A typical CIB branch in Egypt
Commercial International Bank (CIB) announced the opening of an Addis Ababa office on April 18, with the aim of improving the bank’s knowledge of the Ethiopian market, strengthening its relationships with local banks and promoting Egyptian exports to the country.
It represents the first step in CIB’s plan, adopted in 2017, to expand outside Egypt.
Beyond a small presence in Dubai, CIB had previously focused exclusively on its home market. That is now changing, the bank’s chief operating officer Mohamed Sultan tells Euromoney.
“We are trying to engage in markets where we see potential to expand,” he says, adding that has meant looking seriously at African opportunities for the past two years.
CIB is singularly interested in east Africa, which it views as the most natural foreign market for an Egyptian bank, owing to that region’s strong trade links with Egypt.
“We need to consider where can add value, where we can compete,” Sultan says. “It would make less sense for us to expand in the Gulf or in Europe, for example.”
Egypt’s close ties to the region – partly enabled by the Common Market for Eastern and Southern Africa, of which it is a member – combined with the recent expansion of Egyptian corporates into east Africa, makes the region a particularly promising market for financial institutions such as CIB.
Sultan cites work by Egypt’s El Sewedy Electric Co and Arab Contractors on a $3 billion hydroelectric dam in Tanzania as an example of the sort of project CIB could more effectively support if it were present in the region.
Sultan says that Kenya is the most attractive market, owing to its status as a trading hub for east Africa more broadly.
“Our intention had always been to enter Kenya first,” he says. “It would have made a lot of sense to start with Kenya.”
Citing the billions of dollars in annual trade between Kenya and Egypt, Sultan adds: “The potential is very high there, and we are trying to capitalize on that to support local Egyptian businessmen involved in regional trade.”
CIB has not yet secured a bank acquisition in the country, though it is looking at various potential targets there. “Whenever we have the right opportunity, we will not hesitate,” says Sultan.
We believe the [Ethiopian] government is working to change these laws, and soon enough foreign banks will be allowed to operate there- Mohamed Sultan, CIB
Ethiopia does not yet grant licences to foreign financial institutions, but CIB is establishing a presence there in anticipation of possible regulatory reforms that would allow it to obtain a full banking licence later on.
The Abiy administration is pushing through various liberalization reforms that could facilitate this.
“We believe the government is working to change these laws, and soon enough foreign banks will be allowed to operate there with greenfield licences or through the acquisition of local banks,” says Sultan.
More broadly, he says Ethiopia’s fast growth – about 10% a year – and economic reforms make it a worthwhile long-term base for CIB.
Though the Addis Ababa office is headed by an Egyptian, Sultan says, the intention is for all other staff to be Ethiopian.
In east Africa, CIB intends to offer trade and project financing, as well as online banking services – alongside a limited branch network – for retail and corporate clients. Beyond Kenya and Ethiopia, CIB believes that Tanzania and Uganda may also prove attractive.
CIB is not the only Egyptian bank with broader African ambitions: Banque Misr has expressed its intention of expanding into Kenya.
Egyptian investment banks are expanding geographically, too, with EFG Hermes and Beltone Financial actively looking for new markets. EFG has developed a presence in Nigeria and Kenya during the past two years, while Beltone unsuccessfully sought a controlling stake in west African banking conglomerate Oragroup in 2018.
Asked whether currency instability and political challenges in Egypt’s recent past may partially explain banks’ desire to diversify their activities, Sultan says that CIB remains fully committed to its home market.
He cites Egypt’s large unbanked population – more than 80% – as one area of potential growth for the bank at home.
Egypt took the chair of the African Union in February, and intends to use that position to promote intra-African trade – including through the implementation of the Continental Free Trade Area – in a move that may further encourage Egyptian bank participation in business abroad.