Intro: Our report is based on a sample of 12 listed banks, totaling 8 billion Tnd in Market Cap (approx. 2.5bn USD) accounting for 34.3% of the entire Tunis Stock Exchange’s market cap. In terms of deposits, the sample captures 78.3bn Tnd of total deposits, 77.2bn of total loans, 5.5bn Tnd of Net Banking Income (approx. 1.8bn USD), 1199 million Tnd of aggregate net profit (Approx 364 million USD) average free float at 33.2%, PE ratio 6.2x forward and average Price to Book at 0.8x
The Tunisian banks are braced to close the year 2022 with deposits at a record high benefiting from the central bank’s non-conventional measures (although the economy is still in a bad shape and the pandemic effect is still in mind). As for loans’ growth, it is a different story. The lending activity continued to slow down on the back of different factors some of them are internal some others are external to the system.
By Net Banking Income, the Tunisian banks have reported, and outstanding performance lifted by the rise of commissions as a percentage of NBI and by the rise in “Other revenues”. On the “commissions” side, it should be reminded that the central bank has imposed a number of reduced commissions to help the Tunisian businesses, but also the retail clients to address the pandemic crisis. Once the restriction was lifted, the banks were back to business and the commission growth was thus a catch up from the past. “Other revenues” are mostly the spread that the banks are benefiting from the intermediation activity between the cost of money and the interest they charge to the government when the latter was issuing a massive amount of money in the Gvt Bonds market creating a crowding-out effect that put a huge pressure on Interests. “Other revenues” are also revenues from the dealing room which benefited from the surge in foreign trade after Covid.
On the productivity level, all the banks have reported worse numbers than the previous year despite the overall rise in Net Banking Income. Most of the rise in the cost to income ratio derives from salary packages swelling year on year when the overall operating charges were also swelling. The rise in salary packages is linked to the deal between the unions and the private sector signed in July 2021 whereby the banks’ personnel were entitled for a salary increase and the early retirement packages were also rising following the change in the way the banks were calculating the early retirement allowance. As for the rise in overall operating charges, these are linked to the banks’ contribution to BDGF (Bank Deposits Guarantee Fund), a margin call which followed the banks’ efforts to collect deposits.
Asset quality stayed the same despite the negative expectations on covid-19 effect. It should be reminded here that the Central Bank came with a circular on a moratorium on loan repayments during the covid year (2020) which helped the banks keep more or less the same delinquency rate. At the same time, the central bank has eased the collective provisions on general risks which enabled the bank to reduce their allocations to the collective provisions.
Capital Adequacy ratio has also benefited from the central bank’s instruction to freeze dividends distribution during the covid year. Add to that, the smaller collective provisions which boosted the banks’ earnings, ultimately strengthening their equity base.
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By Hamza Ben Taarit firstname.lastname@example.org Head of Research