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Frequently Asked Questions

EFG Hermes Asset Management is the fund manager for Credit Agricole I, Credit Agricole II equity funds and Credit Agricole III money market fund. With over 25 years of experience in the Egyptian market, the fund manager makes investment decisions on behalf of the investors based on through research and close monitoring of market conditions. EFG Hermes Asset Management is responsible for the performance of the funds under its management, as they handle the investment part of the fund.

Mutual funds and Certificates of Deposit (CDs) are two distinct investment options that differ in several key aspects, including structure, risk, returns, diversification and liquidity. below is a comparison:
  1. Investment Type
  • Mutual Funds: Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, treasury bonds, or other securities. The value of your investment fluctuates based on the performance of the underlying assets.
  • CDs: A CD is a fixed-term deposit offered by banks and credit unions. You deposit money for a set period (e.g., 1 year, 3 years, etc.), and the bank pays you a fixed interest rate over that term. The principal is guaranteed, and the interest is usually fixed.
  1. Return and Risk
  • Mutual Funds: These carry market risk because the value of the underlying securities can rise and fall. As a result, returns are variable and depend on the performance of the assets within the fund. Equity mutual funds tend to have higher potential returns, but with greater risk, whereas bond funds offer more stable, albeit lower, returns.
  • CDs: Generally considered low risk because your principal and interest are guaranteed by the issuing bank. However, CDs face interest rate risk- if interest rates rise during the CD term, your fixed rate become less attractive. The return is fixed and predictable, but it is typically lower than the potential mutual fund earnings, especially in a low-interest-rate environment.
  1. Liquidity
  • Mutual Funds: Generally liquid, allowing investors to buy or sell shares daily. Some funds may offer weekly liquidity for entry and exit.
  • CDs: Funds are locked in until the maturity date. Early withdrawals may result in penalties, such as losing some of the accrued interest, and withdrawals are usually not allowed within the first six months.
  1. Diversification
  • Mutual Funds: Provide built-in diversification since the fund invests in a variety of securities, helping to spread risk across multiple assets.
  • CDs: offer no diversification, as the investment is concentrated in a single, fixed-income product.

Redemption orders can be signed at any of the bank’s branches across Egypt. Redemption frequency varies depending on the fund. Some funds offer daily redemption, while others provide weekly redemption. However, in all cases, orders must be submitted before 12:00 pm on any applicable day.

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of capital market instruments, including equities listed on the stock exchange, treasury bills, treasury bonds, or other securities. Each investor in a mutual fund owns shares of the fund, representing a portion of the overall holdings. These shares are referred to as Investment Certificates, symbolizing the investor’s ownership in the mutual funds. The primary objective of mutual funds is to provide investors with access to a diversified portfolio managed by professional fund managers, reducing risk compared to investing in individual securities. Investors benefit from the collective buying power, professional management, and diversification of the fund, which can be difficult to achieve on their own.

All mutual funds announce the Investment Certificate price on a weekly basis, allowing investors to track their performance. Additionally, the fund manager publishes quarterly fact sheets that provide insights into the fund’s performance.
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PRESS RELEASE – JUNE 2014 RESULTS

Good development of activity in Q2 2014, with strong growth of our portfolio of clients

Our continued growth in Q2 2014 was highlighted by an increase in our loan outstandings of 4.8% for the quarter, with all customer segments contributing well to this growth. Our loan book has now grown by 6.0% in 2014 to date, a very satisfactory performance given the still low demand by our Corporate clients, demand that we are confident will pick up as the country’s economic situation stabilizes. Retail and Private Banking individual lending again performed very well, with loans to this segment now up 11.5% in 2014.

Deposits increased by 1.7% in Q2 2014, with deposits now up 4.9% in 2014 to date, our Corporate and Retail & Private Banking segments the standout performers in this area.

A satisfactory development in 1H 2014 has been achieved, with a very significant growth of our client portfolio (+17,500 net clients for 1H 2014).

Revenues better than expectations, though below an exceptional Q2 2013

While revenues continue to be better than expectations, supported by excellent trade finance and strong trading results, revenues are now slightly below those achieved in 1H 2013. This is primarily driven by an exceptional Q2 2013 FX performance, where the Bank benefited from both significantly higher FX margins, and exceptional transactions.

Total revenues are 3.1% below 1H 2013, with net interest income up 0.7% (2013 benefited from one-off suspended interest reversals, excluding which our core NII is up around 4.5%), net commissions and fees increasing by 30.0%, while other income (comprising FX, option premium, trading and investment income) is down by 52.7%, this reduction driven by the change in market practice for FX pricing.

On a pro-forma basis, excluding FX revenues, the Bank’s revenues are up 7.8% over 2013.

Excellent performance in efficiency and cost management

Expenses have decreased by 2.9% compared to 1H 2013, due to continuous cost cutting efforts and productivity gains, while the cost to income ratio has remained stable at 39.8%.

To improve our productivity further, CAE will shortly move into its new headquarters in New Cairo, with much better operational logistic efficiencies, as well as a “Green” certified environment friendly facility. We will also soon implement our new Core Banking System, which will provide a “State of the Art” platform to better serve clients and increase productivity.

Stabilization of cost of risk

The banking sector continues to experience some challenges in the risk environment, with a number of clients impacted by the economic slowdown, in particular within the SME client segment. CAE had addressed this with increased provisioning in Q1 (concentrated on 1 single counterparty), and an increase in our non-performing loan (“NPL”) ratio in the first quarter. While we have continued to book provisions in Q2, no major new risky files have been identified, and our NPL ratio has stabilized in the second quarter.

Apart from the risk challenges within the SME portfolio, there has been some stabilization in the risk environment in general, with both Corporate and Retail risks remaining quite low.

Robust profitability and solvency, impacted by increase in tax rate

On the regulatory side, the Corporate Tax rate has been increased from 25% to 30%. While this was only formally approved in June, the higher rate is retrospective from the beginning of 2014, and has significantly impacted our 1H 2014 results, with the additional tax cost for 2014 to date booked in Q2.

The Bank’s net income before tax for 1H 2014 is EGP446.4 million. This compares with EGP482.2 million last year, and has therefore decreased by 7.4%. Net income after tax is 15.1% below 2013, significantly impacted by the increase in Corporate Tax rate.

Our Return on Equity for 1H 2014 is 27.3%, while our capital adequacy base of 14% provides us with ample room to grow our business further.

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