The leaders of Al-Ahli Bank of Kuwait (ABK) are in the process of devising their new operating strategy in the Egyptian market after AKB’s acquisition of Piraeus Bank Egypt (PBE).
ABK recently concluded the deal conducted with Piraeus Bank Greece in order to acquire 98.5% of Piraeus Bank Egypt’s shares, worth $150m. The shares were transferred officially to ABK’s ownership on 10 November.
At a press conference last week, ABK’s leaders in Kuwait and Egypt announced the conclusion all procedures for the acquisition, revealing their hopes for operations in the Egyptian market. The conference was attended by ABK’s CEO Michel Accad, ABK-Egypt’s CEO and Managing Director, Constantinos Loizides, and ABK-Egypt’s Executive Vice-Chairman Nayera Amin.
The bankers spoke with Daily News Egypt about the bank’s future, the Egyptian business environment and the prospect for growth in financial operations.
When will ABK’s name and brand be announced in Egypt?
Accad: We have decided to change the name of Piraeus Bank Egypt into ABK-Egypt after the approval of official authorities in Egypt on the new name. It will be applied at all 39 of the bank’s branches over the first half of 2016.
What is the significance of this deal for ABK?
Accad: The speedy acquisition of Piraeus Bank Egypt will ABK diversify its banking operations and services while expanding its regional coverage. It will also provide several new growth and prosperity opportunities for both ABK and ABK-Egypt.
ABK-Egypt represents approximately 10% of the assets of the mother group in Kuwait, and the group has the intention to increase this share to 20%, and perhaps as much as 30%.
What is the importance of the Egyptian market to the bank?
Accad: We are very happy to be in the Egyptian market, and any bank working in Kuwait or the gulf in general believes that Egypt has the largest potential in the Middle East and North Africa, and is a very attractive market.
Egypt is very populous, and the number of banks in it is less than the number needed to fulfill the needs of citizens. One person out of 10 has a bank account, which means that there are great opportunities for the growth of banking services.
Also, investment opportunities in the sector have become very limited, as most banks have already been sold, although there might be a bank or two that are still available for sale. Egypt is a great place to be, especially since ABK plans to be a regional bank. Moreover, the situation in Egypt is stable compared to many other countries, and the security situation in Egypt is no concern for us whatsoever.
Expected growth rates of banks in Kuwait and the Gulf region can range between 5% and 10% annually. However, in Egypt, we expect growth rates of no less than 15% every year.
In Egypt, there are plenty of jobs in the retail sector and business. We will focus on these sectors as they are not far from the bank’s work in Kuwait, where the retail sector accounts for two-thirds of the bank’s financing, and the business sector accounts for other third.
Does the bank plan to enter into other markets at the moment?
Accad: Before we think of entering into other markets, we must first accommodate the Egyptian market. When we achieve our desired growth, we may consider entering into other markets. But this will not be any time soon, at least three years from now.
What is the bank’s capital in Egypt currently? Are there any plans to increase it?
Accad: The bank’s capital in Egypt at the moment is estimated at EGP 700m, and we aim to increase it to EGP 1bn in order to support the capital base of the bank and help it provide larger finances. However, the timing of this step will be considered with the bank’s management. Also, it is possible to transfer profits achieved by the bank in 2016 in order to increase capital, and we can inject liquidity from the parent bank to support the capital base of the bank in Egypt. But planning a step like that is difficult.
What is the size of the bank’s market share in Egypt? What are the plans to increase it?
Accad: The bank’s share in the Egyptian market right now is estimated at 1%, and we aim to achieve unlimited rapid growth in the Egyptian market.
It is known that when a bank is smaller, it can achieve quicker growth rates. Piraeus bank had big ambitions in the Egyptian market. However, its problems in Greece hindered those ambitions.
What are the main features of the Bank’s business strategy in Egypt during the coming period?
Accad: It may be too early to disclose this now. We would not have talked about this before finishing all acquisition procedures for Piraeus Bank Egypt. Now that we have finished them, we are talking with the bank’s management in Egypt about conducting operations in the Egyptian market. It could be a few months before we have a solid strategy, so it may not be before the first quarter of 2016.
Loizides: The bank will be able to compete well in the Egyptian market and we are looking forward to achieving a high growth rate.
Amin: We look forward to seizing all opportunities that support the bank’s growth in Egypt. I believe there is an agreement between the bank’s management in Kuwait and Egypt to realize that goal.
Accad: I can say that we are working in accordance with four core values, namely: transparency, integrity, simplicity, and excellence.
Our vision is to provide all banking services to our customers in a very simple manner.
Simplicity of transactions is ABK’s approach. When a customer seeks a loan, the approval should be granted and the money should be deposited in their account on the same day. It happens with opening accounts too. The customer can get the card that will be used to manage that account before walking out of the bank.
It is clear that you have a special interest in the retail sector in Egypt, although there are already some major banks, such as Citibank, in this sector. Do you agree?
Accad: Working in retail is very attractive, and we aim to achieve high growth rates in the sector. Citibank stopped its retail activity in Egypt due to circumstances of its own. It stopped that activity in a number of countries, not just Egypt. And we do not suffer from similar circumstances.
Will the bank resort to geographical expansion by increasing the number of branches to achieve the growth target in the Egyptian market?
Accad: The bank now has 39 branches in Egypt. We will need to increase the number of branches and the geographical spread. However, this is not the right time to take that step.
Amin: The bank’s growth in Egypt is not only about increasing the number of branches. Branches are established when needed. When Piraeus Bank bought the Egyptian Commercial Bank, many of the latter’s branches were closed as they were not needed. What we need is to develop the bank’s business and innovate to attract new customers before opening new branches.
Can the mother bank enter as a financier of projects launched in the Egyptian market next to the bank in Egypt?
Accad: Yes, certainly, but that depends on the feasibility of the projects, and each will be considered separately.
What about the bank’s support for small and medium projects?
Accad: Piraeus Bank used to fund that sector as part of the business sector. However, we will significantly focus on that sector in the next period, but it will take some time.
How does the ABK serve the Egyptians working in Kuwait and the Emirates?
Accad: We are interested in working with the Egyptians residing in Kuwait and Emirates, not only in regard to transferring money – this is not our mission or goal – but we aim at supporting and serving these customers in everything.
Loizides: the bank aims at playing a significant role in facilitating the cash flows of the Egyptians working in the Gulf countries – especially in Kuwait and the Emirates – to Egypt.
Are you worried about the crises take place in Egypt from time to time?
Accad: There are risks in everywhere in the world, and it is known that the high risks are associated with high growth rates. This is our choice, and we accept the risks in Egypt, and are not worried.
How do you perceive the exchange rate crisis Egypt is going through?
Accad: The currency’s crisis in Egypt does not worry us at all. We do not invest in Egypt today to obtain profits and transfer them abroad tomorrow. That is not our goal; we are here to continue. The major investor in the bank may obtain profits. However, that will not be before two or three years.
Egypt goes through fluctuations in regard to the availability of foreign exchange, and it faced such crises before. However, it was able to solve and combat them. Other crises may occur in the future, but anyone who believes that these crises will continue is mistaken. Egypt heavily relies on the tourism as a major source for foreign exchange, and that sector was affected a lot. The sector will recover quickly, and not for the first time.
Moreover, the New Suez Canal that Egypt dug recently will be very useful for Egypt with the return of the growth in international trade.
Finally, are there plans to sell shares in the bank on the stock market in Egypt in the upcoming period?
Accad: We came to Egypt to buy not to sell. We bought 98% of Piraeus Bank Egypt, and soon, we will present an offer to buy the remaining percentage. We do not intend to offer shares of the bank on the stock market. The situation may change, and we may think about that after five or 10 years, but not now.
