1/Q: Could you our readers a brief historical background of Misr International Bank?
Misr International Bank was the second joint venture bank to be established in Egypt following the Open Door policy. It was established in 1975 but started activities on March 15th 1976. The original structure of MIBank was a joint venture between Banque Misr, which is a state-owned bank, the First National Bank of Chicago, and Banca di Roma. These were the original founders. According to the statute of the bank, each founder was to sell parts of his participation to other banks or companies. Banque Misr sold 4% to Misr Insurance, Banca di Roma sold to its European partners. The current structure is as follows: the Bank of Chicago sold its 20% share to Banque Misr and in turn Banque Misr sold this 20% through the GDR issue in June 1997. Now, Banque Misr owns 26%, Banca di Roma owns 10%, British Arab Commercial owns 8.5%, Euro partners own 8%.
- So, ‘Misr International’ represents the structure of ownership?
No. ‘Misr’ means Egypt in Arabic. Banque Misr, being one of the founders and one of the core banks in Egypt, so the name became Misr International. And the word ‘international’ because of the international nature of the founders.
2/Q: Do you operate internationally?
Yes, we do. We have two subsidiaries, one of which is in Germany. But, basically, 99% of the work is done in Egypt.
3/Q: Are you specialized in terms of banking activities?
I would say that we are a commercial bank specializing in lending to major corporate customers. We have also established ourselves as trade financing specialists. We are very active in trade financing. We are also recognized as one of the trade financing specialists. To a lesser extent, we are active in project financing and domestic and international loans, which falls under corporate lending.
4/Q: Will you be interested in adding more activities?
We have started to do so. We have a small nucleus in the bank that we are developing and the business there is increasing. Especially now that privatization is increasing, we are involved now – and we have been before as well - in bidding for some of the companies.
5/Q: Could you give us some of the achievements or results of what you done in the transitional period of privatization?
Let me go back in time. The bank has been profitable since day one. We have continued ROE of more than 30% that has stretched over the years. In terms of privatization, we have been involved in consultations and lead managing initial public offering for 4 public sector companies. In addition, we were involved with other companies in indirect ways. In terms of multinational relationships, we are involved with most of the multinational companies operating in Egypt.
6/Q: In terms of figures, could you give us last year’s results?
We will give you the annual report. On the other hand, it is very difficult to give you the specific market share. We are the second largest private sector bank in Egypt. If we figure that public sector banks have about 70% of the market and we are the second largest private sector bank, it will give you a general idea.
7/Q: The big four banks are in the process of being privatized. What are your plans to face this huge competition?
In terms of size alone, the public sector banks are in a league of their own. However, I do not believe that the privatization, which probably means the sale of the shares through an IPO or to individual shareholders will make any difference to the management or the policies of those banks. This is my personal opinion. If those banks were to be sold to a strategic anchor investor, then there would be a change, but I believe that for the immediate future, there will not be a change. There will not be a real competition, at least not for two or three years because it will take them time to develop. Public sector banks are in most cases over staffed, the quality of the staff is not the same as you would find in joint venture banks, mainly due to the circumstances. Those banks operated according to the policies of a centralized economy where they were obliged to take a number of employees every year and selectivity was not really the issue in recruitment. Senior management, however, has improved in most public sector banks. Joint venture banks, on the other hand, were established in a different environment. We had the possibility to select and train our staff. We had international banks as shareholders. This was considered a value added to our technology, the systems and procedures because most of the joint venture banks had their systems developed with the international shareholders. When we started our systems and procedures, they were developed by the First National Bank of Chicago. During the first years of operations, we had a representative from the First National Bank of Chicago and Banca di Roma for the day-to-day management of the bank until they felt that the bank did not need that type of support. Now, the bank is entirely managed by Egyptians.
8/Q: how do you explain that although the private sector banks offer the best services, public banks still hold 70% of banking activities?
The reason is their sheer size. Banque Misr has over 400 branches. National Bank of Egypt has over 500 branches. Furthermore, government organizations are not allowed to deal with joint venture banks. And whether they were allowed or not, they deal with public sector banks out of habit.
9/Q: More globally, what are MIBAnk’s stronger assets to compete?
We have been recognized for our quality of service and our personalized approach to our customers. We have senior management that has direct relations with the client. Also, the entire services provided are done in a very personal approach, which is always appreciated. Other banks have been more aggressive with respect to their client relations.
10/Q: Are you planning to open more branches in Egypt?
Yes, we have to. But, one of the problems with opening new branches is recruitment. It is not just expenditure but also getting the right people to manage and run these branches. We have 4 branches in the pipeline. They should be coming on stream, one will be in the coming few days, another one will probably open by the end of this year or the beginning of next year and another two by the mid or end of 2000. Moreover, we are looking at the possibility of opening what we call ‘limited service branches’ or
‘sub branches’ and may be also some branches in the south. But, they are still in the planning stage. No decisions have been taken yet.
11/Q: What are the new financial services that you plan to offer to provide the best services to your clients?
We have already developed some new services. We offer home-banking to some of our customers. We were the first bank to introduce the on-line connection between branches. We have ATM machines. We issue credit cards, American Express and Visa. We have a committee in the bank that conducts surveys in the market and presents their ideas to the management.
12/Q: What will be the impact of the banking development in Egypt with the privatization of the big four banks and the opening of the country to foreign companies?
The sector that has been most affected by reform is the banking and financial sectors. The changes that took place, moving from a very centralized, regulated and passive sector to a deregulated, dynamic and competitive sector in just 7-8 years. It has been a very fast and deep development. Competition is tough. New services are being developed almost every day and the quality of services has improved. The sector itself has developed significantly. Although the Central Bank of Egypt is no longer the centralized decision-makers and have left the day-to-day business to the bank, they have also improved their supervisory function. So, the quality and regularity of auditing has improved significantly. The control in terms of supervision, rather than the control in terms of decision making has improved. There are a lot of new foreign banks that are looking at coming into Egypt. I would imagine that in the next few months and years there will be some M&A activity. And then, it might take longer because it is still something new in the market, but I am sure that it will come. So, the sector is developing rapidly. The quality of management and supervision are improving. I think that the sector is quite dynamic. | And in terms of its impact on the economy?
Banking is the backbone of the economy. Until recently, all the borrowing needs were covered by local banks. But now, because of the size of new projects and the foreign interest in Egypt, there is foreign financing, which is a very good indication. The most recent example was the financing of the Sidi Kreir power station in which part of the financing has been by domestic banks and part by foreign banks. It is a very good project. What gives more confidence to the investor is that the Central Bank supervision and the reporting that the Central Bank requires from banks, is of a quality that helps the Central Bank detect any problem before it escalates. This has always been the case and not because of the crisis in Latin America and South East Asia.
13/Q: What are the main challenges or threats that the banking system in Egypt is or could be facing?
I think that like any market, the desire to compete or make profit could make some banks more aggressive and therefore put bad prices or lend to riskier projects. That is natural. But, as long as the supervisory function is there, it limits these activities. We do not have the speculative instruments that other emerging markets have had. So, the option to speculate, whether in currency or securities, is not even there. The liquidity in capital markets is still rather limited. So, again, the impact is small. The foreign currency cover for investors is quite satisfactory. So, we do not have the problem where there would be an overnight shift in assets out of the country. The market has changed very quickly so you might have management teams that might not be very familiar with open markets and open competition. But, because there is not the ability to leverage the decision making or speculative process – and this applies to smaller banks- the impact is limited.
The threats are very common to what you would have in any other market. There is no particular threat that applies only to the Egyptian market.
The stock exchange is not very liquid. It has improved a lot. But, there is still room for further development.
14/Q: Are you listed on the stock exchange?
Yes, we are listed on the Cairo & Alexandria Stock Exchange and the London Stock Exchange.
Will you increase your number of shares offered on the stock exchange?
We will need some new funding for the bank. We are looking at subordinated loan from the shareholders, possible issuance of bonds and also a capital increase which will have to come at some time.
So, are you confident in the stock market? Yes, definitely. The stock market is the main catalyst for the growth of any economy. Even today, when the market itself is not very liquid and needs more transparency, the progress that has been made in the last 3 year has been incredible. After what happened in 1961, no one believed that the stock market will be revived ever. It is easy to lose confidence. It is more difficult to regain confidence. Still, it needs further development and everyday there are new rules and regulations to have more transparency, make trading more efficient and encourage new listings. There is no reason why there should not be further development given that before 1961, the Cairo stock market was the 4th all over the world.
How do you see the future of the stock market? As I was saying earlier, there are new listings everyday. Every week, there are new directives to insure more efficiency and transparency. In terms of price quality, there is a lot of price quality that exists in terms of investment.
15/Q: Keeping in mind that investors are mostly interested in finding a reliable bank, how will you welcome them?
We have already established a reputation through our investors and correspondents, when they recommend a bank to any of their customers that will come to Egypt, you find that Misr International Bank is on the top of their list. We have 23 years of experience in the market. One of our stronger assets that is valuable to foreign investors is that we have cross-cultural abilities. We know the market extremely well and we have the management and staff that could understand the needs of multinational companies. So, they will operate in Egypt with the same expected services and relations as in London, New York or Paris. In addition, we have department that is established for the sole purpose of dealing with the multinational companies. Moreover, there is our penetration of the market being the second largest joint venture bank and being involved in most of the projects that are going on in Egypt.
16/Q: How would you be interested in attracting foreign investment?
There is a full range of services that a foreign client or investor would require including joint ventures, project financing, capital market opportunities and direct investment. The importance of having the foreign clients talk to the banks, accountants and lawyers to judge for themselves the opportunities that exist in Egypt can not be emphasized enough.
17/Q: What is you opinion of what has been achieved in the economic reform?
I believe that the Egyptian model of economic reform has been quite successful. This has been recognized by international institutions. The reform in the banking sector had an impact on all economic reform. One of the arguments that has always been voiced was the slow approach that Egypt has taken towards reform; gradualism. If you look at the problems in South East Asia and in Eastern Europe in particular, you would see the advantages of gradualism. As an emerging market, our structure reform and economic fundamentals proved to be a lot more solid, stable and resilient. Even with the public companies that were being privatized there was a minimal social impact because of gradualism. The workers did not find themselves in the street. They were offered early retirement, pensions or offered an opportunity to be trained in different areas to be able to find other jobs.
18/Q: What are your main achievements since you have joined the senior management of Misr International Bank?
We have always done things together. One of the strengths of the bank is the management team in the bank. We all started since the establishment of the bank and it is something that we take pride in. We started with a $2.5 million in capital and now the bank has a network of almost $600 million. We started with a small branch and now we have 16 branches and 4 are in the pipeline. We have established ourselves as the second largest joint venture bank. We started with 18 employees and now we have more than 900 employees.
19/Q: What are your personal backgrounds?
Mrs. El-Tobgy: I started work at Banque Misr. I was educated at an American school. Before joining MIBank I received a training course at an American bank. When they started to establish MIBank I was asked to assist in the establishment, which was a very interesting experience. I was 20 years old when I studied the statute of the bank, statutes of other banks. I was working with the former Chairman of Banque Misr, Mr. Mohamed Hafez, who was an extremely knowledgeable man. There were two representatives of Banca di Roma and First National Bank of Chicago. We started obtaining the license. We started in a small room and then in an apartment. Then, we rented one of Banque Misr’s branches, which is now our Kasr El Nil branch. It was a very interesting experience. I think that it was better than any training course. I also come from a banking family; both my father and uncle were bankers.
Mr. Ozalp: I had my initial schooling in Alexandria. I went to a junior high school in Switzerland. I went to the university in the United States. I came back here to spend the summer and ended up staying. I worked for a construction company for 5 years. When I joined MIBank in 1976 I had no banking experience.
20/Q: Keeping in mind that Forbes magazine reaches more than 4 million people, what will your final message to them be?
There are enormous opportunities in Egypt. These opportunities should be looked into by those who have had no experience in Egypt and those who have not had the chance to experience the ‘new Egypt’ after the reforms. Future opportunities are even greater. There was a slogan that was used by a firm in Egypt that says
"Egypt…come see for yourself" and that will be my message to them.
I would like to add that there is a commitment by the government to help investors. What we have seen in the past years is that whenever there was a problem and you could reach the right person, the problem would be solved. |
EGYPT
