United Bank provides an attractive avenue for Gulf and foreign banks to enter the Egyptian market, said United Bank chairperson Ashraf Al-Kady in his first interview since assuming the role.
Al-Kady sat down with Daily New Egypt to discuss the current standing of the bank, particularly in light of the Central Bank of Egypt’s (CBE) decision in March 2016 to put the bank up for sale before the end of the year.
Al-Kady was announced as the bank’s new chairperson on 15 March 2016. While the clock is ticking on the CBE’s promise to sell the bank before the end of the year, Al-Kady said that it is likely to happen in time.
Despite that, Al-Kady said the bank’s administration is continuing the process of restructuring the bank and preparing it to be sold. This entails executing an expansion plan across various sectors within the bank.
Al-Kady said that the process of developing the bank and updating its technological infrastructure is being executed in accordance with the bank’s strategy, and has nothing to do with offering the bank for sale.
The CBE announced recently that it would offer the bank up for sale by the end of the year. How has this affected the bank’s recent plans?
First of all, I would like to explain that everything related to selling the bank is in the hands of the main owner of the bank, which is the CBE, as it owns 99.9% of the bank’s shares.
As part of the executive administration of the bank, we are preparing the bank for sale and working on increasing its profits, which should achieve the best possible return for the bank’s owner.
In order to achieve that goal, we are working to complete a restructuring plan that began in 2006. In addition, we are reorganising the structure of the bank and training workers. We are working to support the business sector within the bank and consequently increase its profitability.
The CBE announced that it aims to sell the bank before the end of this year, which is approximately six months from now. Will your plans be able to meet this deadline?
As I said, we, as the executive administration, are responsible for preparing the bank to be sold while the rest of the issue is in the hands of the CBE. However, I can say that finishing the process and preparations for the bank to be sold before the end of the year or in the last quarter is not unlikely.
Are there institutions that have expressed their interest in acquiring the bank?
Due to United Bank’s extensive network of branches, business value, professional employees, and good infrastructure, in addition to the diversity of its products and the Islamic license, the bank provides an attractive avenue for investment from the Gulf States and foreign countries. However, it is difficult to reveal details related to this issue for the time being.
Regarding this, I would like to mention that the Egyptian market is the most promising market in the Arab region and the Middle East, and has significant opportunities for growth. Moreover, it will be more attractive in the next period after current projects prove their worth in bolstering the Egyptian economy. This says that what is coming is better.
Furthermore, the number of bank accounts in comparison to Egypt’s population is still low, which provides many opportunities for the bank to grow.
The development and growth of financial institutions in the region, and the ability of those banks to reach a level of saturation in their markets will result in these banks looking elsewhere for growth opportunities. For this, they will not find a place better than the Egyptian market to invest in.
With regards to the selling process, are there any tangible steps being taken at the moment other than preparing the bank for sale?
No, the CBE has not allowed any institution to move forward in this regard. I repeat again, we are responsible for the preparation process only. Anything related to the communications of those who are willing to buy the bank is done with the CBE.
Will the bank be sold as Islamic or a regular bank?
The United Bank has two licenses from the CBE: one to work through the regular system, and another for the Islamic system. We are one of the few banks in Egypt that possesses both licenses. This increases the bank’s value for institutions evaluating its worth.
The bank has 21 Islamic branches, while the rest of its branches work within the regular system. However, all of our services, whether regular or Islamic, are reviewed by the Sharia Board of the bank.
It has also been said that the bank will not be sold before approving its financial statements. When will this happen?
Revising the bank’s 2015 financial statements is a process that is currently being completed, and a general assembly meeting scheduled for July will approve the review.
What is the size of the bank’s profits achieved in 2015?
It is too early to reveal these numbers now, but all I can say is that we registered approximately a 15% growth rate in profits compared to 2014, and we are seeking to achieve a growth rate of 20% by the end of 2016.
If the bank is sold, what will happen with the EGP 4bn loan the bank obtained from the CBE?
This amount will be returned in full to the CBE after the sale of the bank is complete, as we have enough liquidity to do so.
What is the current size of the bank’s capital?
The bank’s capital amounts to EGP 1bn while the equity amounts to EGP 1.7bn.
Can we say that the result of the 2006 plan to merge the Nile Bank, the Egyptian United Bank, and the Islamic Bank for Development and Investment into the United Bank has concluded and that the bank is now ready to be sold?
Yes, we can absolutely say that. The merging process has been completed and the bank is now one bank, one team, and one budget, with the same documents.
What is your take on the bank’s debt problem since its establishment?
The bad debt inherited by the bank from the three banks it merged with amounted to EGP 6bn. The United Bank managed to collect about EGP 3bn of this amount, and there is a professional team tasked with collecting the remaining debt.
Can these debts affect the selling of the bank or reduce the selling price?
Not at all, since those debts are covered with 100% allocations, and there is no gap in the allocations.
Have the bank’s activities and its expansion plan been affected by the announcement that it will be sold?
The bank was slightly affected at first, but this impact faded fast through the bank’s constant communication with customers and employees to clarify that the sale process will strengthen and support the bank in the Egyptian market.
The bank’s team has vowed to work together on the bank’s development and the implementation of the bank’s expansion plan as rapidly as possible, whether the acquisition process is completed in time or not.
What are the main details of the development and expansion plan?
There is a strategy of the bank for the coming three years, which includes four main themes. First, we are seeking to increase the bank’s market share through geographic expansion and increasing banking services to reach a larger segment of customers, whether individuals or small- and medium-sized enterprises (SME).
We will activate the CBE’s SMEs initiative and real estate finance for low-and middle-income homeowners.
The bank’s plan also includes, as mentioned earlier, the development of human resources, technical, and banking skills, in addition to confronting the debt problem, in which the bank has already made strides.
We will continue the development of the bank’s infrastructure and technological and digital foundations, so that we can provide new technological services through mobile internet and other digital products.
In this regard, we are about to get a license from the CBE to provide developed online services, to comply with the CBE’s instructions that were issued in January 2015.
The United Bank also offers a “cash management” service for large- and medium-sized companies, so that companies can take advantage of their balance accounts in the bank and its branches or other banks. They can also get the highest possible return on those balances and manage them automatically without visiting the bank’s branches.
What is the bank’s plan with regards to its geographical expansion?
The United Bank has 47 branches and three other banking units, which are strategically placed in order to reach as many customers as possible.
The bank covers most of Upper Egypt, including Beni Suef, Minya, Assiut, and Sohag. It also has six branches in Mansoura and Dakahlia, as well as two branches in Tanta, and a branch in Kafr El-Sheikh.
We target the opening of five new branches by the end of this year in Suez, Ismailia, Port Said, the Tenth of Ramadan, East Port, and New Cairo. We are also studying opening new branches in other places in Cairo.
What is the size of the bank’s credit portfolio?
The bank’s financing portfolio amounts to about EGP 5.8bn, which includes SMEs, real estate, and retail. We target to bring it to about EGP 6.2bn by the end of 2016.
How big is the size of the bank’s deposit portfolio?
The size of deposits in the bank reached about EGP 22bn, and we aim to bring it to EGP 25bn by the end of this year.
The size of loans is relatively low compared to the size of deposits. Why is that?
That is right, because the loan portfolio was completely cleaned to get rid of troublesome loans. A new portfolio was launched in recent years. We choose the projects that deserve loans carefully in order to avoid the probability of default.
What are the social activities of the bank in terms of its social responsibility?
United Bank provides an integrated system of organised community activities through its management of “Ethar”, which includes 32 civil organisations nationwide.
It has also given support to some important issues, including health, education, and the development of ashwa’yat (informal housing areas).
The bank contributed to the establishment Al-Asamarat Moqattam neighbourhood with the aim of building up Duwika area, Antar Stable, and Ezbet Khairallah, and the development of the culture of integrated urban communities for ashwa’yat.
The bank also participated in the campaign for the development of ashwa’yat under the supervision of the Federation of Egyptian Banks, as well as opening an account for the Tahya Misr Fund.