'CIB can defeat the law of numbers,' says chairman

Reem Nafie
8 Min Read

CAIRO: Being a top bank in terms of “size and profit is an extremely difficult situation to defend, but we’ve proven [over time] that we can defeat the law of numbers, Hisham Ezz Al-Arab, chairman and managing director of Commercial International Bank (CIB), told Daily News Egypt.

“We have the stamina to compete in this marathon, and that’s the fun of it, to be able to compete, he added.

Despite rife international competition, Commercial International Bank (CIB) has continued to grow and is keen on maintaining its status as a leader in the Egyptian banking sector.

CIB produced impressive results in 2006 and maintained its position as the country’s most profitable bank with a return on average equity of 23.45 percent. It currently stands as Egypt’s fifth largest bank, with an estimated market share of 6 percent of total deposits in the local banking sector.

In 2007, CIB was named Bank of the Year in Egypt by The Banker.

In more recent developments, the bank is conducting due diligence over the possible acquisition of Cairo-based Arab African International Bank (AAIB), which would further strengthen its role in the Egyptian market and in the region. Ezz Al-Arab refused to disclose further details about the transaction.

In 2006, CIB’s corporate banking group managed to expand its loan portfolio by 24.4 percent in a market that grew by only 5.5 percent. In retail, the bank opened 19 new branches, a record number of new facilities, and expanded the automated branches (My CIB) from seven at the start of 2006 to 26 in July 2007.

“The number of customers is growing and the newcomers to the job market are increasing, [more branches were needed] to retain the quality of service and the number of accounts per branch, he said.

Ezz El-Arab takes pride in his staff, saying that the bank’s success is partially due to the bank’s corporate culture. “It’s an extremely competitive internal culture where people love to compete on the outside as well, he said.

During the last 18 months, CIB has focused on capacity building to prepare for the boom the market is currently experiencing, to establish a sustainable growth model, reduce potential risks and avoid technicality issues.

To do this, “you must have the right capacity in terms of processes and platforms, he said.

CIB – as well as other banks – has embraced the current developments in the banking sector, moving along with the evolution that followed a period of recession.

The banking sector went through some hard times between 1998 and 2004 due to the lack of monetary and exchange policies as well as a proper regulatory environment, he said. From 2001 to 2002, problems in the banking sector became more apparent and they needed to be addressed with radical reform.

There were over 60 banks, and now that number is below 40, he explained. Part of sorting out the problem was consolidation, cleaning up balance sheets, implementing the best accounting standards as well as implementing the right regulatory and supervisory policies.

“On top of that, [there was] a more flexible exchange policy, a reasonable monitoring policy and the openness of the Egyptian government in terms of banks ownership. When you put all these together, obviously the landscape has changed, he said.

“When you look at Egyptian private sector banks, many names have disappeared. After the sale of Al Watany Bank, CIB is the only private sector bank that came out of the turbulence, he said

The few private banks remaining are left to compete with the growing number of international banks in the market.

“It’s a challenge to maintain your standard, this creates motivation. It’s a healthy competition because when you look at large international banks, those are the banks we are competing against, they understand the cost of capital, they will not offer the market silly products with silly pricing, he said.

Competition, he says, improves standards, increases productivity and is healthy for the retail market as well as the customer, “plus we make more money for the shareholders because there is a higher benchmark to meet.

Ezz El-Arab feels that public sector banks now are faced with the challenge of reengineering their business model to survive with the changes in the market

“It’s a change in the philosophy and approach of the market, rather than a change of people. The rules of the game have changed, unless they change their philosophy, structure and how they approach the business process, the risk is that their market share will diminish, he said.

Private sector banks are growing, but are not eating from each other’s market share, he said; in reality, they are eating from the public sector’s market share. Factors hindering the progress of public sector banks are the labor law, the inability to let go inefficient employees, and affording international talents.

“The difference between India and Egypt is that in India, people know that if they don’t work they will die of hunger. In Egypt, people still think that if they don’t work they will still get paid, he said.

With the recent economic boom, all sectors – including banking – found themselves in dire need of professional caliber, which were not available due to the setbacks in the education system. People weren’t prepared for the boom, he said.

“When the current government came on board in 2004, most people thought they were temporary – like painkillers – not committed to the painful process of changing the economic structure. Now, although there are drawbacks, Egypt is on the map and people want to invest in it, he said.

With the privatization of Bank of Alexandria and the near privatization of Banque du Caire, the argument of public and private ownership arises.

“I’m not for or against privatization, I’m against mixing between ownership – whether governmental, private or group – and management, if you don’t segregate and create a wall between management and ownership, you’ll have a conflict of interest, he explained.

“Owners should not interfere in the tactical issues, at the end of the day you want revenues, growth and service, he said.

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