Egypt’s largest private lender is amassing cash so it will be able to consider dividend payouts at the end of the year, when it has assessed the impact of the coronavirus pandemic.
Commercial International Bank SAE has much more capital and liquidity buffers than required by regulators, giving the bank “an ample amount of firepower in case we want to increase dividends next year or keep them the same,” Chairman Hisham Ezz Al-Arab said in an interview with Bloomberg TV. “I don’t see any use for the excess capital we have, unless we carry on with our expansion policy.”
Further acquisitions are on hold until the Cairo-based lender has consolidated the operations of Kenya’s Mayfair Bank Ltd. into its own businesses, the chairman said. CIB last month bought 51% of the lender for about $35 million.
“After we do that and finish with that we can look at other opportunities” as the Covid-19 outbreak has delayed the implementation of the integration plan, he said.
Preparing for Fallout
Dividend talk is rare among banks that are being relied upon by regulators to use additional cash being pumped in to support economies battered by measures to contain the virus. Still, CIB is preparing for the fallout: the lender more than doubled provisions in the first quarter in anticipation that non-performing loans may increase, Al-Arab said.
If conditions improve, the bank may release these provisions, or will otherwise increase them. Egyptian banks pay annual dividends and CIB will consider its payout for this year during the first quarter of 2021, he said.
“The challenge we all have now is, we don’t know really when we are going to fly,” Al-Arab said.
The bank, which is listed on the Egyptian bourse and trades Global Depositary Receipts on the London Stock Exchange, operates 207 branches in Egypt as well as two representative offices, one in Dubai and the other in Addis Ababa. It has no immediate plans to cut jobs and may probably increase the workforce over the next five years as part of its strategy to expand deeper into Africa, Al-Arab said.
While net income declined by 9% in the first quarter, mainly because of the extra provisions, revenue rose 15% and operating profit increased, leaving the lender on “solid ground,” the chairman said.
CIB is using the coronavirus to determine which functions can be done remotely and which jobs can be automated so employees can be redeployed to more productive work.
“We are looking at the entire way of conducting business, and ways of changing to improve efficiency,” Al-Arab said in a separate interview. “We are functioning well. Our thinking is that things will not go back to normal, the world will change and we should accept that and change with it.