CAIRO: With the challenges posed by the global economic slowdown, banks around the world have been forced to react and adapt in order to make sure they remain solvent in anticipation of a difficult few years.
This was first on the mind of Gamal Moharam, chairman and CEO of Piraeus Bank Egypt.
With a heavy appetite for growth, Moharam is in the midst of evaluating and reevaluating the bank’s position to reconcile his long-held growth strategy and the economic realities of the day.
In an interview with Daily News Egypt earlier this week, Moharam, who entered the banking world in the 1970s, exudes all the confidence of one of a seasoned banker.
He began his banking career in Athens, Greece, working for Citibank. He notes with a chuckle that it looks as though his career will end with the Greeks too, since Piraeus is Greek-owned.
In early 1984, Moharram struck out on his own, creating a company to represent foreign banks in Egypt. MGM helped foreign banks navigate the legality and bureaucracy of doing business.
The business “was solving their problems in Egypt, he said, “with the bureaucracy and the Central Bank bureaucracy.
Moharam today still serves as the firm’s honorary chairman.
He has lived in New York and Cairo, working for a number of international banks, including Fleet National Bank, Bank of New York and Irving Trust.
If working for these banks was not achievement enough, Moharam tells with a grin of perhaps his biggest accomplishment: introducing computerization to the Egyptian banking industry.
“In 1984, Irving Trust and myself introduced the first electronic banking device for Egypt, he said. “It was a portable PC. It weighed about 30 kilograms. Two people can carry it. And we used to go to the bank and redial, and redial, and redial until we got the connection. And they could get their balances through this PC.
In more recent times, Moharam came to the Egyptian Commercial Bank in 2002, with a three-year mandate.
“This business plan was for three years, he noted. “It was three recommendations. Either we increase the capital, or sell the bank or merge with someone. And I based all my work on this target.
Overhauling the bank, recalls Moharam, was a tall order.
“It was not just changing the bank, he argued, “It’s changing the culture of the employees, the clients, the management, the owners – everybody. We need to change the whole culture.
After several years, Moharam began looking to sell the bank. After a lengthy process, two bidders emerged as leading contenders, Piraeus and Citadel Capital. In the end, Piraeus won out.
Since buying the bank, Piraeus has brought tremendous change.
“There is a change, he said, “because the value-added is obvious in technology, in risk management – things that we did have in the bank but we didn’t have the tools or the means to do.
Moving under the Piraeus umbrella also earned the bank a considerable capital increase, which is now LE 1.2 billion.
Turning attention to the global economic slowdown, Moharam argues that Piraeus Egypt is planning a short-term strategy shift.
Moharam addressed the rumors that clients were pulling their money out of privatized banks and putting them into the state banks given fears surrounding the economic crisis.
“For the first two days, it happened, he said, discussing the beginning of the financial sector meltdown in mid-September. “But it didn’t stay for long; first because . the Central Bank made it clear that they are guaranteeing all deposits for Egyptian banks and foreign banks. . Our deposits increased last month.
Looking forward to the next three months, he said, the bank would pull back from its aggressive growth strategy in order to take stock of the new economic landscape. He noted that the bank would also take the opportunity to work on internal matters, like more comprehensive employee training.
The bank will not take on many new clients in this assessment period, he added.
“And then after three months, he said, “We are going back to our normal growth, but the picture will be clearer.
Piraeus Egypt has set a target to increase the number of its branches from the current 57 to 100 by 2010. Moharam noted that the target has been reset to 2012 to account for the poor economic climate.
With regard to setting policy, Moharam also discussed the challenges of keeping in strategic lockstep with the larger Piraeus group.
“We are part of a group, so we need to look to the group as a total, he argued. “My growth should be related to the growth of the group itself. If they want to grow, how much the growth will be, are we going to grow the deposits and the loans at the same time?
Looking at the banking landscape in Egypt, Moharam had some strong criticisms.
“Bankers and banks are completely taken by details, he said, noting that this was strictly his own opinion, “And by the courts, and by Basel I, and then Basel II, and then Basel III. And they are forgetting the basics of banking. You have to know your client. You have to look to the ability of your client to repay you. And at the end of the day, the bank is a payment holder, it’s a credit decision maker, it’s a deposit taker.
Moharam also discussed the challenges his bank faced in working to change the culture in Egypt in order to boost the percentage of overall banking clients.
“The Egyptians, he said, “have three taboos. They don’t like to go to three places: the hospital, the police station and the bank.
He noted that historically terrible customer service turned many people off to the idea of banking.
Moharam argued that Egypt was at an important crossroads, noting that 50 percent of the population was under 25 years old.
Reeducating such a young population about the banking system, he said, was critical to the health of the economy.
“Everybody really has to concentrate on raising awareness on the role of the banks because at the end of the day, when you do this, when people start to use the banks, the amount, for example, of savings go up, which will help the economy considerably.
Looking ahead, among Moharam’s priorities for the next year is to take much of Piraeus’ banking operations online.
“A year from now, I would like to see that we are in e-banking, he said, “and have new products electronically, not just for the retail but for our corporate clients.
“Five years from today, he added, “I want to see a market share of 5 percent.
For Piraeus, whose current market share is 2 percent, this is no small task. But for an ambitious guy like Gamal Moharam, it might just be possible.
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