CAIRO: The smell of progress is quite literally in the air at Citibank Egypt these days. Their new office complex in Katameya sits at a nexus of construction in one of Cairo's most dynamic neighborhoods. From his window, Hisham Khairat, Citibank Egypt's marketing director and consumer lending head, can see dust rising up and hear the sounds of the half dozen construction sites in the neighborhood. In an interview with Daily News Egypt, he sounded a confident note for the banking sector. Citibank is the consumer and corporate banking arm of financial services giant Citigroup. The bank entered the Middle East market with its first Egypt branch in 1955. After the nationalizations of the 60s, Citibank relaunched in 1975 through its branch in Cairo with a license to operate in foreign currency. In 1993, Citibank Egypt was granted a license to operate in local currency, and quickly developed its corporate and investment banking business locally. In the late 90s, Citibank launched its consumer banking business in Egypt by introducing unsecured credit card to the market. Khairat, a 10-year Citi veteran, joined the consumer bank upon its creation in 1998, starting off in credit operations. Khairat initially focused on personal loans before becoming a product manager in 2000 to concentrate Citi's growing auto loans business. Today, running the retail bank, Khairat works with consumer banking at all levels and runs Citi's marketing program. Central to the Citibank brand, he said repeatedly, is its leadership in the industry. As a pioneer of foreign consumer banks in the country, Khairat discussed how other banks took a wait-and-see attitude on Citi's Egyptian venture. "After [opening the consumer bank in Egypt], a number of banks came in two to three years after us. They were testing the waters, seeing how Citi would do. And based on Citi's model, they basically came in, expanded, and took a lot of the models that we were collecting. Khairat is bullish on Citibank's current market share. Rattling through what scant data is available, Khairat names some of Citi's successes. "If I look at auto loans, for instance, he says, "in 2007, we had a 37 percent market share: one out of three cars sold on finance was financed by Citigroup. As for credit cards, he said, Citi has a 5 percent market share. Auto loans have been a cornerstone of Citigroup's consumer banking strategy, allowing the bank to work with a diverse set of consumers in a rapidly expanding market. "Auto loans today is one of our big . cash cows. It's delivering tremendous revenue for the bank, and the market is growing year on year. "Our main competition was the dealers, who used to finance the cars themselves at very high interest rates and with very cumbersome procedures he added, "when we came in, we came in with marketing; we came in with clients, and eventually it grew and it became a very big business for us. For its auto loans business, Citigroup has adopted a theme prevalent in all of its consumer business operations. "We've reduced our pricing on the auto loans, he says. "If you're going to sell more then you have to be very competitive in terms of pricing in product features. The buzz word at Citi these days is volume, and the Citigroup envisioned by Khairat and his colleagues acts less like a retail bank and more like a "wholesaler. "At the end of the day, we're making more money, but we're lowering our interest rates and we're increasing the number of customers that we're able to sell. "Consumer banks are all a game of volume, he added. "You want to make sure [if] your profit per unit goes down that you make it up by a larger number of customers. The bank has witnessed a growth in lending volume since it began operations 10 years ago. "There [used to be] very high risk because we were the only bank with a non-guarantee, clean lending, as they say. So there was a premium. There was a high-risk premium, so our prices reflected that premium. With more competition, though, "it was the right time to re-look at our products in terms of more product features and at the same time lower pricing. One of Khairat's chief sources of optimism towards the market is the low percentage of banked Egyptians (he suggested 10 percent to 15 percent), or those that have an active relationship with a bank. "Compared to all the 80 million Egyptian people that are living in this country, the banked population is very low. And that's an opportunity, he said. One of consumer banking's greatest achievements in the past 10 years in Egypt, Khairat argues, has been the general education of the consumer. "Initially people were skeptical when it came to banking, he said. "I think that's slowly, slowly eroding. People are trusting banks more and more. From the research that we do, we're seeing more positive attitudes towards [the banks]. Trust is extremely important. Despite increasing interest rates and greater inflationary pressures, Khairat's optimism for the banking industry endures. Praising the Central Bank's recent interest rate hike, he says, "This is a smart thing to do when you have such an inflationary environment. Khairat said there are two strategies for consumer banks to deal with higher interest rates. The first is to increase lending rates to keep step with the rising national rates; and the second is to maintain lower rates and pursue profit via other avenues. "We're trying to reduce our expenses and become more aggressive in terms of finding ways where we can make safe profits rather than passing on that increased interest rate to the customer, he explained. Even with restrictions on new bank licensing, which some deride as the mark of a closed economy, Khairat is confident that the consumer is benefiting. "This is something very positive because banks are becoming more powerful, and this is impacting consumers in a positive way, he said. "What happened in the last three to four years is a tremendous jump in the sophistication of the market . And it's really helping the customer. As Citigroup's consumer bank continues to grow and spread its risk broadly through its wholesale strategy, it looks prepared to weather this challenging economic time. To read the other stories in our monthly special focus on Egypt s banking sector, click here: http://thedailynewsegypt.com/article.aspx?ArticleID=15394 http://thedailynewsegypt.com/article.aspx?ArticleID=15392 http://thedailynewsegypt.com/article.aspx?ArticleID=15391
