CAIRO: Commercial International Bank (CIB), Egypt s largest listed lender by value, recently posted its second-biggest quarterly profit on record, as operating profits soared to new highs.
The bank recorded a third-quarter net profit of LE 270.1 million, up from LE 227.2 million in the same period of 2006. Net interest income climbed 21 percent to reach LE 852.4 million in the third quarter of 2007 versus LE 705.6 million in the same quarter last year, as a result of a 30 percent increase in interest income as well as a 36 percent increase in interest expense.
“In terms of net income, results are more or less in line with our expectations, Hatem Alaa, banking analyst at HC Securities brokerage firm, said. “The surprise was that the growth in net income was primarily driven by growth in operations . which is very positive.
With operating income growing by 31.4 percent year-on-year (YoY) to reach LE 1.8 billion and no significant increases on the cost side, CIB s bottom line grew by an impressive 44.4 percent YoY to reach LE 943.2 million. “Net fees and commissions growth, which advanced 36.7 percent YoY, have been the two main movers for the past quarters, he added.
The bank’s fee income rose 18.1 percent to LE 243.1 million, mainly attributed to the performance of the bank s mutual funds and its merger transaction involving Commercial International Capital Holding (CICH) – the bank’s investment banking subsidiary. Consequently, investment income went up by 96 percent to LE 415 million affected by the one time capital gain of LE 148.4 million, associated with the merger transaction.
CIB and Arab African International Bank (AAIB) agreed last October to conduct exclusive due diligence that could lead to a merger. However, both banks did not disclose details of the possible merger, due to the non-disclosure agreement between both parties.
CIB Chairman Hisham Ezz Al-Arab recently announced that the bank would not go through with the transaction unless there were visible synergies and positive value for its shareholders. CIB might negotiate with AAIB by the end of the year a possible update on the state of merger talks.
Banking analysts believe the objective of the merger is to create a national champion in the sector. According to Beltone Financial, the new entity would hold 7.4 percent share of total lending and 8.7 percent share of total deposits in the system. Both banks scored high returns on assets and equity in fiscal year 2006 and operated at reasonable efficiencies as reflected in their cost-to-income ratios.
“We believe that if the transaction goes through, it will be a positive consolidation step in the sector, and the new entity will have better opportunities to seize, given its larger size, the company commented.
Beltone Financial assigned CIB shares a “hold recommendation, expecting strong growth to continue into the year’s end.
The recommendation reiterates Ezz Al-Arab’s expectations that the bank would sustain its strong growth into the fourth quarter of 2007 because of favorable economic conditions in Egypt and large inflows of foreign investment.
CIB has strong growth targets for retail lending in 2008, creating a platform of the latest technology, the right marketing staff, the proper structure of products, and the appropriate risk management system.
Moreover, the bank plans to launch pilot projects for both SME financing as well as mortgage lending. The SME financing pilot portfolio is comprised of 300 companies with LE 600 million worth of facilities.
Mortgage financing is currently minimal too, standing at LE 100 million. These pilot projects will help the bank assess current systems and risk management for these two segments, resulting in a wider offering of products.
