We want to remain the best in Egypt. And by being the best, your customers are happy, shareholders are happy, the government is happy, the regulator is happy. The competition may be unhappy, but that’s fine, Commercial International Bank (CIB) Chairman Hisham Ezz Al-Arab, told Daily News Egypt from his office in Giza.
Remaining the best in Egypt was Ezz Al-Arab’s long-term outlook for the bank he runs. Ezz Al-Arab had spent the previous 40 minutes of the interview talking as bank executive, social philosopher and economist.
The comment comes from a man who has thrust his bank into a period of major transition – thereby gambling on its future – and who seems perfectly comfortable with the risk-filled whirlwind of change swirling around him.
About a year ago, the bank made the strategic decision to grow dramatically its retail banking sector. The number of employees at the bank has climbed from around 2,400 to roughly 4,100, and Ezz Al-Arab says it’s full steam ahead for the next year.
Central to Ezz Al-Arab’s philosophy – and critical to his success – is the bet that Egypt is heading towards a banking breakthrough, wherein the masses will reach a level of comfort with the banks that they will flock to teller windows across the country to do business.
“We decided to make the investments in terms of resources, people, technology, process, everything a year ago, although the breakthrough did not happen yet. But we have a sense that this is coming sometime in late 2010, early 2011, he said.
A man who has nearly doubled the number of employees on his payroll, Ezz Al-Arab has bucked the trend of cutting jobs and battening down the hatches for what many have called the worst recession in 80 years.
“We made a bet by starting in 2008, where the entire world is melting down, to start to make that investment, he said, smiling.
With the breakthrough in banking not expected for another year or two, it would seem that CIB is sinking cash into the business now in the hopes that it will pay off down the line.
Instead, the bank posted healthy numbers in the first quarter of this year – a quarter that many executives around the world wish could be expunged from the books.
The bank reported a 1.4 percent increase in first quarter net profit, bringing the three month haul to LE 471.4 million.
Ezz Al-Arab believes that building a strong retail banking sector is a process that takes two years. Speaking from a position of confidence, he warned that any banks who don’t make an investment in what he sees as the imminent breakthrough in banking will find themselves in a tough spot.
“If you try to build the capacity to serve those customers when the breakthrough happens, one of two things will most likely occur, he cautioned. “Either you will be behind the curve and it will take many years until you build the capacity to catch up, or you will do it wrong in a hurry.
Also critical to the success of banks in the evolving landscape, Ezz Al-Arab said, is an investment in small and medium enterprises (SMEs).
But banks, he says, have made a critical misjudgment in their dealing with SMEs. Lumping both small- and medium-sized businesses together, he argues, means a failure to deliver any business the services it really needs.
“What has changed from two years ago is that we separated the S from the M. The mid-cap companies are very much like the big corporates, and they are the future large corporates, he said.
“It’s a final decision that there’s a clear separation between the S and M – the approach and methodology, the requirements, the capacity building is very different.
He notes that many of the large corporations CIB does business with today were medium-sized enterprises 10 or 15 years ago.
A big deal
But Ezz Al-Arab is not punting on the small businesses. In fact, a recent major acquisition involving the bank, said Ezz Al-Arab, should bolster CIB’s efforts to better engage small businesses and enter the world of microfinancing.
Earlier this month, the private equity firm Actis purchased 9.4 percent of CIB – a move that could mean substantial change for the bank.
Actis is a leader in emerging markets around the world, and it’s that expertise and experience that Ezz Al-Arab hopes to capitalize on.
“We need to acquire that knowledge, see how it’s done in other countries who are similar to us in emerging markets. and help us with talents. Take our people and train them there, he said.
Also, the CIB board is expected to undergo an overhaul to reflect the change in ownership of the bank. Strong representation on the new board, Ezz Al-Arab hopes, will propel CIB forward.
“The difference between an active, strong board and a board of ‘yes, sir’ is what happened to ‘yes, sir’ banks and our situation. We are happy to have as many strong, solid board members, either representing themselves or representing an institution. because at the end of the day it keeps us on track, he said.
With massive growth in its retail operations, aspirations for growth in its microfinance program, and a new major shareholder coming on board, Ezz Al-Arab seems utterly nonplussed by an honor recently bestowed on his bank.
Euromoney named CIB as the Best Bank in Egypt for 2009.
But Ezz Al-Arab has bigger fish to fry.
“We have a clear objective to serve shareholders and the community, he said. “We get those done first. And we get them done right. After that, if the award comes, that’s excellent.
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