In its latest Top 100 Arab Banks ranking, published last October, The Banker commended the region-leading performance of Egypt’s financial sector in 2015. It had a few tough fiscal years as a result of political turmoil and the wide-ranging reforms of the banking industry that successive governments have pushed through during the last decade. The Financial Times-owned banking industry publication noted that Egyptian banks have grown assets, deposits, and profits ahead of their MENA peers, and provide much higher returns on capital.
Profitability was close to double the regional average, increasing by almost 25% over the period, while balance sheets swelled by more than 18%, driven by strong public- and private-sector lending. The industry-wide ROCrate reached in excess of 38%. But perhaps the brightest news for the banking sector is the prospect of huge extra revenue streams that will be generated by the Al-Sisi government’s infrastructure mega-projects over the next few years, as well as significant scope to expand penetration rates among the unbanked. At present, just 10% of Egypt’s 90 million people have a bank account.
BANK AUDI EGYPT
One of the leading institutions doing its best to serve the demands of the national market is Bank Audi Egypt, a subsidiary of the Beirut-based regional financial services giant, Bank Audi. The bank opened shop in Egypt just a decade ago, buying a local lender that had just three branches. After increasing its capital from the equivalent of €91m in 2006 to €280m in March 2014, Bank Audi Egypt had 37 branches at the end of 2015.
“We started when there were 58 banks and now there are only 38,” recalls Hatem Sadek, Bank Audi Egypt’s Chairman and Managing Director. “We acquired Egypt’s smallest banking unit, with €43m total assets. Today, we [have] assets of €4.4bn and rank seventh among private-sector banks. When we bought the bank it was making a loss of €10m, but we are targeting a net profit of €69m [for 2015].”
Since 2006, Sadek says that Bank Audi Egypt’s loan portfolio has expanded from less than €14m to more than €1.8bn, while deposits grew from just €38m to over €3.9bn. The bank currently controls 1.65% of the domestic banking marketplace by assets and more than 1.87%, ranked by deposits, but has already embarked on an ambitious drive to expand its assets, profits, and market presence over the next few years.
“Our four-year strategic plan for 2015-18 forecasts our total assets will reach €8.3bn,” Sadek explains, “and net profits, which were €51m at the end of 2014, to more than double [by 2018.] It’s very challenging, given the environment and competition, but inspiring. By the end of 2018, we aim to have 60 branches. The key to success is achieving the right development balance.”
Bank Audi’s strategy is based on four cornerstones, Sadek says: strong management and skilled staff; a set of clear, well-aligned objectives and flexible business models, based on a deep understanding of targeted customer segments and the evolving marketplace; sound risk management and corporate governance; and the firm commitment of the bank’s shareholders.
“If you want to do business and have high returns on your investment, this is the time to come to Egypt,” Bank Audi Egypt’s Chairman and Managing Director believes. “We have geographic advantages as a base for the MENA region, huge local consumer demand, mega-projects, and private-sector partnership opportunities, as well as people willing to learn and work hard. The banking sector and, particularly, Bank Audi are ready and able to offer support.”
Established in 2002, Beltone Financial Holding was bought out last November by Egyptian billionaire Naguib Sawiris’ Orascom Telecom Media and Technology Holding (OTMT), together with investment bank ACT Financial, in a deal worth €75m.
In mid-December, Sawiris and Beltone made news again when Sawiris made an offer to buy CI Capital, the investment-banking arm of Commercial International Bank Egypt, for €116m, with a view to merging it with Beltone to create one of the key players in the MENA financial marketplace.
Beltone was set up by financial managers from across the Middle East and North Africa to offer a comprehensive portfolio of investment-related services to private businesses, public institutions, and high-net-worth individuals, not just across the MENA region, but further afield in Asia, Europe, and the US. The firm has four divisions, covering every aspect of the wealth-maximisation business, from asset management to investment banking, securities brokerage, and research. It also has a subsidiary that works out of the United Arab Emirates, as well as an office in Europe.
The firm has long been a pioneer in the market. Its asset management arm is Egypt’s largest, ranked by assets, with €3.7bn under management. It introduced the first ETF and Money Market Fund in Egypt. And, over the past 12 years, its investment banking division has closed 52 transactions, worth a total of €11.6bn.
“We are looking to expand our market share, through attracting more clients, preparing more research, getting involved in more investment banking deals, introducing new products, and acquiring more companies,” says Bassem Azab, Beltone’s CEO. “Our target for our brokerage business is to be number-one in the market [and] we are focusing on mergers and acquisitions in a very big way. We have a number of transactions we are working on right now.”
After securing a license to manage XT-MISR, Egypt’s pioneering exchange-traded fund (ETF), in 2014, Beltone is now planning to use the NASDAQ Dubai exchange to give the ETF greater exposure in the MENA region this year.
Meanwhile, prior to its purchase by OTMT, at the Reuters Middle East Investment Summit in November, the firm also renewed its commitment to a programme of investments worth €35m in the Egyptian non- banking financial services sector and unveiled plans for four stock market flotations – including one in the hydrocarbons sector and two in consumer goods – in the first half of 2016.
Established in 2012 by some of Egypt’s smartest businesspeople, Accelero Capital is an innovative investment and management group with a track record in digital media, technology, and telecoms. Accelero’s founders include serial entrepreneurs like Naguib Sawiris and Khaled Bichara.
“We are different because our team has operational experience; we are not from a banking background,” Bichara notes. “We’re very hands-on. If it’s a company that doesn’t know how to move from start-up to corporate, we’ve done that. Or if it’s a big company that’s not doing well, we know how to turn it around.”
The firm is now turning its gaze to businesses that offer high-growth or turn-around potential, whatever the sector. Accelero has already diversified into education, transport and energy, and is “looking at tourism, food and real- estate”, Bichara says. “We build opportunities to create value.”
In December 2014, Orascom Telecom Ventures sold assets worth €17.7m to Accelero, giving the firm its first Egyptian interests and bringing its founders back to their roots. Accelero recently grouped their assets under a new entity, A15, an entrepreneurial company that creates digital products and technology brands. It focuses on opportunities for growing the digital world in the Middle East.
“Egypt is in a position to be ‘the next big market’,” Bichara believes. “We have made a lot of money [here] and have proven you can do business in Egypt and internationally with a successful outcome. Come co-invest with us in the future of this country; one that has a great history and is looking at a bright future.”