Ongoing political uncertainty, muted GDP growth and the threat of reduced business volumes that these factors carry with them has resulted in a number of ratings agencies giving Egypt’s banking sector a negative outlook. However, Egypt’s largest banks have demonstrated a high degree of resilience to date, with their bottom lines supported by the ready availability of government securities placed at high yields. What follows is a snapshot of the top-five players in the Egyptian banking sector.
NATIONAL BANK OF EGYPT: With total assets of LE321.5bn ($45.7bn) at the close of June 2012, the National Bank of Egypt (NBE) is the largest commercial lender in the country. The bank has long enjoyed a dominant market position, and according to Moody’s Investor Services its domestic market share in terms of loans stood at 22% in 2012, while in the same year it claimed 27% of total deposits. The sector’s ability to maintain its standing in the market is partly explained by its history.
Established in 1898, it is the oldest bank in the country and as such has played a central role in the nation’s economic development – including taking on the role of central bank after Egypt’s revolution in 1952. It relinquished this role in the 1960s after it was nationalised, but to this day remains in charge of issuing and managing savings certificates on the government’s behalf. Although free from government interference in its operations, its status as the largest state-owned lender has engendered in the bank a sense of social responsibility which is manifested in its investment in the larger economy: at the end of the 2010/11 financial year, it held stakes in around 190 projects across a broad spectrum of economic activity, at a value of LE51.7bn ($7.4bn), and it has also taken the lead in servicing the informal SME sector, a segment traditionally seen as unbankable by other players (see analysis).
The bank has always been a popular destination for household savings, and at the close of the 2011/12 financial year its customer deposits stood at LE278.8bn ($39.7bn), a 6.8% increase on the previous year’s total of LE261bn ($37.1bn). Lending activity over the same period, meanwhile, showed a 12.1% expansion, with loans and advances to customers reaching LE95.3bn ($13.6bn). While noninterest income declined marginally over the year, net interest income showed a considerable increase of 82.6%, to reach LE8.4bn ($1.2bn). This underpinned the bank’s 33.3% rise in net profit over the period, which came in at LE2.8bn ($398.4m).
BANQUE MISR: The state is also the owner of Egypt’s second-largest bank, Banque Misr, which in 2012 posted total assets of LE187.8bn ($26.7bn) and claimed a market share of 15%, according to Moody’s. Established in 1920 by prominent Egyptian economist Talaat Harb, its mandate to invest national savings in the economic development of the country was adopted from the outset, and by 1960 it had established 26 companies across a range of economic sectors. This economic outreach continues to this day, with the bank currently holding stakes in 12 joint venture banks, as well as some 210 projects in the fields of industry, tourism, housing, agribusiness and food, services, finance, and communications and IT. The bank’s network of around 450 branches makes it one of the most visible in the country, and it has traditionally leveraged this fact to address the retail segment with a range of consumer products such as motor and personal loans.
However, the financial year 2011/12 saw the bank post a modest decline in loans and advances to customers, which fell by around 4.2% from LE45.4bn ($6.5bn) to LE43.5bn ($6.2bn) – although the bank did succeed in improving its capital position, raising customer deposits 5.2% to reach LE162.5bn ($23.1bn). Banque Misr completed the year with a satisfactory growth in revenue: net interest income expanded around 85.9% to reach LE3.98bn ($566m), while income from commissions and fees posted a 6.3% gain to reach LE827.2m ($117.7m). This performance enabled the bank to declare a net profit of approximately LE708.9m ($100.9m) for the year, an increase of around 37.5% over the previous year’s profit of LE515.4m ($73.3m).
COMMERCIAL INTERNATIONAL BANK: With total assets of LE89.6bn ($12.8bn) at the close of 2012, Commercial International Bank (CIB) is the third-largest player in the market and the largest private sector lender in Egypt. Having started operations in 1975 as a joint venture between NBE and Chase Manhattan, it spent the decades that followed building up a loan book that was largely focused on the corporate sector. In the late 1980s it became a quasi-public sector operation after being almost entirely bought out by NBE, but over subsequent years the national flagship’s holding was gradually reduced until it sold out completely to an American private equity firm, Ripplewood Holdings.
In 2009 UK-based private equity firm Actis became the largest single shareholder when it purchased 50% of Ripplewood’s stake. The bank has also undergone a strategic pivot in recent years, commencing a retail operation in 1999, widening its loan portfolio with consumer deposits and extending its product range to include wealth management, securitisation, and private equity and treasury services. Like many banks in the sector, the last year has seen CIB bolstering its capital position: customer deposits rose by around 7.3% over the first half of 2012 from LE71.5bn ($10.2bn) to LE76.7bn ($10.9bn), while over the same period loans and advances to customers remained almost static at LE39.69 ($5.7bn) over the previous year’s LE39.67 ($5.6bn). The modest loan growth did not prevent the bank from posting net income gains, however, with net profit for FY 2012 rising by nearly 38% from LE1.6bn ($227.7m) to reach LE2.2bn ($313.1m). NATIONAL SOCIÉTÉ GÉNÉRALE BANK: National Société Générale Bank (NSGB) was established in 1978 as a result of a joint venture between NBE and France’s Société Générale. As with CIB, NBE gradually divested itself of its interest, allowing Société Générale to increase its holding to 77.17% which, together with its acquisition of Misr International Bank, made NSGB the second-largest player in the private sector with total assets of LE63.8bn ($9.1bn) at the close of June 2012.
The universal bank has served the corporate and retail segments since its inception and currently operates more than 160 branches across Egypt’s 24 governorates. Its significant network played a part in Qatar National Bank’s decision to take a 97.1% stake in the bank, The deal represented the largest financial acquisition of the year to date in the MENA region and was the first of what is expected will be a number of merger and acquisition deals involving Gulf capital and Egyptian financial institutions. The change of ownership could bring new growth for NSGB, with QNB’s former group CEO, Ali Shareef Al Emadi, stating in April 2013 that the branch network might be doubled over the coming five years.
One area in particular where NSGB might benefit from it new owner’s capabilities is e-banking, which the Qatari lender has assiduously developed in recent years. The bank put in a solid performance in 2012, expanding loans and advances to customers by around 2.3% in the first half of to reach LE35.9bn ($5.1bn), while net profit for FY 2012 climbed by approximately 3.4% year-on-year from LE1.49bn ($212m) to LE1.54bn ($219.1m).
BANQUE DU CAIRE: With assets of LE56bn ($7.97bn) in December 2012, Banque du Caire is Egypt’s fifth-largest lender, and another of the publicly owned giants which dominate Egypt’s banking sector. Plans to privatise the bank were set in motion during the mid-2000s and by 2008 the government had announced that it would divest itself of 67% of Banque du Caire’s shares. Interest in the deal was widespread, with Saudi Arabia’s Samba Financial Group and Arab Bank Consortium, UK-based Standard Chartered, Dubai’s Mashreqbank and National Bank of Greece all making approaches to the Central Bank of Egypt (CBE) with regard to a purchase.
However, with the $1.6bn ($227.7m) price tag apparently unmet, the government scrapped the sale and thereby brought to an end a programme of privatisation which had included some of the largest state-owned financial institutions. The CBE’s strategy since 2008 has been to subject Banque du Caire to a process of reform with a view to establishing it as a more attractive proposition to potential buyers, although the recent political turmoil in the country has rendered the future of privatisation activity in Egypt moot. Following an intensive process of restructuring, which included increasing the loan-to-deposit ratio and introducing a range of technology and human capital improvements, the bank has showed a steady profit. During the first nine months of 2012, the bank’s net profit expanded by approximately 56%, from LE392m ($55.8m) to LE614m ($87.4m).
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