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Central Bank bails out government

CBE invested EGP 48bn in treasury bonds during the last fiscal year

By Nasser Yousef

The Central Bank Egypt (CBE) purchased a total of EGP 178.8bn in government bonds by November 2012, EGP 48.3bn during the last fiscal year alone, according to recently released financial statements.

A bank official said that as is standard for central banks across the world, the CBE has become the final source of credit for the government during the country’s current economic crisis.

According to official figures, the amount of CBE investments in government bonds in local currency totaled EGP 130.5bn.

Last year, the bank consumed EGP 1.8bn worth of bonds without returns, which by June 2009 totaled EGP 9bn.

Sources within the bank stated that government bonds issued without returns in foreign currency totaled EGP 18bn in 2010, compared with EGP 70bn in 2007.

These numbers show that for the first time, the government was dependent upon the CBE to meet its financial obligations for the previous fiscal year, partially as a result of the negative fallout from Egypt’s widening budget deficit.

The fiscal year ending November 2012 saw the number of bank investments in Egyptian bonds made in American dollars decrease to zero, from EGP 962bn for the year ending in June 2011.

The source added that the amount of CBE bonds issued without returns dropped to EGP 18bn in 2010, compared to EGP 60bn-70bn in 2007. Officials from the bank stated that they were receiving good returns on most other investments.

According to its financial statements, the CBE suffered from net debt differences that could be settled by issuing a maximum treasury bond of EGP 1.5bn without returns for a period of 10 years. In the event of a continued account imbalance, the same terms would be renewed for a period of three years, with the bank covering this by issuing bonds for the same value. If this account balance continues, the Ministry of Finance will issue treasury bonds without returns for a period of 10 years with the renewal of the same terms.

Other statistics show that the bank paid EGP 5.4bn in taxes to the government during the last fiscal year, with its profit before taxes reaching EGP 18.5bn, compared to EGP 3.1bn during the previous fiscal year. Net profits for the bank by the end of November 2012 reached EGP 13.1bn, an EGP 10bn increase from the previous year.

According to official statistics, the CBE’s profits, which were distributed and used to fund the public treasury, totaled EGP 12.5bn last year, as opposed to EGP 3bn the year prior. Bank workers took in a total of EGP 16m last year as opposed to EGP 20m the year previous. However, the bank’s legal reserves totaled EGP 659m, as opposed to EGP 160m the previous year, representing an EGP 499m increase.

Financial statements also showed that loan balances for similar parties totaled EGP 4.9bn this last fiscal year, as opposed to EGP 4.8bn the year prior, representing an EGP 100m decrease. This was made up of EGP 4bn in loan balances for The United Bank (UB), and EGP 907m for the Arab African International Bank (AAIC).

These statements also showed that the CBE was responsible for injecting capital into a number of smaller banks. It accounted for 99% of UB’s injected capital, 49.4% of AAIC’s capital, 9.5% of the African Export-Import Bank’s, 5.9% of the Arab International Bank’s, and 5.9% of the Union of Arab and French Banks’ (UBAF). The bank was also responsible for injecting 16.6% of the Egyptian Mortgage Refinance Company’s capital rates, in addition to 27% of the Egyptian Banks Company for Technological Advancement’s capital.

According to official statistics, total property rights and net bank profits rose by the end of the last fiscal year to EGP 18.9bn, an EGP 10.1bn increase from the year previous. Total bank assets increased from EGP 371.4bn to EGP 403.2bn the previous fiscal year, an EGP 31.8bn rise.

The bank was reported to have 75.6 tons of gold reserves valued at EGP 19.9bn by last November, an EGP 3.6bn increase from EGP 16.3bn the previous year.

According to its budget, the bank’s balances were reported at EGP 18.4bn, compared to EGP 25.5bn by the end of November 2011, an EGP 7.1bn decrease.

Purchased treasury bills for resale totaled EGP 49.8bn during the previous fiscal year, compared to EGP 25.2bn the previous year, an EGP 24.6bn increase.

Financial investments available for sale totaled EGP 4.4bn, compared to EGP 62.1bn the previous year, an EGP 57.7bn decrease. The number of financial investments held until their maturity date by the end of this fiscal year totaling EGP 178.8bn, as opposed to EGP 131.5bn the previous year, representing an EGP 47.3bn increase.

CBE loans to other banks operating in the market for the 2011-2012 fiscal year totaled EGP 4.8bn, as opposed to EGP 5.5bn the previous year, an EGP 700m decrease.

Total cash issued by the bank totaled EGP 207.4bn by the end of November 2012, compared to EGP 179.7bn the previous year, an EGP 27.7bn increase.

Government deposits fell by EGP 7.5bn to EGP 465m by the end of November 2012, compared to EGP 8bn by the end of November 2011.

The amount of deposits made by local banks during the same period totaled EGP 12.1bn.

Outstanding bank balances in foreign currencies rose to EGP 4.18bn compared to EGP 33.2bn the previous fiscal year, representing an EGP 8.6bn increase, whereas credits and other allocations reached EGP 72.9bn, compared to EGP 75.5bn the previous year, an EGP 2.6bn decrease.

Recent data showed that the CBE’s total rate of obligations reached EGP 384.2bn by last June, compared to EGP 362.5bn the previous year, representing an EGP 21.7bn increase. Reserves, on the other hand, rose EGP 200m, reaching EGP 1.8bn, compared to EGP 1.6bn the year previous.

The total amount of property rights by the end of June 2012 reached EGP 5.8bn, as opposed to EGP 5.6bn the previous year, representing an EGP 200m increase with capital approaching EGP 4bn.



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