Banks in Egypt increase capital to comply with new banking law

In the past few days, there have been noticeable changes at a number of banks operating in the Egyptian market as they work on increasing their capital to comply with the country’s new banking law.

Banking Law No 194 of 2020 stipulates that the minimum capital for banks operating in the Egyptian market should stand at EGP 5bn, instead of the EGP 500m in the previous law. The capital of foreign bank branches should stand at $150m, instead of $50m. 

The increase aims to increase the rigidity and efficiency of the capital base at banks, in order to help them face potential risks and enhance their ability to compete with other banks regionally and globally.

The new Banking Law took effect on the second day of its publication in the Official Gazette on 15 September 2020.

According to Article 4 of the law, banks are obliged to adjust their positions according to the provisions of the law, within one year from the date of its implementation. 

The Central Bank of Egypt (CBE) may extend this period for two years at most, ensuring the transitional period ranges from one to three years.

After issuing the law, the CBE has obliged banks operating in the local market not to make cash distributions from the year’s profits or retained earnings that are distributable to shareholders.

In a letter to banks posted on its website, the CBE explained that this measure aims to support the capital base of banks in facing the potential risks due to the continued coronavirus (COVID-19) pandemic. 

It pointed out that the distribution will be limited to employees, and that the bonuses of the Board of Directors will be paid for fiscal year (FY) 2019/20 only.

Housing and Development Bank (HDB)

The Board of Directors at the Housing and Development Bank (HDB) agreed to increase the bank’s issued and paid-up capital with a value of EGP 126.5m from distributable profits in 2020.

The bank revealed, in a statement to the Egyptian Exchange (EGX), that the capital will be increased through the distribution of one free share for every 10 shares of the capital indicated in the bank’s commercial registry, amounting to EGP 1.265bn.

The HDB’s results showed a combined profit of EGP 2bn after taxes, while the independent profits of the bank reached EGP 1.8bn at the end of 2020.

National Bank of Kuwait – Egypt (NBK)

Yasser El-Tayeb, CEO and Managing Director of NBK- Egypt, said that the bank is committed to increasing its issued and paid-up capital to the level stipulated by Law No 194 of 2020.

He added that the bank seeks to increase its authorised capital to EGP 10bn, and the issued and paid-up capital to EGP 5bn.

El-Tayeb also pointed out that the bank’s general assembly agreed to use part of the retained earnings according to the bank’s financial statements for the FY ending in December 2020, which is EGP 3.5bn. This would go towards financing the increase of the issued and paid-up bank’s capital to EGP 5bn. This would depend on the approval of the CBE and the extraordinary general assembly.

The balance of retained earnings for previous years is estimated to stand at EGP 4.396bn. In addition, there are the 2020 profits which are estimated to be EGP 776m, after the distributions, according to the proposed list for FY 2019/20.

Faisal Islamic Bank – Egypt

Faisal Islamic Bank of Egypt said that the ordinary general assembly approved the bank’s financial statements for FY 2019/20, and also agreed to increase the bank’s issued and paid-up capital by 20%.

In a statement to the EGX, the bank stated that the capital would increase from $506.22m to $607.471m, an increase of $101.245m.

The bank’s consolidated financial statements showed that it achieved a net profit of EGP 2.247bn in 2020, compared to EGP 2.785bn in 2019.

Suez Canal Bank (SCB)

The Financial Regulatory Authority (FRA) agreed to publish the Suez Canal…