CBE grants EAB de­posit of EGP 4bn for 10 years


The Daily News Egypt - - Business - By Hos­sam Mounir

The Cen­tral Bank of Egypt (CBE) al­lo­cated the Egyp­tian Agri­cul­tural Bank (EAB) a EGP 4bn de­posit to be re­paid in­ter­est-free in ten years,ac­cord­ing to El­sayed Elkosayer, chair­per­son of the EAB.

In a state­ment, Elkosayer told Daily News Egypt that the CBE de­posit comes within the frame­work of its keen­ness to help the EAB cover the fund­ing gap it is cur­rently suf­fer­ing from, and help it play its role in serv­ing Egyp­tian farm­ers.

The CBE had pre­vi­ously granted the EAB a ten-year bond worth EGP 2.5bn, to be re­paid with­out in­ter­est, un­til the bank’s fur­ther needs were fully eval­u­ated.

Ac­cord­ing to Elkosayer, a spe­cialised of­fice is expected to pre­pare a di­ag­nos­tic study of the bank within two months, and de­ter­mine the fund­ing gap needed to com­plete the re­struc­tur­ing to re­po­si­tion the bank to­wards fi­nan­cial in­de­pen­dence.

He added that the bank had suf­fered large losses in re­cent years, amount­ing to about EGP 6bn, and the ero­sion of its cap­i­tal in full, which re­quires con­sid­er­able sup­port to be re­struc­tured and put on track again.

“The EAB seeks to ob­tain the ap­pro­pri­ate fund­ing, from the World Bank or the CBE, in ad­di­tion to get­ting its dues from the Min­istry of Fi­nance (MOF), which amounts to about EGP 4bn,in or­der to cor­rect its sit­u­a­tion and re­duce its losses, to gen­er­ate rev­enues that en­able it to spend on the devel­op­ment process and play its role in the service of the Egyp­tian farmer to the fullest,” Elkosayer said.

He ex­plained that the re­struc­tur­ing plan also in­cludes the devel­op­ment of the tech­no­log­i­cal in­fra­struc­ture of the bank, which may cost more than EGP 1bn, and is expected to take about 3 years.The EAB aims to pro­vide the best mod­ern bank­ing ser­vices, in­clud­ing the ex­pan­sion of its elec­tronic service sys­tem to serve its cus­tomers, who are farm­ers and their chil­dren, par­tic­u­larly when it comes to pay­ments and remittances, and the de­ploy­ment of an ATM net­work and POS ter­mi­nals.

The EAB owns 1,210 branches and bank­ing units through­out the repub­lic, in­clud­ing 20 Is­lamic branches, which the bank seeks to in­crease to 30 branches.

The tech­no­log­i­cal devel­op­ment of the bank dif­fers from the re­struc­tur­ing plan, and the lat­ter’s cost is much higher, lead­ing the bank to seek fund­ing from in­ter­na­tional fi­nanc­ing in­sti­tu­tions, in­clud­ing theWorld Bank.

Ne­go­ti­a­tions are on­go­ing to com­plete a pre­vi­ously-dis­cussed USD 500m grant for the re­struc­tur­ing,and are be­ing led by Tarek Amer, gover­nor of the CBE and Sa­har Nasr, the min­is­ter of in­vest­ment and in­ter­na­tional co­op­er­a­tion, Elkosayer said.

The World Bank in­di­cated that to pro­vide such sup­port, cer­tain con­di­tions must be met. The Agri­cul­tural Bank should have its own law is­sued, and it should be merged into the Cen­tral Bank, be­com­ing an en­tity within it. Such a re­quest has already been sub­mit­ted to the CBE.

Con­cern­ing the bank’s debts with the MOF, which amounts to about EGP 4bn, Elkosayer said that there is full co­or­di­na­tion with that min­istry, in co­op­er­a­tion with the Cen­tral Bank and the prime min­is­ter to reach so­lu­tions in this mat­ter in the near fu­ture.

He pointed out that there was a re­cent ne­go­ti­at­ing ses­sion at the CBE un­der the pa­tron­age of Lubna Hi­lal,deputy gover­nor of that in­sti­tu­tion, and was at­tended by the vice min­is­ter of fi­nance, dur­ing which the mat­ter was re­viewed.

Elkosayer said he had ear­lier held talks with Prime Min­is­ter Sherif Is­mail to dis­cuss the pos­si­bil­ity of con­vert­ing the MOF’s debt into in­vest­ments in trea­sury bills and bonds, if not given in cash.

This debt was cre­ated as a re­sult of the state’s sup­port for farm­ers, whether through pre­vi­ous ini­tia­tives to elim­i­nate farm­ers’ debts, or to sup­port the re­sult of the dif­fer­ence be­tween the low in­ter­est earned by the farmer and the real mar­ket in­ter­est.

Elkosayer stressed that the ex­ec­u­tive man­age­ment of his bank is ex­ert­ing its ut­most ef­fort to com­plete the re­struc­tur­ing plan, which be­gan with the ap­proval of the new bank law, and the con­clu­sion of the merger process with the Up­per Egypt and Lower Egypt banks.

Ac­cord­ing to Elkosayer, co­or­di­na­tion with the CBE is cur­rently un­der­way to fi­nalise the bank’s main sys­tem and the merger with the Up­per Egypt and Lower Egypt banks be­fore the end of this year, expected to be com­pleted af­ter the Cen­tral Bank ap­proves the EAB’s new board of di­rec­tors.

Pre­vi­ously, there were the Devel­op­ment and Agri­cul­tural Credit Banks for Up­per and for Lower Egypt,and the Prin­ci­pal Bank for Devel­op­ment andA­gri­cul­tural Credit (PBDAC), which su­per­vised the two banks from its head­quar­ters in Cairo.

“The re­struc­tur­ing plan of the EAB in­cludes mod­i­fy­ing the or­gan­i­sa­tional struc­ture of the bank, sep­a­rat­ing the sup­port and busi­ness sec­tors, as well as in­ject­ing the bank with some ex­ter­nal ex­per­tise to en­able it to per­form its role cor­rectly,” ac­cord­ing to Elkosayer.

He added that this plan is in tan­dem with sup­port­ing the cap­i­tal base of the bank, es­tab­lish­ing ba­sic in­fra­struc­ture and tech­nol­ogy to help it launch, and train­ing its em­ploy­ees on the new ser­vices it will pro­vide.

Ac­cord­ing to Elkosayer, the bank is also keen on re­triev­ing its dues from cus­tomers de­fault­ing, in­di­cat­ing the bank’s man­age­ment is se­ri­ously ex­am­in­ing bad debt files,and branches have been granted more au­tho­ri­sa­tion to ad­dress such is­sues quickly.

He fur­ther pointed out that the bank suc­cess­fully dealt with about 18,000 such cases, amount­ing to EGP 1bn, thus re­duc­ing the vol­ume of the bank’s trou­bled debt from EGP 4bn, rep­re­sent­ing about 20% of the its loan port­fo­lio, to about EGP 3bn bil­lion pounds,15% of the port­fo­lio.

Elkosayer said that the bank aims to re­duce the size of bad debts to 10% of the to­tal loan port­fo­lio in 2018,and then even­tu­ally to 7%.

Debtors ow­ing less than EGP 10,000 rep­re­sent about 60% of the to­tal num­ber of de­fault­ers in the EAB.

“The vol­ume of losses achieved by the bank fell from EGP 1.084bn at the end of June 2016 to only EGP 70m by the end of June 2017.The bank is expected to be­gin mak­ing prof­its in 2018,” Elkosayer said.

El­sayed Elkosayer, chair­per­son of the EAB

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