Monday 26th January 2015
FRIDAY, JANUARY 23RD 2015: European markets regulator ESMA has added Athens Exchange Clearing House to its list of authorised CCPs under the European Market Infrastructure Regulation (EMIR). EMIR requires EU-based CCPs to be authorised and non-EU CCPs to be recognised in the European Union (EU). The updated list of authorised CCPs is available on ESMA's website - Driven by strengthening private domestic demand, economic growth in the US is expected to accelerate modestly this year and drag last year’s unspectacular housing activity upward, according to Fannie Mae’s Economic & Strategic Research (ESR) Group. Amid continued low gasoline prices, a firming labour market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds, the economy is expected to climb to 3.1% in 2015, up from the Group’s estimate of 2.7% in the prior forecast. The stronger economic backdrop should lead to improving income prospects, underpinning a higher rate of household formation in 2015. "Our theme for the year, Economy Drags Housing Upward, implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace," says Fannie Mae chief economist Doug Duncan. "We have revised upward our full-year economic growth forecast to 3.1% for 2015, which is not yet robust but still an improvement over last year’s growth. Consumer spending should continue to strengthen due in large part to lower gas prices, giving further support to auto sales and manufacturing. We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017, likely keeping interest rates relatively low for some time." - The Russian Central bank said yesterday that its gold reserves grew by a 600,000 ounces (18.7 tonnes) in December – the ninth successive month of gold reserve increases. Russia has now more than tripled its gold reserves in the past ten years. The ruble has fallen in value by almost 50% in the past 12 months which makes the nation’s gold reserves ever more important to its global economic status – According to LuxCSD the Taiwan Depository and Clearing Corporation (TDCC) has announced, effective Sunday (January 25th) the firm’s BIC will change from TDCCTWT1 to TDCCTWTP. Customers should quote the TDCC's new BIC in field 95P::PSET//TDCCTWTP of their settlement instructions – Moody's today upgraded the Corporate Family Rating (CFR) of Stabilus S.A. to B1 from B2 and the Probability of Default Rating (PDR) to B1-PD from B2-PD. At the same time the rating agency upgraded the instrument ratings assigned to the Senior Secured Notes issued by Servus Luxembourg Holding S.C.A. to B1 from B2. The outlook on all ratings remains positive – The US Federal Reserve Bank of New York says its daily Fed Funds effective rate is now 0.12% (Low 0.30%, High 0.3125%) with four basis points of standard deviation - Vanguard Group, already the biggest mutual fund company in the world, has risen to second place as a provider of exchange-traded funds, says ETF.com—based on the success of its low-cost index funds, including ETFs. Boston-based State Street Global Advisors, has dropped from second to third. Even so, SSGA still has the largest ETF in the world, the SPDR S&P 500 ETF (SPY | A-98) - The Straits Times Index (STI) ended +41.21 points higher or +1.22% to 3411.5, taking the year-to-date performance to +1.38%. The FTSE ST Mid Cap Index gained +0.97% while the FTSE ST Small Cap Index gained +0.23%. The top active stocks were CapitaLand (+4.09%), DBS (+0.80%), SingTel (+0.76%), UOB (+0.72%) and Noble (-0.47%). The outperforming sectors today were represented by the FTSE ST Real Estate Holding and Development Index (+2.31%). The two biggest stocks of the FTSE ST Real Estate Holding and Development Index are Hongkong Land Holdings (+1.18%) and Global Logistic Properties (+1.57%). The underperforming sector was the FTSE ST Oil & Gas Index, which gained +0.16% with Keppel Corp’s share price unchanged and Sembcorp Industries’s share price declining +0.93%. The three most active Exchange Traded Funds (ETFs) by value today were the SPDR Gold Shares (+0.77%), IS MSCI India (+1.89%), DBXT MSCI Asia Ex Japan ETF (+1.57%) –
Hisham Ezz Al-Arab, CEO, CIB. Hisham Ezz Al-Arab, CEO, CIB. Photograph kindly supplied by CIB, November 2011.

20-20: CIB-Captain courageous

Thursday, 15 December 2011
20-20: CIB-Captain courageous CIB was borne in a cross-fire hurricane this year as the Arab Spring found form in Egypt with all the gusto of a force ten gale.  Despite the pouring rain of rubber bullets, tear gas and dissent, CIB kept at its job.  Like many chief executives in high-strung/high growth markets, Hisham Ezz Al-Arab, CIB’s chief executive officer, walks a tightrope between high finance and high politics.  Right now, it is a brave fellow who puts his head above the parapet in Cairo. In a heartfelt polemic on the hopes for change, Ezz Al-Arab shows how the staff of CIB are made of stern stuff. http://www.ftseglobalmarkets.com/media/k2/items/cache/c925b42be0bb1a72b320fe10c797fed2_XL.jpg

CIB was borne in a cross-fire hurricane this year as the Arab Spring found form in Egypt with all the gusto of a force ten gale.  Despite the pouring rain of rubber bullets, tear gas and dissent, CIB kept at its job.  Like many chief executives in high-strung/high growth markets, Hisham Ezz Al-Arab, CIB’s chief executive officer, walks a tightrope between high finance and high politics.  Right now, it is a brave fellow who puts his head above the parapet in Cairo. In a heartfelt polemic on the hopes for change, Ezz Al-Arab shows how the staff of CIB are made of stern stuff.

On February 11th 2011 Hisham Ezz Al-Arab, CIB’s chief executive officer was being interviewed by Bloomberg’s Margaret Brennan. As the interview went to air, the news came that President Hosni Mubarak had resigned. “Four days later at our board meeting we all agreed: it would be a rollercoaster ride so everyone would have to fasten their seat belt and enjoy it,” says Ezz Al Arab. “In practice, what this meant was that whatever was happening outside our doors, we had to remain focused. That focus kept us sane, it kept us in business and all the success we have enjoyed this year is build on that clear focus,” he adds.

The current troubles that blow through Egypt are not of the making of the so-called Arab Spring, suggests Ezz Al Arab. “It goes much further back, to before 2009 or even 2008. In the event, we firmly believe that change it is a good thing and forces us, as a country, to ask important questions of ourselves. Of course, in the run up to elections, there are and will be a lot of political games; and we reckon that it will be a good four to five years before everything settles down and we finally move along the right track. In the interim, we will continue to provide that focus to our clients and to our staff.”



For Ezz Al Arab, the strength to carry on as normal in the midst of apparent chaos is a mindset; and one that he has worked hard to instil in the day to day working culture of CIB “We are the only bank in Egypt where staff have not gone on strike.  We work hard to align our business culture both with our shareholders and our staff; we look after them as we would a family. In consequence we think the culture here at the bank is healthy and very strong,” he says. He explains that this cohesion has been built up over years and has involved some degree of ruthlessness.  “Most failures are down to having the wrong people in place and you are shy of changing them; we have no such qualms at the bank.”

All business sectors in Egypt have been affected by the aftermath of the collapse of former president Hosni Mubarak’s regime, particularly the country’s banking sector, which in recent years has worked hard to improve liquidity, introduce tighter monetary regulations and adopt various reforms. Although in general terms Egypt remains under-banked (only around 15% of the population have bank accounts); over the last decade the sector has undergone substantial consolidation, and the number of banks has decreased from 57 to 39. Both private and public banks were closed during the 18-day uprising that toppled Mubarak, then closed again for a week due to workers’ protests demanding wage parity. CIB was the exception.

Moreover, at the height of the crisis, on February 1st, CIB staff came into work to ensure that customer salaries were processed as normal. “We brought in our own security companies, to ensure that people needing cash could get it. The staff came in and secured our buildings over the worst of the crisis; it wasn’t a drill, but one of the best stress tests we could have had. It showed we could operate in the most uncertain of times. I am proud to say that the staff had the courage to do it.”

The crisis has been tough on the bank as most lending is for corporate business; with mortgages and car loans still a discrete business. “Most of this business is based around payroll and rolls through cards and personal loans,” says Ezz Al Arab, adding that: “the business was launched back in 2009. After the shutdown, the business came through at expected limits; so we cannot complain. The corporate side is a very deep culture at the bank and goes back to our Chase Manhattan days. We are still strongly committed to the cash flow based credit models that we adopted decades ago, and most players in the region followed later on.”

This year the banking segment has also had to work towards adopting Basel III requirements which, in practice, means banks have had to adopt broader measures of risk and demonstrate that they adhere to sound risk management practices that are publicly disclosed.  Basel III also solidifies the definition of capital and calls for stronger conditions for managing liquidity. The banking segment was set to conclude the final phase by this summer, but further reforms may be delayed due to the current circumstances. Even so, several banks continue to raise their capital reserves. What this means explains Ezz Al-Arab is capital adequacy running at 15%, double that of banks in the United States or Europe. We also run a loans/deposit ratio of around 50%, giving us the opportunity to grow. The financial strength of the bank surpasses Basel requirements; but we continue to be penalised by country ceilings.

Whatever the outcome of impending elections in Egypt in mid December 2011 (it appears to be a closing tie between the Muslim Brotherhood and the rising Noor Party), the challenge for any incoming government will be to integrate the official and the grey economy, tackle political corruption and lay the groundwork for economic prosperity. If the country is lucky, it will go down a similar route to Turkey where an Islamic governing party adheres to pragmatic capitalist principles; with all the attendant opportunities that this will provide for the Egyptian banking segment. “If the government insists on collections and paying of duties and the processing of these payments electronically, then obviously the banks will benefit,” explains Ezz Al Arab. “Traffic fines, car licences, etc all have to go through the banks; at the same time it will cut petty corruption and the grey economy. In Egypt the grey economy is at least equal to the GDP; in some ways it is good, because it employs the sometimes unemployable. In other ways it is bad, as the government misses out on substantial tax revenue.”

For Ezz Al Arab, the business of integrating political changes, of lessening corruption and creating conditions for growth centres around trust: “which must operate at every level of society,” he states.

For the time being CIB is focusing on doing more of the same:  “We will have opened five branches by the end of December in new urban areas and we are planning for more branches in 2012, with further growth on the loan book and deposits,” says Ezz Al Arab.  Up to now the policy has been working; the bank claims a growth of 10% in market share overall, backed up by growth of 8.4% in the bank’s loan book and 7.19% growth in deposits up to September 1st, despite  the introduction of some impairments which impacted on overall profits for the year. “The important thing in this regard, is that the bank did it by the book. That was important for us,” he says.

Ezz Al Arab, remains optimistic about the long term: “Our focus is Egypt and we are sure that political changes will bring the accountability that the market needs and we believe this will all be in place within the next three to four years. When you are accountable it changes everything; because everything is done properly, by the book and business is about what you know, rather than who you know. That has to be a good thing.”

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