NSGB Q1 Profit Drops 3.8% On Tax Increase

National Société Générale Bank (NSGB) has reported a dip in profits, missing analysts’ estimates after a tax increase and an unexpected contraction in the bank’s loan book.

On Thursday the Egyptian arm of France’s second-biggest lender reported a loss of market share as the country remained in turmoil and corporate loans proved scarce.

Profits fell to EGP 349.9 million during the first quarter, a 3.8 per cent dip compared with the same period a year earlier, as Egypt’s cash-strapped government raised income taxes.

Consensus estimates had been for quarterly earnings of EGP 380m. The bank’s stocks slid 0.5 per cent, to 28.35 pounds each, in trading yesterday.

It is worth remaining “cautious” on the bank’s stocks, especially over the health of its loan book in Egypt’s restive political climate, analysts from Beltone Financial wrote in a research report.

“The quarterly contraction of NSGB’s gross loans (on weaker corporate lending) came as a negative surprise in addition to the weakness in net investment income,” the report said.

Total lending slid 1.1 per cent to EGP 34.6 billion during the quarter, the bank’s financial statements showed.

But the results showed a few positive signs, including improved net interest margins and the large amounts of capital put aside to cover defaulting loans.

However, bad debts are rising faster than market expectations, analysts from Naeem Brokerage wrote in a research report.

Money set aside for bad debts during the quarter hit EGP 108m, almost double the figure recorded during the same period a year earlier.

Egypt’s government is squeezing more tax out of its banking sector should surprise few. But with the country’s credit rating hanging in the balance as aid from the IMF and Gulf states is negotiated, it is hardly an issue that is likely to fade in the near future, The National reported.