It was a year of some relief for Middle East banking, as the benefits of reform began to be felt and the oil price recovered. Although they remain partly at the mercy of Opec and the US shale energy industry, there was good news for local and international banks, as the government spending crunch eased up and the region turned to international markets to finance its development projects and budget deficits.
In Egypt, it was also a year of structural change, as the country staged its long-awaited shift to a floating exchange rate, with a devaluation in November that saw the Egyptian pound unpeg from eight to 18 to the dollar.
It is, therefore, a fitting year to recognize Egypt’s unmatched management at Commercial International Bank, the local banking sector’s biggest private-sector profit earner. As it steers through a market with great potential, but where conditions are rarely easy, CIB is worthy of the title of best bank in the region.
|CIB chairman Hisham Ezz Al Arab|
CIB’s share price almost doubled in the awards period. It is an institution posting high returns, with steadily increasing net income, while at the same time maintaining exceptional risk management and liquidity and stellar efficiency (its cost-to-income ratio is around 25%). With a capital-adequacy ratio of 14%, CIB recorded a return on equity of 34% in 2016, higher than any other top-tier lender in the region. Its return on risk-weighted assets is also the highest in the Middle East, according to analysts at Arqaam.
The bank retains a solid hold on the local corporate banking market, from project finance to transaction services, a legacy of its past as Chase National Bank. But CIB is furthering a shift to what it sees as its core businesses for the future – principally retail banking, where it already counts around 1 million customers. This year, it made further progress in the strategy with the sale of a majority stake in its investment banking arm, CI Capital, even if that was already largely operationally independent.
Retail makes up three quarters of CIB’s deposit base today, which helped it boost margins after the devaluation spurred a tightening of monetary policy, having relatively little impact on its cost of funding. Its acquisition of Citi’s retail operations in Egypt also boosted this strategy in 2016. CIB says it was the only bank among 11 Citibank acquirers worldwide to commit to a six-month transitional service agreement, making it the only bank to complete the migration process in under a year.
Overseen by its chairman, Egyptian banking veteran Hisham Ezz Al Arab, the last few years have seen the launch of an initiative in SME banking, segmented by turnover and targeted by a dedicated distribution team. Now it is investing in data analytics – the next step for a consumer bank that looks like it is very much of its time and place.