Banque Du Caire is planning to grow its overall portfolio by an average of 15 to 20 percent a year, impelled by what executives see as an improvement of consumer confidence and awareness in dealing with banks.
“In 2008…the bank’s portfolio was LE 5.7 billion and now we have LE 14 billion — of which LE 12 billion are cash. We are growing and we plan to grow even further,” Mohamed Kafafi, vice chairman and chief executive officer of Banque Du Caire, said in an interview with Daily News Egypt.
“We have a very healthy banking sector in Egypt,” he said, pointing to increasing deposit rates.
In August 2010, deposits clocked in at LE 911 billion; up from LE 670 billion a couple of years ago, he said. “Also, today we have LE 450 billion in total loans [while] two or three years ago we had LE 340 billion.”
According to Kafafi, these are positive indicators of consumer confidence levels as well as proof that market and capital market awareness is growing.
The banker and the bank
With over 30 years of expertise in banking and management in Egypt, North America and Arab countries, Kafafi is also president of the Egyptian Company for Credit Inquiry and the Egyptian Company for the Development of Billing Services. He is a board member of Misr-Bank Europe based in Germany, Egypt Lebanon Bank, the Egyptian Banks Company for Technology Solutions and Cairo International Bank Kampala, Uganda.
Kafafi spoke with optimism about Egypt’s banking sector and saw sizeable potential for retail banking, on which Banque Du Caire plans to capitalize.
The 39 banks operating in Egypt are well-capitalized and well-managed, he said, supported by recent reforms in management, structure and branding. Coupled with strong banking control units and a stable regulatory environment administered by the Central Bank of Egypt, the positive trends are sustainable, he said.
Kafafi lauded CBE policies, including real estate lending regulations which capped lending at 5 percent of banks’ loan portfolios. Speculative transactions are prevented by regulating the derivatives market and the “liquid banking system” is cultivated with strict regulations on liquidity ratios.
The CBE has implemented a stringent capital adequacy ratio of 10 percent to abide by requirements of the Basel Accords, which are internationally recognized banking requirements and regulations.
“By 2011, all banks operating in Egypt will be bound by Basel II and Basel III requirements. The action plan was started last year to build stronger mechanisms and supervisory functions and they are currently in the phase of assessment of banks to evaluate them and to monitor their developments towards that goal,” he said.
“The loan-to-deposit ratio [is] 55 percent in [Egypt’s] banking sector as a whole; the CBE rules are a minimum of 45 percent for foreign currency and 20 percent for local currency,” he said.
The planned privatization of state-owned Banque Du Caire in 2007, which was expected to raise more than $1.6 billion, was scraped and it is unclear whether the government will reconsider putting it up for sale again. Since that time, the bank has increased its loan-to-deposit ratio as part of a broader restructuring effort, Reuters reported.
“Banque Du Caire has a very healthy ratio of 45 percent for foreign and 40 percent for the Egyptian currency,” Kafafi told Daily News Egypt.
Banking on potential
Reforms and regulations implemented gradually over the past several years have had a positive impact, Kafafi said, and helped shelter Egypt’s banking sector from the global financial crisis. More reforms are underway and there is room for further growth as the percentage of the banked population is still low.
“The Egyptian population is roughly 80 million and the percentage aged over 15 and under 60 represent almost 42 percent of the population, so around 33 million is the bankable total of the population,” he said. “However, the total number of accounts in the banking system falls in the neighborhood of 14 million, so there is definitely a gap between the bankable population and the current…number of accounts,” he added.
Kafafi argued that the situation is improving from the lender’s perspective, explaining that the Egyptian Credit Bureau established in 2005 currently covers 93 percent of customers in the commercial banking sector. There are 7 million customers on the system and 73,000 companies registered with the credit bureau, those companies with facilities up to LE 1 million, he said.
Banque Du Caire has focused on retail products that attract a wide spectrum of society, he said, enabling it to grow its portfolio substantially. “There are banks that work only in a certain category or class level; but since 1952, our bank has been serving all the classes and segments of the market,” he said.
According to the bank’s website, besides providing traditional retail products through saving accounts, certificates of deposits, credit cards, debit cards and payroll cards, the bank provides personal loans to government and private sector employees and microfinance loans to small investors.
“We have a unique product for government employees, with 380,000 borrowers and with a balance of LE 3.8 billion, which is 10 percent of our lending,” Kafafi said. “Another main retail area, microfinance lending, is at LE 420 million with 113,000 borrowers.”
The program was initiated around eight years ago and its goals include helping communities fight poverty, creating jobs and supporting the government’s plans in these areas.
“We have found it very beneficial to target specific groups with attractive, affordable and competitive products giving us access to a wider customer base. We started programs targeted towards social statuses like single mothers, or geographic areas, like impoverished communities in Upper Egypt, and we have been very successful at that,” he said.
“The default rate of these microcredit loans is excellent at only 1.8 percent, which really encouraged us to raise our product ceiling for a single loan this year from LE 25,000 to LE 50,000,” he added, citing plans to expand these programs with more product offerings.
