S&P Predicts Strong Year Ahead for Egypt’s Banking Sector

Easing inflation, policy support, and rising investment expected to fuel lending despite pressure on profitability

Egypt’s banking sector is heading into 2026 with steady momentum, supported by improving economic conditions and a more accommodative monetary environment, according to the latest outlook from S&P Global Ratings.

After rebounding strongly in 2025, Egypt’s economy is expected to gain further strength. Real GDP growth is forecast to rise to 4.8 percent in fiscal 2026, up from 4.4 percent a year earlier. This acceleration is being driven by increased private-sector investment and continued recovery in tourism, two pillars that are restoring confidence across the financial system.

Lower inflation is another key factor reshaping the banking landscape. S&P expects inflation to cool to an average of around 12 percent in 2026, down sharply from 20 percent in 2025. As price pressures ease, the Central Bank of Egypt is widely expected to continue cutting interest rates, improving borrowing conditions and supporting credit growth across the economy.

Against this backdrop, lending by Egyptian banks is projected to expand by about 25 percent in 2026. Government and public-sector financing will remain a major driver, but private-sector demand is also expected to pick up as businesses respond to improved financing conditions.

“While lending growth will remain strong, lower interest rates will weigh on profitability,” S&P noted, estimating that banks’ return on equity could ease to around 20 percent in 2026, compared to roughly 25 percent in 2025.

On the positive side, asset quality is stabilizing. Nonperforming loans are expected to remain contained, supported by economic recovery and easing inflation. A large and growing deposit base, mainly from households continues to underpin liquidity, keeping Egyptian banks well-positioned as the country moves into its next phase of economic growth.