Despite proceeding with the sale of its consumer banking unit in Egypt, US Citigroup confirms its commitment to an Egyptian presence. It will do so through focusing on large institutional clients, whether banks, corporations or the government sector.
This plan seems ideal, as the Egyptian government is readying itself to unleash a diverse list of megaprojects. These will be established in a bid to attract foreign direct investment (FDI), with Citigroup saying it is on the alert and keen to engage with relevant investors.
In an interview with Citigroup Egypt’s Chief Executive Officer, Nadir Sheikh, Daily News Egypt looks into the bank’s plans for the Egyptian market.
In the wake of Citigroup Inc’s plans to exit its consumer banking unit in Egypt, what are the bank’s plans for its presence in the country?
Citi is fully committed to its ongoing presence in Egypt. Citi originally opened its offices in 1955 given the importance of the country, and then re-entered in 1975 after its initial presence was interrupted by events in the region. From the very beginning, as per Citi’s strategy in most countries, we focus on large institutional clients, ie corporations, banks and the government sector
Will it fully withdraw from the Egyptian market, or will it focus on corporate and government lending?
Citi will continue to focus its lending activities on multinational companies expanding their businesses in Egypt as well as large Egyptian companies with whom we have historical relationships, especially those with a regional or global outlook. We would specifically aim at expanding our lending activities to multinational companies which are active in Egypt, as well as large Egyptian companies with whom we have historical relationships. The banking products offered by Citibank Egypt to its corporate and institutional clients include loans in foreign and local currency, deposits, foreign exchange and transactional services (such as cash management and trade services).
In addition, we are an important player in custody services to foreign investor clients who transact in the Egyptian equities market (Stock Market) and invest in Treasury Bills/Bonds.
We also believe that there will be new opportunities for project financing arising from the large number of infrastructure and industrial projects being planned in the country. We would aim to increase our portfolio in the private sector, and we would also try to participate in important transactions for the Government sector.
How big a risk do you think current security concerns and underlying political tension are, and how big an impact do you think they have on the investment environment?
We believe that the government is addressing security risks. This is certainly a factor considered by foreign investors, especially new investors in a country. However, Citigroup has been present in Egypt on a continuous basis since 1975, and we are also present in many other countries around the world where security risks exist.
Out of the government projects marketed in the summit, which projects would Citigroup consider to be part of or finance?
Citi will evaluate specific projects on a case to case basis, depending on the project sponsors/investors. At the moment, we have not made any commitments to finance these projects, but we are keen to engage with the relevant investors.
Is the bank in talks with the government over any potential cooperation? Can you share any details, in terms of time frame, values and nature of the project?
We do not comment on discussions with clients, including the government. However, we are keen to assist in bringing the government and its agencies back to the global capital markets at the appropriate time and we have had several discussions with the government in this respect.
What obstacles/hardships or difficulties did Citigroup face in Egypt? What would you suggest Egyptian authorities should do to overcome such difficulties, and attract more investors?
One of the key difficulties facing foreign investors in the country, as well as Egyptian companies, is the shortage of foreign exchange to pay for imports and for repatriation of profits and investments. There have been strong measures taken recently by the Central Bank to improve this situation and direct more foreign exchange flows from the parallel market into the banking sector. This is expected to alleviate the situation over time.
Furthermore, Citi views the government’s reform efforts very positively and we believe that these are important steps to attract Foreign Direct Investment (FDI) into the country. These reform steps are already having an impact, and investors’ confidence is increasing. This is critical towards rebuilding the foreign exchange reserve levels and addressing the challenge in the energy sector.
Which countries will Citigroup expand in, in 2015 and 2016?
Citigroup is already present in 101 countries worldwide, which is the most widespread presence of any global bank. It is already present in most of the countries where it would like to be. In addition, it conducts business in many countries where it does not have a physical presence via banking services delivered from global financial centres. Citi reviews conditions and opportunities in each market on a case to case basis and expands or invests accordingly, taking into account specific opportunities and risks.
What is your outlook for growth in Egypt’s investment banking? How do you see the sector’s growth in the Middle East?
Egypt’s Investment Banking sector has bright growth prospects due to the increase in the number of IPOs of companies on the Stock Exchange, as well as increasing interest from investors in the Gulf to acquire Egyptian companies. Investor interest from Western countries has already been evidenced via a significant recent investment by the US company Kellogg’s in the food sector. Citi provided banking services to Kellogg’s in this transaction.
With so many large projects planned in Egypt, the role of the International Financial Institutions, including Citi, is very important. Such institutions are well-established in Egypt and are already playing a very important role in mobilising capital and providing technical advice.