The banking sector had a good first nine months of 2024: The health of Egypt’s banking sector continued to improve throughout 9M 2024, with the sector’s capital adequacy ratio (CAR) increasing 0.5 percentage points from the end of 2023 to clock in at 19.1% by the end of 3Q 2024, according to the Central Bank of Egypt’s latest financial soundness indicatorsreport(pdf). Banks’ CAR remains well above the central bank’s minimum threshold of 12.5%.

Sound smart: The capital adequacy ratio — also known as the capital to risk-weighted assets ratio — is a metric that measures a bank’s ability to pay liabilities (bank-speak for giving depositors back their money), absorb potential losses (from, say, bad debts), and respond to credit risks. The metric increases as the ratio of risk-weighted assets to capital falls — marking a healthier banking system overall.

The report also showed improved asset quality: Non-performing loans (NPLs) dropped to 2.4% of total loans, down from 3.0% by the end of 2023, with the sector’s provision coverage ratio — the percentage of provisions banks set aside to cover losses against their gross NPLs — reaching a robust level of 87.4%.

Liquidity levels remained solid, with local currency liquidity at 32.1% and foreign currency liquidity at 77.7% — both far above the regulatory minimums of 20% and 25% respectively. Banks’ loan-to-deposit ratio increased to 61.3%, up from 54% at the end of 2023, as banks put more of their clients’ deposits to work by lending them out to others.

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