CAIRO: Like many Egyptian banks, Credit Agricole Egypt (CAE) has plenty of cash on hand. But while a loan-to-deposit ratio of 40 percent - Egypt's national average is above 50 percent, and many Gulf countries have rates higher than 100 percent - may be a boon amid tight credit, it also means the bank could be lending much more. Now, as the financial crisis rages and a broader slowdown looms, CAE is trying to push further into Egypt's nascent banking market. This means expanding branches, bolstering training programs and, of course, extending more loans. Daily News Egypt sat with Henri Guillemin, the company's managing director, to discuss banking in Egypt this year. Daily News Egypt: Credit Agricole Egypt's loan-to-deposit ratio is exceptionally low, even for Egypt. Why is this? Henri Guillemin: One of the main reasons is that we took over Egyptian American Bank in late 2006 and this bank had a very low loan-to-deposit ratio. I think it was at the time, if I remember well, around 22 percent. So now we are at 38 percent. There is still a long way to go, and at the same time we want to follow our standards and not develop our loan portfolio unreasonably fast. We have to make sure we are selective, so we have to make a tradeoff between the growth we want to achieve and the standards we want to follow. Do you expect a slowdown in Egypt's growth will change the makeup of your loan portfolio? Generally speaking, we are willing to closely monitor our lending portfolio but we do not have a specific worry about a specific sector for the time being. We are going to adjust depending on the situation of the country. But for the time being, we feel the situation is rather sound. So we keep the standards we have and we follow them closely. But there is no reason for alarm. Do you experience any systemic barriers to lending here, like interest rates or the size of the informal market? No. A systemic issue would mean that we would be worried about the situation of banks in Egypt, which is not the case at all, because the Central Bank is behind them anyway. And overall we feel that the banking sector is in good shape. Do you have trouble finding qualified employees for your banks? We have a lot of Egyptian executives in Dubai and Saudi Arabia, so the market is much wider [than just Egypt]. We have some problems finding specific experts here because there are not many in the market and the prices could be high. But otherwise, for the standard profile, we find whatever we need on the local market; keeping in mind that we have a lot of training offices because we feel there is a need to improve their banking knowledge and get them trained for what we want them to do. We had 840 people trained in 2008 so far. Where do skills need improvement specifically? Everywhere. In all kinds of activities. Specifically, I would say, retail banking. Since we are opening a lot of branches, we need to staff these branches, and the staff needs to be trained. And we generally take very young people for that. We feel that they are better motivated; it is a challenge for them. Part of your business is expanding credit services. How large is the market for credit cards in Egypt now? I know that when you see [figures from] banks which publish the number of cards, compared to the 80 million people in Egypt, the number of cards is quite small. Which products have most potential in Egypt in the near future? Mortgage finance. I think that has potential. It is not going to be easy, because it is a culture, it is a habit which needs to be developed, and it will take some years. But it is a very promising type of activity. And for the rest, there is commercial lending as well. There are a lot of people. It is a young country, people need to get equipment, buy things. Banks, if it is well done, can play a major role in this respect. Much of new real estate in Egypt has been focused on the wealthy. What sector do you think has the potential for mortgages? The market [for mortgages] is not big. But we feel that there is a lot of potential in the middle market. For the time being, we are mostly on the upper end of the market, which starts cooling down, because it is expensive . But the need is definitely in the middle market. We are not going to do subprime. Are there any specific government steps that have made it easier for you to do business? They [the Central Bank] made their approach much better by giving authorization [for new branches] as a batch, not on a case-by-case basis. And we feel there is a good support in this respect. The new approach for retail banking is one year old. And I think it's a good one . it is making it easier to have a dialogue with the Central Bank. And for them it is more professional in the sense that they can figure out what the impact on the market is going be. Depending on the needs of the population, they push the banks to open in remote areas . to make sure that the banks not only go for the best places, but also show concern for the clients by going to some places that might not be as profitable in the short-term. Many areas in the country are still under-branched.
