Gulf state’s largest bank says climbing inflation in North African nation to push up operating costs and spending next year
National Bank of Kuwait said on Tuesday that rising profits from its business in Egypt will help offset any impact from the drop in the value of the Egyptian pound.
But climbing inflation in the country will push up operating costs and spending in 2017 for NBK Egypt, Kuwait's largest bank said in a statement.
Since the pound's peg of 8.8 to the dollar was abandoned last Thursday, the currency has taken its largest drop in a series of depreciations over the last 15 years.
The move is expected to lead to a rise in inflation, already near 14 percent, driving up import costs further.
However, since the move, customers had once again begun using banks to sell foreign currency, giving banks an opportunity to open credit documents for customers and reflecting "positively on interests and profits," NBK said.
By lowering the Egyptian pound to levels which the markets consider fair value, the devaluation should help encourage fresh capital to flow into the country and end a long-standing hard currency shortage.
"NBK Egypt is expected to continue to grow, positively benefiting from the structural reforms programme, especially as confidence in the economic reform measures is expected to increase in coming months with more foreign and local investments in Egypt that will provide for an opportunity for lending and financing to grow," the bank continued.
Following the devaluation, corporate executives said they would now be able to make investment decisions based on a transparent, predictable currency market run by banks, rather than an opaque black market in dollars that swung wildly amid profiteering and speculation.
NBK gained a foothold in Egypt in 2007 after the acquisition of Al Watany Bank of Egypt. The bank, with 40 branches, recorded a net profit of 220.8 million Egyptian pounds ($12.8 million) in the second quarter, up from 157.7 million Egyptian pounds in the same period of last year.
It said the bank will invest in government debt instruments to help bring higher returns, adding that in anticipation of the pound's devaluation it had already invested a chunk of its funds in short-term investments to benefit from changes in interest rates.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.