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Banking sector has been steadily improving
Published in Daily News Egypt on 15 - 11 - 2007

CAIRO: The fourth "Enta Wel Bonook (You and Banks) conference and exhibition - held under the auspices of the Central Bank of Egypt - concluded Wednesday on notes tackling privatization of banks, boosting competitiveness, and establishing a regional champion.
"A bank's main job is to first preserve deposits of its customers and second to increase its capital. Our job is not to fund [non-promising] governmental projects, explained Gamal Mouhram, chairman of the board of Piraeus Bank Egypt (PBE). "Government's interference in a bank's management decisions was a major problem in the past, and it is quite [blissful] that it is now starting to come to an end [via the current privatization scheme].
Mouhram, who is a firm believer in the privatization of banks, explained that a bank should only fund successful projects - whether public or private - that would increase returns on investment. "Otherwise, the bank will lose money, suffer from non-performing loans, risk losing customers' money, and will eventually go bankrupt.
Officials of Egypt's latest privatized bank - the Bank of Alexandria - also supported the ongoing privatization scheme, explaining it rhymed with growth, competitiveness, and revenues.
"After privatization, the bank's budget soared by 15-20 percent to reach LE 34 billion, while deposits jumped 15 percent to reach the current LE 26 billion, said Mohamed Abdel Latif, chairman of the board of Bank of Alexandria. "We expect our net profits to exceed LE 9 million into the year's end.
Last October, Italy s Sanpaolo Bank bought 80 percent stake in Bank of Alexandria -Egypt's fourth largest bank - for a staggering $1.613 billion.
The convention, which was open to the public, brought more than 20 banks and financial institutions under one roof to showcase their services as well as offer various promotions to potential customers. Among the exhibitors were Barclays Bank, ABC Bank, Audi Bank, Citibank, National Bank of Egypt, Egypt Post, Banque Du Caire, Bank of Alexandria, and Piraeus Bank.
"The exhibition is a very good opportunity for the bank to introduce its services to the Egyptian market and consumers and is a good chance for the public to stay updated on latest products and services that the Egyptian banking and financial sector has to offer, said Essam El Wakil, managing director and CEO of ABC Bank Egypt - one of the official sponsors of the exhibition.
Several bankers drew on their experiences in the banking sector and highlighted different challenges they faced in the early 2000s. However, since 2004 - under the new Cabinet - the banking environment has been steadily improving, allowing several regional and international banks to enter the market and expand.
Greece-based Piraeus Bank, for example, marked its official entry into Egypt's banking sector by acquiring Commercial Bank of Egypt in mid-2005. However, it bumped into asset quality problems and a heavy non-performing loan ratio. Later in 2006 and the first half of 2007, the bank s non-performing loan ratio improved, partly due to a combination of recoveries and write-offs and also due to expansion of its loan portfolio, which almost doubled between December 2005 and June 2007.
PBE's Mouhram listed the advantages of having non-Egyptian banks enter the market. "They bring in with them new employment opportunities, more income, training, and new products. They also offer investment opportunities from across the world, which further increases Egypt's foreign direct investment.
Still, these foreign banks, he added, are more competitive than Egyptian ones and might eventually jeopardize their business. "Currently, Egyptian banks [both public and private] hold around 40 percent of the market share. But unless Egyptian banks improve and enhance their competitiveness, this figure can quickly slip down to 5-10 percent.
He also criticized Egyptian banks for operating on a domestic low base rather than expanding their reach to a wider regional level. "A country as big as Egypt does not have a regional presence, while Jordan, for example, operates the region's Arab Bank.
He explained that Egyptian banks should expand their horizon, enter new markets, and aim to maintain a leading position across the region. "They should do their research and study market needs to establish a niche across the region.


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