Best Corporate Banking Services in Egypt: AIB

Interview with Amr Atallah, GM for Branches and Banking Services at AIB

We’ll start with the banking industry in general. What would be your personal evaluation of the banking industry in Egypt at the start of 2015? What are its particularities?

I can tell you that with all that has passed since 2011, the banking sector in Egypt is one of the strongest anywhere in the world. If not for the strong banking reforms of the past 10 years, all the recent events could have left us in a very different position. We still have a stable economy. We still have a very strong monetary policy. There has been no point in time since 2011 when we have had a problem providing foreign exchange or financing the imports of strategic commodities. Some key sectors of our industry like tourism and oil and gas have been hard hit by the events. The Central Bank managed the crisis very professionally. Even the feedback from the old global institutions and global ratings firms has been very positive about the professional performance of the Central Bank of Egypt. I’m very optimistic about the future because we have a solid backbone and we will take the country in the appropriate direction in the future.

It was recently announced that 10 out of the 35 operational banks in Egypt provide mobile banking services. This is very innovative. Does AIB provide mobile banking services?

Let me start by saying AIB is a government bank. It was started with a vision, started by a special treaty between governments. The vision was to have a private bank that brings depositors money from outside the country into Egypt. We don’t operate in the local currency yet. However, this will change in a matter of 2 or 3 months.

AIB is considered the private bank for high net worth individuals inside Egypt.

Talking about mobile payments, it is an Egyptian Pound vehicle. We will start supporting the practice as soon as we start dealing in the local currency. Mobile banking services are the big thing in banking and AIB will incorporate it in a big way in the future.

You say that for the moment you are mainly involved in corporate banking. How do you stand out in the market, what is your unique position?

The reason AIB is here is to support the Egyptian economy. In the corporate area, we provide straight finance or equity participation in some sectors. Right now, we have a loan book of about USD 1.4 billion. We have direct investment or equity participation of almost USD 500 million. This is the size of our participation in the market. For us it is a very good market share as long as we are only dealing in foreign currency. On the individual side, we are the safe haven for large depositors. AIB is considered the private bank for high net worth individuals inside Egypt. This business model will change very soon, once we get local currency operations in place. This is our focus right now. We will have a larger exposure in Egyptian Pound whether in the loan book or finance, in corporate finance and retail banking.

That is a huge move for a bank. When are you going to implement that?

Actually we have finalized all the required processes in terms of board approval and CBE approval. We are now getting our infrastructure and operational processes in place, especially the Central Bank requirement for daily, regular and frequent reporting. We are looking at about 2 or 3 months from now to start operations. But all the approvals from certain bodies in Egypt are already in place, especially from the General Assembly of AIB.

So in terms of time, you are talking about a few months?

Yes, 2 or 3 months from now.

You mentioned the 2 categories you cater to now, high net worth individuals and the corporate sector. Can you give us examples of projects that you have been involved in in both those categories?

In the corporate sector, we have participated in some of the large industries, especially in some industries like Oil and Gas. One of the largest financiers is EGPC (Egyptian General Petroleum Corporation), the large governmental body that manages exploration. We have a good portion in this sector. Another big portion of our interest is in the Tourism sector. A good part of our portfolio, perhaps about 15%, is in financing tourism businesses, be it large hotels, resorts in Sinai, Sharm El Sheik etc. This is a big part of our investment.

As for individual clients, we have an existing customer base whom we provide with a very wide product range to enhance their savings, deposits and global investments. We have built a very good customer base both on the lending side and the deposit side.

What unique quality or advantage do you bring to your high net worth customers that differentiates you from the classic banks in Switzerland etc.? What do you say to these individuals?

The unique advantage of AIB is its financial strength. Our balance sheet is great in comparison to many banks. We have one of the highest liquidity levels and capital adequacy ratios. We are fully compliant with all global compliance procedures. Our strength comes from our shareholders. Forty percent of our shareholding is with the Central Bank of Egypt. Another 40% is held by the Libyan Foreign Bank. The Abu Dhabi Investment Authority holds 8% of the stake. Other countries hold small portions of the remaining stake.

The composition of the shareholders is very important here. This helps the bank with any decisions or any ongoing procedures of the bank. They are very supportive. It is very easy to raise capital for any reason. Expansion is very easy. Supporting the Egyptian economy is very crucial. We sometimes get into some projects with high-risk potentialities from a credit point of view, but we take the risk and carry it, because our calculations are very different from any other commercial bank. We don’t only consider profitable projects, we also seriously consider those projects that serve the economy and the country.

So you see your bank as an institution that supports the economy of the country. Can we conclude with your vision for the future, for the bank and for the country?

Normally the vision comes from the shareholders, not an executive officer. The vison of our shareholders, sees AIB in Egypt as an institution that supports the economy. The vision is to have a banking operation that maintains the balance between expansion and getting a market share, while also looking for opportunities to enhance and advance the banking sector in the country. The reasoning behind moving into operations in the Egyptian Pound is to let AIB expand. We have only 8 branches now. We plan to have a much wider and expanded network of branches. We need to gain access to the mass, retail, individual banking sector so we can increase awareness among people. We want to make people see banking as a service provider. We can bring a real value-add to the industry. This requires more than just an increased number of branches. It requires a greater participation in electronic banking and enhanced delivery channels. We truly believe we can bring a real value-add to the banking industry.

This is the reason for the re-adjusting and re-formatting of the bank to serve both socially and as a normal commercial bank.

I’d like to point out that you have entered a huge potential market. There are 40 million Egyptians eligible for a bank account. But only about 10 million do have bank accounts at the moment.

Those are the official figures but I feel that the numbers of the bankable population are much higher than that. In Egypt, 65% of the population is young, under the age of 28. Still we look at the perfect target customer is someone who is 25 or 26. There are a lot of young people in urban areas are ready to start banking. A lot of these young people, even younger than 18, starting around 16 even, are using computers, the internet and social media. Creating a larger banking population is not very difficult. You don’t even need a huge network of branches. Remote banking can be the answer. As in Britain, Europe etc., the banking population is not just people who go to the bank. I think we need to change the formula in Egypt. I am glad to say the mindset of the Central bank of Egypt is very much in sync with the new way of thinking about the required competence. They are looking to tackle the issue not just in Cairo and Alexandria but all over Egypt. In recent years, the Central Bank has been encouraging the banking sector to go after the younger, urban customers.