Introduction to Bank Statements
When you start reading financial statements for companies listed on the Egyptian Exchange, you quickly notice that banks look very different from industrial or manufacturing firms. If you try to find a traditional revenue or gross profit line, you will search in vain. Banks operate under a completely different financial model, taking in deposits and lending them out, or investing in government securities.
In this guide, we will break down how to read a bank's financial statements, using examples from major institutions like CIB, Credit Agricole, and QNB.
Why Banks Look Different
Industrial companies sell physical goods or services, generating revenues and calculating gross profit after subtracting the cost of goods sold. Banks, however, deal in money. Their primary 'product' is credit.
Instead of revenue, you will see Net Interest Income. This is the difference between the interest a bank earns on loans and treasury bills, and the interest it pays out to depositors. Furthermore, what is a liability for an industrial company—debt—is the core raw material for a bank. Customer deposits represent the largest liability on a bank's balance sheet because the bank owes that money back to its customers.
On the asset side, you will not find large factories or inventories of raw materials. Instead, a bank's assets are dominated by loans extended to individuals and corporations, alongside massive holdings of Egyptian Treasury Bills and bonds.
Key Line Items to Watch
When examining askborsa.com/en/company/COMI or askborsa.com/en/company/CIEB, pay attention to these specific areas:
- Net Interest Income: The core driver of profitability, reflecting how effectively the bank manages its spread between borrowing and lending rates.
- Provisions: Banks set aside provisions for potential loan defaults. Rising provisions can eat into profits, while low provisions suggest a healthy loan portfolio.
- Total Assets: Banks typically feature balance sheets that completely dwarf those of industrial companies. You can see the scale of CIB by looking at its historical asset base.
| CIB · Annual · EGP | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net profit | 10.24 billion | 13.27 billion | 16.11 billion | 29.63 billion | 55.2 billion |
| Total assets | 428 billion | 498 billion | 636 billion | 835 billion | 1.21 trillion |
| Shareholders' equity | 59.96 billion | 69.3 billion | 68.34 billion | 90.64 billion | 153 billion |
Understanding Assets and Equity
A bank's Total assets consist largely of financial instruments, cash reserves with the Central Bank of Egypt, loans, and treasury bills. Because banks operate with high leverage—using other people's money (deposits) to generate returns—their Shareholders' equity forms a much smaller percentage of total assets compared to a manufacturing firm.
To evaluate whether a bank has enough cushion to absorb unexpected losses, analysts look at Capital Adequacy. While you cannot compute exact ratios directly without external figures, you can track the growth of 153 billion EGP relative to 1.21 trillion EGP to understand the capital backing the bank's operations.
Similarly, reviewing the performance of QNB through askborsa.com/en/company/QNBE reveals how steady asset accumulation translates into bottom-line earnings over time.
What to Look For
When reviewing a bank's annual or quarterly report on the EGX, keep this checklist in mind:
- Check the growth trajectory of net interest income to see if core lending operations are expanding.
- Monitor the level of provisions relative to total loans to gauge credit risk.
- Compare total equity growth against asset growth to ensure the bank maintains a stable capital base.
- Review net profit figures across multiple periods to assess consistency in earnings.
