Chairman of Commercial International Bank, Mr. Hisham Ezz Al Arab, discusses the bank's remarkable returns, growth strategies, why it is the chosen partner for 700 of Egypt's largest corporations and the much anticipated Egypt Economic Development Conference
How do you see the current state of Egypt’s economy in terms of stability and potential for growth?
There is a huge growth potential for the Egyptian economy. Given the fact that Egypt has witnessed a lot of political and economic developments over the past period, it is important to remember that nothing has fundamentally changed and, like any emerging market, Egypt has its highs and lows and the diversity of our local economy managed to retain the country's resilience. The underlining story is still a good one, especially with the government proactively addressing chronic economic and social issues, such as infrastructure, budget deficit, and so forth. Accordingly, a more conducive environment for investment seems to be forming, simultaneously with the government’s ongoing efforts to revive international institutions and investors’ confidence and interest in the Egyptian economy.
How optimistic are you about the future of Egypt and this current government’s ability to bring change?
The current Egyptian government has proven to be pro-business in light of the economic reform plan it has been leading. All the measures that have been taken so far aim at restoring the confidence in the Egyptian economy and within the business community, such proactive measures have led to positive outcomes and improvements across all sectors and thus allowing for continuity and sustainability through shaping the country’s economic DNA.
The future of Egypt’s economic growth is reliant on the commitment to continue the implementation of the reform strategies. And, in light of the political stability and the government stance focusing more on the economy, the economy is set to jumpstart and companies as well as individuals are regaining their faith in the country; in short, Egypt is now a go.
Four years on from the January 25 revolution and Egypt's banking sector remains one of the country's brightest spots. The 2011 Revolution impacted the banking sector minimally in comparison to other sectors.What practices did CIB adopt or evolve to showcase this resilience?
Despite the political and economic instabilities that took place in Egypt over the past four years, the banking sector was the least affected thanks to the reform movement that was made by the Central Bank of Egypt (CBE) back in 2004. This move has strengthened the structure of the banking sector and hardened its abilities to adapt to any changes or turbulences. In fact, CIB proved its leadership in the market and the front effectiveness of the bank’s practices, especially on the “Business Continuity”. CIB was the first and only local bank in Egypt to start enforcing Business Continuity standards since 2010. The bank put in place fully fledged business continuity plans, which were developed to mitigate risks and reduce potential negative issues and impacts of natural and man-made disasters. Our plans provide structure and guidance for the safety of customers and employees in the bank’s premises as well as regulated procedures for the continuity of the banking operations and services to be able to continue providing the best service possible to our customers. We believe it is essential that our clients remain confident in our commitment and ability to provide ongoing services during disruptive events, such as at the time of January 25 Revolution. We managed to keep our commitment to maintain effective client communication and provide our valuable customers with the necessary support at all times, while building on our solid growth rate and continuing our investment plans.
Strong Growth: CIB is Egypt’s largest private sector bank with a total market share of approximately 8%. CIB reported a 17% increase in revenues year-on-year and a net-income increase of 20% year-on-year. CIB’s return on average equity reached 29.5% ytd September 2014, up 110 basis points from a year ago. To what do you attribute this success?
At its core, CIB works to produce long-term, profitable growth by building strong brand equity and delivering value to our customers, shareholders and community. This fundamental strategy is simple, adaptable and has a proven winning record.
CIB is characterized by its extensive experience and deep understanding of the market and customers’ needs, which underpin the bank’s plans of expansion and strengthen its position in the banking sector. Backed by our expertise, we have been constantly developing our products and services and introducing innovative financial solutions to meet the ever changing demands of the market and we have been reinforcing our presence by inaugurating new branches that are convenient and easily accessed by CIB clients across Egypt.
This has been translated in CIB’s ability to close its third consecutive record year in both top and bottom lines, with consolidated revenues hitting EGP 8.0bn in 2014. Consolidated bottom line came in at EGP 3.7 billion, an increase of 24% over last year on strong performance across the board. Lending activity continued to recover in the fourth quarter. Our loan portfolio grew over EGP 8 billion, or 18%, throughout 2014, including a record EGP 2 billion in new retail loans. Trade service volumes also grew strongly - over 35% - reflecting the on-going economic recovery and CIB’s ability to grab market share in a growing market while simultaneously protecting margins across our product portfolio. Alongside this, the Bbank maintained its strong asset quality and liquidity indicators. CIB has thus continued to strengthen its financial position in 2014, and today stands ready to capture the growth opportunities that should be forthcoming in 2015.
Topping the index for most efficient bank, CIB is “Bank of the Year” for the second consecutive year.How does CIB’s corporate governance or structure contribute to the firm’s remarkable performance?
CIB has always been a pace setter in the area of corporate governance as the Bank believes such practices are vital to the creation of long-term, sustainable value for our stakeholders. Transparency, fairness, disclosure and meritocracy are at the core of the corporate governance framework.
CIB’s overall corporate governance framework assures the alignment of the interests of shareholders and managers as well as monitoring the management of the business through the dissemination of information and transparent reporting. In this context, the bank’s governance framework is directed by a number of internal policies and regulations that cover a wide range of business and fiduciary aspects including risk management, compliance, audit, remuneration, evaluation, succession planning, ethics and conduct, budgeting and capital management. Clear and segregated reporting lines in different areas of the bank together with highlighting any potential conflict of interest, are set in place throughout CIB along with a continuous chain of supervision and communication channels for the Board’s guidance and strategy.
is one of the world’s least banked nations, where one in 10 adults has a formal account, according to World Bank data. Lenders may see a retail boom as the economy improves. What potential does CIB see for expansion in the domestic market or are expansion efforts targeted internationally?
CIB is always on the lookout for opportunities that serve the bank’s strategy for the long-term sustainable growth. As it stands today, there remains huge untapped growth potential in the domestic market mainly in the retail and SMEs sectors. A large majority of the Egyptian community is under-banked. We at CIB look at the retail segment as a field to expand in, and we work to provide customers with new products that meet their financial needs. Regarding SMEs, although this segment contributes to be a large majority of Egypt’s productivity, most SME’s operate informally and without formal institutional banking support. The registration of SME’s and the support of such enterprises through specialized investment and capacity-building programs would definitely be a future growth driver for the banking industry. Moreover, CIB’s Business Banking is devoted to providing our customers with integrated financial solutions and service that we developed especially to fulfill their financial needs and become an added value by offering: tailor made products & services, wide branch network for customers’ convenience, non-financial products and services, in addition to E-Services and electronic banking solutions. Another promising area for the banking sector is being generated by the government commitment to attract local and foreign investment through public-private partnership projects.
Furthermore, the anticipated reforms in legislative regulations along with the government's direction for promoting the financial inclusion of Egypt's grey economy and under penetrated banking population will undoubtedly open the door for banks to penetrate long-lost untapped opportunities. As a matter of fact, such a strategy of financial inclusion will ultimately lead to a steady growth in system wide deposits and as the sector continues to maintain low loan to deposit ratios demand for credit will always be comfortably met.
Egypt will unveil 10 mega projects in need of financing at the EEDC in March.What are your expectations for this conference and what is the role CIB will play in this event?
Organizing Egypt Economic Development Conference is considered as a strategic step on the route to the development of our national economy and a proof of the great unexploited capabilities and potentials. This is not a donor’s conference. EEDC is a means through which we tell the world what is our economic DNA, the terms and conditions for conducting business in Egypt and expose the opportunities for investors. It is to promote all the current mega projects and give a clear direction to the international community on where the country is going.
CIB, as a firm believer in the Egyptian underlying growth story, accordingly we will continue to deliver superior performance and enhance the bank’s financial condition and prospects, and continue to drive real development in the economy and produce value for our customers, employees and shareholders. The financial needs of the country, companies and individuals will continue to grow over time. CIB, armed with its liquid and robust balance sheet, is there to harness and endorse that growth to grow and help others grow.
Over 700 of Egypt’s largest corporations bank with CIB. As the EEDC seeks to attract foreign investors into the country, why should they choose to bank with CIB as they channel funds into the country, as opposed to any other bank?
CIB has been the partner of choice for Egypt’s 700 largest corporatations for the past 40 years. It’s all about CIB’s success in maintaining long-standing relationships with customers. CIB sustained its preferred and most trusted business partner position through meeting corporate clients’ expectations and needs in a most timely and precise manner, offering best-in-class financial structures and advisory services to its clients with its competent team, customer oriented approach and innovative product portfolio and distribution channel.
CIB aims not just to be the best provider of conventional banking services to corporate clients, but also to retail customers and mid-cap companies in Egypt. This has resulted in a sustained effort to improve the quality and breadth of products and services, which would allow the bank to penetrate new segments.
Despite Egypt’s banking sector showing such high growth, what do you see as the greatest constraint in the sector today?
In order to continue to grow its economy, Egypt needs to continue and further cement its commitment to reforms. The highest constraint is not to keep the current commitment to implement the reform plans adopted by the government and not to continue the execution of development strategies.
CIB Chairman stated, “Banks in Egypt are committed to a share of up to 7% of the profits to CSR, at a time when the rate in foreign banks is about 1.5%.” Can you tell us more about some of CIB’s projects and their impacts?
CSR should never be considered as an obligatory duty, on the contrary, it is a commitment from all CIB employees to willingly pay back to the community. Because our real value is never calculated by the amount of money we earn, but by the degree of happiness we bring to desperate faces.
Through the CIB Foundation, established in 2010 as a non-profit organization dedicated to enhancing health and nutritional services for the underprivileged children, a number of sustainable development initiatives took place and result in positive, long-term outcomes. CIB shareholders generously increased the percentage of CIB’s net annual profit to the Foundation from 1% to 1.5%, allocated for the health services the foundation support with the ultimate goal of creating new beginning for children across the country care.
We were honored to win the EMEA Finance 2014 “Pan-Africa Award for Corporate Social Responsibility”, which is a recognition of CIB’s efforts and attempts to create a better environment for its staff, customers and the wider Egyptian society.