AlexBank: Becoming the best bank in Egypt for SMEs

Interview with Roberto Vercelli, Managing Director & CEO of AlexBank

What is your general assessment of the banking sector in Egypt at the moment? How big is the market? What is the ratio between local and international banks? What is the current growth within the sector? How has the sector been impacted by the recent political turmoil?

In the local banking market, we certainly have been impacted by the events of the last three years. It has been a very difficult period for the country and for the banks. However, the banking sector has maintained a strong position, also because Egypt has a very strong liquidity position. In fact, the loan to deposit ratio in Egypt is more or less 40%, which means there is enough liquidity available in the market.

We have three very strong local banks; the National Bank of Egypt, the Bank of Misr and the Bank du Caire. They represent 70% of the market considering total assets and total profitability. In terms of the private sector, we have the Commercial International Bank (CIB), which is the main private bank here. It is a local bank that is listed on our stock exchange. We also have QNB, who bought the Société Genérale bank as well as another of the three French banks here in Egypt.

AlexBank is the third largest bank in the private sector. We have a very concentrated market because as I said before the three main public banks represent 70% of the market. CIB, QNB and AlexBank represent 20% of the market. There are 39 local banks in the market and they tend to be small banks working in a specific market.

AlexBank has a large network of 180 branches countrywide. We are the only private bank with a presence in every governorate. We have the same kind of coverage as the National Bank of Egypt, the Bank of Misr and the Bank du Caire.

The three years of turmoil have passed and the new cabinet has been appointed, they will continue with the roadmap that was prepared in June 2013 and I am sure that the country will grow. I strongly believe that the political stability will help our economy´s growth and will encourage tourism and foreign investment to return.

How has been the banking sector in Egypt growing over the past year?

The banking sector has grown over the last 3 years both in terms of loans and deposits because as I said before, we have a lot of liquidity in the country. In three years, we have grown by more than 30% in both deposits and loans. The problem is that we had a drop in the request for loans from the corporate sector. However, we increased loans for the retail sector. The market is very basic in terms of banking products, while we give a lot of consumer credit and personal loans but the market for asset management is very low for example. We are also currently evaluating the distribution of bank-assurance products. We are just starting in this process, we have asked for authorization and we are waiting for approval.

Consider that there are just 10 million Egyptian people with a current account however, there are more than 40 million people who according to our analysis are bankable but do not have a bank account yet. Hence, there is a huge potential for new banks and new customers.

As you said, the AlexBank is the third largest private bank in Egypt. Can you tell us a bit about the history of the bank?

AlexBank was acquired in November 2006. The Intesa Sanpaolo Group bought 80% of the bank and, in 2007, it sold 9.75% to IFC, a financial company belonging to the World Bank, and the government maintained 20% of the bank. We have 5,300 employees and 180 branches all over Egypt. We have grown significantly in the last 3 years, in particular in the retail segment. We have more or less EGP 35 billion of deposits and loans worth around EGP 21 billion.

How is the mortgage market performing? It is allegedly a low performance area.

It is not low performance as such Today the mortgage market is very slow but we expect that in 2015 it will improve a lot. Two or three months ago, a new project for mortgage finance began where 20 billion Egyptian pounds have been made available in order to make mortgages more accessible to young people. We are part of this project, which will help young people purchase a property with a 20-year mortgage loan.

What extra value do you offer your clients in terms of services and products? What makes you different from your competitors?

Our main differential is that we have 180 branches all over the country, in every governorate and so we have a very strong presence all over Egypt.

Last year we signed an agreement with Western Union, one of the main players in remittances in the world. Our branches are available for Western Union and so we now manage millions of transactions for remittances every year as many Egyptians live and work abroad particularly in the Arab countries and in the Gulf.

We are also working in cooperation with our parent company Intesa Sanpaolo. This collaboration is very important particularly in terms of SMEs. We are working to improve the SME business by offering new products and using the experience we have gained in Italy where the pillar of the business sector is SMEs. The Egyptian government and the business sector are all saying that the future of the country will be SMEs. Hence, last year we started a big project in this area and we are now ready to start contacting the SMEs and offering them these good opportunities and improvements.

Are you running any programs in terms of corporate social responsibility?

Corporate responsibility is very important for us. Let me underline that every year we invest a lot of resources internally and externally in this respect. We are now in partnership with strong international organizations such as UNICEF and the UN for their world food program. For us it is important to contribute to health, education, nutrition, housing etc. programs and to make sure we can maintain the sustainability of these projects. We invest a lot of money every year. We manage these projects in partnership with these companies. The projects are often in very poor areas such as Beni Suef and Minya. They are often big projects involving local schools, offering education and food to families via the schools. Once again, we are using the experience from our parent company Intesa Sanpaolo. This was the first year that we have managed a partnership with our parent company, the AlexBank and UNICEF.

Internally, we are working on protecting the environment by saving electricity. We also ask our staff every year during Ramadan to identify four or five big projects where they think we should invest. This means that through a voting system our staff get to choose the projects that we are involved in. We invest in the chosen project and reward the members of staff who proposed the idea.
Furthermore, the Federation of Egyptian Banks has asked all banks in Egypt this year to pay 2% of their profits from 2013, which amounts to about EGP 400 million, in order to invest in poor areas to help in health and education. This is the first time that all the banks together will run a project to aid the country.
Moreover, ALEXBANK’s Board of Directors approved the decision to contribute EGP 20 million to the “Long Live Egypt” fund. The bank’s decision stems from its belief that all institutions must join forces to shore up the Egyptian Economy and contribute to boosting production.

What are the key challenges that you face on a daily basis?

The main challenge we faced in the last three years after the revolution were the many strikes that occurred in the country. However, we managed the situation very well through cooperation with the union and the local institutions. The relationship we have with our staff today is very good; we have changed many rules and we did quite a bit of internal re-organization.

What is your personal vision for the bank and for Egypt in the near future?

I am positive about the future of Egypt; I think that we have passed through the high-risk period and I am sure that we can now move the country into a very good position.

In terms of the bank, according to the 4-year plan where we want to grow a great deal in terms of our assets. We want to increase our loan deposit ratio by 50 to 70% to be able to give more money for investment. We also hope to double the profitability of the bank in 4 years.

Is there anything else that you would like to add?

Yes. I would like to say that we are working on improving our work in the corporate segment. We want to grow by EGP 1.5 billion per year until the end of 2017. We want to diversify our segmentation; we want to focus on not only the tourism and real estate sector but also to look at sectors such as food and beverage, telecoms, renewable energy etc.

How do you aim to do this?

We are going to re-organize our approach regarding the corporate segment. We are going to rebuild our portfolio and build a strong team with senior analysts. In the first 5 months of 2014, the results have been positive. We have the same approach for the SMEs. In cooperation with our parent company, we are investing a lot of money into changing the type of relationship we have with the SMEs.

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