UNB Egypt aims to achieve 30% growth in loans and deposits

We aim to acquire a stake of not less than 5% of the Egyptian banking market over the next ten years, says Abdeen

Union National Bank Egypt (UNB) aims to achieve growth rates of 30% in loans and deposits, as well as 45-50% in profits by the end of 2017, according to vice chairperson of the bank in Egypt and UNB-UAE CEO Mohamed Nasr Abdeen.
Abdeen told Daily News Egypt that the bank intends to implement an expansion plan in Egypt in the coming period, considering the importance of the market to the mother group.
UNB Egypt held its general assembly on Wednesday to adopt the financial results of 2016, followed by a press conference to reveal the bank's strategy in the coming period.
According to Abdeen, the strategy aims to acquire not less than 5% of the Egyptian banking sector over the next ten years, supported by geographical expansion in branches and ATMs, as well as adopting modern technologies to support the products and offer better services.
He added that the bank also aims to provide all means of logistical support to the Suez Canal Economic Zone (SCZone), being one of the most promising areas in Egypt, along with financing small and medium enterprises (SMEs) and continuous training to improve staff efficiency.
The bank's financial results indicated profits of EGP 181m at the end of 2016, up from EGP 160m in 2015—an increase of 13%.
According to Abdeen, the bank's earnings were expected to rise above EGP 300m, but the Central Bank of Egypt's (CBE) flotation decision caused the bank to witness losses of over EGP 100m.
Yet, he said that the bank is satisfied with the flotation as it was necessary to fix the Egyptian economy.
"Egypt's economic position was greatly influenced under the previous exchange rate regime, which resulted in a reduction in foreign exchange reserves, hindered business, curbed growth, and poor competitiveness," he explained. "The CBE had to adopt a more flexible exchange rate policy through flotation."
He added that this decision led to the devaluation of the Egyptian pound to EGP 17-19 to the dollar. This was challenging in the short term and led to inflation, declined purchasing power, and higher interest rates. Nonetheless, Abdeen said that it will be positive in the long run, especially in improving Egypt's competitiveness abroad, supporting exports, and attracting foreign investments, which, in turn, will lead to support growth and job creation, in addition to strengthening Egypt's economic position.
As a testimony to the results of UNB, Abdeen said that the total budget in December 2016 amounted to about EGP 24bn, compared to EGP 13bn in December 2015, an increase of 88%.
He pointed out that the total customer deposits amounted to about EGP 21bn, growing by 98%. He added that the retail sector deposits increased from EGP 3.2bn at the end of 2015 to EGP 3.8bn at the end of 2016, an increase of 18%. Meanwhile, institutions, bodies, and small projects' deposits increased from EGP 7bn at the end of 2015 to EGP 17bn at the end of 2016, an increase of 135%.
Moreover, the total volume of credit portfolio (before provisions) at the end of December 2016 reached about EGP 8.6bn, a growth of 52% from the end of December 2015, pointing to higher retail loans by EGP 845m, a growth of 41%. Corporate loans also increased by EGP 1.8bn, an increase of 52%. SMEs' loans rose by EGP 250m, an increase of 281%.
Abdeen pointed out that the size of SMEs business at the bank is less than EGP 1bn, which is 10% of its total loans portfolio, adding that UNB is aiming to support the sector and fulfil the CBE initiative's rate of 20% by 2019.
In another matter, he said that the rate of default stands below 3.3% of loans, which is better than other banks on the market.
With regard to capital adequacy, Abdeen said that it reached 11.3%, but fell after the flotation, which forced the bank to seek a $50m loan from the mother group over five years, including a one-year grace period, to support capital base and boost the capital adequacy required by the CBE.
Asked about the vision of the mother group on the Egyptian market circumstances, Abdeen said that UNB-UAE has taken a strategic decision to invest in Egypt and will continue despite the challenges.
He added the best evidence of this is that the group continued expanding in Egypt after the global financial crisis in 2008 and during the 25 January Revolution in 2011, next to financing major projects in Egypt.
He stressed that even if the bank does not achieve profits today, it will do so in the future.
Abdeen noted that the bank competed on acquiring Barclays Bank Egypt, as part of its expansion plan, either through self-expansion or through the acquisition of other banks. He noted that the bank was excluded from the competition due to the need for more players.
He pointed out that the bank opened 13 branches in 2015, reaching a total of 43, with a plan to open 5 others in 2017, including small ones.
In response to a question by Daily News Egypt on whether the bank intends to compete on acquiring the United Bank, which was offered for sale by CBE, Abdeen said that this will rely on the mother group's opinion on the matter.
Meanwhile, Abdeen said that the bank does not intend to enter the Islamic financing sector this year, despite experience in that field. However, he noted that the bank will enter financial leasing activity pretty soon.
With regards to real estate, Abdeen said the bank has recently established a real estate financing department to provide funding for individuals and contractors. He noted that the department is very new and has not achieved notable results so far.
Furthermore, he pointed out that UNB Egypt signed a cooperation agreement with the SMEs Social Financing Fund, and is in talks with Khalifa Fund for signing a similar agreement.
Abdeen said that the bank is unlikely to resort to borrowing from abroad to finance importers, adding that the bank will only open letters of credit for clients who can secure their own dollar resources. In the same context, he said that the bank collected $1-2m of dollars from clients per day following flotation.
He stressed that the bank aims to increase growth rates over the next period, to reflect its confidence in the Egyptian economy, especially in the framework of the economic reform programme and the political stability.
He concluded by saying that despite the challenges facing the Egyptian economy, the bank improved its financial position in 2016, increased profits, and spread geographically.