Egypt banks damaged in protests

Egyptian banks face an uncertain outlook until the country's political turmoil is resolved.

Banks have been targeted by protesters in the widespread unrest in Egypt, with branches of lenders including Barclays Egypt and National Bank of Abu Dhabi badly damaged.

The financial fallout could take longer to repair.

Although Egypt's stock markets are closed, the London-listed general drawing rights for EFG-Hermes, an investment bank, have fallen 27.3 per cent to US$8 a share since January 25.

Banks will remain closed today, according to Hisham Ramez, the deputy governor of Egypt's central bank.

"The situation will be followed on a daily basis," Mr Ramez told the state-owned Middle East News Agency.

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Remittances, payments between countries by workers living overseas, could also be hit if banks in Egypt are not seen as stable.

Data from the central bank show $9.5bn (Dh34.89bn) worth of remittances were transferred to Egypt last year. "Workers' remittances, which had been increasing as a result of improved job prospects in the Gulf and taking advantage of high local interest rates could also slow [due to the unrest]", according to a recent report from Nomura.

The situation for investment banking appears equally uncertain.

"Foreign direct investment, which had already been on a decline in recent years [last year it registered $6bn after hitting a high of more than $8bn a year ago], could suffer a further blow," the report added.

One banking analyst, who asked not to be named, said the environment for returns on wholesale banking was bleak.

"A best-case scenario is that it will be flat, the analyst said.

"The worst-case scenario is super bad. In the next few days it should be clearer: if the regime doesn't survive, the implications are completely different than if Mubarak stays in power."