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11 Feb 2009 07:00
CIB has released today its end of year results with managements' following comments:
CIB concluded the year with another successful quarter, delivering strong financial and operational performance across all business lines, despite the challenging market conditions. In fact, 2008's results reflect CIB's continued focus to deliver consistent and sustainable performance year on year. It also reflects the hard work, commitment and diligence of all CIB employees.
Profitability
The Bank, on a stand-alone basis, achieved an NPAT for YTD 2008 of EGP 1,615 million, up by 31.01% as compared to the same period of 2007. Regarding the period from September 1st to December 30th, 2008, NPAT reached EGP 333 million, up by 1.8% over same period in 2007. At the end of December 2008, the CBE announced its amendment to the banking sector's Financial Reporting Standards. As such, new valuation methods relating to Available-for-Sale, Held-to-Maturity investments and Derivatives have been applied to FYE 2008's financial reports. In addition, the comparable figures were restated.
On a stand-alone basis, Net Interest income reached EGP 1,809 million, witnessing an outstanding surge of 51.19% as compared to year end 2007. This was achieved from a high quality loan portfolio and efficient asset and liability management. Moreover, banking fees and commissions also showed a growth of 17.3% over the same period of last year.
The success of the Bank's management strategy is evident in its remarkable profitability ratios; whereby CIB has realized Return on Average Equity (RoAE) of 33.12%. The Bank has achieved outstanding return despite retaining a significant portion of last year's profits and the prevailing global economic environment. Moreover, Return on Average Assets (RoAA) maintained its stability at approximately 3%. Accordingly, the diluted EPS has surged to record a 30.45% growth.
Asset quality, prudent credit culture and risk management best practice
In fact, CIB's conservative credit culture has resulted in a well diversified loan book that minimizes earnings vulnerability at times of economic shocks. CIB's dynamic team and effective marketing efforts has succeeded to expand gross loans by EGP 6.2 billion, with a growth rate of 28%. Accordingly, the Bank managed to significantly increase its borrowing market share from 5.93%, to reach 6.56%. NPLs remained stable at 3% level, with a coverage ratio of 194%, in compliance with, if not more than, the regulatory requirements. Moreover, these requirements allow accounting for exposures' collaterals, a procedure that CIB conservatively avoids.
Furthermore, CIB's equity base remained extremely solid, evidenced by a conservative Capital Adequacy Ratio (CAR) of 11.72% and an adjusted CAR of 15%. Such a base acts as a safety cushion to overcome any possible impact from the foreseen global economic downturn.
Asset efficiency and cost structure
General and Administrative Expenses grew by 49% over the period 2007-2008, which was mainly attributed to the following:
Hiring close to 1000 employees, to support the business growth strategy.
Further expansion of the branch network, in turn reaching a total of 152 branches/units and continuous renovation, in addition to, fitting out several areas to accommodate internal restructures and staff mobilization.
Growth in our alternative channels evidenced by adding 37 ATMs, to bring the total number of ATMs to reach 472 at the year end. In addition, the Bank has activated additional 3362 POS, since Jan 2008, rendering CIB's market share from acquiring business to reach approximately 21% within 15 months of its establishment in August 2007.
Despite all these enhancements, our cost control strategies managed to maintain a cost to income ratio of 32.34%, slightly above 2007's ratio of 30.19%.
Despite of the increasing competition in the market, CIB managed to increase its Net Interest Margin (NIM) by 79 bps compared to YTD December 2007 to reach 4.06%, as an indication of the effective Balance Sheet Management.
On July 2008, CIB has acquired the remaining 50% stake in CICH, which is currently its wholly owned subsidiary. On a consolidated basis, the NPAT achieved for 2008 was EGP 1,370 million, which includes the impairment of Goodwill for EGP 183.6 million based on the third party valuation. Also, the Bank amortized EGP 33.7 million intangibles related to the acquisition of CI-CH. Without the effect of the previously mentioned impairment and amortization of intangibles, on a consolidated basis the Bank grew by 23% compared to 2007 to achieve a NPAT of EGP 1,588 million.
Building for the Future
CIB management believes that the key success factor in any growth ambitions is building the adequate capacities to ensure the sustainability of our business. Accordingly, during the last 2 years the bank has been actively implementing an extremely ambitious organic growth plan. Top-line executives with regional and global exposure have joined CIB team, while reshaping the organization to fit international standards. Moreover, significant infrastructure investments were executed, especially in the IT & Branches modernization and Consumer Banking business. By the end of 2008, most of the skill gaps were fulfilled to realize the Bank's growth aspirations.
In light of the current global economic conditions, we would like to share with our shareholders the Bank's business outlook for the coming year.
Institutional Banking
The Institutional Banking remained to be the corner stone of CIB's asset base and accordingly the foremost contributor to its year end performance.
Moving towards a more challenging period, the Institutional Banking has set four main objectives to release through the coming year:
Maintaining a healthy and diversified portfolio;
Further strengthening our customer relations;
Increasing our market share and
Consolidate our strong liquidity position.
We believe that adopting these strategies throughout 2009 would preserve the Bank's sustainable and strong performance. CIB will capitalize on the strength of its Corporate Banking franchise through developing a pro-active approach in the key relationships. This entails, support clients with tailored financial and innovative business solutions. In addition, cross-selling between both Corporate Banking Group and the SME would further expand CIB's market share. Furthermore, the bank will leverage on its international relationships and correspondent network to boost fee based income.
To complement all of the above activities, the Dealing Room and the Treasury will constantly provide new treasury solutions and products to meet our clients' demand. Asset and Liability management would be closely monitored, hence maintaining a strong liquidity position. The current turmoil came with many opportunities for our private equity business that will continue to selectively source new attractive deals from the market and benefiting from our investment banking arm "CI Capital".
Consumer Banking
Going forward, CIB has adopted a two-fold strategy for Consumer Banking business, as follows:
Product Focus, where Consumer Banking business will expand its product offering and services platform. Accordingly, the bank has designed ambitious plans to further expand in consumer finance and upper-class distinguished service.
Aiming at customers' relationships retention, maintaining and improving their loyalty and experience (whether via physical or alternate channels), the Bank has started to implement its Service and Quality Management Program. The program entails:
Demonstrating service quality leadership at all levels & in all areas of the bank;
Measuring customer satisfaction; and
Developing staff skills and capabilities through proper training schemes.
Investment Banking (CI Capital)
Following CIB's full acquisition of CI Capital, earlier in 2008 and the subsequent restructuring that took place; CI Capital is now well positioned to reclaim its rightful position as the leading Investment Bank locally and one of the key players regionally. Further realignment of the Company with Egypt's top private sector Bank will lead to releasing the significant embedded synergy, which is uniquely advantageous, in light of the current turbulent global financial markets.
A clear demonstration of this positive outlook for CI Capital was made in the last few months of the year 2008, evident by significant progress in the brokerage, asset management and private equity businesses.
Business Support Functions
The bank continued with its investments in Information technology, aiming at enhancing the quality of services being provided to our customers. In this respect, a number of strategic steps were taken in 2008, replacing our core banking platform, upgrading technologies in our customer contact points and building up business case for business intelligence.
In 2008 we also consolidated our efforts to centralize all operational activities from the branches to Central Operations to bring economies of scale, better controls and allow the branches to focus on sales and service rendered to our valuable customers and reduces our cost per transaction in the Bank.
The shift in strategy and restructure of our support areas which we laid in 2008 creates a solid foundation for us to support our business growth in coming years. In addition for, 2009, we have two additional priorities which we will focus on, e.g. Risk management capabilities and Expense Control.
While the world is living in extraordinary times and the problems of the globe are certainly felt everywhere, CIB stands in a strong position to take advantage of any opportunities given Egypt's favorable macro fundamentals.
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