Top five banks: The largest players in the sector

The nation’s banks weathered a perfect storm of economic and political crises in the 2008-11 period. With a new government now established, supporting GDP growth and a rising rate of consumer spending, so long as the country remains stable the sector is well-positioned for profitability. What follows is a look at the top-five players in the sector.

NATIONAL BANK OF EGYPT: Established in 1898 with a starting capital of £1m, the National Bank of Egypt (NBE) is the oldest commercial lender in the country, and as such has played a prominent role in the nation’s economic development. During the 1950s it assumed the functions of the central bank and, although it relinquished this role in the 1960s when it was nationalised, it remains in charge of issuing and managing savings certificates on the government’s behalf. Today, it is the largest commercial bank in the sector, claiming a market share of 24.1% of total assets, 27.3% of total deposits and 19.5% of total loans as of June 2011. Despite the challenging economic environment of 2010-11 year, it succeeded in growing its total financial position year-on-year by 2.2% to reach LE306.4bn ($51.3bn), while total deposits showed a 6.7% increase to climb to LE261.1bn ($43.7bn). Net profit before tax, meanwhile, increased by 14% to reach LE4.2bn ($703m), while its after-tax profit of LE2.1bn ($351m) was the highest in the bank’s history.

With the growing competition from Egypt’s private sector banks, its interaction with the economy is extensive: at the end of the 2010/11 financial year it held equity in 189 project across all fields of economic activity at a value of LE51.7bn ($8.65bn), while its savings certificates represented the largest household savings pool in Egypt, standing at LE94.6bn ($15.8bn), a 4.1% rise on the previous year. Much of its investment activity is carried out through its 95%- owned Al Ahly Financial Leasing Company, the activities of which accounted for the bulk of the LE236m ($39.5m) of new investment it made during 2010/11. The bank also directed LE150m ($25m) towards founding the Nile Holding Company for Development and Investment, which was set up as a vehicle to exploit opportunities in the Nile Basin countries.

On the consumer side, the previous financial year saw NBE introduce a number of new credit products, such as the Master Standard credit card. The bank has a network of 258 branches nationwide, as well as full branches established in New York, London and Shanghai and representative offices in a number of Middle East and African states.

BANQUE MISR: Egypt’s second-largest bank, with 16.1% market share at the close of the 2010/11 financial year, is also a state-owned entity, established in 1920 by economist and national hero Talaat Harb. Its pervasive role in the economy reflects its original mission, to invest national savings in the economic development of the country – and to that end it established 26 firms in various sectors between 1920 and 1960. This strategy continues in the present day, and as of 2011 the bank held equities in 220 projects across various economic sectors, including 11 joint-venture banks. It, too, showed record profits for 2010/11, with pre-tax net profit rising 22.1% year-on-year to reach LE1.67bn ($279m). Lending activity also grew over the year, reaching LE3.9bn ($653m), making the total value of credit extended by the bank LE45.3bn ($7.58bn).

On the retail side, this was aided by the launch of a number of new consumer products, such as new car and personal loans, which have been rolled out through its 450 domestic branches, This sizeable network makes Banque Misr one of the most visible financial institutions in the country, but it also has a significant international presence, with outlets in France, Germany, Lebanon and the UAE. On the corporate side, the bank managed 23 significant syndicated loans to fund mega-projects across a number of sectors, worth a total of LE43bn ($7.2bn). Of this, the banks acted as guarantor of nearly LE12bn ($2bn), and succeeded in marketing a further LE4.6bn ($770m) to other lenders.

COMMERCIAL INTERNATIONAL BANK: With total assets of LE85.5bn ($14.3bn) at the end of the calendar year 2011, Commercial International Bank (CIB) is the largest private sector lender in the market. Established in 1975 as a joint venture between the NBE and Chase Manhattan, it was bought almost in its entirety by NBE in 1987, which then reduced its interest in the bank to 19% over the course of two share sales in 1993 and 1996, before selling out completely to a consortium led by an American private equity firm, Ripplewood Holdings. In 2009 UK-based private equity firm Actis purchased 50% of the Ripplewood-led consortium’s stake, becoming the bank’s largest single shareholder. Having started out as a corporate-focused lender, since the launch of its retail operation in 1999 it has sought to establish itself a provider of financial services to households and small enterprises and branching out into wealth management, securitisation, private equity and Treasury services – whilst maintaining its well-established links with big business. The banks net profits declined by 20% in 2011, to reach LE1.62bn ($270m) – a development it attributes to the higher provisions taken “as a pre-emptive measure to cope with the ongoing economic and political upheaval Egypt is witnessing”. The bank did, however, succeed in increasing its deposit base in 2011 by 13% year-on-year, and achieved gross loan growth of 16.9%. Its current goal, according to the public statements of its management, is to carve out a 10% share of the domestic market before expanding its footprint regionally. Its loan market share was 8.66%, according to its 2011 financial results, while its share of sector deposits stands at 7.23%. NATIONAL SOCIÉTÉ GÉNÉRALE BANK: The NBE also acted as a catalyst for the creation of the fourth-largest bank, forming a joint venture in 1978 with France’s Société Générale to form the National Société Générale Bank (NSGB). Since then, NBE has divested itself of its stake while Société Générale has enlarged its holding to 77.17% and acquired its rival Misr International Bank, making NSGB the second-largest player in the private sector. The bank put in a robust performance over 2011, succeeding in growing its net profit for the year by around 12% to LE1.49bn ($249m), compared to LE1.33bn ($218m) in 2010. Total assets also grew, from LE53bn ($8.9bn) in 2010 to LE62.6bn ($10.5bn) – a rise of 18.1%, while asset quality has improved: a non-performing loan ratio of 4.8% in 2009 was reduced to 3.5% in 2010 and then 3% at the close of 2011. This combination of profit growth and improved asset quality was the basis for its “Best Bank in Egypt” award granted it by Euromoney magazine in June 2012. The universal bank has served the corporate and retail segments since its inception, and currently operates more than 160 branches across Egypt’s 24 governorates. Lending to both individuals and corporates grew in 2011, by 11.1% and 11.8% respectively, for a total loans and facilities to customers figure of LE36.3bn ($6bn). The banks has also established four subsidiaries, sometimes as joint ventures, through which it carries out business in the fields of leasing services, life insurance, automotive services (such as long-term fleet rental) and factoring operations.

BANQUE DU CAIRE: With assets of LE44.2bn ($7.4bn) as of June 2010, the most recent data available, Banque du Caire is Egypt’s fifth-largest lender. A publicly owned institution, it were earmarked for privatisation in the mid-2000s, and by 2008 it appeared that a government plan to sell of 67% of the bank at an asking price of $1.6bn were on the brink of coming to fruition. A number of interested parties had responded to the offer – including Saudi Arabia’s Samba Financial Group and Arab Bank Consortium, UK-based Standard Chartered, Dubai’s Mashreqbank and National Bank of Greece – but negotiations halted with a government announcement that the offers it had received had not meet the minimum asking price. The failure of the sale marked the end of the privatisation process in which the government had targeted the large, state-owned financial institutions. Instead, Banque du Caire is undergoing a process of reform which began when Banque Misr took the management role of the institution in 2005. To date this has included increasing its bank’s loan-to-deposit ratio to 45% for foreign currency and 40% for the Egyptian pound, as well as the introduction of a raft of technological and human resource innovations, aimed at making the bank a more attractive proposition at a later date. Its most recent figures show profits increasing from the 2008/08 to the 2009/10 year from LE106m ($17.7bn) to LE153m ($25.6bn), while its longer-term goal remains, according to statements made by then CEO Mohamed Kafafi, to expand its overall portfolio by an average of 15-20% per year on the back of improving consumer confidence and a greater awareness of the value of banking services.