Inflation hurting Egyptian mortgage lending – CIB chief

Commercial International Bank chairman says chronic inflation is raising cost of mortgages
Inflation hurting Egyptian mortgage lending – CIB chief
INFLATION CHECK: In November, Egyptian inflation fell to its lowest in fifteen months, posting a 10.2 percent growth in comparison to the same month last year
By Edward Attwood
Mon 27 Dec 2010 01:23 PM

High levels of inflation in Egypt are causing problems for the local mortgage market, the head of one of the country’s biggest banks has said.      

“We do see the current inflation levels as hindering the growth of mortgage lending,” Commercial International Bank chairman Hisham Ezz Al Arab told Arabian Business.

“In fact, it poses some problems for pricing the mortgage, where due to the chronic inflation of around ten-twelve percent pa, there is no cheap long term funding available to banks, and thus the cost of mortgages is considered quite high compared to other emerging markets.”

In November, Egyptian inflation fell to its lowest in fifteen months, posting a 10.2 percent growth in comparison to the same month last year.

However, the figure is still extremely high when seen in the context of the Gulf countries. Saudi Arabia – which saw the highest inflation in 2010 – breached six percent inflation earlier this year.

GDP growth during this fiscal year is expected to amount to around six percent, according to the government.

Al Arab praised the Central Bank of Egypt’s performance during the recession, and claimed that Egyptian banks had no exposure to the subprime mortgage crisis.

“The Egyptian banking system is characterised with highly liquid balance sheets to support potential lending growth; in fact the average loan-to-deposit ratio stands at 52.2 percent as of June 2010, down from its peak of 86 percent in 2000,” the CIB chairman added.

“Moreover, the Egyptian banking sector is very well capitalised and enjoys an average return on equity of thirteen percent as of June 2010. The industry is under-leveraged exemplified in the corporate and household sectors, which creates huge potential of growth and investments.”

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