CAIRO: Commercial International Bank (CIB) said Tuesday that it will double its issued and paid-up capital to LE 5.90 billion ($1.07 billion) financed from its reserves. Shareholders will receive one free share for every one held by the close of trade on July 14, the bank said in a statement. The move is in line with the bank's previous decisions to increase capital through reserves, which has happened seven times since 1993, CIB Chairman Hisham Ezz Al-Arab said in a written statement to Daily News Egypt. “During this period…the bank's paid in capital increased from LE 400 million to almost LE 6 billion,” he added. Furthermore, he explained that “despite increasing the number of shares [outstanding] from 40 million shares to almost 600 million shares, this allowed the consequent increase in cash dividends.” Mai Elhagar, director of research at Naeem Brokerage in Cairo, agreed, stating that CIB has a consistent record of issuing bonus shares to its shareholders. However, “no new injection is taking place” through this decision, she affirmed. The move allows CIB shareholders to cash in a portion of their investment, but will still permit them to remain shareholders within the bank, Ezz Al-Arab stated. Elhagar explained that the increase does not affect the value of the bank – “its equity remains the same,” she noted. She explained that CIB takes such measures to “compensate for lower dividend payouts” to shareholders. In Ezz Al-Arab's estimation, such a move is “welcomed by retail investors and proven to be value accretive for institutional investors.” When asked what measures the bank took to put itself into a position to double its capital, especially considering the amount — $1.07 billion, Ezz Al-Arab responded, “CIB has always been considered to be a conservative player. However, we prefer to use the term ‘prudent.'” He added, “We have witnessed and weathered various cycles within the Egyptian and world economies that have enabled us to maintain and further enhance a prudent risk management culture insuring that we are well provisioned and capitalized to weather any unforeseen storms.” According to Elhagar, referring to CIB's dividend policy, it is interesting to note that it had a much higher payout ratio, ranging from 60-70 percent, which is in contrast to their current ratio of between 20-25 percent. Elhagar stated that CIB was previously seeking to acquire another bank, in particular the Arab African Bank; and to accomplish this, the bank needed to build equity, which was probably the driving factor in the drop in the payout ratio. In the end, CIB was not able to acquire the Arab African Bank or a second competitor, she said. “Presently no other potential banks for acquisition are on the horizon for CIB,” Elhagar said.
