 Banking on Success |
The government's liquidity package raised hopes that the government was seriously preparing for the sale of its crown jewels: National Bank of Egypt , Banque Misr , Banque du Caire and Bank of Alexandria . Regarded as the hallmarks of Egyptian sovereignty, Egypt's Big Four state-owned banks make up 50 percent of banking-sector assets and around 60 percent of deposits. But as they are in dire need of restructuring, the government continues to bide its time until it puts its banking house in order.
When the time comes, the first banks expected to be on the block will be Banque du Caire or Bank of Alexandria, which have been under valuations by an independent accounting firm following the passage of legislation in 1998 allowing private investment in public-sector banks.
According to Boutros Ghali, the government is building public opinion in favor of privatization through the sale of joint-venture banks, including the divestiture of Misr America International Bank and Misr Iran Bank this year.
This situation is a far cry from the situation in the 1970s, when state interests dominated joint ventures as well. "A few years ago, we had 26 joint-venture banks where the four public-sector banks owned the majority of shares," says Central Bank Governor Ismail Hassan . "Now public-sector banks are required not to own more than 20 percent in any other bank, provided it is not a minority."
One such joint venture is Egyptian American Bank (EAB) . Founded in 1976 by American Express Bank and Bank of Alexandria, EAB has total assets of $1.6 billion and a reported net profit of $32 million in 1999. James Vaughn , managing director of EAB, says that with the 2005 WTO implementation on the horizon, banking consolidation and automation will be necessary to compete.
"Banks that are closer to customers by 2005, given the ongoing changes, will be able to take care of their retail and corporate customers," says Vaughn. EAB, which already offers services at ATMs throughout Egypt, is launching various levels of Internet banking. The bank is also considering issuing credit card facilities to compete with international financial powerhouse Citibank, whose cards took Egypt by storm over the last year. The American Express Bank is also offering numerous new credit card services, having already established itself as a leading corporate lending bank.
| Distance banking reached new frontiers as well, with a deal between mobile phone giant MobiNil and National Societé Générale Bank to provide account information through mobile text messages, allowing customers to know the details of their account anytime, anywhere.
Taking advantage of the slowdown in the market last year, many medium-size banks have taken measures to reduce lending while simultaneously improving efficiency through greater automation using ATMs, as well as telephone, mobile and Internet banking.
"We believe that the future for us lies in information technology, as we are a medium-size bank, and this will give us the edge over our larger competitors," explains Mohamed Barakat , vice chairman and managing director of Egyptian Gulf Bank . "Here in Egypt, Internet usage is skyrocketing--in fact it recorded the highest usage in the Middle East--so we are looking to provide the same services as U.S. banks for the young Egyptians who are beginning to demand them." Since its founding in 1982 by Egyptian, Saudi and Kuwaiti investors, the bank currently has nine branches, with plans to open three more in the near future, focusing on services and new facilities.
While banks prepare for greater competition, Central Bank Governor Ismail Hassan says he remains committed to keeping inflation down while meeting economic growth targets of around 6 percent. But the biggest problem last year was the effect of skyrocketing imports on Egypt's current account deficit, which improved from $2.5 billion in 1997-98 to $1.7 billion in 1998-99.
According to Hassan, the economy weathered the combined pressures of Southeast Asian exports and a dip in tourism and oil prices. With the latter two making big gains this year, Hassan says all the prerequisites for continued growth remain intact. "All these could have affected the economy severely. But luckily we were in a position to face the challenge." |
