The process of merging banks and decreasing the number of banks operating in the market by increasing capital adequacy requirements is helping create a much better banking environment in Egypt," says National Socit Gnrale Bank (NSGB, bt100 number 22) Chairman Mohamed Madbouly. "The merger of institutions introduces larger entities that will increase the standard of services and competition. The entry of international banks has also introduced international standards to the banking sector, which has helped a lot in increasing funds lent in project finance."
NSGB opened in Egypt as an investment bank in 1978, adding retail banking services in 2000 and using 2005's new minimum capital requirement of LE 500 million to rapidly expand its activities in the retail market.
Last year, it acquired Banque Misr's 69.7% stake in Misr International Bank (MIBank) to increase its total stake to 90.7%; MIBank and its 35 branches are being rebranded with the NSGB mark, to bring the total of NSGB branches to 86. With the addition, Madbouly estimates NSGB will own 5% of the retail banking market.
"After the merger between NSGB and MIBank, we will become one of the biggest private-sector banks in Egypt," he says.
"These mergers were really necessary at this point in time, especially since we are entering the World Trade Organization (WTO) era, when we will not only be competing domestically, but with the whole world, with no boundaries," Madbouly adds.
According to the banking executive, the Nazif government's customs reforms and sweeping tax cuts will have an enormous secondary impact on banks, as they are encouraging investments that demand commensurate debt financing. "I think the progress that has taken place in those two areas has had a great effect on investors, and this difference will definitely be reflected in the number of investments that will take place in Egypt in the coming years.
"In the last two years, Egypt has witnessed increasing stability in its economy that has created many investment opportunities. The stability of the foreign currency exchange rate and the increase in the amount of Egyptian exports has decreased the gap between imports and exports, which has benefited the country's economy.
"The policy of decreasing the interest rate on bank loans has been sort of a call to all businessmen and company chairmen for more and more investments, which will eventually increase our gross domestic product and decrease our unemployment rate.
"I see great potential for the small and medium projects and local-product projects to develop, provided that they are guided by large private corporations or the government. Similar cases have taken place in other countries like China and India, which have recently undergone economic development.
"We have a number of domestic products that need to be marketed [internationally]," he continues. "We used to have cities known for producing certain products like cotton or silk. Where did those products go and why are they not seen? They are still being produced."
Madbouly believes that privatization is "coming by default, and there is no possible way to prevent it." He is, however, still a bit nostalgic for the old days, and remembers the national industries he helped create during his time at the National Bank of Egypt.
"I still remember the companies by name: El-Daqahliya Steel Company and Suez Cement Company," he says.
"The public-sector banks at that time were the reason today's big companies [survived]. Watching those companies growing up while they faced huge financial difficulties at the time they were starting helped me learn how to value companies and investments."
Mohamed Madbouly (70)
Chairman, National Societe Generale Bank
Previous experience: A veteran of the Ministry of Economy, Madbouly rose through the ranks at the National Bank of Egypt to the board of directors by the late 1980s and joined NSGB as chairman in 1994. He is also a board member of the Metallurgical Industries Holding Company.
Mentor: Mahmoud Abdel Aziz, ex -chairman of the National Bank of Egypt, for his calm in managing crises
Best business advice: To be accurate, down to earth, and always seek to know more
Brand Egypt: Focus on tourism it is Egypt's soul.
What SMEs need: Well-planned marketing strategies sponsored by private marketing institutions and the government.
By Yasmine Saleh
© Business Today Egypt 2006
