(Photo from Al-Borsa News)
Mohammed Etribi, executive chairman of Egypt Gulf Bank, is planning to implement an ambitious strategic plan approved by the bank’s board of directors. The plan includes new projects and initiatives to bring Egypt Gulf Bank among the major banks operating in the market.
The board approved a business strategy that is divided into short-, medium-, and long-term stages, said Etribi. The strategy will restructure various departments of the bank through projects that support each sector separately.
The main goal is to restructure the administrative sector of Egypt Gulf Bank and increase assets at the same time. The bank recently signed a contract with another company to restructure the human resources department, alongside radical changes in the bank’s overall infrastructure.
The bank will launch an independent unit charged with managing small to medium projects by the end of the year, said Etribi. This unit will work mainly with clients representing small and medium enterprises toward rebuilding the Egyptian economy.
The bank aims to create a financing portfolio of LE400 million for smaller projects by next year, unlike the micro-portfolio of Egypt Gulf Bank’s subsidiary development company, whichis estimated at LE270 million.
Etribi discussed the bank’s introduction into the retail sector in the coming months. This is expected to take place mainly through a project to issue car loans, in cooperation with a major company that prefers not to be named until the final contract is signed. Egypt Gulf Bank is also preparing to launch during this year’s fourth quartera new mortgage product in cooperation with developers, to revitalise the bank’s real estate work. The bank has allocated an initial portfolio of LE100 million for this product.
The new mortgage product will attract many customers, said Etribi, because it is economically feasible, but success depends on political stability. Mortgage rates in Egypt are weaker than those of other Arab countries, which hover around ten percent, he added. This stands in contrast to Europe and America, where employment rates range between 30-50 percent of GDP. Etribiemphasised the importance to mortgage ratesof applying measures set by the Central Bank of Egypt and private real estate finance.
The bank’s total retail portfolio is LE500 million, a figure that evidences the bank’s intention to launch several new products in the coming months. Egypt Gulf Bank prefers not to provide full details at this time, however the bank hopes to bring in profits of LE178 million during the coming fiscal year on the tail end of a breakthrough LE139 million net profit last year, said Etribi.
Egypt Gulf Bank further hopes to increase capital gradually, to reach LE1.5 billion by the end of 2017, in order to both support expansion and allow the bank to obtain a significant market share.
According to Etribi, Egypt Gulf Bank seeks to attract LE1 billion in new deposits this year, bringing total deposits to LE7.7 billion by the end of next December, compared to the currently held LE6.7 billion.
Along with expansion plans, the bank will open five new branches before the second quarter of next year, bringing the total number of branches to 22, said Etribi. Egypt Gulf has received approval from the Central Bank for these branches to be located in Haram, Nasr City, Damietta, and commercial malls, he said.
A new investment management company called Egyptian Gulf has recently been established, addedEtribi, and Egypt Gulf recentlypurchased an independent headquarters for the new company. Plans to establish a leasing company will be postponed until a more politically stable time, he said.
Etribi predicted that banks will see high growth rates in the near future. The only danger comes in the form of persistent political unrest, he said, a reality that may negatively affect customers and lead to the formation of new measures to prevent faltering.
Etribialso claimed that banks reeled in profits last year for a number of reasons, the most prominent of which was a decision made by the Central Bank to reduce the reserve requirement from 14 percent to ten percent. Thus banks that invested in these reserves saw high returns.
Egypt Gulf Bank is very active in the fields of corporate finance and syndicated loans, and recently contributed LE18 billion to a loan granted to the Egyptian Company for Ethylene. Egypt Gulf also contributed LE220 million to a loan for MAF Futaim, along with another loan to Noran Sugar Company for LE220 million. The bank’s total credit portfolio is LE4 billion.
As for debt, Etribi said that bank provisions cover between 80-85 percent of a portfolio marked for non-performing debts, unlike other types of collateral.
He also argued that banks that have recently entered the Egyptian market, among them Qatar National Bank United Arab Emirates Bank–who recently acquired National SocieteGenerale Bank and National Bank BNP Paribas respectively–reflect the outside world’s confidence in the Egyptian economy.
He further noted that an end to the transitional phase and the return of security to Egypt will precede economic improvements, and called for focusing on pursuing Egypt’s interests and making progress toward stability in order for investments to return to Egypt.
Etribisaid also that the root of the current problem is not economic but political, and that stability will contribute greatly to economic success. Egypt continues to be one of the leading countries in the region, thanks to its rich natural resources, its important role throughout history, and its people power, he said.
He also touched on the issue of state loans and deposits, arguing that these measures are imperative throughout the interim phase. Foreign reserves must also be improved, but more importantly, production wheels must begin spinning again in light of loans, deposits, and debt obligations recently paid by the state.
Etribi also called on the government and the banking system to pay attention to small- and medium-sized projects, as these have proved a saving grace in eradicating poverty, increasing employment, and generally developing the economies of countries like Egypt in the past.
The government must take serious measures to close the budget deficit by creating new mechanisms that will reduce expenses, increase revenue, and eventually reduce subsidies and taxes, he added. The budget deficit in 1997 was estimated at LE20 billion, representing one percent of GDP, yet that same deficit rose to LE20 billion in 2006 and then to LE200 billion this year.
Etribi pointed out that interest on deficit reduction bills and government bonds contributes to LE20 billion in expenses each year. Employing bank surplus liquidities as a means to lend to customers is a much better method than buying bills and bonds due to high lending yields, he said.
He also confirmed the ability of the Central Bank to intervene in cases of counter-speculation on foreign currency prices. “The Central Bank implemented an extraordinary package of measures that succeeded in reducing the currency exchange rate in official and parallel markets,” he said.
Etribi finally called for the need to revamp production, as well as the return of tourism, direct investment, and exports to normal levels in order to support cash reserves. Foreign aid will play a role in improving Egypt’s economy as well, he said.
