The Commercial International Bank (CIB) will limit its focus on its latest 51% bank acquisition in Kenya with no further expansion plans on the horizon, the bank has announced.
The announcement came on the back of difficulties relating to the proper remote management and control on large entities.
CIB also intends to issue $100m in green bonds where there has been interest from clients towards sustainable finance, under an International Finance Corporation (IFC) programme, which gives the bank a good margin.
The bank’s management added that its equity is shielded against currency weakness through $200m in support loan packages from the IFC and the European Bank for Reconstruction and Development (EBRD). The loan packages were designed to hedge against any currency weakness in the future.
CIB management anticipates no movement in the interest rate, even with the possibility of some inflationary pressures emerging. However, they expect an upward movement in sovereign yields to attract international money market fund managers. This comes on the back of a slight widening in the budget deficit as Egypt’s tourism revenues have taken a recent hit due to the coronavirus (COVID-19) pandemic. Other forces affecting the budget deficit include lower remittances from Egyptian expatriates, tax revenue weakness, and stimulus spending.
CIB management sees that a market consensus of about 5-10% weakness in the Egyptian pound over the next six or seven months seems acceptable. Currency pressure will be mitigated by $3bn flowing in from financing facilities and Euro bond issuance. This comes in addition to potential international fund managers if sovereign yields became attractive.
The bank’s corporate clients are reporting lower revenues and expecting profits to fall between 5%-20%. Some sectors, including tourism, textiles, and real estate, have taken a hit worse than others, although those remain afloat compared to global occurrences.
Despite a very fluid and frequently changing situation, CIB management has tried to give their best estimates for the current year, assuming very slow growth until the end of 2020. FC loan growth is expected to come in between 5-7%, with LC loan growth between 10-15%, resulting in a blended loan portfolio growth of around 8-12% in fiscal year (FY) 2019/20. This is despite a contraction in lending by 2.3% in 1Q 2020.
FC deposits are expected to grow at 3-5% while LC deposits growing at 10-15% bringing FY 2019/20 deposit growth to around 8-12%. Deposits expanded by 1.8% over the first three months of the year.