Egypt's central bank has held rates at 19% for three straight meetings — pausing an easing cycle just as inflation cools to its lowest level since the regional conflict began. Egyptian banks are locked in a fight for deposits, paying up to 19.5%, and this week the Treasury debuted its first-ever floating rate notes. For investors, the question is who wins and who pays when cuts resume. Joining us now is Dr. Ayman Ghoneim, economic and legal expert. Dr. Ayman, welcome to the show.
Thank you so much.
You have spent three decades inside bank risk functions in Egypt and the Gulf. When you look at Egyptian bank balance sheets today, what do you see that the headline numbers do not show?
The headline numbers show a banking sector that is profitable, efficient, resilient, and liquid. The weighted average capital adequacy ratio of the Egyptian banking sector was 19.6% as of December 31st 2025 — comfortably above Basel's regulatory threshold of 12.5%. But what the headlines do not show is economic concentration in credit, funding concentration, repricing frequency, maturity composition, and the granular composition of revenues. You have to look deeper. Overall, the big numbers point to a strong and resilient sector, but investors need to look beyond the surface.
Banks are currently paying up to 19.5% for deposits while the market is pricing in rate cuts. Is that a rational funding strategy or are banks locking in expensive money at exactly the wrong moment?
We have to differentiate between fixed and floating rate deposits. Floating rate deposits will automatically respond to any rate cuts — their cost will decline accordingly. For fixed rate deposits, it depends entirely on duration. It is also important to note that Egyptian Treasury bonds currently trade at yields to maturity of around 24 to 25%. Yields are still elevated. Using hedging techniques, limit structures, and stress testing, I believe Egyptian banks are well positioned in the short term.
Egypt's domestic savings rate is just 1.2% of GDP. Can banks fund a private sector credit expansion on a savings base that thin?
That figure was 1.2% in 2024-25, but it was 6.1% the year before — so context matters. More importantly, savings rates do not directly correspond to deposit levels. The Egyptian banking sector holds total deposits of around 16 trillion Egyptian pounds, with a loan-to-deposit ratio of around 66%. There is ample room to grow. When you extend one pound in credit, you create another pound in deposits — that is how credit works. I do not think the challenge in financing the private sector is fundamentally a liquidity problem. The real challenge is the number of bankable clients — businesses with sound balance sheets, diversified revenue streams, and the cash flow to service debt.
The Treasury just issued floating rate notes for the first time. What does that tell us about where the Finance Ministry thinks rates are going?
We should not jump to the conclusion that the Finance Ministry expects rates to fall imminently. I actually view this as a very good move because it diversifies the Ministry's funding portfolio and instils a culture of floating rate instruments. The first issuance was 450 billion Egyptian pounds — a significant size, deliberately designed to create a deep and liquid market for this instrument. It is a smart structural decision regardless of the rate outlook.
In March, an energy shock triggered an estimated $7 billion in foreign outflows from Egyptian T-bills in three weeks. What did that episode reveal about the resilience or fragility of Egypt's foreign funding?
I call it the benevolent incident. For the first time, Egypt allowed portfolio investors to exit at the prevailing market exchange rate — not at a subsidised rate. In previous episodes, Egypt would defend the exchange rate from official reserves, which depleted those reserves, eroded confidence, and led to further pound depreciation. This time, the pound adjusted modestly — from around 47 to around 50 pounds per dollar — but official reserves actually increased and have now reached a historic $55 billion. That created and enhanced confidence among both existing investors and those looking to enter. This is the first time we have seen truly professional exchange rate management in Egypt.
For foreign investors holding Egyptian bank equities, the easing cycle means cheaper funding but compressed lending yields. Which banks are best positioned to protect their margins as rates come down?
I will not give specific buy or sell recommendations, but I can describe the archetypes investors should look for. First, banks with higher fee income — given two banks with the same total revenues, the one with higher fee income is more efficient and less exposed to rate compression. Second, banks with a high base of granular retail deposits — retail deposits tend to be sticky and stable even when they have short contractual maturities. Third, banks with high capital adequacy ratios — the stronger the capital base, the more capacity to extend loans and grow. And fourth, banks with low credit concentration risk — avoid those heavily exposed to a small number of large corporates. These are the banks that can grow lending and revenues and that have shown good growth trends in recent years.
Excellent advice for investors. Dr. Ayman, thank you very much for joining us today.
Thank you.
