News Column

EGYPT- Bank of choice

May 19, 2014

How has the bank performed over the last year and to target expectations?

"CIB is a growth-oriented bank. We continuously set our targets to grow and monitor what we can do better as an institution. That is why we have continued since 2011 with our ambitious plans for hiring, investing in critical infrastructure, opening new branches, renewing our information technology systems and, above all, training our people.

"The fruit of this investment was clear in year 2013; CIB produced yet another record financial performance, and once again, was able to retain its position as the most profitable bank within the Egyptian banking sector. Despite broad-based challenges to the economy and three successive downgrades in credit ratings during the first half of the year, we posted an outstanding operational and financial performance with improvement across all key metrics, from margins and spreads to return on equity, return on average assets and cost-to-income, where our ratio is now the lowest it has been in five years. CIB produced consolidated net income of EGP three billion for full year 2013, 35 per cent over 2012. Standalone net income reached EGP 2.6 billion, 19 per cent over 2012. Standalone revenues grew 27 per cent over 2012 to reach EGP 6.8 billion. As for the net fees and commission income, this grew 42 per cent year-on-year to reach EGP 1.2 billion.

"Such impressive performance does not happen overnight; it is the result of the understanding of the Egyptian market's needs, the ability to cater to these needs by highly skilled staff, a varied array of customer-oriented products and services, a widespread branch network throughout the country and the bank's strong brand and reputation. Dedication, motivation as well as hard work continues to allow CIB to be the bank of choice to more than 500 of Egypt's top corporations, throughout its history, and enhances our valued customers' trust."

Which banking segments do you see as areas of growth in the next two years?

"Egypt is characterised by being a cash- dominated market, leaving numerous untapped growth opportunities in the retail segment. Same applies for the SME sector as well as mortgage lending which are under-penetrated and hold significant room for development. For SMEs, CIB saw the underlying potential early on and established the Business Banking segment to cater to those companies with a relationship management approach.

"Retail banking has become one of our main focus areas as CIB intends to exert the same success as corporate banking into this untapped area. CIB continued to build a full-service consumer bank, underscored by the ability to serve clients in a challenging environment last year.

"We offer a wide array of consumer banking products, including personal loans, auto loans, deposit accounts, residential property finance and credit and debit cards. CIB also caters to the largest number of affluent clients in Egypt through wealth management. CIB continued its branch network expansion strategy in 2013, adding 17 new branches, as well as enhancing its image and customer experience through the renovation and replacement of five other branches. CIB was one of the few banks to grow its network significantly in 2013. Such network expansion is within the growth plan of CIB in order to cater to the bank's increasing client base.

"Looking at mortgage financing, Egyptian banking has not yet made strides in the development of mortgage financing systems. The total value of the mortgage sector in Egypt is worth about EGP 4.172 billion. This in itself highlights the fact that the sector has potential of growth in this primitive and underdeveloped area."


What initiatives are planned to grow the SME segment? What is the plan for lending, which sectors are demanding more funding, what educational, networking other support is there for the support of corporates?

"As CIB looks at SME's as a segment to expand in, the bank has launched its business banking services that cater for SMEs. The business banking segment has been one of CIB's strategic initiatives in the past couple of years, handling and managing SMEs within the banking sector. In 2013, the business banking segment was aggressively introduced to the market with a number of financial products and service offerings that were specifically created for the targeted demographic. Such offerings include, but are not limited to, money transfers, online transactions, trade financing, electronic payroll and overdraft with reduced time, effort and fees. The business banking segment has undergone continual growth since its launch in 2011, a success attributed to several factors, including our efforts to develop a relationship based on trust with our clients, our experienced and committed management team, and finally, the hard work and dedication of our relationship managers, who work to establish solid relationships between our clients and CIB."


How are you navigating the bank over the past year and in 2014? "Despite the fact that Egypt has witnessed a lot of political and economic developments over the past period, it is important to remember that not much has fundamentally changed in the banking sector. Egypt has always had positives and negatives as any emerging market would. The diversity of our local economy managed to retain the country's resilience.

"Over the past three years, CIB maintained its strong and resilient balance sheet and capital base, reflected in a comfortable capital adequacy level (13.55 per cent) and CBE liquidity ratios; these place the bank in a flexible position to deal with an uncertain economic environment. CIB continued to be number one private-sector bank in Egypt in terms of revenues, net income, deposits, loans, total assets, book value and market capitalisation."

What moves by the regulator will bring back market confidence?

"The leadership of the Central Bank has been fundamental in leading reform and establishing the framework for the sector over the past few years. The reforms and initiatives undertaken by the CBE have led to the creation of a healthier/stronger banking sector environment that is more convenient for efficient banks as well as the creation of numerous business opportunities on the retail and mortgage spaces. In a solid step to achieve structural reform of the mortgage lending segment, the CBE has launched an initiative which aims to avail long-term financing at low return to low- and middle-income classes. This initiative will provide flexibility in the actual application of mortgage lending and will ensure it reaches the largest number of aforementioned beneficiaries. For such, it is highly expected that this untapped segment will pick up in the near future.

"As for the SME segment, it is the largest business sector in the economy and is considered to be the most profitable. In this context, it represents an attractive future growth opportunity, especially in light of the CBE efforts targeting SME development to create a more enabling environment. The CBE established a specialised small-and medium-enterprises (SME) unit at the Egyptian Banking Institute (EBI) which aims at providing knowledge and management services, enhancing SMEs' financing environment and applying international best practices.

"Some of the activities undergone to promote an enabling environment for SME financing are:

??I-Score - credit bureau which gathers information on companies and individuals

??Nilex - the Egyptian exchange market for growing medium and small companies, which offers SMEs a long-term access to capital

??Credit Guarantee Schemes- to compensate for the lack of collaterals hindering SME access to finance

??Entrepreneurs Awareness / Financial- Education- through training programs and awareness-raising events

There are approximately 36,000 SMEs accounted for in the SME database that the EBI unit is developing, of which only 17,000 deal with banks. Nevertheless, in their attempt to leverage on the huge untapped potential lying in that segment, banks are increasing their focus on that sector."


What technological investment is being made to ramp up online and social media marketing at the bank?

"CIB highly believes in the role of social media and the effect to which social media platforms had left in the marketing sphere. We have just launched our official Facebook page which attracted more than 10,000 fans in one month. With carefully planned strategy, CIB's Facebook page is highly interactive with ordinary users, customers, and potential customers to be able to provide online customer care service in addition to the ordinary 24/7 customer service. CIB is soon to launch other social media platforms to be able to conform to the most efficient social media upgrades."

Any other initiatives?

"CIB is soon to launch its mobile banking services. It is still a new domain for the Egyptian banking sector. However, with a population of more than 87 million and a banked population of five per cent along with mobile penetration rates of 116.94 per cent in January 2013, we can safely assume that Egypt possesses the demographic infrastructure for mobile banking and payments. Such figures present an opportunity for catering to the unbanked population through mobile payments. Several banks are exploring this realm and setting preliminary agreements with Egypt's network providers."

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Banker Middle East