Global Finance sat down with Egyptian bank CIB’s chairman and MD, Hisham Ezz Al-Arab, to discuss its strategy during the Arab Spring and how it plans to attract a younger clientele.
For banks like Egypt’s Commercial International Bank, surviving the political, economic and social upheaval of the 2011 Egyptian revolution was a stress test of a unique kind. During the revolution CIB remained open for business, making sure salaries were paid and ATM machines were replenished. Staying open throughout one of the most tumultuous periods in Egypt’s recent history appears to have paid off for the country’s largest private-sector bank. CIB’s revenue for the first three quarters of the past year increased by 17% year-on-year, to $812 million.
Global Finance: How did you keep the bank’s financial performance on track in the challenging Arab Spring environment?
Al-Arab: It was not the birth of one day’s work. We started more than seven years ago trying to create a world-class bank in terms of process and performance. In 2006 we introduced a plan to align the staff’s interests with those of the shareholders. By 2009, employees had started to feel it when their stock started to rise. They had a tough time during 2011 with the political changes in Egypt. The [bank’s] stock started plummeting. When profits went down in 2011, we decided to keep the bonuses for the junior people the same as the year before, but anyone in middle management, their bonuses went down [percentage-wise] by more than the drop in profit.
Here in the West you talk about stress testing. In Egypt we went through the stress itself. If you talk to any banker in Egypt in the last four years, they will tell you what crisis management is.
GF: You’ve spoken about the need for megaprojects in Egypt and a new economic plan to revive investment in the country. Has the current government put a clear roadmap in place?
Al-Arab: The energy subsidy reform, as well as the declaration of the feed-in tariffs from the private sector in terms of power generation, is a major megaproject. Another project going on right now is the widening of the Suez Canal so it operates in both directions, which makes it cheaper for the shipping liners to cross the canal. Once that megaproject is financed domestically, then comes the investment, either in storage, logistics or industry.
GF: Should the government be doing more to revive investment?
Al-Arab: They are doing the right things. As I’m responsible to my board and shareholders, I kept asking people [in the government], ‘Can someone tell me what is the economic DNA of the country?’ Before January 11, I always got conflicting answers. This time, I ask the same question of the current government and they say, ‘We’ve decided this is a free, disciplined economy dependent on the private sector.’ Someone is now driving the truck—there is leadership there.
GF: In the postrevolutionary period some thought that Islamic banking would flourish in Egypt. Has that come to fruition?
Al-Arab: Even during the one year of the Muslim Brotherhood’s being in power, Islamic banking remained stagnant. [Islamic banking represents approximately 7% of Egypt’s total banking assets]. I always tell people there is a misperception about Islamic banking. Islamic banking is about governance, and if you implement the right governance in normal, traditional commercial banking, you are doing Islamic banking.
GF: You have approximately 120,000 active Internet banking users, but what are your plans regarding digital technologies such as mobile banking?
Al-Arab: One of the challenges we face is, how are we going to deal with the coming generation in terms of digital banking? I talk to my son and he doesn’t want to go to the bank—he wants to do everything through the mobile and the ATM. We plan to launch a mobile-banking app for consumers in the summer of this year. We also hope to launch a mobile wallet that will serve the unbanked. Out of 52 million voters in Egypt, only 10 million have bank accounts.