Cairo, Egypt (CNN) – The National Bank of Egypt issued a decision to reduce the interest of investment certificates of all kinds by a rate ranging from 0.25% to 3.75% on the one-year certificate, concerns of many circles in Egypt; For a large number of citizens to invest their savings in these certificates, whose net sales amounted to more than 435 billion pounds by the end of December 2020, while experts ruled out the impact of reducing the yield of certificates on the decision of the Monetary Policy Committee of the Central Bank on Thursday to discuss interest rates, and they proposed investment alternatives to the buyers of certificates.
The National Bank of Egypt – one of the largest local banks in Egypt – used to sell high-yield investment certificates on behalf of the National Investment Bank, because the latter did not have branches and a geographical spread, but it announced last Sunday that these certificates will be included in its saving containers, and their return was reduced by 0.25%. 3.75% for the one-year certificate.
Banking expert Mohamed Abdel-Al explained why the National Bank had acquired the National Investment Bank certificates, because the latter had undergone a restructuring process, and among its items was disposing of some costly obligations and proved to be of no use in the future stage, such as savings certificates, and with the National Bank assuming the task of managing the offering of these Certificates are in favor of the National Investment Bank, because the latter does not have a spread and a geographical presence.
Abdel-Al explained the reason for the National Bank to reduce investment certificates by a rate ranging between 0.25% to 3.75% on the one-year certificate, so that it is equal to the other vessels it has, adding that before the acquisition, the National Bank had no right to adjust the prices of investment certificates. Issued by the National Investment Bank; Because it is the authority that manages these certificates, but after the acquisition, they became owned by him, and he has the right to amend the investment bank documents in line with the pricing policy of the Assets and Liabilities Management Committee of each bank, which is guided by the official rates set by the Monetary Policy Committee every 45 days.
However, the banking expert indicated that there are other products of the National Bank with a greater return that can be invested in, such as government debt instruments, as treasury bills give a return of up to 10.40% within a period of 6 months or a year, while the yield of bonds reaches 10.90% net after tax, in addition to The continuation of a number of investment certificates with a higher return, such as the 3-year Latin certificate, with an annual return of 11%, in addition to the 10-year cumulative return certificate, only 0.25% decreased.
In exclusive statements to CNN Arabia, Mohamed Abdel-Al ruled out that there would be an effect on investment certificates issued by other banks. On the contrary, they would contribute to a relative balance in the savings vessels of the banking system.
In response to the impact of reducing the return on investment certificates on the monetary policy committee’s decision this week, Abdel-Al stressed that the National Bank’s reduction in the yield of certificates has nothing to do with the decision of the Monetary Policy Committee that will set interest rates next Thursday, as evidenced by the fact that the National Bank reduced the yield of certificates by a percentage 1% one day before the last meeting of the Monetary Policy Committee, however the central bank fixed interest rates.
Abdel-Al expected that the Central Bank’s Policy Committee would fix interest rates at its meeting this week, justifying his view that fixing interest rates would give more comfort to the family sector, as well as the stability of the exchange rate and the Egyptian pound in indirect investment, but he expected interest rates cut by about 2%. During the current year; Because there is still ample room for the central bank to cut interest due to the declining inflation rate.
The banking expert, Muhammad Badra, agreed with him, that the decision to reduce the return on investment certificates of the National Bank does not mean a prelude to the central bank’s reduction of interest rates next Thursday, adding that the decision of the Monetary Policy Committee is not binding on banks to raise or reduce interest and therefore the decision of the Policy Committee has nothing to do with prices Investment bank certificates issued by the National Bank.
Badra noted, in exclusive statements to “CNN Arabia,” that the reduction in the return on investment certificates of the National Bank will be applied to the new issue only. As for the holders of the certificates that were issued before the reduction, they will receive certificates of the previous return.
Badra expected that interest rates would be cut at the Central Bank’s Monetary Policy Committee meeting next Thursday by 0.5 to 1% due to the decrease in inflation in December, as the inflation rate remains at the central bank’s targets at 7%, with an increase or decrease of 2% at the end of the fourth quarter of the year. 2022.
Badra pointed out that if the interest rates are reduced, it will be a positive incentive for a number of citizens to invest their savings in other vessels such as industrial activity, stocks and bonds, but the only negative impact may be related to new certificates and also when renewing certificates issued after the reduction decision.
On the other hand, Radwa Al-Swaify, head of the research department at Pharos Investment Bank, ruled out the link between the decision to reduce the rates of National Bank certificates and the meeting of the Monetary Policy Committee of the Central Bank of Egypt next Thursday to discuss interest rates, referring to the reason that reducing the return on investment certificates is a reflection of the decision of the Central Bank of Egypt to reduce The interest rate was 4% during the past year, as the National Bank did not reduce the rates of these certificates as much as the central bank lowered the interest rate compared to some banks, and at the same time the economy has overcome the repercussions of the Covid-19 pandemic.
Al-Swaify expected, in exclusive statements to CNN Arabia, to cut the interest rate by about 50 basis points at the Monetary Policy Committee meeting next Thursday, reflecting the expectations of many analysts to fix interest rates, and attributed this to the fact that the rate of inflation is still within reasonable limits Amid expectations of a gradual rise in inflation throughout the year, and a return to its decline in the fourth quarter, not because of the rise in prices, but because of the base year.
As for the impact of the decision to reduce the return on investment certificates on the Egyptian Stock Exchange, Radwa Al-Swaify confirmed that the decision will positively affect the Egyptian capital market, by examining a part of the certificate holders on new saving vessels that will bring them high returns, and at the present time the main index of the Egyptian Stock Exchange has achieved an increase. By 7% during the month of January, with expectations of continuing to rise by rates ranging between 20-30% for reasons related to improved corporate business results and the rebound and improvement of the economy over the year 2020, which is evident on the performance of stocks and the stock market.