Returns On Savings Instruments Downed Due To Low Lending Rates

A number of bankers said that some banks have taken procedures to reduce interest rates on savings certificates as ratios of loan-to-deposit continue to retreat amid uncertainty about the market, which in turn dampens levels of banking lending. In addition, the average yield on treasury bills fell to 13%, compared to 16% at the beginning of 2012.

Among others, the Commercial International Bank (CIB) lowered the return on three-and five-year certificates and Ahli United Bank also reduced the return on three-and five-year certificates as well as Blom Bank that reduced the return on the three-year certificates and National Bank for Development (NBD) that reduced the return on three-and five-year sukuks.

Saeed Zaki, member of the board of directors at the Egyptian Gulf Bank, said some banks have reduced interest rates due to the fall of return on treasury bills which declined to 13%, compared to 16% at the beginning of 2012.

Zaki ruled out the possibility that banks may face a lack of liquidity in the upcoming period as they will cut investments in government debt instruments and direct them instead to developmental and commercial projects.

Lowering interest rates on treasury bills is a good sign amid the burgeoning local debt which exceeded EGP one trillion, he noted.

Slow growth rates witnessed by the Egyptian market will not last long as they will rise when investment opportunities increase, he confirmed.

Mahmoud Negm, deputy manager of investment department at Export Development Bank of Egypt, said some banks reduced the returns on savings pools concurrently with the fall of banking lending rates amid the recession that hit many economic sectors and activities. Such factors have made investors retreat from borrowing and yields on treasury bills rise, he noted.

Negm expected such move, lowering returns on savings certificates, will be taken only by private banks as they do not depend on treasury bills, unlike state-owned banks which have played important role in reducing budget deficit.

He ruled out that CBE may raise or lower interest rates in the current period, adding that it may raise interest rates after the economy recovers.