIB executive says this is part of a deliberate strategy to increase dependence on deposits as the basic source of funding, after a period in which CIB had raised considerable amounts of institutional funding. One by-product of this has been a steady reduction in the loan-deposit ratio, which is now 75.5 per cent, compared with over 100 per cent in the mid 1990s.

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