Banque Du Caire Regains Position Through A 3-Yr Ambitious Strategy: El Zahed

Mounir El Zahed, chairman of Banque Du Caire, revealed the bank’s strategy for the next three years which targets building an integrated system so as to enable the bank to regain its market share to stand at 5% in the next two years, up from the current market share which swings from 3% to 3.5%. Such an increase will be met through well-studied expansion in many major banking sectors.

What are the main features bank’s plan for the upcoming period?

Banque Du Caire has set an ambitious strategy that targets building an integrated system aiming at recovering its market share and position in the market. This will be through a well-studied expansion in vital banking sectors in which the bank excels. Having a portfolio with no bad loans together with a loan-to-deposit ratio of 35%, while the average is between 50% and 55% at other Egypt’s banks, will enable the bank to achieve good growth rate strengthened by the highly qualified staff.

The bank’s strategy is based on a number of axes; mainly is financing micro, small and medium enterprises which represent the backbone of national economy in any country. The bank also targets expanding in retail banking sector especially in government employees’ loans and car loans as well as in arranging and managing syndicated loans. For achieving this strategy, the bank plans to step up training programs for the employees so as to reach the goals set by the bank for the upcoming period.

Outlay the bank’s strategy for financing small and medium enterprises?

Banque Du Caire has set an ambitious plan to expand in financing SMEs in the upcoming period through a number of mechanisms mainly is offering the customers a continuous line of credit. This product will be executed on two phases. The first phase includes assigning 80 employees to a single task in inquiry, risk management, external marketing or analysis departments. The second phase depends on the fresh graduates by the second half of the current year.

The bank targets raising SMEs portfolio to EGP 8 billion in three years, from the EGP 600 million offered to 250 customers.

What is the volume of finances offered by the bank to micro-enterprises?

Banque Du Caire depends on micro-enterprises to achieve high growth rate in the upcoming period as it has 10 years experience in financing these enterprises. In addition, the highly trained staff qualified in conducting the financing process has boosted the bank amid the absence of credit bureaus and budgets for these enterprises. The bank also has experience in credit assessment of these projects.

The bank acquires the largest micro-enterprises portfolio that stood at EGP 5 billion with bad loans of less than 3%. The micro-enterprises portfolio offered about one million loans to more than 360,000 customers; 20% of which are women. The value of the loan is up to EGP 50,000 with few documents required. This product succeeded because of the direct communication with customers as the bank’s credit officials visit the place of the business.

Within the efforts aimed at keeping up with the bank’s expansion plan, the minimum limit of micro-enterprises finance was raised from EGP 5,000 to EGP 10,000. The banks also allocated six new units and branches for offering these finances reaching 115 branches and units spread across all governorates in Egypt. The bank studies offering micro-finances through youth centers, in addition to signing a number of finance agreements with Social Fund for Development.

How do you see the bank’s role in managing and arranging syndicated loans?

We concern about financing the big projects; during the last period we widely participated in some syndicated loans for big projects in developmental sectors. In Q4 of 2011 we participated in syndicated loans with EGP 950 millions, most of them in petroleum and gas sectors plus several developmental projects that support the national economy. As per Q1 of 2012 we participated in a group of syndicated loans with $ 180 million for many developmental projects in several sectors; petrochemical sector is most prominent.

What about Mopco & Suez Steel’ struggled loans?

Mopco loan is EGP 6.3 billion, and almost 23 local banks participated in providing the loan. The factory is still suspended; even it got all the environmental approvals, whether from local institutions or global ones. A court verdict was issued to resume work, but the factory doesn’t work due to the people’s fears from the environmental effects; as they claim.

The loan of Suez Steel is EGP 3 billion; Banque Du Caire was one of its organizers. There was an ongoing discussion with the ministry of industry and the company, as it was settled on the license’s value. We had studies in order to detect the company’s ability of commitment and paying the license’ value; this is to secure the loan.

During the current time, banks to limit their retail’s expansion on higher risks
Do you adopt the same approach now?

We have ambitious plan for expanding in financing the retail banking through developing the products the bank has, and which distinguish us in the market. The car’s loan is most prominent, particularly after seizing 20% of the market share during short period.

In addition to that, the bank expands in the loans of the civil servants by which the bank is distinguished in the market. We acquire 30% of the market share for the granted loans inside the market for this sector. This highly distinguishes the governmental banks for their belonging to clients more that the national banks. Even the profits of these loans are not too much, but they are safer as the clients’ salaries are being transferred directly to the bank every month. We seek to expand those loans, so we offered powers to the branches’ directors plus the facilities simplifying the procedures. The client can get the loan in a week. Also we increased the loan’s minimum limit to EGP 60 thousand, moreover, presenting a lot of new products that meet the needs of our clients.

The bank’s market share is currently ranging between 3% and 3.5% out of the Egyptian banking sector. We are seeking to increase it to 5% through carrying out the expansion plans the bank has devised.

What are the results of Sensitivity testing performed by Egyptian banks after the revolution?
The bank has undergone an sensitivity test to find out the impact of the post-revolt incidents on the creditworthiness of the sectors and projects the bank has financed. Besides, the bank has set assumptions that production cost would rise 20% and production would decline 10% to measure the companies’ ability to repay the loans. Provisions were also increased to avert a potential crisis, although the bank chooses well its customers and follows up with them.

What is the volume of Bank’s loan and deposit portfolio? And what about the estimated growth rates?

The bank’s loan portfolio amounts to EGP 18 billion distributed to EGP 6 billion for retail banking; while the rest is distributed to corporate credits. We are targeting growth rates of 35% within this year. The bank’s deposit portfolio amounts to EGP 30 billion and we are targeting to make it reach EGP 35 billion, higher 15%, within this year. The Central Bank of Egypt (CBE)’s decree to decrease the required reserve on deposits by 2% contributes to providing enough liquidity for the market for the current period.

International financial institutions see the Egyptian market still able to attract investments, while we see the opposite… Why?

Indeed, Egyptian economy still has all the factors to achieve growth. A multiple reports made by international financial institutions see that Egypt’s economy will be one of the most active countries in the Middle East in achieving growth in many of its sectors within the coming years. These reports asserted that Egypt can be the hub of many African counties due to large population density of 85 million, which means more of production and consumption, availability of manpower and fertile lands and its unique geographic location.

However, In Egypt there is a quite different vision and perspective regarding this point as here the local investors bear the country’s heavy burden.  Egypt suffers from backwardness in multiple fields, education and health in particular, besides the high rates of poverty, unemployment and living in slums.

All the above-mentioned factors make us feel concerned about the future.

For the international financial institutions, they are detecting the available opportunities for investment and the mechanism of achieving high rates of profitability for their future investments.