Despite Interest Rate Freeze.. Egyptian Banks Raise Savings Certificate Yields and Launch New Products

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Egyptian banks continued to intensify competition for customer savings, as some began new moves that included raising the yield on existing savings certificates and launching new products with relatively high returns, in an attempt to attract new liquidity and maintain the appeal of savings instruments in Egyptian pounds, despite the Central Bank of Egypt keeping interest rates on the pound unchanged last September for the fifth consecutive time.

The asset and liability committees "ALCO" in several major Egyptian banks are studying the re-pricing of interest rates on some of their savings products in the coming days, as banks seek to strengthen their deposit base and provide the necessary liquidity to meet demand for credit, according to banking sources who spoke to "Al Arabiya Business".

The total savings of individuals in Egyptian pounds increased by about 738.95 billion pounds during the first eight months of the current year, reaching 8.5 trillion pounds by the end of August, with savings certificates and time deposits accounting for 7.8 trillion pounds of that, according to data from the Central Bank of Egypt.

The sources indicated that expectations of a return of some inflationary pressures in the coming period could support some banks' tendency to raise the yields on savings products, especially flexible products, in an attempt to maintain the attractiveness of returns on the pound amid market changes.

The decisions regarding repricing are not only related to the trajectory of the central bank's key interest rates, but are also influenced by each bank's liquidity needs, the cost of funds, the level of demand for credit, in addition to the movement of deposits between banks and various savings products.

A survey conducted by "Al Arabiya Business" showed that several Egyptian banks have moved to raise the returns on savings certificates recently, led by Saib Bank and ABC Bank, while other banks preempted the central bank's decision to maintain interest rates and repriced some of their savings products, including the Arab African International Bank and Cairo Bank.

Saib Bank raised the return on the three-year fixed-rate "Excellence" certificate to 18.25% annually when the return is paid semi-annually, compared to 17.5% previously, while the return reached 18% annually when paid monthly, compared to 17.25%, with a minimum purchase amount of 500,000 Egyptian pounds for a duration of 3 years.

ABC Bank Egypt also launched a new three-year savings certificate with a fixed return of 18% annually, payable monthly, with a minimum purchase amount starting from 1,000 Egyptian pounds.

A few days before the decision to maintain interest rates, the Arab African International Bank raised the return on the fixed-rate three-year "Emerald" certificates, ranging between 17.75% when the return is paid monthly and 19% when paid annually, while it is 18% when paid quarterly and 18.25% when paid semi-annually.

Cairo Bank has raised the returns on some savings certificates to reach 19.5%, with a minimum issuance amount starting from 1,000 Egyptian pounds.

Emirates NBD – Egypt has raised the interest rate on the three-year fixed-rate certificate to 18.5% annually when the return is paid annually, compared to 18% when paid monthly, with a duration of 3 years, while the minimum issuance amount starts from 500,000 Egyptian pounds.

The Agricultural Bank also decided to raise the interest rate on the three-year fixed-rate "Khair" savings certificate to 18% annually, compared to 17.25% previously.

Banking expert and member of the board of directors of the Egyptian Gulf Bank, Mohamed Abdel Aal, stated that the move by some banks to raise interest rates on certificates and savings instruments primarily reflects the differing liquidity needs of each bank, and is not necessarily a change in monetary policy trends.

Abdel Aal explained to "Al Arabiya Business" that banks review their product prices according to the cost of funds, the amount of liquidity available to them, and their financing and credit needs, noting that banks aiming to expand lending may be more inclined to attract new deposits by offering higher returns.

On the other hand, some banks may not need to raise their product prices if they have adequate liquidity levels or restrictions that limit their ability to expand credit.

"Competition among banks also drives the repricing of some products, as an increase in the return on a certificate or deposit by a certain bank may prompt other banks to adjust their prices to maintain their ability to attract savings. However, the decision remains linked to the circumstances of each bank and the cost of its funds," according to Abdel Aal, who ruled out the central bank's intention to raise the return on the pound during the current year.