Chairperson and Managing Director of the Suez Canal Bank, Hussein Refaey, dreams of ending non-performing loans (NPLs) in 2019. He noted that the bank's new management has managed to settle EGP 1.5bn of debt in the past 18 months. Refaey informed Daily News Egypt in an interview that the bank also sold 12 assets with a total value of about EGP 300m, which generated an investment profit of EGP 200m, as part of the restructuring of the bank's direct investment portfolio. He stressed that there are many challenges and pressures on the banks' budgets and profits during the coming period. And to the text of the interview, the transcript for which is below, lightly edited for clarity: What do you think of 2019 so far? I think that 2019 will be full of challenges both at the level of the economy or at the level of the banking sector. However, we hope that this year will see the positive outcomes of the reform programme, which began at the end of 2016 and continued during 2017 and 2018, from the flotation of the pound throughout the rest of the programme. Although there has been an increase in remittances and an improvement in tourism, we hope that the impact of these reforms will be reflected in foreign direct investment, and that the volume of these investments will reach the level appropriate for Egypt. The same thing goes for tourism, although it has achieved good successes over the past period, but we hope it would increase in the coming period. The export file has also improved but not in the form we wish. The sector should benefit from the reforms that have taken place and to see the results of the price paid by the Egyptian people for the reduction of the currency in export. It is also necessary to focus on the industry file and not only the support of the initiatives of the Central Bank of Egypt (CBE), which I do not think were enough. The ministry of industry should move as well, pen an industrial plan, and support small businesses to become bigger. The truth is that what is happening in the industry file now are individual cases for investors who start the establishment of factories, but there is no plan to show the roadmap of the industries we actually need as a country. The industrial plan must be present and address all the governorates of the republic according to the competitive advantage of each governorate. The state leaves young people to decide on the project of their choice, but if there is a specific map, we can direct young people to enter the projects needed by the state. Funding is already important and essential for any project. I think that, alone, is not enough to develop the industry. At the bank level, what is your business plan for the new year? I assumed the responsibility of the bank about 18 months ago, and since my presidency of the bank we developed a strategy approved by the board of directors in the third quarter (Q3) of 2017, which is the strategy we have been taking so far and continuing this year. What are the most prominent features of that strategy? We have already established sectors that were not previously in the bank, such as retail banking, small and medium-sized enterprises (SMEs), and a risk sector for these projects. We have started late in financing SMEs, so it only accounts for 5% of the total loans in the bank so far. We have a major challenge to reach this ratio of 20% set by the CBE. To achieve this objective, the bank has signed contracts with the Micro, Small, and Medium Enterprise Development Agency worth EGP 100m to contribute to the development of this sector. In addition, several cooperation protocols have been signed with the Industrial Development Authority and with the Information Technology Industry Development Agency (ITIDA) in cooperation with the CBE and the Egyptian Banking Institute. The bank also participated in the initiative of Nile Pioneers, which was launched in cooperation between the CBE and Nile University, in order to contribute to the development of this sector, and to promote entrepreneurship and the development of SMEs in various stages. The bank's contribution to this initiative amounted to EGP 5m, which is being pumped over five years, in order to support competent students, especially those with ideas related to digital and technological products. The bank's board of directors has also approved the participation of EGP 50m in the Sawari Ventures Fund for investment in emerging projects in the field of information technology, representing the belief of the board of directors of the importance of technology. What about the geographical expansion plan targeted by the bank? The bank had a branch network of 36 branches in December 2016 and currently has 41 branches. We aim to open five new branches during the Q1 and Q2 of 2019, including two branches in Alexandria governorate, a branch in Beni Suef governorate, a branch in Qena governorate, and a branch in Giza governorate. We aim to focus in areas outside Cairo, where we see that the governorate of Beni Suef an example of the promising areas as an industrial area with a high population and it is close to Fayoum governorate and therefore we can serve the citizens of both together. The Qena branch also strengthens the presence of the bank in the heart of Upper Egypt. We hope that we will reach 50 branches by the end of 2019 and the beginning of 2020. What about the bank's contribution to the financing of major projects? The volume of the syndicated loan portfolio arranged for major projects increased from EGP 1.5bn to EGP 5bn. The bank participated in 11 joint loans in various fields including gas, oil, electricity, real estate development and also in the field of plant development and oils. The bank participated in a loan of more than EGP 900m in January, which was arranged for one of the bodies operating in the petroleum sector. The bank is considering participating in other loans, but it cannot be disclosed now. And what are the most prominent files that the bank has been working on since you assumed responsibility? The bank has come a long way in the inherited issues it has suffered from for many years. Among those files was the non-performing debt portfolio, which accounted for about 52% of the total loan portfolio in December 2016. The bank has managed to settle EGP 1.5bn worth of debt in the past 18 months, of which the bank received EGP 1bn of cash and EGP 500m of assets that were transferred to the bank. These assets are also sold for cash. These efforts have succeeded in reducing the ratio of NPLs to 38% of the total loan portfolio by the end of 2017, then to 30% in September 2018, and may reach less than 25% by the end of 2018. The bank's figures are currently under review. Another file is the assets portfolio, which was owned by the bank to meet the debts of stumbling loans. The bank managed to sell 12 assets for EGP 300m, which achieved an investment profit of about EGP 200m. The bank has also restructured the portfolio of direct investments by exiting long-term investments and investments that do not generate returns commensurate with the volume of investment and associated risks. The bank has recently exited two investments with a capital gain of EGP 32m. Moreover, in the past 18 months, the bank has succeeded in ending all tax disputes related to the stamp duty from Q3 of 2006 until the end of 2015. The entire debt has been settled and utilised after applying Law No 174 of 2018 regarding the delay waiver. What about the employees of the bank, did you include them in the development process as well? The emphasis has already been placed on the development of the bank's staff skills. The training budget has been doubled, opportunities for mobility between departments have been granted, while some of them have attracted employees from outside the bank. The branch management has been divided into six regions, all of which are headed by employees from within the bank. I would like to extend my thanks to all the bank's employees for their efforts over the past two years, which is reflected in the performance of the bank's results. How do you see the future of the Suez Canal Bank in the coming period? Despite the successes, we have a lot of challenges so that we can restore the bank to the place it was and deserves to be in. The Suez Canal Bank was the fourth bank in the Egyptian market, before it witnessed a significant decline in its activity. We are trying to return it to its place with a fixed plan. We have successfully attracted 5,000 new customers to the bank. The bank has also raised the EGP 2.6bn through the yield certificate, of which 50% were sold to new customers. We have also re-launched our new credit card and ATMs, in addition to the launch of thee-portfolio. We have also submitted a request to the CBE to issue a Sharia-compliant savings certificate that we aim to introduce soon. What are the target growth rates for 2019? Expectations are very difficult. I believe that there are many challenges and pressure on the budgets of banks and their profits in the coming period, especially after the amendment of the calculation of taxes on debt instruments, and the adoption of the law of health insurance, which will add new burdens on banks, in addition to the large investment cost of the presence of banks in the New Administrative Capital and the application of IFRS 9 financial instruments. The bank has succeeded in achieving the target in 2018, which exceeds 15% in various activities, and despite the challenges we can face in 2019, we hope to reach the same rates of 2018 and exceed them and that will be around 15%. Finally, what dream do you wish to achieve in 2019? I dream of ending the file of bad debts and succeed in reducing the rate to less than 15% of the total loan portfolio of the bank, in preparation for ending this file in full. We have achieved unprecedented success in this file, because it was done in a small period and on a scientific basis, through negotiations with customers, but there are some customers who are still procrastinating, and believe that the solution to the negotiation is the weakness of the bank, but this is not true. We will continue to take judicial proceedings against those clients.
