Investing in People
Investing in the Future
A n n u A l R e p o R t
2012
CIB's 5,181 employees bring to the
table a balanced blend of seasoned
insight coupled youthful vigor — a
mix that helps us efficiently serve more
than 589,645 customers.
Veteran Know-How,
Youthful Vigor
CIB: An Introduction
What We Do . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Our History . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Key Financial Highlights . . . . . . . . . . . . . . . . . . . 4
Key Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A Strategy that Delivers . . . . . . . . . . . . . . . . . . . . 6
A Word from Our Chairman . . . . . . . . . . . . . . . . . . 8
Board of Directors’ Report . . . . . . . . . . . . . . . . . . 10
Key Figures from 2012 . . . . . . . . . . . . . . . . . . . . 20
2012 in Review
Institutional Banking . . . . . . . . . . . . . . . . . . . . . 24
Global Customer Relations . . . . . . . . . . . . . . . . . . 32
Consumer and Business Banking . . . . . . . . . . . . . . 34
COO Area . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Risk Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Strategic Subsidiaries
CI Capital Holding . . . . . . . . . . . . . . . . . . . . . . . 56
Egypt Factors . . . . . . . . . . . . . . . . . . . . . . . . . 59
Commercial International Life Insurance Company . . . . 60
Falcon Group . . . . . . . . . . . . . . . . . . . . . . . . . 60
Corporate Leasing Company (Egypt) SAE – CORPLEASE . . 62
Corporate Governance . . . . . . . . . . . . . . . . . . . . . 66
Executive Management . . . . . . . . . . . . . . . . . . . . . 72
Community Development . . . . . . . . . . . . . . . . . . . . 76
CIB Foundation . . . . . . . . . . . . . . . . . . . . . . . . . 78
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 82
Contents The leading
private sector
bank in Egypt
CIB: An Introduction
What We Do
Commercial International Bank (CIB) is the leading private
sector bank in Egypt, offering a broad range of financial prod-
ucts and services to its customers, which include enterprises
of all sizes, institutions, households and high-net-worth
(HNW) individuals.
In addition to traditional asset and liability products, CIB
offers wealth management, securitization, direct investment
and treasury services, all delivered through client-centric
teams.
The Bank also owns a number of subsidiaries, including CI
Capital (which offers asset management, investment banking,
brokerage and research services), Commercial International
Life Insurance Company, the Falcon Group, Egypt Factors,
and CORPLEASE.
CIB strives to provide clients with superior financial so-
lutions to meet all of their financial needs. This enables the
Bank to maintain its leadership position in the market, while
providing a stimulating work environment for staff and gen-
erating outstanding value for shareholders.
Our History
CIB was established in 1975 as Chase National Bank, a joint
venture between Chase Manhattan Bank and National Bank
of Egypt (NBE). In 1987, Chase divested its ownership stake
due to a shift in international strategy, and the stake was ac-
quired by NBE, at which point the Bank adopted the name
Commercial International Bank.
Over time, NBE decreased its participation in CIB, which
eventually dropped to 19% in 2006, when a consortium led
by Ripplewood Holdings acquired NBE’s remaining stake. In
July 2009, Actis, an emerging market private equity special-
ist, acquired 50% of the stake held by the Ripplewood Con-
sortium. Five months later, in December 2009, Actis became
the single largest shareholder in CIB with a 9.3% stake after
Ripplewood sold its remaining share of 4.7% on the open
market. The emergence of Actis as the predominant share-
holder marked a successful transition in the Bank’s strategic
partnership.
2
Annual Report 2012
A Snapshot of our Businesses
Corporate Banking
Widely recognized as the preeminent cor-
porate bank in Egypt, CIB aspires to be-
come one of the best banks in the region,
serving industry-leading corporate clients.
Business Banking
The Business Banking Segment was for-
mally launched at the end of 2011 follow-
ing a successful one-year pilot program,
particularly among retail companies in the
Egyptian market. It mainly serves small
and midsize companies which are the
backbone of the Egyptian economy with a
contribution of almost 80% of total GDP.
This comes as a natural progression of the
Bank’s mission to remain one of Egypt’s
biggest financial and commercial institu-
tions supporting the Egyptian economy.
Mid-Cap Banking
This division caters to medium-sized com-
panies, employing a dedicated team of cer-
tified officers who are highly specialized
in providing advice and assistance to mid-
sized businesses. The department’s role is
to help these businesses grow to become
large corporations in the future.
Debt Capital Markets
CIB’s global product knowledge, local
expertise and capital resources make the
Bank an industry leader in project finance,
syndicated loans and structured finance
in Egypt. CIB’s project finance and syndi-
cated loans teams provide large borrowers
with better market access and greater ease
and speed of execution.
Consumer Banking
CIB registered considerable progress in
2012 as it continued to build a full-service,
world-class consumer bank, as under-
scored by the ability to serve clients in a
challenging environment last year. We
offer a wide array of consumer banking
products, including:
• Personal Loans: Focusing on employees
of our corporate banking clients and
offering secured overdrafts and trade
products.
• Auto Loans: Positioned to actively sup-
port this growing market in the coming
years.
• Deposit Accounts: Offering a wide
range of account types to serve our cli-
ents’ deposit and savings needs, includ-
ing tailored accounts for minors, youth
and senior citizens, as well as certificates
of deposit and care accounts. This is in
addition to our standard range of cur-
rent, savings and time deposit accounts.
• Residential Property Finance: Provid-
ing loans to finance home purchases,
residential construction and refurbish-
ment and finishing.
• Credit and Debit Cards: Offering a
broad range of credit, debit and prepaid
cards.
Wealth Management
CIB offers a wide array of investment
products and services to the largest num-
ber of affluent clients in Egypt.
Global Transactional Services
(GTS)
The Global Transactional Services (GTS)
Group serves as a key group within CIB
and oversees cash management, trade and
global securities services.
Treasury and Capital Markets
Services
CIB delivers world class service in the areas
of cash and liquidity management, capital
markets, foreign exchange and derivatives.
Direct Investment
CIB actively participates in select direct
investment opportunities in Egypt
and across the region.
Investment Banking Services
Through CI Capital, CIB offers existing
and prospective clients a full suite of invest-
ment banking products and services, in-
cluding investment banking, advisory and
execution, asset management, brokerage
and equity research. CI Capital offers both
deep and broad market knowledge and ex-
pertise; the firm is consistently ranked as a
leading brokerage house serving local and
international clients in Egypt.
CIB: An Introduction
Key Financial Highlights
Common Share Information Per Share
Earning Per Share (EPS) *
Dividends (DPS)
Book Value (BV/No of Share)
Share Price (EGP)**
High
low
Closing
Shares Outstanding
(millions)
Market Capitalization
(EGP millions)
Value Measures
Price to Earnings Multiple (P/E)
Dividend Yield
(based on closing share price)
Dividend Payout Ratio
Market Value to Book Value Ratio
Financial Results (EGP millions)
Net Operating Income
provision for Credit losses - Specific
provision for Credit losses - General
Total Provisions
Non Interest Expense
Net Profits
Financial Measures
Cost : Income
Return on Average Common Equity
(ROAE)
Net Interest Margin
(NII/average interest earning assets)
Return on Average Assets (ROAA)
Regular Workforce Headcount
Balance Sheet and Off Balance
Sheet Information (EGP millions)
Cash Resources and Securities
(Non Governmental)
Net Loans and Acceptances
Assets
Deposits
Common Shareholders Equity
Average Assets
Average Interest Earning Assets
Average Common Shareholders Equity
Balance Sheet Quality Measures
Equity to Risk-Weighted Assets
Risk-Weighted Assets (EGP billions)
Tier 1 Capital Ratio
Adjusted Capital Adequacy Ratio
FY 12
Consoli-
dated
FY 11 FY 10
Consol-
Consol-
idated
idated
FY 12
FY 11 FY 10 FY 09 FY 08 FY 07 FY 06 FY 05
3 .53
1 .25
18 .94
2 .43
1
15 .03
3
1
14 .59
2 .63
1 .5
23 .75
4 .89
1
19 .25
3 .73
1
20 .93
3 .64
1
15 .59
2 .77
1
19 .44
39.8
21.1
34.6
47.4
18.5
18.7
79.49
33.75
47.4
59.7
29.5
54.68
93.4
27.87
37.2
95
53.61
91.77
79
42.11
57.87
63.5
39.91
58.68
597 .2
593 .5
590 .1
292 .5
292 .5
195
195
130
20,646 11,098 27,973 15,994 10,881 17,895 11,285
7,628
9 .8
7 .7
15 .8
20 .8
7 .6
24 .6
15 .9
21 .2
3 .62% 5 .35% 2 .11% 2 .74% 2 .69% 1 .09% 1 .73% 2 .60%
31 .36% 33 .90% 27 .60% 24 .60% 18 .10% 15 .80% 27 .50% 21 .30%
1 .83
1 .24
3 .25
2 .3
1 .93
4 .39
3 .71
3 .02
5,344
3,934
3,952
5,108
3,837
3,727
3,173
3,200
2,288
1,741
1,450
610
321
6
610
321
6
9
610
1,653
2,226
321
1,557
1,615
6
1,562
2,021
610
1,445
2,203
321
1,337
1,749
6
1,188
2,141
9
1,041
1,784
346
49
395
950
193
57
250
636
1,615
1,233
176
18
193
668
802
197
167
364
474
610
30 .93% 39 .58% 39 .52% 28 .29% 34 .84% 31 .87% 32 .80% 29 .69% 27 .82% 38 .38% 32 .72%
22 .79% 18 .69% 28 .66% 21 .77% 20 .96% 30 .47% 31 .18% 36 .31% 37 .95% 31 .58% 29 .30%
4 .74% 3 .71% 3 .62% 3 .81% 3 .54% 3 .12% 3 .06% 3 .50%
2 .48% 2 .01% 2 .89% 2 .45% 2 .18% 3 .08% 2 .94% 3 .08% 2 .90% 2 .37% 2 .09%
5,181
4,867
4,755
4,867
4,517
4,360
4,162
3,809
3,132
2,477
2,301
16,140 18,990 16,325
16,764 19,821 16,854 16,125 14,473 21,573 13,061 10,537
41,877 41,065 35,175
94,014 85,506 75,425
78,729 71,468 63,364
10,822
8,567
8,712
89,760 80,480 69,840
80,063 70,913 62,007
41,877 41,065 35,175 27,443 26,330 20,479 17,465 14,039
94,405 85,628 75,093 64,063 57,128 47,664 37,422 30,390
78,835 71,574 63,480 54,843 48,938 39,515 31,600 24,870
11,311
2,527
90,017 80,361 69,578 60,595 52,396 42,543 33,906 29,183
79,834 70,549 61,624 53,431 44,602 36,603 29,277 25,619
3,040
4,081
8,609
6,946
8,921
5,631
9,767
8,640
7,800
10,116
8,765
7,777
6,288
4,856
3,560
2,784
2,325
16 .59% 15 .79% 17 .63% 17 .33% 16 .11% 17 .71% 17 .01% 15 .19% 13 .70% 14 .14% 13 .83%
55
65
22
12 .20% 12 .53% 15 .66% 12 .20% 12 .53% 15 .66% 15 .28% 13 .74% 10 .17% 9 .59% 9 .78%
13 .59%*** 15 .40% 16 .92% 13 .59%*** 15 .40% 16 .92% 16 .53% 14 .99% 14 .70% 13 .60% 13 .10%
30
26
49
49
65
41
55
37
* Based on net profit available to distribution (after deducting staff profit share and board bonus)
** unadjusted to stock dividends
*** As per Basel II regulations before profit appropriation
Key Facts
#1 Bank in terms of:
Profitability,
achieving
EGP 2.2 billion in
net income.
Revenue
among all Egyptian
private sector banks
with EGP 5.3 billion in
total revenues.
Net-worth
among all
Egyptian private
sector banks.
Market
capitalization in the
Egyptian banking sector.
Loan and deposit
market share
among all Egyptian
private sector banks.
Our
5,181
employees serve some
589,648 customers .
EGP
94 .0 bn
in total assets .
119,611
internet banking subscribers .
Over
500 of
Egypt’s largest corporations
bank with CIB .
CIB: An Introduction
A Strategy that Delivers
CIB’s outstanding performance during
the turbulent times since early 2011 re-
veals that at CIB, our customers are our
top priority. Our continued success de-
pends not only on our ability to satisfy
their evolving needs, but also to have
them served in prime time. CIB prides
itself on its remarkable performance in
standing hand-in-hand with our clients
during these unstable times. Our un-
wavering commitment to our clients is
the basis on which we will continue to
provide our shareholders with consis-
tent and high-quality returns.
We believe a key component of our
success is our skillful staff. CIB’s abil-
ity to offer employees an attractive work
environment, myriad career opportu-
nities and comprehensive training and
feedback, allows us to attract and retain
the strongest banking professionals in
Egypt. Our employees reciprocate with
dedication to our customers and the
wider CIB community.
An Outstanding Track Record
Our Vision
To be the leading and most trusted financial institution in Egypt, admired for our people,
strong core values and performance.
Our Mission
To create outstanding stakeholder value by providing best-in-class financial solutions to the in-
dividuals and enterprises that drive Egypt’s economy. Through our innovative products, focus
on superior customer service, development of staff and commitment to our community, we will
realize our ambitions and pave the landscape of banking in Egypt for years to come.
Our Objective
To grow and help others grow.
Our Values
A number of core values embody the way in which CIB employees work together to deliver ef-
fective results for our customers and community.
Integrity:
• Exemplify the highest standards of personal and professional ethics in all aspects of our business.
• Be honest and open at all times.
• Stand up for one’s convictions as well as accept responsibility for one’s own mistakes.
• Comply fully with the letter and spirit of the laws, rules and practices that govern CIB’s business
in Egypt and abroad.
• Say what we do and do what we say.
Client Focus:
• Our clients are at the center of our activities and their satisfaction is our ultimate objective.
• Our success is dependent upon our ability to provide the best products and services to our clients;
we are committed to helping our clients achieve their goals and be the best at what they do.
Innovation:
• Since our inception as the first joint venture bank in Egypt, CIB has been a pioneer in the financial
services industry. We believe innovation is a core competitive advantage and promote it accord-
ingly.
• We strive to lead the Egyptian financial services industry to a higher level of performance in serv-
ing the millions of Egyptians who remain under-served or un-banked.
Hard Work:
• Discipline and perseverance govern our actions so as to achieve outstanding results for our clients
and outstanding returns for our stakeholders.
• Seeking service excellence guides our commitment to our clients.
• We work with our clients to reach their current goals while anticipating and planning for their
future objectives.
Teamwork:
• We collaborate, listen and share information openly within CIB and with our partners, clients
and shareholders.
• Each one of us consistently represents CIB’s total corporate image.
• There is only one CIB in the eyes of our clients.
• We value and respect one another’s cultural backgrounds and unique perspectives.
Respect to the Individual:
• We respect the individual whether an employee, a client, a shareholder or a member of the com-
munities in which we live and operate.
• We treat one another with dignity and respect and take time to answer questions and respond to
concerns.
• We firmly believe each individual must feel free to make suggestions and offer constructive criti-
cism.
• CIB is a meritocracy, where all employees have equal opportunity for development and advance-
ment based only on their merits.
A Word from Our Chairman
In the wake of the
revolution we protected
middle management
and junior ranks
from salary cuts. Our
rationale was clear:
Rank and file and
mid-level management
are the engine of this
institution.
Systems Built and
Lived by People,
For People
Managing an institution such as CIB through exception-
ally challenging economic and political times on a regional
and even international scale is primarily an exercise in ho-
meostasis. Our goal is simple: To maintain our position as
the nation’s leading private-sector financial institution, to
maintain our credit quality, our risk profile and our abil-
ity to respond creatively to new opportunities and threats
alike.
We have succeeded in doing so since 25 January 2011,
which is a testament not just to the dedication and skills of
our 5,181 employees, but to the soundness of the systems
these same people have built in the decades preceding. It is
for this reason that a spotlight on our investment in human
talent is at the heart of this year’s annual report.
Over a period of years, our staff have built an institution
that rewards creativity, minimizes risk and maximizes pro-
ductivity by recruiting, empowering and retaining profes-
sionals capable of building the responsive systems that have
made us what we are today: Egypt’s largest private-sector
bank by assets, revenues and profitability.
This has been possible because of a can-do culture that
has been part of the fabric of CIB since our earliest days. The
blueprint for success is as deceptively simple as it is difficult
to implement:
We seek business partners: There’s a reason why top-
level management welcome middle management to our
weekly meetings, allowing them to learn from and inter-
nalize our debates and discussions. There’s a reason why
we encourage this practice at all levels of the organization:
Business partners build for the future and feel sufficiently in-
vested in to deliver results come hell or high water.
We specialize: We instill, manage and measure productiv-
ity by creating area specialists. We are not jacks of all trades
and masters of none. Every young fast-mover in our orga-
nization is, first and foremost, someone who has the same
entrepreneurial spirit and systems-backed approach that we
look for in mid-career and senior-level recruits. Our staff are
cross-trained, but they focus on specific areas and become
industry-recognized experts.
We are efficient: From planning to execution, we work at
all costs to minimize wasted time. Our staff are our greatest
asset, and the number of hours available to them in each day
is finite.
We retain our best and brightest: We don’t just look
to recruit the highest-quality individuals possible, we also
invest significantly in their professional development and
retain them for the long term by acknowledging that their
best interests are almost always the best interests of our in-
stitution.
We defy conventional wisdom: The global tendency in
our industry is to cut wages, slash bonuses and reduce head
count in times of crisis. That’s the obvious, mechanical mod-
el: Hammer headcount and fixed costs. Not at CIB. We dig-
in and persevere. Take 2011, when we clearly acknowledged
that short-term savings on the backs of middle management
and the rank and file is not the way to sustain — let alone
enhance — our competitive edge in a 38-bank environment.
In the wake of the Revolution, we protected middle manage-
ment and junior ranks from salary cuts. It was not an ob-
vious solution in our industry, but our rationale was clear:
Rank and file and mid-level management are the engine of
this institution. They repaid our 2011 investment with inter-
est with their outstanding performance in 2012.
We are nimble: Adaptation and change have become part
of our culture, and we have stamped out both institutional
stagnation and the cancer that is mental rust. Where other
institutions would have taken half a year to study and debate
responses to the challenges of 2011 and 2012, we pivoted our
business plans in a matter of weeks.
We show no fear: We are an institution of human beings,
not machines. From the freshest recruit to senior manage-
ment, we are impacted at work by the outside forces that
shape our private lives: by the way we live and go home, by se-
curity and the recurrent nightmare of night-time talk shows.
We cope with difficult times such as these just as we did in
the best of times: By learning how to operate with confidence
outside our comfort zone. That’s what managing change is
all about. Across the bank, our managers have shown a level-
headed approach to business that has instilled confidence in
staff throughout this institution.
2012 Performance as an Institution
If you have read more than a single day’s front-page head-
lines in any newspaper or website — or watched a single
night of television — you know that it is an understatement
to say 2012 presented a ‘challenging working environment.’
As bankers, we have a simple business model: We take
deposits, and give out loans. It is a simple calculus in most
circumstances, but an utter lack of visibility during the pro-
tracted post-Revolutionary transition period made business
judgment not a science, but a dark art.
I was privileged, against this backdrop, to have worked in
2012 with Mr. Hisham Ramez as an equal partner. Hisham
joined us from the Central Bank of Egypt, and having some-
one with whom to share the burden of leadership was among
the highlights of my year. Hisham made a substantial differ-
ence in his time with the bank, and his departure to assume
his duties as the Governor of the CBE is both our nation’s
gain and this institution’s loss. He did great work here and we
will definitely miss him. As we pray for his success, our mis-
sion continues: "To create outstanding value for shareholders
by being the best bank in Egypt, full stop."
Based on our Board Charter, in the absence of one of the
managing directors, the other assumes his responsibilities.
Accordingly, I will temporarily assume Hisham's responsi-
bilities as per the mandated authorities by the board.
As I write these words, it is clear that the challenges of 2012
did not come to an end with the change of the calendar year.
Our goal for 2013 is thus to maintain continuity in people
and systems to allow us to mitigate risk at every turn. We
will maintain a homeostatic position while we hope that
early seeds of willingness on the part of the opposition and
government alike to talk across factional lines blossoms. We
look forward to bedrock political stability returning and to
wise guidance by the new governor of the Central Bank of
Egypt — two factors that we are confident will ultimately see
the return of business confidence.
As local businesses begin investing once more, pent-up
foreign interest in Egypt to translate into fresh investment,
attracted by enduring macro fundamentals, a sound finan-
cial system and attractive asset prices. As this comes to frui-
tion, we will be ready to deliver, calling on the same people
who created the systems and processes that have allowed us
to flourish as others have foundered on the rocks.
Any organization can write policies and slogans, but con-
sistent implementation is the key. Implementation and en-
forcement on the ground year after year is what makes it part
of your DNA.
Hisham ezz el-Arab
Chairman and Managing Director
8
Annual Report 2012
Annual Report 2012
9
Board of Directors’ Report
Board of Directors' Report
2012 Macroeconomic
Overview
Egypt has been undergoing a period of
profound socio-political change as it as-
pires to improve its economic, political
and social conditions post-revolution.
Challenging conditions in both the do-
mestic and global arenas have resulted
in macroeconomic disruptions and
kept growth and investment levels from
reaching their full potential. The major
challenge currently facing the Egyptian
economy is a combination of reduced
security and political instability, which
raise investor concerns and negatively
impact tourism, investment, employ-
ment and production.
to
Egypt’s real GDP growth showed
a relative improvement of 2.2% in
FY 2011/2012 from 1.8% during FY
2010/2011 but remained significantly
below average historical levels. The
main sectors contributing
this
growth were agriculture, construction,
telecommunications and real estate.
Manufacturing and tourism, Egypt’s
traditional economic growth drivers,
showed only modest increases. Tourism
grew by 2.3% (0.1% of real GDP growth)
while manufacturing grew by only 0.7%
(0.1% of real GDP growth). Tourism’s
contribution to current account receipts
has witnessed steady decline from 20%
in 2010 to 17% in 2011 and to only 14%
in 2012.
Low investor confidence caused do-
mestic investments to contract from
19.5% of GDP in 2010 to 17.1% in 2011
and 16.7% in 2012, while FDI came in
at just a quarter of 2010 levels (0.8% of
GDP vs. 3.1%). The lack of investor ap-
petite contributed to lower levels of job
creation and caused unemployment to
reach 12.5% in 2012 (the highest level
since 2002), from 11.9% in 2011 and
8.9% in 2010. Domestic savings declined
from 14.3% of GDP in 2010 to 13% in
2011 and 9.1% in 2012 (lower than levels
seen during the global financial crisis
of 2008/2009). The budget deficit in-
creased to 10.7% of GDP in 2012 from
9.8% in 2011 and BOP to GDP declined
10
Annual Report 2012
to (4.4%) in 2012 from (4.1%) in 2011
and 1.5% in 2010.
Egypt recorded a significant drop of
58% in the Central Bank of Egypt's net
international reserves, from USD 36 bil-
lion in 2010 to USD 15 billion in 2012, as
the CBE defended the Egyptian pound
against devaluation pressures. As a re-
sult, the USD / EGP exchange rate deval-
ued from 6.03 at the end of 2011 to 6.31
by December 2012. Due to continued
weakness in domestic demand as well as
lower global commodity prices, inflation
(consumer price index in urban areas)
declined from 11% in 2011 to 8.6% as of
November 2012.
Despite the unfavorable economic
backdrop, the Egyptian banking system
Management's proactive
actions in Q4 2011 and
Q1 2012 to reposition
the Bank against
looming headwinds were
instrumental in boosting
product revenues.
has remained relatively resilient, liquid
and well-capitalized. The sector’s loan-
to-deposit ratio declined to 47.8% (as of
November 2012) from 49.5% in Decem-
ber 2011. The local currency loan-to-de-
posit ratio declined from 45.7% to 45.3%
while the foreign currency loan-to-de-
posit ratio declined from 61.7% to 56.2%.
Total market deposits grew by 8.1% from
EGP 989 billion in 2011 to EGP 1.07 tril-
lion in November 2012 on increases of
8.2% and 7.5% in LCY and FCY depos-
its respectively. Total market loans grew
by 4.5% from EGP 490 billion in 2011 to
EGP 512 billion as of November 2012, on
a 7.2% increase in LCY loans and a 2.0%
decline in FCY loans. The sharp increase
in sovereign debt rates encouraged local
banks to allocate a larger portion of their
portfolio to sovereign assets.
2012 Financial Position
The year 2012 was a record one for CIB
on many levels. CIB recorded consoli-
dated net income for FY 2012 of EGP
2,227 million, growing 38% from FY
2011. Standalone net income grew 26%
over 2011 and 2.9% over 2010 figures
to EGP 2,203 million. Total standalone
revenues grew 36% over 2011 and 44%
over 2010 to reach EGP 5,422 million,
achieving their highest level of growth
since 2008.
Management’s proactive actions in
Q4 2011 and Q1 2012 to reposition the
Bank against looming headwinds were
instrumental in boosting product reve-
nues, which traditionally have not been
major contributors to top and bottom
lines. In 2012, CIB also witnessed great
adaptability and responsiveness in pric-
ing decisions, which led to a restructur-
ing of the liabilities mix along with mar-
ket share growth, while simultaneously
securing profitability from a long-dated
sovereign position as the Bank ventures
into a more challenging 2013.
In the core business, CIB recorded net
interest income (NII) of EGP 4,084 mil-
lion in FY 2012 constituting approxi-
mately 75% of its total revenues. Of this
figure, approximately 22% came from
the sovereign bond portfolio, which
grew by nearly 87% during the year. Net
income from banking fees and commis-
sions grew by 9% during 2012 to reach
EGP 943 million as a result of solid
business growth.
Driven by strong NII growth, conser-
vative asset growth and tight expense-
control, 2012 saw improvements in all of
the Bank’s key performance indicators.
CIB recorded ROAE of 22.68% up from
22.04% in 2011 despite the impact of the
higher equity base that resulted from
the marking to market of the available
for sale (AFS) bond portfolio. Driven by
concern over the macroeconomic situ-
ation and further delays in a return to
growth, CIB maintained its cautious
capital base, reflected in a comfortable
capital adequacy level and CBE liquid-
ity ratios.
Board of Directors’ Report
In 2012, CIB achieved its lowest cost-
to-income ratio since 2008, which was
primarily driven by NII growth, con-
servative asset growth and controlled
expense growth. CIB had ROAA of
2.45% up from 2.18% in 2011. Net inter-
est margin (NIM) also continued its up-
ward trend to reach 4.74% up 103 basis
points (bps) from 2011. NIM was also
positively impacted by management’s
push to raise minimum lending rates
and re-pricing floating rate loans to bet-
ter reflect risk and enhance margins.
Reflecting the prevailing economic
conditions, CIB’s loan portfolio grew
3.3% from 2011 to reach EGP 44,351
million, with all growth coming from
local currency loans. On the back of
management’s actions to enhance ef-
ficiency and improve portfolio quality,
CIB’s loan market share declined from
8.77% in 2011 to 8.45% as of November
2012. One of management’s key goals
for 2012 was to significantly restruc-
ture the loan portfolio’s currency mix
in favour of higher yielding local cur-
rency loans, which increased by 6.5%
from December 2011 to represent 57%
of the total loan portfolio, up from 55%
in 2011.
CIB increased deposits to reach EGP
78,835 million, up 10.1% from 2011.
Several pricing decisions were made
throughout the year to manage the pace
of deposit gathering and the Bank’s cost
of funds. The bulk of 2012’s incremental
deposits came in the form of certificates
of deposit, with the remainder coming
from saving accounts. Again, CIB was
successful in reweighting its balance
sheet towards local currency deposits,
which reached 61% of the total portfo-
lio (up from 58% in 2011). This achieve-
ment is even more impressive when
taking into account that the foreign
currency portion of the balance sheet
was boosted by a 5% devaluation dur-
ing 2012.
On the competitive landscape, CIB
benefitted from the retrenchment of
foreign competitors and achieved the
fastest year-on-year revenue growth
among its closest competitors as of the
third quarter of 2012. CIB grew rev-
enues by 34% from 2011 higher than
peer banks. CIB’s deposit growth of
8.9% outpaced the overall deposit mar-
ket growth of 8.1%, thus reaching a
market share of 7.29% as of November
2012.
Prudent Risk Management
CIB is well-known for its conservative
risk management strategy, aiming to
take proactive steps at the earliest signs
of weakening in accounts before actual
downgrades in credit rating become a
reality. Building on this track record,
CIB took provisions of EGP 610 million
for the full year. The Bank’s world-class
risk management framework is reflect-
ed in its best-in-sector asset quality and
a high-class corporate loan book.
Preservation of Asset Quality
Despite the prevailing economic cir-
cumstances, CIB maintained its asset
quality and avoided significant deterio-
ration, thanks to its effective credit cul-
ture and stringent risk assessment mea-
sures. CIB reported a 3.63% NPL ratio
in 2012, which is amongst the lowest in
the sector with an ample coverage ratio
of 120%, further cementing a growth
strategy underpinned by an emphasis
on maintaining quality standards.
Institutional Banking
CIB is widely considered the traditional
institutional banking leader in Egypt.
Despite the impact of domestic politi-
cal and economic disruptions in 2012,
net income for Institutional Banking
increased 18% from EGP 1.2 billion in
2011 to EGP 1.5 billion in 2012 repre-
senting 61% of CIB’s total profitabil-
ity. Management instituted minimum
lending rate hikes to increase the prof-
itability and quality of the Bank’s loan
portfolio.
Consumer Banking
Following the January 25th Revolu-
tion, CIB management adopted a more
customer-focused strategy. Consumer
Banking net income increased by 31%
from 2011 to reach EGP 870 million in
2012, accounting for 39% of CIB’s total
profitability. This growth was largely
driven by acquiring LCY deposits of
EGP 10.4 billion to serve as a stable
funding base.
As part of the Bank’s overall strat-
egy to concentrate on alternative chan-
nels in order to allow branches to focus
more on retail customers and sales ac-
tivities, CIB succeeded in offloading a
greater portion of customer activities
from branches to ATMs. In the drive to
lower cash handling costs, tough deci-
sions were taken regarding corporate’s
top teller users that resulted in the re-
duction of excess cash.
Bancassurance was a key initiative
for Consumer Banking in 2012, with
revenues of EGP 38 million, an increase
of 142% over 2011. Business Banking
was another strategic focus for the year,
adding EGP 1.8 billion of incremental
net sales.
Income Appropriation
CIB’s primary objective is to enhance
value for both customers and share-
holders. The Board of Directors pro-
posed the distribution of a dividend
per share of EGP 1.25. CIB is increasing
its Legal Reserve balance by 64% (EGP
149 million) from EGP 231 million in
2011 to EGP 380 million in 2012 and its
General Reserve balance by 65% (EGP
803 million) from EGP 1,234 million to
EGP 2,037 million. This reinforces CIB’s
solid financial position as reflected in
its Basel II Capital Adequacy Ratio of
13.6% (before net profit appropriation).
2012 Achievements
In 2012, CIB for the first time joined
the list of top 20 MENA region banks
in managing and marketing syndicated
loans (ranked 13th) and was among
the leading mandated loan arrangers
(ranked 18th) according to Bloomberg.
This came as CIB arranged for three
syndicated loans of USD 645 million
and managed two syndicated loans of
USD 575 million in addition to partici-
pating in syndicated loans of USD 5.15
billion.
In addition to ranking first in market
share among Egyptian private-sector
banks, CIB was also the only Egyptian
bank to succeed in improving its rank-
ing in the MENA region. CIB climbed
20 places from 2011 to 2012, capturing
a market share of 3% in managing and
marketing syndicated loans, vs. 0.4% in
2011, and rose 35 places among syndi-
cated loan arrangers to capture a mar-
ket share of 1.6%, vs. 0.5% in 2011.
Subsidiaries
CI Capital experienced its strongest
performance in recent years and main-
tained its third place overall ranking
among the top 10 brokerage companies
during 2012. CIBC achieved transac-
tion volumes of around EGP 20.7 bil-
lion on 503 million transactions cover-
ing 2,895 million shares, to capture a
market share of 7.1% in 2012. If a single
outsized transaction is excluded, CIBC
would actually be the brokerage market
leader for listed companies. Expense
control and a turnaround in broker-
age were the key profit drivers for the
Group. During 2012, the entire research
team was restructured with the hiring
of key talent. Additionally, a second
managing director and vice president
joined Investment Banking in Decem-
ber 2012. It is expected that this new
investment in human capital will have a
strong impact on 2013 revenues.
Awards and Recognitions
An award-winning 2012 added another
chapter to CIB’s success story. CIB has
continued to receive global acknowl-
edgment awards for the Bank’s excep-
tional performance and reputation, ac-
quiring a total of 12 awards in 2012.
• Global Finance magazine acknowl-
edged CIB with four awards; “Best
Bank in Egypt” for the 16th time, “Best
Sub-Custodian Bank in Egypt” for the
fourth consecutive year, “Best Foreign
Exchange Provider Bank in Egypt” for
the ninth year and “Best Trade Finance
Bank in Egypt” for the sixth year.
• EMEA Finance recognized CIB as
“Best Local Bank” for the fifth consec-
utive year and “Best Asset Manager in
Egypt” for the second consecutive year.
• CIB was Global Investor ISF’s “Best
Asset Manager in Egypt” for the third
consecutive year as well as the “Best FX
Provider in the Middle East” for the
second time.
• The Remittances Department was
awarded the “Quality Recognition
Award for Outstanding Achievement
– Best-in-Class Book Transfer Rate” by
JP Morgan.
• Global Trade Review acknowledged
CIB as the “Best Trade Finance Bank in
Egypt” for the fourth consecutive year.
• In addition, CIB earned the "STP
awards for 2012 in USD and EUR.”
Corporate Governance
We believe that good governance is a
cornerstone of our success at CIB and
we are proud of CIB’s leadership posi-
tion in board governance. The Board
remains committed to continuous im-
provement where we regularly review
and update our practices.
The overall corporate governance
framework of CIB is directed by the
Board and its sub-committees: Audit
Committee, Corporate Governance and
Compensation Committee, Risk Com-
mittee, Management Committee, High
Lending and Investment Committee.
The Board and its committees are
governed by well-defined charters and
are tasked with assisting directors in
fulfilling their responsibilities and ob-
ligations with respect to their decision-
making roles.
Such task is further facilitated by the
wide array of established internal poli-
cies and manuals covering all business
aspects such as credit and investment,
operational procedures, staff hiring and
promotion.
CIB’s Board consists of nine members,
seven of which are non-executive mem-
bers with a wide range of industry exper-
tise. CIB’s Board met six times over the
course of 2012. In the event of a vacant
Board seat, the Compensation and Gov-
ernance Committee is responsible for
nominating a new member. Among its
defined set of responsibilities, CIB’s Board
constantly monitors the Bank’s adherence
to well-defined, stringently enforced and
fully transparent corporate governance
standards. The Board fulfils its commit-
ment in the following manner:
• Ensures that Board Members have a
clear understanding of their roles in
corporate governance. Annually re-
views the size and overall composition
of the Board and ensures it respects its
independence criteria.
• Through its Governance and Compen-
sation Committee, the Board ensures
that an appropriate review and selec-
tion process for new nominees to the
Board is in place.
• Establishes the strategic objectives and
ethical standards that will direct the
on-going activities of the Bank, taking
into account the interests of all stake-
holders.
• Establishes an internal control envi-
ronment, which comprises systems,
policies, procedures and processes that
are in compliance with regulatory re-
quirements. These control measures
safeguard Bank assets and limit risks
In 2012 CIB was ranked
13th on Bloomberg's
list of top 20 MENA
banks in managing and
marketing syndicated
loans and 18th on the
list of mandated loan
arrangers.
as the Board, management and other
employees work to achieve the Bank’s
objectives.
• Ensures that senior management im-
plements policies to identify, prevent,
manage and disclose potential conflicts
of interest. The Board also oversees the
performance of the Bank, its managing
director, chief executive officers and se-
nior management to ensure that Bank
affairs are conducted in an ethical and
moral manner and in alignment with
Board policies.
• Reviews and approves material related
to disclosure and transparency docu-
ments as may be required to conform
with regulatory requirements or as
may be determined by the Board from
time to time.
• Oversees a code of conduct to govern
the behavior of directors, officers and
12
Annual Report 2012
Annual Report 2012
13
Innovative
Financial
Solutions
In 2012, CIB increased the
efficiency and availability of ATM's
and conducted a soft-launch of
new online banking applications
to support the evolving needs of its
customers.
119,611
internet banking subscribers.
5
Easy Branches, CIB's new teller-
less branch concept in high-end
areas using alternative cash
channels.
Board of Directors’ Report
employees through an independent
Compliance function reporting direct-
ly to the Audit Committee.
• The Code of Conduct sets CIB's core
values as integrity, client focus, inno-
vation, hard work, and respect for the
individual. These values encompass
CIB’s commitment to create a culture
that adopts ethical business practices,
good corporate citizenship, and an
equal and fair working environment.
At the same time, it promotes a culture
of transparency, encourages a whistle-
blowing environment and provides
protection to the whistle-blower.
The Central Bank of Egypt’s audi-
tors and controllers conduct regular
audit assignments and review reports
submitted to them periodically. During
CBE audit missions, CIB’s management
ensures that the auditors are provided
with all necessary documents to fully
perform their audits. CIB’s internal
audit team closely follows up with the
Bank’s management to take all correc-
tive measures with regards to CBE’s au-
dit comments.
Moreover, given the utmost atten-
tion to maintaining the highest levels
of corporate governance, CIB’s inves-
tor relations team is committed to con-
sistently sharing high quality informa-
tion with all stakeholders regarding
the Bank’s activities with emphasis on
transparency.
Operations Platform with
International Standards
The year 2012 was extremely exciting
for the COO Area, which continued
with its efforts to implement its agenda
for improvement and standardization.
All departments worked on a number
of activities during the year. Substan-
tial progress was made in Finance, HR,
Premises, Operations, Marketing and
Corporate Services. The progress pro-
vides a framework for our strategy in
2013 and beyond.
The COO Area continued to focus on
the enhancement of customer experi-
ence as one of the Bank’s key objectives
in multiple areas including the brand-
ing of branches and providing service
and quality measurement tools across
16
Annual Report 2012
the network. In addition, the COO Area
focused on aspects of Human Capi-
staff-development
tal Management,
through effective training, enhancing
performance management and apply-
ing employee engagement initiatives.
Innovative Financial Solutions
During 2012, CIB Operations Group
managed not only to sustain its high
level of productivity and efficiency, but
also took further steps towards being
a proactive business partner. Multiple
initiatives were undertaken to improve
customer experience. These included
launching non-negotiable standards,
CIB Way and key service indicators, as
well as standardizing multiple opera-
tion procedures and customer forms to
provide a consistent, smooth experi-
ence for our customers. Standard pro-
cessing times were also set in place for
Our commitment to the
country in which we live
and operate is an integral
part of our business
culture.
productivity enhancement. To support
GTS customer transactions, an addi-
tional 12 service hubs were added to our
branch network along with a dedicated
GTS operations unit. Improving the ef-
ficiency of alternate channels was also
a key development during this year. In
2012, CIB increased the efficiency and
availability of ATM’s and conducted a
soft-launch of a new online banking ap-
plication to support customers’ evolv-
ing needs.
The new Bank-wide “Cross Selling”
initiative was off to a solid start, with
Consumer Banking staff making 650
referrals to Institutional Banking and
IB staff referring 547 transactions to CB
as of December 2012.
CIB Premises Projects Department
also undertook a number of key strate-
gic initiatives that positively impacted
the Bank’s external and internal cus-
tomers in 2012. One of these initiatives
was the “Easy Branch” concept, a teller-
less branch model located in high-end
premises mainly focusing on sales and
using alternative cash channels. Five
Easy Branches were opened in up-mar-
ket residential areas by December 2012.
CIB also expanded its distribution net-
work, establishing 12 new branches, as
well as enhancing its image and cus-
tomer experience through the renova-
tion of more than 10 branches and 40
wealth lounges with the new ‘wealth’
image.
Focus on People
CIB’s HR strategy for 2012 was to re-
main focused on the Bank’s employees,
working to increase both productiv-
ity and motivation. With this in mind,
a number of initiatives and projects
were put in place. Through the “Focus
on People” framework, CIB has dem-
onstrated leadership and expertise in
attracting top talent while promoting
a highly engaged and motivating work
environment.
Recruitment
During 2012, CIB continued to hire
different levels of staff in various areas
of the Bank, despite the country’s po-
litical and economic situation. In total,
559 new employees were hired in 2012,
compared with 295 new hires in 2011.
Seventy per cent of all new hires in
2012 headed to Consumer Banking and
branches. Moreover, the Recruitment
Department participated in several ca-
reer fairs and campus visits, aiming to
attract the country’s best talent from its
top universities.
We have continued to seek the right
prospects and to attract talent from top
schools. CIB participated in the Har-
vard Business School MENA conference
and annual Employment Fair for the
second year in a row. This participation
has been with a view towards brand-
ing CIB as an employer of choice for
Egyptian students studying at top-tier
universities. CIB is sought as an attrac-
tive employer in Egypt for its valuable
learning experience, modern culture,
sustainability and leadership. Eleven
Egyptian candidates have been identi-
fied during the event and showed an
interest in joining CIB. The department
also played a significant role in selecting
the 60 interns who joined our new Sum-
mer Internship Program, which aims to
attract the best candidates from the best
universities to join the CIB team.
On the corporate side, CIB ran its
second Employee Engagement Sur-
vey through Hay Group. About 80% of
staff responded and provided feedback
with their impressions of the work en-
vironment. Survey findings showed a
remarkably positive improvement over
2011 results. Presentations of the new
findings have taken place with high-
lights on areas of opportunity.
Training
In terms of training, 2012 moved in
a more strategic direction in provid-
ing training to staff. Our Management
Training Programs were once again a
great success. Training became more
targeted by concentrating on key areas.
New programs were introduced. Some
of the programs were conducted by
external vendors while others were de-
veloped in-house and conducted by our
own trainers.
In 2012, the Training Department’s
focus was to identify gaps in the knowl-
edge and skills of staff and to deliver
the appropriate educational courses to
bridge these gaps. To achieve this objec-
tive, the Training Department worked
on a plan to provide educational pro-
grams related to technical, management
and business skills. Our highlight for
the year was the number of programs
that were developed and delivered by
senior staff to enhance overall banking
knowledge across all levels. A total of
4,500 staff members attended the differ-
ent programs.
A total of 49 participants from vari-
ous areas in Consumer Banking and
Operations enrolled in the Leadership
and Development Program for Con-
sumer Banking (LDP). The Leadership
and Management Program for Senior
Officers — which aims to create a sense
of synergy and a unified vision for all
senior management within CIB — con-
tinued this year as well, with fifty par-
ticipants attending and successfully
completing the program. Also in 2012,
our Credit Course was revamped by ex-
ternal consultants and upgraded with
new case studies and updated course
material. Some of the new programs
that were introduced this year includ-
ed: Wealth Management, Supervisory
Skills and a number of middle manage-
ment programs.
Some of the activities also includ-
ed providing specialized training for
Wealth Managers, Road to Manage-
ment for first time supervisors, Middle
Management training, Finance for Line
Managers, Advanced Consumer Risk,
Advanced Sales Management, Product
Knowledge, and specialized programs
in Operations. These programs, as well
as training programs on soft skills like
skills, presentation
communication
skills and advanced negotiation skills,
provided a vast array of training oppor-
tunities to select from.
These efforts were recognized by staff
and management and evident in the
Employee Engagement Survey which
showed a marked
improvement as
compared to 2011. We look forward to
a more exciting 2013 as we introduce
more programs such as the Basic Bank-
ing Program for new hires, Job-Family-
based series of training programs, and
targeted technical training programs.
Organizational Development
In order to increase employee interac-
tion and ensure their voices are heard,
HR administered several initiatives to
maintain communication with employ-
ees, including the Employee Engagement
Survey, the Salary Surveys and various
Town Hall meetings. Salary Surveys
were conducted to assess compensation
and benefits across the market, with
more emphasis on critical / executive po-
sitions to ensure that the Bank is aligned
with current market levels.
The Standardization of Job Families
initiative was also launched to ensure
employees have a clear understanding
of their roles in achieving the Bank’s
strategy and mission.
Corporate Social
Responsibility
Our commitment to the country in
which we live and operate is an integral
part of our business culture. Contribut-
ing to our country’s prosperity and wel-
fare has always been among CIB’s top
priorities. CIB always works on trans-
lating its social responsibility commit-
ments into actions. We are immensely
proud of supporting Egypt during these
turbulent times and are proud of the
broad impact that our time, effort and
resources have had on our community.
CIB Foundation
Now in its third year of operations, the
CIB Foundation has successfully expe-
rienced exponential growth in its activ-
ities. Following the success of the CIB
Foundation in 2011, CIB shareholders
generously agreed to increase the per-
centage of CIB’s net annual profit to
the Foundation from 1% to 1.5%. This
translated into more than EGP 26 mil-
lion being allocated to the CIB Foun-
dation in 2012. It is with this funding
that the CIB Foundation is making
valuable contributions in the areas of
child health and nutrition through vari-
ous multi-faceted initiatives, includ-
ing renovating and upgrading hospital
infrastructure, purchasing medical
equipment for hospitals and providing
surgical and medicinal treatment to un-
derprivileged children.
Additionally, the CIB Foundation ac-
tively supports its initiatives with con-
tributions made to its dedicated fund
raising account. Fully 100% of the do-
nations made to the account go towards
the
implementation of development
projects for children. Through the coor-
dinated efforts of both CIB Foundation
staff and dedicated CIB volunteers, the
Foundation ensures its resources are
spent efficiently and reach the greatest
number of beneficiaries.
In January 2012 the Foundation ful-
filled its annual commitment to the
Children’s Cancer Hospital 57357. This
donation is part of a five-year partner-
ship that began in 2009 in which the
hospital receives EGP 2 million in fund-
ing per year to be used for general op-
erational purposes.
Numerous CIB volunteers also par-
ticipated in two events sponsored by
the Children’s Cancer Hospital 57357,
including the hospital’s five-year an-
Annual Report 2012
17
Board of Directors’ Report
niversary where volunteers distributed
gifts to visiting cancer survivors and
current hospital patients, as well as the
third annual Terry Fox Run in Egypt,
supporting children’s cancer research at
the hospital.
The Magdi Yacoub Heart Founda-
tion (MYHF) has been a long-standing
partner of both CIB and the CIB Foun-
dation. In January 2011, a protocol of
cooperation was signed between the
two foundations for the development
and outfitting of a Pediatric Intensive
Care Unit (PICU) in Building 2 of the
Aswan Heart Centre. The new EGP 13
million PICU will provide state-of-the-
art postoperative care to neonates, in-
fants and children ranging in age from
new-born to 16 years free of charge. The
CIB Foundation’s donation covered the
costs associated with the Unit’s medi-
cal and non-medical equipment. The
PICU had a soft opening in November
2012, and is expected to celebrate its
grand opening in the first half of 2013.
In August 2012, the CIB Foundation al-
located EGP 2 million to MYHF for the
full sponsorship of the children’s play-
room in Building 2 of the Aswan Heart
Centre. In the same month, EGP 6 mil-
lion was allocated to MYHF to cover
the costs associated with 100 children’s
open-heart surgeries. The donation is
being disbursed in two equal tranches,
with the first tranche of EGP 3 million
distributed in September 2012.
Moreover, in August 2012, an EGP
2 million Cooperation Agreement was
signed with the Friends of Abou El
Reesh Children’s Hospitals Organi-
zation to cover the annual operating
expenses of the new ICU. The annual
donation will be used to support staff
salaries and incentives, medical and ad-
ministrative supplies, infection control
and for the provision of computers and
other ICU equipment.
This was not the only donation to the
Friends of Abou El Reesh Children’s
Hospitals Organization: In 2011, the
Friends of Abou El Reesh Children’s
Hospitals Organization turned to the
CIB Foundation for support in renovat-
ing El Mounira Hospital’s Blood Clinic.
The CIB Foundation’s EGP 800,000
donation was used to upgrade the
18
Annual Report 2012
roughly 700-square-meter Blood Clinic
by restructuring it to streamline move-
ment, prevent overcrowding, provide
adequate space for beds and chairs for
blood transfusions as well as providing
a waiting area for family members. The
donation also covered the costs of ad-
ditional computers to develop an elec-
tronic patient database and supporting
blood donation campaigns to offset the
current supply deficit across Egypt. The
renovated Blood Clinic opened its doors
in January 2013.
Through the Rotary Kasr El Nile orga-
nization, the CIB Foundation commit-
ted EGP 1.5 million to fund 1,000 eye
surgeries for children through the Chil-
dren’s Right to Sight (CRTS) program.
Operational for the past six years, CRTS
is dedicated to eradicating blindness by
supporting children and infants requir-
ing immediate eye surgery. Through
partnerships with the El Nour Eye Hos-
pital in Mohandiseen and the Eye Care
Hospital in Maadi, the CRTS team will
oversee 1,000 cataract and glaucoma
operations for underprivileged chil-
dren. The CIB Foundation and CIB staff
are proud to partner and volunteer with
Rotary Kasr El Nile on this project. Pay-
ment for the first round of surgeries was
completed in November 2012.
In 2012, the CIB Foundation reaf-
firmed its partnership with the Gozour
Foundation for Development, the non-
governmental arm of the Centre for
Development Services (CDS). In Au-
gust 2012, the Foundation donated EGP
478,170 to fund 10 eye exam caravans
for public elementary schools in Cairo,
Alexandria and Minya through the 6/6
Eye Exam Caravan Program. Through
a partnership with the Alnoor Magrabi
Foundation, the caravans are designed to
provide public school students with eye
exams, eyeglass frames and lenses, eye
medication and in-depth eye exams at
private hospitals for complex cases. Each
caravan is fully equipped with eye exam
machines; 15-20 doctors, nurses and co-
ordinators; a fully equipped pharmacy;
and an eyeglasses shop. Each one-day
caravan targeted 450 children, with a
total of 4,500 children receiving free eye
exams and care by the end of the project.
The project also presented valuable
opportunities to volunteers from the
CIB family to engage with the local
community and spend quality time
with the less privileged. Volunteers
from head offices, regional offices and
branches across the three governorates
actively participated in the program.
In December 2012, the CIB Founda-
tion donated EGP 1 million to the Ya-
hiya Arafa Foundation for the upkeep
of the three Pediatric Units at the Ain
Shams University Hospital. The Yahiya
Arafa Foundation has been instrumen-
tal in purchasing high-end equipment,
as well as training the nurses and doc-
tors working in these units. The CIB
Foundation strongly believes in ensur-
ing the sustainability of its projects,
and believes that supporting the Yahiya
Arafa Foundation in its operations will
ensure the smooth running of the pre-
viously supported units. The donation
will be used to cover human resources,
equipment maintenance, operating
costs and academic research.
In line with CIB and the CIB Foun-
dation’s commitment to community
fostering quality
development and
in educational opportunities in post-
revolution Egypt the CIB Foundation
established the ‘CIB Foundation Fel-
lowship for Science and Technology’ at
Zewail University. In the first phase of
this partnership with the Zewail City
of Science and Technology, the CIB
Foundation Fellowship will support
50 Egyptian public school graduates
pursuing degrees in the sciences and
engineering, at a total cost of roughly
EGP 5 million.
Going forward, the CIB Foundation
seeks to continue its commitment to en-
hancing health services for underprivi-
leged children in Egypt, supporting
mega projects in the health sector and
providing world-class educational op-
portunities. The Foundation also seeks
to expand its volunteer activities and
more actively involve CIB employees in
its community development projects.
Social Development
Throughout its history, CIB has been
committed to engaging all its stake-
holders in a sustainable and responsible
manner. CIB is one of the most active
CIB's highly engaging
and motivational
environment continues
to attract top talent
Key Figures
from 2012
Balance Sheet (in EGP billions)
a. Standalone CIB
Total Assets
Contingent Liabilities
and Commitments
Loans and Advances to
Banks and Customers
Investments
Treasury Bills and Other
Governmental Notes
Due to Customers
Other Provisions
Total Equity
Balance as of
31/12/2012
94.4
Balance as of
31/12/2011
85.6
% Change
10.28%
14.9
41.9
27.8
8.0
78.8
0.3
11.3
12.6
18.24%
41.1
17.1
9.2
71.6
0.3
8.9
1.95%
62.44%
-13.28%
10.06%
17.36%
26.97%
b. Consolidated CIB and CI-CH
Total Assets
Contingent Liabilities
and Commitments
Loans and Advances to
Banks and Customers
Investments
Treasury Bills and Other
Governmental Notes
Due to Customers
Other Provisions
Total Equity
Balance as of
31/12/2012
94.0
Balance as of
31/12/2011
85.5
% Change
9.96%
14.9
41.9
27.2
8.0
78.7
0.3
10.8
12.6
18.24%
41.1
16.4
1.98%
65.92%
9.3
-13.80%
71.5
0.3
8.7
10.07%
16.24%
24.39%
Income Statement (in EGP millions)
a. Standalone CIB
Interest and Similar
Income
Interest and Similar
Expense
Net Income from Fee and
Commission
Net Profit After Tax
Jan.1, 2012 to
Dec.31, 2012
Jan.1, 2011 to
Dec.31, 2011
% Change
7,846
5,459
43.72%
-3,945
-2,781
41.86%
836
2,203
778
7.37%
1,749
25.94%
b. Consolidated CIB and CI-CH
Interest and Similar
Income
Interest and Similar
Expense
Net Income from Fee and
Commission
Net Profit After Tax
Net Profit After Tax and
Minority Interest
Jan.1, 2012 to
Dec.31, 2012
Jan.1, 2011 to
Dec.31, 2011
% Change
7,859
5,471
43.65%
-3,946
-2,781
41.88%
926
2,227
2,226
843
9.85%
1,614
1,615
37.98%
37.84%
CIB's Corporate
Credit Training
Program has
become a key
competitive
advantage for the
bank.
financial institutions to support the
community via a clear Corporate Social
Responsibility (CSR) strategy.
In the last year, CIB focused on devel-
oping aspects of society that will ultimate-
ly lead to the betterment of our commu-
nity. These aspects include human, child,
health and economic development.
Originating from a conviction that
education is key to a sustainable soci-
ety and that the quality of education
tremendously impacts a community,
the Bank supports several educational
institutions via charitable donations
and event sponsorship. Sponsoring pro-
grams that aim to build tomorrow’s na-
tional leaders such as Enactus (formerly
Students In Free Enterprise - SIFE) and
its one-day National Competition —
where an array of teams from Egypt’s
most prominent universities compete
for a chance to represent Egypt at the
annual Enactus World Cup — will un-
questionably improve Egypt’s future by
creating new leaders, who will promote
further solutions and sustainable im-
provements to the living standards of
disadvantaged communities.
Moreover, CIB’s ongoing support
of environmental initiatives was aug-
mented last year with the implementa-
tion of the CIB Going Green Program
at our head offices. The program aims
to encourage environmentally friendly
attitudes among CIB employees by
promoting awareness on how to save
paper, water, electricity and other con-
sumables while encouraging positive
changes in employees’ habits. Our con-
servation efforts this year also included
the introduction of energy-saving lights
and water-flow restrictors. Addition-
ally, our Going Green drive in 2012 saw
the introduction of an initiative at our
Smart Village premises ensuring that all
corporate branding displays are printed
with eco-friendly ink along with all
façade exhibits at CIB branches. CIB
is also working on instigating various
other sustainability initiatives based on
its continued commitment to environ-
mentally-aware practices.
Furthermore, the Bank is honored to
have supported local artists over the years
as part of its CSR focus on the promotion
of arts and culture. In 2012 CIB collabo-
rated with the Fine Arts Division at the
Egyptian Ministry of Culture to endorse
a new generation of young, talented art-
ists. In this effort, a national art competi-
tion was organized to exhibit a collection
of their artworks under the patronage
of CIB. Inspired by the artwork in the
competition, a book entitled “Egypt the
Promise, Edition 2” was designed and
published by CIB to commemorate the
event. Further CIB support for the Arts
during the year came through the Bank’s
sponsorship of the Egyptian Philharmon-
ic Society to back Egyptian musicians
performing classical music.
The Bank also continued its efforts to
boost community health campaigns by
collaborating with the Children’s Can-
cer Hospital 57357 and the Canadian
Embassy. Volunteers from the Bank
participated in the four kilometer Terry
Fox Run around the AUC campus. All
proceeds from the event went towards
children’s cancer research at the 57357
Hospital. Additionally, CIB has been
taking part in blood donation programs
to help meet blood transfusion needs in
Egypt. In a continuation of this effort,
and under the supervision of the Min-
istry of Health, CIB conducted a three-
day blood donation campaign earlier
this year at a number of its branches
around Egypt to encourage staff mem-
bers to donate.
Annual Report 2012
21
2012 Review
2012 Review
Institutional Banking
Corporate Banking Group
Known across the Egyptian market for
its strong credit culture, the Corporate
Banking Group is CIB’s financing and
underwriting arm that provides best-
in-class financial structures and advi-
sory services to its clients. The Group
caters to the financing needs of large
companies with annual sales figures
above EGP 150 million. Yet, realizing
the important role of medium size com-
panies in the Egyptian economy, the
Group has also, over the past few years,
broadened its scope to include services
for these companies.
The Corporate Banking Group’s fore-
most goal is closely aligned to advanc-
ing the nation’s economic development.
Accordingly, it is committed to closely
monitoring the performance of the
projects and economic entities that CIB
finances to ensure their viability. The
Group believes that economic viability
on the micro level is certain to contrib-
ute to — and promote — macroeco-
nomic welfare. The Group’s mission is
to enhance its position as the top corpo-
rate bank in the Egyptian market, while
maximizing value for its shareholders,
employees and the community.
the Corporate Banking Group’s
competitive advantages include:
• Strong corporate business model.
• Highly experienced staff reinforced
by continuous training to keep pace
with latest industry and technical
know-how.
• Strong customer base with a healthy
and diversified portfolio that is well-
positioned in primary growth indus-
tries including, but not limited to:
Oil and Gas, Power, Petrochemicals,
Infrastructure, Food and Agribusi-
ness, Tourism, Shipping and Ports,
and Real Estate.
• Ability to provide a wide and innova-
tive array of financing schemes.
ating potential future growth oppor-
tunities for the Group.
2012 Key Achievements
• Continued to be the primary con-
tributor to CIB’s bottom line profit-
ability, generating almost 70% of the
Institutional Banking Group’s prof-
its.
• Increased Group cross-selling activi-
ties to enhance CIB’s share of wallet
to reach 23% in 2012.
• Helped alleviate the effects of adverse
market conditions by expanding lo-
cal currency lending to clients, giving
special attention to working capital
finance.
The Debt Capital
Markets team continues
to play a unique role
in the local market by
structuring and placing
complex securitization
structures.
• Introduced more innovative distri-
bution channels to its customer base,
such as e-banking, with 50% of cor-
porate clients now using CIB’s online
services.
In 2013, CIB’s Corporate
Banking Group will pursue the
following objectives:
• Increase focus on cross-selling activi-
ties to capture new business and ex-
pand CIB’s market share.
• Expand CIB’s loan portfolio with em-
phasis on financing mid-cap projects.
• Grow trade business services in or-
der to enhance the Bank’s fee income
stream.
• Expanded scope of corporate bank-
ing to include companies with sales
revenues above EGP 50 million, cre-
• Promote uptake of the e-trade plat-
form and CIB’s online portals to cov-
er 70% of our corporate client base.
• Enhance the Business Enhancement
Unit to better service corporate and
mid-cap clients.
• Roll-out the electronic credit approv-
al system (e-Cam).
Debt Capital Markets Division
The Debt Capital Markets Division has
an unprecedented track record and un-
paralleled experience in underwriting,
structuring and arranging large-scale
project finance, syndicated loans, bond
issues and securitization transactions,
all of which are supported by a dedi-
cated agency desk.
Despite continued turbulence wit-
nessed across the market in 2012, the
Debt Capital Markets team success-
fully executed five prime deals worth
more than EGP 12.4 billion — up from
EGP 10 billion worth of deals in 2011
— while also focusing on restructur-
ing and refinancing existing deals. The
2012 financing deals were primarily in
Petrochemicals, Oil and Gas, Telecom-
munications and Real Estate. Building
on its reputation for excellence in the
field of structuring and arranging deals,
CIB played key roles as initial mandated
lead arranger, agent, security agent and
/ or book runner in the majority of these
transactions. The Debt Capital Markets
team has also laid the foundation for fu-
ture income generation with a pipeline
of deals totaling EGP 38.4 billion.
The Debt Capital Markets team also
continues to play a unique role in the
local market by structuring and placing
complex securitization structures. In
2012, the division structured and placed
the only local securitization deal for
non-bank financial institutions in the
market, with a total issue size of EGP
158 million, while working on another
mandated transaction worth EGP 3.2
billion that is expected to close in 2013.
As an ongoing strategy, Debt
Capital Markets aims to:
• Continue playing a vital role in eco-
nomic development by mobilizing
24
Annual Report 2012
CIB is Egypt's
leading institutional
bank
Net income for Institutional
Banking increased 18% to
EGP 1.5 billion in 2012,
representing 61% of CIB's
total profitability.
2012 Review
funds for large ticket project finance
deals and syndication transactions.
• Position itself to raise the required
debt to fund Egypt’s substantial In-
frastructure and Power investments
whether implemented by public sec-
tor companies, or via IPP or PPP pro-
grams.
• Introduce new financial tools to lead
the development of capital markets in
Egypt.
• Continue to support client needs for
diversified funding sources through
innovation in asset-backed securities.
Financial Institutions Group
The Financial Institutions Group offers
a variety of quality products and ser-
vices through three divisions, including
the Correspondent Banking Division
(CBD), Non-Banking Financial Insti-
tutions Division (NBFI) and Finance
Programs & International Donor Funds
Division (FP & IDF).
Correspondent Banking Division
(CBD)
CBD is the point of contact for local and
foreign banks working with CIB. The
division is responsible for:
• Securing outgoing business for CIB.
• Monitoring and directing business to
banks.
• Attracting trade business and han-
dling related negotiations.
• Marketing and cross-selling CIB
products.
• Acting as liaison for solving prob-
lems (if any) between banks world-
wide and CIB’s departments in order
to facilitate and improve workflow.
• Offering support and new solutions
to CIB clients through strategic al-
liances with various correspondents
under trade finance and cash ser-
vices.
• Supporting
departments
other
through our role as Relationship Of-
ficers for banks.
• Searching for new business opportu-
nities.
• Explored new markets in Asia, Africa
and Latin America.
• Maintained a well-diversified forfeit-
ing portfolio and continued expand-
ing risk participations on both direct
and contingent business.
2013 Strategy:
• Continue to shift focus from West to
East (China, India, S. Korea and Tur-
key).
• Maintain a focus on Egypt.
• Consolidate and sustain our key rela-
tionships in the West.
• Introduce new revenue-generating
products and expand our coverage
into new markets.
• Identify new quality bank relation-
ships.
• Minimize / rationalize exposure
to PIIGS (Portugal, Italy, Ireland,
Greece and Spain)
non-Banking Financial
Institutions Division (nBFI)
NBFI is a credit-lending division under
the Financial Institutions Group. It pro-
vides credit facilities, liability products
and services to all types of non-bank
financial institutions.
Targeted clients include leasing, insur-
ance, securities brokerage, car finance,
factoring and investment companies.
Activities:
• Identifying customer needs and as-
sociating such needs with relevant
facilities such as: short-term lending,
long-term lending, contingent busi-
ness, securitization transactions, etc.
• Focusing on key market players with
relatively moderate risk.
Operating Strategy:
• Regular contacts with existing and
potential customers.
• Stay updated with customers’ busi-
ness needs.
People:
• Continuously invest in training for
team members.
2012 Achievements:
• Succeeded in controlling and main-
taining portfolio risk at moderate
levels and managed an effective col-
lection of loan portfolio payments
through the application of a well-
controlled credit policy.
• Grew its loan portfolio compared to
2011 despite market volatility and in-
stability resulting from political con-
ditions.
• Established new limits for existing
credit insurance companies and tar-
geted new accounts to accommodate
contingent business targeted in 2013.
2013 Strategy:
• Maintaining our market share with
existing relationships while targeting
growth in auto finance and insur-
ance.
• Focus on the liability side through
an aggressive marketing plan for the
Bank’s attractive liability products.
• Reinforce our cross-selling strategy
to provide our customer base with
global banking services
through
CIB’s innovative product mix.
Finance programs &
International Donor Funds
Division (Fp & IDF)
The Finance Programs and Internation-
al Donor Funds (FP & IDF) Division
manages development funds and credit
lines provided by governmental entities
and international agencies, as well as
managing CIB’s microfinance portfolio.
The Division is also engaged in environ-
mental friendly projects designed for
the preservation of natural resources.
Main Functions
• Agency Function: Handles the agency
function for several funds, grants, and
credit lines, by providing tailored op-
erational mechanisms and prudent
investment and fund promotion.
• Participating Bank Function: A partic-
ipating function in special programs
that give CIB a competitive advan-
tage among its peer group.
2012 Achievements:
• Achieved higher trade finance vol-
umes.
• Maintain a strong database to stay
updated with market trends and po-
tential customers.
• Microfinance Business: Manages
CIB’s direct microfinance portfo-
lio through a microfinance service
company and indirect microfinance
portfolio by lending to NGOs (Non-
Governmental Organizations).
2012 Achievements:
• Agency Function: Despite prevailing
economic conditions, FP & IDF suc-
ceeded in maintaining its lead posi-
tion as an Agent bank in the market.
• Participating Function: Preferential
credit funds of around EGP 60 mil-
lion were provided to CIB customers
for agriculture as well as pollution
abatement.
• Loan Contract: A
loan contract
amounting to EGP 100 million sup-
porting the poultry sector was signed
with the Social Fund for Develop-
ment (SFD).
• Microfinance: CIB’s microfinance
portfolio, disbursed through a ser-
vice company and partially financed
by the Spanish government, ap-
proached EGP 100 million.
• Cross Selling: The Division contrib-
uted to cross-selling CIB’s various re-
tail products, including credit cards,
consumer loans, etc.
2013 Strategy:
• Maintain our lead position as an
Agent bank dominating donor funds.
• Attract funds and participate in pro-
grams.
• Increase CIB’s microfinance market
share.
Direct Investment Group (DIG)
"A Local Partner with International
Standards"
Business profile:
The Direct Investment Group is CIB's
investment arm, introducing equity fi-
nance as an additional solution to ex-
isting and potential clients. DIG's main
focus is to identify, evaluate, acquire,
monitor, administer and exit minority
equity investments in privately owned
companies that possess commercial
value for CIB.
Invested funds are sourced from CIB's
own balance sheet, whereby the invest-
ment process is governed by a clear and
strict set of parameters and guidelines.
Our primary objectives encompass
generating
risk-adjusted
attractive,
financial returns for our institution
through dividend income and capital
appreciation, as well as enabling CIB to
offer a broad spectrum of funding alter-
natives to support clients' growth.
We commit to excellence by adopting
industry best practices and creating a
"win-win" situation for all stakeholders.
This commitment is supported by our
unique value proposition and experi-
enced team.
Highlights and
Accomplishments:
Direct Investment activities in Egypt
experienced another challenging year in
2012. Political instability and a high de-
gree of uncertainty were reflected in an
CIB's 2013 strategy
will see the bank
introduce new revenue
generating products
and expand coverage
into new markets.
overall modest economic performance
and a reduced investor appetite. Yet, DIG
believes such market conditions cre-
ate opportunities for local investors to
reshuffle their portfolios and add qual-
ity assets at reduced prices. Throughout
the year, DIG remained supportive of its
portfolio companies in order to maintain
their market positions and to preserve
solid balance sheets. The following rep-
resent major accomplishments for 2012:
• On the portfolio management front,
DIG provided additional growth
capital to three of its subsidiary com-
panies. DIG also remained very sup-
portive of its remaining portfolio
companies through active participa-
tion at the Board of Directors level.
As always, DIG maintained ongoing
dialogue and provided consistent
professional advice to portfolio com-
panies’ management teams.
• Based on a solid pipeline of potential
investments, DIG assessed the acqui-
sition of a number of lucrative and
sizable investment opportunities. Fi-
nal agreements related to one sizable
investment were signed in December,
with deployment of funds expected
to occur in January, 2013.
• DIG successfully exited one of its
portfolio companies and finalized the
terms of exit from another portfolio
company, generating returns for CIB.
Strategy Going Forward:
DIG plans to continue providing support
to existing portfolio companies. Despite
the prevailing restrained investment en-
vironment, DIG remains positive on the
long-term outlook based on a true belief
in Egypt’s solid fundamentals. Accord-
ingly, DIG plans to pursue growth in
defensive sectors showing relative resil-
ience to economic instability.
Strategic Relations Group
(SRG)
Catering to approximately 70 of the
world’s leading donor and development
agencies, as well as the majority of their
sovereign diplomatic missions, the Stra-
tegic Relations Group is a unique func-
tion amongst its peers in the banking
industry. SRG is a small “focus group”
of professionals dedicated to bridging
the gaps between CIB’s streamlined ser-
vices and the distinct expectations of its
clients. SRG’s high-quality, individual-
ized bouquet of services extends beyond
standard banking to include innova-
tive, tailor-made products and services
designed to accommodate the unique
business and operational needs of these
institutional clients.
During 2012, SRG’s client base was
expanded beyond CIB’s prime institu-
tional depositors, which constitute a
substantial portion of CIB’s stable fund-
ing. Through its “Japan Desk” initiative,
SRG was able to attract substantial new
FDI from major Japanese corporations
and channel it to other areas of the
Bank, namely Corporate Banking and
Trade Finance.
CIB remains committed to fostering
these relationships by continuing to
26
Annual Report 2012
Annual Report 2012
27
render support to and sponsorship of
SRG to ensure client satisfaction, as well
as shareholder value.
Treasury & Capital Markets
(TCM)
CIB’s Treasury & Capital Markets De-
partment is a top profit center for the
Bank, providing clients with a wide
range of products and services. The
department deals primarily with large
corporate clients and mid-cap compa-
nies as well as high-net-worth individu-
als. TCM also deals with businesses that
are connected to CIB branches as well
as with financial institutions, including
funds, insurance companies and others.
TCM provides products including
foreign exchange and money market
trading activities, primary and second-
ary government debt trading, manage-
ment of interest rate gaps (with associ-
ated hedging) and pricing of foreign
and local currency deposits.
Foreign exchange and interest rate
products are used by our customers for
both investment and hedging. Our wide
range of products cover direct forwards
and simple / plain vanilla options, in
addition to a wide array of options
structures such as premium embedded
options, participating forwards, zero-
cost cylinders, boosted call / put spread,
interest rate swaps, interest rate caps /
floors / structured products.
The team provides the Bank’s clients
with an incomparable quality of service
around the clock including Fridays and
holidays with daily market commen-
tary, weekly technical analysis and an
SMS service that displays rates of our
main currencies. TCM promptly ac-
commodates customer requests to help
clients avoid market fluctuations.
2012 performance
In 2012, TCM witnessed a notable in-
crease in the volume of foreign exchange
transactions from third counterparty
trading. Third counterparty trading is a
tool offered by CIB where importers pay
their suppliers in the original country of
the unconventional currency. Consum-
ers and retailers use third counterparty
trading if they need to transfer an un-
The TCM team
provides the Bank's
clients with an
incomparable quality of
service around the clock
including Fridays and
holidays.
conventional currency to their foreign
bank account – e.g., Chinese yuan to
their local bank in China.
Asset and Liability
Management (ALM)
Part of the Treasury Group, the Asset
and Liability Management Department
is responsible for managing the Bank’s
liquidity and interest rate risk within
external and internal parameters, while
complying with the Central Bank of
Egypt’s (CBE) regulatory ratios and
guidelines. The department is also re-
sponsible for managing the Bank’s Nos-
tro accounts, overseeing its proprietary
book and setting loan and deposit pric-
es. ALM’s main objectives are liquidity
management, maximizing profitability
and product development.
2012 performance
Despite unfavorable market conditions
prevailing post-revolution — as well
as volatility in international markets
— ALM was able to preserve its sound
liquidity and interest rate levels. This
allowed the department to seize mar-
ket opportunities in order to enhance
the Bank’s net interest income and net
interest margin, all while maintain-
ing healthy regulatory ratios as well as
internal and Basel III measures. ALM
actively encouraged and participated in
aggressive deposit-gathering measures,
which resulted in the growth of the
Bank’s total deposit base. Additionally,
the Bank’s loan portfolio experienced
major growth during 2012.
2013 Strategy
Looking forward to 2013, turbulence in
both the local and global economic envi-
Annual Report 2012
29
2012 Review
ronments is expected to continue in the
near term. Accordingly, ALM’s strategic
initiatives will continue to include pru-
dent and sound management of liquidity
and interest rates through the diversifica-
tion of funding options and investments,
as well as through the introduction of
new products. Further initiatives will in-
clude enhancing the Bank’s performance
and capital management framework.
Global Transaction Services
Group (GTS)
An accelerated pace of technological
change is significantly impacting the way
business is conducted. By adopting new
technologies, many businesses are looking
to streamline and automate key processes
and functions, resulting in improved con-
trols and decreased internal costs.
The Global Transaction Services
Group within CIB has been formed to
ensure that the ever-changing tech-
nological demands of our clients are
addressed efficiently. Accordingly, the
Group has a mandate to introduce new
channels and products to Corporate
and Business Banking clients.
GTS serves as a key product group
within the Bank and oversees the
product areas (and associated delivery
channels) for trade finance, cash man-
agement and payments, and global se-
curities services.
The Group’s primary objectives are to
facilitate and minimize the turnaround
time for executing transactions, as well
as providing transparency, efficiency and
value-added services to clients by offering
a comprehensive range of transactional
banking products and services, with a key
focus on superior customer service and
efficient transaction processing capabili-
ties. These objectives include not only the
enhancement of existing products or the
development of new ones, but also focus
on the delivery channels through which
these products are offered and serviced.
GTS is responsible for the product
management, development and support
associated with the three key businesses:
trade Finance
CIB is a market-leading and award-win-
ning trade finance institution offering
standardized trade service products (LCs,
LGs, IDCs, etc.), as well as non-conven-
tional trade finance solutions including
forfeiting and structured trade finance.
CIB also offers a range of channels through
which clients can submit applications and
associated documents, including dedi-
cated trade hubs and an innovative online
trade channel, CIB Trade Online.
Cash Management & payments
CIB provides both standardized and tai-
lored cash management products and
solutions that improve the management
of incoming and outgoing payments,
as well as streamlining reconciliation
and information management, and en-
hancing working capital efficiency. The
product offering includes a number of
innovative payments and payables prod-
ucts, collection and receivables products,
and standard and tailored information
reporting delivered through a variety of
channels including new online banking
channels, CIB Cash Online and eACH.
Global Securities Services (GSS)
CIB Global Securities Services is a mar-
ket-leading and award-winning sub-
custodian bank, offering a broad range
of custody and securities products and
services to institutions, individuals and
government entities. CIB is the sole
sub-custodian for all Egyptian Deposi-
tory Receipt programs and the leading
provider of trustee services in the mar-
ket. The offering includes local and in-
ternational custody services, local sub-
custody services for GDR programs and
trustee services for securitization trans-
actions.
2012 performance
Launched CIB Trade Online
CIB Trade Online is CIB’s market-
leading online trade channel. The team
spent 2011 analyzing the needs and re-
quirements of CIB’s clients and reached
two key conclusions: Clients are seeking
more efficient ways to initiate their trade
finance transactions and want faster
turnaround times. CIB Trade Online
addresses both of these requirements by
allowing clients to submit all their trade
finance transactions through a fully
secured online channel which is seam-
lessly integrated with CIB’s trade opera-
tions for immediate execution.
Achievements:
• The total number of CIB Trade On-
line subscribers jumped 159% Y-o-Y
in December 2012.
• The total number of CIB Trade On-
line transactions jumped 319% Y-o-
Y in December 2012.
• The percentage of total Bank trans-
actions made through CIB Trade
Online jumped to 12% in December
2012, from 3% in December 2011.
Introduced Dedicated Trade
Hubs:
CIB’s dedicated Trade Hubs are trade fi-
nance centers of excellence in select high
transaction volume zones for clients pre-
ferring to use branches for their primary
dealings with the Bank, rather than an on-
line channel. These dedicated Trade Hubs
are specifically designed to provide accel-
erated turnaround times on trade finance
transactions and to ensure a high level of
service by employing well-trained trade
specialists to execute client transactions.
Achievements:
• The total number of Trade Hubs in
December 2012 was 25, up 92% from
13 in December 2011.
• The percentage of total bank trans-
actions made through Trade Hubs
jumped to 68% in December 2012,
from 39% in December 2011.
• The percentage of total bank trans-
actions made through CIB Trade
Online and Trade Hubs combined
amounted to 80% in December 2012.
Launched CIB Cash Online:
CIB Cash Online is the Bank’s new online
banking channel, offering customers a ro-
bust and comprehensive online view into
all their banking activities while also pro-
viding a channel to conduct transactions
and communicate securely with the Bank.
Achievements:
• The percentage of total bank transac-
tions made through CIB Cash Online
reached 15.81% YTD in 2012.
• 53% of corporate clients are now us-
ing CIB Cash Online.
• Successfully launched CIB Cash On-
line phase II with more than 10 new
features.
Launched CIB eACH
CIB eACH is a market-leading payment
product and the first of its kind in the
Egyptian market. A web-enabled pay-
ables product, eACH allows clients to
efficiently and automatically issue ACH
payments
(local EGP-denominated
electronic payments) through a secure
online channel and through ACH Di-
rect Debit transactions.
Achievements:
• First bank in Egypt to launch the
ACH Direct Debit corporate portal.
New Corporate Ad-hoc Online
Reports
CIB launched two new Corporate On-
line reports provided for corporate
clients for better transparency and en-
hanced cash management:
• Corporate Integrated Post Dated
Checks report.
• Corporate Cash Collection report.
Launched GTS Operations
The GTS Operations unit was launched
under the Centralized Payments Service
Division to serve GTS customers and to
handle their instructions through the
Cash Online system.
Maintained Custody Market
Leadership:
Maintained CIB market share leading
custody position by 35% as of Decem-
ber 2012.
Executed New Custody Deals for
a Total of EGP 6.5 billion
Took Initial Steps in Implementing
the DRIP program
DRIP (Dividends Reinvestments Plan)
is an equity option allowing investors
to reinvest their cash dividends by pur-
chasing additional shares. CIB is the
first bank in Egypt to introduce this
product.
Received Prestigious Awards
CIB was once again declared “Best
Trade Finance Provider in Egypt” and
“Best Sub-Custodian Bank in Egypt” in
2012 by Global Finance magazine; the
Cash Management & Payments Depart-
ment was also named “Best Foreign Ex-
change Provider in Egypt” in 2012 for
the fourth consecutive year by the same
publication.
Institutional Banking Legal
Advisor & Asset Protection
Group
In May 2006, the Institutional Bank-
ing Legal Advisor Department was
launched with the purpose of having an
in-house legal counsel to provide a tar-
CIB Cash Online is
the Bank’s new online
banking channel, offering
customers a robust and
comprehensive online
view into all their banking
activities.
geted and high level of legal advice for
local and cross border transactions.
The function serves the entire Insti-
tutional Banking Department as well
as other CIB subsidiaries and deals di-
rectly with local and international law
firms with regard to any technical and
complex legal issues.
The Institutional Banking’s Legal
Advisor Department provides the busi-
ness area with support on escrow agree-
ments, medium-term loans, syndicated
loans, project finance transactions and
the conducting of legal due diligence.
The function also plays a significant role
in providing the business area with the
requisite legal opinions for any special-
ized case without resorting to outside
legal counselors.
Established in 2003, the Asset Pro-
tection Group is responsible for assist-
ing and completing Corporate Bank-
ing Group (CBG I & CBG II) client
documentation as well as ensuring
that all corporate client documents are
valid and enforceable, thereby protect-
ing the Bank’s rights. The Asset Protec-
tion Group became associated with the
Institutional Banking Legal Advisor
Department in 2007, yet maintains its
separate workflow procedures. Since
the association, the Asset Protection
Group has successfully expanded the
scope of its work to include the Suez
and Canal Zone corporate documents
in 2008; the Alexandria and Delta
Zone in 2009; and established a new
division in 2010 to handle mid-cap
documentation.
2012 Highlights and
Accomplishments
• Generated a gross income to the Bank
in addition to legal fees through legal
advisory services and escrow agree-
ments.
• Contributed effectively and profes-
sionally in finalizing the closure of
several major transactions.
• Professionally handled cases that
were referred to the Department in
the Middle East and Europe.
• Positively affected the Bank’s reputa-
tion by managing escrow agreements
that were released to the media,
which helped attract new clients.
• Supported other lines of business /
departments whenever needed.
• Effectively handled cases relating to
CI Capital Group.
• Handled the majority of key interna-
tional contracts relating to IB clients.
• Safeguarded CIB's portfolio by moni-
toring and facilitating the renewal
of insurance policies to favor the
Bank’s prior expiration dates and
implementing rigid control measures
to manage documentation more
smoothly and efficiently.
• Implemented best-in-class technical
tools to better streamline the docu-
mentation cycle.
• Effectively absorbed the influx of
credit customer accounts "new-to-
bank-commitments" received by the
Asset Protection Group while imple-
menting a more systematic work-
flow.
30
Annual Report 2012
Annual Report 2012
31
2012 Review
Global Customer Relations
Despite the turbulent post-revolution
conditions faced by Egypt in 2012,
the Global Customer Relations (GCR)
Group remained bullish in its outlook
as it looks to capitalize on opportu-
nities brought about by such volatile
economic and political changes. GCR
therefore concentrated all its efforts
this year on responding to these chang-
es and taking full advantage of the ac-
companying opportunities. As a result,
and owing to its pivotal role across all
of CIB’s business lines, we are proud to
announce that 2012 marked another
period of successful achievements for
the GCR Group.
The GCR business model also expand-
ed in line with our Strategic Roadmap in
2012. Organizational and strategic ob-
jectives were prioritized and addressed
and the required resources and staff re-
cruitments were deployed while adher-
ing to our strategic objective of focusing
on overall profitability rather than profit
per product.
In line with GCR’s strategic goals
and KPIs, special focus was directed to-
ward our facilitative inter-departmental
role within the Bank to align objec-
tives across all areas in order to imple-
ment our overall profitability model for
groups and clients under coverage.
GCR also made diligent efforts this
year to provide advisory services to
support specific industries adversely af-
fected by the current economic climate,
especially Real Estate, Tourism, Con-
struction and Building Materials.
We also took a more active role in
designing and developing tailor-made
solutions to enhance, facilitate and im-
prove Bank-wide products and services.
Initiatives were undertaken to improve
product offerings to better meet client
expectations, deepening the Bank’s re-
lationship with existing clients and en-
hancing both growth and profits.
Driven by ownership and account-
ability over accounts under manage-
ment, special focus was directed to:
1. Business development and portfolio
enhancement through growth in the
existing portfolio as well as new com-
mitments.
2. Aggressive efforts towards recover-
ing questionable and non-perform-
ing loans to safeguard the quality of
CIB’s asset portfolio.
3. Proactively solving potential client
problems and identifying new busi-
ness needs.
2012 Achievements:
• Contributed to the growth of Cor-
porate portfolio by EGP 2.5 billion
through increasing CIB share of wal-
let with 15 existing clients and four
new-to-bank clients.
• Contributed to the growth of corpo-
rate profitability by 5.5%, reaching
EGP 605.3 million as of December 31,
2012 up from EGP 573.9 million as of
December 31, 2011.
• Initiated and orchestrated the im-
mediate recovery of EGP 20 million
in non-performing loans this year, as
well as regularizing EGP 97 million in
NPLs which were already written off.
• Aligned with the Bank’s overall strat-
egy to expand its deposits and funds
base.
• Collaborated with other departments
to introduce an amended cash deposit
slip that accommodates the needs of
corporate and non-corporate clients
whose daily operations require keep-
ing records of specific data for cash
deposits, such as Etisalat and ABB
Group. This is a clear example of a
customized solution that meets client
needs and which requires changes to
standard operating procedures across
a number of departments — one of
GCR’s core competencies and prima-
ry business objectives. Proving to be a
valuable improvement, the amended
cash deposit slip was eventually stan-
dardized for all CIB clients.
• Another notable operational
im-
provement has been the introduction
of a custom-designed program under
Global Transaction Services (GTS)
that is uniquely designed to monitor
the receivable support package of a
specific client.
• Effectively marketed a wide range of
CIB products and services, the most
important of which are:
• Consumer Banking:
• A 19.5% increase in the number of
payroll accounts.
• A 39.3% increase in the amount of
personal loans.
• A 37% increase in the amount of
personal deposits.
• Merchant Acquiring Services
expanded, with GCR’s help, to cover
all GCR clients that require them.
The Bank managed to exclusively
provide Point of Sale (POS) termi-
nals throughout the new Americana
Plaza complex in 6th of October City.
In addition, 154 POS terminals were
installed at a number of client outlets
including: Etisalat, Emaar, Concrete,
Mobinil, Vodafone and EuroMed in
Egypt. ATMs were also installed at
the Kempinski and Sheraton hotels at
Soma Bay.
• Custody Services contributed to
the growth in CIB’s custody portfolio
by attracting shares worth EGP 610
million from three leading corpora-
tions in Egypt (Orascom Hotels and
Development, Electrolux and New
Giza).
• Global Transaction Services
successfully completed a total of 20
deals across the “CIB Cash Online”
and “E-Trade” platforms.
• CIB Affiliates:
• Egypt Factors: Receivables factor-
ing services increased by EGP 9.3
million.
• Falcon: Falcon carried out Cash
Transit Services
for Emaar,
Americana and Middle East for
Glass (three of CIB’s major indus-
trial corporate clients).
32
Annual Report 2012
Designing
customer-
focused
solutions
Global Customer Relations
took a more active role in
designing and developing
tailor-made solutions
to enhance, facilitate
and improve Bank-wide
products and services.
2012 Review
Consumer and Business Banking
Payroll
The Payroll business performed well
in 2012, growing by 42,631 accounts
with active salaries as of December
end — a 341% jump in payroll acquisi-
tion compared to 2011 acquisition.
As a significant channel for liabilities
contribution, Payroll recorded EGP 2.2
billion in saving contributions in 2012,
equivalent to an average saving balance
of EGP 12,000 per customer.
The year also showed significant
progress in our goal to off-load the
manual payroll burden from branches
as we have automated 9,000 transac-
tions — 81% of all manual payroll
transactions — easing demands on
staff time and eliminating the risk of
introducing errors in our clients’ pay-
rolls.
E-Payments
The E-Payments Department suc-
ceeded in generating incremental fees
from our branch network by collecting
governmental payments through E-Fi-
nance Company. This was our main tar-
get: E-Finance Company is responsible
for the collection of governmental pay-
ments such as customs, taxes, charging
customs account collections and Alex
Port Authority collection through our
branch network. In 2012 we faced chal-
lenges from worker protests at various
ports, but we retained our first place
ranking in customs collections with
a 46% market share and a 128% year-
on-year increase in fees generated as of
December 2012. This was achieved by
offering our latest technology services
throughout our branch network. We
introduced our service in all Egyptian
ports (Damietta, Sokhna, Alexandria,
Dekheila, Shark El-Tafriea, Airport)
giving us the advantage of cross sell-
ing our banking products to new and
existing customers.
following a successful one-year pilot
program, particularly among retail
companies in the Egyptian market. It
mainly serves small and midsize com-
panies, which are the backbone of the
Egyptian economy with a contribu-
tion of almost 80% of total GDP.
Financials & Achievements:
The Business Banking Segment has
witnessed a gratifying first year, with
KPI achievements and financial re-
sults that have encouraged the top
management team to increase its focus
on this segment and grow it more by
end of 2013. Below are some financial
analyses comparing the pilot launch
year versus 2012 year end results:
• Total Assets grew by EGP 226 mil-
lion, an increase of 89%.
• Customer Deposits grew 43% to
EGP 7.6 billion, including a growth
of EGP 779 million in DDAs and
EGP 1.5 billion in TERMS.
• Business Banking Revenue
in-
creased by EGP 92 million, a 66%
increase that was driven primar-
ily by a growth of EGP 63 million
in Net Interest Income and EGP 30
million in fees.
• Business Banking enrolled compa-
nies increased by 37% and average
client acquisition per month grew
by 37%.
• Average YTD Revenue per relation-
ship manager showed a strong 55%
increase, showing a big productiv-
ity improvement of the dedicated
Business Banking team.
With the launch of the Business Bank-
ing Unsecured Lending Program, CIB
has once again confirmed its role as
a key financial advisor to its clients.
This comes as a natural progression
of the Bank’s mission to remain one
of Egypt’s biggest financial and com-
mercial institutions supporting the
Egyptian economy and push forward
business and trade in Egypt.
Wealth
At CIB Wealth we achieve excellence
by adopting industry best practices
and fostering a “win-win” environ-
ment for all stakeholders. During
Financial Synopsis
FY 2011
2012
Increase
Total Assets:
Secured Facilities
253,970
253,970
479,941
479,941
Customer Deposits:
5,341,516
7,645,462
Demand Deposits
2,460,022
3,238,894
Term
2,881,494
4,406,568
Total Revenue:
140,706
233,303
Net Interest Income
Non-Interest Income
99,362
41,344
161,907
71,396
89%
89%
43%
32%
53%
66%
63%
73%
Business Banking
The Business Banking Segment was
formally launched at the end of 2011
No of RMs
Revenue / RM
Strategic KPIs
FY 2011
Number of New Companies
491
29
4,852
2012
671
31
7,526
Increase
37%
7%
55%
2012 Revenue Trend
17,679
19,128
19,279
18,441
22,139
19,639
21,038
22,376
17,267
17,645
18,133
20,540
25,000
20,000
15,000
10,000
5,000
0
Jan-12
Feb-12 Mar-12
Apr-12 May-12
Jun-12
Jul-12
Aug-12
Sep-12 Oct-12 Nov-12
Dec-12
Net Interest Income
Not-Interest Income
Total Revenue
the past year, through undivided at-
tention to customer needs and qual-
ity services, the Wealth Management
business has grown stronger, taking
our Consumer Business to the next
level and becoming leaders in one of
the most critical retail businesses in
local financial markets.
We also created a designated seg-
ment for high-net-worth clients, pro-
viding them with beyond-wealth bene-
fits. Our offering has evolved to include
a hand-picked package of exclusive
financial and non-financial services
that open doors to new opportunities
for clients. This is all supported by our
unique value-added products package
and a well-selected team of experi-
enced and certified wealth managers.
Liabilities
Perhaps the best indicator of the li-
abilities business success has been the
growth in CIB Customer Deposits. In
2012, CIB Consumer Bank managed
to grow Customer Liabilities by EGP
9.6 billion with a remarkable 25% in-
crease over 2011.
This translates to a total of EGP 59.1
billion of consumer deposits as an
ending balance for the year of 2012.
CIB’s growth has recorded an out-
standing achievement in a market of
39 banks, and helped CIB to raise its
foot print of overall deposits in the
Egyptian banking system.
Cards
CIB Cards Business is a robust, full-
fledged and profitable business offer-
ing a full product suite of credit, debit,
prepaid and POS. Our mission is to
become the leader in processing non-
cash financial transactions in Egypt,
as well as a key enabler of the Egyp-
tian economy.
Overall 2012 was a strong year for
CIB Cards Business. On the Cred-
it Cards line, we achieved an ENR
growth of 24% representing 125 mil-
lion.
In Acquiring, CIB maintained lead-
ership position despite new entrants
and strong competition from exist-
ing acquirers, processing more than 9
million transactions worth EGP 5.18
billion
2013 will witness new product
launches and enhancements such as
DCC (Dynamic Currency Conver-
sion) on acquiring and loyalty fea-
ture on credit cards which will lead to
more aggressive growth on both issu-
ing and acquiring.
Consumer Loans
On the lending side, our Consumer
Assets portfolios recorded growth of
29%, giving CIB the highest market
share increase amongst peers in the
consumer banking segment. During
2012, Assets portfolios began return-
ing to business-as-usual after the re-
turn to normal credit policies, which
had been tightened earlier in 2011,
and an overall improvement in eco-
nomic stability during Q3 2012. This
improvement resulted in better port-
folio credit performance and a de-
crease in overall delinquency ratios.
Tourism, real estate, steel and cement
are still restricted.
Our Personal Loans portfolio grew
by 43% FY 2012, recording ENR EGP
2.7 billion by by end of Q4 2012. The
Personal Loans program range ex-
panded during 2012 with the addition
of several new product programs, with
a strategic focus on improving port-
folio NIM by shifting sourcing mix
towards high yield loan segments. In
keeping with this strategy, new pro-
grams and initiatives will be added
to the current product range on an
ongoing basis throughout 2013. The
Auto Loans segment began to regain
its market leading position in Q3 after
a return to BAU policies designed to
increase portfolio growth and shorten
the breakeven period, which had been
delayed by 12 months due to 2011 po-
litical events.
An initial revamp of mortgage policy
was completed, improving unsecured
lending in order for CIB to capture a
recognizable market share once an-
ticipated changes to the legal frame-
work of mortgages take place in 2013.
The Secured Overdraft portfolio grew
34
Annual Report 2012
Annual Report 2012
35
2012 Review
CIB's 24/7 Call
Center is the main
interaction hub
for our current
and prospective
customers.
further, reaching EGP 2 billion with
a strong focus placed on changing the
portfolio mix towards LCY lending to
enhance spreads.
Alternative Distribution
Channels
At CIB we believe that innovation is
key to meeting ever-changing cus-
tomer needs. Accordingly, in 2012
innovation continued to be a key dif-
ferentiator for our services offering
through:
Intelligent ATM Network: More
than 510 terminals equipped with
state of the art technology for dis-
pensing and accepting cash with real
time effect on customer balances, in
addition to a wide variety of addition-
al services including Bill Payment,
Transfer, Foreign Exchange, Mobile
Top-Up, Cards Settlements, and many
more.
Moreover, to guarantee an out-
standing level of customer experi-
ence, we use geo-marketing research
to guide ATM site selection, allowing
us to best match the presence of CIB
machines with our customer base.
Call Center: CIB’s 24/7 Call Center is
the main interaction hub for our cur-
rent and prospective customers. The
Call Center supports all inquiries, re-
quests and financial transactions on
more than 3 million calls per year. As a
sign of our unwavering commitment to
customer satisfaction, we increased our
Call Center workforce by 45% in 2012,
to a total of 145 agents. The third quar-
ter of this year saw the launch of the
new IVR (Integrated Voice Response
Services) after a complete technology
36
Annual Report 2012
revamp designed to provide more val-
ue-added services and personalize the
navigation menu structure according
to customer experience. Our customer
care officers continue to receive inten-
sive training courses as they often the
first line of contact between CIB and
our customers.
Internet Banking: This year has
also seen the launch of CIB’s Internet
Banking service. The new interface
ensures the continuity of all services
available through the previous plat-
form, but also offers improved servic-
es with higher reliability, presenting
consumer loan products and transac-
tions in real time (as opposed to the
previous batch-based mechanism).
Internet Banking comes with in-
novative features including allowing
users to save beneficiaries for future
transactions, save a drafted transaction
to continue later, securely converse
with a bank agent, and set forward and
recurring transactions, as well as an
easy-to-use authentication mechanism
which allows customers to transfer
funds outside their own accounts to
other CIB clients or outside CIB.
The new interface is also designed
to allow future integration with other
e-channels and to offer advanced ser-
vices such as Mobile Banking, Bill
Payment, Enterprise Alert, and a dif-
ferentiated look and feel from a brand-
ing point of view for the various client
segments such as the Wealth segment.
It will also provide access to e-bank-
ing services for credit-card-only cli-
ents and small companies. This is in
addition to building more functions,
which will support the migration of
banking services from the Branch and
Call Center to e-banking channels,
improving customer satisfaction and
decreasing operational costs.
Channels outlook in 2013
The journey to strengthen the core ca-
pabilities for all self-service and digi-
tal channels will continue to evolve
with the primary focus on providing a
consistent, high quality experience to
our customers across all distribution
Implementing a
consumer focused
strategy
19.5%
increase in the number of
payroll accounts.
39.4%
increase in the amount of
personal loans.
37%
increase in the amount of
personal deposits.
channels. This will also enable alterna-
tive banking channels such as Mobile
Banking, designed to give our custom-
ers maximum flexibility to do business
with CIB at any time, in any place.
Insurance Business
The CIB Insurance Business provides
Life and General Insurance programs
that generate non-interest revenues
for CIB Consumer Banking (fees).
Life Insurance provides a variety of
products including Pure Life Insurance
as well as Saving Plans, which suit the
appetite of a wide range of consumers in
Egypt through a referral-based model.
The department began offering Gen-
eral Insurance in 2011 with strong
links to the best insurance providers in
Egypt, to construct a competitive open
architecture to find the best value and
service for the Egyptian market.
target Segment
Due to the nature of insurance prod-
ucts, periodic premiums are paid to
cover undesired events. Our business
targets all segments based on consumer
income, health situation and need sat-
isfaction.
A number of new Life Insurance
products were introduced in 2011, with
improved benefits, including Term Life,
Permanent, Endowment and Annu-
ity Life Insurance products that cover
nearly all consumer needs.
Strategy
• Insurance Business’ strategic goal is
to increase revenue contribution to
Consumer Banking to 10% in 2016.
• Increase CIB customer base pen-
etration.
• Lead the market by introducing a
wide range of products from the
best insurance providers.
2012 Achievements
1. Life Insurance
• A strong growth year, with written
policy volumes up to 232 million
from 152 million in 2011.
• Remarkable net growth in fee in-
come reached 135% from last year
reaching EGP 37.6 million in 2012.
38
Annual Report 2012
• Introduced new Pure Life Insur-
ance product with unique variety of
benefits.
2. General Insurance
• Credit Shield a bundled product
for credit cards customers with a
growth rate of 229% in administra-
tive fees compared to 2011.
• Family Protection Plan, an acci-
dent protection product tailored for
credit cards customers and geared
for families. The product was soft-
launched in August 2011.
• Improve Bank Risk Management by
reviewing bank insurance policies
related to financed assets, with 50%
completion of the project.
Insuring a better
future
135%
growth in net fee income from life insur-
ance in 2012.
229%
growth in administrative fees from Credit
Shield, a bundled general insurance
product for credit card customers.
World-class
customer care
More than 3 mn
calls received in 2012 by our highly-quali-
fied call center personnel.
45%
increase in call center workforce in 2012.
2012 Review
COO Area
In 2012, the COO Area continued its
efforts to implement its agenda for im-
provement and standardization. Much
progress was made in terms of people,
processes, controls, service and quality,
as well as infrastructure enhancement
and strategic decision-making.
The COO Area also continued this
year to focus on the enhancement of
customer experience, one of the Bank’s
key objectives. The COO Area sup-
ported this objective in multiple areas
including the branding of branches and
providing service and quality measure-
ment tools across the network. Great
strides were made to standardize and
centralize multiple processes in order to
enhance productivity and control.
This year we were able to boost our
distribution network by opening 12 new
branches. We are also undertaking mul-
tiple projects to enhance our safety and
security measures based on our security
assessment.
Strategic decision support moved to
another level; the quality of information
across lines of business, products and
customers was enhanced and helped all
stakeholders in analysis and decision-
making. Finance support from infor-
mation management, regulatory and
accounting perspectives added much
value for the Bank in 2012.
Hiring, developing and retaining tal-
ent is one of the Bank’s key missions.
This year, the COO Area focused on a
variety of aspects of Human Capital
Management, developing staff through
effective training, enhancing perfor-
mance management and applying em-
ployee engagement initiatives. We ac-
tively participated in employment fairs
in universities across the country, in-
creasing new hires by 264 this year over
2011. We introduced new training pro-
grams that were attended by 4,500 staff
members, provided staff with opportu-
nities to develop their careers in other
areas within the Bank, and conducted
salary surveys to align our compensa-
tion and salaries with current market
42
Annual Report 2012
levels in order to increase staff satisfac-
tion and retain key talent.
Internal communication processes
were also enhanced through updating
our intranet portal to include policies,
procedures and selective course materi-
al, as well as keeping staff updated with
changes across the organization.
Operations Group
During 2012, the Operations Group
managed not only to sustain its high
level of productivity and efficiency, but
also took further steps towards being a
proactive business partner.
The Group undertook formation and
restructuring operations for multiple
functions, including Institutional Op-
erations, GTS Operations and Opera-
Hiring, developing and
retaining talent is one of
the Bank's key missions.
tional Excellence, with the objective of
consolidating and standardizing opera-
tions functions to increase productiv-
ity and improve service quality — key
focus areas on the Operations Group
agenda for 2012.
Multiple initiatives were undertaken
to improve customer experience, in-
cluding launching non-negotiable stan-
dards, CIB Way and key service indica-
tors, as well as standardizing multiple
operation procedures and customer
forms to provide a consistent, smooth
experience for our customers. Standard
processing times were also set in place
for productivity enhancement. And to
support GTS customer transactions, an
additional 12 service hubs were added
to our branch network along with a
dedicated GTS Operations unit.
Improving the efficiency of alternate
channels was also a key development
this year: In 2012 we managed to in-
crease the efficiency and availability of
our ATMs and conducted a soft-launch
of a new online banking application to
support customers’ evolving needs.
While we work on our initiatives,
controls are always the number-one pri-
ority. With this in mind, we were able in
2012 to widen the scope of our Internal
Control unit to cover several units in
the Operations Group and a wider array
of branches in order to reduce opera-
tional risks and further embed the con-
trols culture in different areas within
the Bank.
To support the resumption of our
business during emergencies and dis-
ruptions, our business continuity and
crisis management planning were im-
proved by establishing alternative re-
covery locations.
Finally, an award-winning 2012 add-
ed another chapter to the CIB success
story, with the Trade Finance Depart-
ment winning the “Best Trade Finance
Bank” from Global Finance magazine
for the 7th year in a row. The Remittanc-
es Department was also awarded “The
Quality Recognition Award for Out-
standing Achievement – Best-in-Class
Book Transfer Rate” by JP Morgan.
Premises Projects Department
In 2012, the Premises Projects Depart-
ment undertook a number of key stra-
tegic initiatives that positively impacted
the Bank’s external and internal cus-
tomers.
One of these initiatives was the “Easy
Branch” concept, a teller-less branch
model located in high-end premises
mainly focusing on sales, and using
alternative cash channels. Five Easy
Branches had been opened in up-mar-
ket residential areas by December 2012.
We also expanded CIB’s distribution
network, establishing 12 new branches,
as well as enhancing CIB’s image and
customer experience through the reno-
vation of more than 10 branches and 40
wealth lounges with the new ‘wealth’
image.
We also undertook a geo-marketing
assessment of all CIB branches, pro-
viding us with a scientific approach
for assessing the current reach of our
branches.
Finally, the Premises Projects De-
partment is preparing for 2013 with an
aggressive expansion plan for our net-
work, aiming to add 30 new branches.
The department has already front-load-
ed almost all the steps for this plan in
order to expedite its completion within
the designated timeframe.
Finance Department
In response to a mandate from the
Bank’s leadership for the Finance De-
partment to become a value-added and
strategic financial partner to Business,
Finance successfully changed its orga-
nizational design in 2012. The resulting
flatter and more entrepreneurial struc-
ture — which now embraces global tal-
ent — is more empowered and focused
on shareholder value.
Finance now has more involvement
in strategic decision-making through
the ability to call certain directions,
disseminate quality information and
conduct discussions with Senior Man-
agement regarding key performance
indicators, accounting standards, and
regulations including taxation. This
scope was expanded and now covers
subsidiaries and associate companies in
addition to the Bank itself.
Management and financial informa-
tion (in terms of details, analysis and
timelines) have been enhanced this year
to help the Bank better execute its strat-
egy. The greater participation of the Fi-
nance Department has been a key driver
of many efficiency initiatives across the
Bank such as cash management, cross
selling, procures to pay infrastructure
and core system migration.
Corporate Service Department
In continuation of the rationalization
and enhancement projects that were
initiated last year, the Corporate Ser-
vices Department went the extra mile
in 2012 to ensure the best services are
provided for the cleaning, maintain-
ing and managing of equipment. Some
of the Corporate Service Department’s
achievements this year included the
new Digital Archiving & Microfilming
project, which aims to transfer all of
the Bank’s documents into digital files
and microfilm. The Department also
carried out a number of upgrades this
year, which included Q-Matic system,
cameras, DVRs, UPS devices, genera-
tors for branches and Head Offices and
firefighting systems for branches.
Human Resources
HR’s strategy for 2012 was to remain
focused on the Bank’s employees, work-
ing to increase both productivity and
motivation. With this in mind, a num-
ber of initiatives and projects were put
in place:
Recruitment
During 2012, CIB continued to hire dif-
ferent levels of staff in various areas of
the Bank, despite the political and eco-
nomic situation in the country. In total,
559 new employees were hired during
2012, compared with 295 new hires in
2011. Seventy percent of all new hires in
2012 headed to Consumer Banking and
branches. Moreover, the Recruitment
Department participated in several ca-
reer fairs and campus visits, aiming to
attract Egypt's best talent from its top
universities.
The Bank participated in the Harvard
Arab Conference for the second year in
a row, with a view toward branding CIB
as an employer of choice for Egyptian
students studying at top-tier universities.
Eleven Egyptian candidates were iden-
tified during the event and showed an
interest in joining CIB. The Department
also played a significant role in selecting
the 60 interns who joined our new Sum-
mer Internship Program, which aims to
attract the best candidates from the best
universities to join the CIB team.
training
In 2012, the Training Department’s fo-
cus was to identify gaps in the knowl-
edge and skills of staff and to deliver
the appropriate educational courses to
bridge these gaps. To achieve this objec-
tive, the Training Department worked
on a plan to provide educational pro-
grams related to technical, management
and business skills. Our highlight for
the year was the number of programs
that were developed and delivered by
senior staff to enhance overall bank-
ing knowledge across all levels. A total
4,500 staff attended the different pro-
grams.
Our Management Training Programs
were once again a great success. A total
of 49 participants from various areas in
Consumer Banking and Operations en-
rolled in the Leadership and Develop-
ment Program for Consumer Banking
(LDP). The Leadership and Management
Program for Senior Officers — which
aims to create a sense of synergy and a
unified vision for all senior management
within CIB — continued this year as
well, with 50 participants attending and
successfully completing the program.
Also in 2012, our Credit Course was
revamped by external consultants and
upgraded with new case studies and up-
dated course material. Some of the new
programs that were introduced this year
included: Wealth Management, Supervi-
sory Skills and a number of middle man-
agement programs.
organizational Development
In order to increase employee interac-
tion and ensure their voices are heard,
HR administered several initiatives to
maintain communication with employ-
ees, including the Employee Engage-
ment Survey, the Salary Surveys and
various Town Hall meetings.
The Employee Engagement Survey
was conducted for the second consecu-
tive year, with this year’s response rate
reaching 79%. Salary Surveys were con-
ducted to assess compensation and ben-
Annual Report 2012
43
efits across the market, with more em-
phasis on critical / executive positions
to ensure that the Bank is aligned with
current market levels.
The Standardization of Job Families
initiative was also launched to ensure
employees have a clear understanding
of their roles in achieving the Bank’s
strategy and mission.
Marketing and Communication
The Marketing and Communication
Department has made major efforts this
year to influence CIB’s brand equity as it
builds strong bonds with both external
and internal customers by encouraging
loyalty, building trust and fostering an
optimistic outlook.
Alongside launching the “Bank to
Trust” Tactical Campaign, the de-
partment also launched the “Values &
Dreams” advertising campaign during
Q2 2012, as well as the thorough revi-
sion of our Cairo Airport branding.
CIB’s Airport branding helps maintain
a strong and solid position for CIB in
comparison with other banks while re-
ceiving a wide range of publicity from
customers.
CIB has always been an avid sup-
porter of the Arts. Working with the
Ministry of Culture and the Fine Arts
sector, CIB lent its support to talented
young artists by sponsoring the Salon
of Young Artists. The art pieces bought
from the gallery were the inspiration
behind CIB’s new book, “Egypt: The
Promise,” featuring some of the artwork
in CIB’s varied collection.
As part of our overall marketing strat-
egy this year, we focused on upgrading
and standardizing the branding for all
our branches. The purpose of this proj-
ect was to project a consistent overall
image to our customers. More than 60
CIB branches were enhanced in terms
of branding during 2012, along with the
implementation of a new theme in 30 of
our Wealth Lounges.
Recognizing the importance of the
intranet as a communication
tool
among staff, the Marketing and Com-
munication Department enhanced and
upgraded the system to allow staff to
endorse policies, procedures, forms,
services, training programs, news and
updates. Further developments are be-
ing implemented featuring videos and
online training programs.
CIB Awards
CIB has continued to receive global ac-
knowledgment awards for the Bank’s
exceptional performance and reputa-
tion, acquiring a total of 12 awards dur-
ing 2012:
• “Best Bank in Egypt” for the 16th year,
from Global Finance magazine.
• “Best Sub-Custodian Bank in Egypt”
for the fourth consecutive year, from
Global Finance magazine.
• “Best Foreign Exchange Provider Bank
in Egypt” for the ninth year, from
Global Finance magazine.
• “Best Trade Finance Bank in Egypt”
for the sixth year, from Global Finance
magazine.
• “Best Local Bank” for the fifth consec-
utive year, from EMEA Finance.
• “Best Asset Manager in Egypt” for the
second consecutive year, from EMEA
Finance.
• “Best Asset Manager in Egypt” for the
third consecutive year, from Global In-
vestor ISF.
• “Best FX Provider in the Middle East”
for the second time, from Global Inves-
tor ISF.
• “The Quality Recognition Award MT
202” from JP Morgan.
• “The Elite Quality Recognition Award
MT 103” from JP Morgan.
• “Best Trade Finance Bank in Egypt” for
the 4th consecutive year, from Global
Trade Review.
• "STP awards for 2012 in USD and
EUR,” from Deutsche Bank.
Information Technology
This year has been a milestone in our
three-year IT overhaul, with the finaliza-
tion of key technology upgrades, as well
as the initiation of the final stages in the
Bank’s three-year IT strategy. Our focus
on improving overall customer experi-
ence has continued to drive our strategy,
and with the great strides made in tech-
nology upgrades during 2012, we now
move closer towards ensuring the stabil-
ity and sustainability of all our systems.
Annual Report 2012
45
Best Bank in
Egypt for 16
consecutive
years
A total of 12
international and regional
awards in 2012.
2012 Review
This year we concentrated on man-
aging changes across our technology
environment, succeeding in finalizing
the IT base. As a result, we now have
the foundation to help us build the ad-
vanced services that will better serve
our business goals.
Among the large number of projects
completed in 2012, some of our key
achievements include:
• Moving the Retail Department to the
New Core System: The move of all re-
tail banking activities to our new core
system — a key step towards providing
24/7 banking services — was complet-
ed this year. This includes moving all
our retail customer touch-points such
as ATMs, POS machines, branches,
internet banking, Automated Voice
Response, etc., to the new system.
• New Infrastructure for all Key Sys-
tems: In order to improve perfor-
mance and stability to handle the
growing transaction volume, all key
systems were migrated to the new
infrastructure. This completes a key
pre-requisite for managing our in-
creasing business demand.
• New Online Banking Portal: CIB in-
vested in a completely new system in
order to provide online banking ser-
vices to our customers. Our new ser-
vice offers not only improved func-
tionality, but is also easily accessible
through a variety of devices, ensur-
ing customer ease and productivity.
• Advanced Analytics and Report-
ing: Continuing our data warehouse
strategy, CIB is in an excellent posi-
tion to make full use of the wealth
of data at our fingertips. This has
resulted in advanced analytics, ac-
curate reporting, and improved fore-
casting. We are also in the process of
providing our business with cutting
edge tools for end-user analytics and
reporting. The next step in this area
is to start providing near real-time
feeds for further improved and up-
We are focused on
building upon our
massive technological
backbone by
incorporating new and
improved services to
provide a better overall
experience for our
customers.
to-date views into our customer data.
• New Data Center: As part of our on-
going strategy of embedding cutting
edge IT services into the Bank, CIB
has started work on a brand new data
center to house our complete infra-
structure. This investment will help
us provide the full gamut of our IT
services to clients 24/7 in a highly
controlled and sustainable manner.
The project has been fast-tracked for
completion by mid-2013.
• Improved Process Orchestration: An-
other key project initiated this year was
addressing process automation and
centralization through the introduc-
tion of a system for Business Process
Orchestration. This aims at providing
straight-through processing and work
flow automation in order to improve
customer turnaround times and the
management of business processes.
The first phase of this project will also
be delivered next year.
Going into 2013, we are focused on
building upon our massive technologi-
cal backbone, by incorporating new and
improved services, and delivering wide-
ly available and easily accessible infra-
structure and world class system capa-
bilities, all aimed at providing a better
overall experience for our customers.
46
Annual Report 2012
2012 Review
Risk Group
The Risk Group (RG) provides indepen-
dent oversight and support in the estab-
lishment of the Enterprise Risk Man-
agement (ERM) framework across the
organization. RG proactively assists in
recognizing potential adverse events and
establishing appropriate risk responses,
thereby reducing costs or losses associ-
ated with unexpected business disrup-
tions. The Group identifies, measures,
monitors, controls and reports risk expo-
sures against tolerance levels and limits
to senior management and the Board of
Directors.
Risk Group’s strong disciplined frame-
work has been essential in withstanding
the uncertain economic environment in
Egypt. As a result, CIB was able to deliver
strong results, serve our clients well and
maintain our reputation as a market lead-
er, despite economic challenges.
• Review business decisions adjusted for
risk in order to optimize capital utiliza-
tion and return on shareholders' value.
Risk Group Objectives
• Implement a robust Enterprise Risk
Management framework that meets
regulatory requirements and interna-
tional best practices.
• Work closely with business and sup-
port groups in order to monitor port-
folios and operations to provide inde-
pendent risk analysis.
• Raise efficiency to reduce expected
losses, while maintaining adequate im-
pairments coverage.
• Provide projections for unexpected
losses to maintain capital adequacy.
Risk Organization
The Chief Risk Officer (CRO) manages
the Risk Group and has the overall day-
to-day accountability for functions for the
following key areas: credit and investment
exposure management, consumer credit
risk, credit and investment administra-
tion, credit information, risk manage-
ment, and remedials and recoveries. The
CRO reports directly to the Chairman
and has oversight of the enterprise risk
management framework and fosters a
strong risk culture throughout the orga-
nization.
Risk Group
Chief Risk Officer (CRO)
Credit & Investment
Exposure Management
Credit & Investment
Administration / Credit
Information
Institutional Banking
Credit Exposure
Management
Credit & Investment
Administration
Remedials & Recoveries
Risk Management
Consumer Credit Risk
ALM Risk
Credit Policy & Fraud
Unit
Non-Performing
Exposure Management
Credit Information
Credit Risk & Risk
Analytics
Strategic Analytics Unit
CBE Provisions &
IFRS Impairments
Investment Exposure
Management
48
Annual Report 2012
Market Risk
Account Fulfillment Unit
Operational Risk
Collection & Recovery
Basel II
Applications Fraud
Business Banking Risk
Key Management Risk
Committees
The CRO and other risk officers are key
members of all credit, asset and liability
management, consumer and operational
risk committees.
banking portfolio. CRC decisions are
guided first and foremost by the cur-
rent risk appetite of the Bank, as well
as the prevailing market trends, while
ensuring compliance with the stipu-
lated guidelines set by the Consumer
Risk Committees
Chief Risk Officer
(CRO)
Asset & Liability
Committee (ALCO)
High Lending &
Investment Committee
(HLIC)
Consumer Risk
Committee (CRC)
Operational Risk
Committee (ORC)
• The High Lending and Investment
Committee (HLIC) is composed of
senior executives of the Bank. The
primary mandate is to manage the
asset side of the balance sheet, while
ensuring compliance with the Bank’s
credit policies and CBE directives and
guidelines. The HLIC reviews and ap-
proves the Bank’s large credit facilities
and equity investments, as well as fo-
cuses on the asset quality, allocation
and development, and adequacy of
provisions coverage.
• The objective of the Asset & Liabil-
ity Committee (ALCO) is to optimize
the allocation of assets and liabilities,
given the expectations of future and
potential impact of interest rate move-
ments, liquidity constraints, foreign
exchange exposure and capital ad-
equacy. ALCO monitors the Bank’s
liquidity and market risks, economic
developments, market fluctuations
and risk profile to ensure ongoing ac-
tivities are compatible with the risk/
reward guidelines approved by the
Board of Directors.
• The Consumer Risk Committee's
(CRC) overall responsibility is man-
aging, approving and monitoring
all aspects related to the quality and
growth of the consumer and business
Credit Policy Guide, as approved by
the Board of Directors.
• The Operational Risk Committee
(ORC) supports the Bank by fulfilling
its responsibility to oversee the opera-
tional risk management functions and
processes. The objective of the ORC is
to oversee, approve and monitor all as-
pects pertaining to the Bank’s compli-
ance with the operational risk frame-
work and regulatory requirements.
Credit & Investment
Exposure Management Group
(Institutional Banking)
Credit Risk is a loss from a borrower or
counterparty that fails to meet its obliga-
tion. The Bank is exposed to credit risk
via a diversified client base, consisting
of large corporate, institutional and in-
dividual customers. Management and
the Board of Directors have established
key committees to review credit risk and
concur with the overall policy. Under the
Risk Group, credit risk is managed by the
Credit and Investment Exposure Manage-
ment Group and Consumer Credit Risk
Group. These groups actively monitor and
review exposure to ensure a well-diversi-
fied portfolio in terms of customer base,
geography, industry, tenor, currency and
product.
The Credit & Investment Exposure
Management Group’s primary objective
is to evaluate the lending and investment
portfolios, using qualitative and quanti-
tative analysis to properly build a quality
portfolio, enhance the Bank’s seniority,
and establish adequate protection, control
and a solid provisioning process to ensure
portfolios are adequately covered. This is
achieved through continuous analysis,
monitoring and close follow-up on port-
folios, in addition to conducting periodic
assessment of performance to detect early
signals for possible distress or deteriora-
tion and to set corrective measures for
mitigation.
The above measures — backed by the
high portfolio quality — enabled the Bank
to maneuver safely through a difficult pe-
riod, reflected in a moderate increase in
default ratio of 3.63% in 2012 as compared
to 2.82% in 2011, coupled with a coverage
ratio of 134.4% in 2012 as compared to
136.04% in 2011, in spite of the current po-
litical and economic conditions, confirm-
ing the Bank’s solid financial position.
On the Correspondent Banking side,
turbulence across Europe continues, how-
ever the Bank continues to adopt a strate-
gy of limiting exposures to counterparties
in the affected countries, while confining
exposures to financially strong and stable
institutions that are able to emerge from
the crisis.
Going forward in 2013, CIB will con-
tinue to support business growth through
adoption of a prudent strategy built on
risk mitigation and sound risk assessment.
Credit & Investment
Administration / Credit
Information Group
The Credit & Investment Administration
function ensures administrative control
on institutional and investment exposures
and the compliance with both the Credit
Policy Guidelines and CBE directives.
The Credit and Investment Administra-
tion Department represents a strong back
up to the Institutional Banking Group
by maintaining a quality control system
Annual Report 2012
49
Maintaining a
quality portfolio
by balancing
opportunities
and risks
2012 Review
that ensures CIB seniority, protection and
control, which is processed through veri-
fication of assigned collateral related to
approved facilities prior to disbursement
of funds, in addition to robust reporting
that facilitates effective decision-making.
The Credit Information Department
conducts comprehensive market infor-
mation reports per client, from various
sources, for all corporate and mid-cap cli-
ents, and is responsible for extracting all
regulatory reports, in order to assist in the
approval decision.
Consumer Credit Risk Group
Consumer Credit Risk Group is an inde-
pendent governance group that manages
the centralized risk function for all con-
sumer asset products. The purview of this
unit extends across the entire consumer
credit cycle, including policy formula-
tion, underwriting and credit assign-
ment, collection and repayment, portfolio
monitoring and analytics and application
fraud. The overall objective is to maintain
a quality portfolio, which is monitored
through a robust analytics unit that fa-
cilitates effective decision-making. The
Group also ensures compliance with the
Consumer and Business Banking Policies
and Central Bank of Egypt directives.
The Bank’s Consumer Asset portfolio
consists primarily of Credit Cards, Auto
Loans, Personal Loans, Secured Over-
drafts, Residential Property Finance
and newly launched Business Banking
Segment. The Bank now has assumed a
leadership position in the market on the
Consumer Asset business. The Consumer
Asset portfolio has exhibited relatively
strong growth throughout the year with
an increase of EGP 1.5 billion, represent-
ing a growth rate of 29%.
This growth can substantially be attrib-
uted to the introduction of new programs
and policy changes that give the bank a
definite competitive edge in the market.
The Consumer Credit Risk Group, in
conjunction with the business units, have
deepened the product line by rolling out
multiple programs and product variants
to attract the target segment envisaged
to facilitate the growth. Over the past
four years, CIB has built a sizeable Con-
sumer Asset portfolio of more than EGP
6.8 billion with a strong portfolio quality
carrying loss rate of 0.4%. This portfolio
size and quality provides a high loss-ab-
sorption capacity to the Consumer Asset
portfolio, which has facilitated the launch
of multiple programs to attract high-yield
segments to further enhance the profit-
ability of the Consumer Asset business.
Furthermore, a dedicated Business
Banking set-up has been institutionalized
to attract the previously untapped seg-
ment of customers in the EGP 5-50 mil-
lion turnover range. This new business
line should address the specific needs of
this segment, and consequently, separate
product programs have been launched.
Also, a dedicated risk structure has been
set-up to specifically address the associat-
ed risks of this segment and fulfill the dif-
ferent skill-set required to venture into it.
The aggressive portfolio growth was
achieved while
improving portfolio
quality — after the delinquency increases
seen in 2011 — to levels witnessed prior
to the Egyptian Revolution. The portfolio
has exhibited a healthy trend with non-
performing assets at 2.1% (compared to
3.3% in 2011 and 2.4% in 2010) and loss
rates of 0.4% (compared to 0.6% in 2011
and 0.5% in 2010). The portfolio quality
has been sustained by ensuring the right
portfolio mix; with concentration caps
across comparatively riskier segments;
and a very rigorous portfolio manage-
ment approach that identifies opportu-
nities for growth and defines corrective
actions that are then executed subse-
quently. There are multiple coincident
and lagged indicators instituted across
the consumer credit life cycle to moni-
tor and maintain the optimal portfolio
quality. Portfolio monitoring begins
with rigorous review of all early warning
indicators, such as Through-The-Door
(TTD) analysis, First Payment Defaults
(FPD) and non-starters coupled with key
coincident indicators, such as delinquen-
cies, bucket movements and consequent
flow rates, and Was-Is analysis across
key segments. Segmented vintages and
Month-On-Book (MOB) analysis are
also employed to identify differentiated
customer repayment patterns, which
provides the fundamental base for all
policy formulations and collection strat-
egies. Loss recognition and provisioning
methodologies have been implemented
along IFRS guidelines, which ensure that
the Bank is pragmatic in current risk as-
sessment and forecasting future poten-
tial losses.
Remedials & Recoveries
Department
The Remedials & Recoveries Depart-
ment aims to achieve the maximum re-
covery rate from the Bank’s institutional
written-off exposures via building solid
remedial strategies.
Comprehensive analysis is conducted
with all related departments to avoid re-
currence, including setting guidelines to
avoid future write-offs, and to develop vi-
able strategies to maximize the recovery
prospects. The department further man-
ages and reviews the remedial accounts’
performance and financial standing
through a framework that entails active
involvement in the management of the
turnaround potentials via committees or
board representations.
In addition, it seeks reactivation of re-
lationships with stagnant accounts and
proposes settlements or
turnaround
plans. These tasks are accomplished while
ensuring continuous update and renewal
of the documentation, supports, and oth-
er collaterals to maintain CIB’s seniority
and control.
Despite the difficult market conditions,
recoveries amounted to EGP 19.2 million
in 2012 versus EGP 15.7 million in 2011.
Consolidated Portfolio Quality &
Provisioning
Total IFRS based Impairment Charges
reached EGP 1.93 billion in 2012, as op-
posed to EGP 1.45 billion in 2011, de-
spite the write-off of EGP 186.3 million
in 2012. The Bank’s General Coverage
Ratio for Direct Exposure increased
from 1.77% as of December 2011 to
2.32% as of December 2012.
Risk Management Department
The Risk Management Department
(RMD) identifies, measures, monitors
and controls the Asset and Liability
Management (ALM), and Market and
Operational Risk and ensures that the
50
Annual Report 2012
2012 Review
2009
2010
2011
2012
Gross Loans (000’s of EGP)
28,981,189
36,716,652
42,933,133
44,350,975
NPL (%)
2.97%
2.73%
2.82%
3.63%
Charge-Offs to Date (000’s of EGP)
1,609,105
1,714,960
1,870,898
2,057,209
Recoveries to Date (000’s of EGP)
338,928
368,095
383,835
403,031
General Ratio (Direct Exposure
only)
Recoveries to Date /
Charge-Offs to Date
Basel II and risk analytics requirements
are adequately managed and that the sta-
tus is regularly reported to senior man-
agement and the Board of Directors.
Liquidity Risk is the risk that the Bank
would find itself unable to meet its nor-
mal business obligations and regulatory
liquidity requirements. CIB has a compre-
hensive Liquidity Policy and Contingency
Funding Plan that supports the diversity
of funding sources and maintains an ad-
equate liquidity buffer with a substantial
pool of liquid assets, as well as having
less reliance on wholesale funding. To
measure and control liquidity, CIB uses
gaps, stress testing, net stable funding and
liquidity coverage ratios, and regulatory
and internal liquidity ratios. In 2012, the
Bank maintained strong liquidity ratios
and there was no need to execute the Con-
tingency Funding Plan.
Interest Rate Risk is defined as the
potential loss from unexpected changes
in interest rates, which can significantly
alter the Bank’s profitability and eco-
nomic value of equity. Interest Rate Risk
primarily arises from the re-pricing
maturity structure of interest-sensitive
assets and liabilities and off-balance
sheet instruments. CIB uses a range of
complementary technical approaches to
measure and control Interest rate risk
including: Interest rate gaps, duration,
duration of equity, and earnings-at-risk
(EaR).
In 2012, the balance sheet was strategi-
cally positioned to benefit from the inter-
est rate environment and CIB proactively
managed this sensitivity to safeguard
against adverse shocks.
52
Annual Report 2012
2.32%
2.19%
1.77%
2.32%
21.06%
21.46%
20.52%
19.59%
Market Risk is the risk of loss result-
ing from adverse movements in the
value of financial instruments, arising
from changes in the level or volatility
of interest rates, foreign exchange rates,
commodities, equities and other secu-
rities, including derivatives. The Bank
classifies market risk exposure into
trading and non-trading activities. The
Bank uses various measurement tech-
niques including value-at-risk (VaR),
stress testing and non-technical mea-
sures, such as asset cap and profit and
loss versus stop loss limits to monitor
and control market risks. Despite the
volatility in 2012, CIB maintained ad-
equate market risk appetite levels.
Operational Risk is the loss resulting
from inadequate or failed internal pro-
cesses, people and systems or from exter-
nal events. CIB maintains an Operational
Risk framework and comprehensive poli-
cies and processes designed to provide a
sound and well-controlled environment.
The framework uses the following ap-
proaches to measure and control Op-
erational Risk: loss database, risk control
self-assessment (RCSA), and key risk in-
dicators (KRIs). In 2012, Operational Risk
losses were at minimum tolerance levels
and proactively monitored and managed.
In 2012, CIB continued to participate
in Basel II quantitative impact studies
with the Central Bank of Egypt, and is
well positioned to be compliant with the
new regulations.
2012 Accomplishments
• Embedded the understanding of our
risk appetite across the enterprise and
increased risk transparency.
• Diligently monitored action plans
that led to preservation of portfolio
quality, evidenced by the NPL ratio
of 3.63% and a coverage ratio of
134.40% in 2012.
• Recoveries amounted to EGP 19.2
million, despite difficult conditions.
consumer
• Exceptional
portfolio
quality with non-performing asset
rates at 2.1% and loss rates of 0.4%.
• Enhanced portfolio monitoring with
roll-out of Concierge Automated
Risk Monitoring tool.
• Launch of varied innovative pro-
facilitate asset growth
grams to
through extensive usage of the Credit
Bureau.
• Set-up of dedicated and independent
business banking risk structure.
quality
• Enhanced
• Independent
assurance
checks and subsequent process im-
provements to improve efficiencies
and additional controls.
efficiencies
collection
through building greater coverage
and reach.
• Re-engineered
to
achieve cost-savings and processing
efficiencies, which resulted in credit
assessment of greater numbers of
applications during the year despite
head-count savings.
underwriting
• Enhanced
models.
liquidity measurement
• Conducted Basel II Quantitative Im-
pact Studies for the CBE and in po-
sition to be fully compliant with the
new regulations.
• Encouraged
continuous
learning
through our Risk Group profession-
als by designing and offering educa-
tional training programs.
Compliance
CIB’s Compliance Department was es-
tablished in March 2007 as an indepen-
dent entity guarding the Bank and all
its stakeholders against a full spectrum
of compliance risks, including regula-
tory, governance, legal, fraud, reputa-
tion, money laundering and terrorism
financing. The department works con-
sistently to achieve the highest possible
standard of compliance.
The Compliance Department
in-
cludes four divisions:
1. Policies and Procedures
This Division is responsible for ensur-
ing the Bank’s compliance with poli-
cies, regulations, laws, and procedures
(including CBE rules and regulations).
This entails reviewing, updating and
approving policies and standard oper-
ating procedures. The Division reviews
new products and services, related ads,
and other means of communication to
ensure compliance with CBE in terms
of transparency and proper disclosure
of terms and conditions for products
and services. It also assesses compli-
ance risks and related tools of control to
ensure that all business lines are com-
plying with existing regulations.
In 2012, the Division’s main focus
was on providing recommendations
for improved controls and processes,
an effort that will continue Bank-wide
through 2013.
2. Anti-Money Laundering and
Terrorism Financing
This Division is directly involved in
monitoring transactions with branches
and other business areas to ensure that
all account opening requirements are
obtained, Know Your Client (KYC) data
are sufficient for new clients and that
KYC information is updated for the ex-
isting customer base. During 2012, spot
checks were conducted on 21 branches,
in coordination with Operations, to test
the adequacy of the Bank’s Anti Money
Laundering Compliance Program and
to address any identified gaps. This shall
continue throughout 2013. In doing so,
the Division implemented a risk-based
approach to assess customer profiles
and their related transactions. In order
to conduct more accurate analysis, CIB
has invested in an advanced automated
AML solution that will be in place by
Q2 2013.
This Division is also responsible for
screening customer transactions, in-
cluding incoming and outgoing pay-
ments for individuals and entities that
are negatively listed and between sanc-
tioned countries. In 2013, the Division
will be responsible for handling the
preparation for FATCA (Foreign Ac-
Mitigating
risk
EGP
19.2 mn
in non-performing loan
recoveries.
EGP
6.8 bn
CIB's consumer asset
portfolio, which carries a
loss rate of only 0.4%.
21
CIB branches were spot-
checked to test Anti-Mon-
ey Laundering
compliance.
count Tax Compliance Act) require-
ments for US individuals and entities
in coordination with other areas in the
Bank that will be in effect by January
2014.
3. Corporate Governance and
Code of Conduct
This Division continues to work hard
to build a sound corporate governance
model that is commensurate with CIB’s
status as a leading financial institu-
tion. In 2012, the Division drafted the
Bank Code of Corporate Governance
in alignment with CBE guidelines and
international standards, in addition to
three related policies: Whistle Blow-
ing, Conflict of Interest, and Disclo-
sure, which were all endorsed by the
Board.
The Division continues to provide
regular updates and awareness to all
staff according to CIB ethics standards
and regulations in conjunction with
the Bank’s core values, and investigates
cases related to breaches of the Bank’s
code of conduct. In 2012, through the
Bank Fraud Committee, it succeeded in
putting several precautionary measures
in place to minimize external and inter-
nal fraud risks, thus safeguarding cus-
tomer accounts and bank assets from
such acts.
4. Complaints Investigation
This Division was established in 2010
and is responsible for investigating in-
quiries and complaints received from
CBE and the Chairman’s Office. It co-
ordinates with the Customer Care Unit,
which is in charge of all customer com-
plaints, to investigate the root causes of
such complaints and client dissatisfac-
tion, and to initiate remedial action.
Based on the analysis of the root
causes in 2012, work flow systems were
enhanced and processes improved in
order to continuously decrease the
volume of customer complaints and to
achieve the Bank’s ultimate goal of cus-
tomer satisfaction.
Annual Report 2012
53
Strategic
Subsidiaries
Strategic Subsidiaries
CI Capital Holding
CI Capital is CIB’s wholly-owned, full-
service investment banking division,
offering a range of capital markets so-
lutions through its platforms for securi-
ties brokerage, asset management, and
investment banking advisory, all sup-
ported by a strong research arm.
Business lines
Securities Brokerage
CI Capital Securities is a top-ranked
Egyptian brokerage house that offers its
services through two fully-owned bro-
kerage companies serving a wide range
of global clients: Commercial Interna-
tional Brokerage Company (CIBC) ca-
ters to institutions and high net worth
individuals, while Dynamic Securities
Brokerage focuses on retail clients.
2012 Accomplishments:
• Ranking: CI Capital Securities has
successfully propelled both of its bro-
kerage arms into the upper echelons
of the Egyptian securities market.
In 2012, CIBC was the top-ranked
brokerage firm in Egypt (excluding
OTC and irregular transactions) and
ranked third overall. Dynamic Secu-
rities made steady progress through-
out the year, moving up strongly
from the top 50 to secure a place as
one of the top 15 brokers in the coun-
try.
• Market Share: In 2012, CI Capital Se-
curities added 1.8% to its overall mar-
ket share across both brokerage firms
to reach 8.9% (CIBC, 7.1%; Dynamic,
1.8%), up from 7.1% in 2011. The firm
recorded a total trading value of EGP
25.9 billion in 2012.
• Revenue Diversification: Through-
out 2012, CI Capital Securities has
focused on revenue diversification
through the continued expansion of
its trading platform. Execution capa-
bilities have been expanded beyond
the local market by offering clients
quality access to international equity
markets in Europe, the US and the
GCC.
Asset Management
CI Asset Management (CIAM) is a lead-
ing institutional asset management firm
in Egypt, with total assets under man-
agement reaching EGP 7 billion (as of
December 2012).
CIAM manages seven diverse funds:
• Osoul: One of the largest and best-
performing money market funds in
Egypt, with assets under manage-
ment of over EGP 6 billion.
• Istethmar: CIAM’s first equity fund
(launched in 2006), with assets under
management of EGP 142 million.
• Aman: A Sharia-compliant
fund
launched in 2006 in cooperation
with CIB and Faisal Islamic Bank of
Egypt, with assets under manage-
ment of EGP 38 million.
• BLOM: A money market
fund
launched in 2009, with assets under
management of EGP 270 million.
• Hemaya: A capital-protected fund
launched in 2010, with assets under
management of EGP 41 million.
• Thabat: A CIB fixed income fund
launched in 2011, with current assets
under management of EGP 173 mil-
lion.
• Rakhaa: United Bank of Egypt’s Shar-
ia-compliant money market fund,
launched in 2012 as the first of its
kind on the Egyptian market, with
current assets under management of
EGP 318 million.
CIAM also provides portfolio manage-
ment services for a wide array of CIB
and CI Capital clients, offering discre-
tionary services to high-net-worth indi-
viduals and institutional investors. Cli-
ents are provided with comprehensive
personalized services tailored to their
investment and reporting requirements.
2012 Accomplishments:
Ranking and awards:
• CIAM was named “Best Asset Man-
ager in Egypt” at the Global Investor
Awards for the third year in a row.
56
Annual Report 2012
A transformative
year across CI's
platform
EGP
7 bn
in total AUM as of
December 2012
Strategic Subsidiaries
• CIAM was named “Best Asset Man-
ager in Egypt” by EMEA Finance for
the second year running on the back
of its focus and innovation in launch-
ing Rakhaa and maintaining Osoul’s
leading performance during 2012.
• Osoul maintained its position among
the top 3 money market funds in
Egypt for the fifth consecutive year.
• The BLOM money market fund
maintained its first place ranking
among all money market funds in
Egypt for the second consecutive
year.
• Thabat ranked first in its category of
fixed income funds.
Diversification in products and client
base:
• CIAM’s range of funds and portfo-
lios cover nearly every asset class in
the Egyptian market, including equi-
ty (Islamic and non-Islamic), money
market (Islamic and non-Islamic),
fixed income and capital protected.
• CIAM currently manages funds and
portfolios on behalf of a wide range
of clients, including public and pri-
vate banks, governmental institution,
insurance companies and corporate
entities.
• Launch of Rakhaa, the first Sharia-
compliant money market fund in
Egypt, with a 2.7x covering ratio
and EGP 318 million in assets under
management as of year-end 2012.
• Added EGP 450 million in assets un-
der management through a new fixed
income portfolio.
dition that dates back to 1991, CI Capi-
tal Investment Banking (CIIB) offers
some of the most focused, experienced
and professional advisory and execu-
tion capabilities in Egypt.
As CIB’s investment banking arm,
CIIB enjoys a unique position in terms
of access to deal flow, unparalleled sec-
tor, industry and company knowledge,
and the ability to access, raise and
structure equity and debt capital.
CIIB’s investment banking
services include:
Equity Capital Markets (ECM)
• Private placements
• Initial public offerings
• Follow-on offerings
• ADR / GDR listings
• Valuation advisory
The business
underwent a significant
restructuring exercise
that centered on
bolstering the senior
leadership team.
Mergers & Acquisitions (M&A)
• Buy-side advisory
• Sell-side advisory
• Asset disposal programs and divesti-
tures
• New fixed
income
launched by Q1 2013.
fund
to be
• Management and leveraged buy-outs
Internal operational enhancements:
• Disaster recovery and business conti-
nuity plans were implemented during
2012, preparing CIAM to perform its
responsibilities and provide the best
service to clients under any circum-
stances.
• Applied for ISAE 3402 (International
Standards on Assurance Engage-
ment).
Investment Banking
Building on an investment banking tra-
Debt Advisory (in collaboration with
CIB)
• Securitizations
• Corporate bonds
• Debt raising advisory
2012 Accomplishments:
Despite the challenges facing equity
and debt capital markets and other
investment banking activity in Egypt
during 2012, CIIB had a transforma-
tive year during which the business
underwent a significant restructuring
exercise that centered on bolstering the
senior leadership team. Two managing
directors were hired to lead the trans-
formation of the franchise, bringing
a combined 27 years of experience at
top-ranked regional and international
financial institutions.
With a new leadership in place, cou-
pled with important enhancements
across the CI Capital platform, CIIB
has repositioned itself as the leading
investment bank in Egypt, targeting
high profile and complex transactions
and establishing new relationships
with key corporate clients. During the
year, CIIB was selected as lead advisor
on a number of landmark M&A and
ECM transactions, including several
cross-border deals. In addition, CIIB is
in the final stages of closing two trans-
actions with completion projected dur-
ing Q1 2013.
CIIB aims to develop its franchise as
the market leader in M&A and ECM
transactions, while continuing to en-
hance its transactions pipeline with
high quality mandates and leveraging
the relationship with CIB to offer cli-
ents one-stop-shop financial solutions
and strategic financial counseling at the
highest level.
CI Capital Research
The Research Department was founded
in 1998 for the purpose of producing
equity research reports covering listed
Egyptian entities for our institutional
and retail clients. In 2005, the unit was
renamed CI Capital Research (CICR)
and integrated into CI Capital Hold-
ing.
The CICR team comprises some of
the most experienced equity analysts in
the region, with a cumulative 48 years
of experience in equity research in the
MENA area. Our team covers various
industries in Egypt and the GCC coun-
tries, specializing
in comprehensive
industry reports and company-specific
notes that aim to generate profitable
investment ideas for our clientele. In
addition, the macro and strategy team
tracks, analyzes and forecasts macro-
economic indicators, and identifies in-
vestment opportunities across sectors
and countries.
Egypt Factors
Profile
Egypt Factors (EGF) is a joint venture
between Commercial
International
Bank (CIB) and Malta-based FIMBank
plc. Each entity owns 40% of the joint
venture, with the International Finance
Corporation (IFC) — a member of
the World Bank Group — holding the
remaining 20%. EGF is the first non-
banking financial institution in Egypt to
purely specialize in factoring, and is the
first registered company on the Egyp-
tian Register for Factoring Companies.
product type
With a clear focus on non-traditional
trade finance instruments, Egypt Fac-
tors is committed to supporting and
promoting cross-border and domestic
trade in Egypt. To that end, Egypt Fac-
tors provides a comprehensive package
of receivables management services that
consist of the following:
• Administration & Commercial Col-
lection: EGF will undertake all
debtor book-keeping and collection
measures, as well as monitoring and
following up on all outstanding in-
voices. With the company’s cover-
age extending to over 80 countries
around the world, including Egypt,
EGF is able to bridge differences in
culture, language, market habits and
legal environment through a com-
prehensive network of more than 390
correspondents worldwide.
• Funding: EGF will advance up to
90% of all covered receivables. This
turns sales on credit terms into cash
sales. As cash flows improve, client
flexibility increases.
• Debt Protection: EGF guarantees
100% payment up to a limit estab-
lished for each buyer, and will settle
covered undisputed receivables if not
paid after a defined period from the
due date. Buyers are under periodic
evaluation to make sure that upcom-
ing risks are recognized on time.
Target Market
The company targets producers /
manufacturers, traders and service
providers who conduct transactions
based on short-term deferred pay-
ments. EGF also offers services to
domestic buyers from local or foreign
sources, which benefit from the in-
creased purchasing power without ty-
ing up banking facilities.
For large corporations, factoring is
advantageous in that it provides value-
added services and non-recourse fund-
ing to improve risk position, business
efficiency and financial ratios. Factoring
is also considered highly beneficial to
mid-cap companies in terms of liquid-
ity and growth.
2012 Accomplishments
Despite the turbulence that rocked both
the global markets and Egypt’s econo-
my over the past two years, Egypt Fac-
tors has succeeded in maintaining its
business portfolio and achieving almost
100% growth during FY 2012.
The company managed to capitalize
on current circumstances by divest-
ing and replacing more than 40% of its
portfolio to minimize risk and enhance
profitability.
According to Factors Chain Inter-
national (FCI) statistics, EGF has, for
the fourth consecutive year, achieved
the highest volume of international
trade handled through the FCI network
among all Egyptian factoring compa-
nies.
Ongoing Forward Strategy
With a positive outlook for domestic
growth and stability and a more con-
genial global environment expected
over the coming year, Egypt Factors
aims to double its volume while focus-
ing on providing value-added services
to its clients. Long-term, Egypt Fac-
tors aims to become a leading com-
mercial finance hub in the MENA
region.
58
Annual Report 2012
Annual Report 2012
59
Strategic Subsidiaries
Commercial
International Life
Insurance Company
Commercial International Life Insurance
Company (CIL) seeks to meet the sav-
ings and protection needs of individual
and corporate customers in Egypt with
insurance products that offer excellent
value-for-money. CIL was a pioneer in
introducing unit-linked products to the
Egyptian market and remains the leader
in this segment today.
Leveraging on the combined strength
of its two respected shareholders, UK’s
Legal & General and Egypt’s Commercial
International Bank, CIL delivers a suc-
cessful banc-assurance sales model. The
company has risen to become one of the
largest players in the Egyptian life insur-
ance industry.
2012 performance
CIL currently insures the lives and pro-
vides retirement savings programs for
more than 389,000 and 21,000 individu-
als respectively. Revenue increased sig-
nificantly in 2012 despite tough market
conditions and distressed circumstances.
Moreover, a range of system and process
enhancements were implemented to im-
prove customer service and transparency.
Forward Strategy
Going forward, CIL is determined to
maintain its strategy to:
• Build a strong and vibrant company
through sustained growth in the sale
of profitable products to individual
and corporate customers.
• Deliver
innovative value-for-money
protection and
savings products,
aimed at satisfying the needs of clients.
• Provide exceptional customer ser-
vice, professional growth and fulfill-
ment of employees, and improved
quality of life in the community.
• Contribute materially to CIB’s rev-
enue base with strong sales growth,
high policy persistency and maximi-
zation of synergies with CIB affiliate
companies.
Falcon Group
Falcon Group is a joint venture be-
tween CIB, the CIB Employees Fund,
Al Ahly for Marketing and Services
and other private entities. CIB owns
40%, the Employees Fund 16%, Al Ahly
for Marketing and Services 6%, while
other shareholders own the remaining
38%.
Products
Falcon Group includes six companies:
Falcon Security Services
Company
• Properties and Premises Protection
• Public Event Security
• Personal Protection
• Security Dogs
• Corporate Security Training Courses
• Female Guards
• Safety Training
• Industrial Security
Falcon tech. for technical
Services and Security
• Security Surveillance Equipment
• Counter Surveillance Equipment
• Access Control Equipment
• Fire Systems
• Safety Equipment
• Security Fences
Falcon for Money transfer
Services
• Cash Management and Transit
• ATM Services
• Money Processing
• Valuables Transfer
Falcon Blue for touristic
Services
• Booking International and Domestic
Flights
• Booking International and Domestic
Hotels
• Visa Handling
• Meet and Assist
• Medical Insurance for Travel
• Assistance in Tracing Lost Baggage
• Tour Arrangement for Groups and
Individuals
• Haaj and Omrah
Falcon for public Services and
project Management
• Cleaning and Housekeeping
• Pest Control
• Planting and Trimming
• Maintenance
Falcon for Investment and
Sports Marketing
• Organizing tournaments and event
conferences, festivals, exhibitions and
a wide range of sports, cultural, social,
artistic and religious activities.
• Preparing events and
supplying
equipment and supplies such as sports
equipment, stationery and any other
supplies needed by Falcon Clients.
Target Market
In order to better meet security and ser-
vice needs, organizations are increas-
ingly considering the use of managed
service providers for some or all of their
activities. Companies operating in di-
verse sectors of the economy, including
tourism, banking, commerce and pub-
lic services view security and property
management as essential components
of their day-to-day operations. Falcon
Group has developed a unique bouquet
of high-quality services to meet diverse
market needs. Every year, Falcon Group
expands its service offering to ensure cli-
ents remain fully satisfied and confident
that Falcon is the number one choice in
terms of efficiency and customer service.
Falcon has developed a
long-standing, positive
relationship with
governmental authorities
and entities and is licensed
by the Ministry of State for
Administrative Development
to provide Concierge and
Governmental Services such
as national IDs, passports
and drivers licenses.
Expanded Market Presence
Falcon aspires to maintain its market
leadership by growing both organically
and through acquisitions. With an eye
on local and regional expansion, Falcon
plans to establish operations in at least
two new locations annually. Expansions
have taken place primarily in the Delta
and Upper Egypt, but plans are cur-
rently underway to further expand Fal-
con’s footprint in the coming four years
within Greater Cairo, which we consider
a cash intensive area with a large number
of high-growth financial institutions that
will be in need of cash handling solutions.
2012 Group Accomplishments
Falcon currently represents 28% of the
money transfer market in Egypt. In 2012,
our monthly transferred volume of cash
reached over EGP 7 billion, our monthly
transferred valuables were worth more
than EGP 46 million and our daily sorting
and counting operations covered more
than EGP 250 million. We also provided
ATM replenishment and maintenance
services for 350 ATMs throughout Egypt.
In the area of Public Services and Proj-
ect Management, Falcon holds a market
share of 9%, serving a large client base out
of 201 different locations in 2012. Our Se-
curity Services Group has a 25% market
share, and continues to be a trustworthy
provider to clients in 475 locations, de-
spite the increased political tension and
heightened security situation in Egypt.
We have opened two new branches,
one in Maadi and another cash center in
the Fifth Settlement. Our total turnover
increased by 47% to reach EGP 144.3
million.
Strategy Going Forward
Decentralization: Falcon has opened two
new branches in 2012 and will open an
additional four by the end of 2013. This
decentralization will help us achieve
greater control over costs, thereby ensur-
ing our ability to continue providing high
quality services at competitive prices.
Falcon is developing a uniform for all
operations staff to improve employee
appearance and increase efficiency and
productivity. Falcon also provides in-
centive training to maintain a high level
of service and to keep up to date with
the latest developments in Egypt.
Falcon’s call center will operate 24/7,
analyzing client data and administer-
ing satisfaction surveys to guarantee a
maximum level of client satisfaction.
Superior Corporate
Governance
Group organization is characterized by
a decentralized structure where each
division is held responsible for its own
performance with respect to both prof-
itability and business development. We
are continuously working to improve the
efficiency and profitability of our branch
offices, with a clear target to increase ser-
vice revenues by 2014.
Falcon is committed to safeguarding
the well-being of its employees. We have
created a well-functioning structure and
utilized systematic procedures for iden-
tifying and minimizing the risk of em-
ployee harm.
60
Annual Report 2012
Annual Report 2012
61
Strategic Subsidiaries
Corporate Leasing
Company (Egypt) SAE
– CORPLEASE
CORPLEASE, established in 2004, is
one of the top three financial leasing
companies in Egypt. The company pro-
vides classic finance and operating lease
products to the SME sector as well as
to the corporate sector at large. COR-
PLEASE also provides fleet manage-
ment and vendor finance products as
well as structured leasing products. The
company covers all of Egypt through its
offices in Cairo, Alexandria, Mansoura,
Assiut, Hurghada and Suez (the last two
in early 2013). In addition, the Compa-
ny established a fully owned subsidiary
in Dubai, incorporated in the Dubai In-
ternational Financial Center (DIFC).
While 2011 saw CORPLEASE achieve
robust new lease bookings, volumes
in 2012 were impacted by the political
and economic circumstances, which
led to increased credit risk and to lower
demand for medium and long term fi-
nancing. Despite these developments,
the company retained a robust and
healthy portfolio and has a strong pipe-
line going into 2013. CORPLEASE en-
acted another capital increase in 2012,
in line with its established policy of an-
nual equity increases, and continues to
enjoy a strong financial position with
favorable coverage, liquidity, capitaliza-
tion and funding ratios.
CORPLEASE continues to place sig-
nificant emphasis on developing its
automation, risk and internal controls.
The company invests continuously in
the development and training of its
professional staff through dedicated
in-house and outside training activities
and the company believes that the qual-
ity of its people, operating practices and
controls are the best in the industry.
62
Annual Report 2012
Fostering
productivity and
innovation
More than 4,500
staff members participated in
new training programs.
Corporate Governance
Corporate Governance
We at CIB firmly believe that good gov-
ernance is a cornerstone of our success
as it assures the alignment of interests
of shareholders and managers and the
monitoring of management through
the dissemination of information and
transparent reporting. Corporate gov-
ernance is the underlying framework
within which our five-year plan is be-
ing implemented. As such, we have de-
veloped a sound reporting system that
guarantees timely, transparent and
accurate disclosure of material mat-
ters regarding the Bank, its ownership,
operations and financial performance.
The Bank also advocates the equal
treatment of all shareholders and the
protection of their voting rights.
We take pride in our strong cor-
porate governance structures, which
include an experienced team of pro-
fessional executive directors and se-
nior management, competent board
committees, as well as a distinguished
group of non-executive directors who
truly believe that, while business re-
quires mandated laws and rules, these
can never substitute for ethical behav-
ior and voluntary compliance.
CIB’s highly qualified Board of Di-
rectors is supported by internal and
external auditors, as well as other in-
ternal control functions (Risk, Com-
pliance, and Internal Audit), and ef-
fectively utilizes the work carried out
by those functions to ensure that the
Bank adheres to international best
practices in corporate governance. CIB
also changes auditors every five years
to ensure objectivity and exposure to
new practices.
In line with new Central Bank of
Egypt directives on corporate gov-
ernance as well as international best
practices that increasingly separate the
roles of chairman and chief executive
officer, and in view of the Bank’s up-
coming aggressive growth plan, CIB’s
Board decided to appoint a managing
director to be responsible for manag-
ing the Bank’s business lines and en-
66
Annual Report 2012
suring smooth day-to-day running of
operations and execution of the strat-
egy approved by the Board.
In 2011, Mr. Hisham Ramez Abdel
Hafez was appointed as Vice Chair-
man and Managing Director of the
Bank to carry out the aforementioned
responsibilities creating greater capac-
ity for the Chairman to focus on the
strategic direction of the Bank. Mr.
Ramez remained with CIB until early
in Q1 2013, participating actively in the
Bank's corporate governance. He has
since left the Bank to serve as Governor
of the Central Bank of Egypt.
Good governance
is a cornerstone
of our success
as it assures the
alignment of interests
of shareholders
and managers and
the monitoring of
management through
the dissemination
of information and
transparent reporting.
The Board of Directors: One of
our key strengths is our prominent
Board of Directors, which is the ul-
timate decision-making body of the
Bank. The Board is composed of nine
members; two are executive and seven
non-executive members with a diverse
knowledge base and a balanced skill
set that gives CIB a distinct competi-
tive edge. The Board primarily focuses
on long-term financial returns and the
best interest of all CIB’s stakeholders:
customers, shareholders and employ-
ees of the Bank, as well as the com-
munities in which the Bank operates.
Moreover, the Board’s role is to set the
Bank’s values, strategy and key poli-
cies, along with pursuing and main-
taining its long-term success. Such role
is accomplished through providing en-
trepreneurial leadership, sound strate-
gies and risk management oversight
to ensure that risks are assessed and
properly managed. The Directors meet
at least six times per year for discus-
sions on matters that are important to
shareholders. Over the course of 2012,
CIB’s Board met six times. Being the
single largest shareholder in CIB, Actis
— an emerging market private equity
specialist — currently owns 9.14% of
CIB’s shares and has a representative
on the Board.
Mr. Hisham Ezz Al-Arab
Chairman and Managing Director
Mr. Hisham Ezz Al-Arab has been
leading CIB since 2002 as Chairman
and Managing Director. Under his
leadership, CIB expanded its leading
position, grew its market capitaliza-
tion from $200 million to $4 billion
and evolved from a wholesale lender
into the full fledged financial institu-
tion it is today. His vision transcended
financial performance to include the
adoption of best practices in corporate
governance, risk management and in-
stilling of a modern banking culture.
Prior to joining CIB, Mr. Ezz Al-
Arab led a distinguished banking
career as Managing Director in inter-
national investment banks in London
(Deutsche Bank, JP Morgan and Mer-
rill Lynch), Bahrain, New York and
Cairo. In 1999, Mr. Ezz Al-Arab joined
CIB as Deputy Managing Director re-
sponsible for leading the Bank's mod-
ernization and restructuring efforts
aimed at protecting its leading market
position in the face of future changes.
In 2002, he was promoted to the role
of Chairman.
Mr. Ezz Al-Arab is a member of nu-
merous organizations, including the
Federation of Egyptian Industries,
the American Chamber of Commerce
in Egypt and the Board of Trustees of
AUC. He is also a member of Master
Card’s South Asia, Middle East and Af-
rica Region Advisory Board and serves
as Chairman of the Board of Trustees
of CIB Foundation.
Mr. Hisham Ramez Abdel
Hafez
Vice Chairman and Managing
Director
Mr. Ramez has over 30 of years’ expe-
rience in international banking, with
a strong background in asset and li-
ability management, investment bank-
ing and risk management. He joined
CIB in December 2011 as Vice Chair-
man and Managing Director and has
brought to the role a considerable
wealth of knowledge gained from a
distinguished career with various local
and international banks.
Prior to joining CIB, Mr. Ramez was
Deputy Governor and Vice Chairman
of the Central Bank of Egypt (CBE)
from July 2008 to November 2011. His
professional career began in 1982 as a
foreign exchange and money market
trader with Bank of America in Cairo.
From there he moved on to become a
senior trader with Bank of America
in Bahrain before assuming the post
of Vice President of the Arab Banking
Corporation, also in Bahrain. In 1996,
Mr. Ramez returned to Egypt, where
he became the General Manger and
later CEO of the Egyptian Gulf Bank,
a post he held until 2006. Afterwards,
he assumed the role of Chairman and
Managing Director of the Suez Canal
Bank until June 2008.
Mr. Ramez is a board member of
the Arab Monetary Fund (AMF), the
Egyptian American Business Council,
the Egyptian Financial Supervisory
Authority (EFSA), the Egyptian Ex-
change (EGX), the National Bank for
Investment, the Coordinating Council
of the Government of Egypt, the Cen-
tral Bank of Egypt’s (CBE) Anti Money
Laundering Unit and Monetary Policy
Committee, the National Organization
for Social Insurance, and the Egyptian
Banking Institute. Mr. Ramez is also
the non-executive Chairman of the
Arab International Bank.
Dr. William Mikhail
Non-Executive Board Member
Dr. Mikhail is a professor of Econo-
metrics at the American University
in Cairo (AUC). He obtained his PhD
from the London School of Economics,
in 1969. He served as an associate pro-
fessor of Statistics and Econometrics at
Cairo University in 1970s.
In addition to his academic career,
Dr. Mikhail worked at the Ministry of
Planning, London School of Econom-
ics, Dar Al-Handasah Consultants
in Rabat, Morocco and in Amman,
Jordan, Techno-Economics Division
of Kuwait Institute for Scientific Re-
search, UN Development Program,
and UNDESD. Dr. Mikhail has pub-
lished extensively on econometric
theory and applied econometrics in
international journals, and supervised
many PhD and MA theses both at Cai-
ro University and AUC.
Mr. Mahmoud Fahmy
Non-Executive Board Member
Counsellor Fahmy is a renowned Egyp-
tian lawyer, an international arbitrator
and an Attorney at Law admitted to the
Bar of Civil, Commercial and Criminal
Cassation Courts, the Supreme Ad-
ministrative Court and the Supreme
Constitutional Court. He is also a
member of the General Assembly of
Public Sector’s Banks at the Central
Bank of Egypt, a member of the Egyp-
tian Businessmen’s Association and
head of its Investment and Economic
Legislation Committee, Chairman of
the Egyptian Legal Association, Chair-
man of Corporate Leasing Co. Egypt
(CORPLEASE) and Chairman of The
Egyptian Leasing Association. He pre-
viously served as the Chairman of the
Capital Market Authority.
Currently Mr. Fahmy is the founder
of Fahmy’s Law Office for Legal Profes-
sion, Legal Consultation, Arbitration,
Investment and Capital Markets.
Dr. Nadia Makram Ebeid
Non-Executive Board Member
Dr. Nadia Makram Ebeid is the Ex-
ecutive Director of the Centre for En-
vironment and Development for the
Arab Region and Europe (CEDARE),
an international diplomatic position
which she has held since January 2004.
For a period of five years beginning in
1997, Dr. Ebeid served as Egypt’s first
Minister of Environment, the first
woman to assume this position in the
Arab World.
Early in her career, Dr. Ebeid held
several managerial posts with the
United Nations Development Program
(UNDP), the United Nations Food and
Agriculture Organization’s Regional
Office for the Near East, and the Coun-
cil for Environment and Development
Research. In recognition of her role in
environmental policy and advocacy,
Dr. Ebeid has been awarded numerous
awards and distinctions from local and
international NGOs, leading institu-
tions and associations.
Dr. Medhat Hassanein
Non-Executive Board Member
Dr. Medhat Hassanein, Egypt’s for-
mer Minister of Finance (1999-2004),
is a professor of Banking and Finance
with the Management Department of
the School of Business, Economics &
Communication at the American Uni-
versity in Cairo.
Dr. Hassanein is a senior policy ana-
lyst with long experience in institu-
tional building, macro-policy analysis,
financial economics, corporate finance
and international financial manage-
ment. He has previously served as
advisor to government, high-level ad-
visory bodies and the donor commu-
Annual Report 2012
67
Corporate Governance
nity. During his term as Minister of
Finance, he developed and instituted
the second generation of fiscal public
policy reforms for the Government of
Egypt.
Dr. Hassanein has also served as
Chairman and Board Member in pub-
lic holding companies, private corpo-
rations and many respected banks in
Egypt, last of which was HSBC Egypt
(2004-May 2009) where he chaired its
Audit Committee.
Dr. Hassanein obtained his BA in
Economics
from Cairo University
(with Honors), an MBA from New
York University (with Distinction) and
a PhD from Wharton School of Busi-
ness, University of Pennsylvania, USA.
Mr. Paul Fletcher
Non-Executive Board Member
Mr. Fletcher is a Senior Partner of Ac-
tis, leading the firm, which he joined
in 2000, from its London headquar-
ters. Originally a banker with Cargill,
Banker’s Trust and Swiss Bank Corpo-
ration, Mr. Fletcher transitioned into
corporate finance in the early 1990s
with a role at Citibank.
At Citibank, he led the East African
operations, becoming Head of Emerg-
ing Markets Strategic Planning. With
two decades of experience in emerg-
ing markets, Mr. Fletcher’s career has
spanned Kenya, Tokyo, New York and
London.
Mr. Fletcher is a Founding Director
of the Emerging Markets Private Eq-
uity Association (EMPEA). He holds
a Masters in Geography from Oxford
University.
Mr. Robert Willumstad
Non-Executive Board Member
Mr. Willumstad is the Co-founder and
Partner of Brysam Global Partners
since 2007. –From 2007 to 2008, he
served as the Non-Executive Chairman
and the CEO of American Internation-
al Group (AIG). In October 1998, Mr.
Willumstad joined Citigroup, where
he played a critical role in its creation.
He was named Citigroup’s president in
2002, joined its Board of Directors and
became Citigroup’s Chief Operating
Officer until July 2005.
Prior to Citigroup, Mr. Willumstad
spent 20 years with Chemical Bank
and 11 years with Commercial Credit
and its successor companies.
Mr. Willumstad is a Director of
S.C Johnson & Son, Inc. and a trustee
of both the American Scandinavian
Foundation and Adelphi University.
Mr. Essam El Wakil
Non Executive Board Member
Mr. El Wakil is a renowned banker
with over 36 years of experience in the
financial industry, including Treasury
& Capital Markets, Corporate Finance,
Project Finance, Trade Finance, Islam-
ic Banking and Investment Banking.
Mr. El Wakil served in various prom-
inent banks such as: National Bank of
Egypt, Arab International Bank-Egypt
and Arab Banking Corporation (ABC)
Group in Egypt, Singapore, New York,
London and Bahrain, where he spent
almost 28 years. He also held several
senior banking positions and director-
ships in both Islamic and Commercial
banks throughout the MENA region.
In 2008 Mr. El Wakil joined CIB as
CEO for Institutional Banking. In May
2009, he was appointed to lead, as a
Non Executive Chairman, CI Capital
(the CIB Investment Arm). In October
2011, Mr. El Wakil became a Non-Ex-
ecutive Board Member in CIB.
The Board of Directors’
Committees
CIB’s Board of Director’s has five stand-
ing committees that assist the Board in
fulfilling its responsibilities. According-
ly, the Board is provided with all neces-
sary resources to enable them to carry
out their duties in an effective manner.
Each committee operates under a writ-
ten charter that sets out its responsibili-
ties and composition requirements.
Committee
Members
Key Responsibilities
Audit Committee
Supervising the quality and
integrity of CIB’s financial
reporting
Chair:
William Mikhail
Members:
Mahmoud Fahmy
Medhat Hassanein
The Committee’s mandate is to ensure compliance with the
highest levels of professional conduct, reporting practices,
internal processes and controls. Consistent with the inter-
ests of all stakeholders, the Audit Committee also insists
on high standards of transparency and strict adherence to
internal policies and procedures. In performing its critical
functions, the Committee is cognizant of the important role
CIB plays in the Egyptian financial sector as a leader in all
of the aforementioned areas. The Audit Committee met five
times in 2012.
Committee
Members
Key Responsibilities
the Governance
and Compensation
Committee
Responsibility for corporate
governance of CIB as well as
Responsibility for the Board’s
performance
evaluation,
compensation and succession
planning
Chair:
Nadia Makram Ebeid
Members:
William Mikhail
Mahmoud Fahmy
Medhat Hassanein
Paul Fletcher
Robert Willumstad
Essam El Wakil
The Governance and Compensation Committee (GCC) is an
integral part of the overall responsibilities of the Board of
Directors. As such, and in line with CIB’s corporate gover-
nance framework, the GCC is responsible for establishing
corporate governance standards, providing assessment of
Board effectiveness and determining the compensation of
members of the Board. The Committee also determines the
appropriate compensation levels for the Bank’s senior exec-
utives and ensures that compensation is consistent with the
Bank’s objectives, performance, and strategy and control
environment. The Governance and Compensation Commit-
tee (GCC) met two times in 2012.
the Risk Committee
Supervising the management
of risk of CIB
Chair:
Robert Willumstad
Members:
Hisham Ramez Abdel
Hafez
Mark Richards
Essam El Wakil
The primary mission of the Risk Committee is to assist the
Board in fulfilling its oversight risk responsibilities by es-
tablishing, monitoring and reviewing internal control and
risk management systems to ensure the Bank has the proper
focus on risk. It also recommends to the Board the Bank’s
risk strategy with all its associated limits. The Risk Commit-
tee met four times in 2012.
the Management
Committee
Responsibility for execution
of the Bank’s strategy
Chair:
Hisham Ezz Al-Arab
Members:
Hisham Ramez Abdel
Hafez
the High lending and
Investment Committee
Responsibility for assets’ al-
location, quality and develop-
ment
Chair:
Hisham Ramez
Members:
Hisham Ramez Abdel
Hafez
The Management Committee is an Executive committee
chaired by the Chairman and Managing Director and is
composed of the Vice Chairman and Managing Director,
CEO of Institutional Banking, CEO of Consumer Banking
and the COO. The Management Committee is responsible
for executing the Bank’s strategy as approved by the Board.
It manages the day-to-day functions of the Bank to ensure
alignment with strategy, effective controls, risk assessment
and efficient use of resources in the Bank. The committee
adheres to high ethical standards and ensures compliance
with regulatory and internal CIB policies. The committee
also provides the Board with regular updates regarding the
Bank’s financial and business activity reports as well as any
key issues. The Management Committee met twelve times
in 2012.
This committee is an Executive Committee chaired by the
Vice Chairman and Managing Director and members of the
Bank’s key senior executives. The High Lending and Invest-
ment Committee is responsible for managing the assets side
of the balance sheet; keeping an eye over assets allocation,
quality and development. Per its mandate, the High Lend-
ing and Investment Committee convened weekly through-
out 2012.
68
Annual Report 2012
Annual Report 2012
69
A local bank
with international
standards
559
new employees hired by CIB in
2012 from top-tier universities in
Egypt and abroad.
Executive Management
Executive Management
Chief Executive Officers
Mr. Hisham ezz Al-Arab 1
Chairman and Managing Director
Mr. Hisham Ezz Al-Arab has been lead-
ing CIB since 2002 as Chairman and
Managing Director. Under his leader-
ship, CIB expanded its leading bank-
ing position by increasing its market
capitalization from USD 200 million
to USD 4 billion and growing from a
wholesale lender into the full-fledged
financial institution that it is today. His
vision was not just confined to finan-
cial performance. Mr. Ezz Al-Arab also
spearheaded the wholesale adoption of
best practices in corporate governance,
risk management and the instilling of a
modern banking culture at CIB.
Prior to joining CIB, Mr. Ezz Al-Arab
led a distinguished banking career as
Managing Director at leading inter-
national investment banks in London
(Deutsche Bank, JP Morgan and Merrill
Lynch), Bahrain, New York and Cairo.
In 1999, Mr. Ezz Al-Arab joined CIB
as Deputy Managing Director. In that
role, he was responsible for leading the
Bank’s modernization and restructur-
ing efforts aimed at protecting its lead-
ing market position in the face of indus-
try changes. In 2002, he was promoted
to the role of Chairman.
Mr. Ezz Al-Arab is a member of nu-
merous organizations, including the
Federation of Egyptian Industries, the
American Chamber of Commerce in
Egypt and the Board of Trustees of the
American University in Cairo (AUC).
He is also a member of MasterCard’s
South Asia, Middle East and Africa
Region Advisory Board, and serves as
Chairman of the Board of Trustees of
the CIB Foundation.
Mr. Hisham Ramez 2
Vice Chairman and Managing
Director
Mr. Ramez has over 30 of years’ experi-
ence in international banking, with a
strong background in asset and liability
72
Annual Report 2012
management, investment banking and
risk management. He joined CIB in De-
cember 2011 as Vice Chairman and Man-
aging Director and has brought to the
role a considerable wealth of knowledge
gained from a distinguished career with
various local and international banks.
Prior to joining CIB, Mr. Ramez was
Deputy Governor and Vice Chairman of
the Central Bank of Egypt (CBE) from
July 2008 to November 2011. His profes-
sional career began in 1982 as a foreign
exchange and money market trader with
Bank of America in Cairo. From there
he moved on to become a senior trader
with Bank of America in Bahrain before
CIB's world
class executive
management
provides the Bank
the unwavering
leadership and
strategic vision that
has allowed it to
maintain its position
as Egypt's number one
private sector bank.
assuming the post of Vice President of
the Arab Banking Corporation, also in
Bahrain. In 1996, Mr. Ramez returned
to Egypt, where he became the General
Manger and later CEO of the Egyptian
Gulf Bank, a post he held until 2006. Af-
terwards, he assumed the role of Chair-
man and Managing Director of the Suez
Canal Bank until June 2008.
Mr. Ramez is a board member of
the Arab Monetary Fund (AMF), the
Egyptian American Business Council,
the Egyptian Financial Supervisory
Authority (EFSA), the Egyptian Ex-
change (EGX), the National Bank for
Investment, the Coordinating Council
of the Government of Egypt, the Cen-
tral Bank of Egypt’s (CBE) Anti Money
Laundering Unit and Monetary Policy
Committee, the National Organization
for Social Insurance, and the Egyptian
Banking Institute. Mr. Ramez is also the
non-executive Chairman of the Arab
International Bank.
Mr. Mohamed Abdel Aziz
el toukhy 3
Chief Executive Officer,
Consumer Banking
Mr. Mohamed Abdel Aziz El Toukhy
is leading the transformation of the
organization into a modern Consumer
Banking franchise.
Mr. Toukhy began his career with
CIB’s Trade Finance Department in
1979. He has risen through the ranks,
assuming positions
in Operations,
Branch Management and Corporate
Banking. In July 2006, he was promot-
ed to General Manager of Consumer
Banking and has since led the CIB
Branch Network and Retail Banking
areas to unprecedented success.
During his tenure, CIB branches have
grown in number to 156, covering all
key governorates in Egypt. Moreover, all
of the Bank’s Asset and Liabilities busi-
nesses are on solid growth trajectories,
with CIB taking leadership positions in
credit cards, auto loans, personal loans,
current and saving accounts, time de-
posits, certificates of deposit and invest-
ment / insurance products. In terms of
profitability, the Consumer Bank has
increased its share of the Bank’s net in-
come from only 10% in 2006 to over 37%
in 2012. Under Mr. Toukhy’s leader-
ship, CIB’s Branch Network and Retail
Banking Group grew its 2012 Consumer
Banking balance sheet (B/E) to over EGP
60.9 billion in customer deposits.
Mr. Hussein Abaza 4
Chief Executive Officer,
Institutional Banking
Mr. Hussein Abaza assumed his duties as
CEO of Institutional Banking in October
4
1
3
5
2
2011. Prior to his current role, Mr. Abaza
was CIB’s Chief Operating Officer, Chair-
man of CIAM and a member of the High
Lending and Investment Committee, the
Board Risk Committee, and the Board of
the CI Capital Holding Company.
In addition to these positions, he has a
long history with CIB where, as General
Manager and Chief Risk Officer, he was
responsible for Bank-wide Credit, Market
and Operational Risk, and Investor Rela-
tions. Outside CIB, Mr. Abaza worked as
Head of Research at EFG Hermes Asset
Management from March 1995 until Oc-
tober 1999. He began his career at (Chase
National Bank of Egypt), the forerunner
to CIB. He holds a BA in Business Ad-
ministration from the American Univer-
sity in Cairo (AUC).
Mr. omar Khan 5
Chief Operating Officer
Mr. Omar Khan joined CIB in 2008
and currently holds the position of
Chief Operating Officer. Mr. Khan
has brought to CIB his considerable
and diversified banking experience
in Branch Management, Service and
Quality, Treasury, Asset and Liability
Management, Market Risk, and Stra-
tegic Planning and Finance. He has
worked in the Middle East, Europe and
Asia with leading institutions includ-
ing Citibank. During his tenure with
CIB, Mr. Khan has been responsible
for implementing the Change Man-
agement agenda for the COO Area.
This included Strategic Management,
Process Re-Engineering, Service and
Quality, Infrastructure Upgrades, Fi-
nance, as well as the implementation of
the Bank’s People Agenda.
Annual Report 2012
73
Developing
our human
resources
More than 100 CIB
managers and senior officers
participated in the Bank's re-
nowned management develop-
ment programs in 2012.
Community Development
Community Development
Throughout 2012, CIB continued its
strong commitment to Corporate Social
Responsibility (CSR) as evidenced by
the wide range of CSR endeavors that
the Bank undertook during the year.
Sponsoring Talent
In 2012 CIB collaborated with the Fine
Arts Division at the Egyptian Ministry
of Culture to endorse a new generation
of young, talented artists. In this effort,
a national art competition was organized
to exhibit a collection of their artworks
under the patronage of CIB. Portraying
artwork from the competition, a book
entitled “Egypt the Promise, Edition 2”
was designed and published by CIB to
commemorate the competition. Other
CIB support for the Arts during the year
came from the Bank’s sponsorship of the
Egyptian Philharmonic Society to sup-
port Egyptian musicians performing
classical music.
enactus
For the seventh consecutive year, CIB
continued its
long-standing partner-
ship with Enactus (formerly Students in
Free Enterprise-SIFE) to promote entre-
preneurial solutions aimed at achieving
sustainable improvements to the living
standards of disadvantaged communi-
ties. Driven by students, academics and
business leaders, business concepts are
applied to socioeconomic problems – a
process that not only helps the under-
privileged, but also aids participating
students’ in the development of their
teamwork, presentation,
leadership,
interper-
communication and other
sonal skills. While cultivating a sense of
service and responsibility towards their
communities, students also get to devel-
op their business and leadership skills.
This year CIB sponsored both the En-
actus special competition on “Business
Ethics” as well as the one-day National
Competition, where an array of teams
from Egypt’s most prominent universi-
ties competed for a chance to represent
Egypt at the annual Enactus World Cup.
We are pleased to announce that the En-
actus Egypt team from the French Uni-
versity in Egypt came in second at the
2012 World Cup held in Washington,
DC.
Community Health
In collaboration with the Children’s
Cancer Hospital 57357 and the Cana-
dian Embassy, volunteers from the Bank
participated in the four kilometer Terry
Fox Run around the AUC campus. All
proceeds from the event went towards
children’s cancer research at the 57357
Hospital.
On a similar note, CIB has been tak-
ing part in blood donation campaigns
for a number of years to help meet blood
transfusion needs in Egypt. Under the
supervision of the Ministry of Health,
CIB conducted a three day blood dona-
tion campaign at a number of its branch-
es around Egypt and encouraged staff
members to donate.
Environmental Awareness
On the environmental front, our main
objective in 2012 was to ensure the im-
plementation of the CIB Going Green
Program at our head offices. The pro-
gram aims to encourage environmen-
tally friendly attitudes among CIB em-
ployees by promoting awareness on how
to save paper, water, electricity and other
consumables while encouraging posi-
tive changes in employees’ habits. Our
conservation efforts also included the
introduction of energy saving lights and
water-flow restrictors. Additionally, our
Going Green drive in 2012 introduced
an initiative at our Smart Village prem-
ises to ensure that all corporate branding
displays are printed with eco-friendly
ink along with all façade exhibits at CIB
branches.
CIB is also working on launching
various other sustainability initiatives
based on its continued commitment to
environmentally-friendly practices.
Employee Development
In the area of training and develop-
ment, we focused on enhancing mana-
gerial skills for all executive levels. This
involved the launching of two new pro-
grams:
1- The First Time Supervisors Program
is designed to equip newly promoted
managers with key principles and
teamwork dynamics in order to per-
form effectively as supervisors.
2- The Middle Management Develop-
ment Program emphasizes manag-
ing change, strengthening leadership
skills and enabling middle managers to
strategically align their thinking with
CIB’s vision and mission.
These newly-launched
initiatives are
now running alongside our two other
management programs: the Consumer
Banking Leadership Program that is spe-
cifically designed to bolster new talent in
the Egyptian consumer banking sector,
and the Leadership and Management
Program (LAMP),, which aims at devel-
oping the leadership and management
skills of senior managers.
Code of Conduct
CIB believes in creating an equal op-
portunity environment for all Bank
employees, which is clearly reflected in
our Code of Conduct. In addition to en-
couraging nondiscriminatory practices,
our policies also prohibit any forms of
harassment and intimidation. This is
evident in the adoption of a whistle-
blowing policy that provides the highest
levels of confidentiality and indemnity
when raising concerns about any ir-
regularities.
Customer Experience
Management
Managing and monitoring the quality
of customers’ experiences continues to
grow in importance. Achieving success
here has required a holistic approach
with focus on:
76
Annual Report 2012
• Delivery of Operational Excellence
• Focusing on Customer Experience
• Building Bank Capabilities
To enhance Operational Excellence
we created and managed a framework
for exceeding customer expectations
through the monitoring and improve-
ment of key processes. Close attention
was paid to organizational enablers to-
gether with creating an environment
that fosters customer satisfaction.
A service quality training was provided
in three phases as part of staff orientation
at the departmental and customer service
levels. The training has positively impact-
ed customers’ experiences. Various meth-
ods have been adopted to collect customer
feedback and document customer service
throughout different areas of the Bank.
Customer satisfaction is a top prior-
ity for CIB. Complaints are investigated
with utmost care through our Customer
Care Unit and Complaints Investiga-
tion Division, which is managed by the
Compliance Group. All shortcomings
are promptly identified and resolved to
ensure customer satisfaction.
Meeting Shareholder
Expectations
CIB’s Board consists of seven non-exec-
utives and two executive directors. The
diverse backgrounds and experiences of
the Board members presents added value
and reflects the Bank’s culture.
The Board is regularly updated on
Bank activities and assesses performance
against set strategic objectives. Prompt
disclosure of financial and non-financial
data is regularly provided in order to
reinforce CIB’s commitment to all of its
stakeholders.
In conclusion, it is worth noting that
CIB’s well-established corporate gov-
ernance policies, which ensure the in-
dependence of its compliance and risk
functions, have demonstrated high levels
of compliance with the new CBE Corpo-
rate Governance Guidelines for Egyp-
tian Banks.
CIB Foundation
CIB
Foundation
Now in its third year of operations, the
CIB Foundation has successfully expe-
rienced exponential growth in its activi-
ties. Established in 2010 as a non-profit
organization dedicated to enhancing
health and nutritional services for un-
derprivileged children in Egypt, and reg-
istered under the Ministry of Social Soli-
darity as per the Ministry’s Decree No.
588 of 2010, the Foundation focuses on
sustainable development initiatives that
result in positive long-term outcomes.
The CIB Foundation is
governed by a seven-member
Board of Trustees:
gical and medicinal treatment to under-
privileged children.
Additionally, the CIB Foundation ac-
tively supports its initiatives with con-
tributions made to its dedicated fund
raising account. Fully 100% of the do-
nations made to the account go towards
the
implementation of development
projects for children. Through the co-
ordinated efforts of both CIB Founda-
tion staff and dedicated CIB volunteers,
the Foundation ensures its resources
are used efficiently in order to reach the
greatest number of beneficiaries.
Over the course of 2012, the Founda-
tion’s partnerships and initiatives in-
cluded:
foundations for the development and
outfitting of a 10-bed Pediatric Inten-
sive Care Unit (PICU) in Building 2 of
the Aswan Heart Centre. The EGP 13
million PICU provides state-of-the-art
post-operative care to neonates, infants
and children up to 16 years old, free of
charge. The CIB Foundation’s dona-
tion covered the costs associated with
the Unit’s medical and non-medical
equipment and, in return, was awarded
with exclusive naming rights to the
Unit. The PICU had a soft opening in
November 2012, and the new building
of the Aswan Heart Centre is expected
to celebrate its grand opening in early
2013.
Mr . Hisham Ezz Al-Arab
Chairman
Mr . Rafik Madkour
Treasurer
Ms . Maha El-Shahed
Secretary General
Dr . Nadia Makram Ebeid
Member
Mr . Essam El Wakil
Member
Mr . Hossam Abou Moussa
Member
Ms . Pakinam
Essam El Din Mahmoud
Member
Following the success of the CIB Foun-
dation in 2011, CIB shareholders gener-
ously agreed to increase the percentage
of CIB’s net annual profit to the Foun-
dation from 1% to 1.5%. This translated
into a budget of over EGP 26 million be-
ing allocated to the CIB Foundation in
2012. With this funding, the CIB Foun-
dation is making valuable contributions
in the area of child health and nutrition
through various multi-faceted initia-
tives, including renovating and upgrad-
ing hospital infrastructure, purchasing
medical equipment and providing sur-
78
Annual Report 2012
1. Children’s Cancer Hospital
57357: Annual Donation
In 2009, CIB entered into a five-year
partnership with the Children’s Can-
cer Hospital 57357, under which EGP 2
million is donated to the hospital each
year. In January 2012, the Foundation
fulfilled its fourth year commitment to
the hospital. The funds have been used
for general operational purposes.
Numerous CIB volunteers also par-
ticipated in two events sponsored by the
Children’s Cancer Hospital 57357, includ-
ing the hospital’s five-year anniversary,
where volunteers distributed gifts to visit-
ing cancer survivors and current hospital
patients, as well as the third annual Terry
Fox Run in Egypt, where all proceeds
from the event went towards supporting
children’s cancer research at the hospital.
2. Magdi Yacoub Heart
Foundation: pediatric Intensive
Care unit
The Magdi Yacoub Heart Foundation
has been a long-standing partner of
both CIB and the CIB Foundation. In
January 2011, a Cooperation Agree-
ment was signed between the two
3. Friends of Abou el
Reesh Children’s Hospitals
organization: Intensive Care unit
In November 2010, a Cooperation
Agreement was signed between the CIB
Foundation and the Friends of Abou El
Reesh Children’s Hospitals Organiza-
tion for the establishment of an Inten-
sive Care Unit (ICU) at the Abou El
Reesh El Mounira Children’s Hospital.
The Foundation’s donation was used to
develop an 11-bed unit, doubling the
hospital’s capacity to serve critical pa-
tients. The new ICU operates alongside
the existing ICU, and provides quality
service and care to patients from across
the country. The new ICU celebrated its
official opening in February 2012.
In August 2012, an EGP 2 million
Cooperation Agreement was signed
with the Friends of Abou El Reesh
Children’s Hospitals Organization to
cover the annual operating expenses of
the Foundation-funded ICU. The an-
nual donation is used to support staff
compensation, medical and adminis-
trative supplies, infection control, and
for the provision of computers and
other ICU equipment.
4. Rotary Kasr el nile: one
thousand eye Surgeries
Through the Rotary Kasr El Nile orga-
nization, the CIB Foundation has com-
mitted EGP 1.5 million to fund 1,000 eye
surgeries for children through the Chil-
dren’s Right to Sight (CRTS) program.
Operational for the past six years, CRTS
is dedicated to eradicating blindness by
supporting children and infants requir-
ing immediate eye surgery. Through
partnerships with the El Nour Eye Hos-
pital in Mohandiseen and the Eye Care
Hospital in Maadi, the CRTS team will
oversee 1,000 various ophthalmological
operations for underprivileged children.
Payments for the first and second round
of surgeries were completed in Novem-
ber and December 2012.
5. Gozour Foundation for
Development: eye exam
Caravans
In 2012, the CIB Foundation reaf-
firmed its partnership with the Gozour
Foundation for Development, the non-
governmental arm of the Center for
Development Services (CDS). In Au-
gust 2012, the Foundation donated EGP
478,170 to fund 10 eye exam caravans
at public elementary schools in Cairo,
Alexandria and Minya through the 6/6
Eye Exam Caravan Program. Through
a partnership with the Alnoor Magrabi
Foundation, the caravans are designed
to provide public school students with
eye exams, eyeglass frames and lenses,
eye medication and in-depth eye-exams
and referrals at private hospitals for
complex cases. Each caravan is fully
equipped with eye exam machines, 15-
20 doctors, nurses, coordinators, a fully
equipped pharmacy and an eyeglass
shop. Each one-day caravan targeted
450 children, with a total of 4,500 chil-
dren receiving free eye exams and care
by the end of the project.
The caravans also presented valu-
able opportunities for volunteers from
the CIB family to engage with the lo-
cal community and spend quality time
with the less privileged. Volunteers
from head offices, regional offices and
branches across the three governorates
actively participated in the program.
CIB shareholders
generously agreed
to increase the
percentage of CIB’s
net annual profit
to the Foundation
from 1% to 1.5%.
This translated into
a budget of over EGP
26 million being
allocated to the CIB
Foundation in 2012.
6. Magdi Yacoub Heart
Foundation: Children’s playroom
In August 2012, the CIB Foundation
allocated EGP 2 million to the Magdi
Yacoub Heart Foundation for the full
sponsorship of the children’s playroom
in Building 2 of the Aswan Heart Cen-
tre. The room will be used by children
during their pre-and post-operation pe-
riod, and will be an area where parents
can visit with their children. This part-
nership compliments the CIB Founda-
tion’s donation to support the Pediatric
Intensive Care Unit located in the same
building of the Centre.
7. Magdi Yacoub Heart
Foundation: 100 open-Heart
Surgeries
In August 2012, the CIB Foundation
allocated EGP 6 million to the Magdi
Yacoub Heart Foundation to cover the
costs associated with the open-heart
surgeries of 100 children. Through this
donation, the CIB Foundation was able
to cover the costs for almost all children
that had been on the open-heart surgery
waiting list. The donation is being dis-
bursed in two equal tranches, with the
first tranche of EGP 3 million distrib-
uted in September 2012.
8. Friends of Abou el
Reesh Children’s Hospitals
organization: Blood Clinic
In 2011, the Friends of Abou El Reesh
Children’s Hospitals Organization
turned to the CIB Foundation for sup-
port in renovating El Mounira Hospi-
tal’s Blood Clinic. The CIB Founda-
tion’s EGP 800,000 donation was used
to upgrade the roughly 700m2 Blood
Clinic by restructuring it to streamline
movement, prevent overcrowding, pro-
vide adequate space for beds and chairs
for blood transfusions, and provide a
waiting area for family members. The
donation also covered the costs of ad-
ditional computers to develop an elec-
tronic patient database as well as sup-
porting blood donation campaigns to
offset the current blood supply deficit
across Egypt. The renovated Blood
Clinic is expected to open its doors in
March 2013.
9. Yahiya Arafa Children’s
Charity Foundation: Annual
Donation
The Yahiya Arafa Children’s Charity
Foundation is a long-standing partner
of the CIB Foundation. In December
2012, the CIB Foundation donated EGP
Annual Report 2012
79
1 million to the Yahiya Arafa Founda-
tion for the upkeep of three previously-
supported Pediatric Units at the Ain
Shams University Hospital. The Yahiya
Arafa Foundation has been instrumen-
tal in purchasing high-end equipment,
as well as training the nurses and doc-
tors working in these units. The CIB
Foundation strongly believes in ensur-
ing the sustainability of its projects, and
believes that supporting the operations
of the Yahiya Arafa Foundation will en-
sure the smooth running of the other
supported units. The donation will be
used to cover human resources, equip-
ment maintenance, operating costs and
academic research.
10. Zewail City of Science and
technology: undergraduate
Fellowship
In line with CIB and the CIB Foun-
dation’s commitment to community
development and
fostering quality
in educational opportunities in post-
revolution Egypt, the CIB Foundation
established the ‘CIB Foundation Fel-
lowship for Science and Technology’ at
Zewail University. In the first phase of
this partnership with the Zewail City of
Science and Technology, the CIB Foun-
dation Fellowship will support 50 of
the top Egyptian public school gradu-
ates pursuing degrees in the sciences
and engineering, at a total cost of EGP
5 million.
11. Bank Al-Kesaa: one Million
Blankets Campaign
The One Million Blankets Campaign
was initiated in 2012 in collaboration
with Amr Adib’s ‘Cairo Today’ talk
show, Bank Al-Kesaa (Clothing Bank),
Dar El Orman, and the Misr El Khair
Foundation, in order to ensure that no
Upper Egyptian went to sleep cold. In
December 2012, the CIB Foundation
made a contribution of EGP 500,000 to
the national campaign through Bank
Al Kesaa, a trusted organization with
lengthy experience and success working
in Upper Egypt, to provide 10,000 blan-
kets to the children of the area.
Going forward, the CIB Foundation
seeks to continue its commitment to en-
hancing health services for underprivi-
leged children in Egypt, supporting
mega projects in the health sector and
providing world-class educational op-
portunities. The Foundation also seeks
to expand its volunteer activities, and
more actively involve CIB employees in
its community development projects.
To read more about the projects that
the CIB Foundation has helped support
and ways in which you can contribute,
please visit www.cibfoundationegypt.org
or www.facebook.com/cibfoundation.
Annual Report 2012
81
Separate Financials:
Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . 84
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . 86
Income Statement . . . . . . . . . . . . . . . . . . . . . . 87
Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Changes in Shareholder’s Equity . . . . . . . . . . . . . . 90
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Consolidated Financials:
Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . 138
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . 140
Income Statement . . . . . . . . . . . . . . . . . . . . . 141
Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Shareholder’s Equity . . . . . . . . . . . . . . . . . . . . 144
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Financial Statements Financial Statements: Separate
84
Annual Report 2012
Annual Report 2012
85
Financial Statements: Separate
Commercial International Bank (Egypt) S.A.E
Separate balance sheet on December 31, 2012
Commercial International Bank (Egypt) S.A.E
Separate income statement for the year ended on December 31, 2012
» Interest and similar income
» Interest and similar expense
Net interest income
» Fee and commission income
» Fee and commission expense
Net income from fee and commission
» Dividend income
» Net trading income
» Profit (Losses) from financial investments
» Administrative expenses
» Other operating (expenses) income
» Impairment (charge) release for credit losses
Net profit before tax
» Income tax expense
» Deferred tax
Net profit of the year
Earning per share
» Basic
» Diluted
Dec. 31, 2012
EGP
7,845,913,494
(3,945,237,550)
3,900,675,944
942,867,320
(107,365,742)
835,501,578
32,234,196
565,727,965
(116,514,246)
(1,444,645,467)
(109,790,791)
(609,971,077)
3,053,218,102
(884,498,673)
33,991,482
2,202,710,911
Notes
6
7
8
9
22
10
11
12
13
33 & 13
14
Dec. 31, 2011
EGP
5,459,248,277
(2,780,703,161)
2,678,545,116
865,620,940
(87,451,431)
778,169,509
59,921,078
368,912,520
19,799,495
(1,336,701,608)
(68,220,065)
(320,648,863)
2,179,777,182
(446,414,136)
15,485,032
1,748,848,078
3.53
3.47
2.43
2.39
Hisham Ezz El-Arab
Chairman and Managing Director
Assets
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Trading financial assets
» Loans and advances to banks
» Loans and advances to customers
» Derivative financial instruments
Financial investments
» Available for sale
» Held to maturity
» Investments in subsidiary and associates
» Investment property
» Other assets
» Deferred tax
» Property, plant and equipment
Total assets
Liabilities and equity
Liabilities
» Due to banks
» Due to customers
» Derivative financial instruments
» Other liabilities
» Long term loans
» Other provisions
Total liabilities
Equity
» Issued and paid in capital
» Reserves
» Reserve for employee stock ownership plan (ESOP)
» Retained earnings
Total equity
» Net profit of the period / year after tax
Total equity and net profit for period / year
Total liabilities and equity
Notes
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
15
16
17
18
19
20
21
22
22
23
24
25
33
26
27
28
21
30
29
31
32
32
5,393,974,124
7,957,710,034
7,978,030,413
1,472,281,763
1,178,867,739
40,698,313,773
137,459,761
21,161,884,032
4,205,753,328
938,033,700
10,395,686
2,459,025,844
129,133,209
684,527,896
94,405,391,302
1,714,862,716
78,834,726,890
119,099,260
2,034,351,571
80,495,238
310,648,113
83,094,183,788
5,972,275,410
2,970,458,093
164,761,121
1,001,979
9,108,496,603
2,202,710,911
11,311,207,514
94,405,391,302
7,492,064,510
8,449,298,705
9,213,390,067
561,084,273
1,395,594,609
39,669,785,864
146,544,656
15,412,566,069
29,092,920
995,595,778
12,774,686
1,518,509,876
95,141,726
636,775,294
85,628,219,033
3,340,794,517
71,574,047,530
114,287,990
1,313,785,436
99,333,376
264,625,909
76,706,874,758
5,934,562,990
1,085,472,868
137,354,419
15,105,920
7,172,496,197
1,748,848,078
8,921,344,275
85,628,219,033
Contingent liabilities and commitments
» Letters of credit, guarantees and other commitments
37
14,897,789,005
12,559,603,516
The accompanying notes are an integral part of these financial statements .
Hisham Ezz El-Arab
Chairman and Managing Director
86
Annual Report 2012
Annual Report 2012
87
Cash flow from financing activities
» Increase (decrease) in long term loans
» Dividend paid
» Capital increase
Net cash generated from (used in) financing activities
» Net increase (decrease) in cash and cash equivalent
» Beginning balance of cash and cash equivalent
Cash and cash equivalent at the end of the period
Cash and cash equivalent comprise:
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Obligatory reserve balance with CBE
» Due from banks (time deposits) more than three months
» Treasury bills with maturity more than three months
Total cash and cash equivalent
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
(18,838,138)
(806,206,521)
37,712,420
(787,332,239)
(2,545,054,108)
8,081,134,203
5,536,080,095
5,393,974,124
7,957,710,034
7,978,030,413
(3,093,283,199)
(4,637,273,016)
(8,063,078,261)
5,536,080,095
(29,944,867)
(841,922,204)
33,119,390
(838,747,681)
302,190,161
7,778,944,041
8,081,134,202
7,492,064,510
8,449,298,705
9,213,390,067
(3,014,779,811)
(5,237,471,784)
(8,821,367,485)
8,081,134,202
Financial Statements: Separate
Commercial International Bank (Egypt) S.A.E
Separate cash flow for the year ended on December 31, 2012
Cash flow from operating activities
» Net profit before tax
Adjustments to reconcile net profit to net cash provided by
operating activities
» Depreciation
» Impairment charge for credit losses
» Other provisions charges
» Trading financial investments revaluation differences
» Available for sale and held to maturity investments exchange
revaluation differences
» Financial investments impairment charge (release)
» Utilization of other provisions
» Other provisions no longer used
» Exchange differences of other provisions
» Profits from selling property, plant and equipment
» Profits from selling financial investments
» Profits from selling associates
» Exchange differences of long term loans
» Shares based payments
» Investments in subsidiary and associates revaluation
» Real estate investments impairment charges (release)
Operating profits before changes in operating assets and
liabilities
Net decrease (increase) in assets and liabilities
» Due from banks
» Treasury bills and other governmental notes
» Trading financial assets
» Derivative financial instruments
» Loans and advances to banks and customers
» Other assets
» Due to banks
» Due to customers
» Other liabilities
Net cash provided from operating activities
Cash flow from investing activities
» Purchase of subsidiary and associates
» Proceeds from selling subsidiary and associates
» Purchases of property, plant and equipment
» Redemption of held to maturity financial investments
» Purchases of held to maturity financial investments
» Purchases of available for sale financial investments
» Proceeds from selling available for sale financial investments
» Proceeds from selling real estate investments
Net cash generated from (used in) investing activities
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
3,053,218,102
2,179,777,182
167,225,901
609,971,077
51,616,932
(78,642,848)
185,074,214
322,276,483
4,217,707
61,887,578
(60,242,239)
(60,380,784)
7,902,478
(12,294,615)
(531,054)
7,230,941
(2,387,583)
(519,013)
-
-
79,068,829
89,736,000
(371,000)
(58,080,987)
(3,412,238)
(48,748,110)
2,329,620
(2,716,747)
(37,608,880)
(1,873,813)
164,818
77,459,887
18,430,000
400,000
3,910,981,908
2,639,195,930
521,695,379
758,289,224
(832,554,642)
13,896,165
(1,421,772,116)
(948,385,056)
(1,625,931,801)
7,260,679,360
(163,932,538)
7,472,965,883
(32,173,922)
-
(204,721,832)
-
(4,176,660,408)
(10,163,193,809)
5,343,312,219
2,750,000
(9,230,687,752)
(1,857,455,963)
(1,729,254,403)
799,066,990
(6,543,758)
(6,213,116,023)
(92,518,310)
2,018,514,608
8,094,163,906
(261,547,906)
3,390,505,071
(16,834,427)
1,000,000
(153,108,029)
271,802,813
(5,000,000)
(4,535,816,259)
2,172,867,695
15,520,978
(2,249,567,229)
88
Annual Report 2012
Annual Report 2012
89
Financial Statements: Separate
l
a
t
o
T
P
G
E
r
o
f
e
v
r
e
s
e
R
e
e
y
o
p
m
e
l
k
c
o
t
s
i
p
h
s
r
e
n
w
o
n
a
p
l
t
fi
o
r
p
t
e
N
r
a
e
y
e
h
t
f
o
i
g
n
k
n
a
B
s
k
s
i
r
e
v
r
e
s
e
r
e
v
r
e
s
e
R
.
S
F.
A
r
o
F
s
t
n
e
m
t
s
e
v
n
i
n
o
i
t
a
u
a
v
e
r
l
.
f
f
i
d
l
i
a
c
e
p
S
e
v
r
e
s
e
r
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
)
s
e
s
s
o
l
(
l
a
r
e
n
e
G
e
v
r
e
s
e
r
l
a
g
e
L
e
v
r
e
s
e
r
l
a
t
i
p
a
C
1
1
0
2
,
1
3
.
c
e
D
1
1
3
,
5
9
8
,
8
0
6
,
8
9
5
8
,
0
2
5
,
9
4
1
9
1
1
,
2
7
6
,
0
1
0
,
2
5
1
5
,
2
9
9
,
6
5
1
)
1
3
6
,
4
1
0
8
1
,
(
0
9
3
,
9
1
1
,
3
3
-
-
)
4
0
2
,
2
2
9
,
1
4
8
(
-
8
7
0
,
8
4
8
,
8
4
7
,
1
)
7
8
1
,
6
5
0
,
5
0
7
(
-
-
-
-
)
1
(
)
7
2
3
,
6
2
6
,
9
8
(
)
3
9
2
,
5
7
8
,
3
7
1
,
1
(
)
6
0
9
,
0
9
6
,
1
2
8
(
-
8
7
0
,
8
4
8
,
8
4
7
,
1
)
4
0
1
,
7
9
6
,
4
2
1
(
7
8
8
,
9
5
4
,
7
7
7
8
8
,
9
5
4
,
7
7
-
-
-
)
0
2
9
,
5
0
1
,
5
1
(
-
-
4
0
1
,
7
9
6
,
4
2
1
-
-
-
-
-
-
-
-
-
-
-
-
)
7
8
1
,
6
5
0
5
0
7
,
(
-
-
-
-
-
-
-
,
9
6
5
6
5
3
4
8
1
,
,
6
4
7
4
7
5
1
,
-
-
,
8
9
2
1
3
2
0
2
,
)
,
8
9
2
1
3
2
0
2
,
(
-
-
-
-
,
0
2
9
5
0
1
5
1
,
5
7
2
,
4
4
3
,
1
2
9
,
8
9
1
4
,
4
5
3
,
7
3
1
5
7
9
,
0
5
1
,
4
2
6
,
1
9
1
6
,
9
8
6
,
1
8
2
)
8
1
8
,
0
7
0
3
2
7
(
,
,
5
1
3
1
3
9
5
8
1
,
,
0
2
9
5
0
1
5
1
,
,
6
4
6
4
6
5
8
7
,
,
7
3
3
8
2
1
5
2
1
,
-
-
,
4
1
3
0
1
7
5
5
1
1
,
,
,
9
5
5
6
1
2
6
0
1
,
-
-
-
-
-
-
-
-
-
-
-
-
,
0
6
9
4
7
2
4
3
2
1
,
,
,
6
9
8
4
4
3
1
3
2
,
-
-
-
-
-
-
-
0
9
3
,
9
1
1
,
3
3
0
0
6
,
3
4
4
,
1
0
9
,
5
0
9
9
,
2
6
5
,
4
3
9
,
5
s
e
v
r
e
s
e
r
o
t
d
e
r
r
e
f
s
n
a
r
T
»
e
s
a
e
r
c
n
i
l
a
t
i
p
a
C
»
l
e
c
n
a
a
b
g
n
n
n
g
e
B
»
i
i
i
d
a
p
d
n
e
d
v
D
»
i
i
n
o
i
t
a
u
a
v
e
r
l
t
n
e
m
t
s
e
v
n
i
l
i
a
c
n
a
n
fi
m
o
r
f
n
o
i
t
i
d
d
A
»
r
a
e
y
e
h
t
f
o
t
fi
o
r
p
t
e
N
»
k
n
a
b
o
t
d
e
r
r
e
f
s
n
a
r
T
»
e
v
r
e
s
e
r
k
s
i
r
s
e
e
y
o
p
m
e
l
r
o
f
e
v
r
e
s
e
R
»
i
l
n
a
p
p
h
s
r
e
n
w
o
k
c
o
t
s
i
g
n
g
n
a
h
c
f
o
t
c
e
f
f
e
e
h
T
»
s
e
c
i
i
l
o
p
g
n
i
t
n
u
o
c
c
a
f
o
d
n
e
e
h
t
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
)
P
O
S
E
(
1
1
0
2
,
1
3
r
e
b
m
e
c
e
D
n
o
d
e
d
n
e
r
a
e
y
e
h
t
r
o
f
y
t
i
u
q
e
’
s
r
e
d
l
o
h
e
r
a
h
s
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
e
t
a
r
a
p
e
S
.
E
A
S
.
)
t
p
y
g
E
(
k
n
a
B
l
a
n
o
i
t
a
n
r
e
t
n
I
l
i
a
c
r
e
m
m
o
C
l
a
t
o
T
P
G
E
r
o
f
e
v
r
e
s
e
R
e
e
y
o
p
m
e
l
k
c
o
t
s
i
p
h
s
r
e
n
w
o
n
a
p
l
t
fi
o
r
p
t
e
N
r
a
e
y
e
h
t
f
o
i
g
n
k
n
a
B
s
k
s
i
r
e
v
r
e
s
e
r
e
v
r
e
s
e
R
.
S
F.
A
r
o
F
s
t
n
e
m
t
s
e
v
n
i
n
o
i
t
a
u
a
v
e
r
l
.
f
f
i
d
l
i
a
c
e
p
S
e
v
r
e
s
e
r
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
)
s
e
s
s
o
l
(
l
a
r
e
n
e
G
e
v
r
e
s
e
r
l
a
g
e
L
e
v
r
e
s
e
r
l
a
t
i
p
a
C
2
1
0
2
,
1
3
.
c
e
D
2
1
0
2
,
1
3
r
e
b
m
e
c
e
D
n
o
d
e
d
n
e
r
a
e
y
e
h
t
r
o
f
y
t
i
u
q
e
’
s
r
e
d
l
o
h
e
r
a
h
s
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
e
t
a
r
a
p
e
S
.
E
A
S
.
)
t
p
y
g
E
(
k
n
a
B
l
a
n
o
i
t
a
n
r
e
t
n
I
l
i
a
c
r
e
m
m
o
C
0
2
4
,
2
1
7
,
7
3
-
-
-
)
1
2
5
,
6
0
2
,
6
0
8
(
-
-
1
1
9
,
0
1
7
,
2
0
2
,
2
9
9
5
,
7
7
5
,
6
7
8
)
7
2
1
,
2
6
6
,
1
5
(
)
4
7
3
,
0
5
0
,
3
3
8
(
-
-
-
-
-
)
1
0
6
,
0
0
1
,
1
9
7
(
-
-
7
8
6
,
2
7
9
,
7
7
1
1
1
9
,
0
1
7
,
2
0
2
,
2
-
-
-
-
-
-
)
7
8
6
,
2
7
9
,
7
7
1
(
9
2
8
,
8
6
0
,
9
7
9
2
8
,
8
6
0
,
9
7
-
-
-
-
-
-
-
5
7
2
,
4
4
3
,
1
2
9
,
8
9
1
4
,
4
5
3
,
7
3
1
5
7
9
,
0
5
1
,
4
2
6
,
1
9
1
6
,
9
8
6
,
1
8
2
)
8
1
8
,
0
7
0
3
2
7
,
(
-
-
9
9
5
,
7
7
5
6
7
8
,
-
-
-
-
-
-
-
-
-
-
-
-
,
5
1
3
1
3
9
5
8
1
,
,
0
2
9
5
0
1
5
1
,
,
0
6
9
4
7
2
4
3
2
1
,
,
,
6
9
8
4
4
3
1
3
2
,
-
,
7
4
7
6
1
7
2
,
-
-
-
-
,
7
8
1
9
8
6
4
9
7
,
,
7
6
5
6
0
3
7
8
,
-
-
)
,
6
9
4
2
4
8
0
7
,
(
-
,
9
7
9
1
0
0
1
,
)
,
0
2
9
5
0
1
5
1
,
(
-
-
-
-
,
5
2
2
3
4
1
8
,
,
2
9
2
7
9
6
1
6
,
-
-
-
-
-
-
-
0
2
4
,
2
1
7
,
7
3
0
9
9
,
2
6
5
,
4
3
9
,
5
s
e
v
r
e
s
e
r
o
t
d
e
r
r
e
f
s
n
a
r
T
»
e
s
a
e
r
c
n
i
l
a
t
i
p
a
C
»
i
d
a
p
d
n
e
d
v
D
»
i
i
r
a
e
y
e
h
t
f
o
t
fi
o
r
p
t
e
N
»
l
i
a
c
e
p
s
m
o
r
f
r
e
f
s
n
a
r
T
»
e
v
r
e
s
e
r
n
o
i
t
a
u
a
v
e
r
l
t
n
e
m
t
s
e
v
n
i
l
i
a
c
n
a
n
fi
m
o
r
f
n
o
i
t
i
d
d
A
»
k
n
a
b
o
t
d
e
r
r
e
f
s
n
a
r
T
»
e
v
r
e
s
e
r
k
s
i
r
s
e
e
y
o
p
m
e
l
r
o
f
e
v
r
e
s
e
R
»
l
i
n
a
p
p
h
s
r
e
n
w
o
k
c
o
t
s
l
e
c
n
a
a
b
g
n
n
n
g
e
B
»
i
i
4
1
5
,
7
0
2
,
1
1
3
,
1
1
1
2
1
,
1
6
7
,
4
6
1
8
9
5
,
3
8
6
,
0
8
3
,
2
2
3
9
,
6
1
7
,
3
0
1
1
8
7
,
6
0
5
3
5
1
,
,
6
6
5
5
0
8
7
1
1
,
,
9
7
9
1
0
0
1
,
,
2
7
3
7
0
1
7
3
0
2
,
,
,
5
5
7
8
4
3
0
8
3
,
0
1
4
,
5
7
2
,
2
7
9
,
5
f
o
d
n
e
e
h
t
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
)
P
O
S
E
(
90
Annual Report 2012
Annual Report 2012
91
Financial Statements: Separate
Notes to the separate financial statements for the year ended on
December 31, 2012
1. General information
Commercial International Bank (Egypt) S.A.E. provides retail, corporate and investment banking services in various parts of
Egypt through 112 branches, and 44 units employing 4867 employees on the balance sheet date.
Commercial International Bank (Egypt) S.A.E. was formed as a commercial bank under the investment law no. 43 of 1974.
The address of its registered head office is as follows: Nile tower, 21/23 Charles de Gaulle Street-Giza. The Bank is listed in the
Egyptian stock exchange.
2. Summary of accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise stated.
2.1. Basis of preparation
The separate financial statements have been prepared in accordance with Egyptian financial reporting standards issued in
2006 and its amendments and in accordance with the Central Bank of Egypt regulations approved by the Board of Direc-
tors on December 16, 2008.
The separate financial statements have been prepared under the historical cost convention, as modified by the revaluation
of financial assets and liabilities classified as trading or held at fair value through profit or loss, available for sale invest-
ment and all derivatives contracts.
The separate and consolidated financial statements of the Bank and its subsidiaries have been prepared in accordance with
the relevant domestic laws and the Egyptian financial reporting standards, the affiliated companies are entirely included
in the consolidated financial statements and these companies are the companies that the Bank - directly or indirectly – has
more than half of the voting rights or has the ability to control the financial and operating policies, regardless of the type
of activity, the Bank’s consolidated financial statements can be obtained from the Bank’s management. The Bank accounts
for investments in subsidiaries and associate companies in the separate financial statements at cost minus impairment
loss.
The separate financial statements of the Bank should be read with its consolidated financial statements, for the period
ended on December 31, 2012 to get complete information on the Bank’s financial position, results of operations, cash flows
and changes in ownership rights.
2.2. Subsidiaries and associates
2.2.1. Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Bank has owned directly or indirectly the
control to govern the financial and operating policies generally accompanying a shareholding of more than one half of the
voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the Bank has the ability to control the entity or not.
2.2.2. Associates
Associates are all entities over which the Bank has significant influence but do not reach to the extent of control, generally
accompanying a shareholding between 20% and 50% of the voting rights.
The acquisition method of accounting is used to account for the purchase of subsidiaries. The cost of an acquisition is
measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed, plus any costs
directly related to the acquisition. The excess of the cost of an acquisition over the Bank share of the fair value of the iden-
tifiable net assets acquired is recorded as goodwill. A gain on acquisition is recognized in profit or loss if there is an excess
of the Bank’s share of the fair value of the identifiable net assets acquired over the cost of the acquisition.
The cost method is applied to account for investments in subsidiaries and associates, whereby, investments are recorded
based on the acquisition cost including any goodwill, deducting any impairment losses, and dividends are recorded in
the income statement in the adoption of the distribution of these profits and evidence of the Bank right to collect them.
2.3. Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different from those of other business segments. A geographical segment is engaged in providing
products or services within a particular economic environment that are subject to risks and returns different from those
of segments operating in other economic environments.
2.4. Foreign currency translation
2.4.1. Functional and presentation currency
The financial statements are presented in Egyptian pound, which is the Bank’s functional and presentation currency.
2.4.2. Transactions and balances in foreign currencies
The Bank maintains its accounting records in Egyptian pound. Transactions in foreign currencies during the period are
translated into the Egyptian pound using the prevailing exchange rates on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the end of reporting period at the
prevailing exchange rates. Foreign exchange gains and losses resulting from settlement and translation of such transac-
tions and balances are recognized in the income statement and reported under the following line items:
• Net trading income from held-for-trading assets and liabilities.
• Other operating revenues (expenses) from the remaining assets and liabilities.
Changes in the fair value of investments in debt instruments; which represent monetary financial instruments, denomi-
nated in foreign currencies and classified as available for sale assets are analyzed into valuation differences resulting from
changes in the amortized cost of the instrument, differences resulting from changes in the applicable exchange rates and
differences resulting from changes in the fair value of the instrument.
Valuation differences resulting from changes in the amortized cost are recognized and reported in the income statement
in ‘income from loans and similar revenues’ whereas differences resulting from changes in foreign exchange rates are rec-
ognized and reported in ‘other operating revenues (expenses)’. The remaining differences resulting from changes in fair
value are deferred in equity and accumulated in the ‘revaluation reserve of available-for-sale investments’.
Valuation differences resulting from the non-monetary items include gains and losses of the change in fair value of such
equity instruments held at fair value through profit and loss, as for recognition of the differences of valuation resulting
from equity instruments classified as financial investments available for sale within the fair value reserve in equity.
2.5. Financial assets
The Bank classifies its financial assets in the following categories:
• Financial assets designated at fair value through profit or loss.
• Loans and receivables.
• Held to maturity investments.
• Available for sale financial investments.
Management determines the classification of its investments at initial recognition.
2.5.1. Financial assets at fair value through profit or loss
This category has two sub-categories:
• Financial assets held for trading.
• Financial assets designated at fair value through profit and loss at inception.
A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repur-
chasing in the short term or if it is part of a portfolio of identified financial instruments that are managed together and for
which there is evidence of a recent actual pattern of short term profit making. Derivatives are also categorized as held for
trading unless they are designated as hedging instruments.
Financial instruments, other than those held for trading, are classified as financial assets designated at fair value through
profit and loss if they meet one or more of the criteria set out below:
• When the designation eliminates or significantly reduces measurement and recognition inconsistencies that would
arise from measuring financial assets or financial liabilities, on different bases. Under this criterion, an accounting
92
Annual Report 2012
Annual Report 2012
93
Financial Statements: Separate
mismatch would arise if the debt securities issued were accounted for at amortized cost, because the related deriva-
tives are measured at fair value with changes in the fair value recognized in the income statement. The main classes
of financial instruments designated by the Bank are loans and advances and long-term debt issues.
• Applies to groups of financial assets, financial liabilities or combinations thereof that are managed, and their perfor-
mance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy,
and where information about the groups of financial instruments is reported to management on that basis.
• Relates to financial instruments containing one or more embedded derivatives that significantly modify the cash
flows resulting from those financial instruments, including certain debt issues and debt securities held.
Any financial derivative initially recognized at fair value can't be reclassified during the holding period. Re-classification
is not allowed for any financial instrument initially recognized at fair value through profit and loss.
2.5.2. Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market, other than:
• Those that the Bank intends to sell immediately or in the short term, which is classified as held for trading, or those
that the Bank upon initial recognition designates as at fair value through profit and loss.
• Those that the Bank upon initial recognition designates and available for sale; or
• Those for which the holder may not recover substantially all of its initial investment, other than credit deterioration.
2.5.3. Held to maturity financial investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturi-
ties that the Bank’s management has the positive intention and ability to hold till maturity. If the Bank has to sell other
than an insignificant amount of held-to-maturity assets, the entire category would be reclassified as available for sale un-
less in necessary cases subject to regulatory approval.
2.5.4. Available for sale financial investments
Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response
to needs for liquidity or changes in interest rates, exchange rates or equity prices.
The following are applied in respect to all financial assets:
Debt securities and equity shares intended to be held on a continuing basis, other than those designated at fair value, are
classified as available-for-sale or held-to-maturity. Financial investments are recognized on trade date, when the group
enters into contractual arrangements with counterparties to purchase securities.
Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value
through profit and loss. Financial assets carried at fair value through profit and loss are initially recognized at fair value,
and transaction costs are expensed in the income statement.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or when the
Bank transfers substantially all risks and rewards of the ownership. Financial liabilities are derecognized when they are
extinguished, that is, when the obligation is discharged, cancelled or expired.
Available-for-sale, held–for-trading and financial assets designated at fair value through profit and loss are subsequently
measured at fair value. Loans, receivables and held-to-maturity investments are subsequently measured at amortized cost.
Gains and losses arising from changes in the fair value of the ‘financial assets designated at fair value through profit or
loss’ are recognized in the income statement in ‘net income from financial instruments designated at fair value’. Gains and
losses arising from changes in the fair value of available for sale investments are recognized directly in equity, until the
financial assets are either sold or become impaired. When available-for-sale financial assets are sold, the cumulative gain
or loss previously recognized in equity is recognized in profit or loss.
Interest income is recognized on available for sale debt securities using the effective interest method, calculated over the
asset’s expected life. Premiums and discounts arising on the purchase are included in the calculation of effective interest
rates. Dividends are recognized in the income statement when the right to receive payment has been established.
The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a
financial asset, or no current demand prices available the Bank measures fair value using valuation models. These include
the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation mod-
els commonly used by market participants. If the Bank has not been able to estimate the fair value of equity instruments
classified available for sale, value is measured at cost less any impairment in value.
Available for sale investments that would have met the definition of loans and receivables at initial recognition may be reclassified
out to loans and advances or financial assets held to maturity. In all cases, when the Bank has the intent and ability to hold these
financial assets in the foreseeable future or till maturity. The financial asset is reclassified at its fair value on the date of reclassifica-
tion, and any profits or losses that have been recognized previously in equity, are treated based on the following:
• If the financial asset has a fixed maturity, gains or losses are amortized over the remaining life of the investment using the
effective interest rate method. In case of subsequent impairment of the financial asset, the previously recognized unrealized
gains or losses in equity are recognized directly in the profits and losses.
• In the case of financial asset which has infinite life, any previously recognized profit and loss in equity will remain until the
sale of the asset or its disposal, in the case of impairment of the value of the financial asset after the re-classification, any gain
or loss previously recognized in equity is recycled to the profits and losses.
• If the Bank adjusts its estimates of payments or receipts of a financial asset that in return adjusts the carrying amount of the
asset (or group of financial assets) to reflect the actual cash inflows, the carrying value is recalculated based on the present
value of estimated future cash flows at the effective yield of the financial instrument and the differences are recognized in
profit and loss.
• In all cases, if the Bank re-classifies financial asset in accordance with the above criteria and increases its estimate of the
proceeds of future cash flow, this increase adjusts the effective interest rate of this asset only without affecting the investment
book value.
2.6. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a legally
enforceable right to offset the recognized amounts and there is an intention to be settled on a net basis.
Agreements of repos & reverse repos are shown by the net in the financial statement in treasury bills and other governmental notes.
2.7. Derivative financial instruments and hedge accounting
Derivatives are recognized initially, and subsequently, at fair value. Fair values of exchange traded derivatives are obtained
from quoted market prices. Fair values of over-the-counter derivatives are obtained using valuation techniques, including
discounted cash flow models and option pricing models. Derivatives are classified as assets when their fair value is positive
and as liabilities when their fair value is negative.
Embedded derivatives in other financial instruments, such as conversion option in a convertible bond, are treated as sepa-
rate derivatives when their economic characteristics and risks are not closely related to those of the host contract, provided
that the host contract is not classified as at fair value through profit and loss. These embedded derivatives are measured
at fair value with changes in fair value recognized in income statement unless the Bank chooses to designate the hybrid
contract as at fair value through net trading income through profit and loss.
The timing method of recognition in profit and loss, of any gains or losses arising from changes in the fair value of deriva-
tives, depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged.
The Bank designates certain derivatives as:
• Hedging instruments of the risks associated with fair value changes of recognized assets or liabilities or firm com-
mitments (fair value hedge).
• Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable fore-
cast transaction (cash flow hedge)
• Hedge accounting is used for derivatives designated in a hedging relationship when the following criteria are met.
At the inception of the hedging relationship, the Bank documents the relationship between the hedging instrument
and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge trans-
actions. Furthermore, at the inception of the hedge, and on ongoing basis, the Bank documents whether the hedging
instrument is expected to be highly effective in offsetting changes in fair values of the hedged item attributable to the
hedged risk.
94
Annual Report 2012
Annual Report 2012
95
Financial Statements: Separate
2.7.1. Fair value hedge
Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recognized in profit
and loss immediately together with any changes in the fair value of the hedged asset or liability that is attributable to the
hedged risk. The effective portion of changes in the fair value of the interest rate swaps and the changes in the fair value
of the hedged item attributable to the hedged risk are recognized in the ‘net interest income’ line item of the income state-
ment. Any ineffectiveness is recognized in profit and loss in ‘net trading income’.
When the hedging instrument is no longer qualified for hedge accounting, the adjustment to the carrying amount of a
hedged item, measured at amortized cost, arising from the hedged risk is amortized to profit and loss from that date using
the effective interest method.
2.7.2. Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognized
immediately in the income statement. These gains and losses are reported in ‘net trading income’, except where deriva-
tives are managed in conjunction with financial instruments designated at fair value , in which case gains and losses are
reported in ‘net income from financial instruments designated at fair value’.
Interest income and expense
2.8.
Interest income and expense for all financial instruments except for those classified as held-for-trading or designated at
fair value are recognized in ‘interest income’ and ‘interest expense’ in the income statement using the effective interest
method.
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appro-
priate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective
interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for example, prepay-
ment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between
parties to the contract that represents an integral part of the effective interest rate, transaction costs and all other premiums
or discounts.
Once loans or debts are classified as nonperforming or impaired, the revenue of interest income will not be recognized and will
be recorded off balance sheet, and are recognized as income subsequently based on a cash basis according to the following:
• When all arrears are collected for consumer loans, personnel mortgages and micro-finance loans.
• When calculated interest for corporate are capitalized according to the rescheduling agreement conditions until
paying 25% from rescheduled payments for a minimum performing period of one year, if the customer continues
to perform, the calculated interest will be recognized in interest income (interest on the performing rescheduling
agreement balance) without the marginalized before the rescheduling agreement which will be recognized in inter-
est income after the settlement of the outstanding loan balance.
2.9. Fee and commission income
Fees charged for servicing a loan or facility that is measured at amortized cost, are recognized as revenue as the service
is provided. Fees and commissions on non-performing or impaired loans or receivables cease to be recognized as income
and are rather recorded off balance sheet. These are recognized as revenue, on a cash basis, only when interest income
on those loans is recognized in profit and loss, at that time, fees and commissions that represent an integral part of the
effective interest rate of a financial asset, are treated as an adjustment to the effective interest rate of that financial asset.
Commitment fees and related direct costs for loans and advances where draw down is probable are deferred and recog-
nized as an adjustment to the effective interest on the loan once drawn. Commitment fees in relation to facilities where
draw down is not probable are recognized at the maturity of the term of the commitment.
Fees are recognized on the debt instruments that are measured at fair value through profit and loss on initial recognition
and syndicated loan fees received by the Bank are recognized when the syndication has been completed and the Bank
does not hold any portion of it or holds a part at the same effective interest rate used for the other participants portions.
Commission and fee arising from negotiating, or participating in the negotiation of a transaction for a third party such as
the arrangement of the acquisition of shares or other securities and the purchase or sale of properties are recognized upon
completion of the underlying transaction in the income statement .
Other management advisory and service fees are recognized based on the applicable service contracts, usually on accrual
basis. Financial planning fees related to investment funds are recognized steadily over the period in which the service is
provided. The same principle is applied for wealth management; financial planning and custody services that are provided
on the long term are recognized on the accrual basis also.
2.10. Dividend income
Dividends are recognized in the income statement when the right to collect it is declared.
2.11. Sale and repurchase agreements
Securities may be lent or sold according to a commitment to repurchase (Repos) are reclassified in the financial state-
ments and deducted from treasury bills balance. Securities borrowed or purchased according to a commitment to resell
them (Reverse Repos) are reclassified in the financial statements and added to treasury bills balance. The difference
between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective
interest rate method.
2.12. Impairment of financial assets
2.12.1. Financial assets carried at amortised cost
The Bank assesses on each balance sheet date whether there is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired only if there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the asset (a ‘loss event/s’) and that loss event/s has an impact
on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:
• Cash flow difficulties experienced by the borrower ( e.g, equity ratio, net income percentage of sales).
• Violation of the conditions of the loan agreement such as non-payment.
• Initiation of bankruptcy proceedings.
• Deterioration of the borrower’s competitive position.
• The Bank for reasons of economic or legal financial difficulties of the borrower by granting concessions may not
agree with the Bank granted in normal circumstances.
• Deterioration in the value of collateral or deterioration of the creditworthiness of the borrower.
The objective evidence of impairment loss for a group of financial assets is observable data indicating that there is a meas-
urable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those
assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, for instance an
increase in the default rates for a particular banking product.
The Bank estimates the period between a losses occurring and its identification for each specific portfolio. In general, the
periods used vary between three months to twelve months.
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individu-
ally significant, and individually or collectively for financial assets that are not individually significant and in this field the
following are considered:
• If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment according to historical default ratios.
• If the Bank determines that an objective evidence of financial asset impairment exist that is individually assessed
for impairment and for which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effec-
tive interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the
loss is recognized in the income statement. If a loan or held to maturity investment has a variable interest rate, the discount rate
for measuring any impairment loss is the current effective interest rate determined under the contract when there is objective
evidence for asset impairment. As a practical expedient, the Bank may measure impairment on the basis of an instrument’s fair
value using an observable market price.
96
Annual Report 2012
Annual Report 2012
97
Financial Statements: Separate
The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows
that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
Computers and core systems
Fixtures and fittings
3/10 years
3 years
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk
characteristics (i.e., on the basis of the group’s grading process that considers asset type, industry, geographical location,
collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the con-
tractual terms of the assets being evaluated.
For the purposes of evaluation of impairment for a group of a financial assets according to historical default ratios future
cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics
similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the
effects of current conditions that did not affect the period on which the historical loss experience is based and to remove
the effects of conditions in the historical period that do not currently exist.
Estimates of changes in future cash flows for groups of assets should be reflected together with changes in related observ-
able data from period to period (e.g. changes in unemployment rates, property prices, payment status, or other indicative
factors of changes in the probability of losses in the Bank and their magnitude). The methodology and assumptions used
for estimating future cash flows are reviewed regularly by the Bank.
2.12.2. Available for sale investments
The Bank assesses on each balance sheet date whether there is objective evidence that a financial asset or a group of finan-
cial assets classify under available for sale is impaired. In the case of equity investments classified as available for sale, a
significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the
assets are impaired. During periods start from first of January 2009, the decrease consider significant when it became 10%
from the book value of the financial instrument and the decrease consider to be extended if it continues for period more
than 9 months, and if the mentioned evidences become available then any cumulative gains or losses previously recog-
nized in equity are recognized in the income statement , in respect of available for sale equity securities, impairment losses
previously recognized in profit and loss are not reversed through the income statement.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can
be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impair-
ment loss is reversed through the income statement to the extent of previously recognized impairment charge from equity
to income statement.
2.13. Real estate investments
The real estate investments represent lands and buildings owned by the Bank in order to obtain rental returns or capital
gains and therefore do not include real estate assets which the Bank exercised its work through or those that have owned
by the Bank as settlement of debts. The accounting treatment is the same used with property, plant and equipment.
2.14. Property, plant and equipment
Lands and buildings comprise mainly branches and offices. All property, plant and equipment are stated at historical cost less de-
preciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or as a separate asset, as appropriate, only when it is probable
that future economic benefits will flow to the Bank and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to other operating expenses during the financial period in which they are incurred.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their residual
values over estimated useful lives, as follows:
Buildings
Leasehold improvements
Furniture and safes
Typewriters, calculators and air-conditions
Transportations
20 years.
3 years, or over the period of the lease if less
5 years.
8 years
5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, on each balance sheet date. Depreciable as-
sets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be re-
covered. An asset’s carrying amount is written down immediately to its recoverable value if the asset’s carrying amount exceeds
its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
Gains and losses on disposals are determined by comparing the selling proceeds with the asset carrying amount and
charged to other operating expenses in the income statement.
2.15. Impairment of non-financial assets
Assets that have an indefinite useful life are not amortized -except goodwill- and are tested annually for impairment. As-
sets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Assets are tested for impair-
ment with reference to the lowest level of cash generating unit(s). A previously recognized impairment loss relating to a
fixed asset may be reversed in part or in full when a change in circumstances leads to a change in the estimates used to
determine the fixed asset’s recoverable amount. The carrying amount of the fixed asset will only be increased up to the
amount that the original impairment not been recognized.
2.16. Leases
The accounting treatment for the finance lease is complied with law 95/1995, if the contract entitles the lessee to purchase
the asset at a specified date and predefined value, or the current value of the total lease payments representing at least 90%
of the value of the asset. The other leases contracts are considered operating leases contracts.
2.16.1. Being lessee
Finance lease contract recognizes the lease cost, including the cost of maintenance of the leased assets in the income state-
ment for the period in which they occurred. If the Bank decides to exercise the right to purchase the leased asset the leased
assets are capitalized and included in ‘property, plant and equipment’ and depreciated over the useful life of the expected
remaining life of the asset in the same manner as similar assets.
Operating lease payments leases are accounted for on a straight-line basis over the periods of the leases and are included
in ‘general and administrative expenses’.
2.16.2. Being lessor
For finance lease, assets are recorded in the property, plant and equipment in the balance sheet and amortized over the
expected useful life of this asset in the same manner as similar assets. Lease income is recognized on the basis of rate
of return on the lease in addition to an amount corresponding to the cost of depreciation for the period. The difference
between the recognized rental income and the total finance lease clients’ accounts is transferred to the in the income state-
ment until the expiration of the lease to be reconciled with a net book value of the leased asset. Maintenance and insurance
expenses are charged to the income statement when incurred to the extent that they are not charged to the tenant.
In case there is objective evidence that the Bank will not be able to collect the of financial lease obligations, the finance
lease payments are reduced to the recoverable amount.
For assets leased under operating lease it appears in the balance sheet under property, plant and equipment, and depreci-
ated over the expected useful life of the asset in the same way as similar assets, and the lease income recorded less any
discounts given to the lessee on a straight-line method over the contract period.
2.17. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’
maturity from the date of acquisition, including cash and non-restricted balances with central banks, treasury bills and
other eligible bills, loans and advances to banks, amounts due from other banks and short-term government securities.
98
Annual Report 2012
Annual Report 2012
99
Financial Statements: Separate
2.18. Other provisions
Provisions for restructuring costs and legal claims are recognized when the Bank has present legal or constructive obliga-
tions as a result of past events; where it is more likely than not that a transfer of economic benefit will be necessary to settle
the obligation, and it can be reliably estimated.
In case of similar obligations, the related cash outflow should be determined in order to settle these obligations as a group.
The provision is recognized even in case of minor probability that cash outflow will occur for an item of these obligations.
When a provision is wholly or partially no longer required, it is reversed through profit or loss under other operating
income (expenses).
Provisions for obligations, other than those for credit risk or employee benefits, due within more than 12 months from the
balance sheet date are recognized based on the present value of the best estimate of the consideration required to settle the
present obligation on the balance sheet date. An appropriate pretax discount rate that reflects the time value of money is
used to calculate the present value of such provisions. For obligations due within less than twelve months from the balance
sheet date, provisions are calculated based on undiscounted expected cash outflows unless the time value of money has a
significant impact on the amount of provision, then it is measured at the present value.
2.19. Share based payments
The Bank applies an equity-settled, share-based compensation plan. The fair value of equity instruments recognized as an
expense over the vesting period using appropriate valuation models, taking into account the terms and conditions upon which
the equity instruments were granted. The vesting period is the period during which all the specified vesting conditions of a
share-based payment arrangement are to be satisfied. Vesting conditions include service conditions, performance conditions
and market performance conditions are taken into account when estimating the fair value of equity instruments on the date
of grant. On each balance sheet date the number of options that are expected to be exercised are estimated. Recognizes esti-
mate changes, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and
share premium when the options are exercised.
2.20. Income tax
Income tax on the profit and loss for the period and deferred tax are recognized in the income statement except for income
tax relating to items of equity that are recognized directly in equity.
Income tax is recognized based on net taxable profit using the tax rates applicable on the date of the balance sheet in ad-
dition to tax adjustments for previous years.
Deferred taxes arising from temporary time differences between the book value of assets and liabilities are recognized in accordance
with the principles of accounting and value according to the foundations of the tax, this is determining the value of deferred tax on
the expected manner to realize or settle the values of assets and liabilities, using tax rates applicable on the date of the balance sheet.
Deferred tax assets of the Bank recognized when there is likely to be possible to achieve profits subject to tax in the future
to be possible through to use that asset, and is reducing the value of deferred tax assets with part of that will come from tax
benefit expected during the following years, that in the case of expected high benefit tax, deferred tax assets will increase
within the limits of the above reduced.
2.21. Borrowings
Borrowings are recognized initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at
amortized cost also any difference between proceeds net of transaction costs and the redemption value is recognized in
the income statement over the period of the borrowings using the effective interest method.
2.22. Dividends
Dividends on ordinary shares and profit sharing are recognized as a charge of equity upon the general assembly approval.
Profit sharing includes the employees’ profit share and the Board of Directors’ remuneration as prescribed by the Bank’s
articles of incorporation and the corporate law.
2.23. Comparatives
Comparative figures have been adjusted to conform with changes in the presentation of the current period where necessary.
3. Financial risk management
The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and manage-
ment of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable
consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and rewards and minimize
potential adverse effects on the Bank’s financial performance. The most important types of financial risks are credit risk, market risk,
liquidity risk and other operating risks. Also market risk includes exchange rate risk, rate of return risk and other prices risks.
The Bank’s risk management policies are designed to identify and analyze these risks, to set appropriate risk limits and con-
trols, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank
regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.
Risk management is carried out by risk department under policies approved by the Board of Directors. Bank treasury identi-
fies, evaluates and hedges financial risks in close co-operation with the Bank’s operating units.
The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as for-
eign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.
In addition, credit risk management is responsible for the independent review of risk management and the control environment.
3.1. Credit risk
The Bank takes on exposure to credit risk, which is the risk that counterparty will cause a financial loss for the Bank by
failing to discharge an obligation. Management therefore carefully manages its exposure to credit risk. Credit exposures
arise principally in loans and advances, debt securities and other bills. There is also credit risk in off-balance sheet finan-
cial arrangements such as loan commitments. The credit risk management and control are centralized in a credit risk
management team in bank treasury and reported to the Board of Directors and head of each business unit regularly.
3.1.1. Credit risk measurement
3.1.1.1. Loans and advances to banks and customers
In measuring credit risk of loans and facilities to banks and customers at a counterparty level, the Bank reflects three com-
ponents (i) the ‘probability of default’ by the client or counterparty on its contractual obligations (ii) current exposures to
the counterparty and its likely future development, from which the Bank derive the ‘exposure at default’; and (iii) the likely
recovery ratio on the defaulted obligations (the ‘loss given default’).
These credit risk measurements, which reflect expected loss (the ‘expected loss model’) are required by the Basel committee on
banking regulations and the supervisory practices (the Basel committee), and are embedded in the Bank’s daily operational man-
agement. The operational measurements can be contrasted with impairment allowances required under EAS 26, which are based
on losses that have been incurred on the balance sheet date (the ‘incurred loss model’) rather than expected losses (note 3.1).
The Bank assesses the probability of default of individual counterparties using internal rating tools tailored to the various catego-
ries of counterparty. They have been developed internally and combine statistical analysis with credit officer judgment and are
validated, where appropriate. Clients of the Bank are segmented into four rating classes. The Bank’s rating scale, which is shown
below, reflects the range of default probabilities defined for each rating class. This means that, in principle, exposures migrate
between classes as the assessment of their probability of default changes. The rating tools are kept under review and upgraded as
necessary. The Bank regularly validates the performance of the rating and their predictive power with regard to default events.
Bank’s rating
1
2
3
4
Description of the grade
Performing loans
Regular watching
Watch list
Non-performing loans
Loss given default or loss severity represents the Bank expectation of the extent of loss on a claim should default occur. It is
expressed as percentage loss per unit of exposure and typically varies by type of counterparty, type and seniority of claim
and availability of collateral or other credit mitigation.
3.1.1.2. Debt instruments and treasury and other bills
For debt instruments and bills, external rating such as standard and poor’s rating or their equivalents are used for man-
aging of the credit risk exposures, and if this rating is not available, then other ways similar to those used with the credit
100
Annual Report 2012
Annual Report 2012
101
Financial Statements: Separate
customers are uses. The investments in those securities and bills are viewed as a way to gain a better credit quality mapping
and maintain a readily available source to meet the funding requirement at the same time.
3.1.2. Risk limit control and mitigation policies
The Bank manages, limits and controls concentrations of credit risk wherever they are identified − in particular, to indi-
vidual counterparties and banks, and to industries and countries.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to
one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving
basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by
individual, counterparties, product, and industry sector and by country are approved quarterly by the Board of Directors.
The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off-
balance sheet exposures, and daily delivery risk limits in relation to trading items such as forward foreign exchange con-
tracts. Actual exposures against limits are monitored daily.
Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to
meet interest and capital repayment obligations and by changing these lending limits where appropriate.
Some other specific control and mitigation measures are outlined below:
3.1.2.1. Collateral
The Bank sets a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security
for funds advances, which is common practice. The Bank implements guidelines on the acceptability of specific classes of
collateral or credit risk mitigation. The principal collateral types for loans and advances are:
• Mortgages over residential properties.
• Mortgage business assets such as premises, and inventory.
• Mortgage financial instruments such as debt securities and equities.
Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are
generally unsecured. In addition, in order to minimize the credit loss the Bank will seek additional collateral from the
counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances.
Collateral held as security for financial assets other than loans and advances is determined by the nature of the instru-
ment. Debt securities, treasury and other governmental securities are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios of financial instruments.
3.1.2.2. Derivatives
The Bank maintains strict control limits on net open derivative positions (i.e., the difference between purchase and sale contracts),
by both amount and term. At any one time, the amount subject to credit risk is limited to the current fair value of instruments that
are favorable to the Bank (i.e., assets with positive fair value), which in relation to derivatives is only a small fraction of the contract,
or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall
lending limits with customers, together with potential exposures from market movements. Collateral or other security is not usually
obtained for credit risk exposures on these instruments, except where the Bank requires margin deposits from counterparties.
Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a cor-
responding receipt in cash, securities or equities. Daily settlement limits are established for each counterparty to cover the
aggregate of all settlement risk arising from the Bank market transactions on any single day.
3.1.2.3. Master netting arrangements
The Bank further restricts its exposure to credit losses by entering into master netting arrangements with counterpar-
ties with which it undertakes a significant volume of transactions. Master netting arrangements do not generally result
in an offset of balance sheet assets and liabilities, as transactions are usually settled on a gross basis. However, the credit
risk associated with favorable contracts is reduced by a master netting arrangement to the extent that if a default occurs,
all amounts with the counterparty are terminated and settled on a net basis. The Bank overall exposure to credit risk on
derivative instruments subject to master netting arrangements can change substantially within a short period, as it is af-
fected by each transaction subject to the arrangement.
3.1.2.4. Credit related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and
standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which are
written undertakings by the Bank on behalf of a customer authorizing a third party to draw drafts on the Bank up to a
stipulated amount under specific terms and conditions – are collateralized by the underlying shipments of goods to which
they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guar-
antees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to
loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused
commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit stand-
ards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a
greater degree of credit risk than shorter-term commitments.
Impairment and provisioning policies
3.1.3.
The internal rating system described in Note 3.1.1 focus on the credit-quality mapping from the lending and investment
activities perspective. Conversely, for only financial reporting purposes impairment losses are recognized for that has
been incurred on the balance sheet date when there is an objective evidence of impairment. Due to the different method-
ologies applied, the amount of incurred impairment losses in balance sheet are usually lower than the amount determined
from the expected loss model that is used for internal operational management and CBE regulation purposes.
The impairment provision reported in balance sheet at the end of the period is derived from each of the four internal credit
risk ratings. However, the majority of the impairment provision is usually driven by the last two rating degrees. The fol-
lowing table illustrates the proportional distribution of loans and advances reported in the balance sheet for each of the
four internal credit risk ratings of the Bank and their relevant impairment losses:
Bank’s rating
1-Performing loans
2-Regular watching
3-Watch list
4-Non-Performing loans
December 31, 2012
December 31, 2011
Loans and
advances (%)
Impairment
provision (%)
Loans and
advances (%)
Impairment
provision (%)
90.00
5.89
0.48
3.63
40.85
8.56
2.01
48.58
91.13
4.32
1.74
2.81
42.26
4.70
3.70
49.34
The internal rating tools assists management to determine whether objective evidence of impairment exists under EAS 26,
based on the following criteria set by the Bank:
• Cash flow difficulties experienced by the borrower or debtor
• Breach of loan covenants or conditions
• Initiation of bankruptcy proceedings
• Deterioration of the borrower’s competitive position
• Bank granted concessions may not be approved under normal circumstances due to economic, legal reasons and
financial difficulties facing the borrower
• Deterioration of the collateral value
• Deterioration of the credit situation
The Bank’s policy requires the review of all financial assets that are above materiality thresholds at least annually or more
regularly when circumstances require. Impairment provisions on individually assessed accounts are determined by an
evaluation of the incurred loss at balance-sheet date, and are applied to all significant accounts individually. The assess-
ment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts
for that individual account. Collective impairment provisions are provided portfolios of homogenous assets by using the
available historical loss experience, experienced judgment and statistical techniques.
3.1.4. Pattern of measuring the general banking risk
In addition to the four categories of the Bank’s internal credit ratings indicated in note 3.1.1, management classifies loans and
advances based on more detailed subgroups in accordance with the CBE regulations. Assets exposed to credit risk in these cat-
egories are classified according to detailed rules and terms depending heavily on information relevant to the customer, his activ-
ity, financial position and his repayment track record. The Bank calculates required provisions for impairment of assets exposed
102
Annual Report 2012
Annual Report 2012
103
Financial Statements: Separate
to credit risk, including commitments relating to credit on the basis of rates determined by CBE. In case, the provision required
for impairment losses as per CBE credit worthiness rules exceeds the required provisions by the application used in balance sheet
preparation in accordance with EAS. That excess shall be debited to retained earnings and carried to the general banking risk
reserve in the equity section. Such reserve is always adjusted, on a regular basis, by any increase or decrease so, that reserve shall
always be equivalent to the amount of increase between the two provisions. Such reserve is not available for distribution.
Below is a statement of institutional worthiness according to internal ratings compared with CBE ratings and rates of
provisions needed for assets impairment related to credit risk:
CBE Rating
1
2
3
4
5
6
7
8
9
10
Categorization
Low risk
Average risk
Satisfactory risk
Reasonable risk
Acceptable risk
Marginally acceptable risk
Watch list
Substandard
Doubtful
Bad debts
Provision% Internal rating
0%
1%
1%
2%
2%
3%
5%
20%
50%
100%
1
1
1
1
1
2
3
4
4
4
Categorization
Performing loans
Performing loans
Performing loans
Performing loans
Performing loans
Regular watching
Watch list
Non performing loans
Non performing loans
Non performing loans
3.1.5. Maximum exposure to credit risk before collateral held
In balance sheet items exposed to credit risk
» Treasury bills and other governmental notes
Trading financial assets:
» Debt instruments
» Gross loans and advances to banks
» Less:Impairment provision
Gross loans and advances to customers
Individual:
» Overdraft
» Credit cards
» Personal loans
» Mortgages
» Other loans
Corporate:
» Overdraft
» Direct loans
» Syndicated loans
» Other loans
» Unamortized bills discount
» Impairment provision
» Unearned interest
» Derivative financial instruments
Financial investments:
» Debt instruments
» Investments in subsidiary and associates
Total
Off balance sheet items exposed to credit risk
» Financial guarantees
» Customers acceptances
» Letter of credit
» Letter of guarantee
Total
Dec. 31, 2012
EGP
11,153,742,074
Dec. 31, 2011
EGP
10,653,390,067
1,138,056,688
1,208,166,369
(29,298,630)
353,860,497
1,433,545,112
(37,950,503)
1,220,222,219
660,932,044
3,616,553,758
463,833,879
20,045,324
4,288,571,348
23,196,204,054
9,588,649,990
87,795,754
(22,277,973)
(1,901,222,402)
(520,994,222)
137,459,761
24,849,111,471
938,033,700
80,093,585,206
2,276,369,133
1,176,928,870
933,297,936
12,787,562,199
17,174,158,138
952,982,877
575,672,905
2,659,469,004
419,990,050
40,265,000
4,239,213,684
24,265,367,037
8,245,001,963
101,625,796
(45,231,397)
(1,419,409,102)
(365,161,953)
146,544,656
14,898,586,881
995,595,778
68,113,358,352
2,219,596,241
542,833,642
753,154,858
11,263,615,016
14,779,199,757
The above table represents the Bank Maximum exposure to credit risk on December 31, 2012, before taking account of
any held collateral.
For assets recognized on balance sheet, the exposures set out above are based on net carrying amounts as reported in the
balance sheet.
As shown above 52.46% of the total maximum exposure is derived from loans and advances to banks and customers while
investments in debt instruments represents 32.45%.
Management is confident in its ability to continue to control and sustain minimal exposure of credit risk resulting from
both its loans and advances portfolio and debt instruments based on the following:
• 95.88% of the loans and advances are concentrated in the top two grades of the internal credit risk rating system.
• 96.37% of loans and advances portfolio are considered to be neither past due nor impaired.
• Loans and advances assessed individualy are valued EGP 1,609,976,311.
• The Bank has implemented more prudent processes when granting loans and advances during the financial period
ended on December 31, 2012.
• 94.29% of the investments in debt Instruments are Egyptian sovereign instruments.
3.1.6. Loans and advances
Loans and advances are summarized as follows:
Dec.31, 2012
EGP
Dec.31, 2011
EGP
Loans and
advances to
customers
40,779,399,095
785,027,964
1,578,381,311
43,142,808,370
Loans and
advances to
banks
Loans and
advances to
customers
1,176,571,369 39,842,142,236
478,696,381
1,178,749,699
1,208,166,369 41,499,588,316
-
31,595,000
Loans and
advances to
banks
1,403,385,688
-
30,159,424
1,433,545,112
1,901,222,402
22,277,973
520,994,222
40,698,313,773
29,298,630
-
-
1,419,409,102
45,231,397
365,161,953
1,178,867,739 39,669,785,864
37,950,503
-
-
1,395,594,609
» Neither past due nor impaired
» Past due but not impaired
» Individually impaired
Gross
Less:
» Impairment provision
» Unamortized bills discount
» Unearned interest
Net
Impairment provision losses for loans and advances reached EGP 1,930,521,032.
During the period the Bank’s total loans and advances increased by 3.30% .
In order to minimize the propable exposure to credit risk, the Bank focuses more on the business with large enterprises,banks
or retail customers with good credit rating or sufficient collateral.
104
Annual Report 2012
Annual Report 2012
105
Financial Statements: Separate
P
G
E
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
:
s
k
n
a
b
d
n
a
s
r
e
m
o
t
s
u
c
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
t
e
N
l
a
t
o
T
l
a
t
o
T
s
k
n
a
b
s
r
e
m
o
t
s
u
c
d
n
a
s
n
a
o
l
d
n
a
s
n
a
o
l
o
t
s
e
c
n
a
v
d
a
o
t
s
e
c
n
a
v
d
a
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
s
n
a
o
l
r
e
h
t
O
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
2
1
0
2
,
1
3
.
c
e
D
2
1
1
,
2
1
3
,
8
6
1
,
1
7
2
9
,
3
9
2
,
5
5
9
,
7
3
4
5
7
,
7
8
0
,
2
8
0
7
6
,
7
4
0
,
4
3
6
,
8
2
8
1
,
3
2
7
,
4
1
7
9
1
,
-
-
1
3
9
,
4
0
9
,
7
7
1
-
1
4
7
,
5
5
8
,
6
4
4
,
2
1
9
9
,
9
7
4
0
7
,
0
8
6
,
1
3
4
6
9
2
,
3
4
0
,
5
3
1
-
8
0
7
,
5
5
2
,
2
6
7
1
,
7
2
6
,
5
5
5
,
0
1
9
6
3
,
1
3
5
,
1
6
6
1
0
1
,
6
2
5
6
1
7
,
9
0
3
,
1
5
5
2
2
,
9
0
2
,
7
7
4
9
3
7
,
7
6
8
,
8
7
1
,
1
8
6
9
,
5
8
5
,
1
4
2
,
1
4
6
4
8
,
3
9
6
,
2
8
6
8
3
,
1
8
0
,
2
5
2
,
9
5
1
1
,
8
8
1
,
4
5
9
1
2
,
P
G
E
e
t
a
r
o
p
r
o
C
,
1
3
2
6
6
0
8
2
8
3
,
,
,
3
5
8
7
0
1
1
,
,
4
8
4
3
8
1
9
4
4
,
,
3
5
6
2
0
5
9
5
4
3
,
,
,
8
7
0
7
5
5
8
,
,
5
4
2
8
4
8
4
9
,
-
2
5
3
7
8
8
,
,
5
6
5
8
4
5
7
4
1
,
,
8
8
1
9
5
9
6
1
,
-
-
,
5
3
5
3
7
2
1
,
,
6
2
6
5
9
3
5
3
,
,
2
1
4
1
4
4
0
2
,
,
3
1
5
8
7
7
6
2
,
,
9
1
1
0
2
0
9
7
0
4
,
,
,
3
9
3
4
5
9
8
1
,
,
9
1
0
7
5
4
0
5
4
,
,
4
0
2
8
1
1
2
4
5
3
,
,
8
6
6
,
1
8
8
,
3
3
6
1
3
4
,
3
9
6
,
2
5
1
,
1
s
n
a
o
l
i
g
n
m
r
o
f
r
e
P
»
8
0
1
,
0
6
9
,
2
1
1
5
8
,
5
7
9
,
9
3
i
g
n
h
c
t
a
w
l
r
a
u
g
e
R
»
8
0
5
,
0
4
9
,
3
7
3
6
,
2
2
9
,
9
9
2
4
,
1
2
8
,
1
3
5
2
,
7
7
8
,
6
3
1
7
,
3
0
6
,
2
5
6
2
7
1
,
9
6
4
,
9
0
2
,
1
i
g
n
m
r
o
f
r
e
p
-
n
o
N
»
t
s
i
l
h
c
t
a
W
»
s
n
a
o
l
l
a
t
o
T
:
s
e
d
a
r
G
l
i
a
u
d
v
d
n
i
I
l
a
t
o
T
l
a
t
o
T
s
k
n
a
b
s
r
e
m
o
t
s
u
c
d
n
a
s
n
a
o
l
d
n
a
s
n
a
o
l
o
t
s
e
c
n
a
v
d
a
o
t
s
e
c
n
a
v
d
a
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
s
n
a
o
l
r
e
h
t
O
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
1
1
0
2
,
1
3
.
c
e
D
7
8
1
,
6
5
4
,
2
4
9
7
,
4
6
2
,
2
8
7
,
1
2
0
1
,
1
0
1
,
5
1
8
2
,
0
1
2
,
8
5
5
8
4
,
3
9
1
,
6
9
4
1
,
4
6
0
,
2
6
3
,
7
7
3
,
1
3
5
8
,
7
1
9
,
1
3
1
,
7
3
4
8
3
,
9
8
6
,
4
9
0
5
3
,
5
9
3
,
1
5
7
,
7
4
9
2
,
5
3
4
,
6
7
0
1
2
,
-
2
2
9
,
1
0
9
,
1
9
6
6
2
5
,
1
0
1
-
6
5
3
,
4
2
6
,
6
4
6
8
5
3
,
6
7
7
,
5
1
5
4
6
,
4
9
0
,
4
7
4
6
4
0
,
7
4
6
6
6
,
7
6
7
,
8
2
1
9
2
1
,
6
1
3
,
5
5
2
9
0
6
,
4
9
5
,
5
9
3
,
1
4
1
2
,
9
7
1
,
0
8
0
,
0
4
8
5
0
,
9
3
9
,
9
9
7
9
2
,
3
7
3
,
8
3
9
,
7
4
6
2
,
9
6
5
,
4
7
4
3
2
,
,
5
1
1
4
3
3
2
2
,
,
5
6
0
0
8
9
6
3
1
,
-
,
5
9
0
1
4
2
7
3
,
-
-
,
7
8
3
8
7
2
8
2
,
,
7
7
5
6
5
3
1
1
,
,
2
4
1
6
3
6
4
6
8
3
,
,
7
5
2
7
5
2
,
,
6
0
7
8
7
3
5
0
4
,
,
0
6
7
0
8
7
0
2
5
2
,
,
,
8
6
9
7
0
6
7
4
,
,
6
1
7
2
7
1
1
,
,
7
4
0
5
3
7
2
,
,
9
0
8
0
5
5
2
2
,
,
0
9
2
8
5
5
1
7
0
4
,
,
,
8
6
0
1
7
6
8
3
,
,
3
5
7
3
1
1
8
0
4
,
,
3
3
5
6
6
9
2
8
5
2
,
,
9
8
0
,
5
4
2
,
4
0
5
0
7
8
,
9
9
0
,
4
1
9
s
n
a
o
l
i
g
n
m
r
o
f
r
e
P
»
0
5
9
,
8
7
2
,
3
3
4
8
,
8
9
7
,
0
1
6
3
5
,
1
6
4
,
9
8
9
3
,
6
0
2
,
8
5
0
8
,
9
5
0
,
5
1
9
5
4
,
7
3
8
7
8
6
,
2
8
3
,
3
3
5
3
6
2
,
5
0
6
,
2
3
9
i
g
n
h
c
t
a
w
l
r
a
u
g
e
R
»
i
g
n
m
r
o
f
r
e
p
-
n
o
N
»
t
s
i
l
h
c
t
a
W
»
s
n
a
o
l
l
a
t
o
T
:
s
e
d
a
r
G
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
P
G
E
.
t
n
e
m
r
i
a
p
m
i
f
o
e
c
n
e
d
i
v
e
e
v
i
t
c
e
j
b
o
n
a
s
i
e
r
e
h
t
s
s
e
l
n
u
,
d
e
r
i
a
p
m
i
d
e
r
e
d
i
s
n
o
c
t
o
n
e
r
a
e
u
d
t
s
a
p
s
y
a
d
0
9
n
a
h
t
s
s
e
l
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
:
d
e
r
i
a
p
m
i
t
o
n
t
u
b
e
u
d
t
s
a
p
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
l
a
t
o
T
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
l
a
t
o
T
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
s
d
r
a
c
t
i
d
e
r
C
s
t
f
a
r
d
r
e
v
O
2
1
0
2
,
1
3
.
c
e
D
,
0
3
1
7
0
8
1
1
,
-
,
8
8
7
4
7
3
7
,
,
2
4
3
2
3
4
4
,
,
2
6
4
0
4
4
2
2
2
,
,
3
4
0
2
0
9
5
0
1
,
,
5
6
1
8
9
8
3
8
,
,
3
5
2
0
4
6
2
3
,
,
9
5
5
2
7
5
7
5
,
,
1
5
6
1
8
8
1
,
,
1
8
5
0
8
8
4
2
,
,
8
2
3
0
1
8
0
3
,
,
2
5
1
0
2
8
1
9
2
,
,
4
9
6
3
8
7
7
0
1
,
,
5
3
5
3
5
1
6
1
1
,
,
3
2
9
2
8
8
7
6
,
7
0
7
,
6
8
4
,
9
1
4
5
9
9
,
0
0
7
0
9
8
,
8
4
4
,
1
1
2
7
4
,
1
3
8
,
6
3
1
2
6
9
,
3
0
5
,
6
5
3
4
1
,
7
1
2
,
7
1
2
1
8
,
7
0
2
,
3
9
4
6
2
6
,
1
9
0
0
4
,
0
1
1
1
2
0
,
3
0
9
5
3
0
,
5
8
5
,
2
7
6
2
,
5
9
1
,
2
0
9
0
,
4
9
7
,
4
3
9
5
,
0
9
6
,
3
1
2
9
1
,
9
2
2
,
6
1
5
5
1
,
6
1
3
,
5
5
1
,
8
0
7
6
3
1
0
4
,
,
0
5
3
5
0
5
0
7
2
,
,
6
8
3
7
1
1
0
1
,
,
4
4
4
9
5
7
0
2
3
,
s
y
a
d
0
3
o
t
p
u
e
u
d
t
s
a
P
»
s
y
a
d
0
6
-
0
3
e
u
d
t
s
a
P
»
s
y
a
d
0
9
-
0
6
e
u
d
t
s
a
P
»
l
a
t
o
T
,
2
0
4
3
3
9
7
,
,
5
6
9
7
5
9
7
1
,
,
5
8
0
0
0
5
3
0
1
,
,
2
5
4
1
9
3
9
2
1
,
-
-
-
-
,
5
8
0
0
0
5
3
0
1
,
-
5
0
2
,
8
0
2
,
2
1
3
6
7
2
,
1
1
2
,
1
,
6
2
8
7
7
0
8
,
,
9
3
1
0
8
8
9
,
,
7
1
8
3
4
2
1
,
,
5
8
5
9
8
6
6
,
,
8
2
7
1
2
8
2
1
1
,
,
4
2
7
9
6
5
6
1
,
9
7
8
,
4
2
2
,
3
2
5
4
8
,
1
7
8
,
3
1
9
9
4
,
4
9
1
1
5
,
9
5
9
2
9
,
4
0
3
,
9
4
3
6
8
2
,
5
6
3
,
1
l
a
t
o
T
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
l
a
t
o
T
s
e
g
a
g
t
r
o
M
9
8
6
,
9
0
5
,
3
0
3
6
,
0
3
8
,
1
0
3
7
,
3
6
2
,
1
9
4
0
,
4
0
6
,
6
l
a
n
o
s
r
e
P
s
n
a
o
l
s
d
r
a
c
t
i
d
e
r
C
s
t
f
a
r
d
r
e
v
O
1
1
0
2
,
1
3
.
c
e
D
9
9
0
,
4
8
9
,
3
1
2
2
,
4
7
4
,
1
1
1
0
3
,
9
0
5
,
6
0
1
1
2
6
,
7
6
9
,
1
2
1
,
5
0
5
4
6
5
8
,
,
9
2
5
5
2
8
9
,
,
9
3
9
7
7
9
0
0
2
,
,
3
7
9
7
6
3
9
1
2
,
s
y
a
d
0
3
o
t
p
u
e
u
d
t
s
a
P
»
s
y
a
d
0
6
-
0
3
e
u
d
t
s
a
P
»
s
y
a
d
0
9
-
0
6
e
u
d
t
s
a
P
»
l
a
t
o
T
P
G
E
:
s
w
o
l
l
o
f
s
a
e
r
a
,
k
n
a
B
e
h
t
y
b
d
l
e
h
l
a
r
e
t
a
l
l
o
c
d
e
t
a
l
e
r
f
o
e
u
l
a
v
r
i
a
f
e
h
t
h
t
i
w
g
n
o
l
a
,
t
c
u
d
o
r
p
y
b
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
a
u
d
i
v
i
d
n
i
f
o
t
n
u
o
m
a
s
s
o
r
g
e
h
t
f
o
n
w
o
d
k
a
e
r
b
e
Th
.
1
1
3
,
,
,
6
7
9
9
0
6
1
P
G
E
d
e
l
a
t
o
t
e
r
a
s
e
e
t
n
a
r
a
u
g
m
o
r
f
s
w
o
fl
h
s
a
c
n
o
i
t
a
r
e
d
i
s
n
o
c
o
t
n
i
g
n
i
k
a
t
t
u
o
h
t
i
w
d
e
s
s
e
s
s
a
y
l
l
a
u
d
i
v
i
d
n
i
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
,
1
1
3
6
7
9
9
0
6
1
,
,
,
1
7
1
0
8
4
3
,
,
0
7
6
4
9
9
9
7
1
,
,
0
4
4
0
7
7
5
6
0
1
,
,
,
1
5
4
2
6
4
,
8
3
2
0
7
2
,
4
4
2
,
1
3
2
7
,
6
8
0
,
1
1
8
1
8
,
7
3
0
,
9
8
6
3
4
,
2
1
4
,
6
,
2
3
3
7
8
4
4
1
,
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
»
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
l
a
t
o
T
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
t
c
e
r
i
D
s
n
a
o
l
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
2
1
0
2
,
1
3
.
c
e
D
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
l
a
t
o
T
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
t
c
e
r
i
D
s
n
a
o
l
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
1
1
0
2
,
1
3
.
c
e
D
,
3
2
1
9
0
9
8
0
2
1
,
,
4
2
9
6
2
1
,
,
3
5
6
4
7
0
6
2
3
,
,
6
8
6
0
1
3
7
5
5
,
,
1
1
4
7
8
2
,
7
5
1
8
9
9
,
1
1
4
,
1
4
2
8
,
0
2
0
,
1
1
8
0
0
,
7
9
1
,
6
8
0
6
3
,
1
0
1
,
2
5
,
9
5
2
8
7
3
7
1
,
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
»
106
Annual Report 2012
Annual Report 2012
107
Financial Statements: Separate
• Loans and advances restructured
Restructuring activities include reschaduling arrangements, obligatory management programs, modification and deferral of
payments. The application of restructuring policies are based on indicators or criteria of credit performance of the borrower
that is based on the personal judgment of the management, indicate that payment will most likely continue. Restructuring is
commonly applied to term loans, specially customer loans. Renegotiated loans totaled at the end of the period
Dec.31, 2012
Dec.31, 2011
Loans and advances to customer
Corporate
» Direct loans
Total
2,924,873,000
2,924,873,000
2,780,557,000
2,780,557,000
3.1.7. Debt instruments, treasury bills and other governmental notes
The table below presents an analysis of debt instruments, treasury bills and other governmental notes by rating agency
designation at end of financial period, based on Standard & Poor’s ratings or their equivalent:
EGP
Dec.31, 2012
» AAA
» AA- to AA+
» A- to A+
» Lower than A-
» Unrated
Total
Treasury bills
and other gov.
notes
-
-
-
-
7,978,030,413
7,978,030,413
Total
Trading
financial debt
instruments
-
-
-
9,194,145
Non-trading
financial debt
instruments
1,058,879,243
1,058,879,243
140,720,779
140,720,779
227,946,980
227,946,980
945,853,162
936,659,017
1,128,862,543 22,484,905,452 31,591,798,408
1,138,056,688 24,849,111,471 33,965,198,573
3.1.8. Concentration of risks of financial assets with credit risk exposure
3.1.8.1. Geographical sectors
Following is a breakdown of the Bank’s main credit exposure at their book values categorized by geographical region at
the end of the current period.
The Bank has allocated exposures to regions based on the country of domicile of its counterparties.
Dec.31, 2012
Cairo
Alex, Delta
and Sinai
Upper Egypt
Total
EGP
1,138,056,688
1,208,166,369
(29,298,630)
750,010,323
660,932,044
2,401,536,267
373,157,230
18,722,593
» Treasury bills and other governmental notes 11,153,742,074
Trading financial assets:
» Debt instruments
» Gross loans and advances to banks
» Less:Impairment provision
Gross loans and advances to customers
Individual:
» Overdrafts
» Credit cards
» Personal loans
» Mortgages
» Other loans
Corporate:
» Overdrafts
» Direct loans
» Syndicated loans
» Other loans
» Unamortized bills discount
» Impairment provision
» Unearned interest
» Derivative financial instruments
Financial investments:
» Debt instruments
» Investments in subsidiary and associates
Total
3,451,485,639
16,641,174,813
8,933,686,091
77,751,440
(22,277,973)
(1,901,222,402)
(403,955,322)
137,459,761
24,849,111,471
938,033,700
70,376,272,176
-
-
-
-
- 11,153,742,074
-
-
-
1,138,056,688
1,208,166,369
(29,298,630)
447,045,445
-
1,107,474,070
81,891,354
1,322,731
835,548,706
6,518,007,292
654,963,899
10,044,314
-
-
(115,616,300)
-
23,166,451
-
107,543,421
8,785,295
-
1,220,222,219
660,932,044
3,616,553,758
463,833,879
20,045,324
1,537,003
4,288,571,348
37,021,949 23,196,204,054
9,588,649,990
87,795,754
(22,277,973)
(1,901,222,402)
(520,994,222)
137,459,761
-
-
-
-
(1,422,600)
-
-
-
9,540,681,511
- 24,849,111,471
938,033,700
-
176,631,519 80,093,585,206
s
r
o
t
c
e
s
y
r
t
s
u
d
n
I
.
2
.
8
.
1
.
3
.
s
e
i
t
i
v
i
t
c
a
s
r
e
m
o
t
s
u
c
k
n
a
B
e
h
t
y
b
d
e
z
i
r
o
g
e
t
a
c
e
u
l
a
v
k
o
o
b
r
i
e
h
t
t
a
e
r
u
s
o
p
x
e
t
i
d
e
r
c
n
i
a
m
s
’
p
u
o
r
G
e
h
t
s
i
s
y
l
a
n
a
e
l
b
a
t
g
n
w
o
i
l
l
o
f
e
Th
P
G
E
l
a
t
o
T
l
i
a
u
d
v
d
n
i
I
s
e
i
t
i
v
i
t
c
a
r
o
t
c
e
s
r
e
h
t
O
t
n
e
m
n
r
e
v
o
G
l
e
a
s
e
o
h
W
l
e
d
a
r
t
l
i
a
t
e
r
d
n
a
e
t
a
t
s
e
l
a
e
R
g
n
i
r
u
t
c
a
f
u
n
a
M
,
4
7
0
2
4
7
3
5
1
1
1
,
,
,
8
8
6
6
5
0
8
3
1
1
,
,
,
9
6
3
6
6
1
8
0
2
1
,
,
,
)
0
3
6
8
9
2
9
2
(
,
,
9
1
2
2
2
2
0
2
2
1
,
,
-
-
-
-
,
9
1
2
2
2
2
0
2
2
1
,
,
,
4
4
0
2
3
9
0
6
6
,
,
4
4
0
2
3
9
0
6
6
,
,
4
2
3
5
4
0
0
2
,
,
4
2
3
5
4
0
0
2
,
,
9
7
8
3
3
8
3
6
4
,
,
9
7
8
3
3
8
3
6
4
,
,
8
5
7
3
5
5
6
1
6
3
,
,
,
8
5
7
3
5
5
6
1
6
3
,
,
-
-
-
-
-
-
-
-
-
,
4
7
0
2
4
7
,
3
5
1
,
1
1
-
-
-
-
-
-
-
-
,
8
8
6
6
5
0
,
8
3
1
,
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
,
8
4
3
1
7
5
8
8
2
4
,
,
,
4
5
0
4
0
2
6
9
1
3
2
,
,
,
0
9
9
9
4
6
8
8
5
9
,
,
,
4
5
7
5
9
7
7
8
,
,
)
3
7
9
7
7
2
2
2
(
,
,
)
2
2
2
4
9
9
0
2
5
(
,
,
)
2
0
4
2
2
2
1
0
9
1
(
,
,
,
1
6
7
9
5
4
7
3
1
,
,
0
0
7
3
3
0
8
3
9
,
,
1
7
4
1
1
1
9
4
8
4
2
,
,
-
-
-
-
-
-
)
,
0
9
9
5
1
0
4
3
,
(
)
,
5
8
5
4
4
2
2
3
2
,
(
-
-
-
,
0
7
4
4
6
5
,
4
6
3
,
3
2
-
-
-
)
0
7
9
,
0
1
(
-
-
-
-
-
-
-
)
2
4
8
,
7
9
4
,
2
4
2
(
-
-
-
-
-
)
,
8
7
9
5
4
5
3
2
1
,
(
)
,
2
2
6
3
3
9
4
2
8
,
(
)
,
1
3
4
9
1
0
,
3
1
(
)
5
6
4
,
6
4
2
,
7
(
)
7
3
0
,
1
8
1
,
9
3
(
)
0
6
5
,
6
1
7
,
4
6
7
(
,
8
2
2
4
3
4
2
4
3
1
,
,
,
5
4
8
2
5
3
,
5
1
7
3
2
,
3
0
5
,
6
3
4
5
1
7
,
6
4
9
,
3
3
4
,
1
7
7
4
,
3
2
4
,
1
4
0
,
1
6
4
8
,
0
1
9
,
8
1
-
,
4
5
8
6
9
6
3
2
,
,
5
4
7
6
2
3
7
9
0
4
,
,
,
7
3
0
5
4
0
2
2
8
0
1
,
,
-
-
-
-
-
-
,
1
8
3
3
6
9
,
5
3
2
,
1
0
7
2
,
6
6
4
,
3
3
2
-
-
2
7
5
,
9
5
3
,
1
9
1
8
5
1
,
6
0
4
,
9
3
6
0
0
9
,
8
9
0
,
4
6
7
8
0
,
7
1
9
,
1
5
8
,
4
-
-
4
3
6
,
0
6
7
,
5
3
9
,
9
0
6
1
,
9
0
6
,
7
7
7
-
)
3
7
9
,
7
7
2
,
2
2
(
,
6
0
2
5
8
5
3
9
0
0
8
,
,
,
6
5
2
5
2
0
4
2
8
5
,
,
,
7
5
6
4
2
3
8
2
2
5
1
,
,
,
8
2
0
0
6
6
,
4
9
8
,
6
3
2
7
0
,
2
1
7
,
2
6
6
8
0
4
,
1
3
5
,
5
2
2
,
2
6
9
6
,
5
8
9
,
5
8
8
,
4
1
9
8
0
,
6
4
3
,
2
7
3
,
4
)
5
3
8
,
4
2
2
,
2
1
(
)
9
0
3
,
9
7
5
,
8
2
1
(
1
6
7
,
9
5
4
,
7
3
1
s
t
n
e
m
u
r
t
s
n
i
l
i
a
c
n
a
n
fi
e
v
i
t
a
v
i
r
e
D
»
0
0
7
,
3
3
0
,
8
3
9
0
0
0
,
7
4
5
,
4
8
4
,
1
d
n
a
i
y
r
a
d
s
b
u
s
i
n
i
s
t
n
e
m
t
s
e
v
n
I
»
i
s
e
t
a
c
o
s
s
a
l
a
t
o
T
:
s
t
n
e
m
t
s
e
v
n
i
l
i
a
c
n
a
n
F
i
s
t
n
e
m
u
r
t
s
n
i
t
b
e
D
»
l
i
a
c
n
a
n
F
i
s
n
o
i
t
u
t
i
t
s
n
i
-
-
9
6
3
,
6
6
1
,
8
0
2
,
1
)
0
3
6
,
8
9
2
,
9
2
(
-
-
-
-
-
-
n
r
e
v
o
g
r
e
h
t
o
d
n
a
s
l
l
i
b
y
r
u
s
a
e
r
T
»
s
e
t
o
n
l
a
t
n
e
m
2
1
0
2
,
1
3
.
c
e
D
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
s
s
o
r
G
»
s
t
n
e
m
u
r
t
s
n
i
t
b
e
D
»
:
s
t
e
s
s
a
l
i
a
c
n
a
n
fi
g
n
d
a
r
T
i
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
s
s
o
r
G
s
r
e
m
o
t
s
u
c
s
n
a
o
l
l
a
n
o
s
r
e
P
»
s
d
r
a
c
t
i
d
e
r
C
»
s
t
f
a
r
d
r
e
v
O
»
s
e
g
a
g
t
r
o
M
»
s
n
a
o
l
r
e
h
t
O
»
:
e
t
a
r
o
p
r
o
C
s
t
f
a
r
d
r
e
v
O
»
s
n
a
o
l
t
c
e
r
i
D
»
s
n
a
o
l
i
d
e
t
a
c
d
n
y
S
»
:
l
i
a
u
d
v
d
n
i
I
t
n
u
o
c
s
d
s
i
l
l
i
b
d
e
z
i
t
r
o
m
a
n
U
»
s
n
a
o
l
r
e
h
t
O
»
i
i
n
o
s
v
o
r
p
t
n
e
m
r
i
a
p
m
I
»
t
s
e
r
e
t
n
i
d
e
n
r
a
e
n
U
»
i
i
n
o
s
v
o
r
p
t
n
e
m
r
i
a
p
m
I
:
s
s
e
L
»
s
k
n
a
b
108
Annual Report 2012
Annual Report 2012
109
Financial Statements: Separate
3.2. Market risk
Market risk represnted as fluctuations in fair value or future cash flow, including foreign exchange rates and commodity
prices, interest rates, credit spreads and equity prices will reduce the Bank’s income or the value of its portfolios. The Bank
separates exposures to market risk into trading or non-trading portfolios.
Market risks are measured, monitored and controlled by the market risk management department. In addition, regular
reports are submitted to the Asset and Liability Management Committee (ALCO), Board Risk Committee and the heads of
each business unit.
Trading portfolios include positions arising from market-making, position taking and others designated as marked-to-
market. Non-trading portfolios include positions that primarily arise from the interest rate management of the group’s retail
and commercial banking assets and liabilities, financial investments designated as available for sale and held-to-maturity.
3.2.1. Market risk measurement techniques
As part of the management of market risk, the Bank undertakes various hedging strategies. The Bank also enters into
interest rate swaps to match the interest rate risk associated with the fixed-rate long-term debt instrument and loans to
which the fair value option has been applied.
3.2.1.1. Value at Risk
The Bank applies a “Value at Risk” methodology (VaR) to its trading and non-trading portfolios, to estimate the market
risk of positions held and the maximum losses expected under normal market conditions, based upon a number of as-
sumptions for various changes in market conditions.
VaR is a statistically based estimate of the potential loss on the current portfolio from adverse market movements. It
expresses the ‘maximum’ amount the Bank might lose , but only to a certain level of confidence (95%). There is therefore
a specified statistical probability (5%) that actual loss could be greater than the VaR estimate. The VaR model assumes a
certain ‘holding period’ until positions can be closed (1 Day). The Bank is assessing the historical movements in the mar-
ket prices based on volatilities and correlations data for the past five years. The use of this approach does not prevent losses
outside of these limits in the event of more significant market movements.
As VaR constitutes an integral part of the Bank’s market risk control regime, the Market Risk Management set Soft VaR
Limits, trading book, which have been approved by the board, and are monitored and reported on a daily basis to the
Senior Management. In addition, monthly limits compliance is reported to the ALCO.
The Bank has developed the internal models used to calculate VaR and are not approved yet by the central bank as the
regulator is still applying Basel I in parallel basis with the standardized market risk approach in Basel II.
3.2.1.2. Stress tests
Stress tests provide an indication of the potential size of losses that could arise under extreme market conditions. There-
fore, bank computes on a daily basis trading Stress VaR, combined with trading Normal VaR to capture the abnormal
movements in financial markets and to give more comprehensive picture of risk. The results of the stress tests are reviewed
by the ALCO on a monthly basis and the board risk committee on a quarterly basis.
3.2.2. Value at risk (VaR) Summary
• Total VaR by risk type
Medium
41,293
69,880,113
63,018,453
6,861,659
199,809
345,860
69,926,059
Dec.31, 2012
High
175,325
81,920,976
72,607,499
9,313,477
253,871
465,524
81,958,286
Low
5,847
58,491,659
52,982,174
5,509,485
149,646
282,380
58,537,533
Medium
275,822
19,970,380
9,752,494
13,919,605
1,659,204
921,509
20,406,187
Dec.31, 2011
High
798,293
25,574,668
11,883,218
16,474,199
1,762,596
1,057,998
26,002,691
EGP
Low
22,715
15,047,233
7,638,408
11,866,315
1,488,630
798,571
15,490,695
» Foreign exchange risk
» Interest rate risk
» For non trading purposes
» For trading purposes
» Equities risk
» Investment fund
Total VaR
110
Annual Report 2012
• Trading portfolio VaR by risk type
» Foreign exchange risk
Interest rate risk
» For trading purposes
» Equities risk
» Investment fund
Total VaR
Medium
41,293
Dec.31, 2012
High
175,325
Low
Medium
5,847
275,822
Dec.31, 2011
High
798,293
Low
22,715
6,861,659
199,809
345,860
7,268,816
9,313,477
253,871
465,524
9,360,357
5,509,485 13,919,605 16,474,199 11,866,315
1,488,630
798,571
5,546,276 14,382,231 15,076,004 13,832,710
1,659,204
921,509
1,762,596
1,057,998
149,646
282,380
• Non trading portfolio VaR by risk type
Medium
Dec.31, 2012
High
Low
Medium
Dec.31, 2011
High
Low
Interest rate risk
» For non trading purposes
Total VaR
63,018,453 72,607,499 52,982,174
63,018,453 72,607,499 52,982,174
9,752,494 11,883,218
9,752,494 11,883,218
7,638,408
7,638,408
The aggregate of the trading and non-trading VaR results does not constitute the Bank’s VaR due to correlations and con-
sequent diversification effects between risk types and portfolio types.
3.2.3. Foreign exchange risk
The Bank’s financial position and cash flows are exposed to fluctuations in foreign currency exchange rates. The Board sets
limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are moni-
tored daily. The table below summarizes the Bank’s exposure to foreign currency exchange rate risk and Bank’s financial
instruments at carrying amounts, categorized by currency.
Dec.31, 2012
Financial assets
» Cash and balances with
Central Bank
» Due from banks
» Treasury bills and other
governmental notes
» Trading financial assets
» Gross loans and advanc-
es to banks
» Gross loans and advanc-
es to customers
» Derivative financial instru-
ments
Financial investments
» Available for sale
» Held to maturity
» Investments in subsidiary
and associates
Total financial assets
Financial liabilities
» Due to banks
» Due to customers
» Derivative financial instru-
ments
» Long term loans
Total financial liabilities
Net on-balance sheet
financial position
EGP
USD
EUR
GBP
Other
Total
Equivalent EGP
4,547,889,733
649,709,912
128,385,584
24,385,266
43,603,629 5,393,974,124
53,493,996 5,049,101,786 2,401,041,621
402,155,264
51,917,368 7,957,710,034
4,733,513,339 3,472,922,400
241,653,085
1,447,209,884
9,194,145
-
-
1,170,995,566
37,170,803
-
-
-
-
8,448,088,824
15,877,734 1,472,281,763
-
1,208,166,369
25,149,379,935 17,249,717,628
698,370,716
37,776,260
7,563,832 43,142,808,370
34,317,819
98,258,816
4,883,126
19,852,236,705 1,309,647,328
-
4,205,753,328
901,067,550
36,966,150
-
-
-
-
-
-
-
-
137,459,761
- 21,161,884,032
4,205,753,328
-
-
938,033,700
60,924,862,289 29,046,513,730 3,511,504,934
464,316,790
118,962,562 94,066,160,307
650,505
1,362,866,273
48,030,144,773 26,846,823,314 3,403,851,868
351,304,112
41,825
453,989,690
-
1,714,862,716
99,917,245 78,834,726,890
12,295,409
102,612,684
4,191,167
-
-
119,099,260
80,495,238
-
49,485,801,694 27,300,740,110 3,408,693,540
-
-
454,031,515
-
80,495,238
99,917,245 80,749,184,104
11,439,060,595 1,745,773,620
102,811,394
10,285,275
19,045,318 13,316,976,202
Annual Report 2012
111
Financial Statements: Separate
3.2.4. Interest rate risk
The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair
value and cash flow risks. Interest margins may increase as a result of such changes but profit may decrease in the event
that unexpected movements arise.The Board sets limits on the gaps of interest rate repricing that may be undertaken,
which is monitored by bank’s Risk Management Department.
The table below summarizes the Bank’s exposure to interest rate risks. It includes the Bank’s financial instruments at car-
rying amounts, categorized by the earlier of repricing or contractual maturity dates.
Dec.31, 2012
Financial assets
» Cash and bal-
ances with
Central Bank
» Due from banks
» Treasury bills and
other govern-
mental notes*
» Trading financial
assets
» Gross loans and
advances to
banks
» Gross loans and
advances to
customers
» Derivatives finan-
cial instruments
(including IRS
notional amount)
Financial in-
vestments
» Available for sale
» Held to maturity
» Investments in
subsidiary and
associates
Total financial
assets
Financial liabili-
ties
» Due to banks
» Due to custom-
ers
» Derivatives finan-
cial instruments
(including IRS
notional amount)
» Long term loans
Total financial
liabilities
Total interest
re-pricing gap
Up to1
Month
1-3
Months
3-12
Months
1-5 years
Over 5
years
Non-
Interest
Bearing
Total
-
-
-
3,724,249,373 4,039,063,382
41,664,325
(2,392,490,261) 2,359,738,000 8,480,841,085
-
-
-
-
-
-
5,393,974,124
5,393,974,124
152,732,954
7,957,710,034
-
8,448,088,824
318,347,333
-
-
918,121,244
219,935,445
15,877,741
1,472,281,763
72,394,428
751,920,402
383,851,539
-
-
23,384,335,335 8,056,916,417 7,335,797,152 3,512,242,033
853,517,433
-
-
1,208,166,369
43,142,808,370
601,968,669
589,566,465
859,582,784 3,306,273,019
379,393,905
103,141,940
5,839,926,782
1,322,522,351
-
-
-
-
-
4,017,903,710 11,736,956,304 3,636,620,842
-
15,732,123 4,190,021,205
447,880,825
-
21,161,884,032
4,205,753,328
-
-
-
938,033,700
938,033,700
27,031,327,228 15,797,204,666 21,135,372,718 23,663,613,805 5,089,467,625 7,051,641,284
99,768,627,326
1,360,467,819
-
-
-
-
354,394,897
1,714,862,716
25,075,487,093 12,100,430,806 8,222,585,000 20,807,578,680
470,785,000 12,157,860,312
78,834,726,890
2,175,142,530 2,703,939,377
132,811,540
153,115,055
549,753,928
106,803,850
5,821,566,280
-
-
59,508,571
20,986,667
-
-
80,495,238
28,611,097,442 14,804,370,183 8,414,905,111 20,981,680,402 1,020,538,928 12,619,059,059
86,451,651,124
(1,579,770,214)
992,834,483 12,720,467,607 2,681,933,403 4,068,928,697 (5,567,417,775)
13,316,976,202
* After deducting Repos.
112
Annual Report 2012
3.3. Liquidity risk
Liquidity risk is the risk that the Bank does not have sufficient financial resources to meet its obligations arises from its
financial liabilities as they fall due or to replace funds when they are withdrawn. The consequence may be the failure to
meet obligations to repay depositors and fulfill lending commitments.
3.3.1. Liquidity risk management process
the Bank’s liquidity management process, is carried by the assets and Liabilities Management Department and monitored
independently by the Risk Management Department, which includes: Projecting cash flows by major currency under vari-
ous stress scenarios and considering the level of liquid assets necessary in relation thereto:
• The Bank maintains an active presence in global money markets to enable this to happen.
• Maintaining a diverse range of funding sources with back-up facilities.
• Monitoring balance sheet liquidity and advances to core funding ratios against internal and Central Bank of Egypt regulations.
• Managing the concentration and profile of debt maturities.
• Monitoring and reporting takes the form of cash flow measurement and projections for the next day, week and month re-
spectively, as these are key periods for liquidity management. The starting point for those assets projections is an analysis
of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. Bank’s Risk
Management Department also monitors unmatched medium-term
3.3.2. Funding approach
Sources of liquidity are regularly reviewed jointly by the Bank’s Assets & Liabilities Management Department and Con-
sumer Banking to maintain a wide diversification within currencies, geographical area, depositors, products and tenors.
3.3.3. Non-derivative cash flows
The table below presents the undiscounted cash flows payable by the Bank under non-derivative financial liabilities by remain-
ing contractual maturities and the maturities assumption for non contractual products are based on there behavior studies.
Dec.31, 2012
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total liabilities (contrac-
tual and non contractual
maturity dates)
Total financial assets
(contractual and non con-
tractual maturity dates)
Dec.31, 2011
Up to
1 month
One to
three
months
Three
months
to one year
One year to
five years
Over five
years
Total
EGP
1,714,862,716
1,714,862,716
11,526,810,962 9,736,841,059 20,452,119,693 35,809,584,757 1,309,370,420 78,834,726,890
80,495,238
59,508,571
20,986,667
-
-
-
-
-
-
-
13,241,673,678 9,736,841,059 20,511,628,264 35,830,571,424 1,309,370,420 80,630,084,844
9,874,255,24212,497,060,088 22,097,635,946 39,608,844,700 9,940,640,568 94,018,436,544
Up to
1 month
One to
three
months
Three
months
to one year
One year to
five years
Over five
years
Total
EGP
-
-
125,931
3,340,794,517
3,340,794,517
12,876,722,334 8,576,616,724 17,868,791,406 30,859,028,066 1,392,889,000 71,574,047,530
99,333,376
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total liabilities (contrac-
tual and non contractual
maturity dates)
Total financial assets
(contractual and non con-
tractual maturity dates)
Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, due from CBE and
due from banks, treasury bills, other government notes , loans and advances to banks and customers.
16,217,642,782 8,578,138,228 17,951,548,347 30,873,957,066 1,392,889,000 75,014,175,423
14,753,504,167 11,100,069,868 20,844,934,425 28,478,165,923 10,614,870,781 85,791,545,163
82,756,941
14,929,000
1,521,504
-
-
-
In the normal course of business, a proportion of customer loans contractually repayable within one year will be extended.
Annual Report 2012
113
Financial Statements: Separate
In addition, debt instrument and treasury bills and other governmental notes have been pledged to secure liabilities. The
Bank would also be able to meet unexpected net cash outflows by selling securities and accessing additional funding
sources such as asset-backed markets.
3.3.4. Derivative cash flows
Derivatives settled on a net basis the Bank’s derivatives that will be settled on a net basis include:
Foreign exchange derivatives: exchange traded options and over-the-counter (OTC) ,exchange traded forwards currency options.
Interest rate derivatives: interest rate swaps, forward rate agreements, OTC and exchange traded interest rate options,
other interest rate contracts and exchange traded futures.
The table below analyses the Bank’s derivative undiscounted financial liabilities that will be settled on a net basis into
maturity groupings based on the remaining period of the balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows:
Dec.31, 2012
Liabilities
Derivatives financial instruments
» Foreign exchange derivatives
» Interest rate derivatives
Total
Off balance sheet items
Dec.31, 2012
» Letters of credit, guarantees
and other commitments
Up to
1 month
One to
three
months
Three
months
to one
year
One year
to
five years
Over five
years
Total
EGP
2,518,555
-
2,518,555
1,956,292
189,039
2,145,330
7,819,636
1,584,638
9,404,274
-
7,178,710
7,178,710
927
12,295,410
97,717,438 106,669,824
97,718,365 118,965,234
Up to 1 year
1-5 years
Over 5 years
Total
10,332,483,593
3,239,319,148
1,325,986,263
14,897,789,005
EGP
Total
10,332,483,593
3,239,319,148
1,325,986,263
14,897,789,005
3.4. Fair value of financial assets and liabilities
3.4.1. Financial instruments not measured at fair value
The table below summarizes the book value and fair value of those financial assets and liabilities not presented on the
Bank’s balance sheet at their fair value.
Book value
Fair value
Dec.31, 2012
Dec.31, 2011
Dec.31, 2012
Dec.31, 2011
7,957,710,034
8,449,298,705
7,957,710,034
8,449,298,705
1,208,166,369
1,433,545,112
1,208,166,369
1,433,545,112
5,981,587,224
37,161,221,146
4,648,379,836
36,851,208,480
5,981,587,224
37,161,221,146
4,648,379,836
36,851,208,480
4,205,753,328
56,514,438,101
29,092,920
51,411,525,053
4,205,753,328
56,514,438,101
29,092,920
51,411,525,053
1,714,862,716
78,834,726,890
80,495,238
80,630,084,844
3,340,794,517
71,574,047,530
99,333,376
75,014,175,423
1,714,862,716
78,834,726,890
80,495,238
80,630,084,844
3,340,794,517
71,574,047,530
99,333,376
75,014,175,423
Financial assets
» Due from banks
» Gross loans and advances to
banks
Gross loans and advances to
customers
» Individual
» Corporate
Financial investments
» Held to Maturity
» Total financial assets
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total financial liabilities
114
Annual Report 2012
Due from banks
The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of fixed
interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with
similar credit risk and similar maturity date.
Loans and advances to banks
Loans and advances to banks represented in loans do not considering bank placing. The expected fair value of the loans
and advances represents the discounted value of future cash flows expected to be collected. Cash flows are discounted us-
ing the current market rate to determine fair value.
Loans and advances to customers
Loans and advances are net of provisions for impairment. The estimated fair value of loans and advances represents the
discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current
market rates to determine fair value.
Financial Investments
Investment securities include only interest-bearing assets held to maturity assets classified as available for sale are meas-
ured at fair value.
Fair value for held-to-maturity assets is based on market prices or broker/dealer price quotations. Where this information is not
available, fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.
Due to other banks and customers
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount
repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings not quoted in an
active market is based on discounted cash flows using interest rates for new debts with similar maturity date.
3.5 Capital management
For capital management purposes, the Bank’s capital includes total equity as reported in the balance sheet plus some other
elements that are managed as capital. The Bank manages its capital to ensure that the following objectives are achieved:
• Compliance with the legally imposed capital requirements in Egypt.
• Protecting the Bank’s ability to continue as a going concern and enabling it to generate yield for shareholders and other
parties dealing with the bank.
• Maintaining a strong capital base to enhance growth of the Bank’s operations.
Capital adequacy and the use of regulatory capital are monitored on a daily basis by the Bank’s management, employing techniques based
on the guidelines developed by the Basel Committee as implemented by the banking supervision unit in the Central Bank of Egypt.
The required data is submitted to the Central Bank of Egypt on a quarterly basis. Central Bank of Egypt requires the following:
• Maintaining EGP 500 million as a minimum requirement for the issued and paid-in capital.
• Maintaining a minimum level of capital adequacy ratio of 10%, calculated as the ratio between total value of the capital
elements, and the risk-weighted assets and contingent liabilities of the Bank.
Tier one:
Tier one, comprised of paid-in capital (after deducting the book value of treasury shares), retained earnings and reserves resulting
from the distribution of profits except the banking risk reserve and deducting previously recognized goodwill and any retained losses
Tier two:
Represents the gone concern capital which comprised of general risk provision according to the impairment provision
guidelines issued by the Central Bank of Egypt for to the maximum of 1.25% risk weighted assets and contingent liabili-
ties, subordinated loans with more than five years to maturity (amortizing 20% of its carrying amount in each year of
the remaining five years to maturity) and 45% of the increase in fair value than book value for available for sale , held to
maturity , subsidiaries and associates investments.
When calculating the numerator of capital adequacy ratio, the rules set limits of total tier 2 to no more than tier 1 capital
and also limits the subordinated to no more than 50% of tier1.
Annual Report 2012
115
Financial Statements: Separate
Assets risk weight scale ranging from zero to 100% based on the counterparty risk to reflect the related credit risk scheme,
taking into considration the cash collatrals. Similar criteria are used for off balance sheet items after adjusting it to reflect
the nature of contingency and the potential loss of those amounts. The Bank has complied with all local capital adequacy
requirements for the current year.
The tables below summarizes the compositions of teir 1, teir 2 and the capital adequacy ratio .
According to Basel I :
Dec.31, 2012
In thousands EGP
Dec.31, 2011
In thousands EGP
Tier 1 capital
» Share capital (net of the treasury shares)
» General reserves
» Legal reserve
» Other reserve
» Retained Earnings
Total qualifying tier 1 capital
Tier 2 capital
» General risk provision
» 45% of the Increase in fair value than the book value for
available for sale and held to maturity investments
Total qualifying tier 2 capital
Total capital 1+2
Risk weighted assets and contingent liabilities
» Risk weighted assets
» Contingent liabilities
Total
*Capital adequacy ratio (%)
* Based on separate financial statement figures
According to Basel II :
5,972,275
2,037,107
380,349
203,498
1,002
8,594,231
689,829
147,873
837,702
9,431,933
50,040,545
5,145,814
55,186,359
17.09%
Restated
5,934,563
2,054,762
318,651
(474,528)
-
7,833,448
692,088
-
692,088
8,525,536
50,175,825
5,191,197
55,367,022
15.40%
Tier 1 capital
» Share capital (net of the treasury shares)
» Reserves
» Retained Earnings
» Total deductions from tier 1 capital Common Equity
Total qualifying tier 1 capital
Tier 2 capital
» 45% of special reserve
» 45% of the Increase in fair value than the book value for available for sale and held
to maturity investments
» Impairment provision for loans and regular contingent liabilities
Total qualifying tier 2 capital
Total capital 1+2
Risk weighted assets and contingent liabilities
» Total credit risk
» Total market risk
» Total operational risk
Total
*Capital adequacy ratio (%)
Dec.31, 2012
In thousands EGP
5,972,275
2,502,995
(510,946)
(4,701)
7,959,623
53,011
147,873
708,329
909,213
8,868,836
56,794,762
1,994,960
6,460,913
65,250,635
13.59%
* Based on consolidated financial statement figures and in accordance with Centeral Bank of Egypt regulation issued on 24
December 2012.
116
Annual Report 2012
4. Critical accounting estimates and judgments
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next finan-
cial year.
Estimates and judgments are continually evaluated and based on historical experience and other factors, including expecta-
tions of future events that are believed to be reasonable under the circumstances and available information.
Impairment losses on loans and advances
4.1.
The Bank reviews its loan portfolios to assess impairment on monthly basis a quarterly basis. In determining whether
an impairment loss should be recorded in the income statement, the Bank makes judgments as to whether there is any
observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans
before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data
indicating that there has been an adverse change in the payment status of borrowers in a Bank, or national or local eco-
nomic conditions that correlate with defaults on assets in the Bank. Management uses estimates based on historical loss
experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio
when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and tim-
ing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
To the extent that the net present value of estimated cash flows differs by +/-5%
Impairment of available for-sale equity investments
4.2.
The Bank determines that available-for-sale equity investments are impaired when there has been a significant or pro-
longed decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In
making this judgment, the Bank evaluates among other factors, the normal volatility in share price. In addition, impair-
ment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry and
sector performance, changes in technology, and operational and financing cash flows.
4.3. Fair value of derivatives
The fair value of financial instruments that are not quoted in active markets are determined by using valuation techniques.
Where valuation techniques (as models) are used to determine fair values, they are validated and periodically reviewed by
qualified personnel independent of the area that created them. All models are certified before they are used, and models
are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use
only observable data; however, areas such as credit risk (both own and counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions about these factors could affect reported fair value of financial
instruments.
4.4. Held-to-Maturity investments
The non-derivative financial assets with fixed or determinable payments and fixed maturity are being classified held to
maturity. This requires significant judgment. In making this judgment, the Bank evaluates its intention and ability to hold
such investments to maturity. If the Bank fails to keep these investments to maturity other than for the specific circum-
stances – for example, selling an insignificant amount close to maturity it will be required to reclassify the entire category
as available for sale. The investments would therefore be measured at fair value not amortized cost.
5. Segment analysis
5.1. By business segment
The Bank is divided into main business segments on a worldwide basis:
• Corporate banking – incorporating direct debit facilities, current accounts, deposits, overdrafts, loan and other credit
facilities, foreign currency and derivative products
• Investment banking – incorporating financial instruments Trading, structured financing, Corporate leasing,and merger
and acquisitions advice.
• Retail banking – incorporating private banking services, private customer current accounts, savings, deposits, investment
savings products, custody, credit and debit cards, consumer loans and mortgages;
• Others –Include other banking business, such as Assets Management.
• Transactions between the business segments are on normal commercial terms and conditions.
Annual Report 2012
117
Corporate
banking
SME’s
Investment
banking
Retail
banking
EGP
Total
3,302,588,319
731,332,747
(273,334,474) 1,610,326,906 5,370,913,498
(1,124,760,077)
(308,458,766)
(25,353,002)
(859,123,551)
(2,317,695,396)
6. Net interest income
Interest and similar income
» Banks
» Clients
Financial Statements: Separate
Dec.31, 2012
» Revenue according to
business segment
» Expenses according to
business segment
Profit before tax
» Tax
Profit for the year
Total assets
Dec.31, 2011
» Revenue according to
business segment
» Expenses according to
business segment
Profit before tax
» Tax
Profit for the year
Total assets
2,177,828,242
(552,626,343)
1,625,201,899
751,203,355 3,053,218,102
(298,687,476)
(190,591,442)
(850,507,191)
-
560,611,913 2,202,710,911
(298,687,476)
80,952,435,040 2,626,503,517 1,451,894,947 9,374,557,798 94,405,391,302
422,873,981
(107,289,406)
315,584,575
Corporate
banking
SME’s
Investment
banking
Retail
banking
Total
2,226,050,418
597,635,091
(75,724,924) 1,278,100,557 4,026,061,142
(777,096,428)
(255,290,741)
(25,181,851)
(788,714,940)
(1,846,283,960)
1,448,953,990
(273,777,928)
1,175,176,062
489,385,617 2,179,777,182
(100,906,775)
(92,466,940)
(430,929,104)
-
396,918,677 1,748,848,078
(100,906,775)
74,621,790,612 2,143,523,905 1,533,773,854 7,329,130,662 85,628,219,033
342,344,350
(64,684,236)
277,660,114
5.2. By geographical segment
Dec.31, 2012
» Revenue according to geographical seg-
ment
» Expenses according to geographical seg-
ment
Profit before tax
» Tax
Profit for the year
Total assets
Dec.31, 2011
» Revenue according to geographical seg-
ment
» Expenses according to geographical seg-
ment
Profit before tax
» Tax
Profit for the year
Total assets
Cairo
Alex, Delta &
Sinai
Upper Egypt
Total
4,334,514,952
887,705,321
148,693,225 5,370,913,498
EGP
(1,834,683,705)
(399,008,070)
(84,003,621)
(2,317,695,396)
2,499,831,247
(696,353,609)
1,803,477,638
64,689,604 3,053,218,102
(18,020,186)
(850,507,191)
46,669,418 2,202,710,911
84,065,156,225 9,048,557,087 1,291,677,989 94,405,391,302
488,697,251
(136,133,396)
352,563,855
Cairo
Alex, Delta &
Sinai
Upper Egypt
Total
3,056,055,933
835,887,927
134,117,282 4,026,061,142
(1,335,361,487)
(405,117,905)
(105,804,568)
(1,846,283,960)
1,720,694,446
(340,172,340)
1,380,522,106
430,770,022
(85,159,580)
345,610,442
75,287,082,794 9,812,046,055
28,312,714 2,179,777,182
(5,597,184)
(430,929,104)
22,715,530 1,748,848,078
529,090,184 85,628,219,033
» Treasury bills and bonds
» Reverse repos
» Financial investments in held to maturity and available for sale
debt instruments
» Other
Total
Interest and similar expense
» Banks
» Clients
» Financial instruments purchased with a commitment to re-sale
(Repos)
» Other
Total
Net interest income
7. Net income from fee and commission
Fee and commission income
» Fee and commissions related to credit
» Custody fee
» Other fee
Total
Fee and commission expense
» Other fee paid
Total
Net income from fee and commission
8. Dividend income
» Trading securities
» Available for sale securities
» Subsidiaries and associates
Total
Dec.31, 2012
EGP
Dec.31, 2011
EGP
132,463,454
3,523,926,754
3,656,390,208
4,013,129,815
17,423,270
142,055,284
2,900,254,722
3,042,310,006
2,229,154,572
22,223,513
158,941,017
165,313,561
29,184
7,845,913,494
246,625
5,459,248,277
181,169,862
3,449,311,643
3,630,481,505
188,421,651
2,567,289,984
2,755,711,635
310,995,070
22,306,090
3,760,975
3,945,237,550
3,900,675,944
2,685,436
2,780,703,161
2,678,545,116
Dec.31, 2012
EGP
Dec.31, 2011
EGP
470,471,721
40,798,715
431,596,884
942,867,320
107,365,742
107,365,742
835,501,578
431,874,322
37,706,902
396,039,716
865,620,940
87,451,431
87,451,431
778,169,509
Dec.31, 2012
EGP
Dec.31, 2011
EGP
578,098
27,138,391
4,517,707
32,234,196
874,720
45,773,632
13,272,726
59,921,078
118
Annual Report 2012
Annual Report 2012
119
Financial Statements: Separate
9. Net trading income
14. Earning per share
» Profit (losses) from foreign exchange
» Profit (losses) from revaluations of trading assets and liabilities
in foreign currencies
» Profit (Loss) from forward foreign exchange deals revaluation
» Profit (Loss) from interest rate swaps revaluation
» Profit (Loss) from currency swap deals revaluation
» Trading debt instruments
» Trading equity instruments
Total
10. Administrative expenses
Staff costs
» Wages and salaries
» Social insurance
» Other benefits
» Other administrative expenses
Total
11. Other operating (expenses) income
» Profits (Losses) from non-trading assets and liabilities revaluation
» Profits (losses) from selling property, plant and equipment
» Release (charges) of other provisions
» Others
Total
12. Impairment (charge) release for credit losses
» Loans and advances to customers
» Held to maturity financial investments
Total
13. Adjustments to calculate the effective tax rate
» Profit before tax
» * Tax settlement for prior years
» Profit after settlement
» Tax rate
Income tax based on accounting profit
Add / (Deduct)
» Non-deductible expenses
» Tax exemptions
» Effect of provisions
» Effect of depreciation
Income tax
Effective tax rate
**Tax claims for the year ended on December.31, 2011
Dec.31, 2012
EGP
249,583,425
Dec.31, 2011
EGP
293,331,214
2,045,486
6,341,379
6,669,087
212,030
(2,963,355)
311,074,819
(893,527)
565,727,965
16,779,398
(19,845)
548,800
52,845,534
(913,960)
368,912,520
Dec.31, 2012
EGP
Dec.31, 2011
EGP
684,521,699
30,542,233
30,941,993
698,639,542
1,444,645,467
Dec.31, 2012
EGP
36,631,170
2,387,583
(51,085,880)
(97,723,664)
(109,790,791)
Dec.31, 2012
EGP
(609,971,077)
-
(609,971,077)
Dec.31, 2012
EGP
3,053,218,102
(65,137,014)
2,988,081,089
24.98%
746,520,272
22,716,152
(77,772,622)
88,495,041
5,411,335
785,370,178
26.28%
599,054,292
24,707,497
38,341,470
674,598,349
1,336,701,608
Dec.31, 2011
EGP
(53,338,683)
2,716,747
45,511,985
(63,110,114)
(68,220,065)
Dec.31, 2011
EGP
(322,276,483)
1,627,620
(320,648,863)
Dec.31, 2011
EGP
2,179,777,182
-
2,179,777,182
From20%to25%
544,444,295
24,155,850
(183,887,532)
46,216,491
-
430,929,104
19.77%
» Net profit for the period available for distribution
» Board member’s bonus
» Staff profit sharing
Profits shareholders’ Stake
» Number of shares
Basic earning per share
By issuance of ESOP earning per share will be:
» Number of shares including ESOP shares
Diluted earning per share
15. Cash and balances with Central Bank
» Cash
Obligatory reserve balance with CBE
» Current accounts
Total
Non-interest bearing balances
16. Due from banks
» Current accounts
» Deposits
Total
» Central banks
» Local banks
» Foreign banks
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
Total
17. Treasury bills and other governmental notes
» 91 Days maturity
» 182 Days maturity
» 364 Days maturity
» Unearned interest
Total 1
» Repos - treasury bills
Total 2
Net
Dec.31, 2012
EGP
2,379,297,994
(35,689,470)
(237,929,799)
2,105,678,724
597,227,541
3.53
Dec.31, 2011
EGP
1,636,540,147
(24,548,102)
(163,654,015)
1,448,338,030
597,227,541
2.43
607,261,107
3.47
605,482,218
2.39
Dec.31, 2012
EGP
1,744,700,680
3,649,273,444
5,393,974,124
5,393,974,124
Dec.31, 2012
EGP
227,153,819
7,730,556,215
7,957,710,034
3,093,850,399
500,586,325
4,363,273,310
7,957,710,034
152,732,954
7,804,977,080
7,957,710,034
7,957,710,034
7,957,710,034
Dec.31, 2012
EGP
3,142,959,400
4,022,757,000
4,458,084,085
(470,058,411)
11,153,742,074
(3,175,711,661)
(3,175,711,661)
7,978,030,413
Dec.31, 2011
EGP
1,891,659,489
5,600,405,021
7,492,064,510
7,492,064,510
Dec.31, 2011
EGP
197,047,111
8,252,251,594
8,449,298,705
3,031,574,198
155,171,707
5,262,552,800
8,449,298,705
149,987,713
8,299,310,992
8,449,298,705
8,449,298,705
8,449,298,705
Dec.31, 2011
EGP
1,866,250,000
2,559,925,000
6,861,223,570
(634,008,503)
10,653,390,067
(1,440,000,000)
(1,440,000,000)
9,213,390,067
120
Annual Report 2012
Annual Report 2012
121
Financial Statements: Separate
18. Trading financial assets
Debt instruments
» Governmental bonds
Total
Equity instruments
» Foreign company shares
» Mutual funds
Total
Total financial assets for trading
19. Loans and advances to banks
» Time and term loans
» Less:Impairment provision
Total
» Current balances
» Non-current balances
Total
Analysis for impairment provision of loans and advances to banks
» Bgining balance
» Charge (release) during the year
» Write off during the year
» Exchange revaluation difference
Ending balance
Dec.31, 2012
EGP
37,950,503
(11,450,369)
-
2,798,496
29,298,630
Dec.31, 2012
EGP
Dec.31, 2011
EGP
1,138,056,688
1,138,056,688
15,877,741
318,347,334
334,225,075
1,472,281,763
Dec.31, 2012
EGP
1,208,166,369
(29,298,630)
1,178,867,739
1,172,317,036
6,550,703
1,178,867,739
353,860,497
353,860,497
18,677,035
188,546,741
207,223,776
561,084,273
Dec.31, 2011
EGP
1,433,545,112
(37,950,503)
1,395,594,609
1,304,111,350
91,483,259
1,395,594,609
Dec.31, 2011
EGP
2,694,538
34,736,518
-
519,447
37,950,503
20. Loans and advances to customers
Individual
» Overdraft
» Credit cards
» Personal loans
» Mortgages
» Other loans
Total 1
Corporate
» Overdraft
» Direct loans
» Syndicated loans
» Other loans
Total 2
Total Loans and advances to customers (1+2)
Less:
» Unamortized bills discount
» Impairment provision
» Unearned interest
Net loans and advances to customers
Distributed to
» Current balances
» Non-current balances
Total
Dec.31, 2012
EGP
Dec.31, 2011
EGP
1,220,222,219
660,932,044
3,616,553,758
463,833,879
20,045,324
5,981,587,224
4,288,571,348
23,196,204,054
9,588,649,990
87,795,754
37,161,221,146
43,142,808,370
(22,277,973)
(1,901,222,402)
(520,994,222)
40,698,313,773
16,908,542,925
23,789,770,848
40,698,313,773
952,982,877
575,672,905
2,659,469,004
419,990,050
40,265,000
4,648,379,836
4,239,213,684
24,265,367,037
8,245,001,963
101,625,796
36,851,208,480
41,499,588,316
(45,231,397)
(1,419,409,102)
(365,161,953)
39,669,785,864
17,307,625,654
22,362,160,210
39,669,785,864
Analysis for impairment provision of loans and advances to customers
Individual
Dec.31, 2012
Overdraft
Credit
cards
Personal
loans
20,377,614
42,290,218
76,502,471
Real
estate
loans
11,876,297
Other
loans
Total
1,593,932 152,640,532
» Beginning balance
» Charged (Released) dur-
ing the year
» Write off during the year
» Recoveries from written
off debts
Ending balance
(9,624,567)
(8,977,018)
68,706
1,500,562
(503,001)
(17,535,318)
-
-
(29,454,339)
(2,135,623)
4,469,470
-
-
-
-
-
(31,589,962)
4,469,470
10,753,047
8,328,331
74,435,554
13,376,859
1,090,931 107,984,722
Dec.31, 2012
» Beginning balance
» Charged (Released) during the year
» Write off during the year
» Recoveries from written off debts
» Exchange revaluation difference
Ending balance
Overdraft
Direct
loans
790,797,773
420,954,828
-
14,726,449
15,536,889
209,551,228 1,242,015,939
167,655,394
39,209,960
-
-
2,685,874
Corporate
Syndicated
loans
306,628,666
178,455,887
(154,721,287)
-
6,205,339
336,568,605
Total
Other
loans
1,686,738 1,266,768,571
638,956,764
336,089
(154,721,287)
-
14,726,449
-
3,079,081
27,507,183
5,101,908 1,793,237,680
122
Annual Report 2012
Annual Report 2012
123
Financial Statements: Separate
Individual
Dec.31, 2011
Overdraft
Credit
cards
Personal
loans
6,948,242 42,119,828 71,459,209
Real
estate
loans
8,888,164 13,400,430 142,815,873
Other
loans
Total
» Beginning balance
» Charged (Released) during the
year
» Write off during the year
» Recoveries from written off
debts
Ending balance
13,429,372
5,306,910
6,589,871
2,988,133 (11,806,498) 16,507,788
-
-
(8,858,433)
(2,273,609)
3,721,913
727,000
-
-
-
-
(11,132,042)
4,448,913
20,377,614 42,290,218 76,502,471 11,876,297
1,593,932 152,640,532
Dec.31, 2011
» Beginning balance
» Charged (Released) during the year
» Write off during the year
» Recoveries from written off debts
» Exchange revaluation difference
Ending balance
Overdraft
149,208,018
17,175,711
-
-
1,271,665
167,655,394
Direct
loans
759,961,827
154,370,230
(144,805,506)
11,291,492
9,979,730
790,797,773
Corporate
Syndicated
loans
200,640,880
100,360,788
-
-
5,626,998
306,628,666
Total
Other
loans
2,561,291 1,112,372,016
271,032,176
(874,553)
(144,805,506)
-
11,291,492
-
16,878,393
-
1,686,738 1,266,768,571
21. Derivative financial instruments
21.1. Derivatives
The Bank uses the following financial derivatives for non hedging purposes.
Forward contracts represents commitments of buying foreign and local currencies including unexecuted spot transac-
tions. Future contracts for foreign currencies and/or interest rates represents contractual commitments to receive or pay
net on the basis of changes in foreign exchange rates or interest rates, and/or buying or selling foreign currencies or finan-
cial instruments in a future date with a fixed contractual price under active financial market.
Credit risk is considered low, and future interest rate contracts represents future exchange rate contracts negotiated for
case by case, these contracts requires financial settlements of any differences in contractual interest rates and prevailing
market interest rates on future interest rates on future dates based on contractual amount (nominal value) pre agreed
upon.
Foreign exchange and/or interest rate swap represents commitments to exchange cash flows, resulting from these con-
tracts exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign exchange
and interest rate contracts)/ contractual amounts are not exchanged except for some foreign exchange contracts.
Credit risk is represented in the expected cost of foreign exchange contracts that takes place if other parties default to
fulfill their liabilities. This risk is monitored continuously through comparisons of fair value and contractual amount, and
to control the outstanding credit risk, The Bank evaluates other parties using the same methods as in borrowing activities.
Options contracts in foreign currencies and/or interest rates represents contractual agreements for the buyer (issuer) to
seller (holders) as a right not an obligations whether to buy (buy option) or to sell (sell option) at a certain day or within
certain period for a certain amount in foreign currency or interest rate. Options contracts are either traded in the market
or negotiated between The Bank and one of its clients (Off balance sheet). The Bank exposed to credit risk for purchased
options contracts only and in the line of its book cost which represent its fair value.
The contractual value for some derivatives options considered a base to compare the realized financial instruments on the
balance sheet, but it didn’t provide indicator on the projected cash flows of the fair value for current instruments, those
amounts doesn’t reflects credit risk or interest rate risk.
Derivatives in The Banks benefit represent (assets) conversely it represents (liabilities) as a result of the changes in foreign
exchange prices or interest rates related to these derivatives. Contractual / expected total amounts of financial derivatives
can fluctuate from time to time and also the range through which the financial derivatives can be in benefit of The Bank
or conversely against its benefit and the total fair value of the financial derivatives in assets and liabilities. hereunder are
the fair values of the booked financial derivatives.
21.1.1. For trading derivatives
Dec.31, 2012
Dec.31, 2011
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
1,996,990,255
16,812,998
959,570 1,324,589,420
14,828,172
5,643,831
1,258,600,443
770,698,823
9,781,221
7,723,601
34,317,820
3,612,239 1,408,305,712
509,022,896
7,723,601
12,295,410
54,023,412
2,251,502
71,103,086
13,909,846
2,251,502
21,805,179
859,324,209
12,149,920
12,630,731
12,630,731
134,026
134,026
8,739,696 1,124,316,614
8,739,696
134,026
134,026
128,045,173
15,667,505
15,667,505
870,385
870,385
11,842,172
11,842,172
870,385
870,385
47,082,577
21,169,132
87,640,976
34,517,736
Foreign derivatives
» Forward foreign ex-
change contracts
» Currency swap
» Options
Total 1
Interest rate deriva-
tives
» Interest rate swaps
Total 2
» Commodity
Total 3
Total assets (li-
abilities) for trading
derivatives (1+2+3)
21.1.2. Fair value hedge
Interest rate deriva-
tives
» Governmental
debit instruments
hedging
» Customers depos-
its hedging
Total 4
Total financial de-
rivatives (1+2+3+4)
549,753,000
-
97,708,858
524,775,300
-
78,514,812
4,293,389,812
90,377,184
221,270 3,661,135,640
58,903,680
1,255,442
90,377,184
97,930,128
58,903,680
79,770,254
137,459,761
119,099,260
146,544,656 114,287,990
21.2. Hedging derivatives
21.2.1. Fair value hedge
The Bank uses interest rate swap contracts to cover part of the risk of potential decrease in fair value of its fixed rate gov-
ernmental debt instruments in foreign currencies. Net derivative value resulting from the related hedging instruments is
EGP 97,708,858 at the end of December, 2012 against EGP 78,514,812 at the end of December, 2011, Resulting in net loss
form hedging instruments at the end of December, 2012 EGP 19,194,046 against net loss EGP 78,514,812 at the end of
December, 2011. Gains arises from the hedged items at the end of December, 2012 reached EGP 14,842,228 against profits
arises EGP 77,848,826 at the end of December, 2011.
The Bank uses interest rate swap contracts to cover part of the risk of potential decrease in fair value of its fixed rate
customers deposits in foreign currencies. Net derivative value resulting from the related hedging instruments is EGP
90,155,914 at the end of December, 2012 against EGP 57,648,238 at the end of December, 2011, Resulting in net profits
form hedging instruments at the end of December, 2012 EGP 32,507,675 against net profit EGP 58,450,867 at the end of
December, 2011. Losses arises from the hedged items at the end of December , 2012 reached EGP 27,731,731 against losses
EGP 57,855,943 at the end of December, 2011.
124
Annual Report 2012
Annual Report 2012
125
Financial Statements: Separate
22. Financial investments
Available for sale
» Listed debt instruments
» Listed equity instruments
» Unlisted instruments
Total
» Held to maturity
» Listed debt instruments
» Unlisted instruments
Total
Total financial investment
» Actively traded instruments
» Not actively traded instruments
Total
» Fixed interest debt instruments
» Floating interest debt instruments
Total
» Beginning balance on Jan.01, 2011
» Addition
» Deduction (selling - redemptions)
» Exchange revaluation differences
» Profit (losses) from fair value difference
» Impairment (charges) release
Ending Balance
Available for sale
financial
investments
13,605,347,030
4,535,816,258
(2,135,258,815)
55,264,416
(647,348,588)
(1,254,232)
15,412,566,069
» Beginning balance on Jan.01, 2012
» Addition
» Deduction (selling - redemptions)
» Exchange revaluation differences
» Profit (losses) from fair value difference
» Impairment (charges) release
Ending Balance
15,412,566,069
10,163,193,809
(5,342,793,206)
60,242,239
895,941,363
(27,266,242)
21,161,884,032
22.1. Profit (Losses) from financial investments
» Profit (Loss) from selling available for sale financial instruments
» Impairment release (charges) of available for sale equity instru-
ments
» Impairment release (charges) of available for sale debt instru-
ments
» Profit (Loss)from selling investments in subsidiaries and associ-
ates
» (Losses) from impairment of subsidiaries and associates
» Profit (Loss) from selling held to maturity debt investments
Dec.31, 2012
EGP
Dec.31, 2011
EGP
20,607,710,266
84,923,090
469,250,676
21,161,884,032
4,144,677,917
61,075,411
4,205,753,328
25,367,637,360
23,745,724,106
1,621,913,254
25,367,637,360
23,611,233,775
1,237,877,696
24,849,111,471
Held to maturity
financial
investments
289,151,745
5,000,000
(271,802,813)
5,116,368
-
1,627,620
29,092,920
29,092,920
4,176,660,408
-
-
-
-
4,205,753,328
14,533,886,080
79,748,671
798,931,318
15,412,566,069
1,580,420
27,512,500
29,092,920
15,441,658,989
13,301,628,105
2,140,030,884
15,441,658,989
12,978,748,170
1,919,838,711
14,898,586,881
Total
EGP
13,894,498,775
4,540,816,258
(2,407,061,628)
60,380,784
(647,348,588)
373,388
15,441,658,989
15,441,658,989
14,339,854,217
(5,342,793,206)
60,242,239
895,941,363
(27,266,242)
25,367,637,360
Dec.31, 2012
EGP
519,013
Dec.31, 2011
EGP
37,608,880
(27,859,838)
(1,254,232)
593,597
-
(89,736,000)
(31,018)
(116,514,246)
-
1,873,813
(18,430,000)
1,034
19,799,495
23. Investments in subsidiary and associates
Dec.31, 2012
Subsidiaries
» CI Capital Holding
Associates
» Commercial International Life
Insurance
» Corplease
» Haykala for investment
» Egypt Factors
» International Co. for Security
and Services (Falcon)
Total
Company’s
country
Company’s
assets
Company’s
liabilities
(without
equity)
Company’s
revenues
Company’s
net profit
Investment
book value
EGP
Stake
%
Egypt
505,372,278 160,819,277 121,452,725
1,834,684 777,920,000
99.98
Egypt
1,768,401,6911,711,942,438 253,087,786
(969,320)
49,020,250
Egypt
Egypt
Egypt
Egypt
1,539,490,3551,361,597,602 317,924,102
270,000
18,514,114
180,722
203,984,151 151,643,286
3,875,454
9,974,915
209,835
(3,608,534)
67,527,300
600,000
36,966,150
91,085,635
79,197,211 106,514,090
1,219,081
6,000,000
4,112,209,5643,465,380,536 817,762,817
8,660,660 938,033,700
45
40
40
39
40
Dec.31, 2011
Company’s
Country
Company’s
Assets
Company’s
Liabilities
(without
equity)
Company’s
Revenues
Company’s
Net Profit
Investment
book value
EGP
Stake
%
Subsidiaries
» CI Capital Holding
Associates
» Commercial International Life
Insurance
» Corplease
» Haykala for Investment
» Egypt Factors
» International Co. for Security
and Services (Falcon)
Total
24. Investment property *
Egypt
494,679,584
152,092,327
87,475,153
(37,629,469) 867,656,000
99.98
Egypt
1,532,549,363 1,469,720,530 108,295,223
791,813
44,520,250
Egypt
Egypt
Egypt
1,418,875,386 1,271,498,831 162,014,580
270,000
18,440,302
307,737
165,064,735
3,595,277
179,815,258
6,762,407
103,358
(6,533,187)
60,000,000
600,000
18,819,528
Egypt
62,511,444
46,751,684
71,809,412
(2,721,265)
4,000,000
3,692,026,312 3,105,435,844 448,304,670 (39,226,343) 995,595,778
45
40
40
39
40
Dec.31, 2012
EGP
Dec.31, 2011
EGP
» Commercial unit number f 35 in arkadia mall (14 elbahr st. Bou-
lak kornish el nile )
» Appartment no. 70 in the third floor building 300 meters elgom-
horia st. Port said
» 338.33 meters on a land and building the property number 16
elmakrizi st. Heliopolis
» Villa number 113 royal hills 6th of october
» Land area with 1468.85 meters elsaidi basin -markaz nabrouh
eldakahlia
» Land and a bulding in elmansoura elnahda street 766.3 meters
» Agricultural area 1 feddan 14t and 17.25 shares near el azazi
fakous elsharkia
» Agriculutral area - markaz shebin eldakahlia
Total
432,000
-
700,000
-
1,121,965
3,463,000
161,000
4,517,721
10,395,686
-
750,000
700,000
2,000,000
1,121,965
3,463,000
222,000
4,517,721
12,774,686
* Including non rigestred by EGP 6,500,686 which were acquired against settlement of the debts mentioned above.
126
Annual Report 2012
Annual Report 2012
127
Financial Statements: Separate
25. Other assets
» Accrued revenues
» Prepaid expenses
» Advances to purchase of fixed assets
» Accounts receivable and other assets
» Assets acquired as settlement of debts
Total
26. Property, plant and equipment
Dec.31, 2012
EGP
1,637,781,937
75,319,597
96,120,400
640,826,581
8,977,329
2,459,025,844
Dec.31, 2011
EGP
898,844,761
75,649,940
103,989,488
433,844,754
6,180,933
1,518,509,876
Dec.31, 2012
Land
Premises
IT
Vehicles
Fitting
-out
Machines
and
equipment
Furniture
and
furnishing
Total
EGP
60,575,261 423,794,894 741,229,919
46,898,333 267,239,246 256,827,447 106,136,591 1,902,701,691
-
1,066,148
93,576,242
4,873,978
80,196,178
27,330,516
7,935,441
214,978,503
60,575,261 424,861,042 834,806,161
51,772,311 347,435,424 284,157,963 114,072,032 2,117,680,194
-
-
-
161,870,230 576,418,710
25,815,491 240,994,064 188,525,308
72,302,594 1,265,926,397
19,129,849
68,318,634
5,688,921
35,822,477
28,319,117
9,946,903
167,225,901
181,000,079 644,737,344
31,504,412 276,816,541 216,844,425
82,249,497 1,433,152,298
60,575,261 243,860,963 190,068,817
20,267,899
70,618,883
67,313,538
31,822,535
684,527,896
60,575,261 261,924,664 164,811,209
21,082,842
26,245,182
68,302,139
33,833,997
636,775,294
%5
%20
%20
%33.3
%33.3
%20
» Beginning gross
assets (1)
» Additions (deduc-
tions) during the
year
Ending gross assets
(2)
» Accu.depreciation
at beginning of the
year (3)
» Current period
depreciation
Accu.depreciation
at end of the year (4)
Ending net assets
(2-4)
Beginning net as-
sets (1-3)
Depreciation rates
Net fixed assets value on the balance sheet date includes EGP 21,769,393 non registered assets while their registrations proce-
dures are in process.
27. Due to banks
» Current accounts
» Deposits
Total
» Central banks
» Local banks
» Foreign banks
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
» Non-current balances
Total
128
Annual Report 2012
Dec.31, 2012
EGP
369,862,716
1,345,000,000
1,714,862,716
7,546,231
1,362,363,985
344,952,500
1,714,862,716
354,394,897
1,360,467,819
1,714,862,716
369,862,716
1,345,000,000
1,714,862,716
Dec.31, 2011
EGP
493,794,517
2,847,000,000
3,340,794,517
46,941,713
2,905,759,685
388,093,119
3,340,794,517
398,317,328
2,942,477,189
3,340,794,517
493,794,517
2,847,000,000
3,340,794,517
28. Due to customers
» Demand deposits
» Time deposits
» Certificates of deposit
» Saving deposits
» Other deposits
Total
» Corporate deposits
» Individual deposits
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
» Non-current balances
Total
29. Long term loans
» Financial Investment & Sector
Cooperation (FISC)
» Support to Private Sector Indus-
try Environmental Protection II
(KFW)
» Agricultural Research and Devel-
opment Fund (ARDF)
» Social Fund for Development
(SFD)
» Spanish Cooperation Microfi-
nance Fund (SCMF)
Total
30. Other liabilities
» Accrued interest payable
» Accrued expenses
» Accounts payable
» Income tax
» Other credit balances
Total
Dec.31, 2012
EGP
17,034,550,714
24,133,038,485
24,299,048,221
12,106,727,204
1,261,362,266
78,834,726,890
36,764,106,988
42,070,619,902
78,834,726,890
12,157,860,312
66,676,866,578
78,834,726,890
51,976,518,051
26,858,208,839
78,834,726,890
Dec.31, 2011
EGP
17,048,122,359
24,532,817,359
18,819,931,329
9,484,866,150
1,688,310,333
71,574,047,530
37,227,665,007
34,346,382,523
71,574,047,530
10,855,512,526
60,718,535,004
71,574,047,530
50,607,367,855
20,966,679,675
71,574,047,530
Interest rate
%
Maturity
date
Maturing
through
next year
EGP
Balance on
Dec.31,
2012
EGP
Balance on
Dec.31,
2011
EGP
3.5 - 5.5
depends on
maturity date
3-5 years
17,428,571
19,095,238
13,697,721
9 - 10.5
2012
-
-
3,285,048
3-5 years
42,080,000
61,400,000
78,570,000
3.5 - 5.5
depends on
maturity date
3 months T/D
or 9% which
more
0.5
2012
-
-
-
-
167,326
3,613,282
59,508,571
80,495,238
99,333,376
Dec.31, 2012
EGP
436,723,614
242,231,936
467,830,762
819,361,660
68,203,599
2,034,351,571
Dec.31, 2011
EGP
263,654,637
162,930,130
345,917,454
446,414,136
94,869,079
1,313,785,436
Annual Report 2012
129
Financial Statements: Separate
31. Other provisions
Dec.31, 2012
» Provision for income
tax claims
» Provision for legal
claims
» Provision for contin-
gent
» * Provision for other
claim
Total
Dec.31, 2011
» Provision for income
tax claims
» Provision for legal
claims
» Provision for contin-
gent
» Provision for other
claim
Total
Beginning
balance
Charged
amounts
Exchange
revaluation
difference
Utilized
amounts
Reversed
amounts
Ending
balance
EGP
6,909,685
-
-
-
-
6,909,685
35,171,959
4,668,841
11,983 (10,958,065)
(531,054)
28,363,664
210,103,042
40,594,505
7,202,883
-
12,441,223
6,353,586
16,075
(1,336,550)
-
-
257,900,430
17,474,334
264,625,909
51,616,932
7,230,941 (12,294,615)
(531,054) 310,648,113
Beginning
balance
Charged
amounts
Exchange
revaluation
difference
Utilized
amounts
Reversed
amounts
6,909,685
-
33,150,547
2,021,413
-
-
-
-
-
-
Ending
balance
EGP
6,909,685
35,171,959
256,708,900
-
2,321,223
(178,971)
(48,748,110) 210,103,042
13,469,799
2,196,294
8,397
(3,233,267)
-
12,441,223
310,238,930
4,217,707
2,329,620
(3,412,238)
(48,748,110) 264,625,909
* Provision for other claim formed on December 31, 2012 amounted to 6,353,586 EGP to face the potential risk of banking
operations against amount 2,196,294 EGP on December 31, 2011 .
32. Equity
32.1. Capital
The authorized capital reached EGP 20 billion according to the extraordinary general assembly decision on March 17,
2010.
Issued and Paid in Capital reached EGP 5,972,275,410 to be divided on 597,227,541 shares with EGP 10 par value for each
share based on:
• Increase issued and Paid up Capital by amount EGP 25,721,800 on April 21, 2010 in according to Board of Directors deci-
sion on November 11,2009 by issuance of first trench for E.S.O.P program.
• Increase issued and Paid up Capital by amount EGP 2,950,721,800 on July 15, 2010 according to Board of Directors deci-
sion on May 12 ,2010 by distribution of one share for every outstanding share by capitalizing on the General Reserve and
part of the Legal Reserve.
• Increase issued and Paid up Capital by amount EGP 33,119,390 on July 31, 2011 in according to Board of Directors decision
on November 10,2010 by issuance of second trench for E.S.O.P program.
• Increase issued and Paid up Capital by amount EGP 37,712,420 on April 9, 2012 in according to Board of Directors deci-
sion on December 22,2011 by issuance of third trench for E.S.O.P program.
The Extraordinary General Assembly approved in the meeting of June 26, 2006 to activate a motivating and rewarding
program for the Bank’s employees and managers through Employee Share Ownership Plans (ESOP) by issuing a maxi-
mum of 5% of issued and paid-in capital at par value ,through 5 years starting year 2006 and delegated the Board of Direc-
tors to establish the rewarding terms and conditions and increase the paid in capital according to the program.
The Extraordinary General Assembly approved in the meeting of April 13,2011 continue to activate a motivating and re-
warding program for The Bank’s employees and managers through Employee Share Ownership Plans (ESOP) by issuing
a maximum of 5% of issued and paid-in capital at par value ,through 5 years starting year 2011 and delegated the Board
of Directors to establish the rewarding terms and conditions and increase the paid in capital according to the program.
Dividend deducted from shareholders’ equity in the Year that the General Assembly approves the dispersment the share-
holders of this dividend, which includes staff profit share and remuneration of the Board of Directors stated in the law.
32.2. Reserves
According to The Bank status 5% of net profit is to increase legal reserve until it reaches 50% of The Bank’s issued and paid
in capital.
Central Bank of Egypt concurrence for usage of special reserve is required.
33. Deferred tax
Deferred tax assets and liabilities are attributable to the following:
» Fixed assets (depreciation)
» Other provisions (excluded loan loss, contingent liabilities and
income tax provisions)
» Other investments impairment
» Reserve for employee stock ownership plan (ESOP)
Total
Dec.31, 2012
Assets (Liabilities)
EGP
Dec.31, 2011
Assets (Liabilities)
EGP
(18,477,693)
(12,780,032)
10,998,616
98,979,194
37,633,092
129,133,209
9,522,636
69,148,702
29,250,420
95,141,726
34. Share-based payments
According to the extraordinary general assembly meeting on June 26, 2006, The Bank launched new Employees Share Own-
ership Plan (ESOP) scheme and issued equity-settled share-based payments. Eligible employees should complete a term of 3
years of service in The Bank to have the right in ordinary shares at face value (right to share) that will be issued on the vest-
ing date, otherwise such grants will be forfeited. Equity-settled share-based payments are measured at fair value at the grant
date, and expensed on a straight-line basis over the vesting period (3 years) with corresponding increase in equity based on
estimated number of shares that will eventually vest(True up model). The fair value for such equity instruments is measured
using of Black-Scholes pricing model.
Details of the rights to share outstanding during the period are as follows:
» Outstanding at the beginning of the period
» Granted during the period
» Forfeited during the period
» Exercised during the period
Outstanding at the end of the period
Details of the outstanding tranches are as follows:
Maturity date
» 2013
» 2014
» 2015
Total
Dec.31, 2012
No. of shares
12,676,036
7,208,355
(673,567)
(3,771,242)
15,439,582
EGP
Exercise price
10
10
10
EGP
Fair value
21.70
21.25
9.98
Dec.31, 2011
No. of shares
10,550,825
5,844,356
(407,206)
(3,311,939)
12,676,036
No. of shares
2,934,838
5,487,194
7,017,550
15,439,582
130
Annual Report 2012
Annual Report 2012
131
Financial Statements: Separate
The fair value of granted shares is calculated using Black-Scholes pricing model with the following:
36. Cash and cash equivalent
» Exercise price
» Current share price
» Expected life (years)
» Risk free rate %
» Dividend yield%
» Volatility%
6th tranche
5th tranche
10
18.7
3
16.15%
5.35%
38%
10
31.15
3
11.60%
3.21%
34%
Volatility is calculated based on the daily standard deviation of returns for the last three years.
35. Reserves and retained earnings
» Legal reserve
» General reserve
» Retained earnings (losses)
» Special reserve
» Reserve for A.F.S investments revaluation difference
» Banking risks reserve
Total
35.1. Banking risks reserve
» Beginning balance
» Transferred from profits
Ending balance
35.2. Legal reserve
» Beginning balance
» Transfer from special reserve
» Transferred from previous year profits
Ending balance
35.3. Reserve for A.F.S investments revaluation difference
» Beginning balance
» Unrealized gains (losses) from A.F.S investment revaluation
Ending balance
35.4. Retained earnings (losses)
» Beginning balance
» Dividend previous year
» Transferred from special reserve
» The effect of changing accounting policies
Ending balance
Dec.31, 2012
EGP
380,348,755
2,037,107,372
1,001,979
117,805,566
153,506,781
103,716,932
2,793,487,384
Dec.31, 2012
EGP
281,689,619
(177,972,687)
103,716,932
Dec.31, 2012
EGP
231,344,896
61,697,292
87,306,567
380,348,755
Dec.31, 2012
EGP
(723,070,818)
876,577,599
153,506,781
Dec.31, 2012
EGP
15,105,920
(15,105,920)
1,001,979
-
1,001,979
Dec.31, 2011
EGP
231,344,896
1,234,274,960
15,105,920
185,931,315
(723,070,818)
281,689,619
1,225,275,891
Dec.31, 2011
EGP
156,992,515
124,697,104
281,689,619
Dec.31, 2011
EGP
125,128,337
-
106,216,559
231,344,896
Dec.31, 2011
EGP
(18,014,631)
(705,056,187)
(723,070,818)
Dec.31, 2011
EGP
20,231,298
(20,231,298)
-
15,105,920
15,105,920
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Obligatory reserve balance with CBE
» Due from banks (time deposits) more than three months
» Treasury bills with maturity more than three months
Total
Dec.31, 2012
EGP
5,393,974,124
7,957,710,034
7,978,030,413
(3,093,283,199)
(4,637,273,017)
(8,063,078,261)
5,536,080,095
Dec.31, 2011
EGP
7,492,064,510
8,449,298,705
9,213,390,067
(3,014,779,811)
(5,237,471,784)
(8,821,367,485)
8,081,134,202
37. Contingent liabilities and commitments
37.1. Legal claims
There are a number of existing cases filed against the bank on December.31, 2012 without provision as it’s not expected to
make any losses from it.
37.2. Capital commitments
37.2.1. Financial investments
The capital commitments for the financial investments reached on the date of financial position EGP 199,123,121 as fol-
lows:
» Available for sale financial investments
Investments value
EGP
322,671,851
Paid
EGP
123,548,730
Remaining
EGP
199,123,121
37.2.2. Fixed assets and branches constructions
The value of commitments for the purchase of fixed assets contracts and branches constructions that have not been imple-
mented till the date of financial statement amounted to EGP 14,922,669.
37.3. Letters of credit, guarantees and other commitments
» Letters of guarantee
» Letters of credit (import and export)
» Customers acceptances
Total
38. Mutual funds
Osoul fund
Dec.31, 2012
EGP
12,787,562,199
933,297,936
1,176,928,870
14,897,789,005
Dec.31, 2011
EGP
11,263,615,016
753,154,858
542,833,642
12,559,603,516
• The Bank established an accumulated return mutual fund under license no.331 issued from capital market authority on
February 22, 2005 CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 32,294,160 with redeemed value EGP 6,272,494,697.
• The market value per certificate reached EGP 194.23 on December 31, 2012.
• The Bank portion got 1,612,914 certificates with redeemed value EGP 313,276,286.
Istethmar fund
• CIB bank established the second accumulated return mutual fund under license no.344 issued from capital market au-
thority on February 26, 2006. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 2,332,745 with redeemed value EGP 141,644,276.
• The market value per certificate reached EGP 60.72 on December 31, 2012.
• The Bank portion got 194,744 certificates with redeemed value EGP 11,824,856. Aman fund ( CIB and Faisal Islamic Bank
Mutual Fund)
• The Bank and Faisal Islamic Bank established an accumulated return mutual fund under license no.365 issued from capi-
tal market authority on July 30, 2006. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
132
Annual Report 2012
Annual Report 2012
133
Financial Statements: Separate
• The number of certificates issued reached 884,496 with redeemed value EGP 37,290,351 .
• The market value per certificate reached EGP 42.16 on December 31, 2012.
• The Bank portion got 71,943 certificates with redeemed value EGP 3,033,117.
Hemaya fund
• CIB bank established an accumulated return mutual fund under license no.585 issued from financial supervisory Author-
ity on June 23, 2010. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 344,619 with redeemed value EGP 40,737,412.
• The market value per certificate reached EGP 118.21 on December 31, 2012.
• The Bank portion got 50,000 certificates with redeemed value EGP 5,910,500.
• Several resolutions were issued to amend some income tax laws and were published in the official newspaper on December
6, 2012. which will take effect as of the next day of publication and these amendments are as follows:
• Amend certain regulations of the Income Tax Law issued by Act No. 91 of 2005
• Amend certain regulations of the Sales Tax Law issued by Act No. 11 of 1991
• Amend certain regulations of the tax law on property built issued by Act No. 196 of 2008
• Amend certain regulations of the Stamp Tax Law issued by Act No. 111 of 1980
• Presidential instructions were issued to freeze those laws and so, the financial statements hadn’t been affected by those
amendments.
• The impact of those laws on the bank if applied has been calculated from the date of their publication in the official news-
paper.
• This had resulted in a total liability within the limit of L.E 3.1 million.
• The bank’s external auditors had verified the calculation of this commitment.
Thabat fund
• CIB bank established an accumulated return mutual fund under license no.613 issued from financial supervisory author-
41. Main currencies positions
ity on September 13, 2011. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 1,479,698 with redeemed value EGP 173,006,290.
• The market value per certificate reached EGP 116.92 on December 31, 2012.
• The Bank portion got 52,404 certificates with redeemed value EGP 6,127,076.
39. Transactions with related parties
All banking transactions with related parties are conducted in accordance with the normal banking practices and regulations
applied to all other customers without any discrimination.
» Egyptian pound
» US dollar
» Sterling pound
» Japanese yen
» Swiss franc
» Euro
Dec.31, 2012
In thousand EGP
Dec.31, 2011
In thousand EGP
12,800
(10,376)
1,670
(67)
179
8,598
8,068
24,134
408
(53)
118
7,481
39.1. Loans, advances, deposits and contingent liabilities
» Loans and advances
» Deposits
» Contingent liabilities
EGP
660,440,043
243,759,055
114,859,635
39.2. Other transactions with related parties
» International Co. for Security & Services
» Corplease Co.
» Commercial International Life Insurance Co.
» Commercial International Brokerage Co.
» Dynamics Company
» Egypt Factors
» CI Assets Management
» Commercial International Capital Holding Co.
» Haykala for Investment
» CI Capital Researches
40. Tax status
Income
EGP
1,328,326
66,903,581
3,469,611
11,403,131
1,148,345
10,436,589
119,733
1,144,024
14,985
8,346
Expenses
EGP
65,837,521
52,183,938
2,448,968
5,892,856
679,078
8,126,601
35,370
114,132
1,372
881
• The Bank’s corporate income tax position has been examined and settled with the tax authority from the start up of opera-
tions up to the end of year 1984.
• Corporate income tax for the years from 1985 up to 2000 were paid according to the tax appeal committee decision and
the disputes are under discussion in the court of law.
• The Bank’s corporate income tax position has been examined and settled with the tax authority from Year 2001 up to Year
2004.
• Corporate income tax for the years 2005-2006 has been examined from the tax authority and paid.
• The Bank pays salary tax according to concerning domestic regulations and laws, and the disputes are under discussion
in the court of low The Bank pay stamp duty tax according to concerning domestic regulations and laws, and the disputes
are under discussion in the court of law .
134
Annual Report 2012
Annual Report 2012
135
Financial Statements: Consolidated
Financial Statements: Consolidated
138
Annual Report 2012
Annual Report 2012
139
Financial Statements: Consolidated
Commercial International Bank (Egypt) S.A.E
Consolidated balance sheet on December 31, 2012
Commercial International Bank (Egypt) S.A.E
Consolidated income statement for the year ended on December 31, 2012
Assets
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Trading financial assets
» Loans and advances to banks
» Loans and advances to customers
» Derivative financial instruments
Financial investments
» Available for sale
» Held to maturity
» Investments in associates
» Brokers - debit balances
» Reconciliation accounts- debit balances
» Investment property
» Other assets
» Goodwill
» Intangible Assets
» Deferred tax
» Property, plant and equipment
Total assets
Liabilities and equity
Liabilities
» Due to banks
» Due to customers
» Brokers- credit balances
» Reconciliation accounts - credit balances
» Derivative financial instruments
» Other liabilities
» Long term loans
» Other provisions
Total liabilities
Equity
» Issued and paid in capital
» Reserves
» Reserve for employee stock ownership plan (ESOP)
» Retained earnings
Total equity
» Net profit of the period / year after tax
Total equity and net profit for period / year
» Minority interest
Total minority interest and equity and net profit for
period / year
Total liabilities , equity and minority interest
Contingent liabilities and commitments
» Letters of credit, guarantees and other commitments
Notes
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
15
16
17
18
19
20
21
22
22
23
24
25
40
40
33
26
27
28
21
30
29
31
32
32
5,393,974,124
8,047,820,388
8,017,754,432
1,515,325,502
1,178,867,739
40,698,313,773
137,459,761
21,177,427,597
4,215,787,960
165,198,634
134,944,510
-
10,395,686
2,474,945,065
-
33,422,415
129,356,874
683,455,846
94,014,450,306
1,714,862,716
78,729,121,488
124,759,011
1,664,718
119,099,260
2,059,005,013
80,495,238
315,488,382
83,144,495,826
5,972,275,410
2,970,163,921
164,761,121
(510,946,406)
8,596,254,046
2,226,180,503
10,822,434,549
47,519,931
7,492,064,510
8,528,229,519
9,260,842,183
675,325,450
1,395,594,609
39,669,785,864
146,544,656
15,421,546,277
39,159,520
106,676,167
24,185,525
42,507,905
12,774,686
1,534,819,491
120,280,337
309,353,104
96,018,092
630,508,089
85,506,215,984
3,340,794,517
71,467,935,259
111,851,855
-
114,287,990
1,342,736,040
99,333,376
270,801,909
76,747,740,946
5,934,562,990
1,387,842,060
137,354,418
(362,379,298)
7,097,380,170
1,614,738,322
8,712,118,492
46,356,546
10,869,954,480
8,758,475,038
94,014,450,306
85,506,215,984
37
14,897,739,005
12,559,553,516
The accompanying notes are an integral part of these financial statements.
Hisham Ezz El-Arab
Chairman and Managing Director
» Interest and similar income
» Interest and similar expense
Net interest income
» Fee and commission income
» Fee and commission expense
Net income from fee and commission
» Dividend income
» Net trading income
» Profit (Losses) from financial investments
» Goodwill Amortization
» Administrative expenses
» Other operating (expenses) income
» Impairment (charge) release for credit losses
» Intangible Assets Amortization
» Bank’s share in the profits of associates
Net profit before tax
» Income tax expense
» Deferred tax
Net profit of the year
» Minority interest
Bank shareholders
Earning per share
» Basic
» Diluted
Notes
6
7
8
9
22
10
11
12
Last 9 Months
Dec. 31, 2012
EGP
7,859,311,839
(3,945,685,636)
3,913,626,203
1,033,628,014
(107,365,742)
926,262,272
33,110,823
574,575,176
(26,909,306)
(10,426,511)
(1,559,401,781)
(103,307,092)
(609,971,077)
(82,990,084)
26,348,545
3,080,917,168
Last 9 Months
Dec. 31, 2011
EGP
5,470,990,831
(2,781,039,268)
2,689,951,563
930,569,533
(87,622,734)
842,946,799
61,506,980
381,692,480
38,669,156
(40,093,445)
(1,449,718,695)
(72,539,394)
(320,648,863)
(67,467,240)
(7,859,808)
2,056,439,533
13
33 & 13
(887,265,476)
33,338,781
2,226,990,473
(448,586,285)
6,374,868
1,614,228,116
809,970
2,226,180,503
(510,206)
1,614,738,322
14
3.53
3.47
2.43
2.39
Hisham Ezz El-Arab
Chairman and Managing Director
140
Annual Report 2012
Annual Report 2012
141
Financial Statements: Consolidated
Commercial International Bank (Egypt) S.A.E
Consolidated cash flow for the year ended on December 31, 2012
Commercial International Bank (Egypt) S.A.E
Consolidated cash flow for the year ended on December 31, 2012
Cash flow from financing activities
» Increase (decrease) in long term loans
» Dividend paid
» Capital increase
Net cash generated from (used in) financing activities
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
(18,838,138)
(806,206,518)
37,712,420
(787,332,236)
(29,944,868)
(844,414,580)
33,119,390
(841,240,058)
» Net increase (decrease) in cash and cash equivalent
» Beginning balance of cash and cash equivalent
Cash and cash equivalent at the end of the period
(2,541,602,667)
8,207,517,133
5,665,914,465
149,390,638
8,058,126,497
8,207,517,135
Cash and cash equivalent comprise:
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Obligatory reserve balance with CBE
» Due from banks (time deposits) more than three months
» Treasury bills with maturity more than three months
Total cash and cash equivalent
5,393,974,124
8,047,820,388
8,017,754,432
(3,093,283,199)
(4,637,273,016)
(8,063,078,264)
5,665,914,465
7,492,064,510
8,528,229,519
9,260,842,183
(3,014,779,811)
(5,237,471,783)
(8,821,367,483)
8,207,517,135
Cash flow from operating activities
» Net profit before tax
Adjustments to reconcile net profit to net cash provided by
operating activities
» Depreciation
» Impairment charge for credit losses
» Other provisions charges
» Trading financial investments revaluation differences
» Intangible assets amortization
» Goodwill amortization
» Available for sale and held to maturity investments exchange
revaluation differences
» Financial investments impairment charge (release)
» Utilization of other provisions
» Other provisions no longer used
» Exchange differences of other provisions
» Profits from selling property, plant and equipment
» Profits from selling financial investments
» Profits from selling associates
» Exchange differences of long term loans
» Shares based payments
» Investments in associates revaluation
» Real estate investments impairment charges
Operating profits before changes in operating assets and
liabilities
Net decrease (increase) in assets and liabilities
» Due from banks
» Treasury bills and other governmental notes
» Trading financial assets
» Derivative financial instruments
» Loans and advances to banks and customers
» Other assets
» Due to banks
» Due to customers
» Other liabilities
Net cash provided from operating activities
Cash flow from investing activities
» Purchase of subsidiary and associates
» Proceeds from selling subsidiary and associates
» Purchases of property, plant and equipment
» Redemption of held to maturity financial investments
» Purchases of held to maturity financial investments
» Purchases of available for sale financial investments
» Proceeds from selling available for sale financial investments
» Proceeds from selling real estate investments
Net cash generated from (used in) investing activities
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
3,080,917,168
2,056,439,533
168,382,905
609,971,077
51,872,777
(86,525,026)
82,990,084
10,426,511
188,125,507
322,276,483
4,217,707
49,692,862
67,467,240
40,093,445
(60,242,239)
(60,380,784)
8,033,536
(13,886,192)
(531,054)
7,230,941
(2,387,583)
(519,013)
-
-
79,068,829
-
(371,000)
(373,389)
(4,068,833)
(50,567,704)
2,329,620
(2,716,747)
(100,273,310)
(1,873,813)
164,819
77,459,887
7,151,567
400,000
3,934,431,721
2,595,564,090
521,695,379
758,289,224
(753,475,026)
13,896,165
(1,421,772,116)
(1,015,446,313)
(1,625,931,801)
7,261,186,229
(156,424,620)
7,516,448,842
(58,522,467)
-
(211,873,420)
-
(4,176,628,441)
(10,169,757,165)
5,343,312,219
2,750,000
(9,270,719,274)
(1,851,562,990)
(1,729,254,403)
860,729,523
(6,543,758)
(6,213,116,023)
21,744,773
2,018,514,608
8,103,757,981
(560,452,284)
3,239,381,517
(18,000,000)
1,000,000
(157,632,289)
270,207,161
(5,000,000)
(4,536,303,691)
2,181,457,020
15,520,978
(2,248,750,821)
142
Annual Report 2012
Annual Report 2012
143
Financial Statements: Consolidated
l
a
t
o
T
P
G
E
y
t
i
r
o
n
M
i
t
s
e
r
e
t
n
I
-
e
r
a
h
S
l
a
t
o
T
s
r
e
d
o
h
l
y
t
i
u
q
E
e
v
r
e
s
e
R
-
m
e
r
o
f
e
e
y
o
p
l
k
c
o
t
s
i
p
h
s
r
e
n
w
o
n
a
p
l
f
o
t
fi
o
r
p
t
e
N
r
a
e
y
e
h
t
i
g
n
k
n
a
B
s
k
s
i
r
e
v
r
e
s
e
r
e
v
r
e
s
e
R
.
S
F
A
.
r
o
F
n
o
i
t
a
u
a
v
e
r
l
.
f
f
i
d
-
t
s
e
v
n
i
s
t
n
e
m
l
i
a
c
e
p
S
e
v
r
e
s
e
r
i
l
e
b
g
n
a
t
n
I
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
)
s
e
s
s
o
l
(
s
t
e
s
s
a
r
o
f
e
u
a
v
l
e
r
a
h
s
k
n
a
b
e
r
o
f
e
b
n
o
i
t
i
s
u
q
c
a
i
l
a
r
e
n
e
G
e
v
r
e
s
e
r
l
a
g
e
L
e
v
r
e
s
e
r
l
a
t
i
p
a
C
1
1
0
2
,
1
3
.
c
e
D
4
5
7
,
2
0
9
,
3
1
6
,
8
9
3
6
,
5
6
9
,
6
4
5
1
1
,
7
3
9
,
6
6
5
,
8
8
5
8
,
0
2
5
,
9
4
1
0
0
7
,
1
1
3
,
0
9
8
,
1
,
5
1
5
2
9
9
,
6
5
1
)
6
3
7
,
8
1
4
,
8
1
(
9
6
5
,
6
5
3
,
4
8
1
)
0
1
6
,
4
0
6
,
3
0
2
(
1
2
4
,
4
9
7
,
2
0
3
2
6
4
,
2
1
4
,
8
7
7
3
3
,
8
2
1
,
5
2
1
0
0
6
,
3
4
4
,
1
0
9
,
5
l
e
c
n
a
a
b
g
n
n
n
g
e
B
i
i
1
1
0
2
,
1
3
r
e
b
m
e
c
e
D
n
o
d
e
d
n
e
r
a
e
y
e
h
t
r
o
f
y
t
i
u
q
e
’
s
r
e
d
l
o
h
e
r
a
h
s
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
d
e
t
a
d
i
l
o
s
n
o
C
.
E
A
S
.
)
t
p
y
g
E
(
k
n
a
B
l
a
n
o
i
t
a
n
r
e
t
n
I
l
i
a
c
r
e
m
m
o
C
0
9
3
,
9
1
1
,
3
3
-
-
-
-
0
9
3
,
9
1
1
,
3
3
e
s
a
e
r
c
n
i
l
a
t
i
p
a
C
-
-
0
9
3
,
9
1
1
,
3
3
-
-
-
)
0
8
5
,
4
1
4
,
4
4
8
(
-
)
0
8
5
,
4
1
4
,
4
4
8
(
6
1
1
,
8
2
2
,
4
1
6
,
1
)
2
0
4
,
5
9
8
,
0
3
(
)
6
0
2
,
0
1
5
(
)
7
8
8
,
8
9
(
2
2
3
,
8
3
7
,
4
1
6
,
1
)
5
1
5
,
6
9
7
,
0
3
(
)
7
2
1
,
5
2
9
,
4
0
7
(
-
)
7
2
1
,
5
2
9
,
4
0
7
(
-
-
-
-
-
-
-
-
-
)
7
2
3
,
6
2
6
,
9
8
(
5
9
7
,
2
5
8
,
2
2
1
)
3
9
2
,
5
7
8
,
3
7
1
,
1
(
)
2
8
2
,
3
8
1
,
4
2
8
(
-
-
2
2
3
,
8
3
7
,
4
1
6
,
1
)
4
0
1
,
7
9
6
,
4
2
1
(
-
-
7
8
8
,
9
5
4
,
7
7
-
-
-
7
8
8
,
9
5
4
,
7
7
7
8
8
,
9
5
4
,
7
7
-
-
-
)
0
2
9
,
5
0
1
,
5
1
(
-
-
-
-
-
-
-
-
-
-
-
-
-
)
,
7
2
1
5
2
9
4
0
7
,
(
-
-
4
0
1
,
7
9
6
4
2
1
,
-
-
-
-
,
6
4
7
4
7
5
1
,
-
-
-
-
-
-
-
-
-
-
)
,
5
9
7
2
5
8
2
2
1
,
(
)
,
8
9
2
1
3
2
0
2
,
(
-
)
,
5
1
5
6
9
7
0
3
,
(
-
-
-
,
0
2
9
5
0
1
5
1
,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
,
,
4
1
3
0
1
7
5
5
1
,
1
9
5
5
,
6
1
2
,
6
0
1
-
-
-
-
-
-
-
-
-
i
s
g
n
n
r
a
e
d
e
n
a
t
e
r
i
o
t
d
e
r
r
e
f
s
n
a
r
T
»
)
s
e
s
s
o
l
(
e
h
t
f
o
t
fi
o
r
p
t
e
N
r
a
e
y
i
d
a
p
d
n
e
d
v
D
i
i
»
»
e
h
t
g
n
i
r
u
d
e
g
n
a
h
C
»
d
o
i
r
e
p
n
o
i
t
i
d
d
A
»
e
v
r
e
s
e
r
k
s
i
r
k
n
a
b
o
t
d
e
r
r
e
f
s
n
a
r
T
»
k
c
o
t
s
s
e
e
y
o
p
m
e
l
r
o
f
e
v
r
e
s
e
R
»
t
n
e
m
t
s
e
v
n
i
n
o
i
t
a
u
a
v
e
r
l
l
i
a
c
n
a
n
fi
m
o
r
f
i
l
n
a
p
p
h
s
r
e
n
w
o
i
g
n
g
n
a
h
c
f
o
g
n
i
t
n
u
o
c
c
a
t
c
e
f
f
e
e
h
T
»
s
e
c
i
i
l
o
p
)
P
O
S
E
(
o
t
d
e
r
r
e
f
s
n
a
r
T
s
e
v
r
e
s
e
r
»
»
8
3
0
,
5
7
4
,
8
5
7
,
8
6
4
5
,
6
5
3
,
6
4
2
9
4
,
8
1
1
,
2
1
7
,
8
8
1
4
,
4
5
3
,
7
3
1
9
1
2
,
1
4
0
,
0
9
4
,
1
9
1
6
,
9
8
6
,
1
8
2
)
3
6
8
,
3
4
3
,
3
2
7
(
5
1
3
,
1
3
9
,
5
8
1
)
8
9
2
,
9
7
3
,
2
6
3
(
1
2
4
,
4
9
7
,
2
0
3
6
7
7
,
2
2
1
,
4
3
2
,
1
6
9
8
,
4
4
3
,
1
3
2
0
9
9
,
2
6
5
,
4
3
9
,
5
d
n
e
e
h
t
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
f
o
l
a
t
o
T
P
G
E
y
t
i
r
o
n
M
i
t
s
e
r
e
t
n
I
l
-
d
o
h
e
r
a
h
S
k
c
o
t
s
y
t
i
u
q
E
s
r
e
i
p
h
s
r
e
n
w
o
l
a
t
o
T
r
o
f
e
v
r
e
s
e
R
e
e
y
o
p
m
e
l
n
a
p
l
f
o
t
fi
o
r
p
t
e
N
r
a
e
y
e
h
t
i
g
n
k
n
a
B
s
k
s
i
r
e
v
r
e
s
e
r
e
v
r
e
s
e
R
S
F.
A
.
r
o
F
-
t
s
e
v
n
i
s
t
n
e
m
n
o
i
t
a
u
a
v
e
r
l
.
f
f
i
d
l
i
e
b
g
n
a
t
n
I
l
i
a
c
e
p
S
e
v
r
e
s
e
r
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
)
s
e
s
s
o
l
(
s
t
e
s
s
a
r
o
f
e
u
a
v
l
e
r
a
h
s
k
n
a
b
e
r
o
f
e
b
n
o
i
t
i
s
u
q
c
a
i
l
a
r
e
n
e
G
e
v
r
e
s
e
r
l
a
g
e
L
e
v
r
e
s
e
r
l
a
t
i
p
a
C
2
1
0
2
,
1
3
.
c
e
D
2
1
0
2
,
1
3
r
e
b
m
e
c
e
D
n
o
d
e
d
n
e
r
a
e
y
e
h
t
r
o
f
y
t
i
u
q
e
’
s
r
e
d
l
o
h
e
r
a
h
s
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
d
e
t
a
d
i
l
o
s
n
o
C
.
E
A
S
.
)
t
p
y
g
E
(
k
n
a
B
l
a
n
o
i
t
a
n
r
e
t
n
I
l
i
a
c
r
e
m
m
o
C
8
3
0
,
5
7
4
,
8
5
7
,
8
6
4
5
,
6
5
3
,
6
4
2
9
4
,
8
1
1
,
2
1
7
,
8
8
1
4
,
4
5
3
,
7
3
1
9
1
2
,
1
4
0
,
0
9
4
,
1
9
1
6
,
9
8
6
,
1
8
2
)
3
6
8
,
3
4
3
,
3
2
7
(
5
1
3
,
1
3
9
,
5
8
1
)
8
9
2
,
9
7
3
,
2
6
3
(
1
2
4
,
4
9
7
,
2
0
3
6
7
7
,
2
2
1
,
4
3
2
1
,
,
6
9
8
4
4
3
1
3
2
,
,
0
9
9
2
6
5
4
3
9
5
,
,
-
-
0
2
4
,
2
1
7
,
7
3
-
-
-
-
-
)
8
1
5
,
6
0
2
,
6
0
8
(
-
)
8
1
5
,
6
0
2
,
6
0
8
(
4
7
4
,
0
9
9
,
6
2
2
,
2
1
7
9
,
9
0
8
3
0
5
,
0
8
1
,
6
2
2
,
2
-
-
-
-
4
1
4
,
3
5
3
)
4
1
4
,
3
5
3
(
-
7
5
6
,
8
0
7
,
6
7
8
-
-
-
-
-
-
-
)
7
2
1
,
2
6
6
,
1
5
(
)
4
7
3
,
0
5
0
,
3
3
8
(
3
5
7
,
9
0
1
,
4
3
1
)
8
9
5
,
0
0
1
,
1
9
7
(
3
0
5
,
0
8
1
,
6
2
2
,
2
-
-
-
7
8
6
,
2
7
9
,
7
7
1
-
-
-
-
-
-
-
-
)
7
8
6
,
2
7
9
,
7
7
1
(
0
2
4
,
2
1
7
,
7
3
-
-
-
7
5
6
,
8
0
7
,
6
7
8
9
2
8
,
8
6
0
,
9
7
)
1
2
4
,
4
9
7
,
2
0
3
(
-
-
-
-
)
1
2
4
,
4
9
7
,
2
0
3
(
-
9
2
8
,
8
6
0
,
9
7
9
2
8
,
8
6
0
,
9
7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
5
6
,
8
0
7
,
6
7
8
-
7
4
7
,
6
1
7
,
2
-
-
-
-
-
)
6
9
4
,
2
4
8
,
0
7
(
-
-
-
-
-
)
3
5
7
,
9
0
1
,
4
3
1
(
-
9
7
9
,
1
0
0
,
1
)
0
2
9
,
5
0
1
,
5
1
(
)
4
1
4
,
3
5
3
(
-
-
-
-
-
-
-
-
-
-
-
-
-
-
)
1
2
4
,
4
9
7
,
2
0
3
(
7
8
1
,
9
8
6
,
4
9
7
-
-
-
5
2
2
,
3
4
1
,
8
-
-
-
-
-
-
-
-
,
7
6
5
6
0
3
7
8
,
,
2
9
2
7
9
6
1
6
,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
,
0
2
4
2
1
7
7
3
,
,
,
,
0
8
4
4
5
9
9
6
8
0
1
1
3
9
,
9
1
5
,
7
4
9
4
5
,
4
3
4
,
2
2
8
,
0
1
1
2
1
,
1
6
7
,
4
6
1
9
8
1
,
3
5
1
,
4
0
4
,
2
2
3
9
,
6
1
7
,
3
0
1
4
9
7
,
4
6
3
,
3
5
1
6
6
5
,
5
0
8
,
7
1
1
)
6
0
4
,
6
4
9
,
0
1
5
(
-
8
8
1
,
5
5
9
,
6
3
0
2
,
,
5
5
7
8
4
3
0
8
3
,
,
0
1
4
5
7
2
2
7
9
5
,
,
l
e
c
n
a
a
b
g
n
n
n
g
e
B
i
i
e
s
a
e
r
c
n
i
l
a
t
i
p
a
C
o
t
d
e
r
r
e
f
s
n
a
r
T
»
»
o
t
d
e
r
r
e
f
s
n
a
r
T
»
s
e
v
r
e
s
e
r
i
s
g
n
n
r
a
e
d
e
n
a
t
e
r
i
)
s
e
s
s
o
l
(
e
h
t
f
o
t
fi
o
r
p
t
e
N
r
a
e
y
i
d
a
p
d
n
e
d
v
D
i
i
»
»
m
o
r
f
r
e
f
s
n
a
r
T
»
e
v
r
e
s
e
r
l
i
a
c
e
p
s
g
n
i
r
u
d
e
g
n
a
h
C
»
d
o
i
r
e
p
e
h
t
m
o
r
f
n
o
i
t
i
d
d
A
»
-
t
s
e
v
n
i
l
i
a
c
n
a
n
fi
n
o
i
t
a
u
a
v
e
r
l
t
n
e
m
e
v
r
e
s
e
r
k
s
i
r
k
n
a
b
o
t
d
e
r
r
e
f
s
n
a
r
T
»
k
c
o
t
s
s
e
e
y
o
p
m
e
l
r
o
f
e
v
r
e
s
e
R
»
l
i
n
a
p
p
h
s
r
e
n
w
o
)
P
O
S
E
(
s
t
e
s
s
a
e
b
g
n
a
t
n
l
i
I
f
o
t
n
e
m
e
l
t
t
e
s
»
k
n
a
b
r
o
f
e
u
a
v
l
e
r
o
f
e
b
e
r
a
h
s
n
o
i
t
i
s
u
q
c
a
i
e
h
t
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
f
o
d
n
e
144
Annual Report 2012
Annual Report 2012
145
Financial Statements: Consolidated
Notes to the consolidated financial statements for the year ended
on December 31, 2012
1. General information
Commercial International Bank (Egypt) S.A.E. provides retail, corporate and investment banking services in various parts of
Egypt through 112 branches, and 44 units employing 4867 employees at the balance sheet date.
Commercial international Bank (Egypt) S.A.E. was formed as a commercial bank under the investment law no. 43 of 1974.
The address of its registered head office is as follows: Nile tower, 21/23 Charles de Gaulle Street-Giza. The Bank is listed in the
Egyptian stock exchange.
CI Capital Holding Co S.A.E it was established as a joint stock company on April 9th, 2005 under the capital market law no. 95
of 1992 and its executive regulations. Financial register no. 166798 on April 10th, 2005 and the company have been licensed by
the Capital Market Authority to carry out its activities under license no. 353 on May 24th, 2006.
As of December 31, 2012 the Bank directly owns 54,988,500 shares representing 99.98% of CI Capital Holding Company’s
capital and on December 31, 2012 CI Capital Holding Co. Directly owns the following shares in its subsidiaries:
Company name
· CIBC Co.
· CI Assets Management
· CI Investment Banking Co.
· CI for Research Co.
· Dynamic Brokerage Co.
No. of shares
579,570
478,577
481,578
448,500
3,393,500
Ownership%
96.60
95.72
96.30
96.32
99.97
Indirect Share%
96.58
95.70
96.28
96.30
99.95
2. Summary of accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise stated.
2.1. Basis of preparation
The consolidated financial statements have been prepared in accordance with Egyptian financial reporting standards is-
sued in 2006 and its amendments and in accordance with the instructions of the Central Bank of Egypt approved by the
Board of Directors on December 16, 2008 consistent with the principles referred to.
voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the Bank has the ability to control the entity or not.
2.2.2. Associates
Associates are all entities over which the Bank has significant influence but do not reach to the extent of control, generally
accompanying a shareholding between 20% and 50% of the voting rights.
The acquisition method of accounting is used to account for the purchase of subsidiaries. The cost of an acquisition is
measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed, plus any costs
directly related to the acquisition. The excess of the cost of an acquisition over the Bank share of the fair value of the iden-
tifiable net assets acquired is recorded as goodwill. A gain on acquisition is recognized in profit or loss if there is an excess
of the Bank’s share of the fair value of the identifiable net assets acquired over the cost of the acquisition.
The cost method is applied to account for investments in subsidiaries and associates, whereby, investments are re-
corded based on the acquisition cost including any goodwill, deducting any impairment losses, and dividends are
recorded in the income statement in the adoption of the distribution of these profits and evidence of the Bank right
to collect them.
2.3. Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different from those of other business segments. A geographical segment is engaged in providing
products or services within a particular economic environment that are subject to risks and returns different from those
of segments operating in other economic environments.
2.4. Foreign currency translation
2.4.1. Functional and presentation currency
The financial statements are presented in Egyptian pound, which is the Bank’s functional and presentation currency.
2.4.2. Transactions and balances in foreign currencies
The Bank maintains its accounting records in Egyptian pound. Transactions in foreign currencies during the period are
translated into the Egyptian pound using the prevailing exchange rates at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the end of reporting period at the
prevailing exchange rates. Foreign exchange gains and losses resulting from settlement and translation of such transac-
tions and balances are recognized in the income statement and reported under the following line items:
The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation
of trading, financial assets and liabilities held at fair value through profit or loss, available for sale and all derivatives contracts.
• Net trading income from held-for-trading assets and liabilities.
• Other operating revenues (expenses) from the remaining assets and liabilities.
2.1.1. Basis of consolidation
The method of full consolidation is the basis of the preparation of the consolidated financial statement of the Bank, given
that the Bank’s acquisition proportion is 99.98 % (full control) in CI Capital Holding.
Consolidated financial statements consist of the financial statements of Commercial International Bank and consolidated
financial statements of CI Capital Holding and its subsidiaries. Control is achieved through the Bank’s ability to control
the financial and operational policies of the companies that the Bank invests in it in order to obtain benefits from its activi-
ties. The basis of the consolidation is as follows:
• Eliminating all balances and transactions between the Bank and group companies.
• The cost of acquisition of subsidiary companies is based on the company's share in the fair value of assets acquired
and obligations outstanding on the acquisition date.
• Minority shareholders represent the rights of others in subsidiary companies.
• Proportional consolidation is used in consolidating method for companies under joint control.
2.2. Subsidiaries and associates
2.2.1. Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Bank has owned directly or indirectly the
control to govern the financial and operating policies generally accompanying a shareholding of more than one half of the
Changes in the fair value of investments in debt instruments; which represent monetary financial instruments, denomi-
nated in foreign currencies and classified as available for sale assets are analyzed into valuation differences resulting from
changes in the amortized cost of the instrument, differences resulting from changes in the applicable exchange rates and
differences resulting from changes in the fair value of the instrument.
Valuation differences resulting from changes in the amortized cost are recognized and reported in the income statement
in ‘income from loans and similar revenues’ whereas differences resulting from changes in foreign exchange rates are rec-
ognized and reported in ‘other operating revenues (expenses)’. The remaining differences resulting from changes in fair
value are deferred in equity and accumulated in the ‘revaluation reserve of available-for-sale investments’.
Valuation differences resulting from the non-monetary items include gains and losses of the change in fair value of such
equity instruments held at fair value through profit and loss, as for recognition of the differences of valuation resulting
from equity instruments classified as financial investments available for sale within the fair value reserve in equity.
2.5. Financial assets
The Bank classifies its financial assets in the following categories:
• Financial assets designated at fair value through profit or loss.
• Loans and receivables.
146
Annual Report 2012
Annual Report 2012
147
Financial Statements: Consolidated
• Held to maturity investments.
• Available for sale financial investments.
Management determines the classification of its investments at initial recognition.
2.5.1. Financial assets at fair value through profit or loss
This category has two sub-categories:
• Financial assets held for trading.
• Financial assets designated at fair value through profit and loss at inception.
A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or re-
purchasing in the short term or if it is part of a portfolio of identified financial instruments that are managed together
and for which there is evidence of a recent actual pattern of short term profit making. Derivatives are also categorized
as held for trading unless they are designated as hedging instruments.
Financial instruments, other than those held for trading, are classified as financial assets designated at fair value through
profit and loss if they meet one or more of the criteria set out below:
• When the designation eliminates or significantly reduces measurement and recognition inconsistencies that would
arise from measuring financial assets or financial liabilities, on different bases. under this criterion, an accounting
mismatch would arise if the debt securities issued were accounted for at amortized cost, because the related deriva-
tives are measured at fair value with changes in the fair value recognized in the income statement. The main classes
of financial instruments designated by the Bank are loans and advances and long-term debt issues.
• Applies to groups of financial assets, financial liabilities or combinations thereof that are managed, and their perfor-
mance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy,
and where information about the groups of financial instruments is reported to management on that basis.
• Relates to financial instruments containing one or more embedded derivatives that significantly modify the cash
flows resulting from those financial instruments, including certain debt issues and debt securities held.
Any financial derivative initially recognized at fair value can't be reclassified during the holding period. Re-classification
is not allowed for any financial instrument initially recognized at fair value through profit and loss.
2.5.2. Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market, other than:
• Those that the Bank intends to sell immediately or in the short term, which is classified as held for trading, or those
that the Bank upon initial recognition designates as at fair value through profit or loss.
• Those that the Bank upon initial recognition designates as available for sale; or
• Those for which the holder may not recover substantially all of its initial investment, other than credit deterioration.
2.5.3. Held to maturity financial investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturi-
ties that the Bank’s management has the positive intention and ability to hold till maturity. If the Bank has to sell other
than an insignificant amount of held-to-maturity assets, the entire category would be reclassified as available for sale un-
less in necessary cases subject to regulatory approval.
2.5.4. Available for sale financial investments
Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response
to needs for liquidity or changes in interest rates, exchange rates or equity prices.
The following are applied in respect to all financial assets:
Debt securities and equity shares intended to be held on a continuing basis, other than those designated at fair value, are
classified as available-for-sale or held-to-maturity. Financial investments are recognized on trade date, when the group
enters into contractual arrangements with counterparties to purchase securities.
Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value
through profit and loss. Financial assets carried at fair value through profit and loss are initially recognized at fair value,
and transaction costs are expensed in the income statement.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or when the
Bank transfers substantially all risks and rewards of the ownership. Financial liabilities are derecognized when they are
extinguished, that is, when the obligation is discharged, cancelled or expired.
Available-for-sale, held–for-trading and financial assets designated at fair value through profit and loss are subsequently mea-
sured at fair value. Loans and receivables and held-to-maturity investments are subsequently measured at amortized cost.
Gains and losses arising from changes in the fair value of the ‘financial assets designated at fair value through profit or
loss’ are recognized in the income statement in ‘net income from financial instruments designated at fair value’. Gains
and losses arising from changes in the fair value of available for sale investments are recognized directly in equity, until
the financial assets are either sold or become impaired. When available-for-sale financial assets are sold, the cumulative
gain or loss previously recognized in equity is recognized in profit or loss.
Interest income is recognized on available for sale debt securities using the effective interest method, calculated over the
asset’s expected life. Premiums and discounts arising on the purchase are included in the calculation of effective interest
rates. Dividends are recognized in the income statement when the right to receive payment has been established.
The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for
a financial asset, or no current demand prices available the Bank measures fair value using valuation models. These
include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valu-
ation models commonly used by market participants. If the Bank has not been able to estimate the fair value of equity
instruments classified available for sale, value is measured at cost less any impairment in value.
Available for sale investments that would have met the definition of loans and receivables at initial recognition may be reclas-
sified out to loans and advances or financial assets held to maturity. In all cases, when the Bank has the intent and ability to
hold these financial assets in the foreseeable future or till maturity. The financial asset is reclassified at its fair value on the date
of reclassification, and any profits or losses that has been recognized previously in equity, is treated based on the following:
• If the financial asset has a fixed maturity, gains or losses are amortized over the remaining life of the investment
using the effective interest rate method. In case of subsequent impairment of the financial asset, the previously rec-
ognized unrealized gains or losses in equity are recognized directly in the profits and losses.
• In the case of financial asset which has infinite life, any previously recognized profit or loss in equity will remain
until the sale of the asset or its disposal, in the case of impairment of the value of the financial asset after the re-
classification, any gain or loss previously recognized in equity is recycled to the profits and losses.
• If the Bank adjusts its estimates of payments or receipts of a financial asset that in return adjusts the carrying
amount of the asset (or group of financial assets) to reflect the actual cash inflows, the carrying value is recalculated
based on the present value of estimated future cash flows at the effective yield of the financial instrument and the
differences are recognized in profit and loss.
• In all cases, if the Bank re-classifies financial asset in accordance with the above criteria and increases its estimate
of the proceeds of future cash flow, this increase adjusts the effective interest rate of this asset only without affecting
the investment book value.
2.6. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a legally
enforceable right to offset the recognized amounts and there is an intention to be settled on a net basis.
2.7. Derivative financial instruments and hedge accounting
Derivatives are recognized initially, and subsequently, at fair value. Fair values of exchange traded derivatives are obtained
from quoted market prices. Fair values of over-the-counter derivatives are obtained using valuation techniques, including
discounted cash flow models and option pricing models. Derivatives are classified as assets when their fair value is positive
and as liabilities when their fair value is negative.
Embedded derivatives in other financial instruments, such as conversion option in a convertible bond, are treated as sepa-
rate derivatives when their economic characteristics and risks are not closely related to those of the host contract, provided
that the host contract is not classified as at fair value through profit and loss. These embedded derivatives are measured
at fair value with changes in fair value recognized in income statement unless the Bank chooses to designate the hybrid
contact as at fair value through net trading income in profit or loss.
148
Annual Report 2012
Annual Report 2012
149
Financial Statements: Consolidated
The timing of recognition in profit and loss, of any gains or losses arising from changes in the fair value of derivatives,
depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. The
Bank designates certain derivatives as:
• Hedging instruments of the risks associated with fair value changes of recognized assets or liabilities or firm com-
mitments (fair value hedge).
• Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable fore-
cast transaction (cash flow hedge)
• Hedge accounting is used for derivatives designated in a hedging relationship when the following criteria are met.
At the inception of the hedging relationship, the Bank documents the relationship between the hedging instrument and
the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore,
At the inception of the hedge, and on ongoing basis, the Bank documents whether the hedging instrument is expected to
be highly effective in offsetting changes in fair values of the hedged item attributable to the hedged risk.
2.7.1. Fair value hedge
Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recognized in profit or
loss immediately together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk. The effective portion of changes in the fair value of the interest rate swaps and the changes in the fair value
of the hedged item attributable to the hedged risk are recognized in the ‘net interest income’ line item of the income state-
ment. Any ineffectiveness is recognized in profit or loss in ‘net trading income’.
When the hedging instrument is no longer qualified for hedge accounting, the adjustment to the carrying amount of a
hedged item, measured at amortized cost, arising from the hedged risk is amortized to profit or loss from that date using
the effective interest method.
2.7.2. Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognized
immediately in the income statement. These gains and losses are reported in ‘net trading income’, except where deriva-
tives are managed in conjunction with financial instruments designated at fair value , in which case gains and losses are
reported in ‘net income from financial instruments designated at fair value’.
Interest income and expense
2.8.
Interest income and expense for all financial instruments except for those classified as held-for-trading or designated at fair
value are recognized in ‘interest income’ and ‘interest expense’ in the income statement using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and
of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that ex-
actly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the
effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for
example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid
or received between parties to the contract that represents an integral part of the effective interest rate, transaction costs
and all other premiums or discounts.
Once loans or debts are classified as nonperforming or impaired, the revenue of interest income will not be recognized
and will be recorded off balance sheet, and are recognized as income subsequently based on a cash basis according to the
following:
• When all arrears are collected for consumer loans, personnel mortgages and micro-finance loans.
• When calculated interest for corporate are capitalized according to the rescheduling agreement conditions until
paying 25% from rescheduled payments for a minimum performing period of one year, if the customer continues
to perform, the calculated interest will be recognized in interest income (interest on the performing rescheduling
agreement balance) without the marginalized before the rescheduling agreement which will be recognized in inter-
est income after the settlement of the outstanding loan balance.
2.9. Fee and commission income
Fees charged for servicing a loan or facility that is measured at amortized cost, are recognized as revenue as the service
is provided. Fees and commissions on non-performing or impaired loans or receivables cease to be recognized as income
and are rather recorded off balance sheet. These are recognized as revenue, on a cash basis, only when interest income
on those loans is recognized in profit and loss, at that time, fees and commissions that represent an integral part of the
effective interest rate of a financial asset, are treated as an adjustment to the effective interest rate of that financial asset.
Commitment fees and related direct costs for loans and advances where draw down is probable are deferred and recog-
nized as an adjustment to the effective interest on the loan once drawn. Commitment fees in relation to facilities where
draw down is not probable are recognized at the maturity of the term of the commitment.
Fees are recognized on the debt instruments that are measured at fair value through profit and loss on initial recognition
and syndicated loan fees received by the Bank are recognized when the syndication has been completed and the Bank does
not hold any portion of it or holds a part at the same effective interest rate used for the other participants portions.
Commission and fee arising from negotiating, or participating in the negotiation of a transaction for a third party such as
the arrangement of the acquisition of shares or other securities or the purchase or sale of properties are recognized upon
completion of the underlying transaction in the income statement .
Other management advisory and service fees are recognized based on the applicable service contracts, usually on accrual
basis. Financial planning fees related to investment funds are recognized steadily over the period in which the service is
provided. The same principle is applied for wealth management; financial planning and custody services that are provided
on the long term are recognized on the accrual basis also.
Operating revenues in the holding company are:
• Commission income is resulting from purchasing and selling securities to a customer account upon receiving the
transaction confirmation from the Stock Exchange.
• Mutual funds and investment portfolios management which is calculated as a percentage of the net value of assets
under management according to the terms and conditions of agreement. These amounts are credited to the assets
management company’s revenue pool on a monthly accrual basis.
2.10. Dividend income
Dividends are recognized in the income statement when the right to collect is established.
2.11. Sale and repurchase agreements
Securities may be lent or sold subject to a commitment to repurchase (Repos) are reclassified in the financial statements
and deducted from treasury bills balance. Securities borrowed or purchased subject to a commitment to resell them (Re-
verse Repos) are reclassified in the financial statements and added to treasury bills balance. The difference between sale
and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method.
2.12. Impairment of financial assets
2.12.1. Financial assets carried at amortised cost
The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is impaired only if there is objective evidence of impair-
ment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event/s’) and that loss
event/s has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reli-
ably estimated.
The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:
• Cash flow difficulties experienced by the borrower (for example, equity ratio, net income percentage of sales)
• Violation of the conditions of the loan agreement such as non-payment.
• Initiation of Bankruptcy proceedings.
• Deterioration of the borrower’s competitive position.
• The Bank for reasons of economic or legal financial difficulties of the borrower by granting concessions may not
agree with the Bank granted in normal circumstances.
• Deterioration in the value of collateral or deterioration of the creditworthiness of the borrower.
150
Annual Report 2012
Annual Report 2012
151
Financial Statements: Consolidated
The objective evidence of impairment loss for a group of financial assets is observable data indicating that there is a mea-
surable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those
assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, for instance an
increase in the default rates for a particular Banking product.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can
be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impair-
ment loss is reversed through the income statement to the extent of previously recognized impairment charge from equity
to income statement.
The Bank estimates the period between a losses occurring and its identification for each specific portfolio. In general, the
periods used vary between three months to twelve months.
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individu-
ally significant, and individually or collectively for financial assets that are not individually significant and in this field the
following are considered:
• If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment according to historical default ratios.
• If the Bank determines that an objective evidence of financial asset impairment exist that are individually assessed
for impairment and for which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of esti-
mated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and
the amount of the loss is recognized in the income statement. If a loan or held to maturity investment has a variable inter-
est rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the
contract when there is objective evidence for asset impairment. As a practical expedient, the Bank may measure impair-
ment on the basis of an instrument’s fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows
that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk
characteristics (i.e., on the basis of the group’s grading process that considers asset type, industry, geographical location,
collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future
cash flows for groups of such assets by Being indicative of the debtors’ ability to pay all amounts due according to the con-
tractual terms of the assets being evaluated.
For the purposes of evaluation of impairment for a group of a financial assets according to historical default ratios future
cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics
similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the
effects of current conditions that did not affect the period on which the historical loss experience is based and to remove
the effects of conditions in the historical period that do not currently exist.
Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes
in related observable data from period to period (for example, changes in unemployment rates, property prices, payment
status, or other indicative factors of changes in the probability of losses in the Bank and their magnitude. The methodol-
ogy and assumptions used for estimating future cash flows are reviewed regularly by the Bank.
2.12.2. Available for sale investments
The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of
financial assets classify under available for sale is impaired. In the case of equity investments classified as available
for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining
whether the assets are impaired. During periods start from first of January 2009, the decrease consider significant when
it became 10% from the book value of the financial instrument and the decrease consider to be extended if it continues
for period more than 9 months, and if the mentioned evidences become available then any cumulative gains or losses
previously recognized in equity are recognized in the income statement , in respect of available for sale equity securities,
impairment losses previously recognized in profit or loss are not reversed through the income statement.
2.13. Real estate investments
The real estate investments represent lands and buildings owned by the Bank in order to obtain rental returns or capital
gains and therefore do not include real estate assets which the Bank exercised its work through or those that have owned
by the Bank as settlement of debts. The accounting treatment is the same used with property, plant and equipment.
2.14. Property, plant and equipment
Land and buildings comprise mainly branches and offices. All property, plant and equipment are stated at historical cost less de-
preciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or as a separate asset, as appropriate, only when it is probable
that future economic benefits will flow to the Bank and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to other operating expenses during the financial period in which they are incurred.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their residual
values over estimated useful lives, as follows:
Buildings
Leasehold improvements
Furniture and safes
Typewriters, calculators and air-conditions
Transportations
Computers and core systems
Fixtures and fittings
20 years.
3 years, or over the period of the lease if less
5 years.
8 years
5 years
3/10 years
3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Depre-
ciable assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recovered. An asset’s carrying amount is written down immediately to its recoverable value if the asset’s car-
rying amount exceeds its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less
costs to sell and value in use.
Gains and losses on disposals are determined by comparing the selling proceeds with the asset carrying amount and
charged to other operating expenses in the income statement.
2.15. Impairment of non-financial assets
Assets that have an indefinite useful life are not amortized -except goodwill- and are tested annually for impairment. As-
sets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Assets are tested for impair-
ment with reference to the lowest level of cash generating unit/s. A previously recognized impairment loss relating to a
fixed asset may be reversed in part or in full when a change in circumstances leads to a change in the estimates used to
determine the fixed asset’s recoverable amount. The carrying amount of the fixed asset will only be increased up to the
amount that it would have been had the original impairment not been recognized.
2.15.1. Goodwill
Goodwill is capitalized and represents the excess of acquisition cost over the fair value of the Bank’s share in the acquired
entity’s net identifiable assets on the date of acquisition. For the purpose of calculating goodwill, the fair values of acquired
assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future
cash flows. Goodwill is included in the cost of investments in associates and subsidiaries in the Bank’s separate financial
statements. Goodwill is tested for impairment, impairment loss is charged to the income statement.
152
Annual Report 2012
Annual Report 2012
153
Financial Statements: Consolidated
Goodwill is allocated to the cash generating units for the purpose of impairment testing. The cash generating units repre-
sented in the Bank main segments.
2.15.2. Other intangible assets
Is the intangible assets other than goodwill and computer programs (trademarks, licenses, contracts for benefits, the ben-
efits of contracting with clients).
Other intangible assets that are acquired by the Bank are recognized at cost less accumulated amortization and impair-
ment losses. Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of
the intangible asset with definite life. Intangible assets with indefinite life are not amortized and tested for impairment.
2.16. Leases
The accounting treatment for the finance lease is complied with law 95/1995, if the contract entitles the lessee to purchase
the asset at a specified date and predefined value, or the current value of the total lease payments representing at least 90%
of the value of the asset. The other leases contracts are considered operating leases contracts.
2.16.1. Being lessee
Finance lease contract recognizes the lease cost, including the cost of maintenance of the leased assets in the income state-
ment for the period in which they occurred. If the Bank decides to exercise the right to purchase the leased asset the leased
assets are capitalized and included in ‘property, plant and equipment’ and depreciated over the useful life of the expected
remaining life of the asset in the same manner as similar assets. Operating lease payments leases are accounted for on a
straight-line basis over the periods of the leases and are included in ‘general and administrative expenses’.
2.16.2. Being lessor
For finance lease, assets are recorded in the property, plant and equipment in the balance sheet and amortized over the
expected useful life of this asset in the same manner as similar assets. Lease income is recognized on the basis of rate
of return on the lease in addition to an amount corresponding to the cost of depreciation for the period. The difference
between the recognized rental income and the total finance lease clients’ accounts is transferred to the in the income
statement until the expiration of the lease to be reconciled with a net book value of the leased asset. Maintenance and
insurance expenses are charged to the income statement when incurred to the extent that they are not charged to the
tenant.
In case there is objective evidence that the Bank will not be able to collect the of financial lease obligations, the finance
lease payments are reduced to the recoverable amount.
For assets leased under operating lease it appears in the balance sheet under property, plant and equipment, and depreci-
ated over the expected useful life of the asset in the same way as similar assets, and the lease income recorded less any
discounts given to the lessee on a straight-line method over the contract period.
2.17. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’
maturity from the date of acquisition, including cash and non-restricted balances with Central Bank, treasury bills and
other eligible bills, loans and advances to banks, amounts due from other banks and short-term government securities.
2.18. Other provisions
Provisions for restructuring costs and legal claims are recognized when the Bank has present legal or constructive obliga-
tions as a result of past events; where it is more likely than not that a transfer of economic benefit will be necessary to settle
the obligation, and it can be reliably estimated.
In case of similar obligations, the related cash outflow should be determined in order to settle these obligations as a group.
The provision is recognized even in case of minor probability that cash outflow will occur for an item of these obligations.
When a provision is wholly or partially no longer required, it is reversed through profit or loss under other operating
income (expenses).
Provisions for obligations, other than those for credit risk or employee benefits, due within more than 12 months
from the balance sheet date are recognized based on the present value of the best estimate of the consideration re-
quired to settle the present obligation at the balance sheet date. An appropriate pretax discount rate that reflects the
time value of money is used to calculate the present value of such provisions. For obligations due within less than
twelve months from the balance sheet date, provisions are calculated based on undiscounted expected cash outflows
unless the time value of money has a significant impact on the amount of provision, then it is measured at the pres-
ent value.
2.19. Share based payments
The Bank applies an equity-settled, share-based compensation plan. The fair value of equity instruments recognized as
an expense over the vesting period using appropriate valuation models, taking into account the terms and conditions
upon which the equity instruments were granted. The vesting period is the period during which all the specified vesting
conditions of a share-based payment arrangement are to be satisfied. Vesting conditions include service conditions and
performance conditions and market performance conditions are taken into account when estimating the fair value of
equity instruments at the date of grant. At each balance sheet date the number of options that are expected to be exer-
cised are estimated. Recognizes estimate changes, if any, in the income statement, and a corresponding adjustment to
equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and
share premium when the options are exercised.
2.20. Income tax
Income tax on the profit or loss for the period and deferred tax are recognized in the income statement except for income
tax relating to items of equity that are recognized directly in equity.
Income tax is recognized based on net taxable profit using the tax rates applicable at the date of the balance sheet in addi-
tion to tax adjustments for previous years.
Deferred taxes arising from temporary time differences between the book value of assets and liabilities are recognized in
accordance with the principles of accounting and value according to the foundations of the tax, this is determining the
value of deferred tax on the expected manner to realize or settle the values of assets and liabilities, using tax rates appli-
cable at the date of the balance sheet.
Deferred tax assets of the Bank recognized when there is likely to be possible to achieve profits subject to tax in the future
to be possible through to use that asset, and is reducing the value of deferred tax assets with part of that will come from tax
benefit expected during the following years, that in the case of expected high benefit tax, deferred tax assets will increase
within the limits of the above reduced.
2.21. Borrowings
Borrowings are recognized initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at
amortized cost also any difference between proceeds net of transaction costs and the redemption value is recognized in
the income statement over the period of the borrowings using the effective interest method.
2.22. Dividends
Dividends on ordinary shares and profit sharing are recognized as a charge of equity upon the general assembly approval.
Profit sharing includes the employees’ profit share and the Board of Directors’ remuneration as prescribed by the Bank’s
articles of incorporation and the corporate law.
2.23. Comparatives
Comparative figures have been adjusted to conform to changes in presentation in the current period where necessary.
3. Financial risk management
The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and
management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational
risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between
risk and rewards and minimize potential adverse effects on the Bank’s financial performance. The most important types of
financial risks are credit risk, market risk, liquidity risk and other operating risks. Also market risk includes exchange rate risk,
rate of return risk and other prices risks.
154
Annual Report 2012
Annual Report 2012
155
Financial Statements: Consolidated
The Bank’s risk management policies are designed to identify and analyze these risks, to set appropriate risk limits and
controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The
Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best
practice.
Risk management is carried out by risk department under policies approved by the Board of Directors. Bank treasury identi-
fies, evaluates and hedges financial risks in close co-operation with the Bank’s operating units.
The board provides written principles for overall risk management, as well as written policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial in-
struments. In addition, credit risk management is responsible for the independent review of risk management and the control
environment.
3.1. Credit risk
The Bank takes on exposure to credit risk, which is the risk that counterparty will cause a financial loss for the Bank by
failing to discharge an obligation. Management therefore carefully manages its exposure to credit risk. Credit exposures
arise principally in loans and advances, debt securities and other bills. There is also credit risk in off-balance sheet finan-
cial arrangements such as loan commitments. The credit risk management and control are centralized in a credit risk
management team in Bank treasury and reported to the Board of Directors and head of each business unit regularly.
3.1.1. Credit risk measurement
3.1.1.1. Loans and advances to banks and customers
In measuring credit risk of loans and facilities to banks and customers at a counterparty level, the Bank reflects three
components:
• The ‘probability of default’ by the client or counterparty on its contractual obligations
• Current exposures to the counterparty and its likely future development, from which the Bank derive the ‘exposure
at default.
• The likely recovery ratio on the defaulted obligations (the ‘loss given default’).
These credit risk measurements, which reflect expected loss (the ‘expected loss model’) are required by the Basel commit-
tee on banking regulations and the supervisory practices (the Basel committee), and are embedded in the Bank’s daily
operational management. The operational measurements can be contrasted with impairment allowances required under
EAS 26, which are based on losses that have been incurred at the balance sheet date (the ‘incurred loss model’) rather than
expected losses (note 3.1).
The Bank assesses the probability of default of individual counterparties using internal rating tools tailored to the various
categories of counterparty. They have been developed internally and combine statistical analysis with credit officer judg-
ment and are validated, where appropriate. Clients of the Bank are segmented into four rating classes. The Bank’s rating
scale, which is shown below, reflects the range of default probabilities defined for each rating class. This means that, in
principle, exposures migrate between classes as the assessment of their probability of default changes. The rating tools are
kept under review and upgraded as necessary. The Bank regularly validates the performance of the rating and their predic-
tive power with regard to default events.
Bank’s rating
1
2
3
4
description of the grade
performing loans
regular watching
watch list
non-performing loans
Loss given default or loss severity represents the Bank expectation of the extent of loss on a claim should default occur. It is
expressed as percentage loss per unit of exposure and typically varies by type of counterparty, type and seniority of claim
and availability of collateral or other credit mitigation.
3.1.1.2. Debt instruments and treasury and other bills
For debt instruments and bills, external rating such as standard and poor’s rating or their equivalents are used for man-
aging of the credit risk exposures, and if this rating is not available, then other ways similar to those used with the credit
customers are uses. The investments in those securities and bills are viewed as a way to gain a better credit quality mapping
and maintain a readily available source to meet the funding requirement at the same time.
3.1.2. Risk limit control and mitigation policies
The Bank manages, limits and controls concentrations of credit risk wherever they are identified − in particular, to indi-
vidual counterparties and banks, and to industries and countries.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation
to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a re-
volving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit
risk by individual, counterparties, product, and industry sector and by country are approved quarterly by the Board of
Directors.
The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off-
balance sheet exposures, and daily delivery risk limits in relation to trading items such as forward foreign exchange con-
tracts. Actual exposures against limits are monitored daily.
Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to
meet interest and capital repayment obligations and by changing these lending limits where appropriate.
Some other specific control and mitigation measures are outlined below:
3.1.2.1. Collateral
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of
security for funds advances, which is common practice. The Bank implements guidelines on the acceptability of specific
classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are:
• Mortgages over residential properties.
• Mortgage business assets such as premises, and inventory.
• Mortgage financial instruments such as debt securities and equities.
Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are
generally unsecured. In addition, in order to minimize the credit loss the Bank will seek additional collateral from the
counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances.
Collateral held as security for financial assets other than loans and advances is determined by the nature of the instru-
ment. Debt securities, treasury and other governmental securities are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios of financial instruments.
3.1.2.2. Derivatives
The Bank maintains strict control limits on net open derivative positions (i.e., the difference between purchase and sale
contracts), by both amount and term. At any one time, the amount subject to credit risk is limited to the current fair value
of instruments that are favorable to the Bank (i.e., assets with positive fair value), which in relation to derivatives is only a
small fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk
exposure is managed as part of the overall lending limits with customers, together with potential exposures from market
movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except
where the Bank requires margin deposits from counterparties.
Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a cor-
responding receipt in cash, securities or equities. Daily settlement limits are established for each counterparty to cover the
aggregate of all settlement risk arising from the Bank market transactions on any single day.
3.1.2.3. Master netting arrangements
The Bank further restricts its exposure to credit losses by entering into master netting arrangements with counterpar-
ties with which it undertakes a significant volume of transactions. Master netting arrangements do not generally result
in an offset of balance sheet assets and liabilities, as transactions are usually settled on a gross basis. However, the credit
risk associated with favorable contracts is reduced by a master netting arrangement to the extent that if a default occurs,
all amounts with the counterparty are terminated and settled on a net basis. The Bank overall exposure to credit risk on
156
Annual Report 2012
Annual Report 2012
157
3.1.4. Pattern of measuring the general banking risk
In addition to the four categories of the Bank’s internal credit ratings indicated in note 3.1.1, management classifies loans
and advances based on more detailed subgroups in accordance with the CBE regulations. Assets exposed to credit risk
in these categories are classified according to detailed rules and terms depending heavily on information relevant to the
customer, his activity, financial position and his repayment track record. The Bank calculates required provisions for
impairment of assets exposed to credit risk, including commitments relating to credit on the basis of rates determined by
CBE. In case, the provision required for impairment losses as per CBE credit worthiness rules exceeds the required provi-
sions by the application used in balance sheet preparation in accordance with EAS. That excess shall be debited to retained
earnings and carried to the general banking risk reserve in the equity section. Such reserve is always adjusted, on a regular
basis, by any increase or decrease so, that reserve shall always be equivalent to the amount of increase between the two
provisions. Such reserve is not available for distribution.
Below is a statement of institutional worthiness according to internal ratings compared with CBE ratings and rates of
provisions needed for assets impairment related to credit risk:
CBE Rating
1
2
3
4
5
6
7
8
9
10
Categorization
Low risk
Average risk
Satisfactory risk
Reasonable risk
Acceptable risk
Marginally acceptable risk
Watch list
Substandard
Doubtful
Bad debts
Provision% Internal rating
0%
1%
1%
2%
2%
3%
5%
20%
50%
100%
1
1
1
1
1
2
3
4
4
4
Categorization
Performing loans
Performing loans
Performing loans
Performing loans
Performing loans
Regular watching
Watch list
Non performing loans
Non performing loans
Non performing loans
Financial Statements: Consolidated
derivative instruments subject to master netting arrangements can change substantially within a short period, as it is af-
fected by each transaction subject to the arrangement.
3.1.2.4. Credit related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and
standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which are
written undertakings by the Bank on behalf of a customer authorizing a third party to draw drafts on the Bank up to a
stipulated amount under specific terms and conditions – are collateralized by the underlying shipments of goods to which
they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guar-
antees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to
loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused
commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit stan-
dards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have
a greater degree of credit risk than shorter-term commitments.
Impairment and provisioning policies
3.1.3.
The internal rating system described in Note 3.1.1 focus on the credit-quality mapping from the lending and invest-
ment activities perspective. Conversely, for only financial reporting purposes impairment losses are recognized for
that has been incurred at the balance sheet date when there is an objective evidence of impairment. Due to the different
methodologies applied, the amount of incurred impairment losses in balance sheet are usually lower than the amount
determined from the expected loss model that is used for internal operational management and CBE regulation pur-
poses.
The impairment provision reported in balance sheet at the end of the period is derived from each of the four internal credit
risk ratings. However, the majority of the impairment provision is usually driven by the last two rating degrees. The fol-
lowing table illustrates the proportional distribution of loans and advances reported in the balance sheet for each of the
four internal credit risk ratings of the Bank and their relevant impairment losses:
Bank’s rating
1-Performing loans
2-Regular watching
3-Watch list
4-Non-Performing Loans
December 31, 2012
December 31, 2011
Loans and
advances (%)
90.00
5.89
0.48
3.63
Impairment
provision (%)
40.85
8.56
2.01
48.58
Loans and
advances (%)
91.13
4.32
1.74
2.81
Impairment
provision (%)
42.26
4.70
3.70
49.34
The internal rating tools assists management to determine whether objective evidence of impairment exists under EAS 26,
based on the following criteria set by the Bank:
• Cash flow difficulties experienced by the borrower or debtor
• Breach of loan covenants or conditions
• Initiation of bankruptcy proceedings
• Deterioration of the borrower’s competitive position
• Bank granted concessions may not be approved under normal circumstances due to economic, legal reasons and
financial difficulties facing the borrower
• Deterioration of the collateral value
• Deterioration of the credit situation
The Bank’s policy requires the review of all financial assets that are above materiality thresholds at least annually or more
regularly when circumstances require. Impairment provisions on individually assessed accounts are determined by an
evaluation of the incurred loss at balance-sheet date, and are applied to all significant accounts individually. The assess-
ment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts
for that individual account. Collective impairment provisions are provided portfolios of homogenous assets by using the
available historical loss experience, experienced judgment and statistical techniques.
158
Annual Report 2012
Annual Report 2012
159
3.1.6. Loans and advances
Loans and advances are summarized as follows:
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
Loans and
advances to
customers
40,779,399,095
785,027,964
1,578,381,311
43,142,808,370
Loans and
advances to
banks
Loans and
advances to
customers
1,176,571,369 39,842,142,236
478,696,381
1,178,749,699
1,208,166,369 41,499,588,316
-
31,595,000
Loans and
advances to
banks
1,403,385,688
-
30,159,424
1,433,545,112
1,901,222,402
22,277,973
520,994,222
40,698,313,773
29,298,630
-
-
1,419,409,102
45,231,397
365,161,953
1,178,867,739 39,669,785,864
37,950,503
-
-
1,395,594,609
» Neither past due nor impaired
» Past due but not impaired
» Individually impaired
Gross
Less:
» Impairment provision
» Unamortized bills discount
» Unearned interest
Net
Impairment provision losses for loans and advances reached EGP 1,930,521,032.
During the period the Bank’s total loans and advances increased by 3.30% .
In order to minimize the propable exposure to credit risk, the Bank focuses more on the business with large enterprises,banks
or retail customers with good credit rating or sufficient collateral.
Financial Statements: Consolidated
3.1.5. Maximum exposure to credit risk before collateral held
In balance sheet items exposed to credit risk
» Treasury bills and other governmental notes
Trading financial assets:
» Debt instruments
Gross loans and advances to banks
Less:Impairment provision
Gross loans and advances to customers
Individual:
» Overdraft
» Credit cards
» Personal loans
» Mortgages
» Other loans
Corporate:
» Overdraft
» Direct loans
» Syndicated loans
» Other loans
» Unamortized bills discount
Impairment provision
Unearned interest
Derivative financial instruments
Financial investments:
» Debt instruments
» Investments in associates
Total
Off balance sheet items exposed to credit risk
Financial guarantees
Customers acceptances
Letter of credit
Letter of guarantee
Total
Dec. 31, 2012
EGP
11,193,466,093
Dec. 31, 2011
EGP
10,700,842,183
1,181,100,426
1,208,166,369
(29,298,630)
468,101,674
1,433,545,112
(37,950,503)
1,220,222,219
660,932,044
3,616,553,758
463,833,879
20,045,324
4,288,571,348
23,196,204,054
9,588,649,990
87,795,754
(22,277,973)
(1,901,222,402)
(520,994,222)
137,459,761
952,982,877
575,672,905
2,659,469,004
419,990,050
40,265,000
4,239,213,684
24,265,367,037
8,245,001,963
101,625,796
(45,231,397)
(1,419,409,102)
(365,161,953)
146,544,656
24,859,146,103
165,198,634
79,413,552,530
14,908,653,481
106,676,167
67,396,198,634
2,276,369,133
1,176,928,870
933,297,936
12,787,512,199
17,174,108,138
2,219,596,241
542,833,642
753,154,858
11,263,565,016
14,779,149,757
The above table represents the Bank Maximum exposure to credit risk on December 31, 2012, before taking account of
any held collateral.
For assets recognized on balance sheet, the exposures set out above are based on net carrying amounts as reported in the
balance sheet.
As shown above 52.91% of the total maximum exposure is derived from loans and advances to banks and customers while
investments in debt instruments represents 32.79%.
Management is confident in its ability to continue to control and sustain minimal exposure of credit risk resulting from
both its loans and advances portfolio and debt instruments based on the following:
• 95.88% of the loans and advances are concentrated in the top two grades of the internal credit risk rating system.
• 96.37% of loans and advances portfolio are considered to be neither past due nor impaired.
• Loans and advances assessed individualy are valued EGP 1,609,976,311.
• The Bank has implemented more prudent processes when granting loans and advances during the financial period
ended on December 31, 2012.
• 94.29% of the investments in debt Instruments are Egyptian sovereign instruments.
160
Annual Report 2012
Annual Report 2012
161
Financial Statements: Consolidated
-
-
7
2
6
,
5
5
5
,
0
1
1
3
9
,
4
0
9
,
7
7
1
9
6
3
,
1
3
5
,
1
6
6
-
6
9
2
,
3
4
0
,
5
3
1
-
1
0
1
,
6
2
5
6
1
7
,
9
0
3
,
1
5
5
2
2
,
9
0
2
,
7
7
4
1
4
7
,
5
5
8
,
6
4
4
,
2
1
9
9
,
9
7
4
0
7
,
0
8
6
,
1
3
4
8
0
7
,
5
5
2
,
2
6
7
1
,
2
1
1
,
2
1
3
,
8
6
1
,
1
7
2
9
,
3
9
2
,
5
5
9
,
7
3
4
5
7
,
7
8
0
,
2
8
0
7
6
,
7
4
0
,
4
3
6
,
8
2
8
1
,
3
2
7
,
4
1
7
9
1
,
,
8
7
0
7
5
5
8
,
,
5
4
2
8
4
8
4
9
,
-
2
5
3
7
8
8
,
,
5
6
5
8
4
5
7
4
1
,
,
1
3
2
6
6
0
8
2
8
3
,
,
,
3
5
8
7
0
1
1
,
,
8
8
1
9
5
9
6
1
,
-
-
,
4
8
4
3
8
1
9
4
4
,
,
5
3
5
3
7
2
1
,
,
6
2
6
5
9
3
5
3
,
,
2
1
4
1
4
4
0
2
,
,
3
1
5
8
7
7
6
2
,
,
3
5
6
2
0
5
9
5
4
3
,
,
8
0
5
,
0
4
9
,
3
9
2
4
,
1
2
8
,
1
7
3
6
,
2
2
9
,
9
3
5
2
,
7
7
8
,
6
8
0
1
,
0
6
9
,
2
1
1
5
8
,
5
7
9
,
9
3
8
6
6
,
1
8
8
,
3
3
6
1
3
4
,
3
9
6
,
2
5
1
,
1
9
3
7
,
7
6
8
,
8
7
1
,
1
8
6
9
,
5
8
5
,
1
4
2
,
1
4
6
4
8
,
3
9
6
,
2
8
6
8
3
,
1
8
0
,
2
5
2
,
9
5
1
1
,
8
8
1
4
5
9
,
1
2
,
9
1
1
,
0
2
0
,
9
7
0
,
4
3
9
3
,
4
5
9
,
8
1
9
1
0
,
7
5
4
,
0
5
4
4
0
2
,
8
1
1
,
2
4
5
,
3
,
3
1
7
3
0
6
,
2
5
6
2
7
1
,
9
6
4
,
9
0
2
,
1
P
G
E
l
a
t
o
T
l
a
t
o
T
d
n
a
s
n
a
o
l
d
n
a
s
n
a
o
l
s
e
c
n
a
v
d
a
o
t
s
e
c
n
a
v
d
a
s
k
n
a
b
o
t
s
r
e
m
o
t
s
u
c
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
P
G
E
l
a
t
o
T
l
a
t
o
T
d
n
a
s
n
a
o
l
d
n
a
s
n
a
o
l
s
e
c
n
a
v
d
a
o
t
s
e
c
n
a
v
d
a
s
k
n
a
b
o
t
s
r
e
m
o
t
s
u
c
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
r
e
h
t
O
s
n
a
o
l
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
2
1
0
2
,
1
3
.
c
e
D
:
s
k
n
a
b
d
n
a
s
r
e
m
o
t
s
u
c
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
t
e
N
-
8
5
3
,
6
7
7
,
5
1
2
2
9
,
1
0
9
,
1
9
6
5
4
6
,
4
9
0
,
4
7
4
6
4
0
,
7
4
6
2
5
,
1
0
1
6
6
6
,
7
6
7
,
8
2
1
9
2
1
,
6
1
3
,
5
5
2
-
6
5
3
,
4
2
6
,
6
4
6
7
8
1
,
6
5
4
,
2
4
9
7
,
4
6
2
,
2
8
7
,
1
2
0
1
,
1
0
1
,
5
1
8
2
,
0
1
2
,
8
5
5
8
4
,
3
9
1
,
6
9
4
1
,
4
6
0
,
2
6
3
,
7
7
3
,
1
3
5
8
,
7
1
9
,
1
3
1
,
7
3
4
8
3
,
9
8
6
,
4
9
0
5
3
,
5
9
3
,
1
5
7
,
7
4
9
2
,
5
3
4
,
6
7
0
1
2
,
,
5
1
1
4
3
3
2
2
,
,
5
6
0
0
8
9
6
3
1
,
,
2
4
1
6
3
6
4
6
8
3
,
,
-
7
5
2
7
5
2
,
,
5
9
0
1
4
2
7
3
,
-
-
,
7
8
3
8
7
2
8
2
,
,
7
7
5
6
5
3
1
1
,
,
6
0
7
8
7
3
5
0
4
,
,
0
6
7
0
8
7
0
2
5
2
,
,
3
4
8
,
8
9
7
,
0
1
6
3
5
,
1
6
4
,
9
0
5
9
,
8
7
2
,
3
8
9
3
,
6
0
2
,
8
9
8
0
,
5
4
2
,
4
0
5
0
7
8
,
9
9
0
,
4
1
9
,
8
6
9
7
0
6
7
4
,
,
6
1
7
2
7
1
1
,
,
7
4
0
5
3
7
2
,
,
9
0
8
0
5
5
2
2
,
5
0
8
,
9
5
0
,
5
1
9
5
4
,
7
3
8
s
n
a
o
l
i
g
n
m
r
o
f
r
e
p
-
n
o
N
»
9
0
6
,
4
9
5
,
5
9
3
,
1
4
1
2
,
9
7
1
,
0
8
0
,
0
4
8
5
0
,
9
3
9
,
9
9
7
9
2
,
3
7
3
,
8
3
9
,
7
4
6
2
,
9
6
5
4
7
4
,
3
2
,
0
9
2
,
8
5
5
,
1
7
0
,
4
8
6
0
,
1
7
6
,
8
3
3
5
7
,
3
1
1
,
8
0
4
3
3
5
,
6
6
9
,
2
8
5
,
2
7
8
6
,
2
8
3
,
3
3
5
3
6
2
,
5
0
6
,
2
3
9
l
a
t
o
T
.
t
n
e
m
r
i
a
p
m
i
f
o
e
c
n
e
d
i
v
e
e
v
i
t
c
e
j
b
o
n
a
s
i
e
r
e
h
t
s
s
e
l
n
u
,
d
e
r
i
a
p
m
i
d
e
r
e
d
i
s
n
o
c
t
o
n
e
r
a
e
u
d
t
s
a
p
s
y
a
d
0
9
n
a
h
t
s
s
e
l
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
:
d
e
r
i
a
p
m
i
t
o
n
t
u
b
e
u
d
t
s
a
p
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
,
0
3
1
7
0
8
1
1
,
-
,
8
8
7
4
7
3
7
,
,
2
4
3
2
3
4
4
,
,
2
6
4
0
4
4
2
2
2
,
,
3
4
0
2
0
9
5
0
1
,
,
5
6
1
8
9
8
3
8
,
,
3
5
2
0
4
6
2
3
,
,
9
5
5
2
7
5
7
5
,
,
1
5
6
1
8
8
1
,
,
1
8
5
0
8
8
4
2
,
,
8
2
3
0
1
8
0
3
,
,
2
5
1
0
2
8
1
9
2
,
,
4
9
6
3
8
7
7
0
1
,
,
5
3
5
3
5
1
6
1
1
,
,
3
2
9
2
8
8
7
6
,
7
0
7
,
6
8
4
,
9
1
4
5
9
9
,
0
0
7
0
9
8
,
8
4
4
,
1
1
2
7
4
,
1
3
8
,
6
3
1
2
6
9
,
3
0
5
,
6
5
3
4
1
,
7
1
2
,
7
1
2
1
8
,
7
0
2
,
3
9
4
6
2
6
,
1
9
0
0
4
,
0
1
1
1
2
0
,
3
0
9
5
3
0
,
5
8
5
,
2
7
6
2
,
5
9
1
,
2
0
9
0
,
4
9
7
,
4
3
9
5
,
0
9
6
,
3
1
2
9
1
,
9
2
2
,
6
1
5
5
1
,
6
1
3
,
5
5
1
,
0
5
3
5
0
5
0
7
2
,
,
8
0
7
6
3
1
0
4
,
,
6
8
3
7
1
1
0
1
,
,
4
4
4
9
5
7
0
2
3
,
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
l
a
t
o
T
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
l
a
t
o
T
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
s
d
r
a
c
t
i
d
e
r
C
s
t
f
a
r
d
r
e
v
O
e
t
a
r
o
p
r
o
C
l
i
a
u
d
v
d
n
i
I
,
2
0
4
3
3
9
7
,
,
5
6
9
7
5
9
7
1
,
,
5
8
0
0
0
5
3
0
1
,
,
2
5
4
1
9
3
9
2
1
,
-
-
-
-
,
5
8
0
0
0
5
3
0
1
,
-
5
0
2
,
8
0
2
,
2
1
3
6
7
2
,
1
1
2
,
1
,
6
2
8
7
7
0
8
,
,
9
3
1
0
8
8
9
,
,
7
1
8
3
4
2
1
,
,
5
8
5
9
8
6
6
,
,
8
2
7
1
2
8
2
1
1
,
,
4
2
7
9
6
5
6
1
,
9
7
8
,
4
2
2
,
3
2
5
4
8
,
1
7
8
,
3
1
9
9
4
,
4
9
1
1
5
,
9
5
9
2
9
,
4
0
3
,
9
4
3
6
8
2
,
5
6
3
,
1
l
a
t
o
T
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
l
a
t
o
T
s
e
g
a
g
t
r
o
M
9
8
6
,
9
0
5
,
3
0
3
6
,
0
3
8
,
1
0
3
7
,
3
6
2
,
1
9
4
0
,
4
0
6
,
6
l
a
n
o
s
r
e
P
s
n
a
o
l
s
d
r
a
c
t
i
d
e
r
C
s
t
f
a
r
d
r
e
v
O
9
9
0
,
4
8
9
,
3
1
2
2
,
4
7
4
,
1
1
1
0
3
,
9
0
5
,
6
0
1
1
2
6
,
7
6
9
,
1
2
1
,
5
0
5
4
6
5
8
,
,
9
2
5
5
2
8
9
,
,
9
3
9
7
7
9
0
0
2
,
,
3
7
9
7
6
3
9
1
2
,
s
y
a
d
0
3
o
t
p
u
e
u
d
t
s
a
P
»
s
y
a
d
0
6
-
0
3
e
u
d
t
s
a
P
»
s
y
a
d
0
9
-
0
6
e
u
d
t
s
a
P
»
l
a
t
o
T
2
1
0
2
,
1
3
.
c
e
D
s
y
a
d
0
3
o
t
p
u
e
u
d
t
s
a
P
»
s
y
a
d
0
6
-
0
3
e
u
d
t
s
a
P
»
s
y
a
d
0
9
-
0
6
e
u
d
t
s
a
P
»
l
a
t
o
T
1
1
0
2
,
1
3
.
c
e
D
,
1
1
3
6
7
9
9
0
6
1
,
,
,
1
7
1
0
8
4
3
,
,
0
7
6
4
9
9
9
7
1
,
,
0
4
4
0
7
7
5
6
0
1
,
,
1
5
4
,
2
6
4
,
8
3
2
0
7
2
,
4
4
2
,
1
3
2
7
,
6
8
0
,
1
1
8
1
8
,
7
3
0
,
9
8
6
3
4
,
2
1
4
,
6
,
2
3
3
7
8
4
4
1
,
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
»
l
a
t
o
T
r
e
h
t
O
s
n
a
o
l
e
t
a
r
o
p
r
o
C
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
l
i
a
u
d
v
d
n
i
I
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
2
1
0
2
,
1
3
.
c
e
D
l
a
t
o
T
,
3
2
1
9
0
9
8
0
2
1
,
,
4
2
9
6
2
1
,
r
e
h
t
O
s
n
a
o
l
e
t
a
r
o
p
r
o
C
d
e
t
a
c
d
n
y
S
i
s
n
a
o
l
l
i
a
u
d
v
d
n
i
I
s
n
a
o
l
t
c
e
r
i
D
t
f
a
r
d
r
e
v
O
r
e
h
t
O
s
n
a
o
l
s
e
g
a
g
t
r
o
M
l
a
n
o
s
r
e
P
s
n
a
o
l
t
i
d
e
r
C
s
d
r
a
c
s
t
f
a
r
d
r
e
v
O
1
1
0
2
,
1
3
.
c
e
D
,
3
5
6
4
7
0
6
2
3
,
,
6
8
6
0
1
3
7
5
5
,
1
1
4
,
7
8
2
,
7
5
1
8
9
9
,
1
1
4
,
1
4
2
8
,
0
2
0
,
1
1
8
0
0
,
7
9
1
,
6
8
0
6
3
,
1
0
1
,
2
5
,
9
5
2
8
7
3
7
1
,
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
»
:
s
w
o
l
l
o
f
s
a
e
r
a
,
k
n
a
B
e
h
t
y
b
d
l
e
h
l
a
r
e
t
a
l
l
o
c
d
e
t
a
l
e
r
f
o
e
u
l
a
v
r
i
a
f
e
h
t
h
t
i
w
g
n
o
l
a
,
t
c
u
d
o
r
p
y
b
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
a
u
d
i
v
i
d
n
i
f
o
t
n
u
o
m
a
s
s
o
r
g
e
h
t
f
o
n
w
o
d
k
a
e
r
b
e
Th
.
1
1
3
,
,
,
6
7
9
9
0
6
1
P
G
E
d
e
l
a
t
o
t
e
r
a
s
e
e
t
n
a
r
a
u
g
m
o
r
f
s
w
o
fl
h
s
a
c
n
o
i
t
a
r
e
d
i
s
n
o
c
o
t
n
i
g
n
i
k
a
t
t
u
o
h
t
i
w
d
e
s
s
e
s
s
a
y
l
l
a
u
d
i
v
i
d
n
i
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
L
s
n
a
o
l
d
e
r
i
a
p
m
i
y
l
l
i
a
u
d
v
d
n
i
I
s
n
a
o
l
i
g
n
m
r
o
f
r
e
p
-
n
o
N
»
l
a
t
o
T
s
n
a
o
l
i
g
n
m
r
o
f
r
e
P
i
g
n
h
c
t
a
w
l
r
a
u
g
e
R
t
s
i
l
h
c
t
a
W
»
»
»
:
s
e
d
a
r
G
1
1
0
2
,
1
3
.
c
e
D
s
n
a
o
l
i
g
n
m
r
o
f
r
e
P
i
g
n
h
c
t
a
w
l
r
a
u
g
e
R
»
»
t
s
i
l
h
c
t
a
W
»
:
s
e
d
a
r
G
162
Annual Report 2012
Annual Report 2012
163
Financial Statements: Consolidated
• Loans and advances restructured
Restructuring activities include reschaduling arrangements, obligatory management programs, modification and deferral of
payments. The application of restructuring policies are based on indicators or criteria of credit performance of the borrower
that is based on the personal judgment of the management, indicate that payment will most likely continue. Restructuring is
commonly applied to term loans, specially customer loans. Renegotiated loans totaled at the end of the period
Loans and advances to customer
Corporate
» Direct loans
Total
Dec. 31, 2012
Dec. 31, 2011
2,924,873,000
2,924,873,000
2,780,557,000
2,780,557,000
3.1.7. Debt instruments, treasury bills and other governmental notes
The table below presents an analysis of debt instruments, treasury bills and other governmental notes by rating agency
designation at end of financial period, based on Standard & Poor’s ratings or their equivalent:
EGP
Dec. 31, 2012
» AAA
» AA- to AA+
» A- to A+
» Lower than A-
» Unrated
Total
Treasury bills
and other gov.
notes
-
-
-
-
8,017,754,432
8,017,754,432
Total
Trading
financial debt
instruments
Non-trading
financial debt
instruments
1,058,879,243
1,058,879,243
140,720,779
140,720,779
227,946,980
227,946,980
936,659,017
988,896,900
1,128,862,543 22,494,940,084 31,641,557,059
1,181,100,426 24,859,146,104 34,058,000,962
-
-
-
52,237,883
3.1.8. Concentration of risks of financial assets with credit risk exposure
3.1.8.1. Geographical sectors
Following is a breakdown of the Bank’s main credit exposure at their book values categorized by geographical region at
the end of the current period.
The Bank has allocated exposures to regions based on the country of domicile of its counterparties.
Dec. 31, 2012
Cairo
Alex, Delta
and Sinai
Upper Egypt
Total
-
-
-
-
- 11,193,466,093
-
-
-
1,181,100,426
1,208,166,369
(29,298,630)
750,010,323
660,932,044
1,181,100,426
1,208,166,369
(29,298,630)
» Treasury bills and other governmental notes 11,193,466,093
» Trading financial assets:
» Debt instruments
» Gross loans and advances to banks
» Less:Impairment provision
Gross loans and advances to customers
Individual:
» Overdrafts
» Credit cards
» Personal loans
» Mortgages
» Other loans
Corporate:
» Overdrafts
» Direct loans
» Syndicated loans
» Other loans
» Unamortized bills discount
» Impairment provision
» Unearned interest
» Derivative financial instruments
Financial investments:
» Debt instruments
» Investments in associates
Total
8,933,686,091
77,751,440
(22,277,973)
(1,901,222,402)
(403,955,322)
137,459,761
24,859,146,103
165,198,634
447,045,445
-
2,401,536,267 1,107,474,070
81,891,354
1,322,731
373,157,230
18,722,593
3,451,485,639
835,548,706
16,641,174,813 6,518,007,292
654,963,899
10,044,314
-
-
(115,616,300)
-
-
-
69,696,239,500 9,540,681,511
-
23,166,451 1,220,222,219
660,932,044
107,543,421 3,616,553,758
463,833,879
20,045,324
8,785,295
-
1,537,003 4,288,571,348
37,021,949 23,196,204,054
9,588,649,990
87,795,754
(22,277,973)
(1,901,222,402)
(520,994,222)
137,459,761
(1,422,600)
-
-
-
-
-
- 24,859,146,103
-
165,198,634
176,631,519 79,413,552,530
s
r
o
t
c
e
s
y
r
t
s
u
d
n
I
.
2
.
8
.
1
.
3
P
G
E
l
a
t
o
T
l
3
9
0
,
6
6
4
,
3
9
1
,
1
1
6
2
4
,
0
0
1
,
1
8
1
,
1
9
6
3
,
6
6
1
,
8
0
2
,
1
)
0
3
6
,
8
9
2
,
9
2
(
-
-
-
-
8
4
3
,
1
7
5
,
8
8
2
,
4
4
5
0
,
4
0
2
,
6
9
1
,
3
2
0
9
9
,
9
4
6
,
8
8
5
,
9
4
5
7
,
5
9
7
,
7
8
)
3
7
9
,
7
7
2
,
2
2
(
-
-
-
-
-
9
1
2
,
2
2
2
,
0
2
2
,
1
9
1
2
,
2
2
2
,
0
2
2
,
1
4
4
0
,
2
3
9
,
0
6
6
4
4
0
,
2
3
9
,
0
6
6
8
5
7
,
3
5
5
,
6
1
6
,
3
8
5
7
,
3
5
5
,
6
1
6
,
3
4
2
3
,
5
4
0
,
0
2
9
7
8
,
3
3
8
,
3
6
4
4
2
3
,
5
4
0
,
0
2
9
7
8
,
3
3
8
,
3
6
4
i
a
u
d
v
d
n
i
I
s
e
i
t
i
v
i
t
c
a
r
o
t
c
e
s
r
e
h
t
O
t
n
e
m
n
r
e
v
o
G
l
e
a
s
e
o
h
W
l
e
d
a
r
t
l
i
a
t
e
r
d
n
a
e
t
a
t
s
e
l
a
e
R
g
n
i
r
u
t
c
a
f
u
n
a
M
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
9
0
,
6
6
4
3
9
1
,
,
1
1
6
2
4
,
0
0
1
1
8
1
,
,
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
2
2
,
4
3
4
,
2
4
3
,
1
5
4
8
,
2
5
3
,
5
1
7
3
2
,
3
0
5
6
3
4
,
5
1
7
,
6
4
9
3
3
4
,
-
4
5
8
,
6
9
6
,
3
2
5
4
7
,
6
2
3
,
7
9
0
,
4
-
-
-
-
-
-
7
3
0
,
5
4
0
,
2
2
8
,
0
1
1
8
3
,
3
6
9
5
3
2
,
,
1
0
7
2
,
6
6
4
3
3
2
,
-
-
2
7
5
,
9
5
3
1
9
1
,
8
5
1
,
6
0
4
,
9
3
6
-
-
-
-
-
-
-
-
-
,
1
7
7
4
4
3
6
,
3
2
4
1
4
0
,
,
0
6
7
5
3
9
,
-
-
-
-
-
,
1
,
9
6
4
8
,
0
1
9
,
8
1
0
6
1
,
9
0
6
,
7
7
7
0
0
9
8
9
0
,
,
4
6
7
8
0
7
1
9
,
,
1
5
8
4
,
-
-
-
)
3
7
9
,
7
7
2
,
2
2
(
l
i
a
c
n
a
n
F
i
s
n
o
i
t
u
t
i
t
s
n
i
-
-
)
0
3
6
,
8
9
2
,
9
2
(
,
9
6
3
6
6
1
,
8
0
2
,
1
-
n
r
e
v
o
g
r
e
h
t
o
d
n
a
s
l
l
i
b
y
r
u
s
a
e
r
T
»
s
e
t
o
n
l
a
t
n
e
m
2
1
0
2
,
1
3
.
c
e
D
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
s
s
o
r
G
»
s
t
n
e
m
u
r
t
s
n
i
t
b
e
D
»
:
s
t
e
s
s
a
l
i
a
c
n
a
n
fi
g
n
d
a
r
T
i
o
t
s
e
c
n
a
v
d
a
d
n
a
s
n
a
o
l
s
s
o
r
G
s
r
e
m
o
t
s
u
c
s
n
a
o
l
l
a
n
o
s
r
e
P
»
s
d
r
a
c
t
i
d
e
r
C
»
s
t
f
a
r
d
r
e
v
O
»
s
e
g
a
g
t
r
o
M
»
s
n
a
o
l
r
e
h
t
O
»
:
e
t
a
r
o
p
r
o
C
s
t
f
a
r
d
r
e
v
O
»
s
n
a
o
l
t
c
e
r
i
D
»
s
n
a
o
l
i
d
e
t
a
c
d
n
y
S
»
:
l
i
a
u
d
v
d
n
i
I
i
i
n
o
s
v
o
r
p
t
n
e
m
r
i
a
p
m
I
:
s
s
e
L
»
s
k
n
a
b
t
n
u
o
c
s
d
s
i
l
l
i
b
d
e
z
i
t
r
o
m
a
n
U
»
s
n
a
o
l
r
e
h
t
O
»
.
s
e
i
t
i
v
i
t
c
a
s
r
e
m
o
t
s
u
c
k
n
a
B
e
h
t
y
b
d
e
z
i
r
o
g
e
t
a
c
e
u
l
a
v
k
o
o
b
r
i
e
h
t
t
a
e
r
u
s
o
p
x
e
t
i
d
e
r
c
n
i
a
m
s
’
p
u
o
r
G
e
h
t
s
i
s
y
l
a
n
a
e
l
b
a
t
g
n
w
o
i
l
l
o
f
e
Th
)
2
0
4
,
2
2
2
,
1
0
9
,
1
(
)
8
7
9
,
5
4
5
,
3
2
1
(
)
2
2
6
,
3
3
9
,
4
2
8
(
)
1
3
4
,
9
1
0
3
1
,
(
)
5
6
4
,
6
4
2
7
,
(
)
7
3
0
1
8
1
,
,
9
3
(
)
0
6
5
,
6
1
7
4
6
7
,
(
)
9
0
3
,
9
7
5
,
8
2
1
(
i
i
n
o
s
v
o
r
p
t
n
e
m
r
i
a
p
m
I
»
1
6
7
,
9
5
4
,
7
3
1
4
3
6
,
8
9
1
,
5
6
1
3
0
1
,
6
4
1
,
9
5
8
,
4
2
-
-
-
-
-
-
)
2
2
2
,
4
9
9
,
0
2
5
(
)
0
9
9
,
5
1
0
,
4
3
(
)
5
8
5
,
4
4
2
,
2
3
2
(
-
-
-
0
7
4
,
4
6
5
4
6
3
,
,
3
2
-
-
-
)
0
7
9
0
1
,
(
-
-
-
-
0
3
5
,
2
5
5
,
3
1
4
,
9
7
6
5
2
,
5
2
0
,
4
2
8
,
5
7
5
6
,
4
2
3
,
8
2
2
,
5
1
4
8
7
,
7
2
4
7
7
9
,
,
6
3
2
7
0
,
2
1
7
2
6
6
,
8
0
4
,
1
3
5
5
2
2
,
-
-
-
,
2
6
9
6
,
5
8
9
,
5
8
8
4
1
,
4
3
6
,
8
9
1
,
5
6
1
3
3
6
,
1
8
5
,
4
9
4
,
1
,
6
5
6
5
4
5
,
9
0
6
,
3
d
n
a
i
i
y
r
a
d
s
b
u
s
n
i
s
t
n
e
m
t
s
e
v
n
I
»
i
s
e
t
a
c
o
s
s
a
l
a
t
o
T
:
s
t
n
e
m
t
s
e
v
n
i
l
i
a
c
n
a
n
F
i
s
t
n
e
m
u
r
t
s
n
i
t
b
e
D
»
1
6
7
,
9
5
4
,
7
3
1
s
t
n
e
m
u
r
t
s
n
i
l
i
a
c
n
a
n
fi
e
v
i
t
a
v
i
r
e
D
»
)
2
4
8
,
7
9
4
2
4
2
,
(
)
5
3
8
,
4
2
2
,
2
1
(
t
s
e
r
e
t
n
i
d
e
n
r
a
e
n
U
»
164
Annual Report 2012
Annual Report 2012
165
Financial Statements: Consolidated
3.2. Market risk
Market risk represnted as fluctuations in fair value or future cash flow, including foreign exchange rates and commodity
prices, interest rates, credit spreads and equity prices will reduce the Bank’s income or the value of its portfolios. the Bank
separates exposures to market risk into trading or non-trading portfolios.
Market risks are measured, monitored and controlled by the market risk management department. In addition, regular
reports are submitted to the Asset and Liability Management Committee (ALCO), Board Risk Committee and the heads
of each business unit.
Trading portfolios include positions arising from market-making, position taking and others designated as marked-to-
market. Non-trading portfolios include positions that primarily arise from the interest rate management of the group’s
retail and commercial banking assets and liabilities, financial investments designated as available for sale and held-to-
maturity.
3.2.1. Market risk measurement techniques
As part of the management of market risk, the Bank undertakes various hedging strategies. the Bank also enters into inter-
est rate swaps to match the interest rate risk associated with the fixed-rate long-term debt instrument and loans to which
the fair value option has been applied .
3.2.1.1. Value at Risk
The Bank applies a “Value at Risk” methodology (VaR) to its trading and non-trading portfolios, to estimate the market
risk of positions held and the maximum losses expected under normal market conditions, based upon a number of as-
sumptions for various changes in market conditions.
VaR is a statistically based estimate of the potential loss on the current portfolio from adverse market movements. It
expresses the ‘maximum’ amount the Bank might lose , but only to a certain level of confidence (95%). There is therefore
a specified statistical probability (5%) that actual loss could be greater than the VaR estimate. The VaR model assumes
a certain ‘holding period’ until positions can be closed ( 1 Day). The Bank is assessing the historical movements in the
market prices based on volatilities and correlations data for the past five years. The use of this approach does not prevent
losses outside of these limits in the event of more significant market movements.
As VaR constitutes an integral part of the Bank’s market risk control regime, the Market Risk Management set Soft VaR
Limits, trading book, which have been approved by the board, and are monitored and reported on a daily basis to the
Senior Management. In addition, monthly limits compliance is reported to the ALCO.
The Bank has developed the internal models used to calculate VaR and are not approved yet by the central bank as the
regulator is still applying Basel I in parallel basis with the standardized market risk approach in Basel II.
3.2.1.2. Stress tests
Stress tests provide an indication of the potential size of losses that could arise under extreme market conditions. There-
fore, bank computes on a daily basis trading Stress VaR, combined with trading Normal VaR to capture the abnormal
movements in financial markets and to give more comprehensive picture of risk. The results of the stress tests are reviewed
by the ALCO on a monthly basis and the board risk committee on a quarterly basis.
3.2.2. Value at risk (VaR) Summary
Total VaR by risk type
EGP
Dec. 31, 2012
High
175,325
Dec. 31, 2011
High
798,293
Low
5,847
41,293
275,822
Medium
Medium
Low
22,715
69,880,113 81,920,976 58,491,659 19,970,380 25,574,668 15,047,233
63,018,453 72,607,499 52,982,174
7,638,408
9,752,494 11,883,218
5,509,485 13,919,605 16,474,199 11,866,315
9,313,477
1,488,630
253,871
798,571
465,524
69,926,059 81,958,286 58,537,533 20,406,187 26,002,691 15,490,695
6,861,659
199,809
345,860
1,659,204
921,509
1,762,596
1,057,998
149,646
282,380
» Foreign exchange risk
Interest rate risk
» For non trading purposes
» For trading purposes
» Equities risk
» Investment fund
Total VaR
166
Annual Report 2012
• Trading portfolio VaR by risk type
Medium
Dec. 31, 2012
High
175,325
Low
Medium
5,847
275,822
Dec. 31, 2011
High
798,293
Low
22,715
41,293
Foreign exchange risk
Interest rate risk
» For trading purposes
» Equities risk
Investment fund
Total VaR
6,861,659
199,809
345,860
7,268,816
9,313,477
253,871
465,524
9,360,357
5,509,485 13,919,605 16,474,199 11,866,315
1,488,630
798,571
5,546,276 14,382,231 15,076,004 13,832,710
1,659,204
921,509
1,762,596
1,057,998
149,646
282,380
• Non trading portfolio VaR by risk type
Medium
Dec. 31, 2012
High
Low
Medium
Dec. 31, 2011
High
Low
Interest rate risk
» For non trading purposes
Total VaR
63,018,453 72,607,499 52,982,174
63,018,453 72,607,499 52,982,174
9,752,494 11,883,218
9,752,494 11,883,218
7,638,408
7,638,408
The aggregate of the trading and non-trading VaR results does not constitute the Bank’s VaR due to correlations and
consequent diversification effects between risk types and portfolio types.
3.2.3. Foreign exchange risk
The Bank’s financial position and cash flows are exposed to fluctuations in foreign currency exchange rates. The Board sets
limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are moni-
tored daily. The table below summarizes the Bank’s exposure to foreign currency exchange rate risk and Bank’s financial
instruments at carrying amounts, categorized by currency.
Equivalent EGP
Dec. 31, 2012
Financial assets
» Cash and balances with
Central Bank
» Due from banks
» Treasury bills and other
governmental notes
» Trading financial assets
» Gross loans and advanc-
es to banks
» Gross loans and advanc-
es to customers
» Derivative financial instru-
ments
Financial investments
» - Available for sale
» - Held to maturity
» Investments in associates
Total financial assets
Financial liabilities
» Due to banks
» Due to customers
» Derivative financial instru-
ments
» Long term loans
Total financial liabilities
Net on-balance sheet
financial position
EGP
USD
EUR
GBP
Other
Total
4,547,889,733
649,709,912
128,385,584
24,385,266
43,603,629 5,393,974,124
143,604,350 5,049,101,786 2,401,041,621
402,155,264
51,917,368 8,047,820,388
4,773,237,358 3,472,922,400
241,653,085
1,490,253,622
9,194,145
-
-
1,170,995,566
37,170,803
-
-
-
-
8,487,812,843
15,877,734 1,515,325,501
-
1,208,166,369
25,149,379,935 17,249,717,628
698,370,716
37,776,260
7,563,832 43,142,808,370
34,317,819
98,258,816
4,883,126
-
-
137,459,761
19,867,780,270 1,309,647,328
-
4,215,787,960
38,373,478
126,825,156
-
-
-
60,349,076,203 29,047,921,058 3,511,504,934
-
-
-
464,316,790
- 21,177,427,597
-
4,215,787,960
-
165,198,634
118,962,562 93,491,781,548
650,505
1,362,866,273
47,924,539,371 26,846,823,314 3,403,851,868
351,304,112
41,825
453,989,690
-
1,714,862,716
99,917,245 78,729,121,488
12,295,409
102,612,684
4,191,167
-
-
119,099,260
80,495,238
-
49,380,196,292 27,300,740,110 3,408,693,540
-
-
454,031,515
-
80,495,238
99,917,245 80,643,578,702
10,968,879,911 1,747,180,948
102,811,394
10,285,275
19,045,318 12,848,202,846
Annual Report 2012
167
Financial Statements: Consolidated
3.2.4. Interest rate risk
The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair
value and cash flow risks. Interest margins may increase as a result of such changes but profit may decrease in the event
that unexpected movements arise. The Board sets limits on the gaps of interest rate repricing that may be undertaken,
which is monitored by bank’s Risk Management Department.
The table below summarizes the Bank’s exposure to interest rate risks. It includes the Bank’s financial instruments at car-
rying amounts, categorized by the earlier of repricing or contractual maturity dates.
Dec. 31, 2012
Financial assets
» Cash and
balances with
Central Bank
» Due from banks
» Treasury bills and
other govern-
mental notes*
» Trading financial
assets
» Gross loans and
advances to
banks
» Gross loans and
advances to
customers
» Derivatives finan-
cial instruments
(including IRS
notional amount)
Financial invest-
ments
» - Available for
sale
» - Held to maturity
» Investments in
associates
Total financial
assets
Up to1
Month
1-3 Months
3-12
Months
1-5 years
Over 5
years
Non-
Interest
Bearing
Total
-
-
-
3,814,359,727 4,039,063,382
41,664,325
(2,392,490,261) 2,359,738,000
8,520,565,104
-
-
-
-
-
-
5,393,974,124
5,393,974,124
152,732,954
8,047,820,388
-
8,487,812,843
361,391,071
-
-
918,121,244
219,935,445
15,877,741
1,515,325,501
72,394,428
751,920,402
383,851,539
-
-
23,384,335,335 8,056,916,417
7,335,797,152
3,512,242,033
853,517,433
601,968,669
589,566,465
859,582,784
3,306,273,019
379,393,905
-
-
-
1,208,166,369
43,142,808,370
5,736,784,842
1,322,522,351
15,543,565
4,017,903,710 11,736,95s6,304 3,636,620,842
447,880,825 21,177,427,597
-
-
-
-
15,732,123
4,200,055,837
-
-
-
-
-
4,215,787,960
165,198,634
165,198,634
27,164,481,320 15,812,748,231 21,175,096,737 23,673,648,437 5,089,467,625 6,175,664,278 99,091,106,629
1,360,467,819
Financial liabilities
-
» Due to banks
» Due to customers 24,969,881,691 12,100,430,806
» Derivatives finan-
cial instruments
(including IRS
notional amount)
» Long term loans
Total financial li-
abilities
28,505,492,040 14,804,370,183
2,175,142,530 2,703,939,377
-
-
-
8,222,585,000 20,807,578,680
-
-
354,394,897
1,714,862,716
470,785,000 12,157,860,312 78,729,121,488
132,811,540
153,115,055
549,753,928
106,803,850
5,821,566,280
59,508,571
20,986,667
-
-
80,495,238
8,414,905,111 20,981,680,402 1,020,538,928 12,619,059,059 86,346,045,722
Total interest re-
pricing gap
(1,341,010,720) 1,008,378,048 12,760,191,626
2,691,968,035 4,068,928,697 (6,443,394,781) 12,745,060,907
* After deducting Repos.
168
Annual Report 2012
3.3. Liquidity risk
Liquidity risk is the risk that the Bank does not have sufficient financial resources to meet its obligations arises from its
financial liabilities as they fall due or to replace funds when they are withdrawn. The consequence may be the failure to
meet obligations to repay depositors and fulfill lending commitments.
3.3.1. Liquidity risk management process
The Bank’s liquidity management process, is carried by the assets and Liabilities Management Department and monitored
independently by the Risk Management Department, which includes:
Projecting cash flows by major currency under various stress scenarios and considering the level of liquid assets necessary
in relation thereto:
• The Bank maintains an active presence in global money markets to enable this to happen.
• Maintaining a diverse range of funding sources with back-up facilities.
• Monitoring balance sheet liquidity and advances to core funding ratios against internal and Central Bank of Egypt
regulations.
• Managing the concentration and profile of debt maturities.
• Monitoring and reporting takes the form of cash flow measurement and projections for the next day, week and
month respectively, as these are key periods for liquidity management. The starting point for those assets projec-
tions is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the
financial assets. Bank’s Risk Management Department also monitors unmatched medium-term
3.3.2. Funding approach
Sources of liquidity are regularly reviewed jointly by the Bank’s Assets & Liabilities Management Department and Con-
sumer Banking to maintain a wide diversification within currencies, geographical area, depositors, products and tenors.
3.3.3. Non-derivative cash flows
The table below presents the undiscounted cash flows payable by the Bank under non-derivative financial liabilities by remain-
ing contractual maturities and the maturities assumption for non contractual products are based on there behavior studies.
Dec. 31, 2012
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total liabilities (contrac-
tual and non contractual
maturity dates)
Total financial assets
(contractual and non con-
tractual maturity dates)
Dec. 31, 2011
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total liabilities (contrac-
tual and non contractual
maturity dates)
Total financial assets
(contractual and non con-
tractual maturity dates)
Up to
1 month
One to
three
months
Three
months to
one year
One year
to
five years
Over five
years
Total
EGP
1,714,862,716
1,714,862,716
11,421,205,560 9,736,841,059 20,452,119,693 35,809,584,757 1,309,370,420 78,729,121,488
80,495,238
20,986,667
59,508,571
-
-
-
-
-
-
-
13,136,068,276 9,736,841,059 20,511,628,264 35,830,571,424 1,309,370,420 80,524,479,442
9,874,255,242 12,497,060,088 22,097,635,946 39,608,844,700 9,940,640,568 94,018,436,544
Upto
1month
One to
three
months
Three
months to
one year
One year
to
five years
Over five
years
Total
EGP
3,340,794,517
3,340,794,517
12,770,610,063 8,576,616,724 17,868,791,406 30,859,028,066 1,392,889,000 71,467,935,259
99,333,376
14,929,000
82,756,941
1,521,504
125,931
-
-
-
-
-
16,111,530,511 8,578,138,228 17,951,548,347 30,873,957,066 1,392,889,000 74,908,063,152
14,753,504,167 11,100,069,868 20,844,934,425 28,478,165,923 10,614,870,781 85,791,545,163
Annual Report 2012
169
Financial Statements: Consolidated
Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, due from CBE and
due from banks, treasury bills, other government notes , loans and advances to banks and customers.
In the normal course of business, a proportion of customer loans contractually repayable within one year will be extended.
In addition, debt instrument and treasury bills and other governmental notes have been pledged to secure liabilities. The
Bank would also be able to meet unexpected net cash outflows by selling securities and accessing additional funding
sources such as asset-backed markets.
3.3.4. Derivative cash flows
Derivatives settled on a net basis the Bank’s derivatives that will be settled on a net basis include:
Foreign exchange derivatives: exchange traded options and over-the-counter (OTC) ,exchange traded forwards currency options.
Interest rate derivatives: interest rate swaps, forward rate agreements, OTC and exchange traded interest rate options,
other interest rate contracts and exchange traded futures .
The table below analyses the Bank’s derivative undiscounted financial liabilities that will be settled on a net basis into
maturity groupings based on the remaining period of the balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows:
EGP
Up to one
month
One to
three
months
Three
months to
one year
One year
to five
years
Over five
years
Total
2,518,555
-
2,518,555
1,956,292
189,039
2,145,330
7,819,636
1,584,638
9,404,274
-
12,295,410
7,178,710 97,717,438 106,669,824
7,178,710 97,718,365 118,965,234
927
Dec. 31, 2012
Liabilities
Derivatives financial instru-
ments
» Foreign exchange derivatives
» Interest rate derivatives
Total
Off balance sheet items
Dec. 31, 2012
» Letters of credit, guarantees
and other commitments
Total
10,332,433,593
3,239,319,148
1,325,986,263
14,897,739,005
10,332,433,593
3,239,319,148
1,325,986,263
14,897,739,005
3.4. Fair value of financial assets and liabilities
3.4.1. Financial instruments not measured at fair value
The table below summarizes the book value and fair value of those financial assets and liabilities not presented on the
Bank’s balance sheet at their
Book value
Fair value
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
8,047,820,388
8,528,229,519
8,047,820,388
8,528,229,519
1,208,166,369
1,433,545,112
1,208,166,369
1,433,545,112
5,981,587,224
37,161,221,146
4,648,379,836
36,851,208,480
5,981,587,224
37,161,221,146
4,648,379,836
36,851,208,480
4,215,787,960
56,614,583,087
39,159,520
51,500,522,467
4,215,787,960
56,614,583,087
39,159,520
51,500,522,467
1,714,862,716
78,729,121,488
80,495,238
80,524,479,442
3,340,794,517
71,467,935,259
99,333,376
74,908,063,152
1,714,862,716
78,729,121,488
80,495,238
80,524,479,442
3,340,794,517
71,467,935,259
99,333,376
74,908,063,152
Financial assets
» Due from banks
» Gross loans and advances to
banks
Gross loans and advances to
customers
» Individual
» Corporate
» Financial investments
» Held to Maturity
» Total financial assets
Financial liabilities
» Due to banks
» Due to customers
» Long term loans
Total financial liabilities
170
Annual Report 2012
Due from banks
The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of fixed
interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with
similar credit risk and similar maturity date.
Loans and advances to banks
Loans and advances to banks represented in loans do not considering bank placing. The expected fair value of the loans
and advances represents the discounted value of future cash flows expected to be collected. Cash flows are discounted us-
ing the current market rate to determine fair value.
Loans and advances to customers
Loans and advances are net of provisions for impairment. The estimated fair value of loans and advances represents the
discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current
market rates to determine fair value.
Financial Investments
Investment securities include only interest-bearing assets held to maturity assets classified as available for sale are mea-
sured at fair value. Fair value for held-to-maturity assets is based on market prices or broker/dealer price quotations.
Where this information is not available, fair value is estimated using quoted market prices for securities with similar
credit, maturity and yield characteristics.
Due to other banks and customers
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount
repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings not quoted in an
active market is based on discounted cash flows using interest rates for new debts with similar maturity date.
3.5. Capital management
For capital management purposes, the Bank’s capital includes total equity as reported in the balance sheet plus some other
elements that are managed as capital. The Bank manages its capital to ensure that the following objectives are achieved:
• Compliance with the legally imposed capital requirements in Egypt.
• Protecting the Bank’s ability to continue as a going concern and enabling it to generate yield for shareholders and
Capital adequacy and the use of regulatory capital are monitored on a daily basis by the Bank’s management, employing
techniques based on the guidelines developed by the Basel Committee as implemented by the banking supervision unit
in the Central Bank of Egypt.
The required data is submitted to the Central Bank of Egypt on a quarterly basis.
Central Bank of Egypt requires the following:
• Maintaining EGP 500 million as a minimum requirement for the issued and paid-in capital.
• Maintaining a minimum level of capital adequacy ratio of 10%, calculated as the ratio between total value of the
capital elements, and the risk-weighted assets and contingent liabilities of the Bank.
Tier one:
Tier one, comprised of paid-in capital (after deducting the book value of treasury shares), retained earnings and reserves
resulting from the distribution of profits except the banking risk reserve and deducting previously recognized goodwill
and any retained losses
Tier two:
Represents the gone concern capital which comprised of general risk provision according to the impairment provision
guidelines issued by the Central Bank of Egypt for to the maximum of 1.25% risk weighted assets and contingent liabili-
ties ,subordinated loans with more than five years to maturity (amortizing 20% of its carrying amount in each year of
the remaining five years to maturity) and 45% of the increase in fair value than book value for available for sale , held to
maturity, subsidiaries and associates investments.
Annual Report 2012
171
Up to 1 year
1-5 years
Over 5 years
Total
other parties dealing with the bank.
Financial Statements: Consolidated
When calculating the numerator of capital adequacy ratio, the rules set limits of total tier 2 to no more than tier 1 capital
and also limits the subordinated to no more than 50% of tier1.
Assets risk weight scale ranging from zero to 100% based on the counterparty risk to reflect the related credit risk scheme,
taking into considration the cash collatrals. Similar criteria are used for off balance sheet items after adjusting it to reflect
the nature of contingency and the potential loss of those amounts. The Bank has complied with all local capital adequacy
requirements for the current year.
The tables below summarizes the compositions of teir 1, teir 2 and the capital adequacy ratio .
According to Basel I :
Tier 1 capital
» Share capital (net of the treasury shares)
» General reserves
» Legal reserve
» Other reserve
» Retained Earnings
Total qualifying tier 1 capital
Tier 2 capital
» General risk provision
» 45% of the Increase in fair value than the book value for
available for sale and held to maturity investments
Total qualifying tier 2 capital
Total capital 1+2
Risk weighted assets and contingent liabilities
» Risk weighted assets
» Contingent liabilities
Total
*Capital adequacy ratio (%)
* Based on separate financial statement figures
According to Basel II :
Dec. 31, 2012
In thousands EGP
Dec. 31, 2011
In thousands EGP
Restated
5,972,275
2,037,107
380,349
203,498
1,002
8,594,231
689,829
147,873
837,702
9,431,934
50,040,545
5,145,814
55,186,358
17.09%
5,934,563
2,054,762
318,651
(474,528)
-
7,833,448
692,088
-
692,088
8,525,536
50,175,825
5,191,197
55,367,022
15.40%
Tier 1 capital
» Share capital (net of the treasury shares)
» Reserves
» Retained Earnings
» Total deductions from tier 1 capital Common Equity
Total qualifying tier 1 capital
Tier 2 capital
» 45% of special reserve
» 45% of the Increase in fair value than the book value for available for sale and held
to maturity investments
» Impairment provision for loans and regular contingent liabilities
Total qualifying tier 2 capital
Total capital 1+2
Risk weighted assets and contingent liabilities
» Total credit risk
» Total market risk
» Total operational risk
Total
*Capital adequacy ratio (%)
Dec. 31, 2012
In thousands EGP
5,972,275
2,502,995
(510,946)
(4,701)
7,959,623
53,011
147,873
708,329
909,213
8,868,836
56,794,762
1,994,960
6,460,913
65,250,635
13.59%
*Capital adequacy ratio (%)
*Based on consolidated financial statement figures and in accordance with Centeral Bank of Egypt regulation issued on
24 December 2012.
4. Critical accounting estimates and judgments
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial
year.
Estimates and judgments are continually evaluated and based on historical experience and other factors, including expecta-
tions of future events that are believed to be reasonable under the circumstances and available information.
Impairment losses on loans and advances
4.1.
The Bank reviews its loan portfolios to assess impairment on monthly basis a quarterly basis. In determining whether
an impairment loss should be recorded in the income statement, the Bank makes judgments as to whether there is any
observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans
before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data
indicating that there has been an adverse change in the payment status of borrowers in a Bank, or national or local eco-
nomic conditions that correlate with defaults on assets in the Bank. Management uses estimates based on historical loss
experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio
when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and tim-
ing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
To the extent that the net present value of estimated cash flows differs by +/-5%
Impairment of available for-sale equity investments
4.2.
The Bank determines that available-for-sale equity investments are impaired when there has been a significant or pro-
longed decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In
making this judgment, the Bank evaluates among other factors, the normal volatility in share price. In addition, impair-
ment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry and
sector performance, changes in technology, and operational and financing cash flows.
4.3. Fair value of derivatives
The fair value of financial instruments that are not quoted in active markets are determined by using valuation techniques.
Where valuation techniques (as models) are used to determine fair values, they are validated and periodically reviewed by
qualified personnel independent of the area that created them. All models are certified before they are used, and models
are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use
only observable data; however, areas such as credit risk (both own and counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions about these factors could affect reported fair value of financial
instruments.
4.4. Held-to-Maturity investments
The non-derivative financial assets with fixed or determinable payments and fixed maturity are being classified held to
maturity. This requires significant judgment. In making this judgment, the Bank evaluates its intention and ability to hold
such investments to maturity. If the Bank fails to keep these investments to maturity other than for the specific circum-
stances – for example, selling an insignificant amount close to maturity it will be required to reclassify the entire category
as available for sale. The investments would therefore be measured at fair value not amortized cost.
5. Segment analysis
5.1. By business segment
The Bank is divided into main business segments on a worldwide basis:
• Corporate banking – incorporating direct debit facilities, current accounts, deposits, overdrafts, loan and other
credit facilities, foreign currency and derivative products
• Investment banking – incorporating financial instruments Trading, structured financing, Corporate leasing,and
merger and acquisitions advice.
• Retail banking – incorporating private banking services, private customer current accounts, savings, deposits, in-
vestment savings products, custody, credit and debit cards, consumer loans and mortgages;
• Others –Include other banking business, such as Assets Management.
• Transactions between the business segments are on normal commercial terms and conditions.
172
Annual Report 2012
Annual Report 2012
173
Financial Statements: Consolidated
Dec. 31, 2012
Corporate
banking
SME’s
Investment
banking
Retail
banking
EGP
Total
» Revenue according to
business segment
» Expenses according to
business segment
Profit before tax
» Tax
Profit for the year
Total assets
3,329,477,415
731,332,747
(273,334,474) 1,610,326,906 5,397,802,594
(1,124,760,077)
(308,458,766)
(25,353,002)
(859,123,551)
(2,317,695,396)
2,204,717,338
(556,045,847)
1,648,671,491
751,203,355 3,080,107,198
(298,687,476)
(190,591,442)
(853,926,695)
-
560,611,913 2,226,180,503
(298,687,476)
80,561,494,045 2,626,503,517 1,451,894,947 9,374,557,798 94,014,450,306
422,873,981
(107,289,406)
315,584,575
Dec. 31, 2011
Corporate
banking
SME’s
Investment
banking
Retail
banking
Total
» Revenue according to
business segment
» Expenses according to
business segment
Profit before tax
» Tax
Profit for the year
Total assets
2,103,222,975
597,635,091
(75,724,924)
1,278,100,557
3,903,233,699
(777,096,428)
(255,290,741)
(25,181,851)
(788,714,940)
(1,846,283,960)
1,326,126,547
(285,060,241)
1,041,066,306
74,527,747,169
342,344,350
(64,684,236)
277,660,114
2,143,523,905
(100,906,775)
-
(100,906,775)
1,533,773,854
489,385,617
(92,466,940)
396,918,677
2,056,949,739
(442,211,417)
1,614,738,322
7,329,130,662 85,534,175,590
5.2. By geographical segment
Dec. 31, 2012
» Revenue according to geographical seg-
ment
» Expenses according to geographical seg-
ment
Profit before tax
» Tax
Profit for the year
Total assets
Dec. 31, 2011
» Revenue according to geographical seg-
ment
» Expenses according to geographical seg-
ment
Profit before tax
» Tax
Profit for the year
Total assets
Cairo
Alex, Delta &
Sinai
Upper Egypt
Total
4,361,404,048
887,705,321
148,693,225 5,397,802,594
EGP
(1,834,683,705)
(399,008,070)
(84,003,621)
(2,317,695,396)
2,526,720,343
(699,773,113)
1,826,947,230
64,689,604 3,080,107,198
(853,926,695)
(18,020,186)
46,669,418 2,226,180,503
83,674,215,230 9,048,557,087 1,291,677,989 94,014,450,306
488,697,251
(136,133,396)
352,563,855
Cairo
Alex, Delta &
Sinai
UpperEgypt
Total
2,933,228,490
835,887,927
134,117,282 3,903,233,699
(1,335,361,487)
(405,117,905)
(105,804,568)
(1,846,283,960)
1,597,867,003
(351,454,653)
1,246,412,350
430,770,022
(85,159,580)
345,610,442
75,193,039,351 9,812,046,055
28,312,714 2,056,949,739
(5,597,184)
(442,211,417)
22,715,530 1,614,738,322
529,090,184 85,534,175,590
6. Net interest income
Interest and similar income
» Banks
» Clients
» Treasury bills and bonds
» Reverse repos
» Financial investments in held to maturity and available for sale
debt instruments
» Other
Total
Interest and similar expense
» Banks
» Clients
» Financial instruments purchased with a commitment to re-sale (Repos)
» Other
Total
Net interest income
7. Net income from fee and commission
Fee and commission income
» Fee and commissions related to credit
» Custody fee
» Other fee
Total
Fee and commission expense
» Other fee paid
Total
Net income from fee and commission
8. Dividend income
» Trading securities
» Available for sale securities
» Associates co.
Total
9. Net trading income
» Profit (losses) from foreign exchange
» Profit (losses) from revaluations of trading assets and liabilities
in foreign currencies
» Profit (Loss) from forward foreign exchange deals revaluation
» Profit (Loss) from interest rate swaps revaluation
» Profit (Loss) from currency swap deals revaluation
» Trading debt instruments
» Trading equity instruments
Total
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
132,463,454
3,523,926,754
3,656,390,208
4,021,144,937
17,423,270
142,055,284
2,900,254,722
3,042,310,006
2,233,508,080
22,223,513
164,324,240
172,702,607
29,184
7,859,311,839
246,625
5,470,990,831
181,169,862
3,449,759,729
3,630,929,591
310,995,070
3,760,975
3,945,685,636
3,913,626,203
188,421,651
2,567,626,091
2,756,047,742
22,306,090
2,685,436
2,781,039,268
2,689,951,563
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
470,471,721
133,589,290
429,567,003
1,033,628,014
107,365,742
107,365,742
926,262,272
Dec. 31, 2012
EGP
578,098
28,015,018
4,517,707
33,110,823
554,737,120
103,680,402
272,152,011
930,569,533
87,622,734
87,622,734
842,946,799
Dec. 31, 2011
EGP
874,720
47,359,534
13,272,726
61,506,980
Dec. 31, 2012
EGP
249,583,425
Dec. 31, 2011
EGP
293,331,214
3,010,519
6,926,623
6,669,087
212,030
(2,963,355)
311,074,819
6,988,651
574,575,176
16,779,398
(19,845)
548,800
52,845,534
11,280,756
381,692,480
174
Annual Report 2012
Annual Report 2012
175
Financial Statements: Consolidated
10. Administrative expenses
Staff costs
» Wages and salaries
» Social insurance
» Other benefits
Other administrative expenses
Total
11. Other operating (expenses) income
» Profits (Losses) from non-trading assets and liabilities revalua-
tion
» Profits (losses) from selling property, plant and equipment
» Release (charges) of other provisions
» Others
Total
12. Impairment (charge) release for credit losses
» Loans and advances to customers
» Held to maturity financial investments
Total
13. Adjustments to calculate the effective tax rate
» Profit before tax
» * Tax settlement for prior years
» Profit after settlement
» Tax rate
Income tax based on accounting profit
Add / (Deduct)
» Non-deductible expenses
» Tax exemptions
» Effect of provisions
» Depreciation
Income tax
Effective tax rate
*Tax claims for the year ended on December.31, 2011
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
761,672,607
30,542,233
30,941,993
736,244,948
1,559,401,781
682,034,211
24,707,497
38,341,470
704,635,517
1,449,718,695
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
36,631,170
(53,338,683)
2,387,583
(47,537,825)
(94,788,020)
(103,307,092)
2,716,747
48,030,153
(69,947,611)
(72,539,394)
Dec. 31, 2012
EGP
(609,971,077)
-
(609,971,077)
Dec. 31, 2011
EGP
(322,276,483)
1,627,620
(320,648,863)
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
3,080,917,168
(65,137,014)
3,015,780,155
24.98%
753,445,039
23,146,604
(82,115,715)
88,494,882
5,818,873
788,789,683
26.16%
2,056,439,533
-
2,056,439,533
From 20% to 25%
513,609,883
66,728,265
(184,124,927)
46,216,490
(218,295)
442,211,416
21.50%
14. Earning per share
» Net profit for the period available for distribution
» Board member’s bonus
» Staff profit sharing
* Profits shareholders’ Stake
» Number of shares
Basic earning per share
By issuance of ESOP earning per share will be:
» Number of shares including ESOP shares
Diluted earning per share
* Based on dividend of separate financial statements.
15. Cash and balances with Central Bank
» Cash
Obligatory reserve balance with CBE
» Current accounts
Total
Non-interest bearing balances
16. Due from banks
» Current accounts
» Deposits
Total
» Central banks
» Local banks
» Foreign banks
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
Total
17. Treasury bills and other governmental notes
» 91 Days maturity
» 182 Days maturity
» 364 Days maturity
» Unearned interest
Total 1
» Repos - treasury bills
Total 2
Net
Dec. 31, 2012
EGP
2,379,297,994
(35,689,470)
(237,929,799)
2,105,678,725
597,227,541
3.53
Dec. 31, 2011
EGP
1,636,540,147
(24,548,102)
(163,654,015)
1,448,338,030
597,227,541
2.43
607,261,107
3.47
605,482,218
2.39
Dec. 31, 2012
EGP
1,744,700,680
3,649,273,444
5,393,974,124
5,393,974,124
Dec. 31, 2012
EGP
317,264,173
7,730,556,215
8,047,820,388
3,093,850,399
590,696,679
4,363,273,309
8,047,820,387
152,732,954
7,895,087,434
8,047,820,388
8,047,820,388
8,047,820,388
Dec. 31, 2011
EGP
1,891,659,489
5,600,405,021
7,492,064,510
7,492,064,510
Dec. 31, 2011
EGP
275,977,925
8,252,251,594
8,528,229,519
3,031,574,198
234,102,521
5,262,552,800
8,528,229,519
149,987,713
8,378,241,806
8,528,229,519
8,528,229,519
8,528,229,519
Dec. 31, 2012
EGP
3,182,683,419
4,022,757,000
4,458,084,085
(470,058,411)
11,193,466,093
(3,175,711,661)
(3,175,711,661)
8,017,754,432
Dec. 31, 2011
EGP
1,913,702,116
2,559,925,000
6,861,223,570
(634,008,503)
10,700,842,183
(1,440,000,000)
(1,440,000,000)
9,260,842,183
176
Annual Report 2012
Annual Report 2012
177
Financial Statements: Consolidated
18. Trading financial assets
20. Loans and advances to customers
Debt instruments
» Governmental bonds
» Other debt instruments
Total
Equity instruments
» Foreign company shares
» Mutual funds
Total
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
1,138,056,688
43,043,738
1,181,100,426
15,877,741
318,347,334
334,225,076
353,860,497
114,241,177
468,101,674
18,677,035
188,546,741
207,223,776
Total financial assets for trading
1,515,325,502
675,325,450
19. Loans and advances to banks
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
» Time and term loans
1,208,166,369
1,433,545,112
» Less:Impairment provision
Total
» Current balances
» Non-current balances
Total
(29,298,630)
1,178,867,739
1,172,317,036
6,550,703
1,178,867,739
(37,950,503)
1,395,594,609
1,304,111,350
91,483,259
1,395,594,609
Individual
» Overdraft
» Credit cards
» Personal loans
» Mortgages
» Other loans
Total 1
Corporate
» Overdraft
» Direct loans
» Syndicated loans
» Other loans
Total 2
Total Loans and advances to customers (1+2)
Less:
» Unamortized bills discount
» Impairment provision
» Unearned interest
Net loans and advances to customers
Distributed to
» Current balances
» Non-current balances
Total
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
1,220,222,219
660,932,044
3,616,553,758
463,833,879
20,045,324
5,981,587,224
4,288,571,348
23,196,204,054
9,588,649,990
87,795,754
37,161,221,146
43,142,808,370
(22,277,973)
(1,901,222,402)
(520,994,222)
40,698,313,773
952,982,877
575,672,905
2,659,469,004
419,990,050
40,265,000
4,648,379,836
4,239,213,684
24,265,367,037
8,245,001,963
101,625,796
36,851,208,480
41,499,588,316
(45,231,397)
(1,419,409,102)
(365,161,953)
39,669,785,864
16,908,542,925
23,789,770,848
40,698,313,773
17,307,625,654
22,362,160,210
39,669,785,864
Analysis for impairment provision of loans and advances to banks
Analysis for impairment provision of loans and advances to customers
» Bgining balance
» Charge (release) during the year
» Exchange revaluation difference
Ending balance
Dec. 31, 2012
EGP
37,950,503
(11,450,369)
2,798,496
29,298,630
Dec. 31, 2011
EGP
2,694,538
34,736,518
519,447
37,950,503
Dec. 31, 2012
» Beginning balance
» Charged (Released) during the
year
» Write off during the year
» Recoveries from written off
debts
Ending balance
Individual
Overdraft
Credit
cards
Personal
loans
Real
estate
loans
Other
loans
Total
20,377,614 42,290,218 76,502,471 11,876,297
1,593,932 152,640,532
(9,624,567)
(8,977,018)
68,706
1,500,562
(503,001) (17,535,318)
-
-
(29,454,339)
(2,135,623)
4,469,470
-
-
-
-
-
(31,589,962)
4,469,470
10,753,047
8,328,331 74,435,554 13,376,859
1,090,931 107,984,722
Dec. 31, 2012
» Beginning balance
» Charged (Released) during the year
» Write off during the year
» Recoveries from written off debts
» Exchange revaluation difference
Ending balance
Overdraft
167,655,394
39,209,960
-
-
Direct
loans
790,797,773
420,954,828
-
14,726,449
15,536,889
209,551,228 1,242,015,939
2,685,874
Corporate
Syndicated
loans
306,628,666
178,455,887
(154,721,287)
-
6,205,339
336,568,605
Other loans
Total
336,089
1,686,738 1,266,768,571
638,956,764
(154,721,287)
14,726,449
3,079,081
27,507,183
5,101,908 1,793,237,680
-
-
178
Annual Report 2012
Annual Report 2012
179
Financial Statements: Consolidated
Individual
Dec. 31, 2011
» Beginning balance
» Charged (Released) dur-
ing the year
» Write off during the year
» Recoveries from written
off debts
Ending balance
Overdraft
6,948,242
Credit
cards
42,119,828
Personal
loans
71,459,209
Real estate
loans
8,888,164
Other loans
Total
13,400,430 142,815,873
13,429,372
5,306,910
6,589,871
2,988,133 (11,806,498)
16,507,788
-
-
(8,858,433)
(2,273,609)
3,721,913
727,000
-
-
- (11,132,042)
-
4,448,913
20,377,614
42,290,218
76,502,471
11,876,297
1,593,932 152,640,532
Dec. 31, 2011
» Beginning balance
» Charged (Released) during the year
» Write off during the year
» Recoveries from written off debts
» Exchange revaluation difference
Ending balance
Overdraft
149,208,018
17,175,711
-
-
1,271,665
167,655,394
Direct
loans
759,961,827
154,370,230
(144,805,506)
11,291,492
9,979,730
790,797,773
Corporate
Syndicated
loans
200,640,880
100,360,788
-
-
5,626,998
306,628,666
Other loans
Total
2,561,291 1,112,372,016
271,032,176
(874,553)
(144,805,506)
-
11,291,492
-
16,878,393
-
1,686,738 1,266,768,571
21. Derivative financial instruments
21.1. Derivatives
The Bank uses the following financial derivatives for non hedging purposes.
Forward contracts represents commitments of buying foreign and local currencies including unexecuted spot transac-
tions. Future contracts for foreign currencies and/or interest rates represents contractual commitments to receive or
pay net on the basis of changes in foreign exchange rates or interest rates, and/or buying or selling foreign currencies or
financial instruments in a future date with a fixed contractual price under active financial market.
Credit risk is considered low, and future interest rate contracts represents future exchange rate contracts negotiated for case
by case, these contracts requires financial settlements of any differences in contractual interest rates and prevailing market
interest rates on future interest rates on future dates based on contractual amount (nominal value) pre agreed upon.
Foreign exchange and/or interest rate swap represents commitments to exchange cash flows, resulting from these con-
tracts exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign exchange
and interest rate contracts)/ contractual amounts are not exchanged except for some foreign exchange contracts.
Credit risk is represented in the expected cost of foreign exchange contracts that takes place if other parties default to
fulfill their liabilities. This risk is monitored continuously through comparisons of fair value and contractual amount, and
to control the outstanding credit risk, The Bank evaluates other parties using the same methods as in borrowing activities.
Options contracts in foreign currencies and/or interest rates represents contractual agreements for the buyer (issuer) to
seller (holders) as a right not an obligations whether to buy (buy option) or to sell (sell option) at a certain day or within
certain period for a certain amount in foreign currency or interest rate. Options contracts are either traded in the market
or negotiated between The Bank and one of its clients (Off balance sheet). The Bank exposed to credit risk for purchased
options contracts only and in the line of its book cost which represent its fair value.
The contractual value for some derivatives options considered a base to compare the realized financial instruments on the
balance sheet, but it didn’t provide indicator on the projected cash flows of the fair value for current instruments, those
amounts doesn’t reflects credit risk or interest rate risk.
Derivatives in The Banks benefit represent (assets) conversely it represents (liabilities) as a result of the changes in foreign
exchange prices or interest rates related to these derivatives. Contractual / expected total amounts of financial derivatives
can fluctuate from time to time and also the range through which the financial derivatives can be in benefit of The Bank
or conversely against its benefit and the total fair value of the financial derivatives in assets and liabilities. hereunder are
the fair values of the booked financial derivatives.
21.1.1. For trading derivatives
Dec. 31, 2012
Dec. 31, 2011
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
1,996,990,255
16,812,998
959,570 1,324,589,420
14,828,172
5,643,831
1,258,600,443
770,698,823
9,781,221
7,723,601
34,317,820
3,612,239 1,408,305,712
509,022,896
7,723,601
12,295,410
54,023,412
2,251,502
71,103,086
13,909,846
2,251,502
21,805,179
859,324,209
12,149,920
12,630,731
12,630,731
134,026
134,026
8,739,696 1,124,316,614
8,739,696
134,026
134,026
128,045,173
15,667,505
15,667,505
870,385
870,385
11,842,172
11,842,172
870,385
870,385
47,082,577
21,169,131
87,640,976
34,517,736
549,753,000
-
97,708,858
524,775,300
-
78,514,812
4,293,389,812
90,377,184
221,270 3,661,135,640
58,903,680
1,255,442
90,377,184
97,930,128
58,903,680
79,770,254
137,459,761
119,099,260
146,544,656
114,287,990
Foreign derivatives
» Forward foreign exchange
contracts
» Currency swap
» Options
Total 1
Interest rate derivatives
» Interest rate swaps
Total 2
» Commodity
Total 3
Total assets (liabilities)
for trading derivatives
(1+2+3)
21.1.2. Fair value hedge
Interest rate derivatives
» Governmental debit
instruments hedging
» Customers deposits
hedging
Total 4
Total financial derivatives
(1+2+3+4)
21.2. Hedging derivatives
21.2.1. Fair value hedge
The Bank uses interest rate swap contracts to cover part of the risk of potential decrease in fair value of its fixed rate gov-
ernmental debt instruments in foreign currencies. Net derivative value resulting from the related hedging instruments is
EGP 97,708,858 at the end of December, 2012 against EGP 78,514,812 at the end of December, 2011, Resulting in net loss
form hedging instruments at the end of December, 2012 EGP 19,194,046 against net loss EGP 78,514,812 at the end of
December, 2011. Gains arises from the hedged items at the end of December, 2012 reached EGP 14,842,228 against profits
arises EGP 77,848,826 at the end of December, 2011.
The Bank uses interest rate swap contracts to cover part of the risk of potential decrease in fair value of its fixed rate
customers deposits in foreign currencies. Net derivative value resulting from the related hedging instruments is EGP
90,155,914 at the end of December, 2012 against EGP 57,648,238 at the end of December, 2011, Resulting in net profits
form hedging instruments at the end of December, 2012 EGP 32,507,675 against net profit EGP 58,450,867 at the end of
December, 2011. Losses arises from the hedged items at the end of December , 2012 reached EGP 27,731,731 against losses
EGP 57,855,943 at the end of December, 2011.
180
Annual Report 2012
Annual Report 2012
181
Financial Statements: Consolidated
22. Financial investments
Available for sale
» Listed debt instruments
» Listed equity instruments
» Unlisted instruments
Total
Held to maturity
» Listed debt instruments
» Unlisted instruments
Total
Total financial investment
» Actively traded instruments
» Not actively traded instruments
Total
» Fixed interest debt instruments
» Floating interest debt instruments
Total
» Beginning balance on Jan.01, 2011
» Addition
» Deduction (selling - redemptions)
» Exchange revaluation differences
» Profit (losses) from fair value difference
» Impairment (charges) release
Ending Balance
Available for sale
financial
investments
13,613,839,805
4,536,303,691
(2,135,258,815)
55,264,416
(647,348,588)
(1,254,232)
15,421,546,277
» Beginning balance on Jan.01, 2012
» Addition
» Deduction (selling - redemptions)
» Exchange revaluation differences
» Profit (losses) from fair value difference
» Impairment (charges) release
Ending Balance
15,421,546,277
10,169,757,165
(5,342,793,206)
60,242,239
895,941,363
(27,266,242)
21,177,427,596
22.1. Profit (Losses) from financial investments
» Profit (Loss) from selling available for sale financial instru-
ments
» Impairment release (charges) of available for sale equity
instruments
» Impairment release (charges) of available for sale debt
instruments
» Profit (Loss)from selling investments in subsidiaries and
associates
» Profit (Loss) from selling held to maturity debt investments
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
20,607,710,266
84,923,090
484,794,241
21,177,427,597
4,154,712,549
61,075,411
4,215,787,960
25,393,215,556
23,771,302,303
1,621,913,253
25,393,215,556
23,621,268,407
1,237,877,696
24,859,146,103
Held to maturity
financial
investments
299,250,313
5,000,000
(271,834,782)
5,116,368
-
1,627,620
39,159,519
39,159,519
4,176,628,441
-
-
-
-
4,215,787,960
14,533,886,080
79,748,671
807,911,526
15,421,546,277
11,647,020
27,512,500
39,159,520
15,460,705,797
13,320,674,913
2,140,030,884
15,460,705,797
12,988,814,770
1,919,838,711
14,908,653,481
Total
EGP
13,913,090,118
4,541,303,691
(2,407,093,596)
60,380,784
(647,348,588)
373,388
15,460,705,797
15,460,705,797
14,346,385,606
(5,342,793,206)
60,242,239
895,941,363
(27,266,242)
25,393,215,556
Dec. 31, 2012
EGP
Dec. 31, 2011
EGP
519,013
37,608,880
(27,859,838)
(1,254,232)
593,597
-
-
(162,078)
(26,909,306)
2,444,535
(130,027)
38,669,156
23. Investments in associates
Dec. 31, 2012
Company’s
country
Company’s
assets
Company’s
liabilities
(without
equity)
Company’s
revenues
Company’s
net profit
Investment
book value
EGP
Stake
%
Associates
» Commercial International Life
Insurance
» Corplease
» Haykala for investment
» Egypt Factors
» International Co. for Security
and Services (Falcon)
Total
Egypt
1,768,401,691 1,711,942,438 253,087,786
(969,320)
49,456,444
Egypt
Egypt
Egypt
Egypt
1,539,490,355 1,361,597,602 317,924,102
270,000
18,514,114
180,722
151,643,286
3,875,454
203,984,151
9,974,915
209,835
(3,608,534)
69,710,183
1,170,896
38,373,478
91,085,635
79,197,211 106,514,090
1,219,081
6,487,632
3,606,837,286 3,304,561,259 696,310,092
6,825,976 165,198,634
45
40
40
39
40
Dec. 31, 2011
Company’s
Country
Company’s
Assets
Company’s
Liabilities
(without
equity)
Company’s
Revenues
Company’s
Net Profit
Investment
book value
EGP
Stake
%
Associates
» Commercial International Life
Insurance
» Corplease
» Haykala for Investment
» Egypt Factors
» International Co. for Security
and Services (Falcon)
Total
24. Investment property *
Egypt
1,532,549,363 1,469,720,530 108,295,223
791,813
28,272,975
Egypt
Egypt
Egypt
Egypt
1,418,875,386 1,271,498,831 162,014,580
270,000
18,440,302
307,737
165,064,735
3,595,277
179,815,258
6,762,407
103,358
(6,533,187)
64,950,622
1,801,978
5,752,704
62,511,444
46,751,684
71,809,412
(2,721,265)
5,897,888
3,197,346,728 2,953,343,517 360,829,517
(1,596,874) 106,676,167
45
40
40
39
40
» Commercial unit number f 35 in arkadia mall (14 elbahr st. Bou-
lak kornish el nile)
» Appartment no. 70 in the third floor building 300 meters elgom-
horia st. Port said
» 338.33 meters on a land and building the property number 16
elmakrizi st. Heliopolis
» Villa number 113 royal hills 6th of october
» Land area with 1468.85 meters elsaidi basin -markaz nabrouh
eldakahlia
» Land and a bulding in elmansoura elnahda street 766.3 meters
» Agricultural area 1 feddan 14t and 17.25 shares near el azazi
fakous elsharkia
» Agriculutral area - markaz shebin eldakahlia
Total
Dec. 31, 2012
EGP
432,000
Dec. 31, 2011
EGP
-
-
750,000
700,000
-
1,121,965
3,463,000
161,000
4,517,721
10,395,686
700,000
2,000,000
1,121,965
3,463,000
222,000
4,517,721
12,774,686
* Including non rigestred by EGP 6,500,686 which were acquired against settlement of the debts mentioned above.
182
Annual Report 2012
Annual Report 2012
183
60,575,261 407,137,289 855,453,783
54,254,811 347,435,424 290,416,691 127,403,538 2,142,676,797
29. Long term loans
Financial Statements: Consolidated
25. Other assets
» Accrued revenues
» Prepaid expenses
» Advances to purchase of fixed assets
» Accounts receivable and other assets
» Assets acquired as settlement of debts
Total
26. Property, plant and equipment
Dec. 31, 2012
EGP
1,632,481,861
91,741,953
96,919,829
644,824,093
8,977,329
2,474,945,065
Dec. 31, 2011
EGP
894,579,720
91,415,711
103,989,488
438,653,639
6,180,933
1,534,819,491
Dec. 31, 2012
Land
Premises
IT
Vehicles
Fitting
-out
Machines
and
equipment
Furniture
and
furnishing
Total
60,575,261 406,071,141 758,054,062
48,990,833 267,239,246 262,543,541 117,872,051 1,921,346,135
-
1,066,148
97,399,721
5,263,978
80,196,178
27,873,150
9,531,487 221,330,662
- 161,870,230 588,329,670
26,821,878 240,994,064 191,798,840
81,023,364 1,290,838,046
-
19,129,849
68,083,994
5,365,491
35,822,477
29,041,921
10,939,173 168,382,905
- 181,000,079 656,413,664
32,187,369 276,816,541 220,840,761
91,962,537 1,459,220,951
60,575,261 226,137,210 199,040,119
22,067,442
70,618,883
69,575,930
35,441,001 683,455,846
60,575,261 244,200,911 169,724,392
22,168,955
26,245,182
70,744,701
36,848,687 630,508,089
%5
%20
%20
%33.3
%33.3
%20
» Beginning gross assets
(1)
» Additions (deductions)
during the year
Ending gross assets (2)
» Accu.depreciation at
beginning of the year (3)
» Current period deprecia-
tion
Accu.depreciation at end
of the year (4)
Ending net assets (2-4)
Beginning net assets
(1-3)
Depreciation rates
Net fixed assets value on the balance sheet date includes EGP 21,769,393 non registered assets while their registrations proce-
dures are in process.
27. Due to banks
» Current accounts
» Deposits
Total
» Central banks
» Local banks
» Foreign banks
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
» Non-current balances
Total
Dec. 31, 2012
EGP
369,862,716
1,345,000,000
1,714,862,716
7,546,231
1,362,363,985
344,952,500
1,714,862,716
354,394,897
1,360,467,819
1,714,862,716
369,862,716
1,345,000,000
1,714,862,716
Dec. 31, 2011
EGP
493,794,517
2,847,000,000
3,340,794,517
46,941,713
2,905,759,685
388,093,119
3,340,794,517
398,317,328
2,942,477,189
3,340,794,517
493,794,517
2,847,000,000
3,340,794,517
28. Due to customers
» Demand deposits
» Time deposits
» Certificates of deposit
» Saving deposits
» Other deposits
Total
» Corporate deposits
» Individual deposits
Total
» Non-interest bearing balances
» Fixed interest bearing balances
Total
» Current balances
» Non-current balances
Total
Dec. 31, 2012
EGP
16,928,995,312
24,133,038,485
24,299,048,221
12,106,727,204
1,261,312,266
78,729,121,488
36,658,501,586
42,070,619,902
78,729,121,488
18,190,307,578
60,538,813,910
78,729,121,488
51,870,912,649
26,858,208,839
78,729,121,488
Dec. 31, 2011
EGP
16,942,060,088
24,532,817,359
18,819,931,329
9,484,866,150
1,688,260,333
71,467,935,259
37,121,552,736
34,346,382,523
71,467,935,259
18,630,320,421
52,837,614,838
71,467,935,259
50,501,255,584
20,966,679,675
71,467,935,259
Interest rate
%
Maturity
date
Maturing
through
next year
EGP
Balance on
Dec. 31,
2012
EGP
Balance on
Dec. 31,
2011
EGP
3.5 - 5.5
depends on
maturity date
3-5 years
17,428,571
19,095,238
13,697,721
9 - 10.5
2012
-
-
3,285,048
3-5 years
42,080,000
61,400,000
78,570,000
3.5 - 5.5
depends on
maturity date
3 months T/D
or 9% which
more
0.5
2012
-
-
-
-
167,326
3,613,282
59,508,571
80,495,238
99,333,376
Dec. 31, 2012
EGP
430,377,730
256,350,678
478,367,052
819,361,660
74,547,893
2,059,005,013
Dec. 31, 2011
EGP
258,540,767
183,928,633
353,900,773
446,414,136
99,951,732
1,342,736,040
» Financial Investment & Sector
Cooperation (FISC)
» Support to Private Sector Indus-
try Environmental Protection II
(KFW)
» Agricultural Research and Devel-
opment Fund (ARDF)
» Social Fund for Development
(SFD)
» Spanish Cooperation Microfi-
nance Fund (SCMF)
Total
30. Other liabilities
» Accrued interest payable
» Accrued expenses
» Accounts payable
» Income tax
» Other credit balances
Total
184
Annual Report 2012
Annual Report 2012
185
Financial Statements: Consolidated
31. Other provisions
Dec. 31, 2012
» Provision for income
tax claims
» Provision for legal
claims
» Provision for contin-
gent
» * Provision for other
claim
Total
Dec. 31, 2011
» Provision for income
tax claims
» Provision for legal
claims
» Provision for contin-
gent
» Provision for other
claim
» Provision for end of
service
Total
Beginning
balance
Charged
amounts
Exchange
revaluation
difference
Utilized
amounts
Reversed
amounts
Ending
balance
EGP
16,553,685
-
-
(1,591,577)
-
14,962,108
35,171,960
4,924,686
11,983 (10,958,065)
(531,054)
28,619,510
210,103,042
40,594,505
7,202,883
-
8,973,223
6,353,586
16,075
(1,336,550)
-
-
257,900,430
14,006,334
270,801,909
51,872,777
7,230,941 (13,886,192)
(531,054) 315,488,382
Beginning
balance
Charged
amounts
Exchange
revaluation
difference
Utilized
amounts
Reversed
amounts
Ending
balance
EGP
17,210,280
-
34,719,567
2,021,413
-
-
(656,595)
-
16,553,685
-
(1,569,020)
35,171,960
256,708,900
-
2,321,223
(178,971)
(48,748,110) 210,103,042
10,001,799
2,196,294
8,397
(3,233,267)
-
8,973,223
250,574
-
-
-
(250,574)
-
318,891,120
4,217,707
2,329,620
(4,068,833)
(50,567,704) 270,801,909
Dividend deducted from shareholders’ equity in the Year that the General Assembly approves the dispersment the share-
holders of this dividend, which includes staff profit share and remuneration of the Board of Directors stated in the law.
32.2. Reserves
According to The Bank status 5% of net profit is to increase legal reserve until it reaches 50% of The Bank’s issued and paid
in capital. Central Bank of Egypt concurrence for usage of special reserve is required.
33. Deferred tax
Deferred tax assets and liabilities are attributable to the following:
» Fixed assets (depreciation)
» Other provisions (excluded loan loss, contingent liabilities and
income tax provisions)
» Other investments impairment
» Reserve for employee stock ownership plan (ESOP)
Total
Dec. 31, 2012
Assets (Liabilities)
EGP
(19,439,154)
Dec. 31, 2011
Assets (Liabilities)
EGP
(13,329,499)
10,998,616
9,522,636
98,995,733
38,801,679
129,356,874
69,165,241
30,659,714
96,018,092
34. Share-based payments
According to the extraordinary general assembly meeting on June 26, 2006, The Bank launched new Employees Share Own-
ership Plan (ESOP) scheme and issued equity-settled share-based payments. Eligible employees should complete a term of 3
years of service in The Bank to have the right in ordinary shares at face value (right to share) that will be issued on the vest-
ing date, otherwise such grants will be forfeited. Equity-settled share-based payments are measured at fair value at the grant
date, and expensed on a straight-line basis over the vesting period (3 years) with corresponding increase in equity based on
estimated number of shares that will eventually vest(True up model). The fair value for such equity instruments is measured
using of Black-Scholes pricing model.
* Provision for other claim formed on December 31, 2012 amounted to 6,353,586 EGP to face the potential risk of banking
Details of the rights to share outstanding during the period are as follows:
operations against amount 2,196,294 EGP on December 31, 2011 .
32. Equity
32.1. Capital
The authorized capital reached EGP 20 billion according to the extraordinary general assembly decision on March 17, 2010.
Issued and Paid in Capital reached EGP 5,972,275,410 to be divided on 597,227,541 shares with EGP 10 par value for each
share based on:
• Increase issued and Paid up Capital by amount EGP 25,721,800 on April 21, 2010 in according to Board of Directors
» Outstanding at the beginning of the period
» Granted during the period
» Forfeited during the period
» Exercised during the period
Outstanding at the end of the period
decision on November 11,2009 by issuance of first trench for E.S.O.P program.
Details of the outstanding tranches are as follows:
Dec. 31, 2012
No. of shares
12,676,036
7,208,355
(673,567)
(3,771,242)
15,439,582
EGP
Fair value
21.70
21.25
9.98
Dec. 31, 2011
No. of shares
10,550,825
5,844,356
(407,206)
(3,311,939)
12,676,036
No. of shares
2,934,838
5,487,194
7,017,550
15,439,582
5th tranche
10
31.15
3
12%
3.21%
34%
Maturity date
» 2013
» 2014
» 2015
Total
EGP
Exercise price
10
10
10
The fair value of granted shares is calculated using Black-Scholes pricing model with the following:
» Exercise price
» Current share price
» Expected life (years)
» Risk free rate %
» Dividend yield%
» Volatility%
6th tranche
10
18.7
3
16.2%
5.35%
38%
Volatility is calculated based on the daily standard deviation of returns for the last three years.
• Increase issued and Paid up Capital by amount EGP 2,950,721,800 on July 15, 2010 according to Board of Directors
decision on May 12 ,2010 by distribution of one share for every outstanding share by capitalizing on the General
Reserve and part of the Legal Reserve.
• Increase issued and Paid up Capital by amount EGP 33,119,390 on July 31, 2011 in according to Board of Directors
decision on November 10,2010 by issuance of second trench for E.S.O.P program.
• Increase issued and Paid up Capital by amount EGP 37,712,420 on April 9, 2012 in according to Board of Directors
decision on December 22,2011 by issuance of third trench for E.S.O.P program.
The Extraordinary General Assembly approved in the meeting of June 26, 2006 to activate a motivating and rewarding
program for the Bank’s employees and managers through Employee Share Ownership Plans (ESOP) by issuing a maxi-
mum of 5% of issued and paid-in capital at par value ,through 5 years starting year 2006 and delegated the Board of Direc-
tors to establish the rewarding terms and conditions and increase the paid in capital according to the program.
The Extraordinary General Assembly approved in the meeting of April 13,2011 continue to activate a motivating and re-
warding program for The Bank’s employees and managers through Employee Share Ownership Plans (ESOP) by issuing
a maximum of 5% of issued and paid-in capital at par value ,through 5 years starting year 2011 and delegated the Board
of Directors to establish the rewarding terms and conditions and increase the paid in capital according to the program.
186
Annual Report 2012
Annual Report 2012
187
Financial Statements: Consolidated
35. Reserves and retained earnings
» Legal reserve
» General reserve
» Retained earnings (losses)
» Special reserve
» Reserve for A.F.S investments revaluation difference
» Banking risks reserve
» Intangible Assets Value For Bank Share Before Acquisition
Total
35.1. Banking risks reserve
» Beginning balance
» Transferred from profits
Ending balance
35.2. Legal reserve
» Beginning balance
» Transfer from special reserve
» Transferred from previous year profits
Ending balance
Dec. 31, 2012
EGP
380,348,755
2,036,955,188
(510,946,406)
117,805,566
153,364,794
103,716,932
-
2,281,244,828
Dec. 31, 2012
EGP
281,689,619
(177,972,687)
103,716,932
Dec. 31, 2012
EGP
231,344,896
61,697,292
87,306,567
380,348,755
Dec. 31, 2011
EGP
231,344,896
1,234,122,776
(362,379,298)
185,931,315
(723,343,863)
281,689,619
302,794,421
1,150,159,865
Dec. 31, 2011
EGP
156,992,515
124,697,104
281,689,619
Dec. 31, 2011
EGP
125,128,337
-
106,216,559
231,344,896
35.3. Reserve for A.F.S investments revaluation difference
» Beginning balance
» Unrealized gains (losses) from A.F.S investment revaluation
Ending balance
Dec. 31, 2012
(723,343,863)
876,708,657
153,364,794
Dec. 31, 2011
(18,418,736)
(704,925,127)
(723,343,863)
35.4. Retained earnings (losses)
» Beginning balance
» Dividend previous year
» Change during the period
» Transferred from special reserve
» Transferred to retained earnings (losses)
» The effect of changing accounting policies
Ending balance
36. Cash and cash equivalent
» Cash and balances with Central Bank
» Due from banks
» Treasury bills and other governmental notes
» Obligatory reserve balance with CBE
» Due from banks (time deposits) more than three months
» Treasury bills with maturity more than three months
Total
Dec. 31, 2012
(362,379,298)
(15,105,920)
(353,414)
1,001,979
(134,109,753)
-
(510,946,406)
Dec. 31, 2012
EGP
5,393,974,124
8,047,820,388
8,017,754,432
(3,093,283,199)
(4,637,273,016)
(8,063,078,264)
5,665,914,465
Dec. 31, 2011
(203,604,610)
(20,231,298)
(30,796,515)
-
(122,852,795)
15,105,920
(362,379,298)
Dec. 31, 2011
EGP
7,492,064,510
8,528,229,519
9,260,842,183
(3,014,779,811)
(5,237,471,783)
(8,821,367,483)
8,207,517,135
37. Contingent liabilities and commitments
37.1. Legal claims
There are a number of existing cases filed against the bank on December.31, 2012 without provision as it’s not expected to
make any losses from it.
37.2. Capital commitments
37.2.1. Financial investments
The capital commitments for the financial investments reached on the date of financial position EGP 199,123,121 as follows:
» Available for sale financial investments
Investments value
EGP
322,671,851
Paid
EGP
123,548,730
Remaining
EGP
199,123,121
37.2.2. Fixed assets and branches constructions
The value of commitments for the purchase of fixed assets contracts and branches constructions that have not been imple-
mented till the date of financial statement amounted to EGP 14,922,669.
37.3. Letters of credit, guarantees and other commitments
» Letters of guarantee
» Letters of credit (import and export)
» Customers acceptances
Total
Dec. 31, 2012
EGP
12,787,512,199
933,297,936
1,176,928,870
14,897,739,005
Dec. 31, 2011
EGP
11,263,565,016
753,154,858
542,833,642
12,559,553,516
38. Mutual funds
Osoul fund
• The Bank established an accumulated return mutual fund under license no.331 issued from capital market authority on
February 22, 2005 CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 32,294,160 with redeemed value EGP 6,272,494,697.
• The market value per certificate reached EGP 194.23 on December 31, 2012.
• The Bank portion got 1,612,914 certificates with redeemed value EGP 313,276,286.
Istethmar fund
• CIB bank established the second accumulated return mutual fund under license no.344 issued from capital market
authority on February 26, 2006. CI Assets Management Co.- Egyptian joint stock co - manages the fund. - The number
of certificates issued reached 2,332,745 with redeemed value EGP 141,644,276.
• The market value per certificate reached EGP 60.72 on December 31, 2012.
• The Bank portion got 194,744 certificates with redeemed value EGP 11,824,856.
Aman fund ( CIB and Faisal Islamic Bank Mutual Fund)
• The Bank and Faisal Islamic Bank established an accumulated return mutual fund under license no.365 issued from
capital market authority on July 30, 2006. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 884,496 with redeemed value EGP 37,290,351 .
• The market value per certificate reached EGP 42.16 on December 31, 2012.
• The Bank portion got 71,943 certificates with redeemed value EGP 3,033,117.
Hemaya fund
• CIB bank established an accumulated return mutual fund under license no.585 issued from financial supervisory Au-
thority on June 23, 2010. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 344,619 with redeemed value EGP 40,737,412.
• The market value per certificate reached EGP 118.21 on December 31, 2012.
• The Bank portion got 50,000 certificates with redeemed value EGP 5,910,500.
188
Annual Report 2012
Annual Report 2012
189
Financial Statements: Consolidated
Thabat fund
• CIB bank established an accumulated return mutual fund under license no.613 issued from financial supervisory au-
thority on September 13, 2011. CI Assets Management Co.- Egyptian joint stock co - manages the fund.
• The number of certificates issued reached 1,479,698 with redeemed value EGP 173,006,290.
• The market value per certificate reached EGP 116.92 on December 31, 2012.
• The Bank portion got 52,404 certificates with redeemed value EGP 6,127,076.
39. Transactions with related parties
All banking transactions with related parties are conducted in accordance with the normal banking practices and regulations
applied to all other customers without any discrimination.
• Amend certain regulations of the Income Tax Law issued by Act No. 91 of 2005
• Amend certain regulations of the Sales Tax Law issued by Act No. 11 of 1991
• Amend certain regulations of the tax law on property built issued by Act No. 196 of 2008
• Amend certain regulations of the Stamp Tax Law issued by Act No. 111 of 1980
• Presidential instructions were issued to freeze those laws and so, the financial statements hadn’t been affected by
those amendments.
• The impact of those laws on the bank if applied has been calculated from the date of their publication in the official
newspaper.
• This had resulted in a total liability within the limit of L.E 3.1 million.
• The bank’s external auditors had verified the calculation of this commitment.
39.1. Loans, advances, deposits and contingent liabilities
CICH
• The company has been inspected from the beginning of its operation 1999 till 2000.
• The company has made an objection over the tax declaration & the re-inspection has been approved but till now no
date has been determined for inspection (no inspection made from year 2001 till 2004).
• The tax deceleration has been represented for the years 2005/2007 according to the income tax rule no. 91 year 2005.
• The salary tax has been inspected from the beginning of operation till 2004 & has been settled no tax inspection has
been made from 2005 till now.
• The company has been inspected from the beginning of its operation 1999 till 2000.
• The company made an objection on the legal time & no date has been determined for internal committee to discuss
the issue no tax inspection has been made from 2001 till the cancellation of stamp duty rule on July 31, 2006. Sales
tax is not applied for the company’s operation.
42. Main currencies positions
» Egyptian pound
» US dollar
» Sterling pound
» Japanese yen
» Swiss franc
» Euro
Dec. 31, 2012
In thousand EGP
12,800
(10,376)
1,670
(67)
179
8,598
Dec. 31, 2011
In thousand EGP
8,068
24,134
408
(53)
118
7,481
» Loans and advances
» Deposits
» Contingent liabilities
EGP
660,440,043
243,759,055
114,859,635
39.2. Other transactions with related parties
» International Co. for Security & Services
» Corplease Co.
» Commercial International Life Insurance Co.
Income
EGP
1,328,326
66,903,581
3,469,611
Expenses
EGP
65,837,521
52,183,938
2,448,968
40. Good will & intangible assets
According to Central Bank of Egypt regulation issued on Dec 16, 2008, an amortization of of 20% annualy has been applied on
goodwill starting Year 2010. Amortization amount has been riched until end of December 2012 EGP 200,467,337 Intangible
assets which have been acquired on acquisition date are determined as follows:-
» Brand
» Licenses
» Contracts
» Customer Relationships
Total
» Amortization Till December 2012
Net Intangible Assets
EGP
336,790,272
20,000,000
119,694,389
198,187,745
674,672,406
(641,249,991)
33,422,415
The economic life for intangible assets were estimated to be ten years which intangible assets amortize over it except in case of
impairment loss indication in this case the impairment loss recognizes through profit and loss.
41. Tax status
Bank
• The Bank’s corporate income tax position has been examined and settled with the tax authority from the start up of
operations up to the end of year 1984.
• Corporate income tax for the years from 1985 up to 2000 were paid according to the tax appeal committee decision
and the disputes are The Bank’s corporate income tax position has been examined and settled with the tax authority
from Year 2001 up to Year 2004.
• Corporate income tax for the years 2005-2006 has been examined from the tax authority and paid.
• The Bank pays salary tax according to concerning domestic regulations and laws, and the disputes are under discus-
sion in the court of low The Bank pay stamp duty tax according to concerning domestic regulations and laws, and
the disputes are under discussion in the court of law .
• Several resolutions were issued to amend some income tax laws and were published in the official newspaper on
December 6, 2012. which will take effect as of the next day of publication and these amendments are as follows:
190
Annual Report 2012
Annual Report 2012
191
CIB Employees Featured in this Report
Name
Ahmed El Geoushy
Ahmed Swidan
Amr Al-Shuwaikh
Ahmed Megahed
Alaa Yehia
Amgad Sorour
Amr Al-Shuwaikh
Dina Ibrahim
Engy Ibrahim Abdel Sallam
Habiba El-Gogary
Ingi Akram
Ismail El Saidy
Karim Youssef
Khaled Magdy
Laila Ramez
Mohamed Shams
Mohamed Rouchdy
Mohamed Adel-Mostafa
Mohamed El Nagar
Mostafa Adel
Monia Mikhail
Mohamed Talaat
Mohamed El Rawy
Nermin Rafik
Nermine Farrag
Neveen Gamal
Nermeen Refaat
Nader Fouad
Omar Nagy
Omar Ibrahim
Randa Khodeir
Sherif Shalash
Sameh Karara
Sandra Fouad
Sara Ahmed Fouad Shalaby
Shehab Shams El Din
Sally Asaad
Sherif Hany
Soha El-Etriby
Tariq Feroz
Yasmine Waheed
Yasmine Gadallah
Hiring Date
More than 5 years
More than 5 years
More than 5 years
More than 5 years
More than 5 years
More than 5 years
More than 5 years
More than 5 years
Less than 5 years
More than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
More than 5 years
Less than 5 years
More than 10 years
More than 5 years
More than 5 years
More than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
More than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
More than 5 years
More than 10 years
Less than 5 years
More than 5 years
Less than 5 years
Less than 5 years
Less than 5 years
More than 5 years
Less than 5 years
More than 5 years
Less than 5 years
More than 5 years
Less than 5 years
Commercial International Bank S.A.E
Nile Tower Building
21/23 Charles De Gaulle Street
Giza, Cairo, P.O. Box 2430
Tel: (+202) 3747 2000
Fax: (+202) 3570 3632
Website: www.cibeg.com