Commercial International Bank (CIB) Egypt
Annual Report 2020

Plain-text annual report

THE BANK TO TRUST NAVIGATING UNCHARTED WATERS 2020 was an unprecedented year not only for CIB, but the world over. From lockdowns to dwindling investor sentiment, regulatory shifts to economic disruptions, CIB has had to call on decades of stalwart leadership and the resilience of its strategy to navigate headwinds and emerge as a stronger institution. CONTENTS 01 02 CIB Introduction Strategic Direction 06 At a Glance 08 Key Financial Highlights 10 Leadership 22 What We Do 26 CIB’s Stock 28 Our History and Timeline 34 Awards 40 Strategy 44 Value Creation Model 48 A Note From Our Non-Executive Chairman 50 A Note From Our CEO 54 BOD’s Report 03 Our Businesses 70 Institutional Banking 78 Retail Banking 84 Digital Banking 04 Support Functions 98 Operations and IT 102 Human Resources 106 Marketing and Corporate Communications 05 Our Controls 114 Risk Group 118 Compliance Group 122 Internal Audit 06 Responsible Banking 126 Environmental Sustainability 130 Social Development 142 Corporate Governance 07 08 Subsidiaries and Associates 156 Financial Statements 152 CVentures 152 Mayfair CIB Bank Limited 152 Falcon Group 154 Fawry Plus 155 Al Ahly Computer Equipment 155 Damietta Shipping and Marine Services 2020 Annual Report | 3 01 CIB Introduction #1 Bank by market cap on the EGX CIB is dedicated to CREATING OUTSTANDING STAKEHOLDER VALUE and providing superior customer service solutions. 4 | Annual Report 2020 2020 Annual Report | 5 01010101CIB Introduction At a Glance workforce comprising 7,071 employees, CIB provides tailored, client-centric services to clients in the corporate, commercial, retail, wealth, and small and medium enterprise (SME) spheres, while working to deliver the most streamlined, efficient banking service offering in the Egyptian market. CIB also operates two representative offices, one in Dubai and the other in Addis Ababa, as channels driving busi- ness through these key markets while capitalizing on the synergies inherent in the Bank’s business model as a means of driving value for clients. The Bank has four strategic subsidiaries and affiliates, CVentures, Mayfair CIB Limited, Falcon Group and Fawry Plus, in which CIB’s shares are 99.99%, 51%, 30%, and 23.5%. In addition to CIB’s strategic subsidiaries and affiliates, the Bank has direct ownership in Damietta Shipping Marine Services (DSMS) and Al Ahly Computer Equipment Company (ACE) in which it owns 49.95%, and 39.34% respectively. For several years, CIB has also enjoyed the titles of most profitable bank operating in Egypt and the bank of choice for over 500 of Egypt’s largest corporations. It has been awarded numerous acco- lades from prestigious bodies throughout the year, including the World’s Best Emerging Markets Bank by Global Finance in 2020. CIB is Egypt’s leading private-sector bank, offering a full range of financial products and services to enterprises of all sizes, institutions, households, and individuals. CIB is Egypt’s leading private-sector bank. It is an award-winning institution dedicated to creating outstanding stakeholder value and providing supe- rior customer service solutions to a broad range of clients. The Bank furnishes clients with innova- tive solutions that satisfy their banking needs and facilitate their financial lives. Its dynamic business model and commitment to fully integrating supe- rior technology into its products and services allow it to maintain its market leadership and offer staff an engaging work environment, while generating mounting value. The Bank serves an expansive network of retail customers, high-net-worth (HNW) individuals, and enterprises and institutions that drive the Egyptian economy. With a well-established network of 208 branches and banking units and a KEY FACTS 208 Branches +1.5 Million Clients 7,071 Employees EGP/MN 87,464 Market Cap* EGP/BN 25.8 Revenues 1,121 ATMs *31st of Dec 2020. 6 | Annual Report 2020 2020 Annual Report | 7 CIB Introduction Key Financial Highlights Common Share Information Per Share Earning Per Share (EPS)1 Dividends (DPS) 2 Book Value (BV/No of Share) Share Price (EGP) 3 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) FY20 FY19 FY18 FY17 FY16 Consolidated Consolidated Consolidated Consolidated Consolidated FY20 FY19 FY18 FY17 FY16 FY15 FY14 FY13 FY12 FY11 FY20 FY19 FY18 FY17 FY16 Consolidated Consolidated Consolidated Consolidated Consolidated FY20 FY19 FY18 FY17 FY16 FY15 FY14 FY13 FY12 FY11 6.21 7.33 7.26 5.76 4.56 3.58 3.55 2.67 2.42 2.43 0.00 1.25 1.00 1.00 0.50 0.75 1.20 1.00 1.25 1.00 40.20 35.26 29.26 24.43 18.44 14.39 16.31 13.46 18.94 15.03 59.5 83.5 96.5 88.8 73.6 47.4 51.3 45.4 39.8 47.4 59.0 82.7 67.0 71.1 30.8 28.9 32.6 27.4 21.1 18.5 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 20.71% 21.59% 20.33% 20.79% 21.36% 20.47% 21.58% 20.35% 20.38% 21.26% 19.69% 22.91% 22.89% 28.01% 35.26% 19.20% 29.49% 33.14% 32.45% 34.24% 19.35% 29.55% 33.13% 32.71% 34.03% 32.80% 30.25% 24.77% 24.18% 22.23% 6.75% 6.48% 6.43% 4.97% 5.47% 5.74% 5.41% 5.36% 4.74% 3.71% 2.53% 3.26% 3.03% 2.69% 2.71% 2.55% 3.26% 3.02% 2.72% 2.70% 2.90% 2.87% 2.54% 2.47% 2.20% 7,071 6,900 6,759 6,551 6,422 5,983 5,403 5,193 4,867 4,517 59.2 83.0 74.1 77.4 76.4 38.1 49.2 32.6 34.6 18.7 Balance Sheet and Off Balance Sheet Information (EGP millions) 1478 1469 1167 1162 1154 1147 908 900 597 594 87,464 121,963 86,439 89,865 88,155 43,692 44,673 29,330 20,646 11,098 Sheet Information (EGP millions) Cash Resources and Securities (Non. Governmental) 131,858 63,270 69,068 63,684 77,523 131,708 63,226 69,030 63,673 73,035 34,097 19,430 16,646 16,764 19,821 9.5 11.3 10.2 13.4 16.8 10.6 13.9 12.2 14.3 7.7 0.0% 1.51% 1.35% 1.29% 0.65% 1.97% 2.44% 3.07% 3.62% 5.35% 0.0% 15.6% 15.3% 15.4% 9.7% 18.5% 29.9% 34.4% 33.9% 33.9% 1.47 2.35 2.53 3.17 4.14 2.65 3.02 2.42 1.83 1.24 Net Operating Income 4 25,881 23,019 20,379 14,890 11,315 25,839 23,018 20,351 15,192 11,370 10,165 7,717 6,206 5,108 3,837 Provision for Credit Losses - Specific Provision for Credit Losses - General 5,019 1,435 3,076 1,742 893 4,989 1,435 3,076 1,742 893 1,682 589 916 610 321 Total Provisions 5,019 1,435 3,076 1,742 893 4,989 1,435 3,076 1,742 893 1,682 589 916 610 321 Non Interest Expense 5,626 5,049 4,224 3,119 2,433 5,553 5,045 4,223 3,119 2,433 2,028 1,705 1,450 1,445 1,337 Net Profits 10,238 11,801 9,582 7,516 6,009 10,300 11,804 9,556 7,550 5,951 4,641 3,648 2,615 2,203 1,749 Net Loans and Acceptances 120,347 119,946 106,377 88,428 85,384 119,632 119,946 106,377 88,428 86,152 57,211 49,398 41,970 41,877 41,065 Assets Deposits Common Shareholders Equity Average Assets Average Interest Earning Assets Average Common Shareholders Equity Balance Sheet Quality Measures Equity to Risk-Weighted Assets 5 Risk-Weighted Assets (EGP billions) Tier 1 Capital Ratio 6 Adjusted Capital Adequacy Ratio 7 427,842 386,742 342,461 294,782 267,544 426,145 386,697 342,423 294,771 263,852 179,193 143,647 113,752 94,405 85,628 341,169 304,448 285,297 250,723 231,741 340,087 304,484 285,340 250,767 231,965 155,370 122,245 96,940 78,835 71,574 59,476 51,880 34,228 28,439 21,374 59,405 51,800 34,147 28,384 21,276 16,512 14,816 12,115 11,311 8,921 407,292 364,602 318,622 281,163 223,522 406,421 364,560 318,597 279,312 221,523 161,420 128,700 104,079 90,017 80,361 363,922 328,296 290,869 257,931 203,053 362,981 328,296 290,869 258,315 203,625 145,835 117,133 94,605 79,834 70,549 55,678 43,054 31,334 24,907 18,955 55,602 42,973 31,265 24,830 18,894 15,664 13,465 11,713 10,116 8,765 28.97% 24.32% 16.93% 15.59% 13.34% 28.94% 24.28% 16.89% 15.56% 13.28% 15.74% 15.84% 15.50% 15.69% 14.49% 201 199 186 169 150 201 199 186 169 150 96 84 70 65 55 28.09% 23.59% 16.16% 14.93% 12.90% 28.09% 23.59% 16.16% 14.93% 12.90% 15.01% 15.70% 15.23% 14.33% 14.15% 31.41% 26.07% 19.09% 18.03% 13.97% 31.41% 26.07% 19.09% 18.03% 13.97% 16.06% 16.77% 16.32% 15.71% 15.40% 1 Based on net profit available for distribution (after deducting staff profit share and board bonus) and unadjusted to stock dividends 2 2018 DPS after taking into account the share distributions of one share for every four shares 3 Unadjusted to stock dividends 4 2016, 2015 and 2014 excluding CI Capital profit (Discontinued Operations) 5 Total Equity after Profit Appropriation 6 Including CBE Deposit Auctions 7 After Profit Appropriation. 8 | Annual Report 2020 2020 Annual Report | 9 CIB Introduction Leadership Board of Directors Mr. Sherif Samy Non-Executive Chairman Chair of the Audit Committee and Governance and Nomination Committee Member of the Compensation Committee Mr. Hussein Abaza Chief Executive Officer and Board Member Chair of the Management Committee and High Lending and Investment Committee Mr. Sherif Samy is an experienced senior executive and advisor in the fields of financial markets and services, in addition to investment and corpo- rate governance. He is currently Non-Executive Chairman of a real estate asset management company and serves on the boards of directors of the state’s project finance arm, National Investment Bank, the Universal Health Insurance Authority, and several listed and privately held companies in the education, venture capital, fund management, and private equity sectors. Additionally, he is a member of the Investment Board of the National Pension Fund and of the International Advisory Board of the UAE Securities and Commodities Authority, and a member of Board of Trustees of the French University in Egypt. Mr. Samy served a four-year term, ending 2017, as Chairman of Egypt’s independent non-banking Financial Regulatory Authority (FRA), where he achieved a major legislative and regulatory leap in capital markets, insurance, mortgage, leasing, private pensions, factoring, and microfinance. He served on the board of the Central Bank of Egypt from 2013 to 2017 and its Monetary Policy Committee, and chaired its Audit Committee. He was also Chairman of the Financial Services Institute, the Egyptian Institute of Directors, and a member of the board of the country’s National Payment Council and its Anti-Money Laundering Unit. In 2014, Mr. Samy became the first Egyptian to be elected to the board of the International Organization of Securities Commissions (IOSCO), and was reelected for a second term in 2016. He was also elected presi- dent of the Union of Arab Securities Authorities in 2016/2017. Prior to that, he was the Managing Director of Banque Misr’s investment arm, Misr Capital, and a board member of Banque du Caire. Starting 2007, he was appointed for several consecutive terms to the board of the General Authority for Investment and Free Zones (GAFI). Mr. Samy started his professional career with global consulting firm Accenture, where he worked in its Chicago, Riyadh, and Beirut offices. He graduated from Alexandria University’s Faculty of Commerce with high distinction, and attended numerous executive programs at leading business schools in the US and Europe in the areas of strategy, manage- ment, and investment. Mr. Hussein Abaza leads strategy and operations at CIB, Egypt’s premiere private sector bank serving over a million customers, including corporate clients from among Egypt’s largest 500 institutions. Mr. Abaza has been Chief Executive Officer and a member of the Board of Directors since March 2017. He assumed this position after a six-year run as CEO of Institutional Banking. Prior to this, he was the bank’s Chief Operating Officer and from 2001 until 2010, its Chief Risk Officer responsible for managing credit, market, and operational risk. Mr. Abaza is also a member of the Bank’s award-winning investor relations program, which has helped CIB grow its market capitalization over tenfold since 2008. Previously, he served as Head of Research and then Managing Director at EFG Hermes Asset Management from 1995 until his return to CIB in 2001. Mr. Abaza joined CIB after obtaining his BA in Business Administration from the American University in Cairo. He has pursued post-graduate training and education in Belgium, Switzerland, London, and New York. 10 | Annual Report 2020 2020 Annual Report | 11 CIB Introduction // Leadership Dr. Amani Abou-Zeid Lead Director, Non-Executive Independent Director of the Board Member of the Risk Committee, Governance and Nomination Committee, and Compensation Committee H.E. Dr. Amani Abou-Zeid is the African Union (AU) Commissioner in charge of infrastructure, energy, ICT, and tourism. For more than 30 years, Dr. Abou-Zeid has served in leadership positions in international organizations and has amassed a remarkable mix of experience from across conti- nents and stakeholders. She has managed the African Development Bank’s largest operational portfolio and implemented national and conti- nental multi-sectoral development programs, including implementing the world’s largest solar power plant. As AU Commissioner, she launched the Single African Air Transport Market, benefit- ting 800 million Africans, delivering on the first flagship project for African Integration under AU Agenda 2063. She also launched Africa’s digital transformation strategy to enhance Africa’s leap- frogging development as well as the second 10-year African Programme for Infrastructure Development as well as many cross-continental initiatives and projects. Dr. Abou-Zeid was selected twice, in 2012 and 2019, as one of The Most Influential Women in Africa and also in Egypt; she was decorated the Wissam Alaouite from Morocco, named Personalité d’avenir from France and received the Outstanding Alumni Award from the University of Manchester, UK — some of numerous international awards and recognitions. Dr. Abou-Zeid is a member of the prestigious Global Leaders Broadband Commission for Sustainable Development, the Global Council on Digital ID, the Global Commission for Urgent Action on Energy Efficiency, as well as the Stewardship Board for System Initiative on Shaping the Future of Energy. Dr. Abou-Zeid sets the example for women in STEM and in leadership and decision-making positions and is long named and recognized as a champion of gender equality and women’s empow- erment. An Egyptian national, Dr. Abou-Zeid has a multidisciplinary educational background, receiving a BSc in Electrical Engineering from Cairo University, an MBA from Université Senghor, an MPA from Harvard University, and a PhD in Social and Economic Development from the University of Manchester. Mrs. Magda Habib is the co-founder and Chief Executive Officer of Dawi Clinics, a chain of primary care clinics established in Egypt in 2016. Mrs. Habib has vast experience in the technical information technology and electronic payments fields, as well as smart banking solutions. She brings 25 years of expertise in various managerial arenas, including strategic brand management, retail marketing, corporate consumer and communications, and investor relations. She was also a co-founder, board member, and Chief Commercial, Marketing and Strategy Officer at Fawry Banking and Payment Technology Services. As a co-founder and a key member of the execu- tive team, Mrs. Habib helped establish Fawry as the leading electronics payment platform in Egypt with more than 50,000 payment points nation- wide. Mrs. Habib’s journey with Fawry culminated with a successful exit to a consortium of private equity funds in 2015. Prior to Fawry, Mrs. Habib spent nine years as a member of Raya Holding’s executive team, where she played a key role in the Mrs. Magda Habib Non-Executive Independent Director of the Board Member of Audit Committee, Governance and Nomination Committee, Operation and Technology Committee, and Compensation Committee merger and development of Raya Group, as well as being responsible for the creation and develop- ment of the Raya brand during its evolution into one of Egypt’s leading technology players. Mrs. Habib obtained an MBA from INSEAD, France. She holds a BSc with Honors in Computer Science from the American University in Cairo. 12 | Annual Report 2020 2020 Annual Report | 13 CIB Introduction // Leadership Mr. Paresh Sukthankar Non-Executive Independent Director of the Board Chair of the Risk Committee Member of the Audit Committee Compensation Committee, and Governance and Nomination Committee Sukthankar is currently Lead Partner in Sanaksh Advisors LLP, a firm that provides advisory services to private equity, venture capital, and other entities. Mr. Sukthankar received a BCom from Sydenham College and an MBA from Jamnalal Bajaj Institute of Management Studies, University of Mumbai. He has also completed the Advanced Management Program (AMP) from Harvard Business School. Mr. Paresh Sukthankar has been a banker for over three decades. He was part of the core team that founded HDFC Bank in 1995 and helped build it into one of India’s leading, most respected financial institutions. At HDFC Bank, he contrib- uted to various key areas, including credit, risk management, finance, human resources, investor relations, corporate communications, corporate social responsibility, and information security. He also led the teams managing HDFC Bank’s two acquisitions and its equity capital issuances in the domestic and international markets. Mr. Sukthankar was inducted on the bank’s board as Executive Director in 2007 and was elevated to the post of Deputy Managing Director in 2014. Mr. Sukthankar resigned from HDFC Bank in 2018. Mr. Sukthankar has been a member of various commit- tees formed by Reserve Bank of India and Indian Banks’ Association. Prior to joining HDFC Bank, Mr. Sukthankar worked in Citibank for over nine years from 1985 to 1994, in various departments, including corporate banking, risk management, financial control, and credit administration. Mr. Mr. Rajeev Kakar Non-Executive Independent Director of the Board Chair of the Operations and Technology Committee and Compensation Committee Member of the Governance and Nomination Committee Mr. Rajeev Kakar is a seasoned banker, busi- ness founder, entrepreneur, and corporate board member with over three decades of global banking experience and expertise in financial services, especially in emerging local corporate, commercial, MSME and retail banking, across multiple coun- tries globally with focus on high-growth emerging markets in the Asia Pacific/China, Europe, Indian Sub-Continent, MENA/GCC, and Central/Eastern Europe regions. Mr. Kakar has a strong track record of successfully operating large banks, financial institutions, and leading business turnarounds, with a demonstrated ability to conceptualize and execute multi-country business strategies, lead acquisitions and business/digital transformations, launch green-field financial services businesses, and deliver profitability over a sustained period, while contributing to the community and serving on several boards across different countries. Middle East, and Africa region until 2006. He moved as the Global Co-Founder of Fullerton Financial Holdings, Singapore where he served for 13 years on the Global Management Board as its Executive Vice President and Global Head of Consumer Banking, and the CEO-CEEMEA region of Fullerton Financial from 2006-2017. At the same time, he was also was the founder of Dunia Finance LLC, Fullerton’s UAE subsidiary, which he operated as its Founder Managing Director and CEO until 2018. Mr. Kakar also serves on several bank and financial institution boards, namely, Eurobank Ergasias SA (Greece), (GIB Bahrain), Gulf Gulf International Bank (GIB Saudi Arabia), Commercial International Bank (Egypt), UTI Asset Management Company (India), and Satin Credit Care Networks (India). He is also a member of the Global Advisory Board of the University of Chicago’s Booth School of Business since 2009. International Bank He started his career at Citibank NA, where he worked for two decades, and in his last role was the Regional Head and CEO for Citibank’s Turkey, 14 | Annual Report 2020 2020 Annual Report | 15 CIB Introduction // Leadership Mr. Jay-Michael Baslow Non-Executive Independent Director of the Board Member of the Governance and Nomination Committee, Risk Committee, and Compensation Committee In addition to his banking experience, Mr. Baslow was a strategy consultant in the media and telecoms industry at Booz Allen & Hamilton. He co-founded Frictionless Commerce Incorporated, a strategic sourcing software startup in Cambridge, MA, where he was Chief Financial Officer and a member of the board; and was the Associate Dean for Resource Development at Harvard Medical School, overseeing the major gifts and planned giving operations. Mr. Baslow received a BA in Mathematics from the University of Pennsylvania and an MBA in Finance from The Wharton School. Mr. Jay-Michael Baslow brings to the Board a variety of banking experience acquired during the past four decades. Mr. Baslow spent the last 16 years of his career in Risk Management at J.P. Morgan, covering a range of sectors. Prior to his 2019 retirement, he was the Head of EMEA Risk Management for the bank’s Wealth Management organization and the Chief Risk Officer of J.P. Morgan International Bank Ltd, its London-based private bank. Prior to that, Mr. Baslow worked in Credit Risk Management, covering a variety of corporate and financial sectors and EMEA regions, including over three years based in Dubai as the Head of MENA Credit Risk and then returning to London as the Head of EMEA Emerging Markets Credit Risk. During the late 1990s, Mr. Baslow was an invest- ment banking client executive at Chase Securities, covering global telecommunications operators and equipment manufacturers from the bank’s New York headquarters. He started his career with Chemical Bank in the 1980s, first as a technologist and then as a real estate investment banking analyst. 16 | Annual Report 2020 2020 Annual Report | 17 CIB Introduction // Leadership Management Committee Mr. Hussein Abaza Chief Executive Officer and Board Member Chair of the Management Committee and High Lending and Investment Committee Mr. Hussein Abaza leads strategy and operations at CIB, Egypt’s premiere private sector bank serving over a million customers, including corporate clients from among Egypt’s largest 500 institutions. Mr. Abaza has been Chief Executive Officer and a member of the Board of Directors since March 2017. He assumed this position after a six-year run as CEO of Institutional Banking. Prior to this, he was the bank’s Chief Operating Officer and from 2001 until 2010, its Chief Risk Officer responsible for managing credit, market, and operational risk. Mr. Abaza is also a member of the Bank’s award-winning investor relations program, which has helped CIB grow its market capitalization over tenfold since 2008. Previously, he served as Head of Research and then Managing Director at EFG Hermes Asset Management from 1995 until his return to CIB in 2001. Mr. Abaza joined CIB after obtaining his BA in Business Administration from the American University in Cairo. He has pursued post-graduate training and education in Belgium, Switzerland, London, and New York. Mr. Mohamed Sultan Chief Operating Officer Mr. Mohamed Sultan joined CIB as Head of Consumer Operations in 2008, and within six months, was appointed Head of the Operations Group. In September 2014, Mr. Sultan was appointed Head of Operations and IT before assuming his role as COO. Under his leadership and management, the Operations Group was significantly developed, resulting in major expansions within the operations function. New divi- sions were established, serving the expansion of the business or merging several operations divisions, including Corporate Services, Alternative Channels, and Real Estate and Facility Management. In his continuous efforts to enhance the Bank’s internal and external customer experience in align- ment with CIB’s overall objectives and strategic goals, multiple departments were established, including Treasury Middle Office, Operations Control Management, Retail Operations, Customer Care and Experience, as well as the Sustainable Development Department. His vision brought about the establishment of the Security and Resilience Management Group, with a clear strategic mandate to develop and firmly establish the Bank’s business continuity and cyber security management capabilities. Under his leader- ship, CIB has obtained ISO22301:2012 Certification in Business Continuity Management, positioning CIB as the pioneer and leader among peer financial institutions in the market. In 2015 and 2016, Mr. Sultan led a major trans- formation strategy in the IT Department, adding significant value technology and to existing enhanced infrastructure. The aim was a more solid foundation that provides superior services to customers and allows the business to grow smoothly as the Bank moves forward. Mr. Sultan has also been leading programs under the Bank’s Strategic and Digital Transformational Agenda and has played a significant role in expediting the adoption of digital technologies with the aim of maintaining CIB’s role as market leader in this domain. Prior to joining CIB, Mr. Sultan held the positions of Vice President of Branch Operations and Control Management at Mashreq Bank and Country Operations Head at the National Bank of Oman. He has attended several leadership programs in top business schools and is also an alumnus of INSEAD Business School. Mr. Amr El Ganainy Chief Executive Officer, Institutional Banking Mr. Amr El Ganainy joined CIB as General Manager of the Financial Institutions Group. In January 2010, he assumed his role as President of the Global Customer Relations Department, before taking on his current role. is Chairman of International Mr. El Ganainy Securities & Services Co. (Falcon Group), and a member of the boards of CI Capital Holding Co, Misr for Central Clearing, Depositary and Registry Company, and Egyptian Sport Fund. He is also a member of Egyptair Holding Co’s General Assembly, Honorary Chairman of both Interarab Cambist Association the Egyptian Dealers Association (ACI Egypt), and a member of the American Chamber of Commerce in Egypt. (ICA) and Mr. El Ganainy served as Chairman of CI Asset International Management Co, Commercial Brokerage Co, the Normalization Committee, and Egyptian Football Association. He was on the boards of TE Data, Telecom Egypt, and the Egyptian Holding Co. for Airports and Air Navigation, and executive board member of ACI International (The Financial Market Association). He served as Chairman of Port Marsa Alam for Tourism Investment, and Capital Securities Brokerage Co, in addition to serving on the board of Royal & Sun Alliance Insurance Co. Prior to joining CIB, Mr. El Ganainy worked at the United Bank of Egypt as General Manager, Treasurer, and Head of Correspondent Banking, and was Chief Dealer of the Export Development Bank. He began his career as a dealer at Suez Canal Bank. responsible for managing CIB’s 205 branches and is a member of ALCO, and other group manage- ment committees. He has a proven track record in delivering results as a corporate and invest- ment banker, as a retail banker, as a CFO, and as a chairman of portfolio companies. He has success- fully led big change mandates across CIB business lines and support functions. Mr. Issa started his banking career in 1993 at CIB branches, attended CIB’s industry-leading credit course in 1994, and was later promoted through the ranks within CIB’s Corporate Banking and Investment Banking Divisions between 1995 and 2001. In 2001, he took a two-year study break to earn an MBA degree at UNC-Chapel Hill. During his career, he took on notable positions such as Chairman of the Board of Directors at CORPLEASE, Chairman of the Board of Directors at Falcon Group, board member at CI Capital Holding, Managing Director at CI Capital Investment Banking, Group CFO at CIB, Head of FIG at CIB Institutional Banking, Co-Founder and Head of Research at CIBC, Head of Strategic Planning at CIB and Senior Manager at CIB Corporate Banking. He is the Chairman of the Banking Committee at the American Chamber of Commerce in Egypt. He was appointed by His Excellency, the Prime Minister of Egypt in 2017 to sit on the board of Egypt’s Trade Development Authority. In April 2018, he became a member of the Board of Directors at EGYPTAIR Holding Company. Mr. Ahmed Issa Acting Chief Risk Officer Ms. Hanan El Borollossy Chief Executive Officer, Retail Banking Mr. Ahmed Issa is the Chief Executive Officer of Retail Banking and a Member of the Management Committee at CIB. He is responsible for strategy formulation and execution across CIB’s consumer banking and business banking. Mr. Issa is also With more than 30 years of banking experience, Ms. Hanan El Borollossy joined CIB’s Corporate Banking Department in 1991 and attended CIB’s Credit Course in 1992 to begin her career as a credit analyst. Her responsibilities gradually expanded to include strategic and managerial functions required for her assigned portfolios. 18 | Annual Report 2020 2020 Annual Report | 19 CIB Introduction // Leadership graduate training courses in the US, UK, and Europe, covering different areas as corporate, risk, invest- ment, and strategic leadership. She assumed several roles at CIB over her career, before becoming Chief Corporate Banking Officer in 2010. In March 2017, Ms. Wefky was appointed Deputy CEO – Institutional Banking, handling both the Corporate Banking Group and the Global Customer Relations Group, before assuming her current role as President of Corporate Credit and Investment in December 2017, handling the Corporate Credit Banking Group, Direct Investment Group, and Debt Capital Market Group. Under her leadership, the Bank’s corporate loan book has more than quadrupled in the last 10 years. Ms. Wefky is currently overseeing a transformation project for the corporate functions across the value chain aiming to migrate the entire corporate lending cycle to an electronic solution, thus streamlining all business, risk, and operation processes paving the way for future CIBians to continue leading the corpo- rate finance market. Throughout her career, Ms. Wefky was chosen to represent CIB as a board member, Managing Director, and Chairman at several affiliates. She is an active member in several committees within the Bank, such as the High Lending and Investment Committee, Asset and Liability Management Committee, Non-Financial Risks and Compliance Committee, and Pricing Concession Committee. Ms. Wefky graduated from the American University in Cairo (AUC) in 1985 with a BA in Business Administration. In 2017, she was appointed as Deputy Chief Risk Officer overlooking CIB’s integrated Enterprise Risk Management (ERM) framework through managing and developing all key financial risk areas, such as credit risk, and assets and liabilities management risk, including market, liquidity, and interest rate risks. This is in addition to non-financial risks including opera- tions, strategic, conduct, vendor management, IT, reputation, and social and environmental risks. In January 2020, she was appointed as Acting Chief Risk Officer to lead a highly collaborative and proactive risk function that is able to navigate an increasingly complex business and regulatory environment through the integration of overall risk concepts and frameworks into the Bank’s strategy, while applying best practice methodologies and applications to mitigate those risks. Ms. El Borollossy is a key member in the Bank’s senior committees, and is Chairperson of the Non-Financial Risks and Compliance Committee, Business Banking Risk Committee, and Consumer Risk Committee. Throughout her career, Ms. El Borollossy was chosen to represent the Bank by serving on the boards of several companies and affiliates, and was Chairperson of Commercial Life Insurance Company (CIL). Ms. El Borollossy received her BA in Economics and Political Science from the American University in Cairo in 1983, and has since undergone various postgraduate studies and trainings in corporate, investment, marketing, risk, and strategic management areas at reputable interna- tional financial institutions including INSEAD, DC Gardner, and Euromoney. leadership, Ms. Nevin Wefky President of Corporate Credit and Investment Ms. Nevin Wefky joined CIB in 1986 and finished the Credit Course in February 1987, before joining the Corporate Banking Group. Throughout her 33 years of experience, Ms. Wefky completed various post CIB’s stalwart leadership has enabled the Bank to weather the storm during this unprecedented year. 20 | Annual Report 2020 2020 Annual Report | 21 CIB Introduction What We Do Institutional Banking Corporate Banking and Global Customer Relations Group Widely recognized as Egypt’s preeminent corporate bank, CIB serves enterprises ranging from industry- leading corporates to medium-sized businesses. Debt Capital Markets Global product knowledge, local expertise, and capital resources make CIB an Egyptian industry leader in project finance, syndicated loans, securiti- zation, bonds, and structured finance. CIB’s project finance and syndicated loan teams facilitate market access for large borrowers, providing them with world-class services at exceptional execution times. Direct Investment As a local player that adheres to widely acclaimed international standards, CIB actively participates in carefully selected direct investment opportunities in Egypt and across the region, maximizing return on investment. Financial Institution Group CIB provides a diverse set of banking and financial services designed to suit the needs of different finan- cial institutions through facilities tailored to address the financing needs of banking and nonbanking financial institutions. Treasury and Capital Market Services CIB delivers world-class services in the areas of cash and liquidity management, capital markets, foreign exchange, and derivatives. Strategic Relations Group CIB is dedicated to servicing its prime institutional entities through the Strategic Relations Group. SRG carries out this function with highly qualified relationship managers, who supply our customers with exclusive, personalized services catering to their unique business needs. The market segment covered by SRG contains strategic entities, including, but not limited to, the vast majority of sovereign diplomatic missions. Enterprise and Governmental Relations Group Enterprise and Governmental Relations aims to manage the Bank’s relationship with strategic governmental and large enterprises by focusing on providing first class service and lifetime value for top-tier local and regional companies under state-owned enterprises, governmental entities or sovereign authorities, which require a more sophisticated level of service in order to increase their business with CIB. In addition to creating new business opportunities for other LOB’s out of those customers by offering different corporate, digital, and consumer products and services. Global Transaction and Digital Banking The Bank’s Global Transaction and Digital Banking Group manages all corporate and consumer digital channels to fully integrate the Bank into our clients’ daily lives. It develops simple, reliable, and consulta- tive digital experiences that meet customers’ needs anytime, anywhere, and on any device. Retail Banking Consumer Banking The Consumer Banking division is the core engine to CIB’s dynamic service offering, providing a broad range of retail clients in different customer segments (Prime, Plus, Wealth, or Private), an extensive bundle of products and services tailored to satisfy their needs. These products are diversified from personal to specialized lending solutions, cash management services to credit and debit card offerings, in light with a full-fledged competitive analysis in depth. Business Banking The Business Banking segment serves over 54,000 SMEs with revenues ranging from EGP 1 million to over EGP 200 million through a network of over a hundred experienced relationship managers. The division works with clients across the industry, providing market-leading services and innovative, bespoke solutions for small and medium enterprises as it works to cement CIB’s position as a bank of choice for business owners. Representative Offices, Strategic Subsidiaries, and Associates Dubai Representative Office CIB launched its UAE operations in 2005, allowing for a direct presence in the GCC region to offer a full range of products to retail and corporate clients. The Dubai Representative Office offers its existing and new customer base consultation regarding the Egyptian market, thanks to CIB’s strong business foothold and track record. The office focuses on attracting and channeling inbound investments and cementing relationships with reputable GCC corporations with investment or planned invest- ments in Egypt and Africa, in addition to targeting high-net-worth individuals and business banking clients with an appetite for the Egyptian market. The office creates a bridge between the GCC and Egyptian markets to provide growth opportunities for the Bank, while extending its business portfolio and plays a key role in building and maintaining rela- tionships with large corporate clients and financial Widely recognized as Egypt’s preeminent corporate bank, CIB serves enterprises ranging from industry leading corporates to medium-sized businesses. institutions in the GCC to boost the corporate and trade finance business in Egypt. These strategic alliances are key to the Bank’s expansion strategy, allowing it to leverage unique opportunities to offer clients extensive financial tools while providing valu- able market information to GCC clients. Addis Ababa Representative Office CIB established its Ethiopia Representative Office in April 2019 in Kirkos Sub City, Addis Ababa. The office has been fully operational since 19 July 2019. Entering one of the most attractive markets in the region, with one of the highest GDP growth rates globally over the last few years and the second largest population in Africa, CIB will be able to further its expansion strategy for tremendous growth opportunities. The office works closely with Egyptian corporations operating in Ethiopia, as well as international and 22 | Annual Report 2020 2020 Annual Report | 23 CIB Introduction // What We Do local financial institutions to offer creative solutions for their foreign and local financing needs. The office maintains and builds relationships with Egyptian expatriates in Ethiopia and focuses on developing strong ties with Ethiopian banks to pave the way for establishing on-the-ground market intelligence within the country. CVentures is Egypt’s first corporate venture CVentures capital firm owned by a bank focused primarily on investing in category-defining companies in finan- cial technology spaces with the potential to create meaningful change in financial services. CVentures primarily participates in Series A and Series B invest- ment rounds, and seed investment rounds in core financial applications including, but not limited to, capital markets and payments, money transfers and remittances, digital lending and financial data platforms, artificial intelligence, data analytics and machine learning, security and enterprise IT, insuretech, blockchain, marketing and customer experience, alternative finance, regtech, and digital banking solutions. Mayfair CIB Bank Limited (MCIB) CIB acquired 51% of Mayfair Bank Kenya, now known as Mayfair CIB Bank Limited (MCIB) in April 2020 with a share subscription of USD 35.5 million. It marked the first cross-border acquisition by CIB into Sub-Saharan Africa, allowing the Bank to penetrate what it feels is a hub for the East Africa region, giving it access to ample opportunities in light of the country’s economic fundamentals, its geographic location, and its COMESA membership. The acquisition falls in line with CIB’s strategy to restore Egypt’s relations with its African neighbors and the continental efforts to increase intra-African trade, which led to the ratification of the African Continental Free Trade Area (AfCFTA). The AfCFTA will build a bloc that creates a GDP of USD 2.6 trillion and a market of 1.3 billion consumers, 75% of whom are aged 35 and under. CIB’s strategy for this subsid- iary will focus on trade finance activities, with special attention on growing the Egypt-Kenya trade corridor, building a bridge for Egyptian large corporates and SMEs to do business and even set up shop in the hub of Eastern Africa, and serve multinational and local SMEs in Kenya. Through MCIB, CIB is keen on the transfer of know- how to both countries. Already, CIB is investing in building a pool of young talents from all over the continent for the MCIB’s head office in Cairo and subsidiary in Nairobi. CIB is paying special attention on training, learning, and development while at the same time gaining knowledge of Kenya’s pioneering efforts in the fintech space. Falcon Group Falcon Group provides a plethora of services including, but not limited to, security services, money transfer, technical systems, and security products, public services and project management, and tourism and concierge services to a variety of industries such as the industrial, commercial, tourism, and public sectors. The Group provides state-of-the-art, holistic solutions tailored to every client’s specific requirements. Falcon Group’s key strength lies in its single-point-of-contact solutions that ensure it provides consistent services at the highest quality, lowest risk, and with great flexibility at a reasonable cost. Fawry Plus Fawry Plus is Egypt’s first agent banking company, providing a wide array of banking and financial services to end consumers and businesses through a network of retail branches across Egypt, focusing on serving urban and underserved regions. Fawry Plus branches provide banking services, including limited KYC services and document collection required for mobile wallet registration, prepaid and credit card issuance, loan issuance, and account opening. Other services include collecting bank correspondence and mail, cash withdrawal and deposits, repaying loan and credit card dues, as well as various bill payments such as utility, telecom, subscription fees, taxes, and fines. 24 | Annual Report 2020 2020 Annual Report | 25 CIB Introduction CIB’s Stock CIB continues to hold the highest weight on the EGX30, accounting for 43.71% of the index. Breakdown of Shareholders by Region (As of December 2020) Breakdown of Shareholders by Type (As of December 2020) Since the Bank began offering its shares to the public in 1995, it has become the biggest constit- uent on the Egyptian Exchange (EGX). Investors and analysts view CIB’s stock as a proxy for the Egyptian market, with the Bank acting as a mirror for the local banking sector. The economy’s growth prospects are generally depicted in the credit outlook, while retail banking is seen as portraying the longer-term story of financial inclusion. In 1996, CIB became the first Egyptian bank to offer its shares on international markets with a GDR program on the London Stock Exchange (LSE). In 2001, CIB marked another first by being the first Egyptian bank to register its shares on the NYSE in the form of ADR Level 1 program. In 2012, the Bank began trading on OTCQX International Premier, a segment of the OTCQX marketplace reserved for international-leading, non-US companies listed on a qualified international exchange and providing their home country disclosure to US investors. North America Africa GCC Continental Europe UK and Ireland Rest of the World 47.53% 24.14% 9.49% 8.30% 5.88% 4.66% By the end of 2020, CIB’s total issued shares were 1,477,681,340, the Bank’s GDR outstanding posi- tion reached 330,664,256 shares, representing 22.38% of issued shares, and its ADR outstanding position recorded 15,095,347 shares, representing 1% of issued shares. CIB continues to hold the highest weight on the EGX30, accounting for 43.71% of the index, and the highest free float at 93.45%. CIB’s stock is one of Egypt’s most liquid stocks as it is considered the most valu- able financial institution, with a market capitalization of EGP 87,464 million as of December 2020. Institutions Individuals 92.48% 7.52% Investor Relations The Bank’s Investor Relations (IR) division main- tains a proactive investor relations program to keep shareholders and investors abreast of developments impacting the Bank’s performance. The team and senior management alike dedicate significant time to one-on-one meetings, road shows, investor confer- ences, and conference calls, sparing no effort in providing the investment community with transparent disclosures while simultaneously ensuring analysts have the information they need to maintain a balanced coverage of the Bank’s shares. During 2020, the team and senior management conducted more than 200 one-on-one and group virtual meetings through online communications platforms and met with over 500 local and inter- national investment funds and research analysts, alongside several in-house meetings that took place before the pandemic hit Egypt. In addition to two in-person conferences attended during the first two months of 2020, the IR team participated in 10 online conferences. Moreover, the team conducted a group call attended by more than 700 participants in October and conducted a webinar in June. During the year, disclosures, including regular updates and releases, continued to be periodically made available on CIB’s IR website as well as the EGX, LSE, and OTCQX portals in a timely manner that ensures fair access to information for inves- tors from around the world, allowing them to make informed investment decisions. Thanks to the team’s continuous efforts to further enhance the program, CIB was awarded the Leading Corporate for Investor Relations in Egypt in MENA’s largest investor relations event organized by the Middle East Investor Relations Association (MEIRA) in part- nership with Extel. This is the seventh year in a row in which CIB receives at least one award from MEIRA. Equity Analysts’ Coverage CIB is widely covered by leading research houses both locally and internationally. In 2020, 14 institutions regu- larly issued research reports on CIB. COMI started the year with an open price of EGP 83.02 and ended it at EGP 59.19 with 29% y-o-y nega- tive change as a result of the challenges materializing this year. During 2020, CIB’s price reached a peak of EGP 86.01 and a valley of EGP 56.06, and the average VWAP during the year was EGP 68.06, with an average volume of more than EGP 2.1 million and an average market capitalization of EGP 100 billion. 26 | Annual Report 2020 2020 Annual Report | 27 CIB Introduction Our History and Timeline Commercial International Bank (CIB) was founded in 1975 as Chase National Bank, a joint venture between Chase Manhattan Bank and the National Bank of Egypt (NBE), with ownership of 49% and 51%, respectively. In 1987, Chase divested its ownership stake as part of a shift in its international strategy. NBE acquired that stake, renaming the former joint venture Commercial International Bank (CIB). Over time, NBE’s ownership stake in CIB declined, falling to 19% in 2006. That year, a consortium led by Ripplewood Holdings acquired NBE’s remaining stake. In July 2009, Actis, a Pan-African private equity firm specializing in emerging markets, acquired 50% of the Ripplewood Consortium’s stake. In December 2009, Actis became the single largest shareholder in CIB with a 9.09% stake after Ripplewood sold its remaining share of 4.7% on the open market. The emergence of Actis as the predominant shareholder marked a successful transition in the Bank’s strategic partnership. In March 2014, Actis undertook a partial realization of its investment in CIB by selling 2.6% of its stake on the open market, maintaining its seat on the board. In May 2014, the private equity firm sold its remaining 6.5% stake to several wholly-owned subsidiaries of Fairfax Financial Holdings, making the latter the sole strategic shareholder in CIB. Fairfax is represented on CIB’s Board of Directors by a non-executive member. 1991 • First Egyptian commercial bank to arrange debt swap transactions • First bank to launch a smart card center in Egypt 1993 • Concludes Egypt’s largest initial public offering (IPO) for a domestic bank, which was 1.5x oversubscribed, selling 1.5 million shares in a span of 10 days and generating EGP 390 million in proceeds 1975 • Established as Chase National Bank; the first joint venture bank in Egypt • Becomes the first Egyptian bank to introduce an Institutional Banking Risk Rating Model 1994 • First bank in Egypt to connect with the international SWIFT network 1977 • Becomes first private sector bank to create a dedicated divi- sion providing 24/7 banking services to shipping clients, with a primary focus on business in the Suez Canal 1996 • First Egyptian bank to have a Global Depository Receipt (GDR) program on the London Stock Exchange 1987 • Chase Manhattan divests its stake in the Bank, and Bank changes its name to Commercial International Bank (CIB) 1997 • First Egyptian bank to link to SWIFT via CITA • Concludes first and largest EUR-syndicated loan • Becomes first private sector bank with investment rating (after Luxor incident), rated BBB by Fitch IBCA 1989 • Selected by BSP to become its agent in Egypt 28 | Annual Report 2020 2020 Annual Report | 29 CIB Introduction // Our History and Timeline 1998 • First private sector bank with investment rating (after Luxor incident), rated BBB by S&P • First bank to link its database to Misr for Central Clearing, Depository and Registry (MCDR) Company • First Egyptian bank to form a Board of Directors Audit Committee 2009 • First regional bank to introduce unique concierge and Mastercard emergency services • Only Egyptian bank recognized as ‘Best Bank in Egypt’ by four publications — Euromoney, Global Finance, EMEA Finance, and the Banker — in the same year 2001 • First Egyptian bank to register its shares on the New York Stock Exchange in the form of American Depository Receipts (ADR) Level 1 program • First bank to introduce FX cash services for five currencies through ATM 2005 • First bank in Egypt to launch a page on Bloomberg for local debt securities 2006 • First to adopt a pricing policy according to client risk rating to abide by Basel II requirements • First Egyptian bank to execute a EGP 200 million repo transac- tion in the local market • First and largest Egyptian bank to provide securitization trustee services 2007 • Only Bank in Egypt chosen by UNIFEM and World Bank to participate in the Gender Equity Model (GEM) 2010 • First Egyptian bank to establish a global transaction service department • The only bank in Egypt able to retain one of the top two positions in the primary and secondary markets for Treasury Bills and Treasury Bonds • First and only Egyptian bank to enforce business continuity standards • CIB Foundation becomes the first in Egypt to have its annual budget institutionalized as part of its founding institution’s bylaws, as CIB shareholders unanimously agree to dedicate 1% of annual net profit to the Foundation 2011 • CIB-TCM becomes pioneer in trading in almost 114 new and unconventional currencies 2012 • First Egyptian bank to officially establish a Sustainable Development Department 2008 • First bank to use Value at Risk (VaR) for trading and banking book for internal risk management requirements, despite there being no regulatory requirements 2013 • First Egyptian bank to upgrade its ADRs to trade on the OTCQX platform • First Egyptian bank to sign an agreement with Bolero International, joining the Bolero multi-bank service for guarantees • First Egyptian bank to establish an ERM framework and roadmap • Becomes first Egyptian bank to use RAROC • First Egyptian bank to introduce an interactive multimedia platform that offers customers the option of interacting with call center agents over video calls 30 | Annual Report 2020 2020 Annual Report | 31 CIB Introduction // Our History and Timeline 2014 • First Egyptian bank to sign an agreement with Misr for Central Clearing, Depository and Registry (MCDR) company to issue debit cards for investors to collect cash dividends • Launches first co-branded credit card, Mileseverywhere, with national carrier EgyptAir • Introduces the first interactive social media platform in the Egyptian banking industry • The first block trading transaction on the EGX takes place when Actis sells its 6.5% stake in CIB to Fairfax 2015 • First Egyptian bank to successfully pass external quality assurance on its Internal Audit Department • Generates highest FX income in 10 years among private-sector banks in Egypt • First Egyptian bank to recognize conduct risk and establish a framework 2016 • Launches mobile banking application • Becomes the first Egyptian bank recognized as an active member of the United Nations Environmental Program — Financial Initiative • Receives Socially Responsible Bank of the Year 2016 award from African Banker • Included on the 2019 Bloomberg Gender-Equality Index (GEI), becoming the first Arab and African company to be named to the index out of the 230 companies. Bloomberg GEI is the world’s only comprehensive investment-quality data source on gender equality • Became the only representative from Egypt’s private sector to join the Digital Economy Task Force (DETF) • Launched CIB’s Chatbot named Zaki, which uses artificial intelligence, becoming the first bank in Egypt to introduce a chatbot that supports both English and colloquial Arabic • Became a founding signatory to the United Nations (UNEP-FI) Initiative Environment Program Financial Principles for Responsible Banking 2019 • Recognized by Forbes among the top 500 employers glob- ally coming in 90th place; within the top 100 companies in the world 2020 • Acquired 51% of a Kenyan bank, now known as Mayfair CIB Bank Limited in Kenya through a capital increase for a total transaction value of USD 35.35 million • Included in the 2020 Bloomberg Gender Equality Index (GEI), becoming the only company in Egypt and one of just a handful from Africa to be included in the index, which features 325 companies representing 42 countries across 50 industries with a demonstrable commitment to the global advancement of women in the workplace • Ranked 28th on Forbes Middle East’s Top 100 Listed Companies in the Arab World, ranking highest of the four Egyptian compnies on the list 2017 • Becomes the only Egyptian bank ranked on the FTSE4Good Sustainability Index • First Middle Eastern company to be analyzed in a case study conducted by the Leadership Institute of the London Business School • Establishes CVentures, Egypt’s first corporate venture capital firm primarily focused on investing in transformational fintech startups The only company in Egypt to be included in the 2020 Bloomberg Gender Equality Index (GEI). 2018 • Receives ISO22301:2012 certification for Business Continuity Management by PECB, a global provider of training, examination, audit, and certification standards, in partnership with EGYBYTE, a leader in the MENA market for IT service management • Ranks first on the EGX’s sustainability index (S&P/EGX ESG) for the fifth year in a row since 2014 32 | Annual Report 2020 2020 Annual Report | 33 CIB Introduction Awards 1993 – 1998 2005 2018 2019 Six-time Recipient of Best Bank in Egypt award by Euromoney First Egyptian bank to win the JP Morgan Quality Recognition Award World’s Best Emerging Markets Bank by Global Finance, the second consecutive year in which CIB has been awarded this title by an international institution; CIB is the first bank in Egypt and the Middle East to win this prestigious award The Middle East’s Best Bank for Corporate Responsibility - By Euromoney 2006 – 2012 2013 Seven-time Recipient of JP Morgan Quality Recognition Award First Egyptian bank to win the JP Morgan Quality Recognition Award 2020 2016 2017 • Socially Responsible Bank of the Year by • World’s Best Bank in the Emerging Markets by Euromoney, the first bank in the Middle East and Africa to win this award • First Egyptian bank be named Best Bank in the Middle East by Euromoney African Banker • Best Bank in Egypt Supporting Women-Owned and Women-Run Businesses by the American Chamber of Commerce in Egypt • Achievement in Liquidity Risk and Operational Risk for the Middle East and Africa by Asian Banker • Best Retail Risk Management Initiative by Asian Banker • Most Active Issuing Bank in Egypt in 2015 by the European Bank for Reconstruction and Development • Middle East Most Effective Recovery by BCI • Best Bank in Egypt award by Euromoney • World’s Best Emerging Market Bank award by Global Finance • Best Foreign Exchange Provider in Egypt award by Global Finance • Best Treasury and Cash Management Provid- ers in Egypt award by Global Finance • Best Emerging Markets Bank award by Global Finance • Best Private Bank in Egypt award by Global Finance • Best Bank in Egypt award by Global Finance • Best Regional Bank in North Africa award by African Banker • Best Domestic Bank in Egypt award by Asiamoney • Best Digital Bank in Egypt award by Asiamoney • Pan-Africa Sustainability Award by EMEA Finance CIB has been named World’s Best Bank in Emerging Markets by Global Finance for the third time in only four years, having received the same title from Euromoney in 2017 and Global Finance in 2018. 34 | Annual Report 2020 2020 Annual Report | 35 CIB Introduction // Awards THE WORLD’S BEST CONSUMER DIGITAL BANKS IN THE MIDDLE EAST 2020 BY GLOBAL FINANCE • Best Consumer Digital Bank • Best Integrated Consumer Banking Site • Best Online Product Offerings • Best Website Design • Best Mobile Banking App • Best Information Security and Fraud Management • Most Innovative Digital Bank • Best Open Banking APIs THE WORLD’S BEST CORPORATE/INSTITUTIONAL DIGITAL BANKS IN THE MIDDLE EAST 2020 BY GLOBAL FINANCE • Best Online Investment Management Services • Best Online Treasury Services • Best Online Portal • Best Integrated Corporate Banking Site • Best Information Security and Fraud Management • Best Mobile Banking Adaptive Site • Most Innovative Digital Bank • Best Open Banking APIs NOTABLE RANKINGS • Ranked 28th on Forbes Middle East’s Top 100 Listed Companies in the Arab World • Ranked highest of the four Egyptian companies on the Top 200 Banks list by Jeune Afrique • Ranked highest in Top Banks by African Business and Top 10 Safest Banks in Africa by Global Finance • Only Egyptian institution to be included among the 325 companies in Bloomberg’s Gender Equality Index (GEI) 36 | Annual Report 2020 2020 Annual Report | 37 02 Strategic Direction 3strategy pillars - Core business growth - Digitalization - Geographic expansion CIB’s forward-looking STRATEGY is propped up by its people, effective data analytics tools, and a stalwart management team. 38 | Annual Report 2020 2020 Annual Report | 39 0102020202Strategic Direction Strategic Direction Strategy Over the past few years, CIB’s strategy has focused on uniquely positioning the Bank to become a more client-centric organization. Our motive is to move towards creating more digital experiences for our customers. As we acknowledge the pivotal role that artificial intelligence, blockchain, cloud, and data (ABCD) play, we have been heavily investing in data analytics, upscaling our infrastructure, digitizing and automating the way we do business, while simultane- ously developing our employees’ skillset to match the latest emerging trends. Mission Vision To transform traditional financial services into simple and accessible solutions by investing in people, data, and digitization to serve tomorrow’s needs today To be at the forefront of change, building for the future, and turning aspirations into reality Based on our mission and vision statements, CIB’s strategy will focus on three main growth avenues as we move forward: Core Business Growing our Commercial Business Activities When it comes to our core operations, CIB’s strategy will be focused on customizing solutions to build a bespoke bank and a financial-value-creating companion for our targeted customer base. modules, advanced campaign management capabili- ties and process re-engineering, accompanied by a new distribution strategy to expand outreach. CIB will integrate ABCD to drive the business to new levels by exploiting data, digital, new core banking Using advanced campaign management techniques, CIB will focus on data-driven sales. The Bank will also continue to advance data mining capabilities to enhance its behavioral segmentation in order to target customers’ effectively with relevant products. The institutional banking unit will transform to focus on workflow optimization, digitalization, and auto- mation. Moreover, the corporate lending function will further expand to cover new governorates. Organizational Development Adoption of best practices for corporate governance is key for CIB. The full roll-out of the Enterprise Risk Management (ERM) system, which provides the organization with the necessary controls and risk- informed decision-making process, further solidifies our standing in the eyes of its stakeholders. The business banking unit will be revamped as more investment will be directed towards advanced IT solutions, digitalization of customer experiences in cash and trade management products, automation of sales management, and acquiring and payment solu- tions. The unit will position itself as the clients’ SMEs banking partner by working on building a distinctive value proposition with the aid of data analytics for both the borrowing and non-borrowing customers. These business aspirations will be supported by the transformation of the Global Transactional Banking via the development of products through digital channels for cash management, trade, supply chain, and global custody services. The transformation will benefit the Bank in strengthening the clients’ relation- ship and loyalty, grow the Bank’s low-cost deposit base, and significantly improve the customer experience. Responsible Banking The Bank continues to advocate for responsible banking through the support of financial inclusion and literacy, women and youth empowerment and equality, in addition to the adoption of best practices in sustainability, CSR, and governance. We will also continue to work toward becoming Egypt’s number one green bank and venture into initiatives such as improving employee wellbeing, community investments, promoting accessible banking, and banking the unbanked. The continuous development of our human capital is critical to the strides we have taken to maintain and improve the quality of services offered to our customers, and, consequently, in the value created for stakeholders. Human Resources will continue to play a strategically enabling role to evolve staff capabili- ties, establish a culture of innovation, engagement, and enablement, while building the right skills such as adaptive thinking, cross–cultural competency, computational thinking, and virtual collaboration. Digital Disruption We will continue to develop our digital capabilities to encourage financial inclusion and lower the cost of service and turnaround time (TAT) to ensure operational efficiency and resource allocation. We will harness the power of technology, partnerships, and data to better identify and serve the untapped market in a sustainable manner. Our goal is to offer value-added tailored products and services through the appropriate distribution channels, while at the same time ensuring access to marginalized segments of society. Digitalizing the banking experience and working towards direct processing not only benefits the Bank through productivity gains and cost optimiza- tion, but improves the customer experience. The Bank will continue building a resilient cyber secu- rity environment while moving towards an agile infrastructure and organization. 40 | Annual Report 2020 2020 Annual Report | 41 Strategic Direction Geographical Expansion To diversify our operations, balance sheet struc- ture, and sources of income, CIB embarked on a journey to look for expansion opportunities across the border. In light of its geographical location, historic and cultural ties, its macroeconomic and demographic potential, Sub-Saharan was tapped as a key opportunity. Importantly, regional inte- gration efforts such as the African Continental Free Trade Agreement (ACFTA) and the Egyptian government’s direction to restore bilateral ties provide imperative political support. In particular, East Africa has been identified as the most attractive region for CIB to do business. The region is home to some of the fastest growing econo- mies in the world, while it will also provide a platform for CIB to learn and adopt the strides taken toward digital transformation and financial inclusion. CIB will continue to work on growing and solidi- fying its continental footprint, especially after the establishment of its representative office in Ethiopia and the acquisition of a majority stake in a local Kenyan bank. In short, we aim to position CIB as a trade finance hub for Egypt and East Africa, focusing on both corporate and SMEs. Capturing pent-up capital expenditure and investment flow is the route CIB has set its eyes on to continue its solid and consistent financial performance and creating value for our stakeholders. When it comes to our core operations, CIB’s strategy will be focused on customizing solutions to build a bespoke bank and a financial-value-creating companion for our targeted customer base. 42 | Annual Report 2020 2020 Annual Report | 43 Strategic Direction Value Creation Model Value creation is and has always been one of the main pillars of the Bank’s strategy and focus. CIB works dili- gently to create value for its shareholders, customers, employees, and society. To do this, the Bank efficiently utilizes its key resources to best serve its strategic priorities, taking into account all the macroeconomic driving forces that prevail. This results in creating both financial and non-financial value for CIB’s stakeholders. Our Values • Integrity • Client Focus • Innovation • Hard Work • Teamwork • Respect for the Individual • Decorum • Responsible Leadership • Empowerment Our Pillars • Segmentation – developing innovative prod- ucts tailored to the customer’s needs, while relying on behavioral analysis. • Customer Experience – leveraging on behav- ioral analytics and technology to improve the customer experience. • Operational Efficiency – ensuring a stream- lined approach to provide exceptional customer experience through process re-engineering and straight-through processing. • Digitalization of Journey – developing our digital capabilities and trans- actional banking. the Customer Customer Centricity • Offer need-based, bundled value propositions like digital solutions through data analytics • Quality of service initiatives to enhance customer experience • Performance-driven culture • Social and environ- mental management system • Human capital development Organizational Development and Sustainability STRATEGIC PRIORITIES Financial Performance • Asset quality • Profitability • Loan growth • Centralization of operational processes with focus on automa- tion through STP • Business continuity, cybersecurity, and resilience manage- ment Operational Efficiency KEY STAKEHOLDERS Clients Employees Shareholders and Investors Society Resources (Input) Value Created (Outcome) Financial Capital Strong financial capital is always reinvested in the Bank’s activities • EGP 10.2 billion in consolidated net income • EGP 25.8 billion standalone revenues • EGP 60 billion net worth • EGP 428 billion total assets • EGP 341 billion total deposits • EGP 87,464 million market capitalization • 19.2% ROAE • 4.26% NPLs • 20.7% cost/income Financial Performance • Ranked #1 bank among all Egyptian private-sector banks in terms of revenues, net worth, total assets, and deposits • The largest market capitalization in the Egyptian banking sector. One of the highest ROEs, compared to a market average of 21.5% • One of the lowest efficiency ratios among Egyptian private-sector banks • 7,071 total workforce as of year-end • 6,525 trained employees • 30% of staff are women, well above Egypt’s 23% average Human Capital • Highly skilled staff capable of sustaining CIB’s path of success and maintaining the Bank’s leading position within the market Human Capital CIB’s in-depth expertise in different industries is mainly rooted in our skilled, specialized, and dedicated staff 44 | Annual Report 2020 2020 Annual Report | 45 Strategic Direction // Value Creation Model Resources (Input) Value Created (Outcome) Resources (Input) Value Created (Outcome) Responsible Banking Integrating environ- mental, social, and governance aspects into the Bank’s poli- cies, operations, and culture to achieve sustainable develop- ment and act as an advocate of respon- sible banking Innovation and Technology Innovation is chiseled in the Bank’s DNA, and CIB is at the forefront of the market in offering simple, fast, and contextual experiences to its customers, with a special focus on digitalization • First Bank in Egypt to support the Task Force for Climate Related Financial Disclosures (TCFD) Responsible Banking • Constituent of the FTSE4Good Index • First Egyptian bank to conduct a Debit and Credit for the 5th consecutive year • For the 3rd consecutive year, CIB is listed on the 2021 Bloomberg Gender Equality Index (GEI), after being the first Arab listed on the and African company 2019 Bloomberg GEI — the world’s only comprehensive investment quality data source on gender equality • Co-Chair of the Closing Gender Gap Accelerator supported by the World Economic Forum (WEF) • Included in the new Low Carbon Select Index in the Middle East and North Africa (MENA), recently launched by the Arab Federation of Exchanges (AFE) and data provider Refinitiv • Founding Signatory to the UNEP-FI Principles for Responsible Banking Innovation and Technology • Expanding in digital banking platforms through availing more services to enhance customer experience, sales efficiency, and manage costs. Digital banking achieved a historical record of cost synergy reached EGP 3.2 billion with a 44% y-o-y increase • Continuously upgrading our infrastruc- ture and cyber security capabilities to provide a seamless customer experi- ence in a safe environment Life Cycle Assessment • First Egyptian bank to conduct an Environmental and Social Impact Assessment on borrowing SME clients • Largest ATM network among private banks at 1,121 ATMs, high cash deposit and withdrawal transac- tions migration rates from branches (96.4% and 98.5%, respectively) • 118% y-o-y increase in mobile banking transactions volume to EGP 53 billion; 35% y-o-y increase in number of online banking customers • CIB is the first bank in the market to avail digital registrations for Smart Wallet, maintaining a market competitive activity rate of 20%, with a 107% y-o-y increase in transaction value to EGP 2.8 billion over 7.5 million transactions: 34% y-o-y increase in number of customers • CIB is ranked 1st in the Egyptian banking sector in domestic payments over ACH • 93% y-o-y increase in corporate internet banking transaction volumes; 45% y-o-y increase in number of cash management products; transactions values amounted to EGP 327.5 billion • CIB is ranked 1st in Egyptian market in the e-govern- mental payment space; corporate payment services (CPS) saw a 70% y-o-y increase in transaction volumes to EGP 15.2 billion; 102% y-o-y increase in number of customers • CIB is ranked 1st in Egyptian market for number of securitization SPVs launched in 2020 at eight SPVs amounting to EGP 33 billion NPS in 2020 (vs. 20.3 NPS ME Benchmark) • Overall - 28 • Wealth - 28 • Plus - 29 • Prime - 27 • Corporate - 38 (vs. 37.9 NPS ME Benchmark) • Business Banking - 23 (vs. 37.9 NPS ME Benchmark) CSAT in 2020 (vs. 8 ME Benchmark) • Smart Wallet - 8.7 • Mobile Banking - 8.6 • Internet Banking - 8.6 • ATMs - 8.3 Service Excellence and Brand Recognition • Since 2014, CIB has been monitoring its service performance through a service index, ensuring sustained, high customer satisfaction levels as part of its overarching strategy • CIB has been named the World’s Best Bank in Emerging Markets by Global Finance for the third time in four years, having received the same title from Euromoney in 2017 and Global Finance in 2018 • Ranked 28th on Forbes Middle East’s Top 100 Listed Companies in the Arab World Service Excellence and Brand Recognition CIB has long-standing relationships with clients that are built on trust, customer centricity, and rights concepts. The Bank’s core values enable it to preserve and strengthen its brand positioning in the financial services market in Egypt as the largest private bank, the best bank when it comes to corporate and retail services and a leader in digital transformation CIB works diligently to create value for its shareholders, customers, employees, and society. 46 | Annual Report 2020 2020 Annual Report | 47 Strategic Direction A Note From Our Non-Executive Chairman As a Board of Directors, we are committed to ensuring world- class governance remains a hallmark of this institution. in technology infrastructure and investment innovative digital channels were also leveraged to expand its offerings to clients and migrate a larger share of transactions from branches, addressing both social distancing measures and contributing to our vision for a digital, modern banking future. Thanks to the dedication of thousands of CIB men and women, the Bank is now emerging from the storm in a position of strength with more ambitious objectives for the year to come. As a Board of Directors, we are committed to ensuring world-class governance remains a hallmark of this institution. We start 2021 with a non-executive chairperson and are pressing on with initiatives from last year that will further strengthen our governance, controls, and risk management systems. Dear shareholders, Staying the course is what CIB strived to do in 2020. The year saw thousands of CIBians, lead by the management team and with oversight from the Board of Directors, extend all efforts to keep our clients (and each other) safe and to mitigate as much as feasible the impact of COVID-19 on our business. The challenge was not just to mini- mize disruption to the business and services to our clients, but to also keep momentum going on various development initiatives. We will continue fostering a strategy that prioritizes consistent growth through prudent management, which will allow us to build on the lessons learned in previous years and drive value for shareholders. Sustainability is also an integral part of CIB’s stra- tegic directives, believing that both businesses and the financial institutions that allow them access to capital must place sustainability at the heart of everything they do. Similarly, we must ensure that growth is equitable and that we work to champion the nation’s push toward financial inclusion. In the early days of the pandemic, our focus was squarely on providing a safe banking experience for our clients — and a healthy work environment for our team. As COVID-19 became the ‘new normal’, we were keen to support clients in managing their own responses to the impact on their businesses. CIB has also fully complied with the Central Bank of Egypt’s timely initiatives to support retail, SMEs, and corporate borrowers alike. The Bank’s On behalf of the Board of Directors, I hope 2021 will be a recovery year and that we will be able to report to our shareholders, as well as the rest of our stake- holders, positive developments on performance, innovation, and responsible banking. Sherif Samy Non-Executive Chairman 48 | Annual Report 2020 2020 Annual Report | 49 Strategic Direction A Note From Our CEO — and comparatively little scientific knowledge — of the virus. And they have demonstrated great stamina and strength of character every day since. There are really only two things you can do to prepare for a crisis: you must plan and then be flexible when the crisis arrives. The Central Bank of Egypt’s response to COVID-19 is the stuff of which business school case studies are made. Far beyond measures to ensure physical safety of clients and bankers in the system, the central bank acted quickly to bolster consumer, business, and investor confidence in our financial system. It moved ahead with payment holidays for corporate and individual borrowers. It showed vision with measures designed to both minimize face-to-face contact and drive adoption of electronic payments for the long term. And it showed boldness with a multifaceted stimulus program. As we approach our second year of this pandemic, we can see light at the end of the tunnel. In particular, the prospect of a vaccine. Egyptian medical profes- sionals are already being vaccinated, a development that will prove to be a huge psychological leap for consumers, manufacturers, and retailers alike. And we look forward to the rollout of the vaccine to the wider public over the course of the months to come. In the meantime, I have been regularly reminded by our clients in the business community that we have all managed businesses through more challenging times. Today, consumption is picking up. Businesses of all forms are open. Our monetary policy is appro- priate to the times and our base of foreign reserves is strong, helping ensure stability of the Egyptian pound. The central bank has ensured we remain one of the best carry trades in the world, compensating for the downturn in tourism. There’s every sign that smart policy will ensure that our tourism industry will be able to quickly respond when the world opens again to holidaymakers. We are approaching 2021 from a position of strength: we achieved solid revenue growth in 2020, took appropriate provisions and still delivered good profitability despite an unprecedented year. We have much for which to be grateful as we look forward to the promise of a new year, and the health and wellbeing of the thousands of people who work here — and of the hundreds of thousands of clients we serve — is at the very top of that list. I will not dwell at length in this note on our response to COVID-19 — we have (and will continue) to report on this in successive communications materials to all stakeholders. But I do want to single those to whom we all owe thanks. COVID-19 is insidious. Dangerous to many, fatal to some, and an omnipresent threat to us all. The courage, kindness, and hard work of each and every one of the men and women who work for us every day — particularly front-liners — saw us through the worst of it. During the first wave, we spoke of our team being everyday heroes for continuing to come to work at a time when we had no real experience 50 | Annual Report 2020 2020 Annual Report | 51 Strategic Direction // A Note From Our CEO The question, then, is not “will there be spending on capital expenditure this year?” It is “when will we see the first signs of a pickup?” Any downward movement in interest rates will only work to support that pickup. In short, we believe 2021 is a year in which we are planting the seeds of a solid, gradual recovery — one reinforced by our young, fast-growing population; by a rising interest in entrepreneurism; by a state-led financial inclusion drive that will bring more and more businesses into the formal financial system; and by the continued, rapid digitalization of bank and other financial services. CIB has made substantial investments in digital infrastructure and services for going on a decade, and we started 2021 pushing faster than ever, from our e-wallet and adoption of QR code technology, to the forthcoming rollout of a new web presence with powerful new tools that help us better serve our clients of all sizes. Among those clients will be small and medium-sized businesses. SMEs are growing in number thanks both to the rising popularity of business ownership and to incentives from policymakers and the private sector alike, whether it is new products or incentives to join the formal economy. SMEs are the mainstay of any economy, and CIB looks forward to providing a new crop of businesses with tailor-made products and services as they grow into the next generation of large corporations. As we do so, the Bank will continue to emphasize sustainability at every turn, guided by our goal of creating shared value for every single one of our stakeholders. Our ability help drive change will be underscored later in 2021 when we become the first bank in Egypt to issue a green bond, raising capital to on-lend to pro-environment projects across the economy. And alongside others in our industry, we look forward to participating in the natural gas conversion project, which will help take vehicles more than 20 years old off the road and replace them with new cars, microbuses, and buses that are powered by dual-fuel engines that can run on petrol and cleaner-burning natural gas. Further afield, we are now beginning our first full year in which we have owned Mayfair CIB in Kenya, marking our cautious entry to this exciting new market. Our hope is that a growing global recovery will put the winds in our sails as Egypt’s trade with the rest of Africa blossoms. In sum, we are approaching 2021 from a position of strength: we achieved solid revenue growth in 2020, took appropriate provisions and still delivered good profitability despite an unprecedented year. We have 18% unsecured portfolio coverage, which will ensure that as we see a broad-based market recovery, we will be able to capture the benefits of this upswing without having to take substantial new provisions. Our expectation is that our core corporate franchise will mark the start of its rebound — and following this, increased appetite from SMEs and continued strength in our consumer credit business. As I wrote last year: the true measure of a banker is their ability to generate returns for shareholders over the long term by putting capital to work. If we do it right, we play meaningful roles in helping indi- viduals live better lives and corporate clients build businesses that create meaningful jobs. I have every confidence we are up to this task in the year ahead — and far beyond. Hussein Abaza Chief Executive Officer 52 | Annual Report 2020 2020 Annual Report | 53 Strategic Direction Board of Directors’ Report A Challenging Macroeconomic Environment 2020 was a year of tremendous change, not only on the local front, but on the global arena as well. With a worldwide pandemic that hit most countries, infected tens of millions of people, and claimed the lives of millions by the end of the year, COVID-19 sparked a global economic slowdown that negatively impacted sectors and businesses around the world. Unlike many, Egypt did go into complete lockdown during the height of the pandemic, but imposed in the second half of March curfews that were gradu- ally eased then eventually lifted toward the end of June. With a lower number of infections and fatali- ties than numerous other countries, the first wave of the pandemic did not hit Egypt as hard as many would have expected, given the country’s population and population density. This enabled the Cabinet to open up economic activity faster, which — coupled with the economic reforms the country had final- ized before the pandemic — allowed Egypt to be the only country in the MENA region to register positive GDP growth of 2.5% in the fiscal year ending June 2020. Egypt’s unemployment rate returned to pre- pandemic levels in 3Q2020, falling to 7.3% compared to 7.8% in the same quarter of last year, after hitting a near two-year high of 9.6% in 2Q2020. The country’s plan to ‘coexist’ with the virus was successful from an economic standpoint. The government announced a EGP 100 billion stimulus package to mitigate the economic impact of COVID-19, of which half was allocated to the tourism sector. The package also included EGP 20 billion allocated by the Central Bank of Egypt (CBE) to invest in listed securities on the Egyptian Exchange (EGX) to support asset prices and stem market volatility caused by the pandemic-induced sell-off. State pensions increased by 14% and cash-transfer social programs through Takaful and Karama were extended to reach more families, while a support initiative targeting irregular workers in sectors that were most severely hit was launched. A EGP 10 billion consumer spending initiative was launched to offer citizens two-year, low-interest loans to pay for consumer goods discounted by 10-25% and provide ration-card subsidies. Energy costs were lowered for the entire industrial sector, and real estate tax relief was provided for the industrial and tourism sectors. Under its support programs, the CBE reduced the preferential interest rate from 10% to 8% on loans to the tourism, industry, agriculture. and construction sectors and provided participating banks with the interest differential. The CBE also launched a six-month debt moratorium for individuals and businesses in March, allowing the delay of principal and interest payments until 16 September 2020. It also lifted all fees and commis- sions on local currency digital payments, transfers, and out-of-network ATMs to reduce physical interac- tions, with an eye toward further supporting financial inclusion and the shift to a cashless economy. This was extended from September to December, and again to June 2021.Moreover, the CBE raised the ATM withdrawal ceiling, and adjusted the limit on mobile wallets and prepaid cards. The CBE’s Monetary Policy Committee (MPC) slashed interest rates by an unprecedented 300 basis points (bps) in an emergency meeting in March and kept interest rates unchanged until September, when it cut them 50 bps, followed by another 50 bps cut in its meeting in November. This brought the CBE’s over- night deposit rate to 8.25%, the lending rate to 9.25%, and the main operation and discount rates to 8.75%. These decisions were supported by declining inflation, with annual headline urban inflation slowing to 5.7% in November. Even with the 400 bps rate cut in 2020, Egypt’s carry trade remained attractive to foreign inves- tors, being the second highest in the world, surpassed only by Malaysia, according to a list of more than 50 major economies tracked by Bloomberg. However, the pandemic did not leave the economy unscathed, with Egypt seeing a total of USD 17 billion in foreign portfolio investment outflows from March to May. The government was able to balance the gap created from various sources, including drawing down on USD 5.4 billion from international reserves in March (which hit a two-year low of USD 40.1 billion before dropping to USD 36 billion in May and rebounding upwards for the following four consecu- tive months to end December at USD 40 billion, reaching its highest level since April, with a monthly increase of almost USD 800 million, reflecting the largest monthly increase throughout 2020. It also used c. USD 6 billion in deposits kept outside of the reserves and received a USD 2.8 billion Rapid Financing Instrument (RFI) from the International Monetary Fund (IMF) in May. In the same month, Egypt sold its largest-ever international issuance, a USD 5 billion, three-tranche Eurobond that was 4.4x oversubscribed. In June, the government secured a 12-month Stand-by Arrangement (SBA) worth USD 5.2 billion from the IMF, of which USD 3.6 billion were received, to date. This also cushioned against severe currency fluctuation. The country’s main sources of foreign currency came under pressure amid the global lockdown, with only remittances posting strong and consistent recovery, picking up in 3Q2020 to USD 8 billion (a 28% y-o-y increase) while tourism revenues, Suez Canal receipts, and Foreign Direct Investments (FDI) continued to be weak. Moreover, Egypt recorded a budget deficit of EGP 463 billion — or 7.9% of GDP — in FY2019- 2020, showing an improvement from 8.2% recorded in FY2018-2019. The country’s revenues for the fiscal year came in lower than the forecast of EGP 1.2 trillion by c. EGP 200 billion, recording EGP 975 billion. How Did CIB Operate? Through this, CIB’s management demonstrated flex- ibility and agility to weather the storm. Throughout the pandemic, CIB called on its continuity, resilience, and crisis management plans to effectively manage the situation with minimal impact on services and operations, while simultaneously safeguarding the health and safety of employees, customers, and all relevant stakeholders. Before the pandemic hit Egypt, a continuity and resilience gap assessment was conducted to ensure that the strategies and plans addressed all the dynamics of the situation against a set of best practices and to identify any areas of improve- ment. With the first COVID-19 case in Egypt, CIB began enforcing health and safety practices such as admitting fewer customers to branches, reducing workforce across departments, enforcing the use of facemasks, installing sanitizers in all prem- ises, performing enhanced sterilization and deep cleaning, and publishing instructions for safe ATM usage on ATM screens. During the height of the 54 | Annual Report 2020 2020 Annual Report | 55 Strategic Direction // Board of Directors’ Report crisis, the Bank managed to secure all pandemic supplies despite high demand and scarcity. The Bank also conducted protocol and PCR tests and provided proper medical care and monitoring for all infected employees. For the majority of the year, CIB provided facilities at a local hotel for infected staff that did not have the means to isolate. Moreover, a dedicated page on the Bank’s website under the name Bank Safely was launched, consolidating necessary actions taken by CIB to keep all stake- holders abreast of developments daily. The Path to Sustaining CIB’s Leadership is Paved With Good Governance Corporate governance is and has always been an area of great focus for CIB. The Bank, guided by its Board, has continuously strived to adopt sound corporate governance principles out of its belief that good governance is the best path to achieving and sustaining success. CIB’s governance framework seeks to drive long-term value for shareholders, employees, and other stake- holders through a set of robust and clear internal policies and processes that help the Board and senior management make well-informed decisions. Tailor-made to the Bank’s scope, size, and business complexity, among these policies are the Code of Corporate Governance, Code of Conduct, Conflict of Interest policy, and Disclosure policy. These policies are precisely drafted, clearly communicated, and periodically reviewed to ensure that CIB is constantly up-to-date with market developments, and to reflect on areas for improvement in order to continue providing best-in-class financial solutions to clients, enterprises, and individuals alike. The framework is also anchored in the Bank’s Board of Directors, with a distinguished group of independent non-executive directors (NEDs) that make up the majority of CIB’s Board of Directors, along with competent board committees and an experienced management team. The Board is collectively responsible for CIB’s long- term financial and non-financial success, setting the Bank’s strategic objectives and overseeing their imple- mentation, ensuring the effectiveness of the internal control systems, managing risk, and securing CIB’s institutional reputation and long-term sustainability. The Board structure is in line with international best practices and allows for the position of a lead director. In July 2019, CIB appointed a lead director who is an independent member of the Board. In compliance with CBE regulations and corporate governance directives, two of CIB’s independent NEDs concluded six years of service on the Board in February and March 2020; Mr. Jawaid Mirza and Mr. Mark Richards, respectively. Additionally, Mr. Bijan Khosrowshahi concluded six years of service on the Board as NED in October. 2020 marked a new Board term for CIB, with the Bank’s Ordinary General Assembly convening on 15 March 2020 and electing a new Board term for three years commencing 2020. This was followed by a number of changes to the elected Board of Directors. On 13 October, the Board of Directors appointed Mr. Jay-Michael Baslow as a non-executive, inde- pendent member. Mr. Baslow brings to the Board a wide banking experience acquired throughout the past four decades. He spent the last 16 years of his career in Risk Management at J.P. Morgan, covering a range of sectors. Prior to his 2019 retirement, he was the Head of EMEA Risk Management for the bank’s Wealth Management organization and the Chief Risk Officer of J.P. Morgan International Bank Ltd, its London-based private bank. On 23 October, Mr. Hisham Ezz Al-Arab decided to step down from his responsibilities as Chairman and Managing Director, after receiving a letter from the CBE notifying CIB’s Board that, in light of the findings of a limited review inspection, the CBE’s Board of Directors issued a resolution dated 20 October to discharge the Bank’s Chairman and Managing Director. The letter stipulated that CIB’s board is to elect a Non-Executive Chairman from among its NEDs. The Board unani- mously decided to appoint Mr. Sherif Samy, the Chairman of both the Audit and Governance and Nomination committees, to assume the responsibili- ties of Non-Executive Chairman of the Board, and has received the CBE’s approval in this regard. Several meetings were subsequently held at the CBE and attended by CIB’s Non-Executive Chairman and management, during which the key findings of the CBE inspection were relayed. The Board dedicated signifi- cant attention to the situation, and CIB’s Executive Management reviewed and carefully assessed all the inspection findings to quantify their impact on CIB. Under the Board’s supervision, CIB’s Management thoroughly conducted a corrective action plan that was presented to the CBE. This required additional time for the Bank to complete its review process before it could satisfactorily release the 30 September 2020 financial statements and associated disclosures. Additionally, as directed by the Board, the Audit Committee appointed an independent international professional services firm to conduct an in-depth review of the Bank’s controls and lending functions, in order to further enhance regu- latory compliance and strengthen controls at CIB, as part of the Bank’s governance culture and commitment to enhancing risk management. With these changes, and as of 23 October, CIB’s Board is comprised of seven directors, six of whom are independent NEDs (85%). CIB’s Board boasts an optimal mix of skills, experience, and diversity in terms of gender and nationality, with two female directors (28%) and three non-Egyptian directors (43%). CIB prides itself on having a diverse board with significant leadership and experience across a broad set of industries. During 2020, CIB’s Board of Directors met 17 times, three of which were attended physically, 13 conducted via video conferencing, and one attended physically by the directors who were present in Cairo, with directors residing abroad joining via video confer- ence in view of the prevailing preventive measures due to the COVID-19 pandemic. As such, the Board of Directors is pleased to report CIB’s FY2020 strategy and robust results, despite the year’s challenges and headwinds. CIB’s Strategy CIB’s flexibility to adapt to unforeseen changes in the market is underlined by our strong commitment to continuously create value for all our stake- holders. Over the past few years, the Bank adopted a strategy that focused on transforming CIB into a more customer-centric organization that stands out from its peers through its superior products, services, and brand equity. In doing so, we have been investing heavily in data analytics and artificial intelligence, upscaling our infrastructure, digitalizing and automating how we do business, while continuously developing the skills of our employees. The strategy was put to the test in 2020, proving once again that CIB could and will continue to be “The Bank to Trust” through a strategy anchored in the following pillars: Growing Commercial Business Activities CIB’s strategy is focused on customizing solutions to build a bespoke bank and a financial-value-creating partner for our targeted customer base. Through arti- ficial intelligence, blockchain, cloud, and data — or the ‘alphabet of the future’ better known as ABCD — CIB aims to drive all lines of business to new levels by exploiting data, digital, new core banking modules, advanced campaign management capabilities, and process re-engineering that will work hand in hand with a new distribution strategy to expand outreach. The Bank’s transformation is supported by strong and dynamic balance sheet management, which was formulated in response to a subdued borrowing appetite directly associated with COVID-19. Through a deposit-gathering strategy aimed at reshaping its funding mix, CIB was able to create a flexible balance sheet structure to secure earnings and profitability during the year. Digital Disruption and Financial Inclusion CIB will continue to develop its digital capabilities to encourage financial inclusion, improve the customer experience, ensure operational efficiency and resource allocation, and secure the Bank against risk. Part of the Bank’s digital strategy has always been rooted in alleviating pressure on branches and diverting customers to digital channels. In 2020, with the help of its Bank of the Future (BOTF) program, CIB more heavily relied on robotics and operational centralization to increase efficiency and reduce the cost to serve, through positioning its digital plat- forms as the primary channel. CIB’s ATM network continues to be the largest in Egypt among private sector banks and third in the sector. In 2020, the Bank’s ATM network grew 11% y-o-y to reach 1,121 ATMs, and handled more than 61 million transactions. The Bank also supported nationwide financial inclusion efforts by offering mobile payment interoperability over the ATM network for all mobile payment schemes. Similarly, CIB participated in the regulator’s ATM initiative by installing 180 ATMs across the country. increased reliance on digital platforms With throughout the pandemic, CIB’s online banking subscribers increased 35% y-o-y as of December 2020 to 802,000 users, with an activity rate of 67%. In 2020, the Bank improved its internet banking user 56 | Annual Report 2020 2020 Annual Report | 57 Strategic Direction // Board of Directors’ Report interface, created a digital self-onboarding process for existing CIB customers to register for online or mobile banking, made local payments instant through straight-through-processing (STP), and transformed transaction processing. Online banking channels’ share in total cost savings recorded EGP 946.5 million as of December 2020. Launched in December 2019, Zaki the Chatbot now conducts over 35,000 interactions per month on both CIB’s website and Facebook Messenger in English, Arabic, and colloquial Arabic. Zaki has offloaded the social media team by over 55%. On the mobile payments front, CIB was able to utilize its Smart Wallet as one of the prime digital channels despite the circumstances imposed by the COVID-19 pandemic. CIB became the first bank in Egypt to offer digital wallet registration through SMS for banked and unbanked customers, which had a positive impact on new enrollments and created solutions utilizing major e-commerce platforms to facilitate customer needs. In 2020, smart wallet users grew 34% y-o-y to 840,000 customers, while the number of transactions recorded a 23% y-o-y increase to 7.5 million transactions with a total value of EGP 2.8 billion, an impressive 107% y-o-y increase. The Bank continued to support the government’s efforts to automate governmental payment by part- nering with E-Finance Company, which develops and operates e-payment platforms and channels to enable government authorities to receive and collect payments through the E-Pay portal and Corporate Payment Services (CPS) platform. In 2020, CIB ranked first in the Egyptian market in terms of CPS online transactions, with a 102% y-o-y increase in its customer base to 1,700 corporate customers and a 70% y-o-y increase in the number of CPS transactions for 59,000 transactions worth EGP 15.2 billion. CIB relied on analytics and data management in several initiatives and projects throughout 2020, with one aimed at reducing branch waiting times through applying Operations Research (OR) queuing theory-based models to categorize and classify transaction types and clients whose activities could be transferred to online channels. The Intelligent Product Recommendation Engine was a machine learning-based predictive model developed to help relationship managers find the most suitable products for their clients based on the client’s history with CIB. The Cash Management Project worked to better utilize idle cash within CIB’s different cash hubs, decreasing overall Bank-wide cash levels by establishing a cash formula that predicts the amount of cash needed at each hub. The project enabled CIB to decrease associated costs related to handling, transporting, and storing unnecessary cash. Geographical Expansion To diversify our operations, balance sheet struc- ture, and sources of income, CIB began looking for expansion opportunities beyond Egypt. Considering its geographical location, historic and cultural ties, and its macroeconomic and demographic potential, Sub-Saharan Africa was tapped as a key opportunity. Importantly, regional integration efforts such as the African Continental Free Trade Agreement (ACFTA) and the Egyptian government’s direction to restore bilateral ties provide imperative political support. East Africa was identified as the most attractive region for CIB to do business. Home to some of the fastest growing economies in the world, it will provide a platform for CIB to learn and adopt the strides taken toward digital transformation and financial inclu- sion. We aim to position CIB as a trade finance hub for Egypt and East Africa, focusing on both corporate and SMEs, especially after the establishment of our representative office in Ethiopia and the acquisition of a 51% stake in a local Kenyan bank, which was renamed Mayfair CIB Bank Limited. Completed in May 2020, the transaction was concluded through a capital increase valued at USD 35.35 million. People…The Main Enabler The continuous development of CIB’s human capital is critical to the strides the Bank has taken to main- tain and improve the quality of services offered to customers, and, consequently, the value created for stakeholders. Human Resources will continue to play a strategically enabling role to evolve staff capabili- ties, establish a culture of innovation, engagement, and enablement, while building the right skills such as adaptive thinking, cross–cultural competency, computational thinking, and virtual collaboration. Moreover, the adoption of best practices for corpo- rate governance is key for CIB. The full rollout of the Enterprise Risk Management (ERM) system, which provides the organization with the necessary controls and risk-informed decision-making process, further solidifies the Bank’s standing in the eyes of our stakeholders. By the end of 2020, CIB’s total workforce stood at 7,071, with 75% of the workforce being Generation Y (1982-2000), with women accounting for 30% of staff — well above Egypt’s average ratio of 23%. In 2020, CIB hired 1,013 people, made 1,278 internal transfers, and promoted 609 promising young talents. In response to the COVID-19 pandemic, the Bank put in place a work-from-home (WFH) strategy to ensure all critical activities would be carried out smoothly. This included technology upgrades, ensuring laptops were made available, and increasing network band- width, among others. All departments were able to shift quickly to a more responsive approach, allowing CIB to navigate these unprecedented times. Additionally, HR conducted all entrance assessments, interviews, internal promotions, and internal hiring selection panels online, becoming the first bank in Egypt to have a full online selection process, which will continue into 2021. The Bank participated in five employment fairs, including two virtual sessions at universities to promote CIB’s employer value propo- sition. The Bank was able to continue implementing its talent acquisition and career mobility initiatives despite the pandemic. “Tawarny”, which allows university students to practice mock HR interviews, completed one virtual session, while “Ma7atetna 3andak”, which initiates mobile recruitment teams outside Cairo to facilitate the recruitment process for candidates at local hubs, visited two governorates in Egypt. This year, “Ma7atetna 3andak” also worked to integrate people with disabilities, conducting one session in Alexandria where eight candidates attended and four successfully hired, and another in Tanta where 24 candidates with disabilities attended, six of whom were hired. In 2020, CIB offered its specialized training and developmental programs online. International certi- fication also took place for programs for the Wealth, Plus, Private, Business Banking, Branch Managers, Payroll, Retail Banking, and SMEs segments. Further learning tracks were developed for audit, trade finance, corporate services, communications, stra- tegic planning, information security, IT, and risk. CIB also conducted several strategic programs in 2020 such as the Analyst Program, which provided 43 analysts with over 150 virtual training hours, five mock cases, 15 virtual assessments, and various coaching sessions to prepare for the job market. The SME Academy was conducted over two rounds, with 51 employees receiving more than 400 virtual training hours, 40 assessments, and over 12 role play sessions and engaging activities. Moreover, HR introduced many leadership development tracks, with one entitled ‘Leading with agility in turbulent times’ in response to the pandemic. The program was moderated by a leading professor from IMD Business School and attended by 44 leaders across various areas and departments. HR also revamped and digi- talized the content of its induction programs for CIB staff and Contact Center agents to benefit 404 new hires and 110 Contact Center employees. In line with CIB’s Africa expansion plan, the Bank designed an analyst program for a group of 21 select African delegates, with the induction taking place in Uganda and the program delivered virtually. HR also provided multiple learning and development solu- tions to employees at Mayfair CIB Bank Limited. By continuously engaging our people, we encourage innovation, accountability, retention, and business outperformance. During 2020, CIB continued to build a robust engagement strategy to enhance employee enablement, including the first Recognition Program Event, attended by more than 1,000 top performers. CIB rolled out several initiatives during 2020 to ensure that employees are treated with dignity and respect, creating an inclusive culture to support equal opportunities. CIB introduced the Employee Wellness Program to support employees’ mental health, allowing them to lower stress levels and improve productivity. The Bank also introduced the Flexible Work Arrangement (FWA) Program to empower women in the workplace by affording new mothers the flexibility to work from home full time before applying for unpaid leave. Two rounds of the She is Back initiative, which eases the transi- tion for women returning from maternity and/ or childcare leave, were conducted for a total of 95 women. Externally, the “Helmik Yehmena” program trained and empowered women in areas where they are underrepresented, beginning with South Valley University in Qena where it reached over 200 students in Upper Egypt, and 35 in Port Said. 58 | Annual Report 2020 2020 Annual Report | 59 Strategic Direction // Board of Directors’ Report CIB always recognizes and rewards performance, which underpins its ability to attract, retain, and moti- vate employees. In 2020, CIB further enhanced the variable pay program to build a correlation between each department’s performance and how it contrib- utes to the Bank’s overall performance in achieving both financial and non-financial objectives. The remu- neration is assessed yearly taking into consideration market fluctuations and external developments. 2020 Financial Position The past several years allowed CIB to enter 2020 in good form, as despite the headwinds associated with the pandemic, CIB reported FY2020, with consoli- dated net income down 13% y-o-y to EGP 10.2 billion. Standalone net income reached EGP 10.4 billion, down 13% from 2019. Standalone revenues grew 12% over the previous year to EGP 25.8 billion. Net interest income hit EGP 25.1 billion in FY2020, an increase of 16% y-o-y. The Bank was able to maintain its operational effi- ciency in 2020 despite the extra spending related to the pandemic and the WFH arrangements, with the cost-to-income ratio standing at 20.7% compared to 21.6% in 2019. Return on average equity (ROAE) recorded 19.2% on a consolidated basis (post profit appropriation) compared to 29.5% in 2019. Consolidated return on average assets (ROAA) recorded 2.53% (post profit appropriation) for 2020, down from 3.26% in 2019. As of year-end 2020, CIB booked a net interest margin (NIM) of 6.75%, up from 6.48% a year earlier. CIB’s gross loan portfolio stood at EGP 137 billion at year-end, growing 4% y-o-y from EGP 132 billion by 2019 year-end. This increase met the Bank’s stra- tegic objectives in maintaining asset quality and enhancing profitability. CIB’s market share of total loans amounted to 5.63% in September 2020. The Bank pursued deposit growth in 2020, adding EGP 37 billion to its base, which grew to a total of EGP 341 billion over the year, an increase of 12% from 2019. CIB’s share of the deposits market reached 6.56% in September 2020. Loan-loss provision expense for 2020 exceptionally amounted to EGP 5.0 billion, bringing the loan-loss provision balance to an unprecedented EGP 16.4 billion. This was not associated with any asset quality significant deterioration, as evident by a solid NPLs of the gross loan portfolio of 4.26%, up from 3.99% by 2019 year-end, cushioned by a solid 281% coverage ratio, but rather a result of the Bank’s conservative risk management strategy and management’s deci- sion to cautiously frontload adequate provisions to mitigate any and all potential risks that might arise from such a fluid year. The Bank remains comfortably covered in terms of capital adequacy, with year-end CAR recording 31.4% (post profit appropriation) — well above the minimum regulatory requirement. This year’s financial results highlight CIB’s solid strategic direction, the Board’s invaluable oversight, management’s strong leadership capabilities, and concrete execution across the Bank’s channels, including brick and mortar operations, digital plat- forms, and the product and support functions. Appropriation of Income for FY2020 On 11 January 2021, the CBE instructed banks under its supervision not to pay out cash distributions from 2020 profits and/or retained profits that are distrib- utable to shareholders. Banks are only allowed to disburse employee profit share and Board of Directors remuneration. The decision comes to support banks’ capital and aims at protecting liquidity from any nega- tive effect COVID-19 might instill on the economy. 2020 Operational Highlights Institutional Banking The headwinds that resulted from the global COVID-19 pandemic were felt bank-wide. However, with the technological infrastructure in place and the dedica- tion of its teams, the Institutional Banking (IB) Group contributed 72% to CIB’s loan growth during the year. On the positive side, businesses were pushed toward decentralization, sparking the acceleration of the digital transformation and leading clients to further utilize online transactions. Despite the obstacles stemming from the pandemic, the Bank’s online platform, which offers a full array of products and services, was able to support and accommodate all clients’ banking business needs with no disruption. Despite the circumstances, the Corporate and GCR Group’s year-end loan and investment portfolio reached EGP 97.5 billion through executing several new key transactions in the real estate, power, education sectors, as well as closing numerous key deals in the petroleum, pharmaceutical, and automotive industries, among others. LCY loans remained the main facilities required by clients throughout the year, up 10% y-o-y, mostly financing Working Capital needs. With global markets severely hit by COVID-19 in the first six months of the year, which resulted in significant portfolio outflows from Egypt and a fallout in Egypt’s main sources of foreign currency, the Treasury Group was able to take favorable positions that resulted in noteworthy profits. Moreover, the Group ensured suffi- cient liquidity was available, FX volatility was properly managed, and customer needs were fulfilled. Despite the challenges for direct loans under Non-Banking Financial Institutions (NBFI), the divi- sion maintained strong asset quality of financed loan portfolios related to all financed clients, with zero defaults and minimal NPLs under various financed portfolios directed to the leasing, car finance, and microfinance sectors. As of 3Q2020, a sound improve- ment was reflected in the utilization rates of existing customers due to relative market stability. In light of the Bank’s strategy to promote financial inclu- sion, NBFI supported the Digital Channels team in introducing CIB Smart Wallet to microfinance insti- tutions for the automation of micro lending. NFBI also helped the team introduce CIB Business Online and ACH products to NBFI-affiliated companies. Retail Banking CIB maintained its leadership in the consumer market, adding more consumer loans and liabilities despite the circumstances imposed by the pandemic. New to Bank (NTB) figures continued to grow, ending the year with 269,000 NTB customers. Consumer Banking grew its loan portfolio 33% y-o-y and deposit portfolio 9% y-o-y. To enhance profitability and the funding mix, CIB continued to gather current accounts and savings accounts (CASA), which accounted for 53.4% of the total funding base. CIB branches continued to outperform in 2020 under tremendous pressure from pandemic-related challenges and the highly priced liability offering from public-sector banks. Cards’ revenue was impacted by a 42% y-o-y drop, on the back of the CBE’s six-month debt moratorium initiative due to the pandemic. However, CIB was able to maintain its cards’ acquisition rate, with 138,000 credit cards acquired throughout the year, bringing the total card portfolio to 615,400 primary cards and 120,600 supplementary cards. Business Banking has built a well-established cash and trade management business with average liability book growth rates of 32% and 99%, respectively, for the last three years. In 2020, operating profits for the division came in at EGP 1.6 billion, deposits hit EGP 29.5 billion, growing 26% y-o-y, while trade recorded EGP 26.7 billion. In the payment solution space, the division executed EGP 35 billion in transactions. The Business Banking client base grew to more than 64,000 companies during the year, up 12 % y-o-y. In line with the CIB’s direction and commitment to Egypt’s strategy to grow and expand SME lending, Business Banking launched new lending programs targeting existing and new customers with facilitated documentation, fast approval turnaround time, and fixed monthly installments. This is in addition to a new initiative that supports SMEs in COVID-19 circumstances by offering unsecured unsupported overdraft lines to existing borrowers to pay salaries. CIB maintained its dominant position in Egypt’s payment acceptance sector in 2020, attaining a market-leading share of 28% for POS transactions and a 19% market share for e-commerce transactions. Following the country’s push for financial inclusion, the Bank managed to activate all POS and e-commerce platforms to accept the government-backed Meeza card and launched QR acceptance to reach untapped segments — a key enabler of payment business growth, especially with very small merchants. This year Business Banking witnessed an expansion in women’s activities by sponsoring local and global events such as She Can and She’s Next, in addition to the new Women in Business (WIB) lending program. Operations and Information Technology With a special focus on the customer journey within CIB, the operations and IT functions strive to incorporate technological advancements and artificial intelligence across the Bank’s functions to ensure CIB meets its growth targets. To improve the customer experience and offload banking operations, the Bank implemented several enhancements to Straight Through Processing (STP) for domestic transfers, which increased four- fold daily. Additional services were added to internet 60 | Annual Report 2020 2020 Annual Report | 61 Strategic Direction // Board of Directors’ Report banking to offload branches and expand digitalization, such as credit card requests, loan requests, and mobile wallet subscription, among others. CIB launched an extensive process re-engineering program covering various departments and units. Moreover, CIB was able to conclude stage two of the T24 program in April 2020, with the final stage currently in progress. Moreover, the Bank conducted different activities during the year to maintain CIB’s competitiveness in the market, offload front liners, and ensure a safe banking environment for customers. In line with this, the Contact Center inte- grated a chatbot with WhatsApp Business to cater to customers’ general inquiries and inform them of any CBE policy changes. The IT department was able to deliver on most of its projects according to schedule, and with almost 90% of the IT team working from home to maintain social distancing and reduce staff footprint within the head offices. CIB became the first organization in North and West Africa to receive the Management and Operation Stamp and Certification from Uptime Institute, a leading global data center certification group. Security and Resilience Management CIB has always taken its business continuity and the protection of its customers’ information as a top priority. In a step that confirms that the Bank has put in place best practices for information security ensuring data integrity, confidentiality, availability and customer assets safety, CIB obtained ISO 27001 certi- fication for Information Security Management System covering alternative Channels and Digital Services, Contact Center, and Data Center. The Bank has also been able to successfully maintain its Payment Card Industry – Data Security Standard (PCI-DSS) certifica- tion and renew its Business Continuity Management ISO 22301 certification for the third year, upgrading its certification to the 2019 version of the standards and making it one of the first financial institutions in Egypt to comply with the new version of the standards. CIB kicked off a comprehensive Data Classification and Protection Program to implement a proper Data Protection and Information Governance framework as part of the Bank’s extensive efforts to prevent confidentiality breaches and data leakage. Moreover, CIB successfully finalized one of its key strategic security programs, the Identity Access Management and Privileged Access Management. Reaching out to Shareholders and Investors CIB works diligently to increase value for its stake- holders. The Bank’s active Investor Relations division keeps shareholders and investors abreast of devel- opments impacting the Bank’s performance. The team and senior management dedicate significant time to one-on-one meetings, road shows, investor conferences and conference calls, sparing no effort in providing the investment community with trans- parent disclosures while simultaneously ensuring analysts have the information needed to maintain balanced coverage of the Bank’s shares. including regular updates and Disclosures, releases, were periodically made available on CIB’s investor relations website, as well as the EGX, LSE, and OTCQX portals in a timely manner that ensures fair access to information for investors from around the world, allowing them to make informed investment decisions. Thanks to the team’s continuous efforts to further enhance the program, it was named Leading IR Program in Egypt in 2020 in the largest investor relations event in the MENA region organized by the Middle East Investor Relations Association (MEIRA), in partnership with Extel. This is the seventh year running in which CIB has received at least one award from MEIRA. After the pandemic hit Egypt, the IR team was able to swiftly communicate with investors and analysts online, substituting in-person meetings with confer- ence calls, which has proven efficient and expanded the reach of the team by overcoming the logistical issues associated with physical meetings. During 2020, the team, took part in 10 virtual investor conferences and one webinar, alongside two physical conferences and a total of 34 in-person meetings before the onset of the pandemic. In total, the team conducted more than 240 one-on-one and group meetings — both virtual and in-person — throughout the year and spoke with over 620 local and interna- tional investment funds and research analysts. The IR team’s agenda was particularly busy in March and April 2020, explaining to the investment commu- nity the COVID-19 situation in Egypt, the measures CIB was taking in response to the pandemic, and how this will impact the Bank. In October, November, and December, the team addressed the investment community with the Board changes, responded to their questions, and kept the market abreast of developments related to the findings of the CBE inspection as it continued to unfold, as well as the delay in releasing 3Q2020 financial results. The Bank is widely covered by leading research houses both locally and internationally. In 2020, 14 institutions regularly issued research reports on CIB. Stock Performance COMI started the year with an open price of EGP 83.02 and ended it at EGP 59.19 with 29% y-o-y negative change. During 2020, CIB’s price reached a peak of EGP 86.01 and a valley of EGP 56.06, and the average VWAP during the year was EGP 68.06, with an average volume of more than 2.1 million shares and an average market capitalization of EGP 100 billion. Awards and Recognition in 2020 During 2020, CIB was named World’s Best Bank in Emerging Markets award by Global Finance for the third time in only four years, having received the same title from Euromoney in 2017 and Global Finance in 2018. The recognition comes as the Bank pushed through digital banking solutions and financial inclusion efforts despite the challenges of COVID-19. Moreover, CIB ranked 28th on Forbes Middle East’s Top 100 Listed Companies in the Arab World, ranking the highest of the four Egyptian companies on the list. It was also listed among the Top 200 Banks by Jeune Afrique, Top Banks by African Business, and Top 10 Safest Banks in Africa by Global Finance. CIB was the only Egyptian institution included among the 325 companies on Bloomberg’s Gender Equality Index (GEI). CIB received several international awards demon- strating its excellence across different business lines, including: Global Finance • Best Foreign Exchange Provider in Egypt • Best Treasury and Cash Management Providers in Egypt • Best Emerging Markets Bank • Best Private Bank in Egypt • Best Bank in Egypt • World’s Best Consumer Digital Banks in the Middle East 2020 - Best Consumer Digital Bank - Best Integrated Consumer Banking Site - Best Online Product Offerings - Best Website Design - Best Mobile Banking App - Best Information Security and Fraud Management - Most Innovative Digital Bank - Best Open Banking APIs • World’s Best Corporate/Institutional Digital Banks in the Middle East 2020 - Best Online Investment Management Services - Best Online Treasury Services - Best Online Portal - Best Integrated Corporate Banking Site - Best Information Security and Fraud Management - Best Mobile Banking Adaptive Site - Most Innovative Digital Bank - Best Open Banking APIs Euromoney • Best Bank Asiamoney • Best Domestic Bank in Egypt • Best Digital Bank in Egypt African Banker • Best Regional Bank in North Africa EMEA Finance • Pan-Africa Sustainability Award CIB…A Model for Responsible Banking The Bank continues to advocate for responsible banking by supporting financial inclusion and literacy, women and youth empowerment and equality, in addition to the adoption of best practices in sustain- ability, CSR, and governance. CIB will continue to work toward becoming Egypt’s number one green bank and venture into initiatives such as improving employee wellbeing, community investments, promoting acces- sible banking, and banking the unbanked. This year, CIB celebrated a year of achievements on the sustainability front since becoming a founding signatory of the United Nations Environment Program – Finance Initiative (UNEP-FI) Principles for Responsible Banking. Since becoming one of the first institutions in Egypt to introduce sustainability reporting in 2015, CIB has gradually enhanced its 62 | Annual Report 2020 2020 Annual Report | 63 Strategic Direction // Board of Directors’ Report commitment to sustainability across its business; integrating environmental, social, and governance (ESG) dimensions into its policies, procedure, opera- tions, and culture. In 2020, the Bank also issued its fifth sustainability report. Sustainable Finance CIB has established a new sustainability governance framework in 2020 and launched a Sustainable Finance division to center sustainability as a core business strategy and provide a solid platform to integrate sustainability as well as environmental, social, and governance (ESG) principles across its functions. CIB thus became the first Egyptian bank to launch this kind of a division and the first institution in Egypt to establish the role of a Chief Sustainability Officer. In recognition of its efforts, CIB was elected to represent the MENA region on the UNEP-FI Banking Board, positioning it as a champion in promoting and driving the implementation of the Principles for Responsible Banking (PRB) across the region. High on the Bank’s agenda: • Climate Risk: - Green Bond: CIB took solid steps in its Green Bond issuance process during 2020, which was slated to be issued prior to year-end. The process has taken longer than anticipated due to pandemic-related disruptions. The Bond’s proceeds will help the Bank align with the UN Sustainable Development Goals (SDGs) that fall within the materiality of CIB including SDG 6 (Clean Water and Sanitation), SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation, and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 13 (Climate Action). - CIB is the first bank in Egypt to join the Taskforce for Climate Related Disclosures (TCFD), an organization established in December 2015 by the Financial Stability Board (FSB) to develop recommendations for volun- tary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient. The purpose is to provide decision- useful information to investors, lenders, and other stakeholders to encourage sustainable investments and build an economy that is resil- ient in the face of climate related uncertainties. • Measuring Business Impact: In 2020, CIB was the first bank in the MENA region to measure business and environmental impact through assessing the life cycle of credit and debit cards. life cycle analysis (LCA) The is performed according to ISO 14040 using a powerful modeling and simulation software that allows for detailed and reliable insights for calculation and analysis. CIB initiated the Greening SMEs project in February 2020 to conduct an Environmental and Social Impact Assessment as a partner with borrowing SMEs. • Resource Efficiency: CIB works to measure, reduce, and improve its ecological footprint. Despite the increase in headcount and number of branches, the Bank successfully decreased its paper consumption in 2020 by 8% in comparison to 2019, beating the internal target of 1%. • Gender Empowerment: CIB is one of the first two companies to acquire the Egyptian Gender Equity Seal in the private sector, obtained through a partnership with the National Council for Women and the World Bank. CIB is also Co-Chairing the World Economic Forum (WEF) Closing Gender Gap Accelerator, a national public-private collaboration model that enables governments and businesses to take decisive action toward closing economic gender gaps. • Community Development: CIB partnered with the United Nations Development Program (UNDP), the Egyptian Italian Environmental Project (EIEP), and the Ministry of Environment to inaugurate the first open Natural and Cultural House in Egypt at Zewara Camp, at Wadi El Rayan Protectorate in Fayoum governorate. • Sustainability Indices: CIB was included in the new Low Carbon Select Index in the Middle East and North Africa (MENA), recently launched by the Arab Federation of Exchanges (AFE) and the data provider Refinitiv. CIB Ranks first on the EGX’s Sustainability Index for six consecutive years. The Bank was included in the 2019 and 2020 Bloomberg Gender Equality Index and is a constituent of the Financial Times Stock Exchange (FTSE) FTSE4Good Sustainability Index. Social Development CIB strives to create a positive impact on the local community and has undertaken several initiatives to support underserved segments. The Bank’s commit- ment to social development is performed through three channels: The Corporate Social Responsibility (CSR) Program, the CIB Foundation, and dedication to supporting squash and Egyptian squash champions. Corporate Social Responsibility During these unprecedented times, CIB was leading a key CSR role across Egypt and expanding its commit- ment to the community in general and health in specific. CIB donated USD 2.5 million to support the national project of buying 100 RT-PCR detection kits to enhance testing capacity across Egypt. In a project led by the Federation of Egyptian Banks in coordination with the CBE, CIB donated EGP 80 million to support house- holds and businesses affected by quarantine measures. CIB also participated in the national #GoodChallenge campaign managed by the NGO the Egyptian Food Bank, donating EGP 1.6 million in support of 10,000 families whose incomes were affected by these excep- tional circumstances. CIB also supported many other smaller local projects/initiatives in the healthcare sector, such as supporting the El Nidaa Foundation to build a local face mask production factory in Upper Egypt. CIB also donated USD 250,000 to the African Union COVID-19 Response Fund and USD 100,000 to the Kenya COVID-19 Response Fund. Social Activities 2020 witnessed a lighter schedule of external events and sponsorships due to the outbreak, but the Bank strived to maintain some of the activities it has long been part of. • KidZania – CIB and KidZania’s partnership began in 2013, and since then, the Bank has organized several trips each year to KidZania for underprivileged and special needs children, as well as children with health conditions. • Autism International Day/ADVANCE – The Bank continued its sponsorship of the Egyptian Advance Society for Persons with Autism and Other Disabilities (ADVANCE). A number of activities took place in April, dubbed Autism Awareness Month, including the virtual Annual Autism Conference and the virtual Art Exhibition for Children and Youth with Autism Spectrum Disorder. • Beena – For five consecutive years, the Bank was the main partner and financial sponsor of Beena, a protocol signed between CIB and the Ministry of Social Solidarity to encourage active youth participation and monitor social care services. Beena attracted thousands of youths to volunteer with orphans, senior citizens, and individuals with special needs. CIB Foundation Established in 2010 as a non-profit organization under the Ministry of Social Solidarity Decree No. 588, the CIB Foundation is dedicated to improving health- care and nutrition services extended to children of underprivileged families with limited access to quality healthcare. The CIB Foundation’s efforts include not only donations, but also the monitoring of projects’ impact. In addition to the direct donations made to its fundraising account, the Bank supports the CIB Foundation with 1.5% of its annual net profit. With a vision to ease the burden on families in need, the CIB Foundation works with private, public, and non-governmental healthcare providers that offer free-of-charge services to ensure the widest commu- nity reach and to maximize the value of its work through achieving positive and sustainable results. Over the past years, the CIB Foundation has expanded its activities and initiatives to include different geographical areas throughout Egypt. During 2020, CIB Foundation allocated a total budget of EGP 177 million to support the Egyptian healthcare providers to enhance the level of service provided to children. Total expenditure in 2020 reached EGP 182.72 million for a total of 23 projects serving hundreds of thousands of Egyptian children in different governorates across Egypt. Supporting Squash Supporting sports and athletes has long been central to CIB’s social development goal. The Bank led the fray when it came to recognizing the potential of Egypt’s squash players, with six Egyptians in the world’s top 10 men players and five in the top 10 women as of December 2020. Supporting these talents is part and parcel of the Bank’s desire to generate value for the Egyptian athletic community, with 2020 seeing the bank broaden its support for the sport and capitalize on the traction its players are seeing around the world. Squash Tournament Sponsorships In 2020, the Bank held the CIB Egyptian Squash Open 2020 Women’s and Men’s Platinum for the second year running, a competition that brought together the world’s best 96 men and women squash players from 19 different countries with a total prize money of USD 270,000 each for men and women, representing the largest sum of prizes for squash tournaments this season since the emergence of the COVID-19 outbreak. Moreover, the Bank held the CIB PSA World Tour Finals for the second year in a row. The tournament saw 16 of the world’s top squash players competing for a combined USD 370,000 prize at The Park, Mall of Arabia. 64 | Annual Report 2020 2020 Annual Report | 65 of service, while supporting their investment and financial growth plans. We come into 2021 a stronger institution not only due to our track record in the market but the ability to learn from challenges, be they economic, political, or otherwise — and 2020 was no different. We have come to understand that no matter the operating environment, CIB’s strategic pillars allow us to consistently learn from the hurdles we face, and we remain committed to maximizing returns for shareholders through a business strategy centered around asset quality and profitability. Underlining the Bank’s commitment to enhancing risk management and its governance culture, CIB has appointed an independent international profes- sional services firm to conduct an in-depth review of the Bank’s controls and lending functions in the year to come. The scope of work includes addressing specific and related areas from the CBE inspection with an eye to further enhance regulatory compli- ance and strengthen controls, corporate governance, and risk management at CIB. Any additional recom- mendations of the said review will be considered in the Bank’s future actions. In addition, significant improvements in internal policies, procedures, and frameworks we have implemented over the years, as well as our previously communicated digital transformation strategy, will continue to help CIB’s management lead with fortitude in 2021. Strategic Direction // Board of Directors’ Report Sponsoring the Egyptian Squash Federation CIB maintained its sponsorship of the Egyptian Squash Federation for the ninth consecutive year and sponsored the National Men’s, Women’s, and Junior Squash Teams. Currently, Egyptian players hold the Men’s World Team Championship, the Women’s World Team Championships, and the Juniors’ World Team Championship titles for boys and girls. Additionally, Egyptian players hold all of these individual titles. Sponsoring Egyptian Athletes In support of young players leading the world’s squash rankings, CIB tailored special sponsorships to help eight talented players maintain their rank- ings and continue representing the country, as of December 2020: • Ali Farag – #1 on the Men’s PSA World Squash List • Tarek Momen – #3 on the Men’s PSA World Squash List (current world champion) • Nour El Tayeb – #4 on the Women’s PSA World Squash List (Retired in October 2020) • Karim Abdel Gawad – #5 on the Men’s PSA World Squash List • Hania El-Hammamy – #5 on the Women’s PSA World Squash List • Marwan Elshorbagy – #6 on the Men’s PSA World Squash List • Salma Hany – #10 on the Women’s PSA World Squash List • Mohamed Abouelghar – #11 on the Men’s PSA World Squash List Partnership with Wadi Degla Clubs’ Darwish Squash Academy CIB continued its partnership with Wadi Degla Clubs to support young Egyptian squash athletes by devel- oping their skills and enhancing their international rankings. The partnership is part of the Bank’s strategy to support up-and-coming talents from the ground up and builds on our pioneering role in this area. The athletes representing Wadi Degla and sponsored by CIB are Nouran Gohar (#2 on the Women’s PSA World Squash List), Ali Farag, and Karim Abdel Gawad. Business and Operations in 2021 With the rollout of a COVID-19 vaccine, we hold opti- mism for 2021 as the global economy improves on the back of stoked economic activity and improved sentiment. As we embarked on setting CIB’s priori- ties for 2021, our direction and goals remain clear: continue to provide valuable opportunities for share- holders by providing clients with the highest quality 2020 Performance Measures Results Financial • Maximize shareholder equity and deliver above-peer-average total shareholder return • Grow earnings per share (EPS) • Deliver above-peer-average return on risk- weighted assets • Focus on capital to cushion the Bank against any unforeseen external shocks Business Operations • Grow revenues faster than expenses • Identify market gaps and attain first-mover advantage by laying the groundwork ahead of peers to allow the Bank to benefit from rising opportunities Customer • Improve customer experience • Invest in core businesses to enhance customer experience Employee • Enhance employee experience by: - Listening to employees - Providing a healthy, safe, and flexible work environment - Providing competitive pay, benefits, and performance-based compensation - Investing in training and development • Consolidated ROAE of 19.5% (after profit appropriation) • Consolidated EPS decreased by 12% • Total tier capital hit 31.40% of risk-weighted assets • Standalone cost-to-income ratio of 20.5% • Institutional banking profit before tax declined 16% y-o-y to EGP 1.8 billion, and loan portfolio declined to EGP 98.8 billion, down just below 5 % y-o-y • Retail banking profit before tax decreased 26% y-o-y to EGP 1.3 billion and deposits grew to EGP 227.8 billion, an 11% y-o-y increase • Much effort was exerted to improve cybersecurity, with a clear strategy and comprehensive plan to improve security capabilities and continuously provide a safe banking environment for customers • CIB obtained ISO 27001 certification for Information Security Management System covering alternative Channels and Digital Services, the Contact Center, and its Data Center. The Bank has also been able to successfully maintain its Payment Card Industry – Data Security Standard (PCI-DSS) certification • CIB renewed its Business Continuity Management ISO 22301 certi- fication for the third year, upgrading its certification to the 2019 version of the standards and making it one of the first financial institutions in Egypt to comply with the new version • CIB had an average of 6,988 employees in 2020 with an average annual income of EGP 264,000 per employee • CIB implements an Employee Stock Ownership Plan (ESOP) as part of its compensation strategy, aimed at attracting, motivating, retaining, and rewarding outstanding employees, managers, and executive board members. ESOP allows designated employees to own CIB stocks at face value via promise-to-sell agreements. CIB allocates 1% of its issued and paid-in capital to ESOP. During 2020, CIB allocated a total of 8,599,210 stocks to 4,687 employees. Since the inception of the plan in 2006 and its renewal in 2015 and until 2020, the Bank has allo- cated 99,632,173 shares to its employees (taking into consideration capital increases throughout the stated period) 66 | Annual Report 2020 2020 Annual Report | 67 03 Our Businesses EGP/BN 97.5 loan and investment portfolio 68 | Annual Report 2020 CIB’s digital BUSINESS PLAN is driven by a vision to make CIB part of our customers’ daily lives. 03030303Our Businesses Institutional Banking Corporate Banking and Global Customer Relations (GCR) Groups In light of the profound negative impact of the COVID-19 pandemic on the global economy, the Corporate Banking and Global Customer Relations (GCR) Groups have operated under exceptionally challenging circumstances in 2020. Owing to its talented and agile teams, the strong balance sheet, and hard-earned, widely acknowledged market expertise, CIB was able to steer through the crisis. Supporting clients in times of distress has always been a trademark of CIB. The Bank undertook extraordinary measures caring for its employees and supporting customers, especially in the most impacted sectors by the pandemic, such as tourism, transportation, textiles, and manufacturing, among others. This is in addition to SMEs that do not have the sufficient capital to endure the abrupt disruption of cash flows. Despite these challenging conditions, CIB continued to prioritize the health and safety of its employees, out of the belief that they are the Bank’s main asset. As such, the Bank promptly mobilized flexible work arrangement policies while ensuring that productivity and performance are not undermined. The pandemic also served as a catalyst for change and a reminder of the inevitable necessity of keeping the global financial system fully functioning, through plans for IT resilience and business continuity measures. In this respect, the Bank’s accumulated investments in infrastructure over the years helped it move swiftly in the face of the crisis. The events of 2020 also pushed businesses towards decentralization, leading clients to utilize online transactions. Despite the obstacles stemming from the pandemic, the Bank’s online platform, which offers a full array of products and services, was able to accommodate all clients’ banking business needs with no disruption. This digital onboarding process was supported by the dynamic collaboration between the highly skilled Business and Global Transaction Banking teams, which allowed the Bank to create bespoke digital solutions capitalizing on the teams’ extensive busi- ness-specific and technical expertise. Furthermore, the Bank is fully committed to its digital transforma- tion plan to automate the entire credit approval cycle and provide off-the-shelf financing solutions to elimi- nate redundancies and provide seamless customer experience. The Bank is also working on the use of robotics and machine learning to automate corporate customers’ daily operations and improve straight through processing to avail more time and resources for employees to better serve our corporate clients. Despite the adverse conditions during the year, the Corporate and GCR Groups did not lose sight of the importance of continuously innovating their product offerings and re-engineering their processes, in line with market best practices to facilitate business, all while maintaining credit discipline. As such, the Groups are continuing to promote financial inclu- sion to support medium-sized companies through offering customized financial solutions. Accordingly, the Groups revisited the supply chain finance scheme, navigating towards and incentivizing the use of the designated digital platform to allow for more flexibility under the program. Moreover, the Groups are embedding sustainability into many of the daily business practices, from assessing risks to designing products and advising clients. The Groups have expanded the existing client network to tap into further market opportunities, by financing mega-projects in active sectors such as petroleum, power generation, real estate, food and beverages, pharmaceuticals, oil and commodities, fertilizers, and ports. EGP/BN 34.7 in syndicated short-, medium-, and long-term loans. The Groups’ expertise helped support the Bank’s clientele while providing guidance on the ever- changing business environment and regulatory frameworks. In line with recent market develop- ments, the Groups are well-equipped to support CIB’s clients in expanding their respective businesses, as well as effectively contributing to the national economic growth strategy. 2020 Highlights Egypt’s growth trajectory, unleashed by macroeco- nomic and political stability, undoubtedly decelerated due to the economic shock caused by the COVID-19 crisis, which created an unstable environment for banks. Factors contributing to the economic slow- down included a sharp contraction in vital sectors such as tourism, as well as a reduction in FDIs, drop in flow of remittances, slowdown in consumer spending, decline in net exports, and a growing debt burden. These factors combined weighed down on the local currency. Moreover, a generally slower global economic growth and threats of a second wave lockdown, accompanied by worsening conditions in key trade partners, could further impact growth. On the other hand, the Egyptian government imple- mented a steady reform plan to revive the economy, such as a lower interest rate environment, in a bid to support local economic activity. This is in addition to efforts to promote financial inclusion, implying a stronger monetary base, consolidation, and improved regulatory oversight in the banking sector, leading to stronger asset bases and declining levels of non-performing loans. Start-ups in the fintech sector are also helping broaden the reach of formal banking services in what is still a largely cash-driven society. Furthermore, the CBE undertook highly effective and swift measures to deal with the pandemic, such as extending deal maturities for six months to alle- viate companies’ cash flows, increasing ATM limits and waiving withdrawal fees, launching discounted pricing initiatives in earmarked sectors, and pushing banks to expedite digital and contactless solutions. The Groups’ loan and investment portfolio recorded EGP 97.5 billion as of December 2020. The Groups closed numerous key deals throughout the period, including, but not limited to: • Funding the development of residential, medical, commercial, and educational real estate projects and the securitization deal settling the New Urban Communities Authority (NUCA)’s bridge facility. • Financing raw material imports for pharmaceu- tical products related to the COVID-19 pandemic. • Extending short-term working capital finance to major automotive assemblers and other major players in various key industries. • Participating in a syndicated deal to finance the upgrade of four quays in Alexandria Port. • Funding a major acquisition in the food and beverage sector. • Financing imports for oil and commodity market leaders. • Supporting the IT sector in a securitization deal and financing imports for smart tablets under the Ministry of Education’s National Reform Project. • Extending contingent finance related to the new Monorail project which connects the New Capital with the 6th of October City. 2021 Forward-Looking Strategy Amid the unprecedented market conditions in the global financial sector, and increasing competi- tion from commercial banks and fintechs alike, the Groups’ strategies will be based on diversified pillars. We will build on heavy investment in digital transformation, data analytics, machine learning, and the use of robotics, while focusing on our basic 70 | Annual Report 2020 2020 Annual Report | 71 Our Businesses // Institutional Banking We commit to operational excellence by adopting industry best practices, which is supported by our unique value proposition. commercial activities through grasping strategic opportunities that will drive continuous value for clients and CIB alike. This is in addition to other opportunities, such as financing mega projects in the petrochemicals, power generation, pharmaceuticals, food and beverage, real estate, construction, health- care, education, and ports sectors, among others. Simultaneously, the needed groundwork, through digitization and streamlining of all credit approval cycles, as well as automation of customers’ daily operations and revisiting the processes, will pave the way to ensure customers’ financial needs are met in the smoothest and simplest manner. The year will see an increased focus on financial inclu- sion, and the growth potential of the medium size segment and women’s financing and will continue to tap on potential business opportunities in various governorates. The Groups will also continue to build strategic relationships with key governmental enti- ties. Moreover, a special focus will be given to supply chain financing, sustainability financing, and auto- mated cash-management solutions. Debt Capital Markets (DCM) CIB’s Debt Capital Markets Group (DCM) has an unmatched track record and experience in financial advisory, structuring, and arranging large-ticket syndi- cated loans, project finance, securitization, and bonds. DCM also has a dedicated agency and security agency desk with more than 36 accounts being managed. 2020 Highlights Project Finance and Syndicated Loans: DCM success- fully closed syndicated short-, medium-, and long-term loans equivalent to EGP 34.7 billion as of 31 December 2020, out of which CIB’s share amounted to EGP 3.1 billion for public and private sector companies across several sectors including oil and gas, ports, real estate, as well as mining and packaging. Moreover, DCM focused on refinancing, restructuring, and re-engineering balance sheets for private sector borrowers with deals closed as of 31 December 2020 worth EGP 11.1 billion, out of which CIB’s share amounted to EGP 2.5 billion. Securitizations: DCM continued to play a pivotal role in advising and arranging securitization issu- ances in cooperation with several partner banks and closed securitization deals as of 31 December 2020 worth EGP 11.7 billion out of which CIB’s share amounted to EGP 2.97 billion, cementing CIB’s posi- tion as one of the top Egyptian banks in structuring securitizations in the local market. 2021 Forward-Looking Strategy DCM will continue screening the market and aligning with banks to capture new business opportunities with a special focus on the govern- ment mega infrastructure projects such as railways, dry ports, new economic zones, etc. DCM will also capture opportunities in refinancing, restructuring, and engineering balance sheets for private and public sector borrowers facing struggles because of the COVID-19 pandemic. We will also leverage on our track record in struc- turing debt to capture new roles such as financial advisor, global coordinator, or structuring bank to enhance fee income. DCM has solid deals in the pipeline for FY2021 for new syndicated loans and project finance with deal sizes amounting to EGP 40 billion, as well as restructuring and refinancing deal sizes amounting to EGP 17.2 billion. In term of securitizations and bonds, DCM’s strategy is to attract new potential clients and work with the regulator to adopt more innovative structures that will pave the way for new industries to enter the securitization market. With the current market dynamics and fierce competition, DCM seeks to strengthen its alliances in the market either with established clients in sectors such as real estate, auto finance, leasing, and microfinance or with the large banks who would jointly with CIB underwrite large-ticket transactions. DCM has deals valued at EGP 7.9 billion in the pipeline for FY2021. Direct Investment Group (DIG) CIB’s investment arm, the Direct Investment Group (DIG), is responsible for the Bank’s direct equity acquisitions, divestitures, and equity portfolio management across local and regional markets. DIG maximizes CIB’s return on investments by utilizing the Bank’s designated funds to invest in sectors with high potential for growth. Our primary objectives revolve around generating attractive, risk-adjusted financial returns for our institution through dividend income and capital appreciation, as well as enabling CIB to offer a broad spectrum of funding alternatives to support client growth. We commit to operational excellence by adopting industry best practices, which is supported by our unique value proposition of a full-fledged finan- cial partner in addition to our team of specialized investment experts. 2020 Highlights The disruption caused by the COVID-19 pandemic has resulted in a significant downward trend for global equity markets. The crisis took its toll on the projected performance of the investments as well as underlying strategies. During 2020, DIG’s ultimate objective was to preserve the Bank’s rights in its portfolio and provide continuous support to our partners. Capitalizing on Egypt’s economic direction and focus on key sectors, DIG has cautiously and opportunistically targeted new acquisitions with a focus on sectors that are expected to benefit from the current situation such as the education, healthcare, pharmaceu- tical, and food and beverages industries. DIG has embarked on a set of initiatives, entailing new equity products and tailored structures, to expand its investment portfolio and broaden its funding alter- natives offered to support clients’ growth. 2021 Forward-Looking Strategy In 2021, DIG’s strategy is to achieve targeted growth considering the Bank’s direction, with the aim to revive its pre-COVID-19 expansionary strategy. DIG will continue basing all its investment decisions (whether buy, hold, or exit) on pure fundamental analysis and following a systematic and rational approach in gath- ering, sensitizing, and analyzing information. From a marketing perspective, DIG will continue to expand and diversify its portfolio by executing select quality investments that provide CIB with the opportunity to create possible synergies and stra- tegic alliances, hence generating attractive financial returns for the bank. From a portfolio management perspective, DIG will ensure the Bank is represented as a full-fledged financial service provider through the active participation in companies’ boards of directors as well as maximizing direct and indirect investment returns. With responsible banking becoming the mainstream banking model around the world, CIB has taken steps to shift to sustainable practices that assess, measure, and mitigate economic, social, and environmental impact. Interest in investment products with features related to Environmental, Social, and Governance (ESG) matters has grown exponentially during the past several years and adopting this growth has been fundamental in the investment community. In this respect, and considering the sustainability efforts undertaken by CIB in the last period, DIG is working on introducing the Green Investment initia- tive which will target investments in companies that currently adopt ESG standards or are planning to expand into green projects. 72 | Annual Report 2020 2020 Annual Report | 73 Our Businesses // Institutional Banking Financial Institutions Group (FIG) The Financial Institutions Group (FIG) covers three business segments: 1) Correspondent Banking, International Payments, Trade Finance, and 2) Non-Bank Financial Institutions, and 3) Development Finance. The teams are CIB’s first point of contact for bank and non-bank finan- cial institutions, and serve to manage the Bank’s relationships with different global institutions, including loans, trade finance, and investments, as well as agency management and promotion activi- ties for development programs in partnership with development institutions, government agencies, and local banks. 2020 Highlights 2020 saw global correspondent banks working remotely and increasing their reliance on communication tech- nology. CIB’s investment in digitalization enabled our Correspondent Banking division to ensure that trade, treasury, and cash management services for CIB and its clients remained uninterrupted, with volumes decreasing at a lower rate than expected given lock- downs and delays in project implementation. Africa continued to be a priority for correspondent banking; our coverage has grown to 21 countries through a network of 38 local and Pan-African banks, in addition to several African multilateral financial institutions. This includes CIB’s recently acquired subsidiary in Kenya, Mayfair Bank, in addition to establishing our Representative Office in Ethiopia, a reflection of CIB’s commitment to growing its business in Africa and our support to our clients when venturing into new markets, especially in sub- Saharan Africa. By the end of September 2020, the Development Finance (DF) segment had, through managing developmental programs, served 46,778 agri-busi- ness beneficiaries with approved developmental agri-loans, at a total of EGP 742.3 million. Among those credit lines and development programs is the Sustainable Agriculture Investment and Livelihood Project (SAIL), which targets small farmers to help enhance their living stan- dards by providing tailored loans in certain geographic areas, including Aswan, Beni Suef, and Minya. Development Finance, together with the Non-Banking Financial Institutions (NBFI) team, have disbursed EGP 1,424 million to the microfi- nance market. Some 44% of this amount financed women micro entrepreneurs. DF also supports CIB’s financial inclusion activities by offering its customers a wide range of innovative tailored financial services to meet their needs, such as digital collections and disbursement to MFIs through the smart wallet. Building on existing CIB services such as ACH, DF introduced cash manage- ment solutions to its customers. 2020 was also challenging for direct loans under the NBFI segment. The uncertainties regarding the impact of COVID-19 and the accompanying economic slowdown led to decreased market demand and utilization growth of our NBFI clients, with a witnessed pickup during Q3. Nevertheless, the NBFI division maintained strong asset quality of financed loan portfolios related to all financed clients, with zero defaults and minimal NPLs under various financed port- folios directed to the leasing, car finance, and microfinance sectors. NBFI focused on wider market coverage and succeeded in onboarding new bank clients in the newly regulated consumer finance market, among others. On the investment side, while new issuances were minimal during 1H of the year, the aggressive decreases in pricing encouraged issuers to tap the market in 2H, when NBFI played a prominent role in securitization transactions related to the automotive finance and leasing sectors, in addition to being one of three lead arrangers in the first Sukuk transaction for a NBFI worth EGP 2.5 billion. In light of the Bank’s strategy to promote financial inclusion, we have supported the Digital Channels team in introducing CIB Smart Wallet to micro- finance institutions for the automation of micro lending. NFBI also helped the team introduce CIB Business Online and ACH products to our clients in the non-bank segment. Separately, new FX facilities were extended, and an automated cash flow mechanism was applied to serve third-party clients. We also extended a facility to a credit-worthy insurance company that enhanced the utilization under the CBE initiatives introduced. 2021 Forward-Looking Strategy Egypt has been relatively resilient in the face of the pandemic, and its economic growth was not as affected as other emerging markets which paves the way for a pickup in 2021, translated into a growth on contingent trade finance busi- ness related to mega and infrastructure projects. In terms of FIG’s activities, we will continue to work on expanding our correspondent network in sub-Saharan Africa. We will particularly focus on supporting the growth and development of our subsidiary in Kenya, while identifying potential African trade finance opportunities as well as select infrastructure projects involving Egyptian contractors in key markets in the East African region. We will also continue to approach credit insurance companies that will boost trade finance activities with African countries. We aim to continue being the leading private bank in managing developmental funds. We also intend to enhance our operational effectiveness and effi- ciency through upgrading the current system, and to effectively market our financial services and digital solutions. As stipulated by the CBE, we are focusing on growing our loans to the microfinance sector to fulfill 20% of loans that should be directed to the SME and micro- finance sectors, and supporting financial inclusion and women’s empowerment. We are also looking to expand the sectors we finance by approaching players in the mortgage sector to add them to our client base and accord- ingly aid in increasing the penetration in other NBFI sectors such as leasing, car finance, micro- finance, factoring, and consumer. Additionally, we are participating in the marketing of a new product, authorized by the FRA, which enhances the investments portfolio division. We are also targeting insurance, investment, and brokerage companies to increase their LCY deposits. Treasury Group 2020 Highlights CIB’s Treasury Group was able to establish pruden- tial safeguards that prevented adverse effects resulting from COVID-19. We were able to take necessary actions to ensure that the business is operating efficiently despite internal and external communication challenges. Global markets were severely hit by COVID-19 in 1H2020, resulting in significant portfolio outflows from Egypt and a fallout in Egypt’s main sources of foreign currency, leading to fluctuations in FX and fixed-income markets. However, we found portfolio outflows to be an opportunity to take favorable positions, which resulted in noteworthy profits. Moreover, the Group ensured sufficient liquidity was available, FX volatility was properly managed, and customer needs were fulfilled. The Treasury Group maintained a good line of communication with other departments within the Bank to provide customers with the support they needed to alleviate the negative impact on their respective businesses through offering competitive pricing and customized foreign exchange products. TAT was enhanced through increasing FX limits for customers on the Bank’s digital platforms, such as e-remittance and VCN. In 2020, the Treasury Group won Global Finance Magazine’s Best Treasury and Cash Management Provider in Egypt and Best Foreign Exchange Provider in Egypt. 2021 Forward-Looking Strategy The Treasury Group will continue its shift from offering clients standard products to more client-centric products. In line with the Bank’s expansionary plans, the Group will seek to better the performance of its trading and sales activities by expanding into other African nations, supported by the recent acquisition of Kenya’s Mayfair Bank. This expansion will authorize the Group to act as a hub for international investors and support our representative office with a range of treasury solutions. 74 | Annual Report 2020 2020 Annual Report | 75 Our Businesses // Institutional Banking Strategic Relations Group (SRG) The Strategic Relations Group (SRG) is an insti- tutional banking group dedicated to initiating, nurturing, and growing banking relationships with strategic institutional depositors who are essential contributors to CIB’s stable funding base. The Group’s primary objective is to offer a first-class banking experience while maintaining the balance between mainstream commercial banking activities and its clients’ non-commercial needs. CIB takes pride in being the sole bank operating in Egypt with a focus group, exclusively dedicated to servicing its prime institutional entities. SRG carries out this function through highly qualified Relationship Managers, whose role is to ensure that customers receive superior, personalized services catering to their respective business needs. SRG provides tailored banking services with a highlighted focus on digital banking solutions. Products or services that CIB exclusively offers to clients include advanced, tailored GTS products, and short-term bridge finance facilities for the educational sector to eliminate cash-flow gaps that develop throughout the year. SRG’s strategic clientele consist of more than 180 diplomatic missions, NGOs, educational enti- ties, and international and local donor agencies. The team works tirelessly to facilitate its clients’ business operations and meet their banking requirements by creating innovative and tailored products and services. Its include offering customized digital solutions, the collec- tion of tuition and visa fees, the monitoring and reporting of deposit activities, fund management, and savings plans, providing a settlement system between tourism companies and airlines, and special offerings for staff loans. functions Although COVID-19 led SRG’s foreign clients to pause certain activities, SRG successfully continued to conduct its business with foreign entities. SRG leveraged our electronic channels to ensure a normal workflow without any disruptions, and expanded utilization of GTS products in accordance with the Bank’s strategy. SRG relies heavily on data analytics and digital banking in all aspects of its business decisions, including performance analysis, pricing strategies, and customer behavior analysis. Technology, in particular digital banking, is a key marketing tool that the SRG team leverages when marketing CIB products. 2020 Highlights The Group successfully oversaw the marketing of a lending program, which extends debt against a guaranteed flow of proceeds to an identified group of clients operating within the airline industry. In addition, efforts were directed towards expanding marketing efforts to attract the educational sector’s deposits. The Group also successfully executed bridge finance facilities for the educational sector. lead generators, 2021 Forward-Looking Strategy The Group has become one of CIB’s primary chan- nels for corporate leveraging on existing relationships while simultaneously capturing NTB opportunities by creating a wider networking base. A tailored, short-term bridge finance facility was designed and implemented for the education sector, including universities and schools, to eliminate cash flow gaps that develop during the year. This product is poised to become a major attraction for these institutions, helping expand our institutional depositor rate and enhance the utilization of CIB’s digital banking solutions. Enterprises and Governmental Relations (EGR) Since its establishment in 2016, the Enterprises and Governmental Relations (EGR) Group has positioned itself as a market leader, focusing on large enterprises and governmental institutions. Over the last couple of years, EGR’s role evolved to manage relationships with large private sector companies, conduct fundraising, and attract customers previously segmented under state-owned enterprises, government entities, and sovereign authorities. In 2020, EGR’s role expanded to include a diversity of banking business solutions and products to top-tier clients, and to increase the bank’s market share in this industry. Aside from the usual finan- cial and advisory assistance provided, EGR clients require higher flexibility and constant support in their transactions. The Group caters to the needs of these strategic customers through tailored products and services, all while growing CIB’s business. EGR is one of the market’s pioneers that focus on governmental entities. The Group also overcame the challenges presented by COVID-19 and sustained its client relationships and remarkable financial figures. 2020 Highlights During 2020, EGR continued its vital role of leveraging the power of digital banking to offer an exceptional banking experience to its customers and achieved remarkable growth in all its GTS services ratios. EGR also expanded its institutional banking liabilities portfolio, reflected in the increase in its lending capabilities and achievements in the trade finance business in comparison to the previous before. 2021 Forward-Looking Strategy In the coming year, the division seeks to achieve a solid presence in the market and manage its rela- tionships with clients in a sustainable manner that drives value for its customers. EGR aims to do this by growing its market database and utilize digital banking and other technologies to better the busi- ness and ease clients’ relations with the Bank. At the same time, where possible, the Bank will look at decreasing transaction costs to maximize revenue through using alternative digital channels and e-banking business solutions. EGR will continue to play a crucial role, while increasing the Bank’s total portfolio and market share. The team will also continue to match its clients’ requirements with the best available banking business solutions in the market, and increase its customers’ penetration by sustaining its position as a client-centric organization and preferred service provider. This should lead to an increase in the banking product penetration and revenues. SRG’s strategic clientele consist of more than 180 diplomatic missions, NGOs, educational entities, and international and local donor agencies. 21 Countries covered by CIB’s correspondent banking activities. 76 | Annual Report 2020 2020 Annual Report | 77 Our Businesses Retail Banking We strengthened our customer proposition with regards to product offerings and service levels and increased our customer base in our target segments. Consumer Banking CIB maintained its leadership in the Household market, adding more to Household loans and liabili- ties despite the difficult circumstances imposed by the global pandemic. This reinforced the Bank’s supe- rior position in the market. NTB figures continued to grow, ending the year with 269,000 NTB customers. In light of the COVID-19 pandemic, the digital platform became crucial for customers to conduct seamless, easy transactions, and increase customers’ migration from branches. The priority in 2020 was to drive rapid adoption of digital banking transac- tions across all segments, specifically in the Prime segment. Digital capabilities are planned to be one of the main sourcing channels of customers’ requests. We have enhanced our customers’ experience with our chatbot Zaki, and introduced predictive text to help our customers find the most frequently asked questions based on keywords. Not only did Zaki display tutorials to increase customers’ awareness to the features of digital channels and the registration process, it also helped customers stay up to date with all CBE mandates and circulars related to COVID-19. In 2020, CIB realized the efficiency gains driven from the full rollout of the CRM modules, namely account opening (A/O) and loan origination (LO). A/O improved staff efficiency and customer experi- ence by decreasing the time and resources spent during the account opening process. The full rollout of the loan origination module across the distribu- tion network was completed early 2020. The module reduced the loan approval process for the selected segments to two days, as the process automated the end-to-end credit assessment process while providing instant decisions based on automated workflows and decision rules. The year also saw CIB leverage on our CRM Marketing Module, using the Campaign Command Center in launching personalized campaigns to different groups of customers. The module also sends automated personalized welcome SMSs or emails to customers in their preferred language upon the opening of their accounts, including the account data. 2020 Highlights CIB was the first bank to launch the loan module with a decision engine. Loan origination was successfully rolled out throughout the Bank’s entire branch network, covering personal loans, credit cards, and overdrafts for both secured and unsecured sorts. This led to a 22% and 64% increase in the monthly acquisitions of credit cards and unsecured lending, respectively. We strengthened our customer proposition with regards to product offerings and service levels and increased our customer base in our target segments. We believe there is still ample room for further growth, given our upcoming strategic initiatives and business opportunities. CIB branches continued to outperform in 2020, despite the highly priced liability offering from state banks. The Bank was able to maintain its leading position as the most efficient and productive branch operator in the peer universe, with higher household deposits, personal loans, revenues, and profits per branch than any other bank in Egypt. Improving the customer experience and operating efficiency through the migration of activities from assisted to self-serve channels (digital), by leveraging our investment in digital capabilities, was a priority. CIB invested in different solutions to constantly move certain branch service transactions to digital channels over several phases. As transactions accel- erate via other channels, branches will focus more on sales opportunities and complex services. Segments Private Positioning the CIB Private brand in the high net worth (HNW) community was the key target in 2020. The Private segment launched a range of offer- ings; including portfolio management services in collaboration with CI Capital based on the profiling strategies intended to align customers’ risk appetite with the matching portfolio. The segment introduced the Private Facility Pack, a flexible consumer facility offered with the opportu- nity to switch between overdrafts and personal loan products. A Secured Overdraft against Treasury Bills was launched targeting all customers with custody portfolios, as well as increasing the maximum unse- cured loan ticket size to reach EGP 5 million. On the partnership building level, several agree- ments were forged throughout the year covering a variety of services aligned with private customers’ demands and lifestyle. Deposits for the segment amounted to EGP 34.1 billion, while the total asset portfolio came in at EGP 5.2 billion. Premium Segments Premium segments (Wealth and Plus) offer distin- guished propositions to their customers through the focus on customer migration to digital channels for a smoother and more convenient service. Product penetration reached an average of 3% for Wealth and 2.4% for Plus. In 2020, deposits for the Wealth segment rose to EGP 115.5 billion, while the asset portfolio came in at EGP 16.4 billion. As for the Plus segment, total deposits reached EGP 29.9 billion and assets EGP 3.5 billion. The segments introduced the KYC Customer Interactive Form for automating customers’ data fulfillment, and enhanced customers’ communica- tion through sending email shots and personalized SMSs for impacted Wealth and Plus customers. Prime The Prime segment successfully launched the Prime Me bundle during 2020, geared towards the millen- nial sub-segment. Several activities were conducted to cluster Payroll customers into categories to provide them with the most suitable products. “Solfa w Aman Loan” products were also launched, targeting blue collar workers earning more than EGP 3,000 a month, with a simple communication mecha- nism and a relatively smaller loan amount and tenor. CIB introduced a bundled proposition for prepaid cards and smart wallet, targeting financial inclusion customers whose salaries are less than EGP 3,000. Building on successful launches in 2020, the Prime segment’s assets ENR reached EGP 9.8 billion, while deposits came in at EGP 18.8 billion, with a favorable 78 | Annual Report 2020 2020 Annual Report | 79 Our Businesses // Retail Banking mix of 80% CASA and 20% deposits. The segment also added 253,300 NTB customers, payroll and non-payroll. Household Assets Household assets grew by EGP 8.7 billion, with a total ENR of EGP 34.8 billion despite challenges during the year. Cards continued to contribute to CIB’s income by maintaining a high net interest margin profitability and fee revenue. Consumer loans continued to lead asset income generation, due to portfolio optimization and effective acqui- sition programs and tactics, newly introduced products and the full rollout of loan origination. Cards Due to the CBE initiative following the pandemic, card revenue was impacted, where a 42% drop was driven by the lowered arrears fees. The acquisition figure showed significant growth, despite the circumstances, with 138,000 credit cards acquired throughout the year, bringing the total card portfolio to 615,400 primary cards and 120,600 supplementary cards. Additionally, the pandemic impact and subsequent CBE initiative negatively contributed to the P&L, specifically on the international spending, cash advance fees, arrears, and interchange revenue lines. Despite this, gross contribution grew in 2020 compared to the previous year. CIB launched World Credit Card during the year, with a distinguished rich travel and lifestyle proposi- tion, targeting the Exclusive Wealth customer base to add higher value to CIB’s cards product suite. Prepaid payroll cards were also revamped (with the proper KYC requirements), complementing our payroll proposition by targeting customers with incomes of less than EGP 3,000 per month at a lower cost solution for blue collar workers in the Prime segment. Household Loans It has been an extremely challenging year for the loans business due to unprecedented personal COVID-19 implications such as the CBE’s six-month loan installments postponement initiative, which had a negative impact on the loan top-up program and customer DBR ratios. Furthermore, we froze some lending programs due to market conditions. This was compensated by an improvement in sales efficiency, with a significant increase in the average run rate of unsecured loans. The unsecured acqui- sition crossed EGP 4.26 billion, marking a record achievement in light of market challenges. A number of new personal loans programs were launched in 2020, including “Solfa we Aman”, a short-term fixed loan targeting the low-income band payroll sub-segment. CIB also launched the Car Finance program, a semi-secured bundle targeting premium segments, an unsecured loan limit increase to EGP 5 million, and overdraft lending against T-bills for Private customers. In terms of financial achievements for loans, ENR reached EGP 26.52 billion, interest income EGP 3.2 billion, and fees EGP 186 million. Mortgages Despite the significant drop in the number of referrals provided by social housing, as well as the closure of the Notary Public for three months, the business managed to successfully exceed its ENR by EGP 708 million y-o-y. Low-income mortgages continued to show a healthy portfolio in terms of delinquency, with rates main- tained within the accepted level. ENR reached EGP 1.9 billion in December, up by 61% compared to the previous year, while interest income came in at EGP 146.5 million. Liabilities The high-yielding CDs offered by public banks in March had a negative impact on our business growth, evidenced in the increase of outflows to state-owned institutions. In response, we launched a three-year fixed CD at 12%. The Bank launched the CASA campaign, a loyalty program, and the customer journey to ensure a guaranteed satisfactory customer experience within the first year. The liabilities business remains the main contributor to Retail Banking revenues through its existing product suites. One of the main products that was a key to growth, improving the overall profitability and addressing the segment’s needs, was the ‘Easy Account’, a tailored account offering a competitive interest rate to Prime customers with low balances as an alternative to CIB Savers. Easy Account acquisi- tions closed at 89,700 accounts opened this year. Liability ENR reached EGP 198.3 billion, interest income EGP 14.3 billion, and fees EGP 274 million. Insurance The insurance business worked with AXA to launch two new products this year: Cancer Care, a simple, pre-underwritten product that gives out a tiered lump sum upon the diagnosis, and SME, an insurance cover for companies with less than 200 employees including life and medical covers. The business also developed insurance benefits with the Diamond Plus Payroll package, including acci- dental death or disability coverage and in-hospital cash covers. Introducing an enhancement to increase the medical and referral limit for unsecured personal loans to EGP 1.5 million had a positive impact on the booking process of more than 70% of the cases referred to AXA to obtain the insurability decision. In 2020, total insurance fees reached EGP 241.3 million, while volumes for the life and health insurance business hit 594.5 million. 2021 Forward-Looking Strategy Significant transition will take place in the service model for retail customers, and an extensive strategy to incorporate a well thought out coverage and operation model to satisfy customers’ require- ments, is being implemented. We will continue to improve the operating efficiency through cost control and migration of activity from assisted to self-serve channels (digital) by leveraging our investment in digital capabilities. We will also intro- duce a best-in-class digital onboarding solution to facilitate the onboarding of personal loans, credit cards, debit cards, and prepaid card holders with specific online propositions for customers. Segments In 2021, the Private proposition will be complemented by the launch of new financing programs tailored for this segment, as well as finalizing the lending policy and IT requirements for Margin Lending. In 2021, our aim is to boost the customer base by 22% for Wealth and 20% for Plus by providing the Relationship Managers (RMs) with the best tools and retention schemes. We will continue focusing on our proposition awareness for all fronts and customers through social media. Leads generation will remain a top priority to support our RMs, and so we will continue to enhance the process. We will also leverage the Family Proposition to target potential Plus family customers to match their family banking needs. As for Overseas Banking, we aspire to grow the customer base of Non-Resident Egyptian (NRE) and Foreigner Non-Residents (FNR) customers through a proposi- tion built on a remote/virtual set-up, unique products, and strong digital offering. The Prime segment will identify new sub-segments through continuous marketing research, in line with our sub-segmentation strategy. We will launch the Family bundle, which will cater to affluent Prime customers to increase CIB’s share of wallet. The segment will hammer on the CRM instant account opening and loan origination integration to cross-sell assets under day one programs. This is in addition to introducing agent banks like Fawry Plus as a new acquisition arm for the lower income segment, offering them prepaid cards and smart wallet bundles to reduce the payroll customers’ acquisitions cost. Household Products For the year to come, the Bank plans to develop an online solution that leverages on CIB’s digital 80 | Annual Report 2020 2020 Annual Report | 81 Our Businesses // Retail Banking platform to reinforce acquisitions and generate extra sourcing for cards and household loans through an efficient and customer-friendly digital onboarding experience. CRM will also roll out for the payroll channel to efficiently enable maximizing asset pene- tration for eligible payroll NTB customers. In 2021, we plan to boost credit card acquisitions as well as ENR through capturing further market share and leading the business growth by lever- aging on innovation, agility, and data analytics capabilities. We plan to increase our run rates and leverage the credit risk score capability to optimize acquisition efficiency. New effective acquisition programs and tactics will be introduced. We aim to boost acquisitions in household loans by focusing on online acquisitions, leveraging our new technological capabilities and infrastructure. A new risk-based approach will also be introduced. The liabilities business will depend on three main pillars to achieve the desired growth: 1. Pricing flexibility that is consistent with CIB’s premium strategy and providing frontlines and segment management with the needed agility in acquisitions and P/L management; 2. Digital enhancements to offload frontlines and improve customer experience on lower TATs; and 3. Streamlining our product mix to simplify the range and removing redundancies and compli- cated pricing frameworks, at the same time delivering tailored bundles aligned with each customer segment’s designed value proposition. Business Banking Business Banking has built a well-established cash and trade management business with average liability book growth rates of 32% and 99%, respec- tively, for the last three years. In 2020, operating profits for the division came in at EGP 1.6 billion, deposits hit EGP 29.5 billion, growing 26% y-o-y, while trade rose to EGP 26.7 billion. In the payment solution space, the division processed EGP 35 billion in transactions. The Business Banking client base grew to more than 64,000 companies during the year, up 12% y-o-y. 2020 Highlights In line with the Bank’s direction and commitment to Egypt’s strategy to grow and expand the loan portfolio for SMEs, Business Banking launched new lending programs targeting existing and new customers with facilitated documentation, fast approval turnaround time, and fixed monthly installments. This is in addition to a new initiative that supports SMEs in COVID-19 circumstances by offering unsecured unsupported overdraft lines to existing borrowers to pay salaries. Following the nation’s strategy to support SMEs, Business Banking supported its customers through the internet banking platform for companies, the digital channels and contact center, in addition to an initiative that encourages SMEs to transact online by offering a three-month free online subscription for newly enrolled customers to online banking. Another initiative took place during the pandemic to increase SME awareness by conducting online educational webinars presented by our partners in the non- financial solutions programs covering several topics and market gaps. Business Banking also developed unique and differentiated deposit bundles suitable for various customer needs and banking preferences, including the Super Business Account, which gives customers exclusive benefits and services to manage their business efficiently and conveniently, and the Easy Business Account, an online account that allows customers to fulfill most of their banking needs without having to visit a branch. CIB maintained its dominant position in Egypt’s payment acceptance sector in 2020, attaining a market-leading share of 28% for POS trans- for the actions. Following financial inclusion, the Bank managed to activate all POS and e-commerce platforms to accept the country’s push technology) to provide clients with convenient and efficient ways to manage their finances around the clock, in addition to giving them access to online government payments and payroll services. The division will focus on growing its acquiring business in e-acquiring through QR codes and developing value propositions for different merchant segments capitalizing on the current products available and suitable to merchant needs. CIB maintained its dominant position in Egypt’s payment acceptance sector in 2020, attaining a market-leading share of 28% for POS transactions. government-backed Meeza card and launched QR acceptance to reach untapped segments — a key enabler of payment business growth, especially with very small merchants. This year Business Banking witnessed an expan- sion in women’s activities by sponsoring local and global events in addition to the new (WIB) Women in Business lending program. CIB sponsored the She Can event, a one-day local event that took place in Q1 2020, which included inspiring talks, workshops, panel discussions, master classes, mentorship, and networking activities along with funding opportunities to support the female entre- preneurship eco-system in Egypt and the MENA region. CIB also sponsored She’s Next, a global event held by VISA for 3 days that took place in Q3 2020, which reflects the Bank’s women’s empower- ment and diversity and inclusion strategy, raising brand awareness globally, promoting the strategic direction towards women’s empowerment by highlighting Business Banking tailored lending products and services. Early this year, the Sustainability team, along with the Business Banking team, decided to conduct an environmental and social impact assessment to our investments on SMEs, through a research on the CIB-funded SMEs database in order to assess the level of sustainability and promote a continuous improvement culture among our stakeholders. 2021 Forward-Looking Strategy In the year to come, CIB Business Banking’s SME client companies will enjoy a bouquet of products and services designed for each segment according to their business requirements. Business Banking will enhance its value proposition by tailoring services to the ever-changing needs of its clients. Using state-of-the-art technology, Business Banking will build the infrastructure to automate processes to improve the customer experience. Business Banking will invest in its online banking capabilities and remote services such as (ChatBot, WhatsApp, IVR 82 | Annual Report 2020 2020 Annual Report | 83 Our Businesses Digital Banking The four pillars of CIB’s digital business plan are improving the customer experience, increasing migration and automation ratios, optimizing costs, and generating revenue. At CIB, digital thinking is widely and deeply inte- grated into the organization. This focus goes beyond service channels and transaction processing, as the Bank works to implement digital transformation throughout its entire business, from product devel- opment to risk management and human capital management. With digital banking mapping out the future of businesses and the economy at large, big data has become vital as we build information- gathering and analysis structures and turn our quantitative knowledge into building blocks for future strategies. It is these building blocks that CIB believes has formed the foundation of an entirely distinct business line: Digital Banking. CIB’s digital business plan is driven by a vision to make CIB part of our customers’ daily lives. By giving customers a simple, trusted, and enjoyable experience that includes the right advice and support no matter when, where, and how they interact with the Bank, our digital solutions provide tremendous value. They enhance the customer experience, optimize working improve control capital, reduce operating cost, and visibility of payments and receivables, and add security to financial operations. These elements are also expected to see continuous optimization on the back of CIB’s use of data sciences, management, and analytics in finessing its blockchain initiatives and overarching digital strategy. Through the dynamic use of data in assessing internal and external facets like risks and performance, the Bank expects to easily expand its digital infrastructure as needed to comple- ment the ever-changing demands of digitalization. Accordingly, the four pillars of CIB’s digital busi- ness plan are improving the customer experience, increasing migration and automation ratios, opti- mizing costs, and generating revenue. These are handled through two core groups: the Analytics and Data Management division (ADM) and the Digital Banking and GTB Group, each of which has its own individual segments, directives, and strategies to achieve these goals. Both divisions work together seamlessly to adhere to CIB’s digital business plan and transform the Bank into the digital bank of the future. Analytics and Data Management Division The Analytics and Data Management division (ADM) is the embodiment of the Bank’s innovative drive and a much-needed change catalyst for the organization as a whole. During 2020, and as a result of CIB’s position as a market leader in originality, several global organi- zations such as Forbes recognized CIB’s achievements by featuring ADM in discussion panels and forums alongside other international organizations. The Bank’s stellar performance and experience were evident during discussions with global market leaders about the banks’ role in promoting modernization and keeping up with technological advances, and their responsibility towards offering clients the simplest and most convenient methods of modern banking. CIB’s Data Team has successfully obtained the CMMI Certificate’s latest version in Data for Development V2.0 (CMMI-DEV) Maturity Level 3. This accomplish- ment rendered CIB the first bank in the world and first organization in Egypt to obtain the latest version of the certification. CMMI Maturity Models were originally created for the U.S. Department of Defense to subsequently become a prestigious attestation of extraordinary performance in all fields and sectors. Given the data-driven organic ecosystem built over the years, the necessity of such a model was indispensable to achieve the cutting-edge goals set for the future and to maintain our continuous improvement vision. CIB’s Data Lab, driven by its previous success, renewed its real-life business case practicum partnership with Carnegie Melon University Africa for the second year. The partnership aims to provide CMU Africa Masters’ students with real practical experience in informa- tion technology. Through this partnership, we aim to help the master’s students build a forecasting model to reliably predict demand patterns at the CIB Call Center, under the supervision of the CIB Data Science Team. The Data Lab was also featured in the IIF global survey for machine learning, focusing on our practices and use cases for machine learning. The team also applied for Gartner’s prestigious 2020 Eye on Innovation Award for Financial Services with two different projects to compete with global banking and payment giants worldwide. A clear agenda was put in place to support the busi- ness in providing best-in-class services and products to customers, optimize operational processes, and maintain CIB’s position as a market leader in the field by providing continuous support in the deci- sion-making process. Our focus has recently shifted towards the improvement of business processes, especially in light of the challenging economic and social conditions faced as a result of the COVID-19 pandemic. As such, the ADM team invented busi- ness-specific projects to enhance the Bank’s bottom line and improve the customer experience. The impact of data is constantly felt across the organiza- tion, transforming it into a reliable partner that many stakeholders depend on. ADM has always aimed to commercialize and commoditize CIB’s data assets, to create value out of the intangible data that was not captured by the organization. The team was successful in doing so this year through three main tracks. Optimization of the Customer Experience Robust Operations Research (ROR) queuing theory-based models were applied to reduce branch waiting times, while offering fast, safe, socially distanced, and desirable services, either through our state-of-the-art online processes or our branches. This customer service enhancement came as a direct result of the ADM team’s efforts to categorize and classify transaction types and clients whose activities could be transferred to online/remote channels. This process of customer and transaction segmentation has been shared with the different lines of business for alignment and implementation. Furthermore, the team is working on revamping the entire branch experience towards a more customer centric operation. Our ultimate goal was to reach the best setup for every branch regarding its operational structure, branding, staff functions, and customers’ nature. The ADM team developed a machine learning- Intelligent Product based predictive model, Recommendation Engine, to help relationship managers find the most suitable products for their clients based on the client’s history with the Bank. Additionally, the team is building a fully analytics- driven customer lifetime economic model on top of advanced statistical modeling techniques, allowing us to determine the full value generated during the lifetime of any client and enabling officers to preemptively decide on discounts and pricing offered to the client. Amid the fast-paced changes of current times, the ADM team ensures the Bank can meet new customers’ demands and behaviors. As a result, the team is working on using the vast stores of customer data available on social media to try and gain a more comprehensive and timely understanding of our clients and their needs. 84 | Annual Report 2020 2020 Annual Report | 85 Our Businesses // Digital Banking Operational Support Initiatives We successfully rolled out the Cash Management Project, which aimed to decrease overall bank-wide cash levels. We identified that the amount of idle cash sitting within CIB’s cash hubs can be better utilized by establishing a cash formula that predicts the amount of cash needed at each hub (branches, ATMs, central vaults, and cash-in-transit). In place for nearly a year, the project has proven highly successful, resulting in a substantial decrease in Bank-wide cash levels, along with the decrease of the associated costs related to handling, transport, and storage. The team is also working on the efficient distribution of employees and responsibilities to increase their performance and satisfaction. Mathematical optimization-based capacity planning models are built for each depart- ment, after which the team applies stochastic simulation techniques to account for uncertainties and ensure robustness. By factoring in the respective KPIs, the team will be able to provide an equitable working situation for all employees. In turn, this will result in a more pleasant banking experience for CIB’s clients and a more attentive employee base. Decision Making and Business Reporting Building on its proven reliable information and anal- ysis, the team has chosen to enhance already existing business intelligence (BI) capabilities (branded as CIB Navigator our own internal marketplace) and reporting tools by adding new data streams and developing new platforms that are targeted for specific products to monitor their performance more effectively. In addition to providing management with timely actionable analyses, the team presented the Treasury, management, and board with a trade portal dashboard reflecting the monthly trade activi- ties within the Bank and all relevant data. It also benefited from the existing Institutional Banking portal to develop industry-specific analytics and KPIs reflecting customers’ profitability, cost, and return on capital, as well as macroeconomic figures such as market share and trends. The ADM team is working on enhancing its specialized visualization software, which supports users by facilitating tracking changes in the business and spotting trends, in addition to facilitating the analysis of the different trends, resulting in faster and more actionable reporting. Additionally, the team is currently working on the launch of Livestreaming Systems that will enable real-time integration of core data existing analytics platforms. It is also upgrading CIB’s reporting and analytics dashboards by enhancing the Data Warehouse system based on the cutting-edge Teradata Vantage technology. The new system will give CIB a boost in its data processing and storage capacity, accommodating future business expan- sions. The team is also working to upgrade our Power Center Server (data integration) specifications to cater to the rising demand in data integrations and data provisioning streams to and from the enterprise data warehouse, which is required for future AI and machine learning applications. Digital Banking The Digital Banking Group: • Re-engineers various operational processes to reduce turnaround time (TAT) and increase efficiency • Provides a channel for acquiring new customers • Creates new touch points for existing CIB customers • Generates efficiencies and reducing costs across the Bank • Increases migration and automation ratios • Creates new revenue streams • Enhances the customer experience and inte- grating channels seamlessly • Enables new market segments, specifically financial inclusion • Drives product and service innovation The Group is divided into the following divisions: Global Transaction Banking (GTB): The GTB division helps promote, monitor, and analyze the performance of the Bank’s digital channels, reporting on traffic, segments, products, and services with the goal of maximizing product penetration and increasing CIB’s share of the customer’s ‘wallet’. The GTB division focuses on: • Global Securities Services products • Cash management products • Trade finance products • Supply chain products • GTB business development Consumer Digital Products and Channels: The Consumer Digital Products and Channels divi- sion develops and promotes digital products and services for consumer banking. It monitors and analyzes the performance of these channels and platforms in terms of traffic, segments, products, and services to maximize product penetration and increase CIB’s share of the customer’s ‘wallet’. The division focuses on: • Consumer digital business development • Online banking channels (Internet and mobile banking) • IVR, Chabot, and contact center channels • ATMs and self-service channels • Digital transformation Financial Inclusion and Mobile Products: CIB provides convenient, secure, and cost-effective ways to make purchases and transfer money using mobile devices, serving both banked and unbanked customer segments, and supporting financial inclusion. The Financial Inclusion and Mobile Products division over- sees the implementation of the Bank’s mobile payments strategy and systematically measures the Bank’s digital services and their lifecycles to ensure that customer interactions continually migrate to optimal channels. Digital Strategic Alliance and Innovation: The Digital Strategic Alliance and Innovation division leads on CIB’s innovation and fintech strategies. It seeks to build a strong pipeline of potential entrepre- neurs and start-ups to serve CIB’s strategic objectives, enrich the Bank’s value proposition, and help achieve its financial inclusion goals. As a result, the division enables CIB’s positioning as a key supporter of the nation’s entrepreneurial ecosystem. Digital Banking Governance and Support: The Digital Banking Governance and Support division is dedicated to managing collaboration and ensuring compliance among all group divisions, the Bank’s internal stakeholders, the regulator, and other external stakeholders. Internal and External Success Our successes when it comes to digital transformation come from putting the voice of the customer at the heart of product, service development, and innovation across the Bank, from new customer propositions to customizing existing ones. The Global Transactional and Digital Banking division advocates for the customer during all process redesigns, digital upgrades, and enhancements, helping to translate an understanding of customer needs into clear system requirements, ulti- mately improving the customer experience. Several services have been extended to the Bank’s support functions, resulting in notable gains. Awareness visits conducted for relationship managers and branch staff improved customer service by enhancing their knowledge of our digital products. Business reengi- neering to adopt straight-through processing (STP), including process redesigns and automation, increased efficiency and reduced the workload managed by CIB staff. These and other initiatives to digitalize internal departments helped eliminate manual work and auto- mate daily payment processing. Global Transactional and Digital Banking has worked hard to embed flexible and secured digital capabili- ties across our operations to take our consumer and corporate customers to the next level. The goal is to bring even more customers to digital solutions and provide them with a richer range of services. We also aim to optimize operations on the back end, increasing automation and streamlining workflow to cut the transaction processing times and costs, as well as strengthening security and compliance. Digital Transformation Digital transformation is no longer just an option, but rather a crucial move given CIB’s highly ambitious endeavor to continuously provide superior services to customers, and optimize the cost to serve. The COVID-19 pandemic has put digital transformation at the forefront of our priorities. Recent years have seen significant strides towards digital transforma- tion in different areas within CIB. 2020 was a real test for CIB’s digital platform in light of the unprecedented circumstances imposed by the pandemic, pushing the Bank to attempt to deviate customer behavior away from branches and towards digital. 86 | Annual Report 2020 2020 Annual Report | 87 Our Businesses // Digital Banking CIB has long sought to reduce its environmental footprint, and we take into account in our credit process the footprints of our clients. CIB has started a new program entitled Bank of the Future (BOTF), which paves the way for the digital transformation of the existing customer base towards the new digital era. The Bank of the Future (BOTF) program, aims to posi- tion CIB as “the digital bank to trust”. It will divert customer behavior away from branches, positioning them as an alternative channel, while establishing digital as the primary channel to serve customers. The program will work to digitalize the branch experience and rely on robotics and operations centralization to increase efficiency and reduce the cost to serve. It will also introduce new ways to serve customers indirectly, by availing open platforms third parties can plug into to integrate their services with CIB. Since launching the program in October 2020, the following rates have been positively impacted: • Online banking cost synergy increased by 42% from EGP 83.8 million m-t-d in September to EGP 119.3 million m-t-d in December 2020, being the highest m-t-d cost synergy achieved throughout the year. • Online banking penetration rate increased from 48% y-t-d in September to 53% y-t-d in December 2020. • Internal transfer migration rate increased from 81% m-t-d in September to 86% m-t-d in December 2020. • External transfer migration rate increased from 60% m-t-d in September to 74% m-t-d in December 2020. BOTF has five key pillars: 1. Service Digitalization: Digitalize the customer journey for several services from initiation (online or offline) to execution and delivery. This requires extending digital channels’ capabilities to accommodate more diverse services. The mechanism of the service digitalization work- stream is to revamp the process inside branches, educating customers on the use of digital chan- nels for executing the transactions. 2. Operations Centralization: Migrate services from the branches to central operations. To start, the Bank announced the suspension of 25 in-branch services in two consecutive drops during the year. 3. Robotics: For banks and the financial services industry, Robotic Process Automation (RPA) is vital for success. RPA and Artificial Intelligence (AI) have already helped banks improve effi- ciency by up to 70% with little to no human supervision in the execution of repetitive tasks, decision making, and other complex financial activities. In 2020, CIB identified 250+ potential processes to be automated, explored from more than 40 departments and areas. The processes were initially assessed using set selection criteria: rule-based, high transaction volumes, stable and well-defined low exceptions, processes, low system change, structured data, and readable electronic inputs. 4. Branch Digital Experience: Enhance the branch experience with digital touch points. This includes elements of online appointment booking, self- service kiosks, WiFi, digital signage, biometrics, and experiences such as Walk-Out Banking (where the customer opens an account and walks away with a card and online banking services). 5. Branch classification: Review service model for the branch network and allocate branches to serve individuals only, corporate customers only, or hybrid branches and extend the coverage model to ensure all business banking customers have an assigned account officer. The Innovation Lab CIB’s Innovation Lab is positioned as the fintech and entrepreneurial hub of Egypt’s banking sector. It contributes to incubators and accelerators with workshops, mentorship, judges, and support for key events in the sector. These initiatives allow for global and local scouting of startups to enroll them into our Entrepreneurs Engagement Program (EEP), through which CIB’s banking model can be complemented and/or disrupted. EEP supports startups that have fast and agile solu- tions by helping them transform their offerings into a product line to serve CIB’s departments. The program merges CIB’s resources and brand with the startups’ agility and unique offerings that would eventually allow for continuous enrichment of CIB’s value proposition. Recognizing that the best fintech providers will come from the internal talent of a financial institution as powerful as CIB, the Innovation Lab also promotes intrapreneurship. The lab conducts innovation chal- lenges and competitions that bring together creative multidisciplinary teams from different areas and levels within the Bank. 2020 Highlights • Despite the global impact of COVID-19 on ecosystem activities and events, the Innovation Lab team’s agile model allowed for continuous support of partners, stakeholders, and the Bank’s digital transformation strategy. • Out of a pool of 200 global and local startups and fintechs, the CIB Innovation Lab was consistently managing the commercial and/or technical collaborations with multiple stake- holders across CIB in line with their current challenges and requirements. • Participating and co-organizing youth-related competitions, design sprints, and hackathons to enable financial inclusion, increasing youth awareness, and scouting for solutions that match CIB’s needs. 2021 Forward-Looking Strategy CIB’s Innovation Lab is in the process of formal- izing its internal channels within CIB to enable and promote innovation and its applications through its engagement program and other projects, whether in the local market or as part of CIB’s expansion plans in Africa. We aim to continuously evaluate and adopt disruptive technologies that will enable CIB’s digital transformation strategy and allow for an agile banking model. ATM Network 2020 Highlights CIB’s ATM network grew 11% to reach 1,121 ATMs, being the largest ATM network among private banks and handled more than 61 million transac- tions. Average monthly dispensed cash exceeded EGP 6.4 billion, while average monthly deposits reached EGP 1.7 billion. Despite the added scale and COVID- induced operational complexity, the network’s availability increased in 2020, and synergies jumped 27% y-o-y to EGP 1.5 billion. The Bank has also supported government and regulatory goals for nationwide financial inclusion by participating in the regulator’s ATM initiative by committing to install an additional 180 ATMs across different geographic zones by the end of 2Q21. A new, modern ATM user interface and contactless ATM experience were introduced in Cairo ICT 2020, both of which were received positively by attendees. The new interface has begun rollout and the contact- less experience is planned to begin rolling out in 2021, upon regulatory approval. COVID-19 measures were implemented, including: 1) waiving ATM withdrawal fees, 2) adjusting withdrawal limits to comply with the regulator, 3) customer safety measures, such as social distancing signs, and 4) educational screen displays with appropriate safety measures, encouraging the download of our mobile banking app via a QR code. The year also saw the TAT of replenishment process for both on-site and off-site ATMs reduced. 96.4% of cash 88 | Annual Report 2020 2020 Annual Report | 89 Our Businesses // Digital Banking deposits below EGP 10,000 were migrated to ATMs from in-branch deposits, and 98.5% of cash withdrawals below EGP 20,000 were migrated to ATMs. 2021 Forward-Looking Strategy We will continue to deliver on our ATM strategy, including: • Expanding the ATM network. • Continuing the rollout. • Introducing contactless ATMs. • Introducing robotics for ticketing. • Introducing AI in Cash in Transit (CIT) route optimization. Online Banking (Internet and Mobile Banking) Internet and mobile banking enable customers to remotely access their accounts with ease and conve- nience, and to conduct a broad range of financial transactions anytime wherever they are. During the COVID-19 pandemic, online banking channels became among the main channels for our customers, with a significant increase in usage. This was particu- larly apparent in mobile banking usage, which surpassed that of internet banking, with almost 80% of our online banking customers relying on mobiles. 2020 Highlights In 2020, we focused on enhancing online channels by improving the customer experience and adding more features. These included: • Creating a digital self-onboarding process for existing CIB customers to register for internet banking or mobile banking, without the need to go to branches. • Transforming into straight-through-processing, which drastically reduced TAT to instant local payments and offloaded the operations teams while increasing the migration rate for external transfers to 74% in December 2020. transaction processing • Launching self-service via IVR to unlock accounts and recover usernames. • Increasing transfers limits through online channels and allowing transfers to elec- tronic wallets. Online banking channels share in the total cost savings recorded EGP 946.5 million as of December 2020, marking an 89% y-o-y increase. The online customer base reached 802,000 users, with an activity rate of 67% as of December 2020. Online banking subscribers increased 35% y-o-y as of December 2020. The number of Internet Banking transactions grew by 11% y-o-y in the same period, with the value of transactions reaching EGP 40 billion, while mobile banking transactions grew 118% y-o-y in the same period, with the value of transactions reaching EGP 53 billion. Online banking migration rates y-t-d in December 2020 were 96% for credit card settlements, 81% for internal transfers, and 59% for external transfers from total branch transactions. 2021 Forward-looking Strategy The new digital platform is expected to launch in 2021, upon final regulatory approval. It is anticipated to enhance the market position of our digital pres- ence, boosted by new features and services, and is set to give customers more control over their position in the Bank. The new digital platform will be launched with a mega marketing campaign that will boost activity and acquisition rates for online banking and improve CIB’s digital presence. Phone Banking (IVR and Contact Center) CIB’s phone banking provides value to customers by giving them personalized advice for their banking needs and offering digital solutions that let them bank more quickly and efficiently wherever they are. • Proposing the addition of 11 new requests to Internet Banking and Mobile Banking, pending regulatory approval. This would increase acqui- sition rates for new products such as loans, accounts, credit cards and deposits, and offload our call center and branch network. 2020 Highlights CIB’s 19666 channels (IVR and Contact Center) witnessed 19% growth in calls in 2020 (vs. 11% growth in 2019), reaching nearly one million monthly calls. Customer inquiries related to regulatory initiatives associated with COVID-19 overloaded our networks, while the challenges arising from the curfew and precautionary measures led to a large percentage of absenteeism. As such, we increased voice channel capacity and launched a dedicated menu for regulator’s initiatives and played back educational messages while on queue advising the caller to use alternative channels. We halted certain requests during curfew hours and advised customers to use our digital channels instead. We changed the IVR top level menu, leading the IVR resolve rate to surpass 49% and making IVR our primary voice channel. We also added self-service features, allowing customers to unlock online banking accounts or recover their usernames, which offloaded agents’ calls. These efforts and more saw a 22% y-o-y increase in the IVR customer base to 835,000 customers and a 37% y-o-y increase in syner- gies to EGP 35.2 million. 2021 Forward-looking Strategy We plan to revamp the IVR UX to shorten the time to serve while reducing channel utilization/cost and introduce new self-service features. Plans are underway to transform the call center into a contact center to support new channels (live chat and video) and identify customer personas and behaviors, aiding in customer migration to the best-fit channel. Our four growth pillars are: 1. Quick Wins - These are quick fixes that can help offload the call center to IVR or other channels, improving our channel utilization. 2. Strong Foundation - Such initiatives will strengthen our IVR and Contact Center and serve as a base for future development, including identifying customer personas and behavior in cooperation with the data analytics team. 3. Transformation - Projects and initiatives to continue our journey from call center to contact center, including: remote and video agents and a live text chat. 4. Rich Portfolio - Enhance our proposition with a portfolio of features such as branch appoint- ment booking. CIB Chatbot 2020 Highlights Zaki the Chatbot, which was launched in December 2019, now conducts over 35,000 interactions per month on both the public website and Facebook Messenger in English, Arabic, and colloquial Arabic, growing fivefold in from February (pre-COVID) to April. The feature has offloaded the social media team by over 55%. During the pandemic, a dedicated tab for regulatory mandates and FAQs for all products was updated to reflect any regulatory changes. 2021 Forward-looking Strategy 2021 will see the introduction of Zaki on WhatsApp upon regulatory approval, integrated with seamless live chat. The move will serve new segments of corpo- rate and business banking customers and add new services and features (e.g. balance inquiry, financial transactions, banking requests). CIB Mobile Payment (Smart Wallet) Smart Wallet is an innovative payment experience that serves both banked and unbanked customers by providing a convenient, secure, and cost-effective way to make financial transactions through mobile devices. Customers can easily pay bills, recharge their mobile prepaid lines, send money to other wallet holders in Egypt, and deposit and withdraw funds from all ATM machines or via any of our authorized banking agents. 2020 Highlights Despite the challenges arising from the COVID-19 pandemic, we worked on multiple fronts to leverage Smart Wallet’s value proposition and increase its customer base, activity rate, transaction volumes, and value. We successfully accelerated the momentum and utilized the circumstances imposed by the COVID-19 pandemic to best utilize Smart Wallet as one of the prime digital channels. • CIB is the first bank in the market to avail digital wallet registration through SMS for banked and unbanked customers. This had a positive impact on new enrollments. 90 | Annual Report 2020 2020 Annual Report | 91 Our Businesses // Digital Banking • Applied new tactics for Smart Wallet positioning, visibility, and branding through partnering with major e-commerce platforms in the market. • Collaborated with the acquiring team to success- fully launch the CIB Merchant Mobile Wallet, through which merchants can collect money from customers via QR codes. • CIB Smart Wallet’s customer base increased by 34% y-o-y to reach 840,000 customers as of December 2020, and maintained its leading activity rate of 20% across all banks in the Egyptian market. • CIB Smart Wallet transaction volume increased 23% y-o-y to 7.5 million transactions, while trans- action value rose 107% y-o-y to reach EGP 2.8 billion as of December 2020. • Considering CIB’s financial inclusion objectives, the Bank launched its new E-Wallet program, a digital platform that provides cost effective solutions and access to affordable financial products. The program accommodates the needs of untapped individuals and merchants. The penetration test report has been submitted to the regulator and is pending approval for the launch of the pilot phase, before going to market in 2021. 2021 Forward-looking Strategy A number of initiatives in 2021 will continue to propel the success of the Smart Wallet: • Expand the internal and external sales force. • Position Smart Wallet as a complimentary channel for CIB consumer banking. • Introduce Digital Registration Channel for Smart Wallet. • Digital Campaigns, partnerships, and on-going offers and discounts. • Promote Mobile Acceptance as the key driver of wallet utilization. • Introduce digital community solutions. • Introduce new financial use cases. • Launch the e-Wallet platform, after regulatory approval. • Introduce new financial use cases over the e-Wallet platform such as savings, group savings, lending, and micro insurance after regulatory approval. GTB Business Development The GTB Business Development team provides the most comprehensive GTB solutions that best cater to corporate customers’ daily banking needs, providing best-in-class financial solutions and consulting, and acting as the main stakeholder in developing corpo- rate business needs throughout multiple tasks such as: • Increasing CIB’s market share for corporate digital solutions. • Conducting comprehensive plans for creating bundled products and offers to all corporate customers, offering best-in-class products and pricing to encourage those customers to increase their total deposits and collections in terms of cash inflows. • Providing comprehensive ERP integration solu- tions to attract multinationals and meet their sophisticated needs. 2020 Highlights • Positioning CIB as 1st ranked in the electronic governmental and domestic payments over ACH platforms across all operating banks in the Egyptian market. • Enabling different LOBs to exceed most of their GTB KPIs for all corporate digital products. • Working on comprehensive GTB bundled pricing solutions and attracting new business opportu- nities such as deposits, trade contingents, assets, digital migration rates, and increased NII. 2021 Forward-looking Strategy In terms of product and pricing bundling, we plan to apply multiple product pricing bundles to attract new corporate segments as well as industry segmentation to provide competitive pricing that best suit the industry. We plan to improve collaboration with relationship managers and enhance our digital campaigns. We will launch internal and external communication campaigns through multiple channels in coopera- tion with the digital marketing team, including: • Branch and RMs communications • Flyers, banners, and radio campaigns • Social media, CIB Chatbot, website, and multi- media campaigns • Preparing comprehensive user guides for all GTB products • Staff Sales Performance Rewarding programs Cash Management Digital Products CIB provides an agile and digitized suite of prod- ucts, channels, and technology infrastructure that continuously adapts and responds to changing customer needs, while improving their access to working capital and cash flow, enhancing sales collection, digitizing the payables management process, and improving operational efficiency. digital channels, as well as the payment infrastruc- ture, by improving speed and agility through the initiation and phase deployment of the payment hub and API Gateway, improving after sales solution delivery, and accelerating process automation. 2020 Highlights 2020 saw a notable increase in transactions, gener- ating significant synergies for cash management, which increased by 39% y-o-y as of December 2020 to reach EGP 667 million. Other key highlights include: • First bank in the market to acquire the IPN (Instant Payment Network) certification, which is a new payment network with instant capability to send and receive money between banks using an enhanced experience, with the ability to transact between different account types such as bank accounts, Meeza cards, and Meeza digital wallets using mobile applications, allowing customers to access their accounts in different banks through the desired mobile application provided by banks or Payment Service Providers (PSPs). • A 45% y-o-y increase in the customer base to reach 17,300 corporate customers. • Migration rate of 87% for all outgoing transfers. • Migration rate of 60% for all internal transfers. • A 28% y-o-y increase in the number of cash management product transactions to reach 3.7 million, worth EGP 327.5 billion. • A 93% y-o-y increase in the corporate Internet banking number of transactions. • International remittances witnessed significant improvements on a y-o-y basis, as the number of transactions increased by 136% to reach 173,000, value of transactions increased by 116% to reach EGP 2 billion, and total foreign currency increased by 183% to reach USD 170 million. • Microfinance institutions digitalization process: digitalizing the core MFIs functions. Loan disbursements and installments collections are operated digitally using our digital solutions and customers’ accounts, cards, and wallets. 2021 Forward-looking Strategy In 2021, CIB intends to focus on building and enhancing the capabilities of current products and Below are some of key areas of focus in 2021: • Continuous focus on customer and transac- tion migration rate to further strengthen our digital transformation. • Implement key GTB and digital banking strategic initiatives: New CIB Business Online, Payment Hub, API Gateway, Robotics/RPA. • Intelligent process review and automation for key manual processes. • Accelerate customer ERP Integration. • Scale Supply Chain Finance Sales and Cross Sell Operating Model Trade Finance Management Digital Products Trade Finance Online is CIB’s market-leading online trade channel, offering corporate customers the ability to conduct and manage their trade finance transactions online. The channel provides customers transparent and clear information about their trans- actions, while eliminating paperwork and saving them time and money. 2020 Highlights • Re-engineering and enhancing online trans- actions processes to accelerate the delivery process and increase customer satisfaction, through participating in the revamp of the trade finance core system. The revamp aims to improve the speed of transaction processing and reduce processing TAT. • Re-engineering trade finance process workflow for Mayfair Bank, recently acquired by CIB. • Creating a Trade Finance MT101 end-to- end cycle to be presented to our prime corporate customers. The new service enables our customers to send matured incoming docu- mentary for collection payment instructions through the SWIFT system, which reduces the consumed time and provides a fast and secure channel for sending the payment instructions. • Total trade finance online fees for deals gener- ated online reached EGP 112 million. 92 | Annual Report 2020 2020 Annual Report | 93 Our Businesses // Digital Banking • A 65% y-o-y increase in the customer base to • Number of suppliers digitally enrolled in the SCF 3,700 corporate customers. program reached 13. • A 23 % y-o-y increase in the number of transac- tions to 26,000. • A 75% y-o-y increase in synergies to reach EGP 18 million. 2021 Forward-Looking Strategy • The Trade Finance Management team will work on implementation of the trade finance transfor- mation program in cooperation with Operations and IT. This program is designed to: - Significantly improve the customer experience. - Position CIB as the preferred trade service bank in Egypt. - Improve transaction processing TAT lever- aging automation and new technologies. - Significantly reduce manual intervention and increases cost synergy. 2021 Forward-Looking Strategy • Introduce more SCF programs, techniques, and workflows to be compatible with different types of credit approvals. • Expand the NTB customer base. Governmental Payment Digital Products Considering CIB’s continued support of the govern- ment’s efforts to automate governmental payment, we maintain an outstanding partnership with E-Finance Company. The company develops and operates govern- mental e-payment platforms and channels to enable customs, tax, and other government authorities to receive and collect payments through the E-Pay portal and Corporate Payment Services (CPS) platform, which greatly improves the customer experience. - Trade Revenue Assurance: Automation for commissions and charges collection. 2020 Highlights Supply Chain Finance Supply Chain Finance is an effective way for compa- nies to improve their working capital position, drive EBITDA improvement and strengthen supplier rela- tionships. The key concept behind SCF is to provide suppliers with access to advantageous financing facilities by leveraging the buyer’s stronger credit rating. It provides short-term credit, which can opti- mize cash flow by allowing buyers to lengthen their payment terms whilst providing suppliers with the option to receive payments earlier. 2020 Highlights • Launched the electronic supply chain finance (e-SCF) module of CIB Business Online. • Enhanced SCF’s TAT on both the Bank and customer sides by revisiting the end-to-end process, enabling STP through processing) for invoice eligibility, and enabling new extensions in order to facilitate the process for accepting uploading bulk documents. (straight • Total discounted invoices reached 950, amounting to EGP 69 million. • CIB is ranked 1st in the Egyptian market in governmental e-payment transactions over the corporate payment services (CPS) portal for the last seven months, with transactions worth EGP 15.2 billion in 2020, at a market share of 26%. • A 102% y-o-y increase in the CPS customer base to reach 1,700 corporate customers. • A 70% y-o-y increase in the number of CPS trans- actions to reach 59,000 transactions amounting to EGP 15.2 billion. • A 39% y-o-y increase in synergies to EGP 5.2 million. 2021 Forward-Looking Strategy • A key objective for 2021 is to ease the burden of government payment on the CIB branches by enrolling corporate customers to the digital plat- form (CPS) in order to decrease the high traffic on branches related to processing such payments, and to meet the Bank’s overall strategy. Global Securities Services The Global Securities Services division is respon- sible for marketing and developing the custody services and enhancing CIB market share. Targeted customers include institutions and high-net-worth individuals. Services are diversified among different investment instruments, such as equities, treasury bonds, treasury bills, securitization, global deposit receipts, and eurobonds. 2020 Highlights • GSS successfully attracted new portfolios amounting to EGP 11 billion. • Fixed income instruments hiked 18% y-o-y to EGP 222 billion. • CIB maintained its leading position as No. 1 custodian in the local market, garnering 26% market share among all the 54 local custodians. • CIB Custody is ranked 1st in the Egyptian market in number of securitization SPVs launched in 2020, with a total of eight SPVs amounting to EGP 33 billion. • Enabled the consumer segment to launch lending against securities service treasury bills. Investors can now lend up to 80% of their portfolio against the outstanding treasury bill balance. 2021 Forward-Looking Strategy • Investing in technology through enhancing and upgrading the current custody core system to support performing new use cases such as applying STP for the new depository powered by the regulator to handle the fixed income investments (treasury bills and bonds), as well as enhance billing features. • Automating securitization operation processes by supporting the operations team in imple- menting a new securitization system, in correlation with the business growth in such industry, and to absorb the large volume of transactions related to different SPVs. • Setting the roadmap to launch a margin some lending product, which enhancements with the central depository to mitigate the business risk. required Digital Banking Governance and Support The digital banking governance and support team is dedicated to manage collaboration among digital channels teams, the Bank’s internal stakeholders, the regulator, and other external stakeholders. 2020 Highlights In 2020, and in light of the COVID-19 pandemic, the digital governance team played an orchestrated vital role in governing and coordinating the processes and tasks for all digital channels teams. The regulator at that time issued numerous instructions and regulations for almost all our digital products, which the team handled with the digital channel owners, along with the Bank’s internal stakeholders, to guarantee the full alignment among all engaged parties. The team also closely monitored all digital channels KPIs and deliverables, in order to evaluate the overall performance, highlighting the slow momentum in some KPIs, to take corrective action. 2021 Forward-Looking Strategy • The digital banking governance and support team will continue to diligently ensure compli- ance across the Bank’s digital channels, challenge stakeholders to adopt new technologies while ensuring that digital products, strategies, and financial inclusion efforts comply with regulatory guidelines as they are updated. In all interactions, the team will encourage stakeholders to increase their digital appetite. • In light of the government and CBE’s financial inclusion efforts, we will continue to monitor the recently passed Egyptian Banking Law, along with the frequent regulations issued by the CBE related to digital products and financial inclusion. • Establish a data hub to consolidate all digital channel data in order to generate periodic, comprehensive dashboards and analytical reports, and closely monitor digital channels’ KPIs and deliverables. 94 | Annual Report 2020 2020 Annual Report | 95 04 Support Functions 3 Divisions form the Bank’s support base: Operations and IT, HR, and Marketing 96 | Annual Report 2020 CIB’s SUPPORT FUNCTIONS form the backbone of the organization, ensuring that the Bank runs with efficiency and ease. 0104040404Support Functions Operations and IT What separates CIB from other banks is its unmatched customer experience. The success of its customer-centric approach is due to the effi- ciency of its internal processes, across operations and information technology (IT) areas. Managed through the COO Area, the operations and IT func- tions within the Bank work together to incorporate technological advancements and artificial intelli- gence across the Bank’s functions, with special focus on the customer journey, which is an integral part of all our processes. This is in addition to ensuring that the Bank meet its growth targets. The Operations Group, along with the Information Technology division, remain the main enablers of the Bank’s strategic vision. The Group’s objec- tive is to offer our customers the highest level of service quality, which relies on the continuous enhancement of the Bank’s operational efficiency, automation, and process redesign, with an overall aim to optimize service costs and ameliorate our customer satisfaction. 2020 Highlights 2020 challenged the COO area on several different fronts, owing to the COVID-19 pandemic, which has changed the way we view the world. Equipped with the task to ensure our employees’ safety, CIB managed to secure all pandemic supplies despite scarcity and made sure to conduct protocol and PCR tests for any and all infected staff members as well as ensure they had access to proper medical care. We also closely monitored all infected employees, reaching a recovery rate of more than 80%. Digital adoption was key during this time, with the division employing digital channels and expe- diting digital migration, initiation of projects, and onboarding new digital initiatives. A strong busi- ness continuity plan was set in place to streamline work across the Bank’s different areas and facilitate a remote working environment for most back-office staff. During the pandemic, we continued to main- tain high responsiveness to customer complaints, especially with relation to regulatory changes that were implemented at the time, to ensure a smooth customer experience and optimum service. To cope with the changes imposed by the pandemic, an initial work from home program was launched to maintain business continuity during the pandemic and ensure staff safety. Thereafter, CIB introduced the Flex Program, CIB’s flexible work from home structure. This presented us with an opportunity to alter our current business model and streamline our workplace infrastructure. The pandemic also accelerated the expansion of RPA tools to automate some processes and eliminate manual procedures, a strategic task that will help us serve 3.5 million customers by 2025. The pilot stage was first initiated in the IT Operations department and will be rolled out across other operating units. Despite the imposition of restrictions, we continued to expand our ATM network to 1,121 ATMs. We also increased our branch network to 208 branches during the year. The reduction in staff on prem- ises allowed us to renovate our headquarters and complete other projects, including the New Capital project and Core and Shell. COVID-19 led to challenges in some projects. However, this afforded us the opportunity to review our project pipeline, reprioritize projects to serve the digital front, and deliver projects at an accelerated pace. This also enabled us to make optimum use of our resources across different projects and improved the timeline for product rollout to the market. Stage 2 of the T24 program was concluded in April 2020, and the final stage is currently in progress. 208 branches Stage 3 has two main technical tracks: 1) the migra- tion of our applications to Java Technology as well as another release upgrade from R18 to T24 R20 and 2) addressing a number of module implementation and back-to-core scope items that replace old customiza- tion. Different activities were conducted to maintain CIB’s competitiveness in the market in areas such as the Contact Center, where a chatbot was integrated with WhatsApp Business to cater to customers’ general inquiries and inform them of any CBE policy changes. Current online platforms (CR2 and FCC) were strengthened to provide features that maintain CIB’s competitiveness in the market, while working on building new platforms and solutions to enhance the Bank’s digital environment and offering. All these activities aim to offload front liners and ensure a safe banking environment for our customers. Information Technology As a consequence of COVID-19, the industry had to adapt to changes in customer behavior, which demanded an increase in digital channels, and regu- latory changes imposed by the government and CBE. The Bank dealt with these changes with ease and flexibility, while keeping security and safety tight, particularly when it came to our human capital. Almost 90% of the IT team worked from home, which had no impact on workflow. Most of the IT department’s projects were not impacted by COVID-19 and are running according to schedule. The main delay resulted from the immobilization of resources due to travel constraints imposed around the world. Major projects were rolled out, including LO across branches, IBAN Phase I, and the VDI Phase I rollout for the call center and select corporate banking users, which was completed in July 2020. The project was closed and rollout for any additional departments will be managed either as a BAU or through the CIB Flex program to ensure the project aligns with business needs. As a result of the pandemic, CBE mandated several changes that required immediate implementation to support Egyptian citizens. All these required changes and mandates were successfully managed and imple- mented through the Bank’s IT systems, from the Core Banking and Credit System for loans and due post- ponement to debit card, ATM, and POS daily limits, charges, and fees. From the regulatory side, CIB’s IT team responded to the CBE’s required regulatory changes with the needed flexibility and accuracy, ensuring minimal impact on customer service and leading to maximum use of the department’s automation capabilities. In 2020, CIB became the first organization in North and West Africa to receive the Management and Operation Stamp and Certification from Uptime Institute, a leading global data center certification group, thanks to the efforts of the CIB Infrastructure team. The Data Center team modernized the Monitoring and Control Software to Data Center Infrastructure Management (DCIM) and Building Management System (BMS). The new solution simplifies the operational processes, optimizes the monitoring and alerting capabilities, and gives insightful dashboards that reflect data center capacity and overall health. Digitalization and Straight Through Processing (STP) were essential not only for the customer experience, but also to offload banking opera- tions. Consequently, several improvements were implemented to equip STP for domestic transfers, which increased fourfold daily. Additional services were added to internet banking to offload branches: account opening, CD/TD booking, credit card requests, loan requests, and mobile wallet subscrip- tion. The KYC service was also introduced but is pending CBE approval before rollout to customers. 98 | Annual Report 2020 2020 Annual Report | 99 Support Functions // Operations and IT The IT department also managed to deliver other key projects for CIB’s Compliance and Cards units. For the Compliance unit, the department managed to deliver the Risk Score Card and Smart Wallet Transaction Screening projects. For the Cards unit, IT successfully enhanced the system and front-end tool used by payroll corporates to include and process the additional information needed and mandated by the CBE. This enabled the business to resume prepaid payroll cards issuance. The prepaid card portfolio was migrated from the current application that has limited flexibility to in terms of a dedicated card management system with rich configuration items that support the card business strategy when it comes to expanding prepaid and Meeza card portfolio. Operations To accommodate the growth of the business over the coming years and in light of the ongoing global push toward automation and digital technologies, CIB has set out a digital transformation strategy to improve operational efficiency and meet customer needs. We launched an extensive process re-engineering program covering various departments and units. The main objective was to simplify and streamline processes as well as enhance digitalization for a better customer experience through reducing TAT and increase the efficiency and productivity of the front office and backend operations. Accordingly, one of the most important approaches will be to modernize our processes by expanding tech- nology capabilities and increasing opportunities for customer self-service. Through the self-service option, the customer will be able to send in a request through the various alternative channels, in turn initiating a STP while being able to track the request throughout its entire life cycle. Customer Experience continues to be a cornerstone with most of the KPIs achieved despite the reduction of manpower. Our focus continues to be on main- taining the optimum availability of digital channels to support off-loading front liners and shift customer transactions to digital channels. Different teams within the operations department worked diligently throughout the year to opti- mize efficiency and productivity and absorb the increase in customer transactions while ensuring a high service level. Security and Resilience Management With the rapid spread of COVID-19 across the globe, CIB’s efforts in terms of security and resilience management were directed toward continuity, resil- ience, and crisis management to effectively manage the situation with minimal impact on our services and operations, while safeguarding the health and safety of our employees and customers. Before the pandemic hit Egypt, CIB was closely monitoring the situation to ensure containment of a potential outbreak in the country. A gap assessment was conducted from a continuity and resilience perspective to ensure our strategies and plans are comprehensively addressing all the dynamics of the situation as it evolves. When all triggers and signs pointed towards a partial or full lockdown, a work from home (WFH) strategy was put in place to ensure activities would be carried out smoothly in either scenario. In addition, upgrades to existing technology and an increase in resources were initiated to facilitate WFH plans, such as availing laptops, increasing network bandwidth, and upgrading to collaboration tools. After the successful covering of ACH, inward and outward remittances, remittances can now be executed through IBAN and online channels. Another win for the department was the successful completion of the first surveillance audit of the ISO 9001/2015 Quality Management of the Real Estate and Premises Projects. At the onset of the first cases in Egypt, CIB proactively began enforcing health and safety practices by admit- ting fewer customers into branches and preemptively enforcing the use of facemasks in all premises. Moreover, sanitizers were made available in all branches and headquarters, social distancing was enforced by reducing the workforce, and sterilization and deep cleaning routines were regularly implemented. governance framework as part of the CIB’s exten- sive efforts to prevent confidentiality breaches and data leakages. It allows the Bank to avoid financial losses and legal implications resulting from security breaches and helps us comply with data protection regulations and best practices. With the rapid spread of COVID-19 across the globe, CIB’s efforts in terms of security and resilience management were directed toward continuity, resilience, and crisis management. The pandemic did not prevent the Bank from executing its security and resilience management strategy. It highlights: 1) organizational resilience as an important strategic pillar, focusing on aspects of visibility reporting and coping with unforeseen of risks, 2) promoting security as an asset that supports the Bank’s plans to expand its digital footprint and reach untapped segments to support financial inclu- sion, and 3) building trust by maintaining compliance with regulations, standards and best practices as the Bank proceeds with its expansion plans in Africa. Within this framework and in alignment with its digital transformation strategy, the Bank successfully finalized one of the key strategic security programs, the identity access management and privileged access management program, which manages the identity of users and the privileged identities of IT administrators along with their access to systems and applications across the Bank. The program also provides a unified customer experience and an advanced authentication process that protects customers’ identities against theft. The program benefited CIB in many ways, including but not limited to improved compliance, increased security, productivity gains, and operational cost reduction. CIB obtained the ISO 27001 certification for Information Security Management System covering alternative channels and digital services, contact centers, and data centers. The certification highlights the Bank’s commitment to adopting international best practices for information security and ensuring integrity, confidentiality, availability, and data customer assets safety. The Bank also maintained its Payment Card Industry – Data Security Standard (PCI-DSS) certification and renewed its Business Continuity Management ISO 22301 certification for the third year running, upgrading its certification to the 2019 version and making it one of the very first financial institutions in Egypt to comply with the new version of the standards. In alignment with the Bank’s efforts to secure our customers’ data and ensure privacy and protec- tion controls are in place, a comprehensive Data Classification and Protection program was initiated as one of the key strategic initiatives. The program information established a data protection and 100 | Annual Report 2020 2020 Annual Report | 101 Support Functions Human Resources The cornerstone of our success lies in our people. To maintain this success, we continue to develop and invest in our workforce as well as actively seek to find the right caliber to take our business forward. At the same time, we help match our talent with the right opportunities and help pave their career path. In line with the technological advancements happening within the global Human Resources (HR) field, CIB is shifting its HR focus toward the adoption of digital tools and solutions. Meanwhile, CIB will continue to build on the existing analytics arm in the HR department to propose continuous enhancements related to reshaping the hiring strategy for the future workforce, reviewing the retention tools used, and building strategic workforce planning to deal with the digital future. 2020 Highlights Talent Acquisition and Career Mobility Due to the COVID-19 pandemic, CIB became the first bank to digitize its hiring experience. All entrance assessments and interviews were conducted digi- tally and internal promotions and internal hiring processes were digitalized. This virtual approach will continue to take place in 2021 to maintain CIB’s title as an “Employer of Choice”. employment Despite the global pandemic, CIB hired 1,013 new employees, encouraged the internal mobility of 1,278 employees and promoted 609 employees for better exposure and enhanced career progression. While a major part of our headhunting process is conducted social-distancing through measures forced some organizers to turn to digital; in 2020, CIB participated in five employment fairs across different universities, two of which were conducted online. It was a great experience engaging with interested students virtually in lieu of sending recruiters to campuses, an approach which has transformed from optional to being a necessity. fairs, We continued to conduct HR initiatives despite the pandemic. In 2020, we held three virtual sessions for the Tawarny initiative, which began in 2018 to help university students practice mock HR interviews and provide them with tips to enter the workforce. Fortunately, we were able to maintain our connection with Egyptian youth and continue to qualify candi- dates to drive the country’s development and growth. The “Ma7atetna 3andak” initiative, which helps facili- tate the recruitment process across different areas in Egypt, expanded its outreach in 2020 to include differently abled candidates. The session targeting the differently abled took place in Alexandria, with eight candidates attending, four of which were hired. Another session took place in Tanta, attended by 24 candidates, six of whom were hired. Business Enablement and Skills Development In 2020, CIB continued to administer specialized training programs to cater to employees’ needs and enable them to achieve their objectives. A series of specialized development tracks were catered for each segment of the business, most of which came with international certifications such as those for our Wealth, Plus, Private, Business Banking, Branch Managers, Payroll, Retail Banking, and SMEs segments. Other learning tracks included programs in Audit, Trade Finance, Corporate Services, Communications, Strategic Planning, Information Security, IT, and Risk. Over 500 employees were registered in the programs collectively, and received international certifications. The programs were conducted through digital platforms. Nevertheless, several strategic programs were conducted in 2020 to meet business aspirations, including, but not limited to the following: • Analyst Program: The program provided 43 analysts with more than 150 virtual training hours, more than five mock cases, over 15 virtual assessments, and various coaching sessions with the aim of advancing their technical skills. • SME Academy: A tailored program to qualify competent calibers that would support the bank in attaining its SME strategy. HR conducted two rounds composed of 51 employees and provided them with more than 400 virtual training hours, 40 assessments, and over 12 role plays and engaging activities. • Induction Program: This is designed for new hires. The Induction Program was split into two tracks: one for CIB employees and the other for new Contact Center agents. In total, 404 new hires and 110 new agents were provided with a series of e-learning sessions, virtual trainings, and multiple assessments. • Leadership Program: To tackle the pandemic circumstances, a new training program was introduced called Leading with Agility in Turbulent Times to train middle managers on how to lead employees during challenging times. The program was moderated by one of the top professors from IMD business school. Finally, HR developed specialized Customer Experience training bites targeting outsourced employees to equip them with the right skills to ulti- mately improve the customer journey. Learning External Empowerment Initiatives HR has always keenly supported the bank’s strategy of achieving its core pillars in regards to the social commitment and society development. Consequently, the department resumed undergrad- uate summer training programs. Those programs were successfully delivered virtually to undergradu- ates from public and private universities. Following the Bank’s strategy to expand into Africa, the HR department expanded its outreach of the Analyst Program to include a group of 21 select African delegates. The induction took place in Uganda, while the Analyst program took place online. At the same time, the HR department provided support and learning solutions to employees at the newly acquired Mayfair CIB Bank Limited, exposing them to various development opportunities. Digital Learning To comply with social distancing measures, all programs were offered digitally through various platforms such as e-learning modules and virtual training programs for various departments across the organization. A set of unconventional online training programs, offered by international vendors, were also availed to all employees to provide them with constant development and enhance their tech- nical skills and abilities. Since educational videos have become an important and effective content delivery tool to better dissemi- nate and unify information, HR developed a series of educational videos for several departments to raise awareness related to business topics such as finan- cial inclusion, trade finance, and commercial papers. Employee Engagement and Enablement During 2020, CIB continued to build a robust engagement strategy to enhance employees’ level of enablement and encourage employees’ sustainable engagement through the following initiatives: • Recognition Program Event: CIB witnessed the successful launch of the first recognition program event that was attended by over 1,000 top-performing employees, where winners were chosen based on how they exemplified the Bank’s core values, provided excellent service levels, and played a role to achieve its 2019 goals. • HR Help Desk (Ask HR): CIB founded the HR Help Desk team to become the sole point of contact with employees and to make sure all HR related inquiries are answered in a timely 102 | Annual Report 2020 2020 Annual Report | 103 Support Functions // Human Resources 1,013 new hires during 2020 and efficient manner. During the pandemic, the HR Help Desk team played a crucial role in the crisis management plan. The team acted as a focal point for all employees who suffered from symptoms or tested positive. The HR Help Desk received a total of 18,700 calls until the fourth quarter of 2020. The team will continue to play an engaging role in communication between the HR department and employees while supporting the COVID-19 crisis management action plan. • CIB Flex: CIB introduced the Flexible Work Arrangement (FWA) Program based on the Bank’s strategic direction to adopt a more flexible workplace and adapt to the digital trans- formation era. The pilot phase was launched in August 2020 and two batches with a total of 378 employees were rolled out. The aim of the program is to ensure a safe work environment for employees, enhance the level of satisfaction, engagement, loyalty and commitment, and promote gender equality. • Employee Wellness Program: The Employee Wellness Program seeks to support CIB’s employees in terms of helping them manage their stress levels, improve their productivity, and boost their mental health. • Employee Onboarding: CIB is working on enhancing the onboarding experience for new hires to maintain its position as an employer of choice. Gender Equality Initiatives At CIB, we are strongly committed to equality, inclu- sion, and diversity. To warrant our legacy as an “Employer of Choice”, we create an inclusive culture to promote equal opportunities and ensure that our employees are treated with dignity and respect. We are currently particularly focused on our gender equality initiatives: “Helmik Yehmena”, She is Back, and Women Empowerment. “Helmik Yehmena” In 2020, CIB launched the “Helmik Yehmena” initia- tive aiming to support women to join the workforce in certain areas where they are underrepresented. The initiative helps women using short training programs that began in South Valley University in Qena. To date, we have reached out to 200 women in Upper Egypt, 35 women attended in Port Said, and we hope to expand the program across Egypt. She is Back She is Back helps mothers in their transition back to work from maternity leave. Women are informed of any external or internal changes that affect both the Bank and their own respective roles during their absence. In 2020, two rounds were organized for 95 women, one of which was an online session. Women’s Empowerment Women’s empowerment was one of the main objec- tives of the newly introduced FWA program which gives mothers with infant children the opportunity to work from home before applying for an unpaid leave. This promotes gender equality through a higher percentage of women’s representation throughout different levels in the organization. Reward Management The Bank’s remuneration philosophy revolves around the recognition and the reward of exceptional perfor- mance. It reflects our commitment to attract, retain, and motivate employees to support the achievement of the organization’s business objectives. In 2020, CIB developed its variable pay program, which links each department’s performance to how it contributes to the organization’s overall performance in achieving the Bank’s financial and non-financial objectives. This mechanism ensures transparency, reward appropria- tion, and fair compensation within the organization. Our remuneration is assessed on a yearly basis taking into consideration market fluctuations and external market developments. We further strengthened our value proposition to enhance employees’ enablement and satisfac- tion through introducing non-cash benefits that include travel and housing benefits, as well as other benefits in collaboration with the social services community. 200 Women in Upper Egypt benefited from CIB’s “Helmik Yehemena” initiative Employee Age Breakdown Gen Y Gen X Boomers 75% 22% 2% Employee Gender Breakdown Male Female 70% 30% At CIB, we are strongly committed to equality, inclusion, and diversity. 104 | Annual Report 2020 2020 Annual Report | 105 Support Functions Marketing and Corporate Communications 30% increase in traffic to CIB’s website in 2020 Marketing is constantly evolving, moving from mass to direct to digital marketing, and now to data-driven marketing. CIB’s marketing strategies and resources have kept pace with these changes while adapting to external factors, the Bank’s objectives, and consumer behavior. Consumers use more devices, are more privacy-aware, and have increasingly sophisticated customer-experience expectations. CIB’s forward- looking approach to marketing and communications has kept us aligned with these trends, setting CIB apart from other banks. CIB owns the complete marketing funnel. The Marketing and Corporate Communications division includes a team of user experience (UX) designers who are responsible for the front-end experience across all digital touch points. Marketing campaigns have both the goal of raising awareness for products and services and of driving traffic to digital channels. CIB’s marketing campaigns focus on value propositions rather than on competitive pricing or other simple appeals. 2020 Highlights In the last nine months of 2020, we have likely expe- rienced 10 years’ worth of change. In that same brief span, we’ve seen businesses embrace digital transfor- mation and thrive. In CIB, we are no different and our customers and prospects embraced Digital Banking more than ever. The biggest shift in today’s marketing is in how consumers research and buy products. The Internet is a major contributor to this shift, as is the recent and persistent COVID-19 pandemic and economic uncertainty. In categories as diverse as electronics, financial services, and health care, consumers increasingly ignore push marketing, preferring instead to use the Internet to research products and decide which ones to buy. That said, the core challenge in business and marketing remains the same: deciding on the investments and steps needed to get your business ready to take action on your product, channel, or consumer strategy. Challenges and Responses The first quarter kicked off with various seasonal offers, partnerships, promotions and campaigns, while playing catch-up with the rest of world’s expo- sure to COVID-19. Once the pandemic hit close to home, communication became key. We had to put aside our preplanned marketing calendar, pivot, and stand by CIB values like never before. It was an opportunity to project trust by being transparent about how the pandemic was impacting us, while providing guidance to customers on how to bank safely during these trying times. The division prioritized communication of CBE regu- latory changes, digital migration, general awareness for banking safely, while deprioritizing campaigns that would drive traffic to our branches or drive behavior inverse to social distancing. The marketing calendar was revisited on a weekly basis to accom- modate for the changes in consumer behavior due to the impact of the pandemic. We launched a Bank Safely page, dedicated to the latest news regarding the pandemic, with a mixture of regulatory updates, branch network working hours and temporary closures due to sanitation processes and an abun- dance of caution, and infection and recovery rates among our staff. Even Zaki, our chatbot, still wears a facemask to promote precautionary measures. Our branch network admitted fewer customers, all of whom must be wearing masks, and our advertising real estate were riddled with messages promoting banking safely, our digital channels, and social distancing. Like the rest of the world, we were also working from home, so we needed to ensure that the teams were able to launch all campaigns remotely. During 4Q2020, we began migrating some services from branches to exclusively digital channels; by the end of the year, a total of 37 services will be discon- tinued from branches. Successful 2020 initiatives HNW Experiences Platform CIB takes pride in the fact that we are a ‘premium’ bank; we do not instigate price wars and consciously play no part in them. In an increasingly competitive industry, it is becoming imperative to design experiences that would allow us to retain and grow our high-net-worth (HNW) customer portfolio, create loyalty and drive brand advocacy. We work to craft experiences that customers will cherish and appreciate, going beyond banking and tailoring to customers’ lifestyles. CIB’s HNW Experiences Platform is a marketing platform built around strategic partnerships with niche brands and venues catered around the lifestyle of each segment’s demographics. Experiences range from gifts, exclusive offers and discounts, outings, sports, health, shopping, entertainment, and spon- sorships. We had planned to launch the platform for our Plus, Wealth, and Private consumer segments in 2020, but strategies had to be realigned once the pandemic hit due to the nature of the experiences. As it stands, all HNW perks and experiences were resumed with caution and close monitoring of the ongoing regulatory changes due to COVID-19. Nonetheless, CIB held true to its pre-COVID commit- ments while renegotiating discounts or contract extensions on a case by case basis to ensure conti- nuity of the platform during these trying times when our partners’ cashflow was at risk. Personalization and Marketing Automation (Monthly Offers) Due to the exceptional circumstances, CIB’s monthly offers focused more on retailers that offered e-commerce options. CIB partnered with some of the biggest names in the Egyptian market such as Tradeline, Souq, Carrefour, and Noon, to name a few, offering our cardholders exclusive discounts, installment plans, and other promotions — positioning CIB cards in the market as the go-to cards for safe banking. Our Bonus loyalty program’s redemption process has become fully digital and instant. QR Code Payment acceptance was also launched, providing a convenient and seam- less experience for both merchants and eWallet customers, reducing the use of cash. We also made large strides in automating and person- alizing some Customer Relationship Management messages such as Segment Welcome emails tailored to the needs of each of our consumer segments, follow-up emails for non-customers, and personal- ized Bonus emails, to name a few. We will continue to look for more opportunities to automate, simplify, and personalize communications to build loyalty, pushing customers towards the conversion end of the funnel and simplifying operational marketing. Content Marketing, Always On and Online Lead Generation CIB is considered the best and most consistent bank in terms of social media interactions and second highest ranked for video views due in part to the Always On program launched in 2019. The program helped us generate EGP 9 million in loan bookings and 40 card bookings digitally for the first time, drove an additional 30% of traffic to our website, and pushed our monthly run rate for online banking 106 | Annual Report 2020 2020 Annual Report | 107 Support Functions // Marketing and Corporate Communications During the pandemic, the Corporate Communications team steadily expanded its local media relationships, focusing on online platforms and adding new journals and websites. registrations by 35%. We continued this momentum throughout 2020, especially throughout the worst times of the pandemic, while heavily investing in the search for online lead generation and display adver- tising to raise awareness of our digital channels. On the CIB website, traffic on the ‘Ways to Bank’ section has increased almost 3x since the beginning of year compared to last year. Apply Online lead genera- tion for loans grew 22% y-o-y and cards 140% y-o-y as of October 2020. Even our blog is doing consistently well, with traffic up 247% y-o-y as of October 2020. stakeholders in optimizing UX and UI for our digital channels, leading the design process for our new public website, online banking, and ATM channels. These are planned to launch in 2020 and early 2021 under our Reliable Banking Everywhere initiative, where we worked to design digital channels with personalization and conversion in mind, similar to walking into a branch. Branding and Corporate Communications During 2020, CIB received a number international awards that demonstrate its excellence across different business lines, cementing its position as a leading financial services provider in Egypt and Africa. Global Finance named CIB the 2020 World’s Best Bank in Emerging Markets for our excel- lence in innovation, our digitization and financial inclusion efforts, and serving retail and corporate clients despite all the challenges. The Corporate Communications team worked extensively on a 360-degree brand campaign promoting the award. This is CIB’s third title in four years after winning it from Global Finance in 2018 and Euromoney in 2017. CIB ranked 28th on Forbes Middle East’s Top 100 Listed Companies in the Arab World, ranked highest of the four Egyptian companies on the Top 200 Banks list by Jeune Afrique, Top Banks by African Business, and Top 10 Safest Banks in Africa by Global Finance. It is the only Egyptian institu- tion to be included among the 325 companies in Bloomberg’s Gender Equality Index. For a full list of accolades garnered during the year, please refer to the Awards section of this report. Our social media following has also grown significantly; Facebook followers climbed 14%, Instagram 63%, LinkedIn 86%, and YouTube 65% compared to last year due to consumers’ increased appetite for digital, as well we our focused communications on Digital Migration and Applying Online digital channels. For the first time, on LinkedIn we extended our value proposi- tion for small businesses to include professional services beyond traditional financial products and services. We launched the #GrowTogether miniseries, on which we hosted the CEOs of our professional services providers in live webinars to serve small businesses with advice and best prac- tices from each provider’s area of expertise. UX Design – Launching CIB’s Digital Channels On the UX design front, the team has supported all increasing During the COVID-19 pandemic the Corporate Communications team steadily expanded its local media relationships, its exposure by focusing on online platforms and adding new journals and websites. The team successfully increased the Bank’s media presence, releasing more than 44 news releases to spread awareness and knowledge and promoting its products through marketing campaigns, with 654 digital and print advertisements. The Corporate Communications team secured inter- views for senior management with the world’s most prominent publications, such as Global Finance, Euromoney, and Financial Times. CIB’s former Chairman Hisham Ezz Al-Arab gave insight on CIB’s Challenging Today for Empowering Tomorrow campaign, despite numerous obstacles amid the challenges posed by COVID-19 and the economy. Africa Following the acquisition of Mayfair Bank in Kenya, now Mayfair CIB Bank Limited, a branding, marketing, and communications strategy has been developed to support CIB’s business strategy in Kenya: to facilitate trade finance and credit facilities for Egyptian corpo- rates looking to engage in Africa. As such, the division will support CIB to organize ‘teach-ins’ for mid-sized corporates in Cairo to present CIB’s trade finance and credit facilitating capabilities, as well as market knowledge and economic insights; and lead/host indi- vidual marketing trips to Kenya for the most desirable Egyptian corporate targets to make introductions to relevant manufacturers or trading partners. The team has developed a new corporate identity, with the rebranding of Mayfair – CIB Bank Limited being implemented across the Bank’s branches, online presence, and touch points. CIB hired a local agency to handle the pre and post- acquisition launch and provide ongoing media support and event management. Over 30 articles were generated in Kenya announcing the acquisition, and a media and communications plan has been developed to reflect our business strategy that will include tradi- tional and social media outreach to local audience. Internal Communications CIB appointed an international consultant to evaluate current means of internal communica- tion, assess the communication needs of different stakeholders/employees, and develop an internal communication channel strategy. To ensure the right foundation was set, a compre- hensive audit was conducted to develop a full understanding of the current IC strategies and endeavors and help identify gaps and focus areas. Working towards building a unified culture among employees, the second half of 2020 saw the final- ization and initial implementation of the Internal Communication including ongoing townhalls and casual staff events, which maintain direct communication between senior management and employees. However, due to the exceptional circumstances of COVID-19, online townhalls were introduced to all CIB employees, noting that the average feedback for webinars was more than 90% positive. When caseloads lessened, we were able to resume internal and external activities in 3Q2020, such as a bi-weekly casual Strategy project, breakfast for a small number of junior employees along with our senior management. Our weekly digital newsletter, CIB Round-up, which sheds light on CIB-related news, the banking sector, and the Egyptian economy, received very positive feedback from staff. The round-up was shared in both English and Arabic this year due to popular demand. A new dedicated section for CIB sustain- able finance news was introduced to shed light on CIB’s sustainability updates, news, performance and achievements, as well as national and global sustainability-related topics. We completed the intranet assessment report, and 3Q2020 saw the finalization of the scope of work for intranet enhancement, concluding with the kick-off of the planning and analysis phase. A “5 Years of Sustainability Reporting” competition also took off during 3Q2020, engaging employees while shedding light on and bringing awareness to sustainable banking. The best 12 sustainable stories were chosen to be featured in our 2021 calendar. Similarly, the Bank held an appreciation event for CIB employees in early 2020, aiming to promote engage- ment between staff members and management. A dedicated page was created on the intranet for formal daily updates on the Bank’s operations and procedures during the pandemic. We also launched an internal awareness campaign titled Your Safety First to encourage staff to wear masks, regularly wash/sani- tize their hands, and maintain social distancing. The campaign kicked off in full force within all our prem- ises through different channels, including posters, floor stickers, emails, and desktop screensavers. CIB also launched an Anti-Money Laundering campaign in early 2020, aiming to increase staff awareness about the different types of anti-money tactics. The campaign was launched through all of our internal channels, including emails from our senior management. Branches and ATMs All updates on branch and ATM activities were commu- nicated to customers through several channels, from updated working hours, promoting social distancing by admitting fewer customers in our waiting areas, to voiceover awareness across the branch network via the integrated sound system. Messages were also 108 | Annual Report 2020 2020 Annual Report | 109 Support Functions // Marketing and Corporate Communications displayed on branch LCDs and ATM screens, and commercial ads were replaced with general hygiene awareness messages, including on alternative digital channels. Floor stickers were also added to our ATMs and branches promoting social distancing, in addition to “Wear Your Mask” door stickers. Keeping our staff safe, Everyday Hero packs were distributed among all CIB front liners to express management’s appreciation and gratitude for their efforts and dedication during the pandemic. Desk separators were also successfully dispersed throughout branch network to maintain social distancing. 2021 Forward-looking Strategy Implementing Data Analytics, Digital Banking, and Technology To deliver data-driven marketing and high-quality customer experiences, CIB needs to in building data-rich customer profiles by aggregating and correlating customer and prospects’ transac- tional, behavioral, and interest-related information without breaking customer trust, while maintaining authenticity and transparency. invest One of the primary requirements for actively shaping individual customer journeys across channels is to have a comprehensive data set for each customer. Knowing what customers did in the past, how we approached them, how they responded, and what their current behavior is will enable us to account for their individual needs. To make 360-degree customer profiles a reality, data from all touchpoints needs to be collected and unified in a centralized system. This means consolidating data from various sources like data warehouses, CRM systems, web-tracking systems, or channel-specific marketing tools. facilitator and enabler. We will also focus on human- izing banking by creating content that makes the banking experience less intimidating and simpler for the average customer. Our content strategy on social media will also be targeted. A specific plan for each channel will be devel- oped based on the target audience. This will ensure we keep our content relevant to the audience, creating engagement and extending our organic reach. A key online imperative will be remarketing to existing website visitors, expanding our reach by building lookalike tribes and performance marketing. Large data platforms such as Google and Facebook have extensive data about customers which we can utilize, but not acquire. Performance Marketing is about immersive marketing, whereby a customer is identified and presented with other relevant advertising based on their internet browsing. Remarketing involves any customer that showed interest, whether organically or through a paid ad, by clicking on the ad and landing on our website, to retarget them until they complete a goal. Content Marketing and Always On We aim to build a content resource center by creating CIB tailored content revolving around topics and events of interest that can be made relevant to banking by introducing ways to navigate daily finan- cial challenges faced by our target customers. Over the past few years, we have been carefully creating our website content to guide customers towards the right product and service for them. This will be most visible in our new public website, once launched. Additionally, we have been slowly building our CIB Blog, which will include content for different audi- ences, from beginners to experts, and will include infographics and videos. With a dedicated team of UX designers who are responsible for the front-end experience across all digital touch points, CIB’s marketing campaigns focus on value propositions rather than competi- tive pricing or other simple appeals. The result is customer advocacy, or word-of-mouth, that gener- ates referrals and grows CIB’s customer base. Digital and Social Media Marketing Social media will remain a strong platform for pres- ence and generating sales leads. It will also be used to make the Bank younger by speaking to Gen-Y and millennials through portraying banking as a lifestyle Our main objective from Always On is to use it as a vehicle that keeps communicating during campaign calendar down times through capitalizing on all our digital advertising knowhow and prowess while communicating in an untraditional tone of voice to: • Promote products and services. • Increase brand awareness. • Generate overall awareness, acquisition, and growth of the customer base. • Remain relevant and in the moment with our online customers. • Increase customer engagement over CIB’s digital and social media channels. UX Design, Search, and Personalization The UX team will be highly involved in the UX design of the following projects throughout 2021: new intranet, new corporate online channels, subsequent phases of retail online channels, and continuous improvements to existing channels. The implementation of CIB’s public website should be launched during 4Q2020. New Internet, Mobile Banking, and ATM platform launches are expected within 1Q21, with a carefully bespoke customer expe- rience unique to CIB’s customer needs. Our website will serve as a repository of tailored financial related content to educate customers by serving them a series of articles and videos that will be published according to a monthly calendar to improve website retention and increase returning customers organically. Content should be relevant to challenges and everyday use cases faced by our target and existing customers. The website will include interactive tools that will help customers identify products, services, bundles, and loan and mortgage calculators, to name a few. Search: Search Engine Optimization (SEO) and Search Engine Marketing (SEM) Search engine optimization, or SEO, is about under- standing what people are searching for online, the answers they are seeking, the words they’re using, and the type of content they wish to consume. Knowing the answers to these questions allows us to connect to the people searching online for the prod- ucts and services that we offer within their natural purchase journey. If knowing our customer’s intent is one side of the SEO coin, configuring it in such a way that search engine crawlers can find, under- stand, and highly rank our content in search results is the other. At CIB, we treat SEO as an ongoing activity. The continuous optimization ensures that search engines rank us as high as possible for customers looking for information online. SEO will not be limited to products and services, but rather be configured to extend to content related to our sponsorships, investor relations, and sustainability to capture customer traffic from prospects with aligned values and interests. Search Engine Marketing (SEM) is a campaign- by-campaign play as it simply involves paying for advertised search results. It is an effective tool but requires extended periods of time online. We will begin to more heavily invest in SEM than social media advertising given the better KPIs displayed from the traffic it generates. It is a main marketing channel when it comes to Always On campaigning and we will use it to complement SEO. Personalization The benefits of personalization become apparent when paired with well-targeted social media, and accurate behavior analytics. The same product can be marketed to multiple groups according to what will attract them, and when a customer lands on our site the narrative that captured their interest on social media will continue seamlessly, taking them from consideration, to evaluation and finally to action. Our customers will be targeted based on their online behavior and interactions with our new public website. Personalization will be implemented incre- mentally, with a period of data-gathering after the launch of the site to be able to generate insights into what areas of the site should be personalized and how. Personalization rules will then be strategized and implemented, one at a time, with enough time in between to analyze the impact of the change. CIB’s marketing strategies and resources have kept pace with these changes while adapting to external factors, the Bank’s objectives, and consumer behavior. 110 | Annual Report 2020 2020 Annual Report | 111 05 Our Controls 3 Divisions make up CIB’s control structure: Risk, Compliance, and Internal Audit 112 | Annual Report 2020 CIB’s CONTROL FRAMEWORK is central to ensuring the independent and objective oversight and assurance needed to secure clients’ financial wellbeing as well as the Bank’s. 0105050505Our Controls Risk Group The Risk Group (RG) provides independent risk oversight and supports the Enterprise Risk Management (ERM) framework across the orga- nization by managing different types of financial and non-financial risks. The Group proactively assists in recognizing potential adverse events and establishes appropriate risk responses to proactively manage expected and unexpected losses. The framework works to identify, measure, monitor, and control risk exposure against limits, levels, and promptly appetite, and tolerance reports to senior management and the Board. The Group is managed by the Chief Risk Officer (CRO), and reports to the Board Risk Committee (BRC) to ensure independence. CIB’s Risk Group oversees five main departments: • Credit and Investment Exposure Management • Consumer and Business Banking Risk • Enterprise Risk Management • Restructuring and Recoveries of Distressed Assets • Credit Information and Reporting Lines of Defense Three Lines of Defense Business Line Management Independent Risk, Legal and Compliance Independent Audit The Bank applies the Three Lines of Defense model: The first line includes all business and operations functions responsible for identifying and managing risks inherent in activities. The second line includes the Risk, Compliance, and Legal departments respon- sible for setting frameworks and regulations, as well as monitoring and reporting on their execution, management, and control. The third line includes Independent Audit department that provides an independent assessment of the entire process. The Bank embeds risk management its strategy-setting, budgeting, and performance management, providing management with the information needed to adopt appropriate strategies and enhance decision making. into A comprehensive set of risk management policies (including limits), processes, and guides is in place to cover all material risks, and is regularly updated to be in line with the Bank’s strategy, CBE regula- tions, and international best practices. All policies, procedures, and/or guides are annually reviewed and duly approved. 2020-2021 Highlights and Forward-looking Strategy During the height of the COVID-19 pandemic, Risk Group focused on maintaining a resilient profile and keeping exposure within acceptable levels, while sustaining a healthy profitability ratio. The Bank proactively conducted stress testing to assess unexpected losses, and the Risk Group undertook a number of initiatives that included provisioning to the most affected sectors, as well as the recogni- tion of other risks that may continue in the ‘new normal’ environment. Balance Sheet Risks Liquidity ratios remained within acceptable levels. Local currency (LCY) liquidity ratio reached 56.18% against the CBE’s 20% limit while the foreign currency (FCY) liquidity ratio reached 67.92% against the CBE’s 25% limit. Furthermore, the Bank’s Liquidity Coverage Ratio (LCR) remained steady at 1,359%, and the Net Stable Funding Ratio (NSFR) recorded 251%. The Interest Rate Risk in the Banking Book (IRRBB) remained at acceptable levels and allowed the balance sheet to benefit from a volatile interest rate environ- ment. In 2021, the Bank is expected to maintain a healthy balance sheet, supported by dynamic growth and the ongoing realignment of the funding strategy. Credit Risks During 2020, and in light of the COVID-19 outbreak, the Risk Group diligently monitored the Bank’s portfolio quality to ensure prudent impairment 1,359% LCR Dec. 2020 251% NSFR Dec. 2020 288.62% Total Coverage Dec. 2020 coverage, taking into consideration any adverse change in asset quality. • Institutional Banking: An extensive bottom-up assessment was conducted, which entailed the reassessment of industry risk profiles in industry grading models, and the measurement of early warning and qualitative factors. It also included stress testing of all corporate borrowers using early warning factors as proxies for declining business activity, with a primary focus on assessing financial solvency and debt servicing • Business Banking: As part of Egypt’s 2030 Growth Strategy, the Bank focused on growing 114 | Annual Report 2020 2020 Annual Report | 115 Our Controls // Risk Group the financing of small and medium-sized enterprises (SMEs), a core pillar of the Egyptian economy. Despite COVID-19 and its related chal- lenges, the Bank maintained the quality of its Business Banking portfolio, evidenced through Non-performing Loans (NPL) of 1% of the total portfolio and 2.9% of the unsecured portfolio and portfolio growth from EGP 2 billion in 2019 to EGP 3.3 billion in 2020, with companies served now up to 3,350 versus 2,942 in 2019. • Consumer Banking: Households were rendered vulnerable to the potential short and long-term economic impact of the pandemic, consequently affecting the debt repayment capabilities of customers. Therefore, comprehensive portfolio analysis and stress testing have been conducted to better estimate the impact of the situation and ensure adequate provisioning. The Consumer Risk department was also able to support the business in pursuing targeted portfolio growth levels through rolling out multiple credit param- eter rationalizations and programs. The Group’s primary view in 2021 is to support quality businesses in the coming cycle, as they benefit from potential market recovery while becoming resilient to market disturbances. The specific guidelines recommended are to continue to adopt financing schemes that allow close moni- toring of asset conversion cycles, enhance asset protection through earmarked controls/supports with proper margins, and emphasize portfolio monitoring through top-down assessments and early warning models. • Operational Risk: The comprehensive frame- work is a set of interrelated tools and processes that are used to identify, assess, measure, monitor, and remediate the Bank’s operational risks. The main measurements include opera- tional/conduct risk events management, Risk and Control Self-Assessments (RCSA), Key Risk Indicators (KRIs), control testing analysis, and Operational Risk Assessment procedures (ORAP). • Technology Risk: The framework was enhanced to cover the assessment of six main domains that include cyber security, information security, IT resilience, third-party, IT project execution, and IT control assurance. • Model Risk: The Bank carried out several initia- tives including applying an organization-wide procedure, conducting an annual inventory and documentation process for all models, enhancing risk appetite statement and thresholds, and inde- pendent validation. • Fraud Risk: Improved controls were introduced in response to the expected increase in attacks involving cards and internet banking through ‘Phishing’. The fraud management team moni- tored transactions 24/7 through a set of specific rules; and their triggers were regularly reviewed and modified to track any real-time attacks. The Bank also continuously conducts fraud aware- ness campaigns with customers and employees through various channels. • Third-Party Risk: An organization assessment was conducted to improve coverage of the impact of third-party risks on the Bank’s activities and business continuity during the pandemic, as well as assess readiness to meet unexpected risks. Non-Financial Risks During the pandemic waves and lockdown, the Bank continued to enhance its governance, processes, systems and controls to mitigate potential losses arising from non-financial risks as follows: As global losses continue to accelerate for non- financial risks and trends continue to shift due to COVID-19, the Bank will continue to enhance a comprehensive framework with a focus on tech- nology, vendor, and model risks in 2021. Enhanced Technology and Automation During the COVID-19 lockdown in 2020, technology played an important role in enabling business conti- nuity, and accordingly the Bank revised and prioritized its risk projects. In 2021, critical transformation projects will commence with Corporate Lending by migrating the entire lending cycle to an electronic solution. The Risk Group will also build up scalability and efficiency by leveraging on consumer transformation projects and customer behavior as main drivers to support busi- ness growth and maintain a healthy portfolio quality. Business Banking will also initiate automation of end-to- end workflows to provide superior customer experience. Digital Financial Inclusion A robust risk strategy as well as lending criteria will be developed to address untapped segments, in line with the Bank’s business strategy and the CBE’s directives in order to increase the penetra- tion rates of underserved and unbanked segments and provide access to instant decision-making and customer experience. Risk Culture The Bank continues to promote a strong risk culture, where employees of all levels are engaged and empowered. The Risk Group conducted aware- ness sessions for employees using platforms that include e-learning and virtual trainings. In 2020, the Risk Group diligently monitored CIB’s portfolio quality to ensure prudent impairment coverage, taking into consideration any adverse change in asset quality. 4.27% Default Dec. 2020 116 | Annual Report 2020 2020 Annual Report | 117 Our Controls Compliance Group CIB’s independent Compliance Group is respon- sible for endorsing a culture of ethical conduct. The Group proactively drives bank-wide compliance by establishing policies, programs, and procedures that guide our employees to make sound business deci- sions while adhering to applicable laws, regulations, and requirements. The Group operates through an integrated compliance risk management framework, with the strategic objective of protecting CIB through the provision of guidance, training, and advice to our stakeholders as well as promoting accountability for managing compliance risk in accordance with global standards and best practices. As CIB continues to create one success story after another, our commitment to ethical and professional practices becomes exponentially more important. Our culture is not only shaped by the Bank’s vision, mission statement and strategic objectives; it is defined by how we streamline those core values in who we are and what we believe in as CIBians. Our shared vision is that compliance risk management is the responsibility of all CIBians. Our principal role is to exhibit responsible business behavior that is aligned with the highest ethical standards and is in the interest of our clients, employees, shareholders, and community. 2020 Highlights Tone from the Top With the world making its way through the COVID-19 pandemic, our core values and integrity are being tested now more than ever. As a way to further embed our ethical beliefs into our business culture, the Compliance Group founded the Tone from the Top campaign. The campaign is sponsored by CIB’s executive and senior leadership, and is a reflection of the Bank’s continued emphasis on its compli- ance culture, raising awareness, and reinforcing our shared responsibility in managing compliance risk. The Tone from the Top campaign includes internal communication and bulletins, with a focus on compliance as an integral part of how we do business. Financial Crime Combating Program The Financial Crime Combatting (FCC) Program is an integral part of the CIB Compliance Program. The FCC team is tasked with the overall management and effective implementation of standards, policies, and procedures that safeguard CIB’s local and global community against financial crime. Consequently, the Compliance Group has imple- mented structural and infrastructure enhancements to ensure the FCC team is equipped with the neces- sary independence, manpower, and technology. Our FCC program deploys all possible best prac- tices and international standards to guarantee we can combat the risk of money laundering and terrorist financing. The program is founded on three main pillars: 1. Prevention: This primary step comes during the onboarding stage of potential customers and during important transactional engage- ments. Through our Know Your Customer (KYC) program and the utilization of state-of-the-art risk scoring, customer compliance risk level is preemptively defined. This provides CIB with the insights required to act proactively against the risk of money laundering and terrorist financing. 2. Detection: We monitor our portfolio on an ongoing basis for financial crime risk. Using data analytics, the portfolio is regularly scanned. We also ensure that specific transactions are auto- matically detected and monitored. Detected suspicions are investigated independently by the FCC team to ensure proper diligence is enacted. 3. Reporting: It is our responsibility to track, investigate, and report any suspicious activities and/or transactions. Sanctions Program CIB conducts business in full compliance with all applicable local and international sanctions. To that end, we maintain a robust Sanctions Compliance program that applies to customers’ diverse engagements. Our program is structured to fully adhere to local sanctions requirements included in the Egyptian Money Laundering Combating Unit Sanction Lists as well as global sanctions requirements proposed by organiza- tions such as the United Nations, European Union, Office of Foreign Assets Control, and the Financial Conduct Authority. Required procedures are in place to ascertain that we are continuously kept abreast and in compliance with the increasingly dynamic and ever-growing sanctions requirements. Our Sanctions Compliance team drives our organization when it comes to the design of policies and procedures that incorporate robust control measures to ensure full compliance. They also lead the efforts in employee awareness raising when it comes to sanctions compliance. Customers’ Rights Protection Program CIB has always held customers’ interest as one of our top priorities. To that end and in light of the CBE’s Customers’ Rights Protection guidelines, CIB established the Compliance Customers’ Rights team. Its strategic objective is to lay the foundation necessary to safeguard customers’ rights. The team is responsible for transparency and disclosure; safe keeping confidentiality and information secrecy; handling customers’ complaints and spreading awareness and financial literacy to customers. The department works in tandem with other busi- ness, support, and control functions to guarantee customers receive financial services and solutions that serve their needs, provided with transparency and full disclosure at every interaction. Compliance Monitoring and Control Program We believe in having a hands-on approach to complement our advisory and oversight role. As such, as part of the CIB Compliance Group, the Internal Control Management and Compliance Monitoring and Testing teams have the strategic objective of taking the pulse of the compliance program, assuring the program’s ongoing health and providing independent assessments of the compliance and control environment. The teams act as an independent testing arm while managing the role of process control oversight as part of the second line of defense. The teams also lead the Bank-wide Compliance Risk Assessment and design and implement risk-based reviews to provide assurance related to compliance and controls at an organizational level. Analytics for Compliance The Compliance Group has several ongoing projects that capitalize on the innovative technical solutions, digitalization initiatives and the wealth of data and analytics available at the Bank. The Group is currently at different stages of driving the automation of high-risk compliance processes, machine-learning and the enhancement and unifi- cation of our processes. One of our main focus areas is enhancing the process of transaction monitoring through automation and machine learning with the ultimate aim of improving the efficiency of the process and ensuring that trends are accurately identified and managed. As the face of regulatory and compliance land- scape continues to progressively change, analytics continues to be our strongest asset and the only way we can maintain the flexibility required for compliance. Based on this, the Group established an Analytics team who will work closely with 118 | Annual Report 2020 2020 Annual Report | 119 Our Controls // Compliance Group respective data and technology teams to provide data-driven insights and assist in taking strategic decisions related to compliance risk scoring, risk evaluation, automation, and process enhancement. They will also be heavily involved in our regulatory reporting requirements. Knowledge and People We believe a true compliance and conduct culture can only be achieved through our employees. Despite the exceptionally challenging circumstances imposed by the COVID-19 pandemic and the conversion to hybrid and flexible working arrangements, the team has worked closely with the Learning and Development team to ensure that our people continue to be reminded of our responsibility toward all stakeholders. Through e-learning and virtual classrooms, CIB staff and outsourced employees have been trained on different compliance-related topics including Through e-learning and virtual classrooms, CIB staff and outsourced employees have been trained on different compliance-related topics including Financial Crime Combatting, Sanctions, FATCA requirements and Customers’ Rights Protection. Financial Crime Combatting, Sanctions, Foreign Account Tax Compliance Act (FATCA) requirements, and Customers’ Rights Protection. During 2020, we also chose to disseminate key messages through campaigns focusing on raising awareness. With focus on different areas, ‘Suspicious Activities and Red Flags’ and ‘Financial Crime’ have been selected as our topics of choice for this calendar year. Commitment to our Regulators As we embrace our compliance and controls culture, focusing on our relationship and engage- ment with our regulators is key. To that end, we have expanded the role of the CBE Relations team to now include two new teams: the Regulatory Affairs team and the Advisory Compliance team, together creating the Regulatory Compliance division. The division will work collaboratively with our regulator and CIB business partners to ensure a seamless and structured communication process, common understanding and proper and swift implementation of requirements. The team also works closely on coordinating efforts with our colleagues to ensure we provide proper focus to our regulatory reporting commitments and that the process is designed with agility and capital- izes on data and analytics. The team consistently makes sure that the regulatory reporting processes are accurate and up to date. Egypt’s MENA FATF Visit Recently, Egypt has undergone an assessment by the Middle East and North Africa Financial Action Taskforce (MENA FATF). The assessment covered several key compliance risk indicators including to Ultimate policies and procedures related Beneficial Owner identification and (UBO) on-boarding, KYC updates, Risk Classification, Transactions Monitoring and Reporting. The MENA FATF team acknowledged that the CIB Compliance team have demonstrated the required level of understanding for FATF recommendations and associated risks and praised CIB’s process and its control design. Our Footprint in Africa - Mayfair CIB Bank Limited In April 2020, CIB acquired 51% of Mayfair Bank in Kenya (now Mayfair CIB Bank Limited) in line with CIB’s direction towards expanding its footprint in Africa. The Compliance Group has since been working diligently on fulfilling and securing all the necessary regulatory approvals, conducting required due diligence and compliance risk assessments, aligning the regulatory requirements, and fulfilling any mandates for these types of transactions. A significant step was the completion of our FATCA requirements and fulfilling the ensuing registrations as a lead financial institution. We are also working closely with our colleagues in Mayfair CIB Bank Limited to review and align the compliance policies and procedures in addition to exploring and assessing the regulatory and compli- ance landscape in Kenya. This is to ensure full alignment and synergy between the respective teams when it comes to the compliance and control culture. 2021 Forward-Looking Strategy As we look forward to another successful year in 2021, we embrace our responsibility to continuously work on reinforcing our compliance and controls culture. Our commitment to our stakeholders is to continue being rigorous when it comes to ethical behavior and decision-making. We will continue to advocate this culture with a conviction that this is the responsibility of each and every CIBian. We will also continue to invest in our compliance infrastructure to ensure we have the required tech- nological solutions that provide us with agility and capability to comply at all times and adjust promptly to the ever-changing regulatory and compliance landscape. The Compliance Group’s principal role is to exhibit responsible business practices aligned with the highest ethical standards in the interest of our clients, employees, shareholders, and community. 120 | Annual Report 2020 2020 Annual Report | 121 Our Controls Internal Audit 2020 Highlights Due to the onset of the COVID-19 pandemic, 2020 was an exceptional year. As a consequence of the pandemic, IAG adjusted its methods to ensure the continuity of its services by stressing the use of the remote audit practices. Furthermore, cybersecurity was given noticeable attention due to the conse- quent dramatic changes, which then necessitated a continuous evaluation for the reliability and security of the Bank’s work environment. 2021 Forward-Looking Strategy IAG’s 2021 strategy takes into consideration the Bank’s digital transformation and further relies on big data in IAG’s analytical processes. This should allow the division to maintain its swift and focused support to CIB’s management. The role of the Internal Audit Group (IAG) is to provide independent and objective assurance and consulting activities to its stakeholders. IAG adds value and improves the bank’s operations by helping it accomplish its objectives, through a systematic, disciplined approach, to evaluate the effectiveness of the Governance Process, Enterprise Risk Management and Controls. CIB’s Audit Committee is responsible for overseeing IAG’s activities, including the approval of its charter and safeguarding its independence as the third line of defense. IAG’s main pillar is its employees, who are chosen based on their professional expertise. The team is pushed to leverage their own profes- sional skills and know-how and are frequently invited to attend technical training programs and international conferences. In accordance with international practices, IAG along with the Bank’s Analytics and Data Management team, use a systemic analytical approach to imple- ment a monitoring mechanism to detect early warning signals. 122 | Annual Report 2020 2020 Annual Report | 123 06 Responsible Banking 5 SDGs in our focus 124 | Annual Report 2020 CIB’s commitment to creating SHARED VALUE is the guiding post of its sustainability and responsible finance strategy. 0106060606Responsible Banking Sustainable Finance: A Strategy for Responsible Growth CIB’s journey has been distinguished by its power to link business growth to its quest to advance the wider ecosystem surrounding it. This has found expression in embracing sustainability to achieve stakeholder value creation, from employees to clients, regulators, shareholders, the wider community, and the environ- ment. The Bank believes that to grow, it must promote the growth of all elements of life around it. CIB under- stands that growth is achieved through a connection with its ecosystem and the planet at large. 2020 was a year of achievements for CIB on the sustainability front, since becoming a founding signatory of the United Nations Environment Program – Finance Initiative (UNEP-FI) Principles for Responsible Banking. The Bank continues to act as a domestic and regional influencer in promoting the UNEP-FI Principals for Responsible Banking, and has worked on all of the principles in the last year. 2020 also marked the Bank’s five-year anniversary for sustainability reporting. Since becoming one of the first institutions in Egypt to introduce sustainability reporting in 2015, CIB has gradually enhanced its commitment to sustainability across its business, integrating environmental, social, and governance (ESG) dimensions into its policies, procedures, operations, and culture. its fifth year of sustainability CIB celebrated reporting by launching a Sustainability Reporting Award, given to twenty participants from the 10th Egypt CSR Forum. Award recipients received free Global Reporting Initiative (GRI) Certified Training over a two-day virtual workshop. This is in line with the Bank’s strategy to increase sustainability educa- tion and spread awareness of transparent reporting. New Structure New Sustainability Governance In 2020, CIB embarked on a new chapter in its sustainability journey as a pioneer in Egypt’s banking sector. With the support of the Bank’s committed leadership and a clear vision to place sustainability at the forefront, CIB formally estab- lished a new sustainability governance framework. Sustainable Finance Steering Committee A cross-functional committee that includes Board and Executive Management representation, the Sustainable Finance Steering Committee’s mission is to establish, guide, empower, and monitor the Sustainable Finance Function, in line with CIB’s business needs and international best practices. The committee’s scope covers risk management, revenue generation, ecological footprint and sustainable finance initiatives and programs. It is mandated to endorse and formulate strategic sustainability frameworks, enable the implementation of sustain- ability systems, ensure stakeholder engagement, and oversee monitoring and reporting. Chief Sustainability Officer As part of the Bank’s move towards sustainable governance, CIB was the first institution in Egypt to appoint a Chief Sustainability Officer, who now heads the new Sustainable Finance division. Sustainable Finance Division CIB became the first Egyptian bank to launch a Sustainable Finance division. The new division will ensure the centrality of sustainability as a core business strategy, and provide a solid platform for the integration of sustainability, and environmental, social, and gover- nance (ESG) principles across the Bank’s functions. Sustainability Strategic Network The Sustainability Strategic Network is a cross-func- tional, multi-stakeholder organizational structure that includes key representatives from across the Bank, linking functions and departments together. This structure will embody a knowledge-based and action-oriented network, focused on advancing broadly articulated sustainability issues. The struc- ture will be an integral component of the Bank’s sustainability governance structure, as it ensures an inclusive and participatory approach to embed sustainability within CIB. Policy and Framework Architecture CIB has a clear and comprehensive sustainability infrastructure in place that aligns with national and global frameworks and standards, and rein- forces the Bank’s environmental, social, and governance commitments. Climate Change Green Finance: The First Green Bond in Egypt CIB acknowledges the key role that financial insti- tutions play in economic development, given their ability to allocate monetary resources to compa- nies engaged in diverse economic fields, as well as to private individuals. As such, the Bank aims to contribute to the development of the green bond market, as it represents another milestone in its sustainable finance journey. As the leading private sector bank in Egypt, and in the context of its commitment to advancing sustainable finance, CIB took solid steps during 2020 to issue Egypt’s first corporate Green Bond, aiming to finalize the issu- ance during the second quarter of 2021. The Green Bond serves as the latest addition to a suite of environ- mentally beneficial products to leverage capital market fixed income instruments and fund adaptation and migration measures. The Bond’s proceeds will observe UN Sustainable Development Goals (SDGs) number 6, 7, 9, 11, and 13, which fall within the materiality of CIB. Measuring Climate Risk: First Bank in Egypt to join the Taskforce for Climate Related Disclosures (TCFD) CIB is the first bank in Egypt to join the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD was established in December 2015 by the Financial Stability Board (FSB) with the goal of devel- oping recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, in order to provide deci- sion-useful information to investors, lenders and other stakeholders. The TCFD aims to encourage sustain- able investments so as to build a resilient economy in the face of climate-related uncertainties. 126 | Annual Report 2020 2020 Annual Report | 127 Responsible Banking // Sustainable Finance Measuring Business Impact Credit and Debit Card Product – Life Cycle Assessment In 2020, CIB was the first bank in Egypt and the MENA region to undertake a card product life cycle assessment initiative. The project aims to analyze the environmental impact of the credit and debit cards from initiation as raw materials until their decom- position. The life cycle analysis (LCA) is performed according to ISO 14040 using a powerful modeling and simulation software that allows for detailed and reliable insights for calculation and analysis. Environmental and Social Impact Assessment of SMEs CIB, as partner to its borrowing SMEs, acknowl- edges the opportunities resulting from greening and diversifying such operations. Therefore, in February 2020, CIB initiated the Greening SMEs project, by conducting an Environmental and Social Impact Assessment with the following main objectives: • Baseline Assessment: Assess the environ- mental and social impacts of borrowing SMEs. • Mitigation Strategies: Develop strategies to reduce the environmental and social impacts of SMEs. • Environmental and Social Toolkit: Design and implement generic instruments to promote environmental compliance and sustainable business practices among different SME sectors. • Awareness-Raising: Promote green behavior among SMEs. Managing Ecological Footprint In 2021, CIB will further its measurement and produce an Ecological Footprint report, which widens its scope of assessment and tackles a wide range of environmental indicators that are key to the Bank’s stakeholders. Building on the Bank’s extensive carbon footprint assessment of all CIB branches, we have established seven carbon emission reduction targets for elec- tricity, refrigerant leakage, water, paper usage, aerial transportation, ground transportation, and waste generation. This has culminated in a total target of 10% GHG reduction by 2025, as compared with our baseline emissions in 2018. Resource Efficiency CIB works to measure, reduce, and improve its ecological footprint. Despite the increase in head- count and number of branches, the Bank successfully decreased its paper consumption in 2020 by 8% in comparison to 2019. The set target for total paper reduction in 2020 was 1%. System and Certifications CIB began implementing an Energy Management System (EnMS) at one of its head offices (SV2). The system integrates energy management into existing mechanisms, enabling the Bank to better manage its energy, sustain achieved savings, and continuously improve energy performance. It also combines best practices in project management, energy monitoring, and energy awareness, along with an energy policy that will govern CIB’s approach towards energy use and performance. CIB was also the first organization in Egypt and the first Bank in the Middle East to receive the ISO 41001 certification in 2020. This recognition shows CIB’s full adoption of the Facilities Management System developed by the International Organization for Standardization (ISO). The certification scope covers all the Bank’s premises and its related operations. Gender Empowerment Women are positioned at the heart of CIB’s employ- ment, services, and external initiatives. CIB has been at the forefront of women’s empowerment movements through pioneering innovative efforts that promote the financial inclusion and economic independence of women, to help them achieve socio- economic equality in Egypt. At CIB, we encourage public-private collabora- tions to foster inclusive economies and societies, and achieve sustainability goals. We believe that such partnerships create a platform for knowledge sharing, and further enables governments and institutions. CIB is one of the first two companies to acquire the Egyptian Gender Equity Seal in the private sector, obtained through a partnership with the National Council for Women and the World Bank. In tandem with efforts directed towards narrowing the gender gap in the workforce, the Bank aims to extend this experience to its corporate clients by creating facilities that promote women’s empowerment in the Egyptian market. It also encourages corporate clients to enhance female participation rates amongst their employees, senior management, and Boards of Directors. Moreover, CIB is Co-Chairing the World Economic Forum (WEF) Closing Gender Gap Accelerator, a national public-private collaboration model which enables governments and businesses to take deci- sive action towards closing economic gender gaps. Along with leading businesses and ministers, the Bank will lead the accelerator’s activities, shape its objectives and monitor its impact. The accel- erator focuses on four key objectives: preparing women for post COVID-19 work environments, closing gender gaps in remuneration between and within sectors, facilitating women’s participation in the labor force, and advancing more women into management and leadership roles. Community Development First Natural and Cultural House in Egypt CIB partnered with the United Nations Development Program (UNDP), the Egyptian Italian Environmental Project (EIEP), and the Ministry of Environment for the inauguration of the first open Natural and Cultural House in Egypt at Zewara Camp, at Wadi El Rayan Protectorate in the Fayoum governorate. Aside from its social, environmental, and economic positive impact, this project provides CIB with the opportunity to align its internal environmental initiatives with external community investment. 2020 Highlights Governance • Organizational structure that ensures compliance, growth, and innovation Sustainability Frameworks • First bank in Egypt to join the Task Force for Climate Related Financial Disclosures (TCFD) Sustainability Indices • CIB was included in the new Low Carbon Select Index in the Middle East and North Africa (MENA), recently launched by the Arab Federation of Exchanges (AFE) and the data provider Refinitiv • CIB Ranks 1st in the Egyptian Stock Exchange Sustainability Index for six consecutive years • CIB is included in the 2019 and 2020 Bloomberg Gender Equality Index • CIB is a constituent of the Financial Times Stock Exchange (FTSE) FTSE4Good Sustainability Index Gender Empowerment • First private bank to acquire Egyptian Gender Equity Seal • Co-Chair of the Closing Gender Gap Accelerator supported by the World Economic Forum (WEF) Environmental and Social Impact Assessment • First bank in Egypt to conduct a Debit and Credit Life Cycle Assessment • First bank in Egypt to conduct an Environmental and Social Impact Assessment on Borrowing SMEs Community Development • Funded the Establishment of the First Natural and Cultural House in Egypt 128 | Annual Report 2020 2020 Annual Report | 129 Responsible Banking Social Development 1.5% profits go toward the CIB Foundation CIB took a leading role in numerous community development efforts due to the pandemic. As Egypt’s leading private sector bank, CIB strives to create a positive impact on the local commu- nity. Accordingly, it has undertaken a number of initiatives to promote inclusive and sustain- able development across the country, as well as provide support to underserved segments of the community through the Bank’s corporate social responsibility program, the CIB Foundation, and its dedication to supporting Egyptian squash champions. Although 2020 witnessed a lighter schedule of external events and sponsorships due to the outbreak, the Bank was an active sponsor in some of the events prior to COVID-19, such as the BT 100, Climate Neutrality Dialogue, and African Footballer of the Year 2019. potential employees in an informal setting while also giving jobseekers the opportunity to learn more about CIB and the opportunities available. Corporate Social Responsibility Corporate social responsibility (CSR) is at the heart of CIB’s core values. This year, we imple- mented various CSR projects and supported initiatives carried out by other organizations. We diversified our community development activi- ties by expanding our scope to include sports, fine art, culture, and social welfare. CIB took a leading role in numerous community development efforts due to the pandemic. Believing that healthcare is integral to community growth, it was necessary to support different initiatives not only in Egypt but also in Africa; at the onset of the COVID-19 outbreak, CIB donated USD 2.5 million to support the national project of buying 100 RT-PCR detec- tion kits to enhance the existing COVID-19 testing capacity across Egypt. CIB also participated in a Federation of Egyptian Banks initiative, in coordi- nation with the CBE, donating EGP 80 million to support households and businesses impacted by the preventative measures. The Bank donated an additional EGP 1.6 million to support 10,000 fami- lies whose incomes were affected by the pandemic under a project launched by the Food Bank NGO called the #GoodChallenge. CIB also supported several other smaller domestic healthcare projects/ initiatives, supporting the El Nidaa Foundation to build a local face mask production factory in Upper Egypt, in addition to its donation to the Waqfeyat al Maadi Community Foundation to support daily workers to work from home. CIB also took part in AUC’s virtual employment fair, AUC’s Engagement Fair, and the UCCD Virtual Career Fair, allowing the organization to meet As we start our expansion plans beyond our borders and venture into Africa, we must become a more effective global citizen by showing solidarity with the continent that we all call home. In an effort to do so, USD 250,000 was donated to the African Union COVID-19 Response Fund, as well as another USD 100,000 to the Kenya COVID-19 Response Fund. Social Activities KidZania Since the founding of their partnership in 2013, CIB has organized several annual trips to KidZania for underprivileged and special needs children, and children with health conditions. The trips provided children with a fun setting in which they learned about different banking operations, such as debit cards, issuing cheques, and depositing and withdrawing money using KidZania’s official currency, Kidzos. Autism International Day/ADVANCE The Bank continued its sponsorship of the Egyptian Advance Society for Persons with Autism and Other Disabilities (ADVANCE). A number of activities took place in April, dubbed Autism Awareness Month, including the virtual Annual Autism Conference and the virtual Art Exhibition for Children and Youth with Autism Spectrum Disorder. Beena Beena, a protocol signed between CIB and the Ministry of Social Solidarity, encourages active youth participation in the community and monitors the development of social care services. The Bank has been the main partner and financial sponsor of Beena for five consecutive years. This initiative successfully attracted thousands of youths around Egypt who volunteered with orphans, senior citi- zens, and individuals with special needs. CIB Foundation The CIB Foundation is a non-profit organization dedi- cated to enhancing pediatric healthcare services in Egypt and having a positive, life-changing impact on the country’s youth. Following a decade of responsibility concentrated corporate activities, CIB established the Foundation in 2010 to move away from the mainstream charity model and towards an approach that focuses on insti- tuting sustainable long-term projects for Egypt’s most vulnerable communities. social Through an annual commitment of 1.5% of CIB’s net annual profit, the Foundation concentrates on providing health and nutrition services to underprivileged children, specifically focusing on those who lack access to quality healthcare. The Foundation works with well-established healthcare partners who have an extensive outreach to ensure that the allocated funds yield positive and sustain- able results, and that the children receive the care they need to lead healthy and productive lives. The CIB Foundation does not regard itself as merely a donor organization, but an active partner in all of its projects. Monitoring the progress and ensuring the timely completion of projects is a pivotal cornerstone of the Foundation’s work. Its diligence has allowed the Foundation to gain prominent recognition over the years. Approved Projects in 2020 57357 Fighters On the grounds of its longstanding partnership with the Children’s Cancer Hospital 57357, the Foundation allocated EGP 30 million to establish the Digital Pathology Lab at the hospital. The Lab will use a 130 | Annual Report 2020 2020 Annual Report | 131 Responsible Banking // Social Development computer-based technology to generate information from digitized specimen slides. The specimen glass slides (conventional) are converted into digital slides that can be electronically shared and analyzed using a computer software. This piece of technology will increase diagnosis efficiency by rendering faster results and reducing human error. The automated lab is expected to benefit approxi- mately 7,000 children annually. A Journey of Hope In collaboration with the Nile of Hope Foundation, the CIB Foundation established a pediatric radi- ology department in the hospital. For its part, the Foundation purchased a closed MRI machine (1.5T) for a total of USD 1.29 million. The MRI will assist in detecting and inspecting children’s congenital anomalies syndrome, a structural or functional defect present at birth that may lead to physical or mental disabilities. This project is expected to scan approximately 4,000 children annually. A Journey of Healing The Foundation Board allocated EGP 11.77 million in April 2020 to outfit the pediatric department in the Shifaa Al-Orman Hospital in Luxor. The new department allows children to receive the required treatment without the need to travel long distances. This department fills a gap in Upper Egypt’s healthcare services, where there are limited specialized centers for treating pediatric cancer patients. The commute is not only considered hazardous for the patient, but also a great financial burden on the families. The pediatric department expects to serve around 900 children annually. Our Differences...Our Strength In line with the Foundation’s commitment to supporting children with special needs, the CIB Foundation allocated a budget of EGP 5.55 million to the outfitting of five clinics and rehabilitation centers for cerebral palsy, and audio and mental measurement in Cairo, Giza, and Helwan. This project is expected to serve approximately 1,000 children annually. The Right to Live Upright In collaboration with the Assiut University Hospital, CIB Foundation will fund the establishment of a specialized center in treating children with spine problems and deformities. CIB Foundation allocated EGP 4.48 million for the purchase of high-quality surgical equipment to replace the existing devices that do not adequately monitor the neurological functions. With the new equipment, the hospital will be capable of serving 104 children annually. Touch of Hope Building on the previous successful collaboration between the CIB Foundation and Sporting Students Hospital, the Foundation allocated EGP 3.88 million to establish an advanced pediatric cardiac operating room with a capsule system. The room is expected to enable the hospital to operate on 288 children annually while guaranteeing the highest standards of sterilization and hygiene. It will also enable the hospital to perform minimally invasive and highly advanced surgeries with the utmost accuracy, in accordance with international standards, while decreasing the number of children on the waiting lists for open-heart surgeries. Children Without Risk The Board approved EGP 3.94 million to outfit a Pediatric Intensive Care Unit in Mabara El Maadi Hospital in collaboration with the Garden City Cosmopolitan Lions Club. The Lions Club financed the construction and finishing works of the unit. The Foundation’s role centers on outfitting the unit with the latest medical equipment. The hospital services large numbers of patients in the Maadi area and the surrounding district. Egypt suffers from an acute shortage of around 32% in ICU beds, particularly in pediatric units. The overall purpose of the project is to provide healthcare to children who suffer from medical complications. The unit is expected to serve approximately 800 children each year, and aims to contribute to the reduction in child mortality and treat diseases that may cause permanent damage and/or disability. Strong Hearts...Stronger Future Building on the longstanding partnership between Magdi Yacoub Foundation and the CIB Foundation, the Foundation allocated EGP 20 million to fund 100 pediatric open-heart surgeries and purchase cath lab consumables for 350 children. According to the data from the Aswan Heart Centre, the center performs around 4,000 surgical and cardiac procedures annually. Gift of Life In light of the successful collaboration between CIB Foundation, Rotary Club of Giza Metropolitan, and El Kasr El Eini Hospital, the CIB Foundation allo- cated EGP 4.5 million to fund the third round of 100 open-heart surgeries to be performed in El Kasr El Eini Hospital to reduce the number of children on the waiting lists and alleviate some of the financial burden on the hospital. Super Smile The CIB Foundation allocated EGP 1.25 million to fund 50 cleft lip and cleft palate surgeries in Ain Shams University Hospital. The choice of surgeries came after Rotary District 2451 found that these congenital defects are particularly evident in Upper Egypt. Rotary District 2451 will be in charge of selecting the candidates, as well as supervising and following up on the procedures. Diabetic Heroes The CIB Foundation allocated EGP 370,000 for the Medicine for All Foundation to fund the purchase of medications for 250 underprivileged diabetic children for one year, to be distributed on a monthly basis. The Medicine for All Foundation is a specialized NGO in the field of medicine and therapy devices that provides services for underprivileged children suffering from chronic diseases such as brain atrophy, diabetes, and dwarfism. Children’s Right to Sight Program The CIB Foundation allocated EGP 929,000 to cover 176 surgeries as part of the Children’s Right to Sight 7,000 children benefit from 57357’s Digital Pathology Lab 1,000 children benefit from the Our Differences...Our Strength program (CRTS) program, in collaboration with the Kasr El Nile Rotary Club, to help eradicate the causes of blindness in children and infants. Their Care…Our Responsibility As part of the Foundation’s longstanding partnership with the Yahia Arafa Children’s Charity Foundation, the Board allocated EGP 6 million to fund the annual operating costs of five pediatric units in the Ain Shams University Hospital, supervised and managed by the Yahia Arafa Children’s Charity Foundation. The units are a congenital heart defect unit, pediatric heart surgery unit, women’s obstetrics hospital’s neonatal unit, children’s hospital’s pediatric surgery unit, and the children’s hospital’s neonatal unit. The Board also allocated EGP 3 million for equipping the units, which will serve around 14,500 children annually. Going Miles for Their Smiles As part of the CIB Foundation’s mandate to support children in need, the Board allocated EGP 1.85 million to support FACE for Children in Need’s annual operating costs, to cover a part of the medical services and care provided to orphans at the Maadi Home Center. 132 | Annual Report 2020 2020 Annual Report | 133 Responsible Banking // Social Development FACE for Children in Need is an NGO aiming to assist and protect orphans, abandoned children, and street children. FACE’s mission is to create a world in which deprived and vulnerable children in Egypt receive protection, love, and education, and help them tran- sition into adulthood. For a Better Childhood The Board approved a budget of EGP 1.91 million to fund 50% of the annual operating costs of the pedi- atric and neonatal ICU sections of Benha University Hospital, which serve about 3,500 children in the Qalyubia region annually. The funding will ensure the sustainability of the project and maintain the highest level of care provided to the children. A Warmer Winter In 2020, the Foundation allocated EGP 8 million to fund its seventh collaboration with the Egyptian Clothing Bank to provide winter clothing to under- privileged children, especially in rural areas, across all 27 governorates. The need for winter clothing has been rising for the past few years due to weather fluc- tuations and low temperatures. One Heart CIB Foundation allocated EGP 10 million to cover 100 pediatric open-heart surgeries to reduce the number of children on the waiting lists and alle- viate some of the financial burdens of the hospital. The hospital, which is managed and operated by Al Joud Foundation, is located in Shubra El Kheima and operates in line with international standards. The hospital offers its services free of charge to the underprivileged. For a Better Eyesight The Board allocated EGP 3.07 million to support the establishment of a pediatric ophthalmology center. The fund will be directed to outfit the outpatient clinics. The project helps eradicate the causes of blindness in children and infants. Moreover, the outpatient clinic enables the Institute to provide specialized services tailored for children, as currently they are diagnosed and treated with adults. The center will extend its services to 12,000 children a year from suburban areas in Giza, Upper Egypt, and the Delta region. Ongoing Projects The money will be utilized to produce 50,000 winter training suits and 50,000 pairs of shoes, to be distrib- uted to children in underprivileged areas across Egypt. Private Sector Alliance Against COVID-19 The CIB Foundation allocated EGP 5 million to support the AmCham Private Sector Alliance Against COVID-19, in collaboration with UNICEF Egypt. The fund will be directed to purchasing PPE for medical staff in health units nationwide. For a Better Life Building on its longstanding partnership with the MOVE Foundation, the Board approved EGP 1.39 million to cover 50% of the annual operating costs of the Foundation. The operating costs will enable the MOVE Foundation to provide free services to 100 children in need. The annual operating costs cover staff salaries, maintenance work, children’s transpor- tation, stationery expenses, as well as utility bills. 57357 Fighters 390 Infusion Pumps and 216 Syringe Pumps Building on its longstanding partnership with the Children’s Cancer Hospital 57357, the Foundation allocated EGP 20 million in 2019, which helped the hospital acquire an integrated system that connects, manages, and monitors infusion and syringe pumps during chemotherapy sessions. This is crucial, as each patient requires a minimum of two syringe and infusion pumps per session. The Foundation will purchase 390 infusion pumps and 216 syringe pumps, as well as auxiliary equipment. This project is expected to benefit more than 18,500 children annu- ally. The entire project amount was disbursed over two installments in 2020. Operating Costs The Foundation also allocated EGP 4 million to support the hospital’s operations in funding key segments in the Cairo and Tanta branches. The segments include pathology, blood banks, radiology laboratories, medica- tion, radiotherapy, nuclear medicine, and supplies. The amount was fully disbursed in 2020. Children Without Virus C Program In collaboration with the Egyptian Liver Care Society, the Foundation dedicated over EGP 5.1 million to fund the Children Without Virus C Program. The fund covers medications, blood tests, X-rays, medical staff training (doctors and nurses), and awareness sessions for infected children and their families. Since the program’s inception, a total of EGP 2.72 million was disbursed, EGP 1.01 million of which was disbursed in 2020. For a Better Life Building on its longstanding partnership with the MOVE Foundation, the Board allocated EGP 1.2 million to cover the operating costs of the organi- zation for one year to help accommodate children seeking support from the MOVE Foundation. This fund is expected to cover costs to provide care for 100 children with cerebral palsy. The MOVE Foundation has positively impacted the lives of approximately 250,000 children with cerebral palsy living in Egypt since its establishment in 2004. The fund was fully disbursed in 2020. 6/6 Eye Exam Convoys In April 2019, the Board allocated EGP 21.57 million to fund the deployment of 100 medical convoys to provide free eye examinations to 80,000 students in underprivileged primary schools in the Beni Suef and Minya governorates. In addition to the exams, a personal hygiene and ophthalmic health awareness campaign was launched. The children also received a backpack with a hygiene kit, coloring books, and colored pencils. This initiative was launched in collaboration with the Gozour Foundation for Development, a CIB Foundation partner since 2012. To date, the CIB Foundation has sponsored a total of 441 convoys, benefiting around 301,000 students in more than 20 governorates. The fund was disbursed in full in 2020. The CIB Foundation allocated EGP 5 million to support the AmCham Private Sector Alliance Against COVID-19, in collaboration with UNICEF Egypt. Strong Teeth…Better Health Pediatric Dentistry Clinic The Foundation allocated EGP 7.5 million in 2018 to fund the purchase of equipment and supplies for the Pediatric Dentistry Clinic in El Kasr El Aini. The amount also covers expenses for the establishment of another clinic in Sheikh Zayed to further the services available to children, including those with special needs. The clinic treats more than 95,000 children each year and is one of the country’s few providers of dental services for children with special needs. The fund was fully disbursed during 2020. Maxillofacial Unit The CIB Foundation increased the allocated funds from EGP 45,000 to EGP 90,000 to support the oper- ating expenses of the maxillofacial unit, due to the hikes in the prices of materials and consumables. In April 2019, the Foundation allocated another EGP 90,000 to replace the malfunctioning sterilization device in the unit. The CIB Foundation paid the full amount to the supplier after delivery in 2020. 134 | Annual Report 2020 2020 Annual Report | 135 Responsible Banking // Social Development The Maxillofacial Unit provides treatment for children across the country, and is one of the few providers of specialized procedures. Before the center’s establishment, children were treated in the general prosthodontics area with adults. Our Kids Our Future The Board approved the allocation of EGP 4.1 million in April 2019 to fund a project in partnership with the Ibrahim A. Badran Foundation, which deployed 48 medical convoys in Fayoum’s underserved regions. The convoys offer medical services through a team of qualified doctors in various disciplines who will extend medical services to 30,000 children each year. The final installment was fully disbursed in 2020. Kids on Wheels In line with the Foundation’s commitment to supporting children with special needs, the Board allocated EGP 4 million to provide 100 children with wheelchairs in cooperation with the Al-Hassan Foundation for Differently Abled Inclusion in April 2019. Three installments worth a total of EGP 3 million were disbursed to fund the costs of 75 German wheelchairs, designed for permanent child users. For a Better Childhood In April 2019, the CIB Foundation allocated EGP 12.4 million to Benha University Hospital to equip it with 40 incubators and 10 pediatric ICU beds with their auxiliaries. This planned expansion enabled the hospital to serve approximately 3,500 children each year in Benha and the surrounding areas. A total of EGP 3.32 million was disbursed in 2020. One Heart The Board allocated EGP 33.18 million in April 2019 to exclusively sponsor, outfit, and operate 15 cardiac pediatric intensive care units through purchasing medical equipment, while covering operating costs for six months. The Foundation also sponsored 40 pediatric open-heart surgeries through its dona- tion. The hospital offers its services free of charge to underprivileged communities. The final installment of the project was fully disbursed in 2020. Children Without Risk In February 2019, the Board allocated EGP 1.63 million to purchase equipment to operate four new incubators at the Mabara El Maadi Hospital NICU, in collaboration with Garden City Cosmopolitan Lions Club. The project enables the hospital to serve around 1,200 newborns annually. The CIB Foundation disbursed the final payment after the delivery of all the required equipment and training the medical staff in 2020. Touch of Hope The Foundation granted the Sporting Students’ Hospital EGP 3 million to acquire a new six-color flow cytometry device that assists in the accurate diagnosis of leukemia and lymphoma. The device is expected to help diagnose 1,200 children each year. The full amount was disbursed in 2020. We Can Live Together The Foundation allocated EGP 1.23 million to the True Light Society Association, which seeks to inte- grate children with visual disabilities into the public school system. The equipment provided by the Foundation includes Braille typewriters and books, visual assistants, and school supplies. Training programs will also be offered to children and their parents. Overall, the project will benefit 470 visu- ally impaired children. A total of EGP 960,000 was disbursed in 2020. Healthy Children In April 2019, the Board allocated EGP 3.38 million to launch two mobile clinics providing comprehensive medical services including pediatrics, ophthalmology, and internal medicine to children in remote areas of Upper Egypt. The clinics will provide children with checkups, medical referrals for specialized cases, and medication. The clinics are expected to examine more than 95,000 children each year. In 2020, the first and second installments amounting to a total of EGP 2.25 million were disbursed. Gift of Life Building on the success of previous collaborations, the Board approved the allocation of EGP 3.7 million in October 2018 to support a second round of open heart surgeries for 100 underprivileged children with congenital heart diseases at the El Kasr El Aini Hospital, under the management of the Rotary Club of Giza Metropolitan. The fund was fully disbursed in 2020. Our Children’s Health is Priceless In 2019, the Board allocated EGP 14.45 million to establish a pediatric surgery unit at the South Valley University Hospital, which serves a number of gover- norates in Upper Egypt and the Red Sea. The unit will be equipped with state-of-the-art facilities, including a surgical theatre, a pediatric ward (eight beds), an ICU (two beds), and a diagnostic unit. The hospital, one of few in the region, will work to minimize the risk of traveling for critically ill patients and increase the capacity of the Emergency and Accidents Department to operate on 600 children instead of 150 each year. Kidney Care and Cure In April 2019, the Board allocated EGP 16 million to expand and outfit Sohag University Hospital’s pedi- atric dialysis unit. As the largest unit serving children with kidney diseases in Upper Egypt, there was a pressing need for the hospital to expand. The new dialysis unit features an ICU, a plasma separation room, 16 new dialysis machines, and a central delivery system that will lower infection rates. It is expected to serve approximately 5,000 children each year. A Vision to the Future In April 2019, the Board approved a budget of EGP 4.63 million to outfit the pediatric ophthalmic clinic at Alexandria University Hospital, considered to be a center of excellence serving underprivileged families in the Alexandria and Delta regions. The initiative is expected to benefit 8,750 children each year. Of the total value of the project, EGP 4.47 million was disbursed in 2020. Superstars are Born from Scars In 2019, the CIB Foundation allocated EGP 2 million to fund its second collaboration with the Ahl Masr Foundation to cover the costs of surgeries for more than 200 pediatric burn patients at a number of hospitals, including El Kasr El Eini, Ain Shams Specialized Hospital, El Demerdash Hospital, and others. The collaboration came in response to a severe lack of medical care available for burn victims across Egypt, with children under 18 years old making up approximately one-quarter of the total number of victims. EGP 1.72 million was disbursed in 2020. Healing Hands The Foundation allocated EGP 11.6 million to equip Cairo University Hospital with a state-of-the-art CT Scanner (128 slices) to detect congenital defects and tumors in the nervous, motor, digestive, urinary, and reproductive systems, along with examinations of heart arteries. The device is expected to provide scans for 6,000 children each year. To date, a total of EGP 3.9 million has been disbursed. A Bridge of Knowledge The Foundation will fund a five-year education and training program for 150 staff members of the Ain Shams clinical team (including doctors, nurses, and technicians) in partnership with Great Ormond Street Hospital for Children (GOSH) in London. This initia- tive follows the upgrade of the hospital’s facilities and equipment in line with international standards. Following the program, Ain Shams University Children’s Hospital is expected to double its capacity and serve an additional 67,000 children each year along with enhancing its overall level of care. GOSH is an international centre of excellence in paediatric care, globally recognised as one of the few world-class hospitals for children suffering from rare, complex, or multiple conditions. The emphasis on education and training is key to the delivery of improved patient outcomes. GOSH train more paediatric specialist doctors than any other centre in Europe and have Europe’s largest paediatric nurse education programme, and will work with Ain Shams University Children’s Hospital to deliver bespoke education and training with specific focus on paediatric/neonatal intensive care and haema- tology/oncology. Volunteering/Entertainment Events CIB Family Bag Packing Event In February 2020, the Foundation held an event for CIB staff and families to participate in the packing of more than 11,550 school bags that include health and hygiene kits, coloring books, and colors for beneficia- ries of the 6/6 Eye Exam Convoys. Supporting Squash: Best Bank – Best Players In 2020, CIB continued to positively impact local communities by strengthening the support for sports in Egypt, as well as nurturing the country’s athletic talents. Squash-related initiatives were again at the core of CIB’s CSR agenda, and we broadened our support to generate more opportunities and value for a wider community. 136 | Annual Report 2020 2020 Annual Report | 137 Responsible Banking // Social Development At CIB, we recognized early on the true potential of Egypt’s squash players, who are not only dominating world rankings, but completely revolutionizing how the game is played. This year, we extended our support of the sport to capitalize on the traction its players are carrying out globally. We believe that through supporting these talents, more opportuni- ties are generated for Egypt’s athletic community and more opportunities are presented to raise Egypt’s ranking on the global arena. Egyptian squash players have especially gained traction due to their innovative techniques that has in turn both entertained worldwide spectators and brought home trophies. Egypt has produced five number ones in the men’s game and three in the women’s game in global competitions. As of December 2020, five Egyptian males and five Egyptian females have made it to their respective world’s top 10 players lists. The country’s dominant position in the game stems from a tight-knit squash community, which embodies the values that CIB strives to instill in its own staff and promote to the wider Egyptian community. Young players from all walks of life have the oppor- tunity to display their skills on the global stage owing to their perseverance, openness to competition, support from peers, and the availability of resources. Squash Tournament Sponsorships CIB has expanded its squash-related sponsorships to allow for more Egyptian athletes to progress in the PSA world rankings. The most notable sponsorship in 2020 was the CIB Egyptian Squash Open Women’s and Men’s Platinum, which took place at the Great Pyramids of Giza and brought together 96 athletes for a total prize of USD 540,000. The tournament made significant tides in both the local and global sporting arena due to the unprecedented move toward women’s equality. In 2021, CIB is committed to becoming the title sponsor of future squash tournaments in Egypt. Sponsoring the Egyptian Squash Federation CIB maintained its sponsorship of the Egyptian Squash Federation for the ninth consecutive year. The Bank also expanded its commitment by sponsoring the National Women’s and Junior Squash Teams. Currently, Egyptian players hold the Men’s World Team Championship, the Women’s World Team Championships, and the Juniors’ World Team Championship titles. Sponsoring Egyptian Athletes In support of young players leading the world’s squash rankings, CIB has tailored special sponsorships to help eight talented players maintain their rankings and continue representing the country around the world. As of November 2020, the following players were recipients of the sponsorships: • Ali Farag: #1 on the Men’s PSA World Squash List —The 2019-2020 season may have seen Farag lose the World No.1 spot, but his form was fantastic, reaching the final in five of the six tournaments he played in, along with achieving success for his country on the global front. Farag made it to the quarter-finals of the Manchester Open, the first event back after the PSA World Tour resumed following its six-month suspension due to COVID- 19. He then lost out to Marwan ElShorbagy for the second straight event in Cairo, after reaching the last four of the CIB PSA World Tour Finals. The 2018-2019 World Champion found his form again at the CIB Egyptian Open, though, as he won the title after dropping just three games throughout the tournament, and with the victory at the Platinum event, he reclaimed the World No.1 spot from November 2020. • Nour El-Tayeb: #3 on the Women’s PSA World Squash List — The ‘Black Widow’ began the 2019-2020 campaign in the best possible way, as she got the better of World No.1 Raneem El Welily to win the J.P. Morgan China Squash Open in September. She then made the final of the Oracle NetSuite Open in San Francisco three weeks later, but the 2017 World Champion exacted her revenge. In the first tournament back after the tour’s six-month suspension, El Tayeb took the Manchester Open crown, downing Camille Serme in a high-quality final. She then made it to the final of the season-ending CIB PSA World Tour Finals in Cairo, losing out to Hania El Hammamy. El Tayeb also reached the last four of the CIB Egyptian Open, losing out to eventual champion Nour El Sherbini. • Karim Abdel Gawad: #5 on the Men’s PSA World Squash List — Karim Abdel Gawad made it through to the final of the Manchester Open, Ali Farag Nour El-Tayeb Karim Abdel Gawad the first event back after the PSA World Tour returned, but lost out in four games to World No.1 Mohamed ElShorbagy. He then lost out in the final of the season-ending CIB PSA World Tour Finals in Cairo, defeated by the younger of the ElShorbagy brothers. • Tarek Momen: #3 on the Men’s PSA World Squash List and current world champion ‘The Viper’ started the 2019-2020 campaign with an appearance in the final of the Oracle NetSuite Open, where he lost out to Mohamed ElShorbagy. After reaching the semi-finals at the FS Investments U.S. Open Squash Championships, Momen secured the biggest crown of his career, as he was named PSA Men’s World Champion following victory over Paul Coll in the final in Qatar. The start of 2020 was consistent for Momen, as he finished runner-up to Mohamed ElShorbagy at the J.P. Morgan Tournament of Champions, before winning the Troilus Canada Cup. He then made appearances in the last four of both the Windy City Open presented by the Walter Family and the St. James’s Place Canary Wharf Classic before the suspension of the Tour due to COVID-19. The reigning World Champion could only make the quarter-finals in Manchester as the sport returned, losing out to Paul Coll in an epic five-game clash. ‘The Viper’ then reached the final of the CIB Egyptian Open, making a first final on home soil. However, he came stuck against Ali Farag, losing out in straight games. • Hania El-Hammamy: #5 on the Women’s PSA World Squash List — Hania El Hammamy started the 2019-2020 season with a semi-final appear- ance at the Open de France - Nantes presented by Tailor Capital. She lost out to Camille Serme, the first of four tightly-contested battles with the Frenchwoman over the course of the campaign. She got the better of the World No.3 at the Women’s World Championship en route to a first semi-final appearance at a major tournament just six weeks later. In the final event before the suspension of the PSA World Tour due to the COVID-19 pandemic in early 2020, El-Hammamy wrote her name into the history books of the sport, becoming a major winner for the first time at the age of just 19-years- old. She downed Serme once again, before overcoming tough challenges from Amanda Sobhy, Sarah-Jane Perry, and Nour El Sherbini to win the Black Ball Open. The young starlet of Egyptian 138 | Annual Report 2020 2020 Annual Report | 139 Responsible Banking // Social Development squash reached the semi-finals in Manchester, losing out in another five-game battle with Camille Serme. She made up for that loss in Cairo a week later, downing the Frenchwoman in the group stages route to winning the CIB PSA World Tour Finals, her second major title of the year. ‘The Gazelle’ continued her good form by reaching the last four of the firs Platinum event of the new campaign, losing out to Nouran Gohar in the semis of the CIB Egyptian Open. • Mohamed Abouelghar: #12 on the Men’s PSA World Squash List — ‘The Bullet’ struggled through 2020, but ended the year strongly, with a quarter-final appearance at the CIB Blackball Squash Open on home soil in Cairo. • Marwan ElShorbagy: #6 on the Men’s PSA World Squash List — ElShorbagy started the 2019-2020 campaign in good form, reaching the last four of both the J.P. Morgan China Squash Open and the Oracle NetSuite Open in San Francisco, before making it to the quarter-finals of the CIB Egyptian Squash Open held in front of the Pyramids in November. He then made it through to the semi- finals of the PSA Men’s World Championships in Qatar, before quarter-final appearances at both the Channel VAS Championships and the Motor City Open. His final tournament before the COVID-19 enforced suspension of the Tour came at the St. James’s Place Canary Wharf Classic, where he made it through to the last four. The younger of the ElShorbagy brothers made it through to the last four in Manchester, as the sport returned following six months. ‘The Jackal’ then excelled at the CIB PSA World Tour Finals, winning the title with a straight games victory over Karim Abdel Gawad in the final. His good form continued with a semi- final appearance at the CIB Egyptian Open. • Salma Hany: #10 on the Women’s PSA World Squash List — Hany started the 2019-2020 season by reaching the quarter-finals of the J.P. Morgan China Squash Open, before consistently reaching the last 16 of the major tournaments throughout the campaign, including at the CIB PSA Women’s World Championship in front of the Pyramids. The young Egyptian reached the quarter-finals of the J.P. Morgan Tournament of Champions for 7 squash champions supported by CIB the second consecutive year, before also reaching the last four of the Carol Weymuller Open just a couple of weeks later. A quarter-final appearance at the Manchester Open, as squash returned following its six-month suspension due to COVID- 19, was enough to see Hany move into the top ten of the World Rankings for the first time in her career in October 2020. She followed that up with another last eight result, making that mark at the Platinum level CIB Egyptian Open. Partnership with Wadi Degla Clubs’ Darwish Squash Academy CIB continued its partnership with Wadi Degla Clubs to support young Egyptian squash athletes by developing their skills and enhancing their interna- tional rankings. The partnership is part of the Bank’s strategy to support up-and-coming talents from the ground up. CIB sponsors Wadi Degla athletes Nouran Gohar, Ali Farag, and Karim Abdel Gawad. Nouran Gohar: #2 on the Women’s PSA World Squash List — Nouran Gohar won her first Tour title at the Prague Open in December 2013 at just 16. During the 2018/19 campaign, she made her way back into the top five in the rankings, starting with the semifinal appearances at the Hong Kong Open and the CIB Black Ball Open. She reached the final stage of the El Gouna International and won the British Open, attaining her first trophy. She gained a second major title by winning the 2019 FS Investments U.S. Open Squash Championships, defeating Nour El Tayeb at the final in Philadelphia, also claiming a bronze-level victory at the Carol Weymuller Open. Gohar went on to succeed the retiring Raneem El Welily as women’s World No. 1, securing the top spot in the July 2020 rankings, reaching the summit for the first time in her career. She reached the CIB Egyptian Open finals but lost to Nour El Sherbini. Tarek Momen USD 540,000 Grand prize at the 2020 CIB Egyptian Squash Open Women’s and Men’s Platinum. Hania El-Hammamy Marwan ElShorbagy Mohamed Abouelghar Salma Hany 140 | Annual Report 2020 2020 Annual Report | 141 Responsible Banking Corporate Governance CIB’s governance framework aims to sustain the success of the Bank’s business and operations, backed by a concrete set of policies and procedures relevant to the scope, size, and complexity of CIB’s business. CIB has always been keen to adopt the international best practices of corporate governance as part of its mission to become the best financial institution in Egypt. The governance framework seeks to drive long-term value for shareholders, employees, and other stakeholders. It is anchored in a distinguished group of independent non-executive directors (NED), as well as its competent board commit- tees and experienced management team. A set of internal policies and processes helps the Board and senior management make the proper decisions. The Bank’s governance framework ensures that timely, transparent, and accurate disclosures are made available with respect to material information regarding the Bank, its ownership, operations, and financial performance. It also advocates the equal treatment of all shareholders with sound protection for their voting rights. Besides the support provided by the commit- tees, CIB’s Board of Directors is also supported by internal and external auditors, as well as other internal control departments (Risk, Compliance, Corporate Governance, Internal Audit, and Legal). Work carried out by these functions is fully utilized by the Board to ensure the Bank adheres to local and international standards of corporate governance. CIB’s governance framework aims to sustain the success of the Bank’s business and operations, backed by a concrete set of policies and procedures relevant to the scope, size, and complexity of CIB’s business. The Board works to ensure proper imple- mentation of internal and external regulations and mitigate all possible risks. These mandates are complemented by a set of governance policies designed to promote a corpo- rate culture that emphasizes building trust with key stakeholders. This culture is aligned with the Bank’s purpose and business strategy while promoting integrity within the Bank. The Code of Corporate Governance is the foundation of CIB’s governance framework, setting forth the gover- nance policies and procedures with an eye toward building an environment of trust, transparency, and accountability necessary long-term investment, financial stability, and business integrity. fostering for The Code of Conduct sets out the standards of behavior expected from all employees, providing staff, senior management, and the Board with a comprehensive frame of reference regarding their rights and duties. The code further enshrines the principles of equal employment opportunity and gender equality. forthcoming about any conflict of interest between the Bank and their personal, professional, and business interests, providing guidance on how to handle such cases. The Disclosure policy is designed to help engage with shareholders and potential investors, while increasing their confidence and satisfaction in the credibility and accessibility of the Bank’s infor- mation. The policy aims to minimize the risks of violating relevant laws and regulations in relation to communicating information to the investing public and regulators of the capital and financial markets. This comprehensive policy structure reflects CIB’s prioritization of a strong governance framework, one that is fully backed by each of the Bank’s board members firm leadership and vision. CIB’s experienced executive management team plays an important role in the governance of the Bank by faithfully and efficiently executing the strategy set by the Board of Directors and properly imple- menting the Bank’s policies. Board of Directors CIB is headed by a competent Board of Directors, which provides the Bank with the necessary lead- ership and experience to manage its business with integrity, efficiency, and, most importantly, excel- lence. The Bank’s board structure is in line with local regulations and international best practices and allows for the position of a lead director. CIB’s Board of Directors enjoys an optimal mix of skills, experience, and diversity in terms of gender and nationality. Some 86% of the Board of Directors are NEDs and 29% of the members are women. The Board maintains an independence level of 86% among its members. CIB’s Conflict of Interest policy guarantees that all staff and board members remain aware of and The Bank’s business and affairs are subject to the general oversight of the Board of Directors. 86% independence rate among board members The Board ensures that the Bank’s accounts and financial statements are fair, balanced, and under- standable and provide information necessary to shareholders to asses CIB’s position, performance, business model, and strategy. The Board of Directors’ primary focus is CIB’s long-term financial and non-financial success and seeking the best interests of all related stakeholders. The Board is also responsible for setting CIB’s strategic objectives, overseeing the implementa- tion of said strategy, providing oversight of senior management, ensuring the effectiveness of the Bank’s internal control systems, managing risk, and securing CIB’s institutional reputation and long-term sustainability. Moreover, the Board is responsible for setting compensation and perfor- mance goals and managing director nominations, evaluations, and succession planning. It oversees CIB’s economic, social, and environmental sustain- ability initiatives, while performing its duties with entrepreneurial leadership and in good faith. The Board also sets the seal on the existence of a sound strategy, and risk management oversight to ensure that risks are properly assessed and managed. Changes to the Board of Directors During 2020 In January 2020, the Board of Directors consisted of nine members, seven of whom were non-executive directors, of which six were independent: • Mr. Hisham Ezz Al-Arab – Chairman and MD • Mr. Hussein Abaza – CEO • Mr. Jawaid Mirza – Independent NED • Mr. Mark Richards –Independent NED • Mr. Bijan Khosrowshahi – NED Representative of Fairfax Financial Holding • Dr. Amani Abou Zeid – Independent NED • Mrs. Magda Habib – Independent NED • Mr. Paresh Sukthankar – Independent NED • Mr. Rajeev Kakar – Independent NED 142 | Annual Report 2020 2020 Annual Report | 143 Responsible Banking // Corporate Governance In compliance with CBE corporate governance directives, both Mr. Jawaid Mirza and Mr. Mark Richards stepped down on 2 February 2020 and 2 March 2020, respectively, having concluded six years of service on the Board. CIB’s General Assembly Meeting was held on 15 March, during which the AMG elected and appointed the Board of Directors for a new term for three years, commencing 2020. Accordingly starting March, the elected Board was composed as follows: • Mr. Hisham Ezz Al-Arab – Chairman and MD • Mr. Hussein Abaza – CEO • Mr. Bijan Khosrowshahi – NED Representative of Fairfax Financial Holding • Dr. Amani Abou Zeid – Independent NED • Mrs. Magda Habib – Independent NED • Mr. Rajeev Kakar – Independent NED • Mr. Paresh Sukthankar – Independent NED • Mr. Sherif Samy – Independent NED On 13 October, Mr. Bijan Khosrowshahi stepped down as an NED, after concluding six years of service on the Board. Fairfax Financial Holdings selected Mr. Paresh Sukthankar to represent its interest in CIB through its wholly-owned subsidiaries, subject to CBE approval on the matter. Moreover, Mr. Jay-Michael Baslow joined CIB’s Board of Directors as an Independent NED. On 23 October, Mr. Hisham Ezz Al- Arab decided to step down from his responsibilities as Chairman and Managing Director, after receiving a letter from the CBE stipulating that, in light of the findings of a limited review inspection, the CBE’s Board of Directors issued a resolution to discharge the Bank’s Chairman and Managing Director. The letter also noted that CIB’s board must elect a Non-Executive Chairman from among its NEDs, in accordance with article 144 (I) of the Central Bank and Banking Law 194 for the year 2020. The Board unanimously decided to appoint Mr. Sherif Samy, Chairman of both the Audit and Governance and Nomination committees, to assume the responsibilities of Non-Executive Chairman of the Board. The decision has received CBE approval. CIB’s Board of Directors currently consists of seven members who possess an appropriate balance of expe- rience, competencies, and individual qualifications. These collective qualities give the Bank a distinct competitive edge. Over the course of 2020, with the changes to the Board, CIB’s Board of Directors met 17 times, three of which were attended in person, 13 conducted via video conferencing, and one meeting attended in person by the directors who were present in Cairo, with directors residing abroad joining via video conference, in view of the prevailing preventive measures due to the COVID-19 pandemic. Being the single strategic shareholder in CIB through its wholly owned subsidiaries, Fairfax Financial Holding Ltd. currently holds 6.55% of CIB’s local shares, following its transaction with Actis in May 2014. Fairfax Financial Holdings Ltd. appoints one representative to the Bank’s Board of Directors. Board Committees Backed by an experienced executive management team, CIB’s highly qualified Board of Directors are also supported by specialized board committees. Committees are chaired by the NEDs, who brief the Board on major points raised by their respective committee. CIB’s Board of Directors has seven standing committees that assist in fulfilling its responsibilities: five non-executive and two executive committees. Each committee chairperson is responsible for briefing the Board of Directors on the major issues raised by the committee that he or she chairs. Such briefings enable the members of the Board of Directors to carry out their duties in an effective manner. Each committee operates under a written charter that sets out its responsibilities and composition requirements, reporting to the Board on a regular basis. Separate committees may be set up by the Board of Directors to consider specific issues when the need arises. Non-Executive Committees Audit Committee Responsibilities: The committee was established to provide oversight of the integrity of the Bank’s financial reporting process, the effectiveness of the Bank’s internal control system, and its compliance with all statutory requirements. The committee is also responsible for overseeing and reviewing the performance of the Bank’s Internal Audit and Compliance functions, as well as the work of the Bank’s external auditors, to ensure the indepen- dence and objectivity of each, in addition to the quality of the applied processes and outcomes. In the second half of the year, a new entity was estab- lished entitled Customer Protection, reporting to Compliance, becoming among the areas on which the committee has oversight. additions and amendments to the Board and committee charters. This entails a periodic review of the Bank’s corporate governance structure, with the issuance of recommendations for change when and if necessary. The GNC contributes to the Board’s effectiveness and governance, sets the criteria for selecting new directors, and assists the Board in identifying suitable individuals for nomination as non-shareholder representative board members. The committee’s duties extend to board succession planning, including the Bank’s Chief Executive Officer. The committee met seven times in 2020. The committee met nine times in 2020. 2020 Audit Committee Highlights: During 2020, as mandated in its charter by the Board, the Audit committee reviewed the financial statements and clarifications prepared for publication, discussed them with the relevant bank officers and external auditors, receiving assurances that the financial statements comply with the applicable reporting standards and with CBE and FRA directives. The committee also monitored the outcome of the IFRS 9 model, with a validation exercise and assessment of the policies and methodology for expected credit loss (ECL) calculation as of 30 June 2020. This was an important undertaking in light of the COVID-19 measures and their impact. In March 2020, the committee chair stepped down after concluding six years as a board member, as mandated by the CBE. He was replaced by Mr. Sherif Samy, who chaired the committee as of its second meeting for the year. 2020 Governance and Nomination Committee Highlights: Throughout 2020, the committee regularly advised the Board on governance matters based on its periodic review of the Bank’s corporate governance structure. The GNC assisted the Board in operating as effectively as possible and governing the Bank’s operations, to be executed in accordance with international governance best practices. The committee reviewed the Bank’s 2020 Annual Corporate Governance Report. The results of the Board of Directors’ annual assessment affirmed that board discussions are conducted openly and transparently, creating an environment for sustain- able and robust debate. During 2020, three directors stepped down after completing six years of service on the Board, and two independent NEDs were appointed. Several potential candidates were iden- tified and assessed by the committee throughout the year. The GNC ensured that the newly appointed candidates received proper induction, and the Non-Executive Board committee was formed to accommodate the new directors and leverage their knowledge and experience. Chairperson: Mr. Sherif Samy Members: Mrs. Magda Habib Mr. Paresh Sukthankar Chairperson: Mr. Sherif Samy Members: All non-executive directors Governance and Nomination Committee (GNC) Responsibilities: The committee, which reflects the Board’s voice on governance, advises the Board on the Bank’s governance framework and reviews Compensation Committee Responsibilities: The committee was estab- lished the appropriate compensation for the Board and to provide guidance regarding 144 | Annual Report 2020 2020 Annual Report | 145 Responsible Banking // Corporate Governance the Bank’s executive officers, and to ensure that compensation is consistent with the Bank’s objectives, strategy, and control environment. The committee ensures that clear policies for the Bank’s salaries and compensation schemes are in place, and that they are effective at attracting and retaining the best caliber professionals. The committee met three times in 2020. 2020 Compensation Committee Highlights: During 2020, the committee assessed executive officers’ and expatriates’ performance for the year 2019, and recommended the appropriate compensa- tion accordingly. The committee also reviewed and approved the Bank’s overall variable compensation guidelines for 2019. Chairperson: Mr. Rajeev Kakar Members: All non-executive directors Risk Committee Responsibilities: This committee oversees risk management functions through periodic reports submitted by the Risk Group. The committee assesses compliance, concurs, and makes recom- mendations to the Board of Directors regarding risk management strategies, the Bank’s risk appetite and risk related policies. This includes those related to capital adequacy, liquidity management, and various types of financial and non-financial risks such as credit, market, operations, compliance, reputation, and any other risks to which the Bank may be exposed. The committee met eight times during 2020, with one meeting conducted in person, and seven held via video conferencing in light of the prevailing preventive measures due to the COVID-19 outbreak, as allowed by the CBE and FRA. 2020 Risk Committee Highlights: During 2020, in light of the heightened risk posed by the global pandemic, the committee supported a number of initiatives to ensure the Bank’s critical operations were maintained, and employees’ health safe- guarded. Besides regular periodic risk reporting, the committee closely monitored the new risks encountered during the crisis, the impact on the Bank’s operations, the challenges facing the business, and economic and regulatory capital adequacy. It also reviewed and challenged the Expected Credit Loss (ECL) calculation, and, accordingly, more unscheduled meetings were held during the year. Given the inevitability of economic implications arising from the negative impact of COVID-19 on the Bank’s portfolio quality and impairments, the committee was confident of the Bank’s relatively better and more stable portfolio quality and healthy coverage ratios in the face of the crisis. During the year, two committee members stepped down after concluding six years of service on the Board, as mandated by regulations. The vacan- cies were promptly filled to ensure a quorum for all meetings. Chairperson: Mr. Paresh Sukthankar Members: Dr. Amani Abou-Zeid Mr. Jay-Michael Baslow1 2020 Operations and Technology Committee Highlights: During 2020, the committee’s activi- ties involved maintaining oversight of Operations and Technology’s 2020 strategy and associated budget for the different business segments and IT. Special focus was given to Digital Transformation and Robotics Process Automation (RPA), ATMs, the CIB Flex Program, agile transformation and business banking strategies. The value at stake calculation methodology of the Bank’s key proj- ects and initiatives was reviewed and validated. The committee reviewed the Bank’s key opera- tions and technology risk exposure and validated the steps management has taken to monitor and control such exposure, including, but not limited to disaster recovery, physical security, cyber secu- rity risks, model risk, and compliance risk, with key focus on the KYC update efforts and customer service charter. The committee also focused on outstanding internal and external audit issues in terms of their associated risk criticality and business impact, to ensure proper categoriza- tion, compensating controls, and mitigation are in place. In preparation for the 2021 budget, the committee reviewed, challenged, and validated the IT strategy in alignment with the anticipated business strategy, ensuring consideration of the key business transformation priorities as a top- down approach, with focus on an appropriate sourcing model, vendor selection, applicable trends, enhanced customer future banking journey, and running rather than changing the Bank’s investments. Chairperson: Mr. Paresh Sukthankar Members: Dr. Amani Abou-Zeid Mr. Jay-Michael Baslow1 its oversight Operations and Technology Committee Responsibilities: The Operations and Technology committee assists the Board of Directors in responsibilities over fulfilling Operations and Technology, with respect to direc- tion and alignment with the Bank’s strategy, efficiency and support of the business, robustness, and resilience. This is in addition to ensuring they are at the forefront of developments, adopting cost justified best practices, with the objective of increasing bank competitiveness and reducing risks. The committee met eight times in 2020. 2020 Operations and Technology Committee Highlights: During 2020, the committee’s activities involved maintaining oversight of Operations and Technology’s 2020 strategy and associated budget for the different business segments and IT. Special focus was given to Digital Transformation and Robotics Process Automation (RPA), ATMs, the CIB Flex Program, agile transformation and business banking strategies. The value at stake calculation methodology of the Bank’s key projects and initia- tives was reviewed and validated. The committee reviewed the Bank’s key operations and technology risk exposure and validated the steps management has taken to monitor and control such exposure, including but not limited to disaster recovery, physical security, cyber security risks, model risk, and compliance risk, with key focus on the KYC update efforts and customer service charter. The committee also focused on outstanding internal and external audit issues in terms of their associ- ated risk criticality and business impact, to ensure proper categorization, compensating controls, and mitigation are in place. In preparation for the 2021 budget, the committee reviewed, challenged, and validated the IT strategy in alignment with the anticipated business strategy, ensuring consider- ation of the key business transformation priorities as a top-down approach, with focus on an appro- priate sourcing model, vendor selection, applicable future banking trends, enhanced customer journey, and running rather than changing the Bank’s investments. Chairperson: Mr. Rajeev Kakar Members: Mrs. Magda Habib Mr. Sherif Samy Executive Committees Management Committee Responsibilities: The committee is responsible for executing the Bank’s strategy as approved by the Board. The committee manages the Bank’s day- to-day functions to ensure alignment with strategy, effective controls, risk assessment, and efficient use of the Bank’s resources. It also monitors the Bank’s strategic associates and subsidiaries. The committee met 34 times in 2020. 1 Mr. Jay-Michael Baslow joined the Board of Directors in October 2020. 146 | Annual Report 2020 2020 Annual Report | 147 Responsible Banking // Corporate Governance Chairperson: Mr. Hussein Abaza Voting Members: Mr. Ahmed Issa – CEO Retail Banking Mr. Amr El Ganainy – CEO Institutional Banking Mr. Mohamed Sultan – Chief Operating Officer Ms. Hanan El Borollossy – Deputy Chief Risk Officer (acting as CRO effective 19 January 2020) Ms. Nevine Wefky – President of Corporate Credit and Investment • The remuneration of NEDs. • The appointment of the external auditor. • The appointment, suspension, or dismissal of the members of the Board of Directors. • The issuance of shares or rights to shares, restriction or exclusion of preemptive rights of shareholders, and repurchase or cancellation of shares. • Amendments to the Articles of Association. External Auditor The Board Audit committee recommends the appointment and/or termination of the external auditor, which is approved at the General Assembly Meeting of Shareholders. Moreover, the Board Audit committee evaluates the performance of the external auditor and endorses the prepared finan- cial statements to ensure they reflect the Bank’s performance and faithfully reveal its genuine financial position. In adherence to CBE regulations, external auditors are reappointed every five years to ensure objectivity and exposure to new practices. High Lending and Investment Committee (HLIC) Responsibilities: This committee is responsible for managing the asset side of the balance sheet, through monitoring asset allocation, quality, and development, as stipulated in the Bank’s Credit and Investment Policies. The HLIC is the authority for monitoring the decisions and responsible performance of the Bank’s other credit committees. The committee convened weekly throughout 2020, meeting a total of 54 times. Chairperson: Mr. Hussein Abaza Members: CIB Senior Management Alternate Members: Senior Officers of the Bank Shareholders’ Rights CIB’s Annual General Meeting of Shareholders is held in March of each year, no later than three months after the end of the Bank’s financial year. Additional extraordinary general shareholder meetings may be convened at any time by the Board of Directors. The General Assembly provides a platform for shareholders to engage with the Board of Directors, ask questions, and exercise their voting rights. Shareholder consent is required for key decisions such as: • The adoption of financial statements. • Voting on proposed dividends by the Board of Directors. • Significant changes to the Bank’s corporate governance practices. • The remuneration policy. 148 | Annual Report 2020 2020 Annual Report | 149 07 Subsidiaries and Affiliates 4 strategic subsidiaries and affiliates 150 | Annual Report 2020 CIB’s subsidiaries and affiliate ORGANIZATIONS are part and parcel of its strategy to build out a diversified institution. 0107070707Subsidiaries and Affiliates Subsidiaries and Affiliates CVentures CVentures is an early-stage, cross-border venture capital firm primarily focused on investing in compa- nies creating meaningful change in financial services. CVentures forward-thinking fast-moving, teams with deep market insights and high-perfor- mance cultures. The firm backs groundbreaking businesses with fundamentally distinguishable char- acteristics and disruptive business models. favors 2020 Highlights In 2020, CVentures developed promising industry relationships and a robust pipeline of companies in digital finance and digital financial services. This included: • Three new investments, two of which have been disclosed, growing our portfolio size to four companies; • Expanding CVentures’ network across different technology hubs and entrepreneurship ecosys- tems; and • Engaging with early-stage companies and inves- tors in four continents. CVentures continued to implement a patient deploy- ment strategy during its second year of operations. The Investment team continued to work toward concluding other investments in emerging and disruptive digital financial services while keeping a close eye on changing market dynamics and startup activity in light of the COVID-19 outbreak. 2021 Forward-Looking Strategy In addition to continuing to focus on comple- menting CIB’s strategy, CVentures remains focused on actively growing its portfolio while targeting above industry-average returns and expanding its local, regional, and global footprint. Mayfair CIB Bank Limited (MCIB) Located in Kenya, Mayfair CIB Bank Limited, formerly known has Mayfair Bank Kenya, was estab- lished in 2017. With five branches in Nairobi, Eldoret, and Mombasa, it is Kenya’s fourth smallest lender, focusing on high-net-worth individuals and the corporate market. In April 2020, CIB acquired 51% of the bank, marking CIB’s first cross-border acquisition into Sub-Saharan Africa. CIB’s strategy for Mayfair focuses on trade finance activities, particularly growing the Egypt- Kenya trade corridor, enabling Egyptian large corporates and SMEs to do business in the hub of Eastern Africa. Falcon Group Established in 2006 as a joint venture between CIB, the CIB Employees Fund, Al-Ahly for Marketing, and other private entities, Falcon Group manage- ment’s strategy is centered on service excellence. The company provides services including: security, money transfer, technical systems and security products, public services and project management, and tourism and concierge services to a variety of industries such as the industrial, commercial, tourism, and public sectors. The Group provides state-of-the-art, holistic solutions tailored to every client. Its key strength lies in its single- point-of-contact solutions that ensure it provides consistent services at the highest quality, lowest risk, and with great flexibility at a reasonable cost. Falcon for Security Services Falcon for Security Services has been the main security service provider for several top-tier government and non-government organizations, such as the United Nations, and a number of embassies in Egypt. With a portfolio of over 754 clients, the company provides services such as property protection, event security, corporate security and training, personal protection, as well as safety and industrial training to some of the biggest companies in Egypt. 2020 Highlights Falcon for Security Services achieved its 2020 goal of working with numerous prominent institutions and added new clients, securing several projects such as ones for Tahrir Square, Porto New Cairo Mall, Alamein University, GlobeMed Egypt for Healthcare, Glala University, and King Salman University. We secured numerous public events in 2020, organizing the Aswan International Women Film Festival, Tamer Hosni Festival at Hilton Green Plaza, and the El Gouna International Marathon. 2021 Forward-looking Strategy We captured a market share of 70% this year and will work to maintain our market leadership by growing both organically and through acquisitions. In 2020, the Group plans to expand its market presence by 25%. As part of the Group’s goal of providing top-notch solutions, Falcon companies plan to use managed service providers for its activities. The Group also expects to target prominent institutions and clients such as SAIB, General Motors, and other companies to add to its roster of clients while simultaneously expanding its product and service offering to ensure clients remain fully satisfied and confident in them as their number one choice in terms of efficiency and customer service. 99.99% CIB Ownership in CVentures 51% CIB Ownership in Mayfair CIB Limited 30% CIB Ownership in Falcon Group Falcon for Public Services and Project Management Falcon for Public Services and Project Management operates all facility systems to the comfort and satisfaction of facility occupants. The company offers general cleaning, landscaping, façade cleaning, and marble polishing at the highest quality, efficiency, and cost effectiveness. Falcon for Public Services and Project Management holds a market share of 20%, serving a large client base out of 330 different loca- tions as of 2020. 152 | Annual Report 2020 2020 Annual Report | 153 Subsidiaries and Affiliates 2020 Highlights Through considerable efforts to build solid relation- ships and gain the trust and confidence of public and private institutions, the company succeeded in signing on several new clients such as Arab Maritime Petroleum Transport Company (AMPTC), Galal University, Alamein University, and King Salman University. The company also renewed important contracts such as with the Port Said Security Directorate, the Embassy of the Sultanate of Oman, the Embassy of the State of Kuwait, and the Social and Health Care Improvement Fund for Police Staff. 2021 Forward-looking Strategy The company’s strategy is based in its firm belief that their performance is measured by their clients’ success. Over the next year, the company plans to sign sizeable several contracts with new customers such as the Ministry of Tourism and Antiquities, Mansoura University, and Hurghada University. Falcon for Cash in Transit Services Falcon’s Cash in Transit division works with repu- table banks and companies in Egypt, providing CIT services, ATM replenishment, maintenance, vaulting, cash management, and valuables transportation through a highly qualified team. 2020 Highlights The company signed several new contracts to increase its market position, increasing cash volume 20% y-o-y. It added 14 armored vehicles to its fleet in 2020 for a total of 20 vehicles and was able to boost the number of armored safes in some governorates to make them cash centers. It also added 21 new motor- cycles as a new special team service and worked to lay the foundations for several other service rollouts. 2021 Forward-looking Strategy The company plans to grow the segment’s market share through providing new services for retail, having already integrated new solutions to collect cash from shopping centers. Falcon for Cash in Transit will also use the latest technology to develop ATM services and in its managed cash offerings as part of its strategy to streamline its operations. The company is also investing considerable resources to train its team members to consistently provide the highest level of service to clients. Falcon Tech Falcon Security Systems designs, implements, and maintains all integrated electronic systems in the field of technical security for facilities and individuals. 2020 Highlights Falcon Tech succeeded in expanding its market share to 70% by signing several new contracts to provide security systems to airports, commercial malls, and universities, including ones with: • Ministry of the Armed Forces • New CIB branches • Red Sea Port • Alexandria Port • Damietta Port • Egypt Post for Investment • Maintenance and supply contract with Cairo Airport Company • Maintenance and supply contract with Egyptian Airport Company • Maintenance contract with the Ministry of Interior’s Department of Technical Assistance Falcon for PR and Communications (Tawasul) Falcon for PR and Communications (Tawasul) specializes in communication services and consul- tancy as well as event and conference management. It also offers media services. Fawry Plus Fawry Plus was established in 2017 as a joint venture between CIB, Banque Misr, Fawry, and ACIS to become Egypt’s first banking agent and forerunner in the nation’s strategy to achieve financial inclusion. Fawry Plus seeks to provide a wide array of banking and financial services to consumers and businesses through a network of retail branches across Egypt, with a focus on urban and underserved regions. Fawry Plus branches provide banking services including limited KYC services as well as a document collection services for mobile wallet registration, prepaid and credit card issuance, and loan issuance. Other services include mail and bank correspondence collection, loan and credit card payments, cash withdrawals and deposits, as well as various bill payments including utili- ties, telecom, subscription fees, taxes, and fines. 2020 Highlights In 2020, Fawry Plus opened an additional nine branches, bringing the total number of operating branches to 90, and signed an agreement to triple the number of branches by using a shop-in-shop model that will allow consumers even easier access to the business. It also witnessed a growth of more than 80% in revenues because of this expansion in operations. Fawry Plus also partnered with several banks and received CBE approvals to introduce the Meeza prepaid card KYC service and international remittance disbursement service in addition to the wallet registration services, expanding the portfolio of agent banking services. 2021 Forward-Looking Strategy Fawry Plus seeks to become the banking destination of choice for customers in 2021, attracting customers through the convenience of its branches, which are less crowded, more accessible, and operate longer working hours than banks. The company will also seek to expand its scope of services through a multitude of avenues. It will enter into partnerships with some of Egypt’s leading banks, financial institutions, and industry players to offer their services through Fawry Plus. In addition, it will focus on serving the e-commerce industry through offering cash management and logistics solutions, including setting up branches as drop- off/pick-up stations. Fawry Plus aims to double its cash management services. Other Subsidiaries and Affiliates In addition to CIB’s strategic subsidiaries and affiliates, the Bank has direct ownership in Al Ahly Computer Equipment Company (ACE) and Damietta and Shipping Marine Services (DSMS). Al Ahly Computer Equipment Company (ACE) Established in October 1996 as a joint stock company, ACE has a long track record in the field of trading and maintenance of specialized information technology hardware. The company is well-positioned as the system integrator of choice for the government, major banks, and large institutions. ACE sources its original hardware products from recognized compa- nies in the field, such as Sedco, Fujitsu, HP, and Cisco. In 2020, ACE worked with numerous prominent institutions and was awarded a mega tender project from one of the largest national banks in Egypt. Despite tough market conditions arising from the 23.5% CIB Ownership in Fawry Plus 49.95% CIB Ownership in ACE 39.34% CIB Ownership in DSMS COVID-19 pandemic, the company’s management successfully increased its maintenance contracts to offset the decline in trading activity, ensuring revenue and profitability sustainability. For the coming year, ACE looks to continue focusing on enhancing its maintenance experience and expanding its client base, along with introducing new products and exploring additional strategic technology partnerships. The ultimate objective is to increase the company’s market share and value against competitors. Damietta Shipping and Marine Services Damietta Shipping and Marine Services (DSMS) is a shareholding company, established in 1986 through a public offering. CIB acquired stake in the company in July 2018, with its ownership reached 49.95% in October 2020. DSMS is a small-sized company, with minimal operations focusing on marine services, mainly container repairs, fuel tank rentals, and electricity generators. 154 | Annual Report 2020 2020 Annual Report | 155 08 Financial Statements 156 | Annual Report 2020 08080808Auditors’ Report 158 | Annual Report 2020 2020 Annual Report | 159 Financial Statements // SeparateSeparate balance sheet as at December 31, 2020 Separate income statement for the year ended December 31, 2020 Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Assets Cash and balances at the central bank Due from banks Loans and advances to banks, net Loans and advances to customers, net Derivative financial instruments Investments - Financial Assets at Fair Value through P&L - Financial Assets at Fair Value through OCI - Amortized cost - Investments in associates and subsidiaries Other assets Deferred tax assets (Liabilities) Property and equipment Total assets Liabilities and equity Liabilities Due to banks Due to customers Derivative financial instruments Current tax liabilities Other liabilities Other loans Provisions Total liabilities Equity Issued and paid up capital Reserves Reserve for employee stock ownership plan (ESOP) Retained earnings * Total equity Total liabilities and equity 15 16 18 19 20 21 21 21 22 23 31 24 25 26 20 28 27 29 30 33 33 33 33,572,597 86,997,034 776,980 118,854,880 248,759 359,959 147,646,432 25,020,917 874,348 9,095,212 437,772 2,259,940 426,144,830 8,815,561 340,086,524 331,073 859,582 5,679,266 7,746,946 3,221,252 366,740,204 14,776,813 33,085,554 1,064,648 10,477,611 59,404,626 426,144,830 28,273,962 28,353,366 625,264 119,321,103 216,383 418,781 89,897,257 107,225,613 63,953 9,747,939 350,339 2,202,698 386,696,658 11,810,607 304,483,655 282,588 4,639,364 8,396,487 3,272,746 2,011,369 334,896,816 14,690,821 24,342,314 963,152 11,803,555 51,799,842 386,696,658 The accompanying notes are an integral part of these financial statements. (Audit report attached) *Including net profit for the current year Interest and similar income Interest and similar expense Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividend income Net trading income Profits (Losses) on financial investments Administrative expenses Other operating (expenses) income Intangible assets amortization Impairment release (charges) for credit losses Profit before income tax Income tax expense Deferred tax assets (Liabilities) Net profit for the year Earning per share Basic Diluted 6 7 8 9 21 10 11 12 13 31 - 13 14 42,070,598 (16,980,635) 25,089,963 42,600,957 (21,022,838) 21,578,119 3,053,536 (983,450) 2,070,086 98,175 395,701 922,832 (5,552,800) (2,737,550) - (4,989,288) 15,297,119 (5,084,670) 87,433 10,299,882 3,451,688 (1,170,893) 2,280,795 53,423 688,059 450,697 (5,044,937) (1,794,540) (238,715) (1,435,460) 16,537,441 (4,639,364) (94,522) 11,803,555 6.26 6.24 7.12 7.09 Hussein Abaza CEO & Board member Sherif Samy Chairman Hussein Abaza CEO & Board member 160 | Annual Report 2020 Sherif Samy Chairman 2020 Annual Report | 161 Financial Statements // SeparateSeparate statement of other comprehensive income for the year ended December 31, 2020 Separate cash flow for the year ended December 31, 2020 Net profit for the year EGP Thousands Dec. 31, 2020 Dec. 31, 2019 10,299,882 11,803,555 Other comprehensive income items that will not be reclassified to the Profit or Loss: Change in fair value of equity instruments measured at fair value through other comprehensive income Other comprehensive income items that is or may be reclassified to the profit or loss: Change in fair value of debt instruments measured at fair value through other comprehensive income (13,966) 212,967 (255,293) 5,944,586 Transferred from reserve on disposal of financial assets at fair value through OCI (76,717) - Effect of ECL in fair value of debt instruments measured at fair value through OCI 205,182 (184,921) Total other comprehensive income for the year 10,159,088 17,776,187 162 | Annual Report 2020 Cash flow from operating activities Profit before income tax Adjustments to reconcile net profit to net cash provided by operating activities Fixed assets depreciation Impairment charge for credit losses (Loans and advances to customers and banks) Other provisions charges Impairment charge for credit losses (due from banks) Impairment charge for credit losses ( financial investments) Impairment charge for other assets Exchange revaluation differences for financial assets at fair value through OCI Intangible assets amortization Impairment charge financial assets at fair value through OCI Utilization of other provisions Other provisions no longer used Exchange differences of other provisions (Profits) losses from selling property, plant and equipment (Profits) losses from selling financial investments Shares based payments Released (Impairment) charges of investments in associ- ates and subsidiaries Operating profits before changes in operating assets and liabilities Net decrease (increase) in assets and liabilities Due from banks Financial assets at fair value through P&L Derivative financial instruments Loans and advances to banks and customers Other assets Due to banks Due to customers Income tax obligations paid Other liabilities Net cash used in (generated from) operating activities Cash flow from investing activities Proceeds from investments in associates. Payments for investment in subsidiaries and associates. "Payment for purchases of property, plant, equipment and branches constructions" Proceeds from selling property, plant and equipment Proceeds from redemption of financial assets at amortized cost Payment for purchases of financial assets at amortized cost Payment for purchases of financial assets at fair value through OCI Proceeds from selling financial assets at fair value through OCI Net cash generated from (used in) investing activities Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands 15,297,119 16,537,441 24 12 29 12 12 23 21 21 29 29 29 11 21 21 15 21 20 18 - 19 40 25 26 28 11 21 21 21 677,501 4,777,592 1,232,731 6,514 205,182 69,217 249,642 - 79,126 (2,382) (13,273) (7,193) (1,094) (1,018,469) 552,438 16,511 576,544 1,610,878 461,869 9,503 (184,921) (93,313) 1,593,030 238,715 47,197 (28,135) (6,910) (110,062) (1,439) (497,894) 464,539 - 22,121,162 20,617,042 (10,899,927) 58,822 16,109 (4,276,558) 649,301 (2,995,046) 35,602,869 (3,779,782) (7,700,878) 28,796,072 750 (721,352) (987,061) 1,094 82,203,469 - (112,382,696) 54,970,226 23,084,430 (8,870,547) 2,318,924 (2,910) (14,533,328) 162,502 4,550,788 19,143,183 (3,625,579) 1,894,934 21,655,009 - - (1,301,415) 1,439 43,937,957 (76,516,842) (50,954,311) 54,813,449 (30,019,723) 2020 Annual Report | 163 Financial Statements // SeparateSeparate cash flow for the year ended December 31, 2020 (Cont.) Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Cash flow from financing activities Received (Repaid) in long term loans Dividend paid Capital increase Net cash generated from (used in) financing activities Net increase (decrease) in cash and cash equivalent during the year Beginning balance of cash and cash equivalent Cash and cash equivalent at the end of the year Cash and cash equivalent comprise: Cash and balances at the central bank Due from banks Treasury bills and other governmental notes Obligatory reserve balance with CBE Due from banks with maturities more than three months Treasury bills with maturity more than three months Total cash and cash equivalent 27 15 16 17 15 4,474,200 (3,370,464) 85,992 1,189,728 53,070,230 22,895,017 75,965,247 33,572,597 87,020,365 39,464,714 (27,610,380) (16,280,760) (40,201,289) 75,965,247 (448,783) (2,700,544) 105,413 (3,043,914) (11,408,628) 34,303,645 22,895,017 28,273,962 28,370,183 27,634,062 (22,397,310) (10,593,903) (28,391,977) 22,895,017 y t i u q e l ’ s r e d 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 9 1 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o f s d n a s u o h T P G E r o f e v r e s e R k c o t s e e y o p m e l i g n k n a B i p h s r e n w o i d e n a t e R s k s i r r o f e v r e s e R l i a c n a n fi t a s t e s s a e u a v l r i a f h g u o r h t , 2 4 8 9 9 7 1 5 , 2 5 1 3 6 9 , , 5 5 5 3 0 8 1 1 , l a t o T , 7 4 2 4 5 1 6 3 , n a p l 0 2 3 8 3 7 , 3 1 4 5 0 1 , - - , ) 4 4 5 0 0 7 2 ( , , 5 5 5 3 0 8 1 1 , , 3 5 5 7 5 1 6 , - , ) 1 2 9 4 8 1 ( - - - - - - ) 7 0 7 9 3 2 ( , 9 3 5 4 6 4 , 9 3 5 4 6 4 , - - ) 1 4 8 ( 1 4 8 - i s g n n r a e e v r e s e r I C O , 5 5 7 5 5 5 9 , , ) 0 7 3 4 5 8 6 ( , , ) 4 4 5 0 0 7 2 ( , - , 5 5 5 3 0 8 1 1 , - - - - - 3 2 3 4 , - - - - , 3 5 5 7 5 1 6 , , ) 1 5 8 0 6 8 1 ( , - - 4 6 1 5 , - ) 1 2 9 4 8 1 ( , , 1 8 7 1 1 1 4 , l a t i p a C e v r e s e r 1 2 4 2 1 , - 5 4 0 1 , - - - - - - 6 6 4 3 1 , l a r e n e G k s i r e v r e s e r 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 d e u s s I i d a p d n a l a t i p a c p u , 5 4 4 9 4 5 1 , - - - - - - - - , 5 4 4 9 4 5 1 , , 5 1 2 6 7 7 2 1 , , 3 9 2 0 1 7 1 , , 6 9 2 5 1 6 6 , , ) 2 8 0 7 1 9 2 ( , - - - - - - , 9 2 4 4 7 4 6 1 , - - - - - - - 6 3 7 7 7 4 , , 9 2 0 8 8 1 2 , , 6 2 3 8 6 6 1 1 , , 5 9 4 2 2 0 3 , - - - - - - - , 1 2 8 0 9 6 4 1 , l a i c n a n fi n o ) s s o l ( / n i a g d e s i l a e r n u t e N I C O h g u o r h t e u l a v r i a f t a s t e s s a e v r e s e r k s i r k n a b o t ) m o r f ( d e r r e f s n a r T - u r t s n i t b e d f o t n e m r i a p m i r o f L C E s e v r e s e r o t d e r r e f s n a r T r a e y e h t r o f t fi o r p t e N d i a p d n e d i v i D e c n a l a b g n n n i g e B i e s a e r c n i l a t i p a C 9 1 0 2 , 1 3 . c e D s t n e m t s e v n i s t n e m i n a l p p h s r e n w o k c o t s l s e e y o p m e f o t s o C e c n a l a b g n i d n E ) P O S E ( 164 | Annual Report 2020 2020 Annual Report | 165 Financial Statements // Separate Proposed appropriation account for the year ended December 31, 2020 Net profit after tax Profits selling property, plant and equipment transferred to capital reserve ac- cording to the law Bank risk reserve Available net profit for distributing To be distributed as follows: Legal reserve General reserve Dividends to shareholders Staff profit sharing Board members bonus CIB's foundation Support and development of banking sector fund EGP Thousands Dec. 31, 2020 Dec. 31, 2019 10,299,882 11,803,555 (1,094) (2,718) (1,439) (1,258) 10,296,070 11,800,858 514,939 8,420,479 - 1,029,607 73,643 154,441 102,961 590,106 7,840,287 1,836,353 1,180,086 177,013 177,013 - Total 10,296,070 11,800,858 s d n a s u o h T P G E r o f e v r e s e R k c o t s e e y o p m e l i g n k n a B i p h s r e n w o i d e n a t e R s k s i r r o f e v r e s e R l i a c n a n fi t a s t e s s a e u a v l r i a f h g u o r h t , ) 4 6 4 0 7 3 3 ( , , 2 8 8 9 9 2 0 1 , - 3 1 0 1 0 1 , , ) 9 5 2 9 6 2 ( - 2 8 1 5 0 2 , - - - - - - - - ) 2 4 9 0 5 4 ( , 8 3 4 2 5 5 , 8 3 4 2 5 5 , , 6 2 6 4 0 4 9 5 , , 8 4 6 4 6 0 1 , l a t o T , 2 4 8 9 9 7 1 5 , n a p l 2 5 1 3 6 9 , 2 9 9 5 8 , - - i s g n n r a e e v r e s e r I C O , 5 5 5 3 0 8 1 1 , , ) 3 3 8 1 3 4 8 ( , , ) 4 6 4 0 7 3 3 ( , - 7 1 7 6 7 , 3 1 0 1 0 1 , , 2 8 8 9 9 2 0 1 , - - - - - - - 4 6 1 5 , , 1 8 7 1 1 1 4 , - - - - - ) 7 1 7 6 7 ( , ) 9 5 2 9 6 2 ( , ) 9 5 2 1 ( , 9 5 2 1 , - - - , 1 1 6 7 7 4 0 1 , - - 3 2 4 6 , - 2 8 1 5 0 2 , , 7 8 9 0 7 9 3 , l a t i p a C e v r e s e r 6 6 4 3 1 , - 0 4 4 1 , - - - - - - - - 6 0 9 4 1 , l a r e n e G k s i r e v r e s e r 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 d e u s s I i d a p d n a l a t i p a c p u , 5 4 4 9 4 5 1 , - - - - - - - - - , 5 4 4 9 4 5 1 , - , 9 2 4 4 7 4 6 1 , , 9 2 2 1 9 2 8 , - - - - - - - - , 8 5 6 5 6 7 4 2 , , 9 2 0 8 8 1 2 , , 1 2 8 0 9 6 4 1 , - - - - - - - - - 6 0 1 0 9 5 , - - - - - - - - - 2 9 9 5 8 , , 5 3 1 8 7 7 2 , , 3 1 8 6 7 7 4 1 , I C O h g u o r h t e u l a v r i a f t a s t e s s a l a i c n a n fi f o l a s o p s i d n o e v r e s e r m o r f d e r r e f s n a r T - t u o ' s r a e y s u o i v e r p m o r f d e r r e f s n a r T s e c n a l a b g n d n a t s i l a i c n a n fi n o ) s s o l ( / n i a g d e s i l a e r n u t e N I C O h g u o r h t e u l a v r i a f t a s t e s s a k s i r g n i k n a b o t ) m o r f ( d e r r e f s n a r T s e v r e s e r o t d e r r e f s n a r T r a e y e h t r o f t fi o r p t e N d i a p d n e d i v i D e c n a l a b g n n n i g e B i e s a e r c n i l a t i p a C 0 2 0 2 , 1 3 . c e D - u r t s n i t b e d f o e u l a v r i a f n i L C E f o t c e ff E e v r e s e r I C O h g u o r h t e u l a v r i a f t a d e r u s a e m s t n e m i n a l p p h s r e n w o k c o t s l s e e y o p m e f o t s o C e c n a l a b g n i d n E ) P O S E ( y t i u q e l ’ s r e d 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 0 2 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o f 166 | Annual Report 2020 2020 Annual Report | 167 Financial Statements // Separate Notes to the separate financial statements for the year ended December 31, 2020 1. General information Commercial International Bank (Egypt) S.A.E. provides retail, corporate and investment banking services in various parts of Egypt through 182 branches, and 27 units employing 7071 employees on the statement of financial position 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. Financial statements have been approved by board of directors on February 28, 2021. 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 the Central Bank of Egypt regulations approved by the Board of Directors on December 16, 2008 as modified by the instructions for applying the International Standard for Financial Reports (9) issued by the Central Bank of Egypt on February 26, 2019. Reference is made to the Egyptian Accounting Standards for policies not specifically mentioned in the instructions of the Central Bank of Egypt, under the historical cost convention, as modified by the initial recognition of financial instruments at fair value, financial instru- ments categorized at fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”). The principal accounting policies applied in the preparation of these financial statements have been consis- tently applied to all periods presented and are set below. Subsidiaries 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 op- erating 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 year ended on 31 December, 2020 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 those investees, including structured entities, that the Bank controls because the Bank (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Bank has power over another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the in- vestee need to be made. The Bank may have power over an investee even when it holds less than majority of voting power in an investee. In such a case, the Bank assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities or apply only in exceptional circumstances, do not pre- vent the Bank from controlling an investee. Subsidiaries are consolidated in the Bank’s consolidated financial statements from the date on which control is transferred to the Bank, and are deconsolidated from the date on which control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries [other than those acquired from parties under common control]. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non- controlling interest. The Bank measures non-controlling interest that represents present ownership interest and entitles the holder to a pro- portionate share of net assets in the event of liquidation on a transaction by transaction basis, either at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquiree. Non-controlling interests that are not present ownership interests are measured at fair value. Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognized in profit or loss, after management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed, and reviews appropriateness of their measurement. The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transaction costs incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are expensed. Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless the cost cannot be recovered. The Bank and all its subsidiaries use uniform accounting policies consistent with the Group’s policies. Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group’s equity. Purchases and sales of non-controlling interests. The Bank applies the economic entity model to account for transactions with owners of non-controlling interest. Any difference between the purchase consideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Bank recognizes the dif- ference between sales consideration and carrying amount of non-controlling interest sold as a capital transaction in the statement of changes in equity. 2.2.2. Associates Associates are entities over which the Bank has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The carrying amount of associates includes goodwill identified on acquisition less accumulated credit losses, if any. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in Group’s share of net assets of an associ- ate are recognized as follows: (i) the Group’s share of profits or losses of associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group’s share of other comprehensive income is recognized in other comprehensive income and presented separately, (iii); all other changes in the Group’s share of the carrying value of net as- sets of associates are recognized in profit or loss within the share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Bank applies the impairment requirements in IFRS 9 to long-term loans, preference shares and similar long-term in- terest that in substance form part of the investment in associate before reducing the carrying value of the investment by a share of a loss of the investee that exceeds the amount of the Group’s interest in the ordinary shares. 168 | Annual Report 2020 2020 Annual Report | 169 Financial Statements // SeparateDisposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. 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. • Items of other comprehensive income with equity in relation to investments in equity instruments at fair value through comprehensive income. • Other operating revenues (expenses) from the remaining assets and liabilities. Changes in the fair value of financial instruments of a monetary nature in foreign currencies that are classified as finan- cial investments at fair value through comprehensive income (debt instruments) are analyzed between valuation differ- ences that resulted from changes in the cost consumed for the instrument and differences that resulted from changing the exchange rates in effect and differences caused by changing the fair value For the instrument, the evaluation differences related to changes in the cost consumed are recognized in the income of loans and similar revenues and in the differences related to changing the exchange rates in other operating income (expenses) item, and are recognized in the items of comprehensive income right The ownership of the difference in the change in the fair value (fair value reserve / financial investments at fair value through comprehensive income). Valuation differences arising from the measurement of items of a non-monetary nature at fair value through profit and losses resulting from changes in the exchange rates used to translate those items include, and then are recognized in the income statement by the total valuation differences resulting from the measurement of equity instruments classified at fair value through Profits and losses, while the total valuation differences resulting from the measurement of equity instruments at fair value through comprehensive income are recognized within other comprehensive income items in equity, fair value reserve item for financial investments at fair value through comprehensive income. 2.5. Financial assets Key Measurement Terms: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is price in an active market. An active market is one in which transactions for the asset or liability take place with enough frequency and volume to provide pricing in- formation on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the entity. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consid- eration of financial data of the investees, are used to measure fair value of certain financial instruments for which external market pricing information is not available. Fair value measurements are analyzed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transac- tion costs include fees and commissions paid. Transaction costs do not include debt premiums or discounts. Amortized cost is the amount at which the financial instrument was recognized at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortization of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. 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 a shorter period, if appropriate, to the gross carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortized over the expected life of the instru- ment. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. After the initial recognition, an ECL al- lowance is recognized for financial assets measured at amortized cost and investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the bank commits to deliver a financial asset. All other purchases are recognized when the entity becomes a party to the contractual provisions of the instrument. Financial assets – classification and subsequent measurement – measurement categories. The bank classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measurement of debt financial assets depends on: (i) the bank’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. The following table summarizes measurement categories Methods of Measurement according to Business Models Fair Value Financial Instrument Amortized Cost Equity Instruments Not Applicable Debt Instruments / Loans & Facilities Business Model of Assets held for Collecting Contractual Cash Flows Through Other Comprehensive Income An irrevocable election at Ini- tial Recognition Business Model of Assets held for Collecting Contractual Cash Flows & Selling Through Profit or Loss Normal treatment of equity instruments Business Model of Assets held for Trading 170 | Annual Report 2020 2020 Annual Report | 171 Financial Statements // SeparateFinancial assets – classification and subsequent measurement – business model. The business model reflects how the bank manages the assets in order to generate cash flows – whether the bank’s objec- tive is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the bank undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the bank in determining the business model include the purpose and composition of a portfolio, past expe- rience on how the cash flows for the respective assets were collected, how risks are assessed and managed, how the assets’ performance is assessed. Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the bank assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the bank considers whether the contractual cash flows are consistent with a ba- sic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrange- ment, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed. The following table summarizes the classification of the Banks Financial Assets in accordance with the business model: Financial asset Business model Basic characteristics Financial Assets at Am- ortized Cost (AC) Business model for financial assets held to collect contractual cash flows • The objective of the business model is to retain the financial assets to collect the contractual cash flows of the principal amount of the investment and the proceeds. • Sale is an exceptional event for the purpose of this model and under the terms of the criterion of a deterioration in the credit- worthiness of the issuer of the financial instrument. • Lowest sales in terms of turnover and value. • The Bank makes clear and reliable documentation of the rea- sons for each sale and its compliance with the requirements of the Standard. Financial Assets at Fair Value through Other Comprehensive Income (FVTOCI) Business model of financial assets held to collect cash flows and sales • Both the collection of contractual cash flows and sales are complementary to the objective of the model. • High sales (in terms of turnover and value) compared to the business model retained for the collection of cash flows. Financial Assets at Fair Value through Profit or Loss (FVTPL) Other business models include trad- ing - management of financial assets at fair value - maximizing cash flows by selling) • The objective of the business model is not to retain the financial asset for the collection of contractual or retained cash flows for the collection of contractual cash flows and sales. • Collecting contractual cash flows is an incidental event for the model objective. • Management of financial assets at fair value through profit or loss to avoid inconsistency in accounting measurement. Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The Bank did not change its business model during the current and comparative period and did not make any reclassifications. Financial assets impairment – credit loss allowance for ECL. The bank assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts. The bank measures ECL and recognizes credit loss allowance at each reporting date. The measure- ment of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting date about past events, current conditions and forecasts of future conditions. The bank applies a three-stage model for impairment, based on changes in credit quality since initial recognition. A finan- cial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”). If the bank identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). If the bank determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. Financial assets – write-off. Financial assets are written-off, in whole or in part, when the bank exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecog- nition event. Financial assets – derecognition. The bank derecognizes financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the bank has transferred the rights to the cash flows from the finan- cial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of owner- ship, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale. Financial liabilities – measurement categories.Financial liabilities are classified as subsequently measured at AC, ex- cept for financial liabilities at FVTPL: this classification is applied to derivatives or financial liabilities held for trading (e.g. short positions in securities) 2.6. Financial liabilities – derecognition. Financial liabilities are derecognized when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). 2.7. 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 govern- mental notes. 2.8. Derivative financial instruments and hedge accounting Derivatives are recognized initially, and subsequently, at fair value. Fair values of exchange traded derivatives are ob- tained 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. 172 | Annual Report 2020 2020 Annual Report | 173 Financial Statements // SeparateEmbedded derivatives in other financial instruments, such as conversion option in a convertible bond, are treated as separate 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 commit- ments (fair value hedge). • Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable forecast 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. 2.8.1. 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. 2.8.2. 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 2.9. 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 interest income after the settle- ment of the outstanding loan balance. 2.10. 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. 2.11. Dividend income Dividends are recognized in the income statement when the right to collect it is declared. 2.12. 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 re- sell 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. 2.13. Investment property The investment property represents 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 is carrying out its operations through or those that have owned by the Bank as settlement of debts. The accounting treatment is the same used with property and equipment. 2.14. Property and equipment Lands and buildings comprise mainly branches and offices. All property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisi- tion of the items. 174 | Annual Report 2020 2020 Annual Report | 175 Financial Statements // SeparateSubsequent costs are included in the asset’s carrying amount or as a separate asset, as appropriate, only when it is prob- able 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. 2.15.2. Other intangible assets The intangible assets other than goodwill and computer programs (trademarks, licenses, contracts for benefits, the ben- efits of contracting with clients). 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 Vehicles Computers and core systems Fixtures and fittings 20 years. 3 years, or over the period of the lease if less 3/5 years. 5 years 3/5 years 3 years 3 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, on each balance sheet date. De- preciable 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 as- set’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. 2.15.1. Goodwill Goodwill is capitalized and represents the excess of acquisition cost over the fair value of the Bank’s share in the ac- quired 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 on an annual basis or shorter when trigger event took place, impairment loss is charged to the income statement. Goodwill is allocated to the cash generating units for the purpose of impairment testing. The cash generating units rep- resented in the Bank main segments. 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 the instructions of Central Bank of Egypt, 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 pay- ments 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 statement 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 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 banks, 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 in- come (expenses). 176 | Annual Report 2020 2020 Annual Report | 177 Financial Statements // SeparateProvisions for obligations, other than those for credit risk or employee benefits, due in more than 12 months from the bal- ance 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 bal- ance 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, per- formance 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 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. The bank’s contributions to the employees’ social insurance fund Bank employees benefit from the Social Insurance Fund that has been established under the Law No. 64 of year 84 regard- ing alternative social insurance systems. This system is considered an alternative to state regulations and is subject to the supervision of the Ministry of Social Insurance. A Ministerial Resolution No. 22 of year 83 was issued regarding approval of the establishment of the Social Fund for Employees. The bank is obliged to pay to the fund the contributions due for each month represented in the employer’s share and the share of the insured and pay his obligations towards the fund in implementation of the provisions of the fund system. This is a system of benefits enjoyed by employees, a system of specific benefits for the bank, according to the Egyptian accounting standards. 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 appli- cable 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 in- crease 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. 2.24. Non-current assets held for sale A non-current asset (or disposal group) to be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Determining whether (and when) an asset stops being recovered principally through use and becomes recoverable prin- cipally through sale. For an asset (or disposal group) to be classified as held for sale: (a) It must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets (or disposal groups); (b) Its sale must be highly probable; The standard requires that non-current assets (and, in a ‘disposal group’, related liabilities and current assets,) meeting its criteria to be classified as held for sale be: (a) Measured at the lower of carrying amount and fair value less costs to sell, with depreciation on them ceasing; and (b) Presented separately on the face of the statement of financial position with the results of discontinued operations presented separately in the income statement. 2.25. Discontinued operation Discontinued operation as ‘a component of an entity that either has been disposed of, or is classified as held for sale, and (a) Represents a separate major line of business or geographical area of operations, (b) Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or (c) Is a subsidiary acquired exclusively with a view to resale. When presenting discontinued operations in the income statement, the comparative figures should be adjusted as if the operations had been discontinued in the comparative period. Important Accounting Estimates, and Judgements in Applying Accounting Policies The bank makes estimates and assumptions that affect the amounts recognized, and the carrying amounts of assets and li- abilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circum- stances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognized and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: ECL measurement. Measurement of ECLs is a significant estimate that involves determination of methodology, models and data inputs. The following components have a major impact on credit loss allowance: definition of default, SICR, prob- ability of default (“PD”), exposure at default (“EAD”), and loss given default (“LGD”), as well as models of macro-economic scenarios. The bank regularly reviews and validates the models and inputs to the models to reduce any differences be- tween expected credit loss estimates and actual credit loss experience. The bank used supportable forward-looking information for measurement of ECL, primarily an outcome of its own mac- ro-economic forecasting model. The most significant forward-looking assumptions, for both corporate and retail, that correlate with ECL level and their assigned weights were CBE key interest rate, GDP growth rate, Foreign currency index and Inflation rate. In addition to these assumptions, unemployment rate has been used for the retail sector. 178 | Annual Report 2020 2020 Annual Report | 179 Financial Statements // SeparateThe bank reduced the weights assigned to the upside scenario during 2020 as a result of the most recent developments related to COVID 19. A change in the assigned weight to the base scenario of the forward looking macro-economic variables by 10% towards the downturn scenario would result in an increase in ECL by EGP633,535 thousand as of 31 December 2020 (31 December 2019: by EGP495,372 thousand). A corresponding change towards the upturn scenario would result in a decrease in ECL by EGP386,041 thousand as of 31 December 2020 (31 December 2019: by EGP348,267 thousand). A 10% increase or decrease in LGD estimates would result in an increase or decrease in total expected credit loss allowances of EGP879,960 thousand at 31 December 2020 (31 December 2019: increase or decrease of EGP 773,549 thousand). Credit exposure on revolving credit facilities. For certain loan facilities, the bank’s exposure to credit losses may extend beyond the maximum contractual period of the facility. This exception applies to certain revolving credit facilities, which include both a loan and an undrawn commitment component and where the bank’s contractual ability to demand repay- ment and cancel the undrawn component in practice does not limit its exposure to credit losses. For such facilities, the bank measures ECLs over the period that the bank is exposed to credit risk and ECLs are not mitigated by credit risk management actions. Application of this exception requires judgement. Management applied its judgement in identifying the facilities, both retail and commercial, to which this exception applies. The bank applied this exception to facilities with the following characteristics: (a) there is no fixed term or repayment structure, (b) the contractual ability to cancel the contract is not in practice enforced as a result of day-to-day management of the credit exposure and the contract may only be cancelled when the bank becomes aware of an increase in credit risk at the level of an individual facility, and (c) the exposures are managed on a collective basis. Further, the bank applied judgement in determining a period for measuring the ECL, including the starting point and the expected end point of the exposures. The bank considered historical information and experience about: (a) the period over which the bank is exposed to credit risk on similar facilities, including when the last significant modification of the facility occurred and that therefore de- termines the starting point for assessing SICR, (b) the length of time for related defaults to occur on similar financial instruments following a SICR and (c) the credit risk management actions (eg the reduction or removal of undrawn limits), prepayment rates and other factors that drive expected maturity. In applying these factors, the bank segments the port- folios of revolving facilities into sub-groups and applies the factors that are most relevant based on historical data and experience as well as forward-looking information. Significant increase in credit risk (“SICR”). In order to determine whether there has been a significant increase in credit risk, the bank compares the risk of a default occurring over the life of a financial instrument at the end of the reporting date with the risk of default at the date of initial recognition. The assessment considers relative increase in credit risk rath- er than achieving a specific level of credit risk at the end of the reporting period using, for Corporate and Business Bank- ing: transition in risk ratings, delinquency status, industry and restructured status and for retail: watch list, individual profile, restructured status, and delinquency status. The bank considers all reasonable and supportable forward-looking information available without undue cost and effort, which includes a range of factors, including behavioral aspects of particular customer portfolios. The bank identifies behavioral indicators of increases in credit risk prior to delinquency and incorporated appropriate forward-looking information into the credit risk assessment, either at an individual instru- ment, or on a portfolio level. Business model assessment. The business model drives classification of financial assets. Management applied judgement in determining the level of aggregation and portfolios of financial instruments when performing the business model assess- ment. When assessing sales transactions, the bank considers their historical frequency, timing and value, reasons for the sales and expectations about future sales activity. Sales transactions aimed at minimizing potential losses due to credit deterioration are considered consistent with the “hold to collect” business model. Other sales before maturity, not related to credit risk management activities, are also consistent with the “hold to collect” business model, provided that they are infre- quent or insignificant in value, both individually and in aggregate. The bank assesses significance of sales transactions by comparing the value of the sales to the value of the portfolio subject to the business model assessment over the average life of the portfolio. In addition, sales of financial asset expected only in stress case scenario, or in response to an isolated event that is beyond the bank’s control, is not recurring and could not have been anticipated by the bank, are regarded as incidental to the business model objective and do not impact the classification of the respective financial assets. 180 | Annual Report 2020 The “hold to collect and sell” business model means that assets are held to collect the cash flows, but selling is also integral to achieving the business model’s objective, such as, managing liquidity needs, achieving a particular yield, or matching the duration of the financial assets to the duration of the liabilities that fund those assets. The residual category includes those portfolios of financial assets, which are managed with the objective of realizing cash flows primarily through sale, such as where a pattern of trading exists. Collecting contractual cash flow is often incidental for this business model. Assessment whether cash flows are solely payments of principal and interest (“SPPI”). Determining whether a financial asset’s cash flows are solely payments of principal and interest required judgement. The time value of money element may be modified, for example, if a contractual interest rate is periodically reset but the fre- quency of that reset does not match the tenor of the debt instrument’s underlying base interest rate. The effect of the modified time value of money was assessed by comparing relevant instrument’s cash flows against a benchmark debt instrument with SPPI cash flows, in each period and cumulatively over the life of the instrument. The assessment was done for all reasonably possible scenarios, including reasonably possible financial stress situation that can occur in financial markets. 3. Financial risk management The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, accep- tance 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. 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 identifies, 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 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 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 Bank’s rating 1 2 3 4 Description of the grade Performing loans Regular watching Watch list Non-performing loans 2020 Annual Report | 181 Financial Statements // Separate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. 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. 3.1.1.2. 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 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. 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, guaran- tees 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. 3.1.3. Impairment and provisioning policies 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 follow- ing 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, 2020 December 31, 2019 Loans and advances (%) Impairment provision (%) Loans and advances (%) Impairment provision (%) 80.16 11.14 4.43 4.27 22.79 17.60 25.74 33.87 85.63 6.88 3.50 3.99 19.27 8.76 28.15 43.82 182 | Annual Report 2020 2020 Annual Report | 183 Financial Statements // SeparateThe internal rating tools assists management to determine whether objective evidence of impairment exists, based on the following criteria set by the Bank: 3.1.5. Maximum exposure to credit risk before collateral held • 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. Model 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 ad- vances based on more detailed subgroups in accordance with instructions for the implementation of the International Financial Reporting Standard (9) issued by the Central Bank of Egypt on February 26, 2019. 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, fi- nancial 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 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 to 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% 0% 1% 1% 2% 2% Internal rating 1 1 1 1 1 3% 5% 20% 50% 100% 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 Starting 1st of Jan 2019 and after implementing CBE regulations for IFRS 9, Customer Loans has been reclassified into 3 stages based on each facility credit characteristics. Credit characteristics that used to determine the staging is different from ORR cus- tomer classification In balance sheet items exposed to credit risk Cash and balances at the central bank Due from banks Gross loans and advances to banks Less:Impairment provision Gross loans and advances to customers Individual: - Overdraft - Credit cards - Personal loans - Mortgages Corporate: - Overdraft - Direct loans - Syndicated loans - Other loans Unamortized bills discount Unamortized syndicated loans discount Impairment provision Unearned interest Suspended credit account Derivative financial instruments Financial investments: -Debt instruments Other assets (Accrued revenues) Total Off balance sheet items exposed to credit risk Financial guarantees Customers acceptances Letters of credit (import and export) Letter of guarantee Total EGP Thousands Dec. 31, 2020 Dec. 31, 2019 33,572,597 86,997,034 786,605 (9,625) 1,511,221 4,864,404 27,792,367 2,025,630 23,541,904 44,736,272 31,110,813 21,391 (104,176) (210,680) (16,395,749) - (38,517) 248,759 170,994,957 6,759,229 418,204,436 5,463,960 2,701,590 5,848,427 73,986,785 88,000,762 28,273,962 28,353,366 629,780 (4,516) 1,462,439 4,264,204 20,219,305 1,330,323 19,100,709 51,163,302 33,642,235 61,578 (55,197) - (11,825,887) (8,236) (33,672) 216,383 196,046,335 4,011,196 376,847,609 6,085,760 3,188,757 5,866,630 61,143,216 76,284,363 The above table represents the Bank’s Maximum exposure to credit risk on December 31, 2020, before taking into account 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, 28.61% of the total maximum exposure is derived from loans and advances to banks and customers against 31.83% on December 31, 2019, while investments in debt instruments represent 40.89% against 52.02% on December 31, 2019. Management is confident in its ability to continue to control and sustain minimal exposure of credit risk resulting from both the bank’s loans and advances portfolio and debt instruments based on the following: • 91.30% of the loans and advances are concentrated in the top two grades of the internal credit risk rating system against 92.51% on December 31, 2019 • Loans and advances assessed individualy are valued EGP 5,830,098 thousand against EGP 5,261,976 thousand on Decem- ber 31, 2019 • The Bank has implemented more prudent processes when granting loans and advances during the financial year ended on December 31, 2020. • 95.33% of the investments in debt Instruments are Egyptian sovereign instruments against 97.54% on December 31, 2019. 184 | Annual Report 2020 2020 Annual Report | 185 Financial Statements // Separate3.1.6. Loans and advances Loans and advances are summarized as follows: Dec.31, 2020 Dec.31, 2019 EGP Thousands Loans and advances to customers 135,604,002 16,395,749 104,176 210,680 - 38,517 118,854,880 Loans and advances to banks 786,605 9,625 - - - - 776,980 Loans and advances to customers 131,244,095 11,825,887 55,197 - 8,236 33,672 119,321,103 Loans and advances to banks 629,780 4,516 - - - - 625,264 Gross Loans and advances Less: Impairment provision Unamortized bills discount Unamortized syndicated loans discount Unearned interest Suspended credit account Net Impairment provision losses for loans and advances reached EGP 16,405,374 thousand. During the year, the Bank’s total loans and advances increased by 3.43%. 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. Total balances of loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 34,674,902 50,379,160 85,054,062 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 942,359 43,777,483 44,719,842 Stage 3: Expected credit losses Over a lifetime Credit default 576,361 5,253,737 5,830,098 Dec.31, 2020 Individuals Institutions and Business Banking Total Expected credit losses for loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 705,482 1,395,756 2,101,238 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 22,779 8,756,070 8,778,849 Stage 3: Expected credit losses Over a lifetime Credit default 348,551 5,167,111 5,515,662 Dec.31, 2020 Individuals Institutions and Business Banking Total EGP Thousands Total 36,193,622 99,410,380 135,604,002 EGP Thousands Total 1,076,812 15,318,937 16,395,749 Loans, advances and expected credit losses to banks divided by stages: Stage 1: Expected credit losses over 12 months - - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 786,605 (9,625) 776,980 Stage 3: Expected credit losses Over a lifetime Credit default - - - Dec.31, 2020 Time and term loans Expected credit losses Net Off balance sheet items exposed to credit risk and ecpected credit losses divided by stages: Stage 1: Expected credit losses over 12 months 54,078,581 (1,439,401) 52,639,180 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 28,364,823 (1,400,364) 26,964,459 Stage 3: Expected credit losses Over a lifetime Credit default 93,398 (88,729) 4,669 Dec.31, 2020 Facilities and guarantees Expected credit losses Net Total balances of loans and facilities divided by stages: Stage 1: Expected credit losses over 12 months 26,734,506 63,749,864 90,484,370 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 339,408 35,158,341 35,497,749 Stage 3: Expected credit losses Over a lifetime Credit default 202,357 5,059,619 5,261,976 Dec.31, 2019 Individuals Institutions and Business Banking Total Expected credit losses Stage 1: Expected credit losses over 12 months 96,469 1,208,722 1,305,191 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 10,394 5,325,121 5,335,515 Stage 3: Expected credit losses Over a lifetime Credit default 210,068 4,975,113 5,185,181 Dec.31, 2019 Individuals Institutions and Business Banking Total EGP Thousands Total 786,605 (9,625) 776,980 EGP Thousands Total 82,536,802 (2,928,494) 79,608,308 EGP Thousands Total 27,276,271 103,967,824 131,244,095 EGP Thousands Total 316,931 11,508,956 11,825,887 186 | Annual Report 2020 2020 Annual Report | 187 Financial Statements // SeparateLoans and advances to banks divided by stages: The total balances of loans and facilities divided according to the internal classification: Corporate and Business Banking loans: Stage 1: Expected credit losses over 12 months - - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 629,780 (4,516) 625,264 Stage 3: Expected credit losses Over a lifetime Credit default - - - Dec.31, 2019 Time and term loans Expected credit losses Net Off balance sheet items exposed to credit risk and ecpected credit losses divided by stages: Stage 1: Expected credit losses over 12 months 49,459,621 (1,118,319) 48,341,302 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 20,662,650 (603,614) 20,059,036 Stage 3: Expected credit losses Over a lifetime Credit default 76,331 (68,759) 7,572 Dec.31, 2019 Facilities and guarantees Expected credit losses Net Expected credit losses divided by internal classification: Corporate and Business Banking loans: EGP Thousands Total 629,780 (4,516) 625,264 EGP Thousands Total 70,198,602 (1,790,692) 68,407,910 EGP Thousands Scope of probability of default (PD) 1%-14% 15%-21% 21%-28% 100% Stage 1: Expected credit losses over 12 months 1,026,133 369,623 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 1,993,166 2,598,500 4,164,404 - Stage 3: Expected credit losses Over a lifetime Credit default - 1,802 1,842 5,163,467 Total 3,019,299 2,969,925 4,166,246 5,163,467 EGP Thousands Scope of probability of default (PD) (0% - 5%) (5% - 10%) (> 10%) 100% Stage 1: Expected credit losses over 12 months 704,246 1,236 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy - - 22,779 - Stage 3: Expected credit losses Over a lifetime Credit default - - - 348,551 Total 704,246 1,236 22,779 348,551 Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) 188 | Annual Report 2020 EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-12% 12%-21% 21%-27% 100% 46,553,362 3,825,798 - - 27,385,358 11,288,228 5,103,897 - - 8,551 1,842 5,243,344 Total 73,938,720 15,122,577 5,105,739 5,243,344 EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months (0% - 5%) (5% - 10%) (> 10%) 100% 34,602,984 71,918 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - 942,359 - - - - 576,361 Total 34,602,984 71,918 942,359 576,361 Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Expected credit losses divided by internal classification: Corporate and Business Banking loans: EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-14% 15%-21% 21%-28% 100% 1,041,456 167,266 - - 1,137,990 867,786 3,319,345 - - - - 4,975,113 Total 2,179,446 1,035,052 3,319,345 4,975,113 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) 2020 Annual Report | 189 Financial Statements // SeparateIndividual Loans: The following table provides information on the quality of financial assets during the financial year: EGP Thousands Dec.31, 2020 Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default (0% - 5%) (5% - 10%) (> 10%) 100% 95,234 1,235 - - - - 10,394 - - - - 210,068 Total 95,234 1,235 10,394 210,068 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) The total balances of loans and facilities divided according to the internal classification: Corporate and Business Banking loans: EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-12% 12%-21% 21%-27% 100% 61,291,934 2,457,930 - - 24,935,477 5,944,147 4,278,717 - - - - 5,059,619 Total 86,227,411 8,402,077 4,278,717 5,059,619 EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months (0% - 5%) (5% - 10%) (> 10%) 100% 26,059,247 675,259 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - 339,408 - - - - 202,357 Total 26,059,247 675,259 339,408 202,357 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Due from banks Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Individual Loans Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Corporate and Business Banking loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months 77,096,865 9,923,500 - - 87,020,365 (23,331) 86,997,034 Stage 1 12 months 34,602,984 71,918 - - 34,674,902 (705,482) 33,969,420 Stage 1 12 months 46,553,362 3,825,798 - - 50,379,160 (1,395,756) 48,983,404 Stage 2 Life time Stage 3 Life time - - - - - - - Stage 2 Life time - - 942,359 - 942,359 (22,779) 919,580 Stage 2 Life time 27,385,358 11,288,228 5,103,897 - 43,777,483 (8,756,070) 35,021,413 - - - - - - - Stage 3 Life time - - - 576,361 576,361 (348,551) 227,810 Stage 3 Life time - 8,551 1,842 5,243,344 5,253,737 (5,167,111) 86,626 Financial Assets at Fair Value through OCI Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months Stage 2 Life time Stage 3 Life time 115,663,918 30,310,122 - - 145,974,040 (619,577) 145,354,463 - - - - - - - - - - - - - - EGP Thousands Total 77,096,865 9,923,500 - - 87,020,365 (23,331) 86,997,034 EGP Thousands Total 34,602,984 71,918 942,359 576,361 36,193,622 (1,076,812) 35,116,810 EGP Thousands Total 73,938,720 15,122,577 5,105,739 5,243,344 99,410,380 (15,318,937) 84,091,443 EGP Thousands Total 115,663,918 30,310,122 - - 145,974,040 (619,577) 145,354,463 190 | Annual Report 2020 2020 Annual Report | 191 Financial Statements // SeparateThe following table provides information on the quality of financial assets during the financial year: Dec.31, 2019 Due from banks Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Individual Loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Corporate and Business Banking loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Financial Assets at Fair Value through OCI Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months 19,284,999 9,085,184 - - 28,370,183 (16,817) 28,353,366 Stage 1 12 months 26,059,247 675,259 - - 26,734,506 (96,469) 26,638,037 Stage 1 12 months 61,291,934 2,457,930 - - 63,749,864 (1,208,722) 62,541,142 Stage 1 12 months 59,915,108 28,905,614 - - 88,820,722 (414,395) 88,406,327 Stage 2 Life time Stage 3 Life time - - - - - - - Stage 2 Life time - - 339,408 - 339,408 (10,394) 329,014 Stage 2 Life time 24,935,477 5,944,147 4,278,717 - 35,158,341 (5,325,121) 29,833,220 - - - - - - - Stage 3 Life time - - - 202,357 202,357 (210,068) (7,711) Stage 3 Life time - - - 5,059,619 5,059,619 (4,975,113) 84,506 Stage 2 Life time Stage 3 Life time - - - - - - - - - - - - - - EGP Thousands Total 19,284,999 9,085,184 - - 28,370,183 (16,817) 28,353,366 EGP Thousands Total 26,059,247 675,259 339,408 202,357 27,276,271 (316,931) 26,959,340 EGP Thousands Total 86,227,411 8,402,077 4,278,717 5,059,619 103,967,824 (11,508,956) 92,458,868 EGP Thousands Total 59,915,108 28,905,614 - - 88,820,722 (414,395) 88,406,327 s d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 0 2 0 2 , 1 3 . c e D i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E s k n a b m o r f e u D - - - 8 0 2 0 8 , , 9 1 6 3 5 2 9 , , 5 3 3 1 5 0 1 , - - - ) 3 ( 7 1 8 6 1 , 0 5 1 4 , ) 5 3 1 5 7 3 ( , 7 6 3 2 , - - - , 7 2 0 0 1 0 0 1 , - - - 1 3 3 3 2 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8 0 2 0 8 , , 9 1 6 3 5 2 9 , , 5 3 3 1 5 0 1 , - - - ) 3 ( 7 1 8 6 1 , 0 5 1 4 , 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T ) 5 3 1 5 7 3 ( , 7 6 3 2 , t a e r u s o p x e e h t d n a t l u a f e d f o e s a c n i s s o l - - - , 7 2 0 0 1 0 0 1 , - - - 1 3 3 3 2 , - h t e m d n a s n o i t p m u s s a l e d o m o t s e g n a h C r a e y e h t g n i r u d ff o e t i r W y g o l o d o n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C t l u a f e d e c n a l a b g n i d n E s e c n e r e ff d i s d n a s u o h T P G E l a t o T 1 e g a t S s h t n o m 2 1 1 e g a t S s h t n o m 2 1 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E : s n a o L l i a u d v d n i I , 0 7 2 6 7 2 7 2 , , 3 1 3 3 9 9 8 , - - ) 1 6 9 5 7 ( , , 2 2 6 3 9 1 6 3 , - 1 3 9 6 1 3 , 8 6 6 4 9 7 , ) 1 6 9 5 7 ( , 4 7 1 1 4 , - - 7 5 3 2 0 2 , 5 6 9 9 4 4 , ) 1 6 9 5 7 ( , - 8 6 0 0 1 2 , 0 7 2 3 7 1 , ) 1 6 9 5 7 ( , 4 7 1 1 4 , - - - - - - 8 0 4 9 3 3 , 1 5 9 2 0 6 , 4 9 3 0 1 , 5 8 3 2 1 , - - - , 5 0 5 4 3 7 6 2 , , 7 9 3 0 4 9 7 , , 2 1 8 6 7 0 1 , 1 6 3 6 7 5 , 1 5 5 8 4 3 , 9 5 3 2 4 9 , 9 7 7 2 2 , , 2 0 9 4 7 6 4 3 , - - - 9 6 4 6 9 , 3 1 0 9 0 6 , 2 8 4 5 0 7 , 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C e c n a l a b g n i d n E s e c n e r e ff d i r a e y e h t g n i r u d t n e m r i a p m I r a e y e h t g n i r u d ff o e t i r W s e i r e v o c e R : s r o t c a f e s e h t f o t l u s e r a s a r a e y e h t f o d n e d n a g n i n n i g e b e h t n e e w t e b s e s s o l L C E d e t c e p x e d n a s e c n a l a b n i s e g n a h c s w o h s e l b a t g n w o i l l o f e Th 192 | Annual Report 2020 2020 Annual Report | 193 Financial Statements // Separate s d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E : s n a o l i i g n k n a B s s e n s u B d n a e t a r o p r o C , 1 6 8 5 9 9 9 3 , , 5 2 8 7 6 9 3 0 1 , , 6 3 7 1 0 0 2 , , 6 5 9 8 0 5 1 1 , 5 5 6 6 , ) 9 9 5 2 1 ( , ) 5 4 2 2 3 ( , ) 2 4 8 4 ( , 5 2 2 6 7 , 4 8 1 7 0 1 , , ) 4 1 3 5 3 4 1 5 ( , , ) 8 5 9 4 4 8 1 ( , , 9 1 6 9 5 0 5 , , 3 1 1 5 7 9 4 , , 1 4 3 8 5 1 5 3 , , 1 2 1 5 2 3 5 , , 5 6 8 9 4 7 3 6 , 9 8 4 8 3 5 , 0 4 1 9 7 4 , ) 4 3 8 1 3 5 ( , ) 6 5 9 1 7 3 ( , - - - - - - - , ) 0 2 7 3 6 1 ( , ) 9 1 7 3 6 1 ( , 4 0 5 9 1 9 7 1 , ) 9 4 6 5 3 1 ( , , ) 4 4 8 7 6 1 0 2 ( , , 4 2 3 9 0 2 1 , , 9 8 7 7 9 4 1 , ) 1 1 2 8 ( , 2 2 4 8 0 1 , , ) 9 5 2 5 4 1 1 ( , , 7 5 3 6 7 0 2 2 , 0 5 0 3 2 1 , , ) 0 5 7 3 0 1 1 3 ( , , ) 9 6 5 1 4 2 1 ( , , ) 0 5 3 5 9 9 1 ( , 3 8 1 4 5 4 , ) 7 2 4 8 4 ( , ) 2 6 8 3 4 ( , , 0 3 6 3 2 1 2 , 9 6 0 8 4 5 , , ) 3 5 5 0 7 0 4 ( , , 2 2 7 8 0 2 1 , - 7 4 9 3 0 5 , ) 0 8 9 5 3 5 ( , 9 6 3 3 , ) 7 9 1 2 3 ( , ) 4 2 0 0 5 ( , , 1 7 7 7 4 0 9 , , 7 8 2 8 8 1 3 , - ) 4 2 2 2 3 1 ( , 1 2 7 1 2 1 , ) 4 2 2 2 3 1 ( , - - ) 4 2 2 2 3 1 ( , - , ) 1 3 3 7 5 1 ( - , 0 8 3 0 1 4 9 9 , , 7 3 9 8 1 3 5 1 , , 7 3 7 3 5 2 5 , - 1 2 7 1 2 1 , ) 4 2 2 2 3 1 ( , ) 8 5 0 9 6 ( , , 1 1 1 7 6 1 5 , , 1 1 0 2 0 2 8 , , 8 7 7 1 8 8 2 , 0 6 7 5 4 8 , 9 0 5 6 0 3 , - - - - - ) 3 8 6 9 7 ( , - - - - - ) 0 9 5 8 ( , , 3 8 4 7 7 7 3 4 , , 0 7 0 6 5 7 8 , , 0 6 1 9 7 3 0 5 , , 6 5 7 5 9 3 1 , 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T t a e r u s o p x e e h t d n a t l u a f e d f o e s a c n i s s o l n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C r a e y e h t g n i r u d ff o e t i r W d n a s n o i t p m u s s a l e d o m o t s e g n a h C t l u a f e d y g o l o d o h t e m s e i r e v o c e R e c n a l a b g n i d n E s e c n e r e ff d i s d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E I l C O h g u o r h t e u a V r i a F t a s t e s s A l i a c n a n F i , 1 8 8 8 2 7 3 3 , , 0 7 4 6 2 3 9 1 , - - - , ) 9 3 4 5 9 6 4 1 ( , - - - 5 9 3 4 1 4 , 1 2 0 0 7 2 , , ) 3 7 2 6 2 1 ( 3 5 2 4 9 , 4 3 4 1 6 , - - - , 5 6 1 4 5 4 8 3 , - - - 7 7 5 9 1 6 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - , 1 8 8 8 2 7 3 3 , , 0 7 4 6 2 3 9 1 , , ) 9 3 4 5 9 6 4 1 ( , 5 9 3 4 1 4 , 1 2 0 0 7 2 , ) 3 7 2 6 2 1 ( , 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M - - - - - - 3 5 2 4 9 , 4 3 4 1 6 , - - - , 5 6 1 4 5 4 8 3 , - - - 7 7 5 9 1 6 , d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C t a e r u s o p x e e h t d n a t l u a f e d f o e s a c n i s s o l t l u a f e d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C d n a s n o i t p m u s s a l e d o m o t s e g n a h C r a e y e h t g n i r u d ff o e t i r W y g o l o d o h t e m e c n a l a b g n d n E i s e c n e r e ff d i 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T The following table shows changes in expected ECL losses between the beginning and end of the year as a result of these factors: Stage 1 12 months Stage 2 Life time Stage 3 Life time Dec.31, 2019 Due from banks Provision for credit losses on 1 January 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 "Changes in the probability of de- fault and loss in case of default and the exposure at default" Changes to model assumptions and methodology Write off during the year Cumulative foreign currencies trans- lation differences Ending balance Individual Loans: Provision for credit losses on 1 January 2019 Impairment during the year Write off during the year Recoveries Cumulative foreign currencies trans- lation differences Ending balance Corporate and Business Banking loans: Provision for credit losses on 1 January 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 "Changes in the probability of de- fault and loss in case of default and the exposure at default" Changes to model assumptions and methodology Recoveries Write off during the year Cumulative foreign currencies trans- lation differences Ending balance 160 16,816 (158) - - - (1) - - - 16,817 Stage 1 12 months 72,092 24,377 - - - 96,469 7,155 - (7,155) - - - - - - - - Stage 2 Life time 24,843 (14,449) - - - EGP Thousands Total 7,315 16,816 (7,313) - - - (1) - - - 16,817 - - - - - - - - - - - Stage 3 Life time 127,376 140,974 (118,486) 60,204 - EGP Thousands Total 224,311 150,902 (118,486) 60,204 - 10,394 210,068 316,931 Stage 1 12 months Stage 2 Life time Stage 3 Life time EGP Thousands Total 691,013 6,700,083 4,709,096 12,100,192 751,746 (364,309) 158,357 (3,937) 1,472 1,074,222 (899,007) (359,174) 9,427 (2,560,546) - (772,859) - - 2,409,875 1,825,968 (2,036,175) (200,817) 5,490 (149,199) 93,395 1,509,405 3,051 1,605,851 5,845 401,743 - - - - (124,860) 1,208,722 (551,032) 5,325,121 - 399,429 (1,262,286) (511,193) 407,588 399,429 (1,262,286) (1,187,085) 4,975,113 11,508,956 194 | Annual Report 2020 2020 Annual Report | 195 Financial Statements // Separate EGP Thousands Dec.31, 2020 EGP Thousands Financial Assets at Fair Value through OCI Provision for credit losses on 1 January 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 "Changes in the probability of de- fault and loss in case of default and the exposure at default" Changes to model assumptions and methodology Write off during the year Cumulative foreign currencies trans- lation differences Ending balance Stage 1 12 months Stage 2 Life time Stage 3 Life time 595,511 183,940 (282,223) 931 - - (83,764) - - - 414,395 3,803 - (773) (3,030) - - - - - - - - - - - - - - - - - - Total 599,314 183,940 (282,996) (2,099) - - (83,764) - - - 414,395 Loans and advances restructured Restructuring activities include rescheduling arrangements, applying obligatory management programs, modifying and deferral of payments. The application of restructuring policies are based on indicators or criteria of credit perfor- mance of the borrower that is based on the personal judgment of the management, which 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 year: Loans and advances to customer Corporate - Direct loans Total EGP Thousands Dec.31, 2020 Dec.31, 2019 4,794,419 4,794,419 4,682,243 4,682,243 3.1.7. Financial investments: The following table represents an analysis of financial investment balances by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2020 Amortized cost AAA AA+ to -AA A to -A+ Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 25,020,917 - 25,020,917 “Stage 2: Expected credit losses Over a lifetime that is not creditworthy” “Stage 3: Expected credit losses Over a lifetime Credit default” - - - - - - - - - - - - EGP Thousands “Individually impaired” - - - - - - Total - - - 25,020,917 - 25,020,917 Fair value through OCI AAA AA+ to -AA A+ to -A Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 145,974,040 - 145,974,040 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 145,974,040 - 145,974,040 The following table shows the analysis of impairment on credit losses of financial investments by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2020 Fair value through OCI AAA AA+ to -AA A+ to -A Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 38,454,165 - 38,454,165 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - EGP Thousands Individually impaired - - - - - - Total - - - 38,454,165 - 38,454,165 The following table represents an analysis of financial investment balances by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2019 EGP Thousands Amortized cost AAA AA+ to -AA A+ to -A Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 107,225,613 - 107,225,613 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 107,225,613 - 107,225,613 196 | Annual Report 2020 2020 Annual Report | 197 Financial Statements // SeparateDec.31, 2019 EGP Thousands Fair value through OCI AAA AA+ to -AA A+ to -A Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 88,820,722 - 88,820,722 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 88,820,722 - 88,820,722 The following table shows the analysis of impairment on credit losses of financial investments by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2019 EGP Thousands Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - 414,395 - 414,395 - - - - - - - - - - - - Fair value through OCI AAA AA+ to -AA A+ to -A Less than -A Not rated Total Individually impaired - - - - - - Total - - - 414,395 - 414,395 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 year. The Bank has allocated exposures to regions based on the country of domicile of its counterparties. Dec.31, 2020 Cash and balances at the central bank Due from banks Gross loans and advances to banks Less:Impairment provision Gross loans and advances to customers Individual: - Overdrafts - Credit cards - Personal loans - Mortgages Corporate: - Overdrafts - Direct loans - Syndicated loans - Other loans Unamortized bills discount Unamortized syndicated loans discount Impairment provision Unearned interest Suspended credit account Derivative financial instruments Financial investments: -Debt instruments Total Total as at December 31, 2019 Cairo 33,572,597 86,997,034 786,605 (9,625) 1,000,304 3,807,958 18,483,815 1,928,463 21,102,760 28,340,275 28,771,413 16,391 (104,176) (210,680) (11,851,162) - (38,517) 248,759 170,994,957 383,837,171 345,106,302 Alex, Delta and Sinai Upper Egypt Total EGP Thousands - - - - 417,515 898,858 7,913,359 85,331 1,433,121 11,285,312 2,218,123 5,000 - - - - - 93,402 157,588 1,395,193 11,836 1,006,023 5,110,685 121,277 - - 33,572,597 86,997,034 786,605 (9,625) 1,511,221 4,864,404 27,792,367 2,025,630 23,541,904 44,736,272 31,110,813 21,391 (104,176) - - (210,680) (3,512,766) - - - - 20,743,853 21,081,215 (1,031,821) - - - - 6,864,183 6,648,896 (16,395,749) - (38,517) 248,759 170,994,957 411,445,207 372,836,413 198 | Annual Report 2020 2020 Annual Report | 199 Financial Statements // Separates d n a s u o h T P G E l a t o T l i a u d v d n i l e a s e o h W l r e h t O t n e m n r e v o G l i a t e r d n a l i a c n a n F i I s e i t i v i t c a r o t c e s e d a r t e t a t s e l a e R g n i r u t c a f u n a M s n o i t u t i t s n i 0 2 0 2 , 1 3 . c e D ’ . s e i t i v i t c a s r e m o t s u c s 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 e s y l a n a e l b a t g n w o i l l o f e Th s r o t c e s y r t s u d n I . 2 . . 8 1 3 . , 7 9 5 2 7 5 3 3 , , 4 3 0 7 9 9 6 8 , 5 0 6 6 8 7 , ) 5 2 6 9 ( , , 1 2 2 1 1 5 1 , , 4 0 4 4 6 8 4 , , 7 6 3 2 9 7 7 2 , , 0 3 6 5 2 0 2 , , 4 0 9 1 4 5 3 2 , , 2 7 2 6 3 7 4 4 , , 3 1 8 0 1 1 1 3 , 1 9 3 1 2 , , ) 6 7 1 4 0 1 ( , ) 0 8 6 0 1 2 ( , ) 9 4 7 5 9 3 6 1 ( , - - - - , 1 2 2 1 1 5 1 , , 4 0 4 4 6 8 4 , , 7 6 3 2 9 7 7 2 , , 0 3 6 5 2 0 2 , - - - - - - - - - - - - - - - - - - - - - - , 3 6 1 5 6 3 4 , , 4 1 0 1 3 4 2 , - - ) 0 8 6 0 1 2 ( , - - - , 9 0 0 1 4 2 6 1 , , 3 2 8 0 8 3 4 , , 8 9 3 5 1 6 1 , , 2 9 7 4 3 3 1 2 , , ) 2 1 8 6 7 0 1 ( , , ) 8 9 2 0 7 0 9 ( , ) 7 1 5 8 3 ( , 9 5 7 8 4 2 , , 7 5 9 4 9 9 0 7 1 , - - - - - ) 6 6 ( - - ) 9 6 0 4 3 5 ( , , 9 1 6 1 1 0 3 6 1 , , 7 0 2 5 4 4 1 1 4 , , 3 1 4 6 3 8 2 7 3 , , 0 1 8 6 1 1 5 3 , , 2 3 4 7 1 9 6 2 , , 6 2 5 0 4 9 2 1 , , 9 7 1 4 2 6 0 9 1 , , 0 0 4 0 1 0 5 1 , , 3 9 5 2 3 9 2 2 2 , - - - - - - - - - - - - 0 5 8 6 9 8 , 1 0 2 7 0 9 , - - ) 3 5 2 1 3 1 ( , ) 9 1 9 6 3 ( , , 9 7 8 5 3 6 1 , , 8 9 3 4 2 7 1 , - - - - - - - - - - - - - - - - - - - - 5 0 6 6 8 7 , ) 5 2 6 9 ( , , 7 9 5 2 7 5 3 3 , , 4 3 0 7 9 9 6 8 , , 0 8 8 5 6 4 3 , , 9 7 6 5 7 5 1 , , 3 1 9 0 0 0 1 1 , , 9 9 6 4 6 5 0 2 , , 4 8 0 2 8 3 1 , , 1 6 8 6 6 0 1 , - - - - - - 1 1 6 8 4 9 , ) 3 5 9 9 7 ( , , 7 1 2 0 1 9 5 , , 8 4 4 7 0 3 4 , , 2 1 0 2 1 2 7 , - - 1 9 3 1 2 , , ) 5 6 0 8 1 4 5 ( , - - ) 2 3 5 1 ( , , 8 1 4 9 7 3 3 3 , , 2 3 8 6 9 2 7 3 , - - ) 6 7 1 4 0 1 ( , - ) 9 9 2 5 8 ( , - 9 5 7 8 4 2 , , 8 3 3 3 8 9 7 , , 0 1 3 7 4 6 4 6 , , 8 7 1 8 3 8 1 3 1 , k n a b l a r t n e c e h t t a s e c n a l a b d n a h s a C s k n a b m o r f e u D 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 s s o r G s k n a b o t s e c n a v d a d n a s n a o l s s o r G n o i s i v o r p t n e m r i a p m I : s s e L s n a o l l a n o s r e P - s d r a c t i d e r C - : l a u d i v i d n I s t f a r d r e v O - s e g a g t r o M - : e t a r o p r o C s n a o l t c e r i D s t f a r d r e v O - - s n a o l d e t a c i d n y S - s n a o l r e h t O - t n u o c s i d s l l i b d e z i t r o m a n U t n u o c s i d s n a o l d e t a c i d n y s d e z i t r o m a n U n o i s i v o r p t n e m r i a p m I s t n e m u r t s n i l a i c n a n fi e v i t a v i r e D t n u o c c a t i d e r c d e d n e p s u S 9 1 0 2 , 1 3 r e b m e c e D t a s a l a t o T : s t n e m t s e v n i l a i c n a n i F s t n e m u r t s n i t b e D - l a t o T 3.2. Market risk Market risk represents the fluctuations in fair value, future cash flow, foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices, and it may reduce the Bank’s income or the value of its portfolios. The bank assigns the market risk management department to measure, monitor and control the market risk. In addition, regular reports are submit- ted to the Asset and Liability “Management Committee (ALCO), Board Risk Committee and the heads of each business unit.“ The bank separates exposures to market risk into trading or non-trading portfolios. 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 com- mercial banking assets and liabilities, financial investments designated as FVTOCI and amortized cost. 3.2.1. Market risk measurement techniques As part of the management of market risk, the Bank undertakes various hedging strategies and 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 assesses the historical movements in the market prices based on volatilities and correlations. 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 VaR Lim- its, for the 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 is calculating the Market Risk Capital Requirements by applying Basel II “Standardised Measurement Method”, according to the Central Bank of Egypt regulatory requirements. 3.2.1.2. Stress testing Stress tests provide an indication of the potential size of losses that could arise under extreme market conditions. There- fore, the bank computes on a daily basis trading Stressed VaR, combined with the trading VaR, to capture the abnormal movements in financial markets and to give more comprehensive picture of risk. The results of the stress tests are re- viewed by the ALCO on a monthly basis and the board risk committee on a quarterly basis. 200 | Annual Report 2020 2020 Annual Report | 201 Financial Statements // Separate 3.2.2. Value at risk (VaR) Summary Total VaR by risk type Foreign exchange risk Interest rate risk - For non trading purposes - For trading purposes Portfolio managed by others risk Investment fund Total VaR Trading portfolio VaR by risk type EGP Thousands Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium 954 441,614 448,956 290 6,552 - 443,036 High Low 4,940 776,180 790,500 290 14,894 - 780,053 109 260,701 264,703 290 3,337 - 261,342 Medium 410 604,814 609,137 4,346 4,858 76 605,585 High Low 2,426 1,176,577 1,186,564 9,949 9,696 122 1,178,349 50 274,079 271,813 183 1,487 44 274,303 Foreign exchange risk Interest rate risk - For trading purposes Funds managed by others risk Investment fund Total VaR EGP Thousands Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium 954 290 290 6,552 - 6,752 High 4,940 290 290 14,894 - 14,696 Low 109 290 290 3,337 - 3,398 Medium 410 4,346 4,346 4,858 76 5,839 High 2,426 9,949 9,949 9,696 122 10,382 Low 50 183 183 1,487 44 3,475 Non trading portfolio VaR by risk type Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium High Low Medium High Low EGP Thousands Interest rate risk - For non trading purposes Total VaR 448,956 448,956 790,500 790,500 264,703 264,703 609,137 609,137 1,186,564 1,186,564 271,813 271,813 The increase in the value at risk, especially the rate of return, is associated with the increase in interest rate sensitivity in the global financial markets. The three previous outcomes of the VAR were calculated independently from the centers involved and historical market movements. The aggregate value at risk for trading and non-trading is not the Bank’s risk value because of the correlation between types of risk and types of portfolios and the consequent variety of impact. 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 monitored daily. The table below summarizes the Bank’s exposure to foreign exchange rate risk and financial instruments at carrying amounts, categorized by currency. Dec.31, 2020 EGP USD EUR GBP Other Total Equivalent EGP Thousands Financial assets Cash and balances at the central bank Gross due from banks Gross loans and advances to banks Gross loans and advances to customers Derivative financial instruments Financial investments Gross financial investment securities - Investments in associates and subsidiaries Total financial assets Financial liabilities Due to banks Due to customers Derivative financial instruments Other loans Total financial liabilities 30,124,865 44,696,639 - 89,104,919 49,476 2,037,732 41,266,271 786,605 40,877,651 199,283 656,261 610,710 - 5,557,616 - 83,244 366,864 - 63,815 - 33,572,597 670,495 87,020,365 79,881 - 786,605 1 135,604,002 248,759 - 152,329,829 153,557 20,439,255 159,828 2,205,197 - - - - 174,974,281 874,348 560,963 316,459,285 105,766,625 9,029,784 513,923 1,311,340 433,080,957 106,231 252,811,651 147,168 21,391 253,086,441 8,663,783 78,455,485 183,905 7,725,555 95,028,728 34,251 7,623,112 - - 7,657,363 11,269 925,623 - - 936,892 27 8,815,561 270,653 340,086,524 331,073 7,746,946 270,680 356,980,104 - - Net on-balance sheet financial position Total financial assets as of December 31, 2019 Total financial liabilities as of De- cember 31, 2019 Net on-balance sheet financial position as of December 31, 2019 63,372,844 10,737,897 1,372,421 (422,969) 1,040,660 76,100,853 274,021,131 103,563,099 8,402,003 909,285 914,829 387,810,347 216,664,024 93,357,846 8,552,640 878,388 396,698 319,849,596 57,357,107 10,205,253 (150,637) 30,897 518,131 67,960,751 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 the bank’s Risk Management Department. 202 | Annual Report 2020 2020 Annual Report | 203 Financial Statements // Separate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. Up to1 Month 1-3 Months 3-12 Months 1-5 years Over 5 years Non- Interest Bearing Total - - - 77,008,765 9,923,500 86,527 - - 786,605 - - - - - - 33,572,597 33,572,597 1,573 87,020,365 - 786,605 81,743,186 16,852,628 13,996,242 16,976,960 6,034,986 - 135,604,002 7,266 4,737,712 3,870,718 2,466,062 6,418 - 11,088,176 5,371,975 2,600,844 36,844,848 82,656,113 46,313,638 1,186,863 174,974,281 - - - - - 874,348 874,348 164,131,192 34,114,684 55,584,940 102,099,135 52,355,042 35,635,381 443,920,374 1,032,135 177,446,064 7,472,747 32,107,020 78,660 25,986,755 - 54,588,241 - 58,540 232,019 49,899,904 8,815,561 340,086,524 2,423,241 3,756,876 80,072 6,766 4,903,535 - 4,589,135 3,153,656 4,155 - - - 11,170,490 7,746,946 180,901,440 47,925,778 29,299,143 54,599,162 4,962,075 50,131,923 367,819,521 (16,770,248) (13,811,094) 26,285,797 47,499,973 47,392,967 (14,496,542) 76,100,853 107,147,723 64,307,164 94,406,289 61,344,661 39,777,608 29,707,476 396,690,921 187,516,737 38,196,955 21,690,398 34,839,667 1,937,061 44,549,352 328,730,170 (80,369,014) 26,110,209 72,715,891 26,504,994 37,840,547 (14,841,876) 67,960,751 Dec.31, 2020 Financial assets Cash and balances at the central bank Gross due from banks Gross loans and advances to banks Gross loans and advances to cus- tomers Derivatives finan- cial instruments (including IRS notional amount) Financial invest- ments Gross financial in- vestment securities - Investments in associates and subsidiaries Total financial assets Financial liabili- ties Due to banks Due to customers Derivatives finan- cial instruments (including IRS notional amount) Other loans Total financial liabilities Total interest re- pricing gap Total financial as- sets as of Decem- ber 31, 2019 Total financial liabilities as of De- cember 31, 2019 Total interest re-pricing gap as of December 31, 2019 3.3. Liquidity risk Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfill commitments to lend. Liquidity Risk Management Organization and Measurement Tools Liquidity Risk is governed by Asset and Liability Committee (ALCO) and Board Risk Committee (BRC) subject to provi- sions of Treasury Poilcy Guide (TPG). Board Risk Committee (BRC): Provides oversight of risk management functions and assesses compliance to the set risk strategies and policies approved by the Board of Directors (BoD) through periodic reports submitted by the Risk Group. The committee makes recommendations to the BoD with regards to risk management strategies and policies (including those related to capital adequacy, liquidity management,various types of risks: credit, market, operation, compliance, reputation and any other risks the Bank may be exposed to). Asset & Liability Committee (ALCO): Optimises the allocation of assets and liabilities, taking into consideration expec- tations of the potential impact of future interest rate to ensure ongoing activities are compatible with the risk/ reward guidelines approved by the BoD. Treasury Policy Guide (TPG): The purpose of the TPG is to document and communicate the policies that govern the activities performed by the Treasury Group and monitored by Risk Group. The main measures and monitoring tools used to assess the Bank’s liquidity risk include regulatory and internal ratios, gaps, Basel III liquidity ratios, asset and liability gapping mismatch, stress testing, and funding base concentration. More conservative internal targets and Risk Appetite indicators (RAI) against regulatory requirements are set for various mea- sures of Liquidity and Funding Concentration Risks.At the end of year, the Basel III Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) remained strong and well above regulatory requirements. The Bank maintained a solid LCY & FCY Liquidity position with decent buffers to meet both the global and local increase in risk profile related to the Covid-19 pandemic. CIB will continue with its robust Liability strategy with reliance on cus- tomer deposits (stable funding) as the main contributor of total liabilities, and low dependency on the Wholesale Funding. CIB has ample level of High Quality Liquid Assets (HQLA) based on its LCY & FCY Sovereign Portfolio investments, which positively reflects the Bank’s solid Liquidity Ratios and Basel III LCR & NSFR ratios, with a large buffer maintained above the Regulatory ratios requirements. 3.3.1. Liquidity risk management process The Bank’s liquidity management process is carried by the Assets and Liabilities Management Department and moni- tored independently by the Risk Management Department, and includes projecting cash flows by major currency under various stress scenarios and considering the level of liquid assets necessary in relation thereto: • Maintaining 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 CBE 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 projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. 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 by currency, provider, product and term. 204 | Annual Report 2020 2020 Annual Report | 205 Financial Statements // Separate3.3.3. Non-derivative cash flows The table below presents the cash flows payable by the Bank under non-derivative financial liabilities by remaining con- tractual maturities and the maturities assumption for non contractual products on the basis of their behaviour studies, at balance sheet date. Dec.31, 2020 Financial liabilities Due to banks Due to customers Other loans Total liabilities (contractual and non contractual maturity dates) Total financial assets (contractual and non contractual maturity dates) Dec.31, 2019 Financial liabilities Due to banks Due to customers Other loans Total liabilities (contractual and non contractual maturity dates) Total financial assets (contractual and non contractual 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 Thousands 1,264,151 32,792,022 - 7,472,749 32,480,332 10,079 78,661 97,124,044 2,629,252 - 166,850,344 2,445,156 - 10,839,782 2,662,459 8,815,561 340,086,524 7,746,946 34,056,173 39,963,160 99,831,957 169,295,500 13,502,241 356,649,031 84,620,725 49,072,630 59,598,235 157,255,071 82,285,536 432,832,197 Up to 1 month One to three months Three months to one year One year to five years Over five years Total EGP Thousands 5,795,044 34,976,355 2,868 320,830 25,769,297 42,488 5,694,733 71,077,755 14,090 - 161,953,222 1,257,765 - 10,707,026 1,955,535 11,810,607 304,483,655 3,272,746 40,774,267 26,132,615 76,786,578 163,210,987 12,662,561 319,567,008 39,156,322 30,113,707 85,349,273 167,623,442 67,757,445 390,000,189 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 extend- ed. 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. Derivative cash flows 3.3.4 The Bank’s derivatives include: Foreign exchange derivatives: exchange traded options and over-the-counter (OTC) ,exchange traded forwards currency options that will be settled on a gross basis 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 into maturity groupings based on the re- maining period of the balance sheet to the contractual maturity date will be settled on a net basis. The amounts disclosed in the table are the contractual undiscounted cash flows: Up to 1 month One to three months Three months to one year One year to five years Over five years Total EGP Thousands 16,230 - 16,230 30,061 44,100 - 44,100 51,676 80,072 - 80,072 125,307 6,766 - 6,766 - - 183,905 183,905 75,544 147,168 183,905 331,073 282,588 Dec.31, 2020 Liabilities Derivatives financial instruments Foreign exchange derivatives Interest rate derivatives Total Total as of Dec. 31, 2019 Off balance sheet items Dec.31, 2020 Up to 1 year 1-5 years Over 5 years Total Letters of credit, guarantees and other commitments Total Total as of Dec. 31, 2019 49,680,180 23,421,797 9,434,825 82,536,802 49,680,180 50,210,710 23,421,797 14,264,820 9,434,825 5,723,073 82,536,802 70,198,603 EGP Thousands Dec.31, 2020 Credit facilities commitments Total Up to 1 year 3,511,831 3,511,831 1-5 years 5,383,579 5,383,579 EGP Thousands Total 8,895,410 8,895,410 206 | Annual Report 2020 2020 Annual Report | 207 Financial Statements // Separate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. Financial assets Due from banks Gross loans and advances to banks Gross loans and advances to customers Financial investments: Amortized cost Total financial assets Financial liabilities Due to banks Due to customers Other loans Total financial liabilities Book value Fair value Dec.31, 2020 Dec.31, 2019 Dec.31, 2020 Dec.31, 2019 87,020,365 786,605 28,353,366 629,780 87,018,791 786,605 28,370,754 629,780 135,604,002 131,244,095 135,421,732 128,740,476 25,020,917 248,431,889 107,225,613 267,452,854 26,172,861 249,399,989 106,016,744 263,757,754 8,815,561 340,086,524 7,746,946 356,649,031 11,810,607 304,483,655 3,272,746 319,567,008 8,698,421 339,293,107 7,746,946 355,738,474 11,702,778 302,292,025 3,272,746 317,267,549 The fair value is considered in the previous note from the second and third level in accordance with the fair value standard Due from banks The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of floating 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. Fair values of financial instruments The following table provides the fair value measurement hierarchy of the assets and liabilities according to EAS. Quantitative disclosures fair value measurement hierarchy for assets as at 31 December 2020: instruments: Level 1 - Quoted prices in active markets for the same instrument (i.e. without modification or repacking); Level 2 - Quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all sig- nificant inputs are based on observable market data; and Level 3 - Valuation techniques for which any significant input is not based on observable market data. Dec.31, 2020 Measured at fair value: Financial assets Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI Total Derivative financial instruments Financial assets Financial liabilities Total Assets for which fair values are disclosed: Amortized cost Loans and advances to banks Loans and advances to customers Total Liabilities for which fair values are disclosed: Other loans Due to customers Total Date of Valuation Total Fair value measurement using Quoted prices in active markets (Level 1) Significant observable inputs (level 2) Valuation techniques (level 3) 31-Dec-20 359,959 359,959 - 31-Dec-20 147,646,432 107,691,850 39,954,582 148,006,391 108,051,809 39,954,582 - - - 31-Dec-20 31-Dec-20 248,759 331,073 579,832 31-Dec-20 31-Dec-20 31-Dec-20 26,172,861 786,605 135,421,732 162,381,198 31-Dec-20 31-Dec-20 7,746,946 339,293,107 347,040,053 - - - - - - - - - - - - - 248,759 331,073 579,832 26,172,861 - - 26,172,861 - 786,605 135,421,732 136,208,337 7,746,946 - 7,746,946 - 339,293,107 339,293,107 208 | Annual Report 2020 2020 Annual Report | 209 Financial Statements // SeparateDec.31, 2019 Measured at fair value: Financial assets Financial Assets at Fair value through P&L Financial Assets at Fair value through OCI Total Derivative financial instruments Financial assets Financial liabilities Total Assets for which fair values are disclosed: Amortized cost Loans and advances to banks Loans and advances to customers Total Liabilities for which fair values are disclosed: Other loans Due to customers Total Date of Valuation Total Fair value measurement using Quoted prices in active markets (Level 1) Significant observable inputs (level 2) Valuation techniques (level 3) 31-Dec-19 418,781 418,781 - 31-Dec-19 89,897,257 61,689,580 28,207,677 90,316,038 62,108,361 28,207,677 - - - 31-Dec-19 31-Dec-19 216,383 282,588 498,971 31-Dec-19 31-Dec-19 31-Dec-19 106,016,744 629,780 128,740,476 235,387,000 31-Dec-19 31-Dec-19 3,272,746 302,292,025 305,564,771 - - - - - - - - - - - - - 216,383 282,588 498,971 106,016,744 - - 106,016,744 - 629,780 128,740,476 129,370,256 3,272,746 - 3,272,746 - 302,292,025 302,292,025 Fair value of financial assets and liabilities Loans and advances to banks Loans and advances to banks are represented in loans that do not consider 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 dis- counted using the current market rate to determine fair value. 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: • Complying with the legally imposed capital requirements in Egypt. • Protecting the Bank’s ability to continue as a going concern and enabling the generation of 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 monthly 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 12.75%, calculated as the ratio between total value of the capital elements, and the risk-weighted assets and contingent liabilities of the Bank (credit risk, market risk and opertional risk). While taking into consideration the conservation buffer. Tier one: Tier one comprises 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, interim profits and deducting previously recog- nized goodwill and any retained losses Tier two: Tier two represents the gone concern capital which is compposed of general risk provision according to stage one ECL to the maximum of 1.25% risk weighted assets and contingent liabilities ,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 financial assets fair value through OCI , amortized cost , 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. 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. Assets risk weight scale ranging from zero to 400% is 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 adjustments 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. Financial Investments Investment securities include only interest-bearing assets, financial assets at amortized cost, and fair value through OCI. Fair value for amortized cost assets is based on market prices. 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. 210 | Annual Report 2020 2020 Annual Report | 211 Financial Statements // Separate The tables below summarize the compositions of teir 1, teir 2 , the capital adequacy ratio and leverage ratio . 4. Critical accounting estimates and judgments 1-The capital adequacy ratio Tier 1 capital Share capital Goodwill Reserves Retained Earnings (Losses) Total deductions from tier 1 capital common equity Net profit for the year Total qualifying tier 1 capital Tier 2 capital Subordinated Loans 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 (%) EGP Thousands Dec.31, 2020 Dec.31, 2019 14,776,813 (178,782) 33,427,234 256,266 (842,792) 8,906,131 56,344,870 4,579,135 2,072,612 6,651,747 62,996,617 165,944,439 701,776 33,923,864 200,570,079 31.41% 14,690,821 - 24,661,076 81,328 (807,709) 8,430,530 47,056,046 3,208,300 1,740,919 4,949,219 52,005,265 169,831,103 766,516 28,851,964 199,449,583 26.07% *Based on consolidated financial statement figures and in accordance with Central Bank of Egypt regulation issued on 24 December 2012. 2-Leverage ratio Total qualifying tier 1 capital On-balance sheet items & derivatives Off-balance sheet items Total exposures *Percentage EGP Thousands Dec.31, 2020 Dec.31, 2019 56,344,870 430,849,350 54,025,891 484,875,241 11.62% 47,056,046 409,689,485 46,195,165 455,884,650 10.32% *Based on consolidated financial statement figures and in accordance with Centeral Bank of Egypt regulation issued on 14 July 2015. For December 2020 NSFR ratio record 250.96% (LCY 301.42% and FCY 168.09%), and LCR ratio record 1358.58% (LCY 1976.64% and FCY 336.99%). For December 2019 NSFR ratio record 217.35% (LCY 255.43% and FCY 156.14%), and LCR ratio record 611.44% (LCY 757.42% and FCY 230.87%). 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 ex- pectations of future events that are believed to be reasonable under the circumstances and available information. 4.1. Fair value of derivatives The fair value of financial instruments that are not quoted in active markets are determined by using valuation tech- niques. these valuation techniques (as models) are validated and periodically reviewed by qualified personnel indepen- dent 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. For practicality purposes, 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 assump- tions about these factors could affect reported fair value of financial instruments. 5. Segment analysis 5.1. By business segment The Bank is divided into four 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 – incorporating financial instruments Trading, structured financing, Corporate leasing,and merger and ac- quisitions 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 –Including other banking business, such as Assets Management. Transactions between the business segments are on normal commercial terms and conditions. Dec.31, 2020 Net revenue according to business segment * Expenses according to business segment Profit before tax Tax Profit for the year Total assets Corporate banking SME’s Investments EGP Thousands Retail banking Asset Liability Mangement Total 11,509,020 1,566,102 7,952,088 6,912,740 636,807 28,576,757 (8,534,961) (880,520) (437,153) (3,425,209) (1,795) (13,279,638) 2,974,059 (971,560) 2,002,499 137,464,591 685,582 (223,965) 461,617 7,514,935 (2,454,966) 5,059,969 1,067,415 182,133,166 3,487,531 (1,139,301) 2,348,230 35,348,914 635,012 (207,445) 427,567 15,297,119 (4,997,237) 10,299,882 70,130,744 426,144,830 * Represents the net interest income and other income. 212 | Annual Report 2020 2020 Annual Report | 213 Financial Statements // SeparateEGP Thousands 6. Net interest income Dec.31, 2019 Revenue according to business segment Expenses according to business segment Profit before tax Tax Profit for the year Total assets at 31 December 2019 Corporate banking SME’s Investments Retail banking Asset Liability Mangement Total 9,756,652 2,234,547 5,292,706 7,121,674 816,595 25,222,174 (4,737,534) (898,119) (152,895) (2,882,762) (13,423) (8,684,733) 5,019,118 (1,436,735) 3,582,383 1,336,428 (382,556) 953,872 5,139,811 (1,471,285) 3,668,526 4,238,912 (1,213,400) 3,025,512 803,172 (229,910) 573,262 16,537,441 (4,733,886) 11,803,555 103,509,368 1,398,063 200,721,627 26,524,730 54,542,870 386,696,658 5.2. By geographical segment Dec.31, 2020 Revenue according to geographical segment Expenses according to geographical segment Profit before tax Tax Profit for the year Total assets Cairo Alex, Delta & Sinai Upper Egypt Total 24,786,619 3,033,434 756,704 28,576,757 (11,548,921) (1,471,486) (259,231) (13,279,638) 13,237,698 (4,330,267) 8,907,431 395,946,324 1,561,948 (505,857) 1,056,091 22,705,248 497,473 (161,113) 336,360 7,493,258 15,297,119 (4,997,237) 10,299,882 426,144,830 Dec.31, 2019 Revenue according to geographical segment Expenses according to geographical segment Profit before tax Tax Profit for the year Total assets at 31 December 2019 Cairo Alex, Delta & Sinai Upper Egypt Total 21,218,087 3,309,436 694,651 25,222,174 (7,293,433) (1,143,218) (248,082) (8,684,733) 13,924,654 (3,985,969) 9,938,685 358,860,383 2,166,218 (620,086) 1,546,132 21,081,215 446,569 (127,831) 318,738 6,755,060 16,537,441 (4,733,886) 11,803,555 386,696,658 Interest and similar income - Banks - Clients Total Treasury bills and bonds Repos “Financial investments at amortized cost and fair value through OCI” Total Interest and similar expense - Banks - Clients Total “Financial instruments purchased with a commitment to re-sale “Repos”” Other loans Total Net interest income 7. Net fee and commission income 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 Financial assets at fair value through P&L Financial assets at fair value through OCI Subsidiaries and associates Total EGP Thousands Dec.31, 2020 Dec.31, 2019 2,189,215 12,644,831 14,834,046 26,539,074 4,067 693,411 42,070,598 (458,190) (16,027,482) (16,485,672) (209,975) (284,988) (16,980,635) 25,089,963 3,308,719 14,630,606 17,939,325 24,277,671 - 383,961 42,600,957 (597,877) (19,893,762) (20,491,639) (232,055) (299,144) (21,022,838) 21,578,119 EGP Thousands Dec.31, 2020 Dec.31, 2019 1,185,000 159,082 1,709,454 3,053,536 (983,450) (983,450) 2,070,086 1,258,672 141,907 2,051,109 3,451,688 (1,170,893) (1,170,893) 2,280,795 EGP Thousands Dec.31, 2020 Dec.31, 2019 10,596 36,879 50,700 98,175 7,307 46,116 - 53,423 214 | Annual Report 2020 2020 Annual Report | 215 Financial Statements // Separate9. Net trading income 13. Adjustments to calculate the effective tax rate Profit (Loss) from foreign exchange transactions Profit (Loss) from forward foreign exchange deals revaluation Profit (Loss) from interest rate swaps revaluation Profit (Loss) from currency swap deals revaluation Profit (Loss) from financial assets at fair value through P&L Total 10. Administrative expenses Staff costs Wages and salaries Social insurance Other benefits Other administrative expenses * Total EGP Thousands Dec.31, 2020 Dec.31, 2019 434,920 36,861 (5,744) (5,577) (64,759) 395,701 749,591 (85,657) (29,521) 3,238 50,408 688,059 EGP Thousands Dec.31, 2020 Dec.31, 2019 (2,897,496) (123,625) (125,338) (2,406,341) (5,552,800) (2,604,675) (95,408) (108,367) (2,236,487) (5,044,937) *The expenses related to the activity for which the bank obtains a commodity or service, donations and depreciation. 11. Other operating (expenses) income Profits (losses) of non-trading assets and liabilities Profits of selling property and equipment Release (charges) of other provisions Other income/expenses Total 12. Impairment release (charges) for credit losses Loans and advances to customers Due from banks Financial securities Total EGP Thousands Dec.31, 2020 Dec.31, 2019 25,536 1,094 (1,288,675) (1,475,505) (2,737,550) 91,979 1,439 (361,649) (1,526,309) (1,794,540) EGP Thousands Dec.31, 2020 Dec.31, 2019 (4,777,592) (6,514) (205,182) (4,989,288) (1,610,878) (9,503) 184,921 (1,435,460) Profit before tax Tax rate Income tax based on accounting profit Add / (Deduct) Non-deductible expenses Tax exemptions Withholding tax Income tax / Deferred tax Effective tax rate 14. Earning per share Net profit for the year, available for distribution Board member's bonus Staff profit sharing Profits attributable to shareholders Weighted average number of shares Basic earning per share By issuance of ESOP earning per share will be: Average number of shares including ESOP shares Diluted earning per share 15. Cash and balances at the central bank Cash Obligatory reserve balance with CBE - Current accounts Total Non-interest bearing balances EGP Thousands Dec.31, 2020 Dec.31, 2019 15,297,119 22.50% 3,441,852 2,806,489 (4,224,616) 2,973,512 4,997,237 32.67% 16,537,441 22.50% 3,720,924 1,465,811 (1,493,292) 1,040,443 4,733,886 28.63% EGP Thousands Dec.31, 2020 Dec.31, 2019 10,296,070 (73,643) (1,029,607) 9,192,820 1,467,555 6.26 1,473,666 6.24 11,800,858 (177,013) (1,180,086) 10,443,759 1,467,555 7.12 1,473,666 7.09 EGP Thousands Dec.31, 2020 Dec.31, 2019 5,962,217 5,876,652 27,610,380 33,572,597 33,572,597 22,397,310 28,273,962 28,273,962 216 | Annual Report 2020 2020 Annual Report | 217 Financial Statements // Separate16. Due from banks Current accounts Deposits "Effect of applying IFRS 9 " Expected credit losses Total Central banks Local banks Foreign banks Total Non-interest bearing balances Floating interest bearing balances Fixed interest bearing balances Total Current balances Due from banks Gross due from banks Expected credit losses Net due from banks 17. Treasury bills and other governmental notes 91 Days maturity 182 Days maturity 364 Days maturity Unearned interest Total Repos - treasury bills Net Governmental bonds Governmental bonds Repo Net 218 | Annual Report 2020 EGP Thousands Dec.31, 2020 Dec.31, 2019 2,932,060 84,088,305 - (23,331) 86,997,034 54,425,073 1,268,079 31,303,882 86,997,034 1,573 8,872,165 78,123,296 86,997,034 86,997,034 3,704,142 24,666,041 (7,314) (9,503) 28,353,366 9,945,682 1,348,559 17,059,125 28,353,366 1,460 9,085,184 19,266,722 28,353,366 28,353,366 Stage 1 87,020,365 (23,331) 86,997,034 EGP Thousands Dec.31, 2020 Dec.31, 2019 22,426 98,825 42,049,022 (1,946,973) 40,223,300 (758,586) 39,464,714 6,025 749,625 29,112,513 (1,470,340) 28,397,823 (763,761) 27,634,062 Dec.31, 2020 Financial Assets at Fair Value through OCI 105,998,913 (7,472,925) 98,525,988 EGP Thousands Dec.31, 2019 Financial Assets at Fair Value through OCI 58,769,618 (2,406,225) 56,363,393 Treasury bills and other government securities are classified to financial instruments through other comprehensive in- come when applying IFRS 9 Note 21 18. Loans and advances to banks, net Time and term loans Impairment provision Net Current balances Net Analysis for impairment provision of loans and advances to banks Beginning balance Additions during the year Ending balance Analysis for impairment provision of loans and advances to banks Beginning Balance Addition during the year Ending balance Below is an analysis of outstanding balance: EGP Thousands Dec.31, 2020 Dec.31, 2019 786,605 (9,625) 776,980 776,980 776,980 629,780 (4,516) 625,264 625,264 625,264 EGP Thousands Dec.31, 2020 Dec.31, 2019 (4,516) (5,109) (9,625) Stage 2 (4,516) (5,109) (9,625) (3,246) (1,270) (4,516) Stage 2 (3,246) (1,270) (4,516) Rating B- Balance 776,980 Rating B- Balance 625,264 2020 Annual Report | 219 Financial Statements // Separate19. Loans and advances to customers, net Individual - Overdraft - Credit cards - Personal loans - Real estate 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 Unamortized syndicated loans discount "Effect of applying IFRS 9 " Impairment provision Unearned interest Suspended credit account Net loans and advances to customers Distributed to Current balances Non-current balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 1,511,221 4,864,404 27,792,367 2,025,630 36,193,622 23,541,904 44,736,272 31,110,813 21,391 99,410,380 135,604,002 (104,176) (210,680) - (16,395,749) - (38,517) 118,854,880 52,667,054 66,187,826 118,854,880 1,462,439 4,264,204 20,219,305 1,330,323 27,276,271 19,100,709 51,163,302 33,642,235 61,578 103,967,824 131,244,095 (55,197) - 716,325 (12,542,212) (8,236) (33,672) 119,321,103 51,682,809 67,638,294 119,321,103 l a t o T ) 1 3 9 6 1 3 ( , ) 8 6 6 4 9 7 ( , 1 6 9 5 7 , ) 4 7 1 1 4 ( , s d n a s u o h T P G E , ) 2 1 8 6 7 0 1 ( , , ) 6 5 9 8 0 5 1 1 ( , , ) 5 1 8 7 7 9 3 ( , 4 2 2 2 3 1 , ) 1 2 7 1 2 1 ( , 1 3 3 7 5 1 , , ) 7 3 9 8 1 3 5 1 ( , l a t o T ) 1 1 3 4 2 2 ( , ) 2 0 9 0 5 1 ( , 6 8 4 8 1 1 , ) 4 0 2 0 6 ( , ) 1 3 9 6 1 3 ( , - - ) 9 4 4 1 4 ( , ) 6 7 6 0 2 ( , ) 5 2 1 2 6 ( , ) 3 9 2 9 7 1 ( , ) 4 1 3 6 1 6 ( , 1 8 8 2 5 , ) 4 2 1 0 2 ( , ) 0 5 8 2 6 7 ( , 0 2 0 2 , 1 3 . c e D ) 6 7 7 0 9 ( , ) 2 3 5 3 5 1 ( , 0 8 0 3 2 , ) 0 5 0 1 2 ( , ) 8 7 2 2 4 2 ( , - - - ) 9 9 0 2 ( , ) 6 4 4 3 ( , ) 5 4 5 5 ( , , ) 2 5 5 3 4 7 2 ( , - - 6 7 0 6 3 , ) 4 7 4 2 5 7 ( , , ) 0 5 9 9 5 4 3 ( , l i a u d v d n i I 4 2 2 2 3 1 , ) 1 2 7 1 2 1 ( , 2 1 2 0 1 1 , , ) 8 2 9 3 3 5 0 1 ( , , ) 2 8 4 8 2 8 7 ( , , ) 1 6 1 6 2 8 2 ( , - ) 2 6 7 4 2 ( , ) 7 8 4 5 1 ( , ) 0 0 2 1 ( , ) 9 4 4 1 4 ( , ) 8 6 7 8 0 1 ( , ) 1 4 3 5 1 1 ( , 9 1 2 6 7 , ) 3 0 4 1 3 ( , , ) 3 9 2 9 7 1 ( e t a r o p r o C ) 2 6 1 2 4 ( , ) 0 8 2 3 6 ( , 7 6 2 2 4 , ) 1 0 6 7 2 ( , ) 6 7 7 0 9 ( , l a t o T s n a o l 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 , ) 2 9 1 0 0 1 2 1 ( , , ) 6 0 7 8 5 4 1 ( , , 6 8 2 2 6 2 1 , ) 9 2 4 9 9 3 ( , , 5 8 0 7 8 1 1 , , ) 6 5 9 8 0 5 1 1 ( , - - - - ) 9 9 0 2 ( , ) 9 9 0 2 ( , , ) 1 3 6 8 0 0 2 ( , , ) 7 9 5 9 7 3 9 ( , , ) 0 8 6 2 3 9 ( ) 9 1 5 2 3 2 ( , - - 9 5 7 7 9 1 , , ) 2 5 5 3 4 7 2 ( , , 6 8 2 2 6 2 1 , 7 7 7 0 2 9 , ) 9 2 4 9 9 3 ( , , ) 2 8 4 8 2 8 7 ( , l a t o T s n a o l 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 - - ) 3 1 4 5 ( , ) 6 4 1 4 ( , ) 9 5 5 9 ( , t f a r d r e v O ) 3 2 8 4 3 9 ( , ) 4 3 7 5 9 3 ( , - - 3 4 0 1 1 , , ) 4 1 5 9 1 3 1 ( , 6 0 2 3 4 , ) 9 1 6 8 4 ( , - - ) 3 1 4 5 ( , t f a r d r e v O ) 4 6 9 1 1 7 ( , ) 8 0 4 1 9 2 ( , - - 9 4 5 8 6 , ) 3 2 8 4 3 9 ( , s n a o l e t a t s e l a e R s n a o l l a n o s r e P s d r a c t i d e r C t f a r d r e v O : s n a o l i g n k n a B s s e n s u B d n a i e t a r o p r o C i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e c n a l a b g n i d n E r a e y e h t g n i r u d ff o n e t t i r W r a e y e h t g n i r u d e g r a h C e c n a l a b g n n n i g e B i s e i r e v o c e R r a e y e h t g n i r u d ) d e g r a h c ( d e s a e l e R * r a e y e h t g n i r u d s e i r e v o c e R r a e y e h t g n i r u d ff o e t i r W e c n a l a b g n d n E i e c n a l a b g n n n i g e B i 9 1 0 2 , 1 3 . c e D r a e y e h t g n i r u d ) d e g r a h c ( d e s a e l e R i e c n e r e ff d n o i t a u l a v e r e g n a h c x E * r a e y e h t g n i r u d s e i r e v o c e R r a e y e h t g n i r u d ff o e t i r W e c n a l a b g n d n E i s t n u o m a ff o n e t t i r w y l s u o i v e r p m o r F * e c n a l a b g n n n i g e B i 9 1 0 2 , 1 3 . c e D r a e y e h t g n i r u d ff o n e t t i r W r a e y e h t g n i r u d e g r a h C e c n a l a b g n n n i g e B i e c n a l a b g n i d n E s e i r e v o c e R 0 2 0 2 , 1 3 . c e D s e g a g t r o M 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 n a o L l i a u d v d n i I : s w o l l o f s a s a w r a e y e h t g n i r u d e p y t y b 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 n o s e s s o l t i d e r c d e t c e p x e e h t f o s i s y l a n A 220 | Annual Report 2020 2020 Annual Report | 221 Financial Statements // Separate 20. Derivative financial instruments 20.1 Derivatives The Bank uses the following financial derivatives for non hedging purposes. Forward contracts represent commitments to buy foreign and local currencies including unexecuted spot transactions. Future contracts for foreign currencies and/or interest rates represent contractual commitments to receive or pay net on the basis of changes in foreign exchange rates or interest rates, and/or to buy/sell foreign currencies or financial instru- ments in a future date with a fixed contractual price under active financial market. Credit risk is considered low, and future interest rate contract represents future exchange rate contracts negotiated for case by case, These contracts require 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 are exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign ex- change 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 in order 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 represent contractual agreements for the buyer (issuer) to the seller (holders) as a right not an obligation whether to buy (buy option) or sell (sell option) at a certain day or within certain year for a predetermined 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 is 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 is considered a base to analyze the realized financial instruments on the balance sheet, but it doesn’t provide an indicator for the projected cash flows of the fair value for current instruments, and those amounts don’t reflects credit risk or interest rate risk. Derivatives in the Bank’s benefit that are classified as (assets) are conversely considered (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 as well as the range through which the financial derivatives can be in benefit for 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: 20.1.1. For trading derivatives Foreign currencies derivatives - Forward foreign exchange contracts - Currency swap - Options Total (1) 20.1.2. Fair value hedge Dec.31, 2020 Dec.31, 2019 Notional amount 9,070,529 3,364,578 1,339 Assets Liabilities 41,790 7,686 - 49,476 142,579 4,589 - 147,168 Notional amount 8,315,292 4,904,151 1,365 Assets Liabilities 52,183 24,756 - 76,939 189,833 16,082 - 205,915 Interest rate derivatives - Customers deposits hedging Total (2) Total financial derivatives (1+2) Dec.31, 2020 Dec.31, 2019 Notional amount 10,839,417 Assets Liabilities 199,283 199,283 248,759 183,905 183,905 331,073 Notional amount 8,880,574 Assets Liabilities 139,444 139,444 216,383 76,673 76,673 282,588 20.2. Hedging derivatives Fair value hedge Losses arose from hedged items at December 31, 2020 reached EGP 7,034 thousand against losses of EGP 29,742 thousand at December 31, 2019. The Bank uses interest rate swap contracts to cover part of the risk of potential increase in fair value of its fixed rate cus- tomer deposits in foreign currencies. Net derivative value resulting from the related hedging instruments is EGP 15,378 thousand at the end of December 31, 2020 against EGP 62,771 thousand at December 31, 2019, resulting in losses from hedging instruments at December 31, 2020 of EGP 47,393 thousand against gains of EGP 87,619 thousand at December 31, 2019. Losses arose from the hedged items at December 31, 2020 reached EGP 55,573 thousand against losses EGP 171,993 thousand at December 31 , 2019. 222 | Annual Report 2020 2020 Annual Report | 223 Financial Statements // Separate21. Movement of financial investment securities: Beginning balance Effect of applying IFRS 9 Addition Disposals Exchange revaluation differences for foreign financial assets Profit (losses) from fair value difference Ending Balance as of Dec.31, 2019 Beginning balance Addition Disposals Profit (losses) from fair value difference Exchange revaluation differences for foreign financial assets Ending Balance as of Dec.31, 2020 Financial investments securities Financial Assets at Fair Value through OCI 39,217,890 42,268,972 58,210,468 (54,358,072) (1,588,099) 6,146,098 89,897,257 Financial Assets at Fair Value through OCI 89,897,257 112,404,036 (54,137,187) (269,259) (248,415) 147,646,432 Amortized cost 73,630,764 1,020,895 76,516,842 (43,937,957) (4,931) - 107,225,613 Amortized cost 107,225,613 - (82,203,469) - (1,227) 25,020,917 Dec.31, 2020 Investments listed in the market Governmental bonds Other bonds Equity instruments Portfolio managed by others Sukuk * Investments not listed in the market “Treasury bills and other governmental notes” Equity instruments Mutual funds Total Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI - - - 359,959 - 98,525,988 7,983,338 480,792 - 701,732 EGP Thousands Total 123,546,905 7,983,338 480,792 359,959 701,732 Amortized cost 25,020,917 - - - - - 39,464,714 - 39,464,714 - - 359,959 243,596 246,272 147,646,432 - - 25,020,917 243,596 246,272 173,027,308 * During the fourth quarter, Commercial International Bank subscribed in 7 million bonds, of the first issuance of Tharwa Company, with a nominal value of 100 EGP per unit - excluding the issuance fees - with a variable return paid from the month following the closing of the subscription, and the deposit was made with the custodian: Commercial International Bank (Egypt) Dec.31, 2019 Investments listed in the market Governmental bonds Other bonds Equity instruments Portfolio managed by others Investments not listed in the market "Treasury bills and other governmental notes" Equity instruments Mutual funds Total Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI - - - 418,781 56,363,393 4,823,267 502,920 - EGP Thousands Total 163,589,006 4,823,267 502,920 418,781 Amortized cost 107,225,613 - - - - 27,634,062 - 27,634,062 - - 418,781 344,929 228,686 89,897,257 - - 107,225,613 344,929 228,686 197,541,651 disclosure and measurement of financial assets and financial liabilities: The following table shows the financial assets and the net financial commitments according to the business model classification: Dec.31, 2020 Cash and balances with central bank Due from banks Treasury bills Loans and advances to customers, net Derivative financial instruments Financial Assets at Fair value through OCI Amortized cost Financial Assets at Fair value through P&L Total 1 Due to banks Due to customers Derivative financial instruments Other loans Other provisions Total 2 Amortized cost 33,572,597 86,997,034 - 118,854,880 - - 25,020,917 - 264,445,428 8,815,561 340,086,524 - 7,746,946 3,221,252 359,870,283 Debt financial Assets at Fair value through OCI Equity financial Assets at Fair value through OCI Financial Assets/ Liabilities at Fair value through P&L - - 39,464,714 - - 107,211,058 - - 146,675,772 - - - - - - - - - - - 970,660 - - 970,660 - - - - - - - - - - 248,759 - - 359,959 608,718 - - 331,073 - - 331,073 Total book value 33,572,597 86,997,034 39,464,714 118,854,880 248,759 108,181,718 25,020,917 359,959 412,700,578 8,815,561 340,086,524 331,073 7,746,946 3,221,252 360,201,356 224 | Annual Report 2020 2020 Annual Report | 225 Financial Statements // Separate21.1. Profits (Losses) on financial investments 23. Other assets Accrued revenues Prepaid expenses Advances to purchase of fixed assets Accounts receivable and other assets (after deducting the provision)* Assets acquired as settlement of debts Insurance Gross Impairment of other assets Net EGP Thousands Dec.31, 2020 Dec.31, 2019 6,759,229 285,585 1,195,099 755,836 169,855 40,608 9,206,212 (111,000) 9,095,212 4,011,196 217,484 942,781 4,333,966 356,382 36,130 9,897,939 (150,000) 9,747,939 *A provision with amount EGP 69 million has been charged against pending installments. This item includes other assets that are not classified under specific items of balance sheet assets, such as: accrued income and prepaid expenses, custodies, debit accounts under settlement and any balance that has no place in another asset category. Profit (Loss) from selling FVOCI financial instruments Released (Impairment) charges of FVOCI Released (Impairment) charges of investments in associates and subsidiaries Total 1,018,469 (79,126) (16,511) 922,832 497,894 (47,197) - 450,697 EGP Thousands Dec.31, 2020 Dec.31, 2019 22. Investments in associates and subsidiaries Company’s country Company’s assets Company’s liabilities (without equity) Company’s revenues Company’s net profit (loss) Investment book value Stake % EGP Thousands Egypt Egypt Kenya Egypt Egypt 146,693 613 743 (6,331) 159,828 81,416 5,095 38,521 33,558 122,366 1,856,285 1,242,561 295,723 (118,241) 560,963 82,094 122,518 49,824 143,914 49,254 45,506 7,140 (11,011) 22,191 - Egypt 1,062,033 799,693 472,714 723 9,000 3,351,039 2,241,700 902,461 (94,162) 874,348 99.99 49.95 51.00 39.34 23.50 30.00 Company’s country Company’s assets Company’s liabilities (without equity) Company’s revenues Company’s net profit (loss) Investment book value Stake % EGP Thousands Egypt 37,240 1,259 470 3,467 40,103 99.99 Egypt Egypt 42,920 45,557 17,399 (19,917) 14,100 741,875 501,413 511,163 22,437 9,750 23.50 32.50 822,035 548,229 529,032 5,987 63,953 Dec.31, 2020 Subsidiaries - CVenture Capital - Damietta shipping & marine services - Mayfair Bank Associates - Al Ahly Computer - Fawry Plus - International Co. for Security and Services (Falcon) Total Dec.31, 2019 Subsidiaries - CVenture Capital Associates - Fawry Plus - International Co. for Security and Services (Falcon) Total 226 | Annual Report 2020 2020 Annual Report | 227 Financial Statements // Separates d n a s u o h T P G E e r u t i n r u F i s e n h c a M 0 2 0 2 , 1 3 . c e D , 2 3 4 1 7 8 4 , 3 4 7 4 3 7 , ) 9 0 1 3 9 ( , , 6 6 0 3 1 5 5 , , 4 3 7 8 6 6 2 , 1 0 5 7 7 6 , ) 9 0 1 3 9 ( , , 6 2 1 3 5 2 3 , , 0 4 9 9 5 2 2 , , 8 9 6 2 0 2 2 , 8 2 8 3 1 1 , 6 8 2 5 2 , ) 1 2 0 3 ( , 3 9 0 6 3 1 , 2 4 9 7 7 , 9 6 6 3 1 , ) 1 2 0 3 ( , 0 9 5 8 8 , 3 0 5 7 4 , 6 8 8 5 3 , 0 2 % l a t o T i g n h s n r u f i d n a t n e m p u q e i t u o - d n a g n i t t i F 6 2 0 7 6 5 , 7 2 2 2 4 1 , ) 7 6 3 8 ( , 6 8 8 0 0 7 , 5 3 5 1 5 3 , 7 2 7 9 0 1 , ) 7 6 3 8 ( , 5 9 8 2 5 4 , 1 9 9 7 4 2 , 1 9 4 5 1 2 , 0 2 % 2 7 9 9 7 , 7 9 3 9 6 7 , ) 0 3 3 1 4 ( , 9 3 0 8 0 8 , 0 4 8 4 8 4 , 7 0 2 1 4 1 , ) 0 3 3 1 4 ( , 7 1 7 4 8 5 , 2 2 3 3 2 2 , 7 5 5 4 8 2 , . 3 3 3 % l s e c h e V i T I i s e s m e r P d n a L - 4 3 2 2 2 , 9 8 7 9 0 1 , 0 4 6 1 4 , 4 7 0 1 1 , 3 2 0 2 3 1 , - 4 1 7 2 5 , 9 0 3 9 7 , 9 4 1 8 6 , 0 2 % 2 0 2 3 9 3 , ) 1 5 0 4 2 ( , 2 2 8 1 7 , ) 0 4 3 6 1 ( , - - , 2 5 4 2 7 1 2 , , 1 3 2 4 7 0 1 , 9 0 7 4 6 , , 3 0 6 1 4 5 2 , , 9 1 5 0 9 2 1 , 6 2 9 8 4 3 , ) 1 5 0 4 2 ( , , 4 9 3 5 1 6 1 , . 3 3 3 % 9 0 2 6 2 9 , 3 3 9 1 8 8 , 8 9 8 2 5 , 8 5 2 2 2 4 , ) 0 4 3 6 1 ( , 6 1 8 8 5 4 , 7 9 8 0 7 6 , 3 7 9 1 5 6 , 5 % , 3 1 7 9 2 1 1 , 9 0 7 4 6 , - - - - 9 0 7 4 6 , 9 0 7 4 6 , ) 3 ( r a e y e h t i f o g n n n i g e b t a n o i t a i c e r p e d d e t a l u m u c c A ) 4 ( r a e y e h t f o d n e t a n o i t a i c e r p e d d e t a l u m u c c A * r a e y e h t g n i r u d s l a s o p s i D r a e y e h t r o f n o i t a i c e r p e D ) 3 - 1 ( s t e s s a t e n g n i n n i g e B ) 4 - 2 ( s t e s s a t e n g n i d n E s e t a r n o i t a i c e r p e D r a e y e h t g n i r u d s n o i t i d d A * r a e y e h t g n i r u d s l a s o p s i D ) 2 ( r a e y e h t f o d n e t a t s o C ) 1 ( 0 2 0 2 , 1 0 n a J t a t s o C i t n e m p u q e d n a y t r e p o r P . 4 2 . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r h c i h w r o f d n a s u o h t 5 3 3 , 8 6 2 P G E f o e u l a v t e n a h t i w s t e s s a s e d u l c n i e t a d t e e h s e c n a l a b e h t t a t n e m p i u q e d n a y t r e p o r P . d n u o p e n o n i d e d r o c e r e r a n o i t a r e p o n i l l i t s h c i h w s t e s s a r o f d n u o p s t e s s a d e t a i c e r p e d y l l u F * s d n a s u o h T P G E l a t o T d n a d n a e r u t i n r u F i s e n h c a M , 6 6 6 6 9 7 3 , , 7 6 3 7 2 1 1 , ) 1 0 6 2 5 ( , , 2 3 4 1 7 8 4 , , 1 9 7 4 4 1 2 , 4 4 5 6 7 5 , ) 1 0 6 2 5 ( , , 4 3 7 8 6 6 2 , , 8 9 6 2 0 2 2 , , 5 7 8 1 5 6 1 , 1 0 8 8 8 , 4 6 8 5 2 , ) 7 3 8 ( 6 6 8 8 6 , 8 2 8 3 1 1 , 3 1 9 9 , ) 7 3 8 ( 2 4 9 7 7 , 6 8 8 5 3 , 5 3 9 9 1 , 0 2 % i g n h s n r u f i 3 2 8 9 4 4 , 6 5 3 2 2 1 , ) 3 5 1 5 ( , 6 2 0 7 6 5 , 3 9 3 7 7 2 , 5 9 2 9 7 , ) 3 5 1 5 ( , 5 3 5 1 5 3 , 1 9 4 5 1 2 , 0 3 4 2 7 1 , 0 2 % t n e m p u q e i 9 1 0 2 , 1 3 . c e D t u o - g n i t t i F 3 2 3 5 2 5 , 0 7 5 4 8 2 , ) 6 9 4 0 4 ( , 7 9 3 9 6 7 , 1 3 4 6 0 4 , 5 0 9 8 1 1 , ) 6 9 4 0 4 ( , 0 4 8 4 8 4 , 7 5 5 4 8 2 , 2 9 8 8 1 1 , . 3 3 3 % l s e c h e V i T I i s e s m e r P d n a L - 7 4 1 2 6 , 2 4 6 7 4 , 0 5 7 8 , 0 9 8 2 3 , 9 8 7 9 0 1 , - 0 4 6 1 4 , 9 4 1 8 6 , 7 5 2 9 2 , 0 2 % , 5 9 4 0 8 5 1 , , 8 6 3 5 2 0 1 , 9 0 7 4 6 , 8 1 7 3 9 5 , ) 1 6 7 1 ( , 7 1 2 3 5 , ) 4 5 3 4 ( , - - 0 8 2 2 8 9 , 0 0 0 0 1 3 , ) 1 6 7 1 ( , . 3 3 3 % 3 3 9 1 8 8 , 5 1 2 8 9 5 , , 9 1 5 0 9 2 1 , 1 3 9 6 7 3 , 1 8 6 9 4 , ) 4 5 3 4 ( , 8 5 2 2 2 4 , 3 7 9 1 5 6 , 7 3 4 8 4 6 , 5 % , 2 5 4 2 7 1 2 , , 1 3 2 4 7 0 1 , 9 0 7 4 6 , - - - - 9 0 7 4 6 , 9 0 7 4 6 , ) 3 ( r a e y e h t i f o g n n n i g e b t a n o i t a i c e r p e d d e t a l u m u c c A ) 4 ( r a e y e h t f o d n e t a n o i t a i c e r p e d d e t a l u m u c c A n o i t a i c e r p e d r a e y t n e r r u C * r a e y e h t g n i r u d s l a s o p s i D ) 3 - 1 ( s t e s s a t e n g n i n n i g e B ) 4 - 2 ( s t e s s a t e n g n i d n E s e t a r n o i t a i c e r p e D r a e y e h t g n i r u d s n o i t i d d A * r a e y e h t g n i r u d s l a s o p s i D ) 2 ( r a e y e h t f o d n e t a t s o C ) 1 ( 9 1 0 2 , 1 0 n a J t a t s o C . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r h c i h w r o f d n a s u o h t 8 1 7 1 9 2 P G E f o e u , l a v t e n a h t i w s t e s s a s e d u l c n i e t a d t e e h s e c n a l a b e h t t a t n e m p i u q e d n a y t r e p o r P 25. Due to banks Current accounts Deposits Total Central banks Local banks Foreign banks Total Non-interest bearing balances Floating bearing interest balances Fixed interest bearing balances Total Current balances 26. Due to customers Demand deposits Time deposits Certificates of deposit Saving deposits Other deposits Total Corporate deposits Individual deposits Total Non-interest bearing balances Floating interest bearing balances Fixed interest bearing balances Total Current balances Non-current balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 392,725 8,422,836 8,815,561 114,786 5,233,885 3,466,890 8,815,561 232,019 871,427 7,712,115 8,815,561 8,815,561 420,500 11,390,107 11,810,607 111,967 10,476,614 1,222,026 11,810,607 289,069 4,908,538 6,613,000 11,810,607 11,810,607 EGP Thousands Dec.31, 2020 Dec.31, 2019 107,404,782 57,875,676 100,130,108 70,737,586 3,938,372 340,086,524 140,253,514 199,833,010 340,086,524 49,899,904 33,533,480 256,653,140 340,086,524 237,899,134 102,187,390 340,086,524 98,755,641 47,878,915 85,344,897 68,579,440 3,924,762 304,483,655 120,588,414 183,895,241 304,483,655 44,260,283 39,592,933 220,630,439 304,483,655 217,393,918 87,089,737 304,483,655 228 | Annual Report 2020 2020 Annual Report | 229 Financial Statements // Separate 27. Other loans 29. Provisions Interest rate % Loan duration Due within one year CDC subordinated loan European Bank for Reconstruction and Development (EBRD) Floating rate 10 years Floating rate 2 years International Finance Corporation (IFC) Floating rate Environmental Compliance Project (ECO) Agricultural Research and Development Fund (ARDF) Social Fund for Development (SFD) European Bank for Reconstruction and De- velopment (EBRD) subordinated Loan International Finance Corporation (IFC) subordinated Loan Balance 1 renewable year 3-5 years Fixed rate Fixed rate 3-5 years* Floating rate 04/01/2020* Floating rate 10 years Floating rate 10 years EGP Thousands Dec.31, 2020 Dec.31, 2019 EGP Thousands EGP Thousands - - - 314 17,000 - - - 1,432,715 1,573,210 1,573,210 1,391 20,000 - - - - - 61,578 2,868 1,573,210 1,604,150 1,573,210 1,604,150 17,314 7,746,946 3,272,746 Dec.31, 2020 Provision for legal claims Provision for contingent Provision for other claim Total Beginning balance 66,106 1,790,692 154,571 2,011,369 Charged during the year Exchange revaluation difference Utilized during the year - 1,143,171 89,560 1,232,731 (44) (5,369) (1,780) (7,193) (185) - (2,197) (2,382) Dec.31, 2019 Provision for income tax claims Provision for legal claims Provision for contingent Provision for other claim Total Beginning balance 6,910 57,677 1,449,690 180,330 1,694,607 Charged during the year Exchange revaluation difference Utilized during the year - 11,299 444,786 5,784 461,869 - (244) (103,784) (6,034) (110,062) - (2,626) - (25,509) (28,135) EGP Thousands Reversed amounts (13,273) - - (13,273) Ending balance 52,604 2,928,494 240,154 3,221,252 EGP Thousands Reversed amounts (6,910) - - - (6,910) Ending balance - 66,106 1,790,692 154,571 2,011,369 Interest rates on variable-interest subordinated loans are determined in advance every 3 months. Subordinated loans are not repaid before their repayment dates. * To face the potential risk of banking operations. *Represents the date of loan repayment to the lending agent. 30. Equity 28. Other liabilities Accrued interest payable Accrued expenses Accounts payable Other credit balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 1,165,714 1,316,093 3,083,529 113,930 5,679,266 1,090,649 1,027,526 6,097,077 181,235 8,396,487 30.1. Capital The authorized capital is EGP 50 billion according to the extraordinary general assembly decision on 12 June 2019. • Issued and Paid in Capital increased by an amount of EGP 85,992 thousand on September 21 ,2020 to reach EGP 14,776,813 thousand according to Board of Directors decision on January 5, 2020 by issuance of eleventh tranche for E.S.O.P program. • Issued and Paid in Capital increased by an amount of EGP 105,413 thousand on November 18,2019 to reach EGP 14,690,821 thousand according to Board of Directors decision on February 4, 2019 by issuance of tenth tranche for E.S.O.P program. • Issued and Paid in Capital increased by an amount of EGP 2,917,082 thousand on February 14, 2019 to reach 14,585,408 according to Ordinary General Assembly Meeting decision on March 4 ,2018 by distribution of a one share for every four outstanding shares by capitalizing on the General Reserve. 30.2 Reserves According to The Bank status 5% of net profit is used to increase the legal reseve to reaches 50% of The Bank’s issued and paid in capital. Central Bank of Egypt concurrence for usage of special reserve is required. 230 | Annual Report 2020 2020 Annual Report | 231 Financial Statements // Separate31. Deferred tax assets (Liabilities) Deferred tax assets and liabilities are attributable to the following: Details of the rights to share outstanding during the year are as follows: Assets (Liabilities) Dec.31, 2020 EGP Thousands Assets (Liabilities) Dec.31, 2019 Fixed assets (depreciation) Other provisions (excluded loan loss, contingent liabilities and income tax provi- sions) Other investments impairment Reserve for employee stock ownership plan (ESOP) Interest rate swaps revaluation Trading investment revaluation Forward foreign exchange deals revaluation Balance (84,418) 210,526 97,925 239,545 1,292 (20,059) (7,039) 437,772 (79,162) 146,675 76,407 216,709 6,642 (35,477) 18,545 350,339 Movement of Deferred Tax Assets and Liabilities: Beginning Balance Effect of applying IFRS 9 Additions / disposals Ending Balance Assets (Liabilities) Dec.31, 2020 350,339 - 87,433 437,772 EGP Thousands Assets (Liabilities) Dec.31, 2019 308,370 136,491 (94,522) 350,339 32. Share-based payments According to the extraordinary general assembly meeting on June 26, 2006, the Bank launched new Employees Share Ownership 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 vesting 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 instru- ments is measured using the Black-Scholes pricing model. 232 | Annual Report 2020 Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Outstanding at the end of the year Details of the outstanding tranches are as follows: Dec.31, 2020 No. of shares in thousand EGP Thousands Dec.31, 2019 No. of shares in thousand 27,428 11,313 (1,196) (8,599) 28,946 29,697 9,152 (880) (10,541) 27,428 Maturity date Exercise price Fair value EGP EGP 2021 2022 2023 Total 10.00 10.00 10.00 54.51 50.53 72.71 No. of shares in thousand 9,323 8,560 11,063 28,946 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% 14th tranche 13th tranche 10 83.02 3 13.66% 1.50% 25% 10 59.26 3 18.14% 1.70% 26% Volatility is calculated based on the daily standard deviation of returns for the last five years. 33. Reserves and retained earnings Legal reserve General reserve Capital reserve Retained earnings Reserve for financial assets at fair value through OCI Reserve for employee stock ownership plan Banking risks reserve General risk reserve Ending balance EGP Thousands Dec.31, 2020 Dec.31, 2019 2,778,135 24,765,658 14,906 10,477,611 3,970,987 1,064,648 6,423 1,549,445 44,627,813 2,188,029 16,474,429 13,466 11,803,555 4,111,781 963,152 5,164 1,549,445 37,109,021 2020 Annual Report | 233 Financial Statements // Separate33.1. Banking risks reserve 33.6. General risk reserve Beginning balance Transferred to banking risk reserve Ending balance 33.2 . Legal reserve Beginning balance Transferred to legal reserve Ending balance 33.3. Reserve for financial assets at fair value through OCI EGP Thousands Dec.31, 2020 Dec.31, 2019 5,164 1,259 6,423 4,323 841 5,164 EGP Thousands Dec.31, 2020 Dec.31, 2019 2,188,029 590,106 2,778,135 1,710,293 477,736 2,188,029 EGP Thousands Dec.31, 2020 Dec.31, 2019 Beginning balance Transferred from reserve on disposal of financial assets at fair value through OCI Net unrealised gain/(loss) on financial assets at fair value through OCI Effect of applying IFRS 9 Effect of ECL in fair value of debt instruments measured at fair value through OCI Ending balance 4,111,781 (76,717) (269,259) - 205,182 3,970,987 (3,750,779) - 6,157,553 1,889,928 (184,921) 4,111,781 33.4. Retained earnings EGP Thousands Dec.31, 2020 Dec.31, 2019 Beginning balance Transferred to reserves Dividend paid Net profit for the year Transferred ( from) to banking risk reserve Transferred from previous years' outstanding balances Transferred from reserve on disposal of financial assets at fair value through OCI Ending balance 11,803,555 (8,431,833) (3,370,464) 10,299,882 (1,259) 101,013 76,717 10,477,611 9,555,755 (6,854,370) (2,700,544) 11,803,555 (841) - - 11,803,555 33.5. Reserve for employee stock ownership plan Beginning balance Effect of applying IFRS 9 Transferred to general risk reserve Ending balance 34. Cash and cash equivalent Cash and balances at the central bank Due from banks Treasury bills and other governmental notes Obligatory reserve balance with CBE Due from banks with maturities more than three months Treasury bills with maturities more than three months Total 35. Contingent liabilities and commitments 35.1. Legal claims EGP Thousands Dec.31, 2020 Dec.31, 2019 1,549,445 - - 1,549,445 - 117,251 1,432,194 1,549,445 EGP Thousands Dec.31, 2020 Dec.31, 2019 33,572,597 87,020,365 39,464,714 (27,610,380) (16,280,760) (40,201,289) 75,965,247 28,273,962 28,370,183 27,634,062 (22,397,310) (10,593,903) (28,391,977) 22,895,017 • There is a number of existing cases against the bank on December 31, 2020 and 2019 for which no provisions are made as the bank doesn’t expect to incur losses from it. • A provision for legal cases that are expected to generate losses has been created. (Note No. 29) 35.2. Capital commitments 35.2.1. Financial investments The capital commitments for the financial investments reached on the date of financial position EGP 27,512 thousand as follows: Financial Assets at Fair value through OCI Financial investments in subsidiaries Investments value 157,321 157,318 Paid 129,809 157,318 Remaining 27,512 - 35.3. Letters of credit, guarantees and other commitments Beginning balance Transferred to reserves Cost of employees stock ownership plan (ESOP) Ending balance 234 | Annual Report 2020 EGP Thousands Dec.31, 2020 Dec.31, 2019 963,152 (450,942) 552,438 1,064,648 738,320 (239,707) 464,539 963,152 Letters of guarantee Letters of credit (import and export) Customers acceptances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 73,986,785 5,848,427 2,701,590 82,536,802 61,143,216 5,866,630 3,188,757 70,198,603 2020 Annual Report | 235 Financial Statements // Separate35.4. Credit facilities commitments Takamol fund EGP Thousands Dec.31, 2020 Dec.31, 2019 8,895,410 6,857,510 • CIB bank established an accumulated return mutual fund under license no.431 issued from financial supervisory author- ity on February 18, 2015. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 131,456 with redeemed value of EGP 23,086 thousands. • The market value per certificate reached EGP 175.62 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 8,781 thousands. Credit facilities commitments 36. Mutual funds Osoul fund • CIB established an accumulated return mutual fund under license no.331 issued from capital market authority on Febru- ary 22, 2005. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 4,049,086 with redeemed value of EGP 1,855,534 thousands. • The market value per certificate reached EGP 458.26 on December 31, 2020. • The Bank portion got 137,112 certificates with redeemed value of EGP 62,833 thousands. 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 369,394 with redeemed value of EGP 62,132 thousands. • The market value per certificate reached EGP 168.20 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 8,410 thousands. Aman fund ( CIB and Faisal Islamic Bank Mutual Fund) • CIB 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 281,716 with redeemed value of EGP 24,887 thousands. • The market value per certificate reached EGP 88.34 on December 31, 2020. • The Bank portion got 34,596 certificates with redeemed value of EGP 3,056 thousands. 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 90,255 with redeemed value of EGP 23,498 thousands. • The market value per certificate reached EGP 260.35 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 13,018 thousands. Thabat fund • CIB bank established an accumulated return mutual fund under license no.613 issued from financial supervisory author- ity on September 13, 2011. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 152,949 with redeemed value of EGP 51,688 thousands. • The market value per certificate reached EGP 337.94 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 16,897 thousands. 37. Transactions with related parties All banking transactions with related parties are conducted in accordance with the normal banking practices and regu- lations applied to all other customers without any discrimination. 37.1. Loans, advances, deposits and contingent liabilities Loans, advances and other assets Deposits Contingent liabilities 37.2. Other transactions with related parties International Co. for Security & Services CVenture Capital Fawry plus Mayfair bank Damietta shipping & marine services Al ahly computer EGP Thousands Dec.31, 2020 15,049 149,217 1,210 EGP Thousands Income Expenses 70 80 739 17 5 5 213,668 279 - - 9,469 57 236 | Annual Report 2020 2020 Annual Report | 237 Financial Statements // Separate38. Main currencies positions Egyptian pound US dollar Sterling pound Japanese yen Swiss franc Euro EGP Thousands Dec.31, 2020 Dec.31, 2019 (750,477) 97,057 3,487 (8) 2,175 (218,881) (387,742) (79,511) 248 6 484 32,890 Main currencies positions above represents what is recognized in the balance sheet position of the Central Bank of Egypt. 39. Tax status Corporate income tax • Settlement of corporate income tax since the start of activity till 2017 • 2018 examined & paid • The yearly income tax return is submitted in legal dates Salary tax • Settlement of salary tax since the start of activity till 2019 Stamp duty tax Total other assets by end of 2018 Assets acquired as settlement of debts Advances to purchase of fixed assets Total 1 Total other assets by end of 2019 Assets acquired as settlement of debts Advances to purchase of fixed assets Impairment charge for other assets Total 2 Change (1-2) 41. Significant events during the year EGP Thousands Dec.31, 2019 9,563,218 (276,520) (768,733) 8,517,965 9,747,939 (356,382) (942,781) (93,313) 8,355,463 162,502 • Based on both banks’ Board of Directors’ approval, and after obtaining all necessary approvals from the Central Bank of Egypt and the Central Bank of Kenya, in May 2020, CIB has acquired 51% of what is to be renamed as Mayfair CIB Bank Limited in Kenya in the form of a capital increase, for a total transaction value of USD 35.35 million. The bank has consoli- dated financial results starting from the second quarter of 2020. • In May 2020, CIB gained significant influence in “Damietta Shipping and Marine Services” Company, upon controlling majority seats in the Company’s Board of Directors, besides 32% of the Company’s shares previously owned by the Bank. The Company’s financial results have been consolidated starting Q2 2020. • Starting from Q3 2020, CIB has combined AL-Ahly Computer company financial results as an associate using the equity • The period since the start of activity till 31/07/2006 was examined & paid, disputed points have been transferred to the method. court for adjudication. • The period from 01/08/2006 till 31/12/2019 was examined & paid in accordance with the protocol signed between the Fed- eration of Egyptian Banks & the Egyptian Tax Authority Loans: During the period, CIB has obtained a total debt of $300mn USD as follows: 40. Other assets - net increase (decrease) Total other assets by end of 2019 Assets acquired as settlement of debts Advances to purchase of fixed assets Total 1 Total other assets by end of year Assets acquired as settlement of debts Advances to purchase of fixed assets Impairment charge for other assets Total 2 Change (1-2) EGP Thousands Dec.31, 2020 9,747,939 (356,382) (942,781) 8,448,776 9,095,212 (169,855) (1,195,099) 69,217 7,799,475 649,301 $100mn USD subordinated debt from CDC. $100mn USD senior debt from the European Bank for Reconstruction and Development (EBRD). $100mn USD senior debt from the International Finance Corporation (IFC). • In September 2020, the Central Bank and Banking Institutions Law No. 194 for the year 2020 was issued which cancelled the Central Bank, Banking and Monetary Institutions Law No. 88 for the year 2003. Article No. 4 of Law No. 194 for the year 2020 allows the addressees a transition period for the compliance with the new law. 238 | Annual Report 2020 2020 Annual Report | 239 Financial Statements // SeparateSubsequent event • On Thursday October 22nd 2020 the Bank’s Directors received a letter from the Central Bank of Egypt (CBE) informing them that in light of the findings of a limited review inspection, the CBE Board of Directors agreed on a resolution to discharge the Chairman and Managing Director of CIB and that its Board should elect a Non-Executive Chairman from among its Non-Executive Directors. On the following day the CIB Board convened, during that meeting the Chairman and Managing Director stepped down from his position and resigned from the board with immediate effect and Mr. Sherif Samy was elected Non-Executive Chairman. • CBE issued its report to the Bank on 10 November 2020 and it covered a number of areas that needed immediate remedia- tion covering the Internal Control Environment, Credit facilities and provisions, Governance and Compliance and also referred to instances of violations of certain provisions of the applicable laws (Articles 57, 64 and 111 of Law 88 for year 2003, and Articles 19 and 42 of the Executive Regulation of the said law), and other instances of violations of CBE regula- tions. The Board of the Bank mandated management to review the CBE report findings and propose necessary corrective actions. The Bank carefully assessed all the findings and other similar matters. Since 22 October the Bank management and Board met with the CBE several times to address the matters raised, the findings and compliance requirements. The Bank also engaged external legal counsel to support in the characterization and assessment of the findings. The Bank’s management applied its judgement and experience and included in these financial statements, their assessment of the impact of the CBE findings, including credit losses and legal and other charges. (see notes 19 and 29). • The Board of the Bank assessment is that the design of the internal controls over financial reporting remain appropriate and continue to operate effectively to ensure fair presentation of the financial position of the Bank and its financial per- formance. Management developed a corrective action plan for the CBE to address all the findings and to further enhance regulatory compliance and strengthen controls. Additionally, as directed by the Non-Executive Directors, the Audit Com- mittee appointed an independent international professional services firm to conduct an in depth review of the Bank’s controls and lending functions with a view to addressing specific and related areas from the CBE inspection, based on best practice and to further enhance regulatory compliance and strengthen controls at CIB, as part of the Bank’s commitment to enhancing risk management and the governance culture at the Bank. The said review is currently ongoing up to the date of issue of the financial statements. Any additional recommendations of the said review will be considered in the Bank’s future actions. Impact of covid-19 The coronavirus (“COVID-19”) pandemic has spread across various geographies globally, causing disruption to business and economic activities. COVID-19 has brought about uncertainties in the global economic environment. The fiscal and monetary authorities, both domestic and international, have announced various fiscal and stimulus measures across the globe to counter possible adverse implications. Business continuity planning The Bank is closely monitoring the situation and taking rightful measures to ensure the safety and security of the bank’s staff and an uninterrupted service to its customers. Remote working arrangements have been implemented and part of the Bank staff are working from home in line with government directions. Business continuity plans are in place. The Bank has taken measures to ensure that services levels are maintained, cus- tomer complaints are resolved, and the Bank continues to serve its customers as they would do in normal conditions. CIB regularly conducts stress tests to assess the resilience of the statement of position and the capital adequacy. CIB is closely monitoring the situation and has activated its risk management practices managing the potential business disrup- tion COVID-19 outbreak may have on its operations and financial performance. Impact on expected credit losses In the determination of the impact over the ECL, CIB has considered the potential impact of the uncertainties considering the available information caused by the Covid-19 pandemic and taken into account the economic support and relief mea- sures taken by the Central Bank of Egypt. The Bank has reviewed the potential impact of COVID-19 outbreak on the inputs and assumptions for ECL measurement. In addition, the Bank has analyzed the risk of the credit portfolio by focusing on economic sector wise segmentation analysis using both a top-down approach and the Bank own experience. Overall, the COVID-19 situation remains fluid and is rapidly evolving at this point, which makes it challenging to reliably reflect impacts in our ECL estimates. In addition to the assumptions outlined above, CIB has given specific consideration to the relevant impact of COVID-19 on the qualitative and quantitative factors when determining the significant increase in credit risk (SICR) leading to reclassifying loans from stage 1 to stage 2 and assessing the indicators of impairment for the exposures in potentially affected sectors. The bank has implemented the CBE initiative of payment relief for the customers by deferring interest/principal due for six months. The relief offered to customers may at some cases indicate a SICR. However, the bank believes that the extension of these payment reliefs does not automatically trigger a SICR and a stage migration for the purposes of calculating ECL, as these are being made available to assist borrowers affected by the Covid-19 outbreak to resume regular payments. The Bank has reassessed its ECL models, underlying assumptions including relevant available macroeconomic data, and the judg- mental overlays on the basis of macroeconomic variations reflected in models pertaining to particular industries rather than on customer-account basis. The ECL amounts recognized in the bank’s financial statements for the period ending December 31, 2020 were mainly increased as a result of the Covid 19 impact . The impact of current uncertain economic environment is judgmental and management will keep assessing the current position and its related impact regularly. It should be also considered that the assumptions used about economic forecasts are subject to high degree of inherent uncertainty and therefore the actual outcome may be significantly different from forecasted information. CIB has consid- ered potential impacts of the current economic volatility in determination of the reported amounts of the bank’s financial and non-financial assets and these are considered to represent management’s best assessment based on observable infor- mation. Markets however remain volatile and the recorded amounts remain sensitive to market fluctuations. Liquidity management The Bank’s approach is to maintain a prudent Liquidity position with a Liability driven strategy, as almost the entire fund- ing base is customer based rather than wholesale funding; which is a core component of the Risk Appetite. This is coupled with ample amounts of Liquid Assets. To limit potential Liquidity shocks, the Bank has a well-established Contingency Funding Plan (CFP), where Liquidity Risk is assessed in line with all Regulatory and Internal Liquidity Measurements, and Basel II and III requirements; including Liquidity Stress Testing; and Basel III Ratios; Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR). 240 | Annual Report 2020 2020 Annual Report | 241 Financial Statements // SeparateAuditors’ Report 242 | Annual Report 2020 2020 Annual Report | 243 Financial Statements // ConsolidatedConsolidated balance sheet as at December 31, 2020 Consolidated income statement for the year ended December 31, 2020 Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Assets Cash and balances at the central bank Due from banks Loans and advances to banks, net Loans and advances to customers, net Derivative financial instruments Investments - Financial Assets at Fair Value through P&L - Financial Assets at Fair Value through OCI - Amortized cost - Investments in associates Other assets Goodwill Intangible assets Deferred tax assets (Liabilities) Property and equipment Total assets Liabilities and equity Liabilities Due to banks Due to customers Derivative financial instruments Current tax liabilities Other liabilities Other loans Provisions Total liabilities Equity Issued and paid up capital Reserves Reserve for employee stock ownership plan (ESOP) Retained earnings * Total equity Minority interest Total minority interest, equity and net profit for the year Total liabilities and equity 15 16 18 19 20 21 21 21 22 23 42 43 31 24 25 26 20 28 27 29 30 33 33 33 The accompanying notes are an integral part of these financial statements . (Audit report attached) *Including net profit for the current year 33,768,549 87,426,301 776,980 119,570,005 248,759 359,959 148,118,372 25,285,225 139,871 9,175,525 178,782 44,920 437,772 2,311,147 427,842,167 8,817,535 341,169,450 331,073 859,582 5,735,269 7,746,946 3,223,501 367,883,356 14,776,813 33,094,580 1,064,648 10,539,715 59,475,756 483,055 59,958,811 427,842,167 28,273,962 28,353,366 625,264 119,321,103 216,383 418,781 89,897,257 107,225,613 107,693 9,748,143 - - 350,339 2,204,464 386,742,368 11,810,607 304,448,455 282,588 4,639,364 8,396,794 3,272,746 2,011,369 334,861,923 14,690,821 24,344,815 963,152 11,881,657 51,880,445 - 51,880,445 386,742,368 Interest and similar income Interest and similar expense Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividend income Net trading income Profits (Losses) on financial investments Administrative expenses Other operating (expenses) income Goodwill amortization Intangible assets amortization Impairment release (charges) for credit losses Profits from subsidiaries acquisition Bank's share in the profits of associates Profit before income tax Income tax expense Deferred tax assets (Liabilities) Net profit for the year Minority interest Bank shareholders Earning per share Basic Diluted 6 7 8 9 21 10 11 12 13 31 - 13 14 42,196,235 (17,023,815) 25,172,420 3,059,264 (983,450) 2,075,814 50,175 406,631 922,832 (5,625,883) (2,742,996) (27,505) (6,911) (5,018,781) 8,086 22,426 15,236,308 (5,087,418) 87,433 10,236,323 (1,834) 10,238,157 42,600,957 (21,022,338) 21,578,619 3,451,688 (1,170,893) 2,280,795 53,423 688,059 450,697 (5,048,922) (1,794,750) - (238,715) (1,435,460) - 1,135 16,534,881 (4,639,364) (94,522) 11,800,995 - 11,800,995 6.26 6.24 7.11 7.09 Hussein Abaza CEO & Board member Sherif Samy Chairman Hussein Abaza CEO & Board member 244 | Annual Report 2020 Sherif Samy Chairman 2020 Annual Report | 245 Financial Statements // ConsolidatedConsolidated statement of other comprehensive income for the year ended December 31, 2020 Consolidated cash flow for the year ended December 31, 2020 Net profit for the year Other comprehensive income items that will not be reclassified to the Profit or Loss: Change in fair value of equity instruments measured at fair value through other comprehensive income Other comprehensive income items that is or may be reclassified to the profit or loss: Change in fair value of debt instruments measured at fair value through other comprehensive income Transferred from reserve on disposal of financial assets at fair value through OCI Cumulative foreign currencies translation differences Effect of ECL in fair value of debt instruments measured at fair value through OCI EGP Thousands Dec. 31, 2020 Dec. 31, 2019 10,236,323 11,800,995 (13,966) 212,967 (250,766) 5,944,586 (76,717) (3,684) 205,182 - 2,501 (184,921) Total other comprehensive income for the year 10,096,372 17,776,128 As follows: Bank's shareholders Minority interest Total other comprehensive income for the year 10,098,206 17,776,128 (1,834) - 10,096,372 17,776,128 246 | Annual Report 2020 Cash flow from operating activities Profit before income tax from continued operations Adjustments to reconcile net profit to net cash provided by operating activities Fixed assets depreciation Impairment charge for credit losses (Loans and advances to custom- ers and banks) Other provisions charges Impairment charge for credit losses (due from banks) Impairment charge for credit losses ( financial investments) Impairment charge for other assets Exchange revaluation differences for financial assets at fair value through OCI Goodwill amortization Intangible assets amortization Impairment charge financial assets at fair value through OCI Utilization of other provisions Other provisions no longer used Exchange differences of other provisions Profits from selling property, plant and equipment (Profits) losses from selling financial investments Released (Impairment) charges of investments in associates and subsidiaries Shares based payments Bank's share in the profits of associates 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 Financial assets at fair value through P&L Derivative financial instruments Loans and advances to banks and customers Other assets Due to banks Due to customers Income tax obligations paid Other liabilities Net cash used in (generated from) operating activities Cash flow from investing activities Proceeds from Investments in associates. "Payment for purchases of property, plant, equipment and branches constructions" Proceeds from selling property, plant and equipment Proceeds from redemption of financial assets at amortized cost Payment for purchases of financial assets at amortized cost Payment for purchases of financial assets at fair value through OCI Proceeds from selling financial assets at fair value through OCI Proceeds from investment in subsidiaries. Net cash generated from (used in) investing activities Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands 15,236,308 16,534,881 24 12 29 12 12 23 21 42 43 21 29 29 29 11 21 21 15 21 20 18 - 19 40 25 26 28 11 21 21 21 733,032 4,806,518 1,234,980 7,081 205,182 69,217 249,642 27,505 6,911 79,126 (2,382) (13,273) (7,193) (1,094) (1,018,469) 16,511 552,438 (22,426) 576,544 1,610,878 461,869 9,503 (184,921) (93,313) 1,593,030 - 238,715 - (28,135) (6,910) (110,062) (1,439) (497,894) - 464,539 (1,135) 22,159,614 20,566,150 (10,899,927) - 58,822 16,109 (5,020,609) 568,988 (2,993,072) 36,720,995 (3,779,782) (7,645,182) 29,185,956 (8,870,547) - 2,318,924 (2,910) (14,533,328) 163,933 4,550,788 19,151,586 (3,625,579) 1,895,241 21,614,258 750 - (1,091,829) (1,303,181) 1,094 82,309,481 (233,765) (112,791,966) 54,137,187 194,722 22,525,674 1,439 43,937,957 (76,516,842) (50,954,311) 54,855,966 - (29,978,972) 2020 Annual Report | 247 Financial Statements // ConsolidatedConsolidated cash flow for the year ended December 31, 2020 (Cont.) Notes Dec. 31, 2020 Dec. 31, 2019 EGP Thousands Cash flow from financing activities Received (Repaid) in long term loans Dividend paid Capital increase Net cash generated from (used in) financing activities Net increase (decrease) in cash and cash equivalent during the year Beginning balance of cash and cash equivalent Cash and cash equivalent at the end of the year Cash and cash equivalent comprise: Cash and balances at the central bank Due from banks Treasury bills and other governmental notes Obligatory reserve balance with CBE Due from banks with maturities more than three months Treasury bills with maturity more than three months Total cash and cash equivalent 27 15 16 17 15 4,474,200 (3,370,464) 85,992 1,189,728 52,901,358 22,895,017 75,796,375 33,768,549 87,450,490 39,497,692 (27,744,700) (16,974,367) (40,201,289) 75,796,375 (448,783) (2,700,544) 105,413 (3,043,914) (11,408,628) 34,303,645 22,895,017 28,273,962 28,370,183 27,634,062 (22,397,310) (10,593,903) (28,391,977) 22,895,017 l ’ s r e d 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 9 1 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o f y t i u q e s d n a s u o h T P G E l a t o T y t i r o n M i t s e r e t n I y t i u q E s e c n e r e f f i d n a p l i s g n n r a e e v r e s e r I C O i n g e r o f e e y o p m e l l e v i t a u m u C r o f e v r e s e R l s r e d o h e r a h S l n o i t a s n a r t i p h s r e n w o i d e n a t e R s k s i r l a t o T i s e c n e r r u c k c o t s i g n k n a B l i a c n a n fi t a s t e s s a e u a v l r i a f h g u o r h t r o f e v r e s e R , 5 7 5 5 3 2 6 3 , - 3 1 4 5 0 1 , , ) 4 4 5 0 0 7 2 ( , , 5 9 9 0 0 8 1 1 , , 3 5 5 7 5 1 6 , - , ) 1 2 9 4 8 1 ( 9 3 5 4 6 4 , 5 3 8 1 , , 5 4 4 0 8 8 1 5 , - - - - - - - - - - - , 5 7 5 5 3 2 6 3 , - 3 1 4 5 0 1 , , ) 4 4 5 0 0 7 2 ( , , 5 9 9 0 0 8 1 1 , , 3 5 5 7 5 1 6 , - , ) 1 2 9 4 8 1 ( 9 3 5 4 6 4 , 5 3 8 1 , , 5 4 4 0 8 8 1 5 , - - - - - - - - - 1 0 5 2 , 1 0 5 2 , - 0 2 3 8 3 7 , ) 7 0 7 9 3 2 ( , - - - - - 9 3 5 4 6 4 , - - ) 1 4 8 ( 1 4 8 - , 3 8 0 7 3 6 9 , - , ) 0 7 3 4 5 8 6 ( , - , ) 4 4 5 0 0 7 2 ( , , 5 9 9 0 0 8 1 1 , - - - - - 3 2 3 4 , - - - - , 3 5 5 7 5 1 6 , , ) 1 5 8 0 6 8 1 ( , - ) 6 6 6 ( , 2 5 1 3 6 9 , 7 5 6 1 8 8 1 1 , - - - 4 6 1 5 , - - ) 1 2 9 4 8 1 ( , , 1 8 7 1 1 1 4 , l a t i p a C e v r e s e r 1 2 4 2 1 , - 5 4 0 1 , - - - - - - - 6 6 4 3 1 , r e d n u l o r t n o c n o m m o c r o f e v r e s e R s n o i t c a s n a r t l a r e n e G k s i r e v r e s e r l a r e n e G e v r e s e r l a g e L p u d a p i e v r e s e r l a t i p a c d n a d e u s s I - - - - - - - - - - - , 5 4 4 9 4 5 1 , , 5 1 2 6 7 7 2 1 , , 3 9 2 0 1 7 1 , , 6 2 3 8 6 6 1 1 , - - - - - - - - - , 5 4 4 9 4 5 1 , , ) 2 8 0 7 1 9 2 ( , , 6 9 2 5 1 6 6 , - - - - - - - , 9 2 4 4 7 4 6 1 , - - - - - - - - 6 3 7 7 7 4 , , 9 2 0 8 8 1 2 , , 5 9 4 2 2 0 3 , - - - - - - - - , 1 2 8 0 9 6 4 1 , - m o c r e d n u s n o i t c a s n a r t r o f e v r e s e R l o r t n o c n o m k s i r g n i k n a b o t ) m o r f ( d e r r e f s n a r T e v r e s e r - u r t s n i t b e d f o t n e m r i a p m i r o f L C E s e v r e s e r o t d e r r e f s n a r T r a e y e h t f o t fi o r p t e N d i a p d n e d i v i D e c n a l a b g n n n i g e B i e s a e r c n i l a t i p a C 9 1 0 2 , 1 3 . c e D s t n e m t s e v n i s t n e m - a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C r a e y e h t f o d n e e h t t a e c n a l a B s e c n e r e ff d n o i t i i p h s r e n w o k c o t s l s e e y o p m e f o t s o C ) P O S E ( n a l p 248 | Annual Report 2020 2020 Annual Report | 249 Financial Statements // Consolidated s d n a s u o h T P G E l a t o T y t i r o n M i t s e r e t n I y t i u q E l s r e d o h e r a h S l a t o T , 5 4 4 0 8 8 1 5 , - 2 9 9 5 8 , , ) 4 6 4 0 7 3 3 ( , 9 7 7 5 8 4 , , 3 2 3 6 3 2 0 1 , - - - - 9 7 7 5 8 4 , ) 4 3 8 1 ( , , 5 4 4 0 8 8 1 5 , - 2 9 9 5 8 , , ) 4 6 4 0 7 3 3 ( , - , 7 5 1 8 3 2 0 1 , - 3 1 0 1 0 1 , 7 2 7 5 4 , 3 8 1 8 , ) 2 3 7 4 6 2 ( , - 2 8 1 5 0 2 , 8 3 4 2 5 5 , - - - - - - - - - 3 1 0 1 0 1 , 7 2 7 5 4 , 3 8 1 8 , ) 2 3 7 4 6 2 ( , - 2 8 1 5 0 2 , 8 3 4 2 5 5 , - - - - - - - - - - - - - 1 0 5 2 , i n g e r o f i s e c n e r r u c l n o i t a s n a r t s e c n e r e f f i d ) 5 7 0 7 ( , ) 0 9 8 ( ) 5 8 1 6 ( , ) 5 8 1 6 ( , - l e v i t a u m u C r o f e v r e s e R i p h s r e n w o i d e n a t e R s k s i r k c o t s e e y o p m e l i g n k n a B r o f e v r e s e R l i a c n a n fi t a s t e s s a e u a v l r i a f h g u o r h t - n a p l 2 5 1 3 6 9 , ) 2 4 9 0 5 4 ( , - - - - - - - - - - 8 3 4 2 5 5 , i s g n n r a e e v r e s e r I C O , 7 5 6 1 8 8 1 1 , - , ) 3 3 8 1 3 4 8 ( , , ) 4 6 4 0 7 3 3 ( , - , 7 5 1 8 3 2 0 1 , 7 1 7 6 7 , 3 1 0 1 0 1 , 7 2 7 5 4 , - - - - - - - - - - - - 4 6 1 5 , , 1 8 7 1 1 1 4 , - - - - - ) 7 1 7 6 7 ( , - - - ) 2 3 7 4 6 2 ( , ) 9 5 2 1 ( , 9 5 2 1 , - - - - , 5 1 7 9 3 5 0 1 , - - - 3 2 4 6 , - - , 2 8 1 5 0 2 - - - - - - - - - - - - l a t i p a C e v r e s e r 6 6 4 3 1 , - 0 4 4 1 , - - - - - - - - - - - - - 3 8 1 8 , - - - - - - - - - - - - - - , 8 4 6 4 6 0 1 , , 4 1 5 5 7 9 3 , 6 0 9 4 1 , 3 8 1 8 , , 5 4 4 9 4 5 1 , - , 9 2 2 1 9 2 8 , - - - - - - - - - - - - , 8 5 6 5 6 7 4 2 , - - - - - - - - - - - - - 6 0 1 0 9 5 , - - - - - - - - - - - - - 2 9 9 5 8 , , 5 3 1 8 7 7 2 , , 3 1 8 6 7 7 4 1 , s e v r e s e r o t d e r r e f s n a r T e r a h s t s e r e t n I y t i r o n M i r a e y e h t f o t fi o r p t e N d i a p d n e d i v i D e c n a l a b g n n n i g e B i e s a e r c n i l a t i p a C 0 2 0 2 , 1 3 . c e D n o e v r e s e r m o r f d e r r e f s n a r T s t e s s a l a i c n a n fi f o l a s o p s i d I C O h g u o r h t e u l a v r i a f t a s e c n a l a b g n d n a t s t u o i ' s r a e y s u o i v e r p m o r f d e r r e f s n a r T f o n o i t i s i u q c a m o r f i s g n n r a e d e n i a t e r n i e g n a h C s e i r a i d i s b u s s n o i t c a s n a r t r o f e v r e s e R l o r t n o c n o m m o c r e d n u ) s s o l ( / n i a g d e s i l a e r n u t e N r i a f t a s t e s s a l a i c n a n fi n o I C O h g u o r h t e u l a v o t ) m o r f ( d e r r e f s n a r T e v r e s e r k s i r g n i k n a b f o e u l a v r i a f n i L C E f o t c e ff E d e r u s a e m s t n e m u r t s n i t b e d I C O h g u o r h t e u l a v r i a f t a k c o t s l s e e y o p m e f o t s o C ) P O S E ( n a l p p h s r e n w o i n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C s e c n e r e ff d i e h t f o d n e e h t t a e c n a l a B r a e y r e d n u l o r t n o c n o m m o c r o f e v r e s e R s n o i t c a s n a r t l a r e n e G k s i r e v r e s e r 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 d e u s s I i d a p d n a l a t i p a c p u , 5 4 4 9 4 5 1 , , 9 2 4 4 7 4 6 1 , , 9 2 0 8 8 1 2 , , 1 2 8 0 9 6 4 1 , l ’ s r e d 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 0 2 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o f y t i u q e , 1 1 8 8 5 9 9 5 , 5 5 0 3 8 4 , , 6 5 7 5 7 4 9 5 , Notes to the consolidated financial statements for the year ended December 31, 2020 ) 4 8 6 3 ( , 1. General information Commercial International Bank (Egypt) S.A.E. provides retail, corporate and investment banking services in various parts of Egypt through 182 branches, and 27 units employing 7071 employees on the statement of financial position 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. The bank owns investments in subsidiaries “C-Ventures”, “May Fair” and “Damietta Shipping” in which the bank’s shares are 99.99%, 51% and 49.95% respectively. Financial statements have been approved by board of directors on February 28, 2021. 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 the instructions of the Central Bank of Egypt approved by the Board of Directors on December 16, 2008 as modified by the instructions for applying the Interna- tional Standard for Financial Reports (9) issued by the Central Bank of Egypt on February 26, 2019, reference is made to what was not mentioned in the instructions of the Central Bank of Egypt to the Egyptian Accounting Standards. 2.1.1. Basis of consolidation 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 those investees, including structured entities, that the Bank controls because the Bank (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Bank has power over another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the in- vestee need to be made. The Bank may have power over an investee even when it holds less than majority of voting power in an investee. In such a case, the Bank assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities or apply only in exceptional circumstances, do not pre- vent the Bank from controlling an investee. Subsidiaries are consolidated in the Bank’s consolidated financial statements from the date on which control is transferred to the Bank, and are deconsolidated from the date on which control ceases. 250 | Annual Report 2020 2020 Annual Report | 251 Financial Statements // Consolidated The acquisition method of accounting is used to account for the acquisition of subsidiaries [other than those acquired from parties under common control]. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non- controlling interest. The Bank measures non-controlling interest that represents present ownership interest and entitles the holder to a pro- portionate share of net assets in the event of liquidation on a transaction by transaction basis, either at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquiree. Non-controlling interests that are not present ownership interests are measured at fair value. Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognized in profit or loss, after management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed, and reviews appropriateness of their measurement. The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transaction costs incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are expensed. Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless the cost cannot be recovered. The Bank and all its subsidiaries use uniform accounting policies consistent with the Group’s policies. Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group’s equity. Purchases and sales of non-controlling interests. The Bank applies the economic entity model to account for transactions with owners of non-controlling interest. Any difference between the purchase consideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Bank recognizes the dif- ference between sales consideration and carrying amount of non-controlling interest sold as a capital transaction in the statement of changes in equity. 2.2.2. Associates Associates are entities over which the Bank has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The carrying amount of associates includes goodwill identified on acquisition less accumulated credit losses, if any. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in Group’s share of net assets of an associ- ate are recognized as follows: (i) the Group’s share of profits or losses of associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group’s share of other comprehensive income is recognized in other comprehensive income and presented separately, (iii); all other changes in the Group’s share of the carrying value of net as- sets of associates are recognized in profit or loss within the share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Bank applies the impairment requirements in IFRS 9 to long-term loans, preference shares and similar long-term in- terest that in substance form part of the investment in associate before reducing the carrying value of the investment by a share of a loss of the investee that exceeds the amount of the Group’s interest in the ordinary shares. Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. 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: • Net trading income from held-for-trading assets and liabilities. • Items of other comprehensive income with equity in relation to investments in equity instruments at fair value through comprehensive income. • Other operating revenues (expenses) from the remaining assets and liabilities. Changes in the fair value of financial instruments of a monetary nature in foreign currencies that are classified as finan- cial investments at fair value through comprehensive income (debt instruments) are analyzed between valuation differ- ences that resulted from changes in the cost consumed for the instrument and differences that resulted from changing the exchange rates in effect and differences caused by changing the fair value For the instrument, the evaluation differences related to changes in the cost consumed are recognized in the income of loans and similar revenues and in the differences related to changing the exchange rates in other operating income (expenses) item, and are recognized in the items of comprehensive income. Valuation differences arising from the measurement of items of a non-monetary nature at fair value through profit and losses resulting from changes in the exchange rates used to translate those items include, and then are recognized in the income statement by the total valuation differences resulting from the measurement of equity instruments classified at fair value through Profits and losses, while the total valuation differences resulting from the measurement of equity instruments at fair value through comprehensive income are recognized within other comprehensive income items in equity, fair value reserve item for financial investments at fair value through comprehensive income. 2.5. Financial assets Key Measurement Terms: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is price in an active market. An active market is one in which transactions for the asset or liability take place with enough frequency and volume to provide pricing in- formation on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the entity. 252 | Annual Report 2020 2020 Annual Report | 253 Financial Statements // ConsolidatedValuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consid- eration of financial data of the investees, are used to measure fair value of certain financial instruments for which external market pricing information is not available. Fair value measurements are analyzed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transac- tion costs include fees and commissions paid. Transaction costs do not include debt premiums or discounts. Amortized cost is the amount at which the financial instrument was recognized at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortization of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. 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 a shorter period, if appropriate, to the gross carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortized over the expected life of the instru- ment. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. After the initial recognition, an ECL al- lowance is recognized for financial assets measured at amortized cost and investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the bank commits to deliver a financial asset. All other purchases are recognized when the entity becomes a party to the contractual provi- sions of the instrument. Financial assets – classification and subsequent measurement – measurement categories. The bank classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measurement of debt financial assets depends on: (i) the bank’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. The following table summarizes measurement categories Methods of Measurement according to Business Models Fair Value Financial Instrument Amortized Cost Equity Instruments Not Applicable Debt Instruments / Loans & Facilities Business Model of Assets held for Collecting Contractual Cash Flows Through Other Comprehensive Income An irrevocable election at Ini- tial Recognition Business Model of Assets held for Collecting Contractual Cash Flows & Selling Through Profit or Loss Normal treatment of equity instruments Business Model of Assets held for Trading Financial assets – classification and subsequent measurement – business model. The business model reflects how the bank manages the assets in order to generate cash flows – whether the bank’s objec- tive is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the bank undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the bank in determining the business model include the purpose and composition of a portfolio, past expe- rience on how the cash flows for the respective assets were collected, how risks are assessed and managed, how the assets’ performance is assessed. Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the bank assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the bank considers whether the contractual cash flows are consistent with a ba- sic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed. The following table summarizes the classification of the Banks Financial Assets in accordance with the business model: Financial asset Business model Basic characteristics Financial Assets at Am- ortized Cost (AC) Business model for financial assets held to collect contractual cash flows • The objective of the business model is to retain the financial assets to collect the contractual cash flows of the principal amount of the investment and the proceeds. • Sale is an exceptional event for the purpose of this model and under the terms of the criterion of a deterioration in the credit- worthiness of the issuer of the financial instrument. • Lowest sales in terms of turnover and value. • The Bank makes clear and reliable documentation of the rea- sons for each sale and its compliance with the requirements of the Standard. Financial Assets at Fair Value through Other Comprehensive Income (FVTOCI) Business model of financial assets held to collect cash flows and sales • Both the collection of contractual cash flows and sales are complementary to the objective of the model. • High sales (in terms of turnover and value) compared to the business model retained for the collection of cash flows. Financial Assets at Fair Value through Profit or Loss (FVTPL) Other business models include trad- ing - management of financial assets at fair value - maximizing cash flows by selling) • The objective of the business model is not to retain the financial asset for the collection of contractual or retained cash flows for the collection of contractual cash flows and sales. • Collecting contractual cash flows is an incidental event for the model objective. • Management of financial assets at fair value through profit or loss to avoid inconsistency in accounting measurement. Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The Bank did not change its business model during the current and comparative period and did not make any reclassifications. 254 | Annual Report 2020 2020 Annual Report | 255 Financial Statements // ConsolidatedFinancial assets impairment – credit loss allowance for ECL. The bank assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts. The bank measures ECL and recognizes credit loss allowance at each reporting date. The measure- ment of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting date about past events, current conditions and forecasts of future conditions. The bank applies a three-stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”). If the bank identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). If the bank determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. Financial assets – write-off. Financial assets are written-off, in whole or in part, when the bank exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. Financial assets – derecognition. The bank derecognizes financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the bank has transferred the rights to the cash flows from the finan- cial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of owner- ship, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale. Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for financial liabilities at FVTPL: this classification is applied to derivatives or financial liabilities held for trading (e.g. short positions in securities) 2.6. Financial liabilities – derecognition. Financial liabilities are derecognized when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). 2.7. 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. 2.8. Derivative financial instruments and hedge accounting Derivatives are recognized initially, and subsequently, at fair value. Fair values of exchange traded derivatives are ob- tained 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 separate 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. 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 commit- ments (fair value hedge). • Hedging of risks relating to future cash flows attributable to a recognized asset or liability or a highly probable forecast transaction (cash flow hedge) 256 | Annual Report 2020 • 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. 2.8.1. 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. 2.8.2. 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 2.9. 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 dis- counts 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 op- tions) 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 interest income after the settle- ment of the outstanding loan balance. 2.10. 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 inter- est 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 recognized 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. 2020 Annual Report | 257 Financial Statements // Consolidated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 transac- tion 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. 2.11. Dividend income Dividends are recognized in the income statement when the right to collect is established. 2.12. 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. 2.13. Investment property The investment property represents 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 is carrying out its operations through or those that have owned by the Bank as settlement of debts. The accounting treatment is the same used with property and equipment. 2.14. Property and equipment Land and buildings comprise mainly branches and offices. All property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisi- tion of the items. Subsequent costs are included in the asset’s carrying amount or as a separate asset, as appropriate, only when it is prob- able 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 Vehicles Computers and core systems Fixtures and fittings 258 | Annual Report 2020 20 years 3 years, or over the period of the lease if less 3/5 years 5 years 3/5 years 3 years 3 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Deprecia- ble 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 ac- quired 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 on an annual basis or shorter when trigger event took place, impairment loss is charged to the income statement. Goodwill is allocated to the cash generating units for the purpose of impairment testing. The cash generating units rep- resented in the Bank main segments. 2.15.2. Other intangible assets 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 the instructions of Central Bank of Egypt, 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 pay- ments representing at least 90% of the value of the asset. The other leases contracts are considered operating leases contracts. 2020 Annual Report | 259 Financial Statements // Consolidated2.16.1. Being lessee Finance lease contract recognizes the lease cost, including the cost of maintenance of the leased assets in the income statement 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 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. 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. The bank’s contributions to the employees’ social insurance fund Bank employees benefit from the Social Insurance Fund that has been established under the Law No. 64 of year 84 regard- ing alternative social insurance systems. This system is considered an alternative to state regulations and is subject to the supervision of the Ministry of Social Insurance. A Ministerial Resolution No. 22 of year 83 was issued regarding approval of the establishment of the Social Fund for Employees. The bank is obliged to pay to the fund the contributions due for each month represented in the employer’s share and the share of the insured and pay his obligations towards the fund in implementation of the provisions of the fund system. This is a system of benefits enjoyed by employees, a system of specific benefits for the bank, according to the Egyptian accounting standards. 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 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 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 in- crease within the limits of the above reduced. 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. 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. 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 in- come (expenses). Provisions for obligations, other than those for credit risk or employee benefits, due in more than 12 months from the bal- ance sheet date are recognized based on the present value of the best estimate of the consideration required 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 bal- ance 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 and performance conditions and market performance conditions are taken into account when estimating the fair value of eq- uity instruments at the date of grant. At each balance sheet date the number of options that are expected to be exercised are estimated. Recognizes estimate changes, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. 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. 2.24. Noncurrent assets held for sale a non-current asset (or disposal group) to be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Determining whether (and when) an asset stops being recovered principally through use and becomes recoverable prin- cipally through sale. For an asset (or disposal group) to be classified as held for sale: (a) It must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets (or disposal groups); (b) Its sale must be highly probable; 260 | Annual Report 2020 2020 Annual Report | 261 Financial Statements // ConsolidatedThe standard requires that non-current assets (and, in a ‘disposal group’, related liabilities and current assets,) meeting its criteria to be classified as held for sale be: (a) Measured at the lower of carrying amount and fair value less costs to sell, with depreciation on them ceasing; and (b) Presented separately on the face of the statement of financial position with the results of discontinued operations presented separately in the income statement. 2.25. Discontinued operation Discontinued operation as ‘a component of an entity that either has been disposed of, or is classified as held for sale, and (a) Represents a separate major line of business or geographical area of operations, (b) Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or (c) Is a subsidiary acquired exclusively with a view to resale. When presenting discontinued operations in the income statement, the comparative figures should be adjusted as if the operations had been discontinued in the comparative period. Important Accounting Estimates, and Judgements in Applying Accounting Policies The bank makes estimates and assumptions that affect the amounts recognized, and the carrying amounts of assets and li- abilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circum- stances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognized and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: ECL measurement. Measurement of ECLs is a significant estimate that involves determination of methodology, models and data inputs. The following components have a major impact on credit loss allowance: definition of default, SICR, prob- ability of default (“PD”), exposure at default (“EAD”), and loss given default (“LGD”), as well as models of macro-economic scenarios. The bank regularly reviews and validates the models and inputs to the models to reduce any differences be- tween expected credit loss estimates and actual credit loss experience. The bank used supportable forward-looking information for measurement of ECL, primarily an outcome of its own mac- ro-economic forecasting model. The most significant forward-looking assumptions, for both corporate and retail, that correlate with ECL level and their assigned weights were CBE key interest rate, GDP growth rate, Foreign currency index and Inflation rate. In addition to these assumptions, unemployment rate has been used for the retail sector. The bank reduced the weights assigned to the upside scenario during 2020 as a result of the most recent developments related to COVID 19. A change in the assigned weight to the base scenario of the forward looking macro-economic variables by 10% towards the downturn scenario would result in an increase in ECL by EGP633,535 thousand as of 31 December 2020 (31 December 2019: by EGP495,372 thousand). A corresponding change towards the upturn scenario would result in a decrease in ECL by EGP386,041 thousand as of 31 December 2020 (31 December 2019: by EGP348,267 thousand). A 10% increase or decrease in LGD estimates would result in an increase or decrease in total expected credit loss allowances of EGP879,960 thousand at 31 December 2020 (31 December 2019: increase or decrease of EGP 773,549 thousand). Credit exposure on revolving credit facilities. For certain loan facilities, the bank’s exposure to credit losses may extend beyond the maximum contractual period of the facility. This exception applies to certain revolving credit facilities, which include both a loan and an undrawn commitment component and where the bank’s contractual ability to demand repay- ment and cancel the undrawn component in practice does not limit its exposure to credit losses. For such facilities, the bank measures ECLs over the period that the bank is exposed to credit risk and ECLs are not mitigated by credit risk management actions. Application of this exception requires judgement. Management applied its judgement in identifying the facilities, both retail and commercial, to which this exception applies. The bank applied this exception to facilities with the following characteristics: (a) there is no fixed term or repayment structure, (b) the contractual ability to cancel the contract is not in practice enforced as a result of day-to-day management of the credit exposure and the contract may only be cancelled when the bank becomes aware of an increase in credit risk at the level of an individual facility, and (c) the exposures are managed on a collective basis. Further, the bank applied judgement in determining a period for measuring the ECL, including the starting point and the expected end point of the exposures. The bank considered historical information and experience about: (a) the period over which the bank is exposed to credit risk on similar facilities, including when the last significant modification of the facility occurred and that therefore de- termines the starting point for assessing SICR, (b) the length of time for related defaults to occur on similar financial instruments following a SICR and (c) the credit risk management actions (eg the reduction or removal of undrawn limits), prepayment rates and other factors that drive expected maturity. In applying these factors, the bank segments the port- folios of revolving facilities into sub-groups and applies the factors that are most relevant based on historical data and experience as well as forward-looking information. Significant increase in credit risk (“SICR”). In order to determine whether there has been a significant increase in credit risk, the bank compares the risk of a default occurring over the life of a financial instrument at the end of the reporting date with the risk of default at the date of initial recognition. The assessment considers relative increase in credit risk rath- er than achieving a specific level of credit risk at the end of the reporting period using, for Corporate and Business Bank- ing: transition in risk ratings, delinquency status, industry and restructured status and for retail: watch list, individual profile, restructured status, and delinquency status. The bank considers all reasonable and supportable forward-looking information available without undue cost and effort, which includes a range of factors, including behavioral aspects of particular customer portfolios. The bank identifies behavioral indicators of increases in credit risk prior to delinquency and incorporated appropriate forward-looking information into the credit risk assessment, either at an individual instru- ment, or on a portfolio level. Business model assessment. The business model drives classification of financial assets. Management applied judgement in determining the level of aggregation and portfolios of financial instruments when performing the business model assess- ment. When assessing sales transactions, the bank considers their historical frequency, timing and value, reasons for the sales and expectations about future sales activity. Sales transactions aimed at minimizing potential losses due to credit deterioration are considered consistent with the “hold to collect” business model. Other sales before maturity, not related to credit risk management activities, are also consistent with the “hold to collect” business model, provided that they are infre- quent or insignificant in value, both individually and in aggregate. The bank assesses significance of sales transactions by comparing the value of the sales to the value of the portfolio subject to the business model assessment over the average life of the portfolio. In addition, sales of financial asset expected only in stress case scenario, or in response to an isolated event that is beyond the bank’s control, is not recurring and could not have been anticipated by the bank, are regarded as incidental to the business model objective and do not impact the classification of the respective financial assets. The “hold to collect and sell” business model means that assets are held to collect the cash flows, but selling is also integral to achieving the business model’s objective, such as, managing liquidity needs, achieving a particular yield, or matching the duration of the financial assets to the duration of the liabilities that fund those assets. The residual category includes those portfolios of financial assets, which are managed with the objective of realizing cash flows primarily through sale, such as where a pattern of trading exists. Collecting contractual cash flow is often incidental for this business model. Assessment whether cash flows are solely payments of principal and interest (“SPPI”). Determining whether a financial asset’s cash flows are solely payments of principal and interest required judgement. The time value of money element may be modified, for example, if a contractual interest rate is periodically reset but the fre- quency of that reset does not match the tenor of the debt instrument’s underlying base interest rate. The effect of the modified time value of money was assessed by comparing relevant instrument’s cash flows against a benchmark debt instrument with SPPI cash flows, in each period and cumulatively over the life of the instrument. The assessment was done for all reasonably possible scenarios, including reasonably possible financial stress situation that can occur in financial markets. 262 | Annual Report 2020 2020 Annual Report | 263 Financial Statements // Consolidated3. Financial risk management The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, accep- tance 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. 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 identifies, 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 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 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 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 map- ping 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 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 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. 264 | Annual Report 2020 2020 Annual Report | 265 Financial Statements // ConsolidatedCommitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guaran- tees 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. 3.1.3. Impairment and provisioning policies 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 at 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 follow- ing 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, 2020 December 31, 2019 Loans and advances (%) Impairment provision (%) Loans and advances (%) Impairment provision (%) 80.16 11.14 4.43 4.27 22.76 18.11 25.53 33.60 85.63 6.88 3.50 3.99 19.27 8.76 28.15 43.82 The internal rating tools assists management to determine whether objective evidence of impairment exists, 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. Model 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 instructions for the implementation of the Interna- tional Financial Reporting Standard (9) issued by the Central Bank of Egypt on February 26, 2019. 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 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 to CBE ratings and rates of provi- sions 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% 0% 1% 1% 2% 2% Internal rating 1 1 1 1 1 3% 5% 20% 50% 100% 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 “Starting 1st of Jan 2019 and after implementing CBE regulations for IFRS 9, Customer Loans has been reclassified into 3 stages based on each facility credit characteristics. Credit characteristics that used to determine the staging is different from ORR customer classification” 266 | Annual Report 2020 2020 Annual Report | 267 Financial Statements // Consolidated3.1.5. Maximum exposure to credit risk before collateral held 3.1.6. Loans and advances Loans and advances are summarized as follows: In balance sheet items exposed to credit risk Cash and balances at the central bank Due from banks Gross loans and advances to banks Less:Impairment provision Gross loans and advances to customers Individual: - Overdraft - Credit cards - Personal loans - Mortgages Corporate: - Overdraft - Direct loans - Syndicated loans - Other loans Unamortized bills discount Unamortized syndicated loans discount Impairment provision Unearned interest Suspended credit account Derivative financial instruments Financial investments: -Debt instruments Other assets (Accrued revenues) Total Off balance sheet items exposed to credit risk Financial guarantees Customers acceptances Letters of credit (import and export) Letter of guarantee Total EGP Thousands Dec. 31, 2020 Dec. 31, 2019 33,768,549 87,450,490 786,605 (33,814) 1,519,369 4,864,404 27,882,072 2,033,349 23,698,784 45,228,009 31,110,813 21,391 (104,176) (210,680) (16,434,813) - (38,517) 248,759 171,497,994 6,759,229 420,047,817 5,463,960 2,701,590 5,861,017 74,023,239 88,049,806 28,273,962 28,353,366 629,780 (4,516) 1,462,439 4,264,204 20,219,305 1,330,323 19,100,709 51,163,302 33,642,235 61,578 (55,197) - (11,825,887) (8,236) (33,672) 216,383 196,046,335 4,011,196 376,847,609 6,085,760 3,188,757 5,866,630 61,143,216 76,284,363 The above table represents the Bank’s Maximum exposure to credit risk on December 31, 2020, before taking into account 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, 28.65% of the total maximum exposure is derived from loans and advances to banks and customers against 31.83% on December 31, 2019, while investments in debt instruments represent 40.83% against 52.02% on December 31, 2019. Management is confident in its ability to continue to control and sustain minimal exposure of credit risk resulting from both the bank’s loans and advances portfolio and debt instruments based on the following: • 91.30% of the loans and advances are concentrated in the top two grades of the internal credit risk rating system. • Loans and advances assessed individualy are valued EGP 5,830,098 thousand against EGP 5,261,976 thousand on Decem- ber 31, 2019 • The Bank has implemented more prudent processes when granting loans and advances during the financial year ended on December 31, 2020. • 95.33% of the investments in debt Instruments are Egyptian sovereign instruments against 97.54% on December 31, 2019. Dec.31, 2020 Dec.31, 2019 EGP Thousands Loans and advances to customers 136,358,191 16,434,813 104,176 210,680 - 38,517 119,570,005 Loans and advances to banks 786,605 9,625 - - - - 776,980 Loans and advances to customers 131,244,095 11,825,887 55,197 - 8,236 33,672 119,321,103 Loans and advances to banks 629,780 4,516 - - - - 625,264 Gross Loans and advances Less: Impairment provision Unamortized bills discount Unamortized syndicated loans discount Unearned interest Suspended credit account Net Impairment provision losses for loans and advances reached EGP 16,444,438 thousand. During the year, the Bank’s total loans and advances increased by 4.00%. 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. Total balances of loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 34,766,758 50,932,314 85,699,072 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 947,900 43,863,497 44,811,397 Stage 3: Expected credit losses Over a lifetime Credit default 584,536 5,263,186 5,847,722 Dec.31, 2020 Individuals Institutions and Business Banking Total Expected credit losses for loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 711,711 1,403,518 2,115,229 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 25,326 8,760,972 8,786,298 Stage 3: Expected credit losses Over a lifetime Credit default 356,726 5,176,560 5,533,286 Dec.31, 2020 Individuals Institutions and Business Banking Total EGP Thousands Total 36,299,194 100,058,997 136,358,191 EGP Thousands Total 1,093,763 15,341,050 16,434,813 268 | Annual Report 2020 2020 Annual Report | 269 Financial Statements // ConsolidatedLoans, advances and expected credit losses to banks divided by stages: Loans, advances and expected credit losses to banks divided by stages: Stage 1: Expected credit losses over 12 months - - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 786,605 (9,625) 776,980 Stage 3: Expected credit losses Over a lifetime Credit default - - - Dec.31, 2020 Time and term loans Expected credit losses Net Off balance sheet items exposed to credit risk and ecpected credit losses divided by stages: Stage 1: Expected credit losses over 12 months 54,127,625 (1,441,650) 52,685,975 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 28,364,823 (1,400,364) 26,964,459 Stage 3: Expected credit losses Over a lifetime Credit default 93,398 (88,729) 4,669 Dec.31, 2020 Facilities and guarantees Expected credit losses Net Total balances of loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 26,734,506 63,749,864 90,484,370 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 339,408 35,158,341 35,497,749 Stage 3: Expected credit losses Over a lifetime Credit default 202,357 5,059,619 5,261,976 Dec.31, 2019 Individuals Institutions and Business Banking Total Expected credit losses for loans and facilities to customers divided by stages: Stage 1: Expected credit losses over 12 months 96,469 1,208,722 1,305,191 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 10,394 5,325,121 5,335,515 Stage 3: Expected credit losses Over a lifetime Credit default 210,068 4,975,113 5,185,181 Dec.31, 2019 Individuals Institutions and Business Banking Total 270 | Annual Report 2020 EGP Thousands Total 786,605 (9,625) 776,980 EGP Thousands Total 82,585,846 (2,930,743) 79,655,103 EGP Thousands Total 27,276,271 103,967,824 131,244,095 EGP Thousands Total 316,931 11,508,956 11,825,887 Stage 1: Expected credit losses over 12 months - - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 629,780 (4,516) 625,264 Stage 3: Expected credit losses Over a lifetime Credit default - - - Dec.31, 2019 Time and term loans Expected credit losses Net Off balance sheet items exposed to credit risk and ecpected credit losses divided by stages: Stage 1: Expected credit losses over 12 months 49,459,621 (1,118,319) 48,341,302 Stage 2: Expected credit losses Over a lifetime that is not creditworthy 20,662,650 (603,614) 20,059,036 Stage 3: Expected credit losses Over a lifetime Credit default 76,331 (68,759) 7,572 Dec.31, 2019 Facilities and guarantees Expected credit losses Net Expected credit losses divided by internal classification: Corporate and Business Banking loans: EGP Thousands Total 629,780 (4,516) 625,264 EGP Thousands Total 70,198,602 (1,790,692) 68,407,910 EGP Thousands Scope of probability of default (PD) 1%-14% 15%-21% 21%-28% 100% Stage 1: Expected credit losses over 12 months 1,033,895 369,623 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy 1,993,166 2,603,402 4,164,404 - Stage 3: Expected credit losses Over a lifetime Credit default - 1,802 10,884 5,163,874 Total 3,027,061 2,974,827 4,175,288 5,163,874 EGP Thousands Scope of probability of default (PD) (0% - 5%) (5% - 10%) (> 10%) 100% Stage 1: Expected credit losses over 12 months 710,475 1,236 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy - 2,547 22,779 - Stage 3: Expected credit losses Over a lifetime Credit default - - 4,372 352,354 Total 710,475 3,783 27,151 352,354 Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) 2020 Annual Report | 271 Financial Statements // ConsolidatedThe total balances of loans and facilities divided according to the internal classification: Corporate and Business Banking loans: Individual Loans: EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-12% 12%-21% 21%-27% 100% 47,106,516 3,825,798 - - 27,385,359 11,374,241 5,103,897 - - 8,551 10,942 5,243,693 Total 74,491,875 15,208,590 5,114,839 5,243,693 Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default (0% - 5%) (5% - 10%) (> 10%) 100% 95,234 1,235 - - - - 10,394 - - - - 210,068 Total 95,234 1,235 10,394 210,068 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) The total balances of loans and facilities divided according to the internal classification: Corporate and Business Banking loans: EGP Thousands EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months (0% - 5%) (5% - 10%) (> 10%) 100% 34,694,840 71,918 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - 5,541 942,359 - - - 4,681 579,855 Total 34,694,840 77,459 947,040 579,855 Dec.31, 2020 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Expected credit losses divided by internal classification: Corporate and Business Banking loans: EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-14% 15%-21% 21%-28% 100% 1,041,456 167,266 - - 1,137,990 867,786 3,319,345 - - - - 4,975,113 Total 2,179,446 1,035,052 3,319,345 4,975,113 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default 1%-12% 12%-21% 21%-27% 100% 61,291,934 2,457,930 - - 24,935,477 5,944,147 4,278,717 - - - - 5,059,619 Total 86,227,411 8,402,077 4,278,717 5,059,619 EGP Thousands Scope of probability of default (PD) Stage 1: Expected credit losses over 12 months (0% - 5%) (5% - 10%) (> 10%) 100% 26,059,247 675,259 - - Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - 339,408 - - - - 202,357 Total 26,059,247 675,259 339,408 202,357 Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) Individual Loans: Dec.31, 2019 Performing loans (1-5) Regular watching (6) Watch list (7) Non-performing loans (8-10) 272 | Annual Report 2020 2020 Annual Report | 273 Financial Statements // ConsolidatedThe following table provides information on the quality of financial assets during the financial year: The following table provides information on the quality of financial assets during the financial year: Dec.31, 2020 Due from banks Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Individual Loans Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Corporate and Business Banking loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months 77,526,990 9,923,500 - - 87,450,490 (24,189) 87,426,301 Stage 1 12 months 34,694,841 71,918 - - 34,766,759 (711,711) 34,055,048 Stage 1 12 months 47,106,516 3,825,798 - - 50,932,314 (1,403,518) 49,528,796 Stage 2 Life time Stage 3 Life time - - - - - - - Stage 2 Life time - 5,540 942,359 - 947,899 (25,326) 922,573 Stage 2 Life time 27,385,358 11,374,242 5,103,897 - 43,863,497 (8,760,972) 35,102,525 - - - - - - - Stage 3 Life time - - 4,681 579,855 584,536 (356,726) 227,810 Stage 3 Life time - 8,551 10,942 5,243,693 5,263,186 (5,176,560) 86,626 Financial Assets at Fair Value through OCI Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months Stage 2 Life time Stage 3 Life time 115,902,647 30,310,122 - - 146,212,769 (619,577) 145,593,192 - - - - - - - - - - - - - - EGP Thousands Dec.31, 2019 Total 77,526,990 9,923,500 - - 87,450,490 (24,189) 87,426,301 EGP Thousands Total 34,694,841 77,458 947,040 579,855 36,299,194 (1,093,763) 35,205,431 EGP Thousands Total 74,491,874 15,208,591 5,114,839 5,243,693 100,058,997 (15,341,050) 84,717,947 EGP Thousands Total 115,902,647 30,310,122 - - 146,212,769 (619,577) 145,593,192 Due from banks Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Individual Loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Corporate and Business Banking loans: Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Financial Assets at Fair Value through OCI Credit rating Performing loans Regular watching Watch list Non-performing loans Total Less:Impairment provision Book value Stage 1 12 months 19,284,999 9,085,184 - - 28,370,183 (16,817) 28,353,366 Stage 1 12 months 26,059,247 675,259 - - 26,734,506 (96,469) 26,638,037 Stage 1 12 months 61,291,934 2,457,930 - - 63,749,864 (1,208,722) 62,541,142 Stage 1 12 months 59,915,108 28,905,614 - - 88,820,722 (414,395) 88,406,327 Stage 2 Life time Stage 3 Life time - - - - - - - Stage 2 Life time - - 339,408 - 339,408 (10,394) 329,014 Stage 2 Life time 24,935,477 5,944,147 4,278,717 - 35,158,341 (5,325,121) 29,833,220 - - - - - - - Stage 3 Life time - - - 202,357 202,357 (210,068) (7,711) Stage 3 Life time - - - 5,059,619 5,059,619 (4,975,113) 84,506 Stage 2 Life time Stage 3 Life time - - - - - - - - - - - - - - EGP Thousands Total 19,284,999 9,085,184 - - 28,370,183 (16,817) 28,353,366 EGP Thousands Total 26,059,247 675,259 339,408 202,357 27,276,271 (316,931) 26,959,340 EGP Thousands Total 86,227,411 8,402,077 4,278,717 5,059,619 103,967,824 (11,508,956) 92,458,868 EGP Thousands Total 59,915,108 28,905,614 - - 88,820,722 (414,395) 88,406,327 274 | Annual Report 2020 2020 Annual Report | 275 Financial Statements // Consolidateds d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 0 2 0 2 , 1 3 . c e D i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E s k n a b m o r f e u D 5 2 1 0 3 4 , , 9 1 6 3 5 2 9 , , 5 3 3 1 5 0 1 , - - - 8 0 2 0 8 , - - - 7 1 8 6 1 , 3 8 3 0 0 1 5 , ) 6 8 3 ( ) 5 3 1 5 7 3 ( , 7 6 3 2 , - - - , 2 5 1 0 4 4 0 1 , - - ) 2 9 ( 9 8 1 4 2 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5 2 1 0 3 4 , , 9 1 6 3 5 2 9 , , 5 3 3 1 5 0 1 , - - - 8 0 2 0 8 , - - - 7 1 8 6 1 , 3 8 3 0 0 1 5 , ) 6 8 3 ( ) 5 3 1 5 7 3 ( , 7 6 3 2 , - - - , 2 5 1 0 4 4 0 1 , - - ) 2 9 ( 9 8 1 4 2 , n i s s o l d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C t l u a f e d t a e r u s o p x e e h t d n a t l u a f e d f o e s a c y g o l o d o h t e m d n a s n o i t p m u s s a l e d o m o t s e g n a h C r a e y e h t g n i r u d ff o e t i r W i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C e c n a l a b g n i d n E d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T ) R I A F Y A M ( 0 2 0 2 y a M 1 n o s e s s o l t i d e r c r o f n o i s i v o r P 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P s d n a s u o h T P G E l a t o T 1 e g a t S s h t n o m 2 1 1 e g a t S s h t n o m 2 1 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E : s n a o L l i a u d v d n i I , 9 6 2 6 7 2 7 2 , 2 7 5 5 0 1 , , 4 1 3 3 9 9 8 , - - ) 1 6 9 5 7 ( , , 4 9 1 9 9 2 6 3 , - 4 2 8 1 , 1 3 9 6 1 3 , 5 9 7 9 0 8 , ) 1 6 9 5 7 ( , 4 7 1 1 4 , - - 5 7 1 8 , 7 5 3 2 0 2 , 5 6 9 9 4 4 , ) 1 6 9 5 7 ( , - 7 8 6 0 0 1 2 , 8 3 4 1 8 1 , ) 1 6 9 5 7 ( , 4 7 1 1 4 , - - - 8 0 4 9 3 3 , 0 4 5 5 , 1 5 9 2 0 6 , - - - 4 9 3 0 1 , 1 8 2 1 5 6 4 1 , , 3 6 7 3 9 0 1 , 6 3 5 4 8 5 , 6 2 7 6 5 3 , 9 9 8 7 4 9 , 6 2 3 5 2 , , 4 0 5 4 3 7 6 2 , 7 5 8 1 9 , , 8 9 3 0 4 9 7 , - - - , 9 5 7 6 6 7 4 3 , - - - 9 6 4 6 9 , 6 3 5 1 , 6 0 7 3 1 6 , , 1 1 7 1 1 7 ) R I A F Y A M ( 0 2 0 2 y a M 1 n o s e s s o l t i d e r c r o f n o i s i v o r P i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C e c n a l a b g n i d n E r a e y e h t g n i r u d t n e m r i a p m I r a e y e h t g n i r u d ff o e t i r W s e i r e v o c e R 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P s d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E : s n a o l i i g n k n a B s s e n s u B d n a e t a r o p r o C , 5 2 8 7 6 9 3 0 1 , , 6 5 9 8 0 5 1 1 , , 9 1 6 9 5 0 5 , , 3 1 1 5 7 9 4 , , 1 4 3 8 5 1 5 3 , , 1 2 1 5 2 3 5 , , 5 6 8 9 4 7 3 6 , 5 0 6 7 3 6 , 6 9 1 6 , , 3 7 8 6 0 0 0 4 , , 0 7 4 4 1 0 2 , , ) 4 1 3 5 3 4 1 5 ( , , ) 8 1 2 1 5 8 1 ( , 5 5 6 6 , ) 9 9 5 2 1 ( , ) 5 4 2 2 3 ( , , ) 0 5 3 5 9 9 1 ( , ) 2 7 4 1 ( , 1 7 1 7 7 , 3 9 1 0 1 1 , 3 8 1 4 5 4 , , 1 7 7 7 4 0 9 , , 7 8 2 8 8 1 3 , - - ) 4 2 2 2 3 1 ( , 1 2 7 1 2 1 , ) 4 2 2 2 3 1 ( , , ) 3 1 2 5 5 1 ( , 7 9 9 8 5 0 0 0 1 , , 0 5 0 1 4 3 5 1 , - - - - - 9 4 4 9 , 0 3 6 0 4 4 6 , , ) 0 2 7 3 6 1 ( ) 6 4 7 1 6 1 ( , 4 1 0 6 8 , 1 1 4 1 , 2 4 1 2 4 5 , , 4 0 5 9 1 9 7 1 , , 1 9 6 9 9 4 1 , , 9 6 3 7 8 0 2 2 , ) 9 4 6 5 3 1 ( , , 4 2 3 9 0 2 1 , ) 1 1 2 8 ( , 5 5 7 6 0 1 , 0 5 0 3 2 1 , , ) 9 6 5 1 4 2 1 ( , , ) 4 4 8 7 6 1 0 2 ( , , ) 9 5 2 5 4 1 1 ( , , ) 0 5 7 3 0 1 1 3 ( , 9 8 4 8 3 5 , 7 4 5 9 7 4 , ) 4 3 8 1 3 5 ( , ) 9 1 8 0 7 3 ( , - ) 7 2 4 8 4 ( , ) 2 6 8 3 4 ( , - - - ) 4 2 2 2 3 1 ( , - 1 2 7 1 2 1 , ) 9 5 0 9 6 ( , , ) 4 2 2 2 3 1 ( , 6 8 1 3 6 2 5 , , 0 6 5 6 7 1 5 , , 0 3 6 3 2 1 2 , 9 6 0 8 4 5 , , ) 3 5 5 0 7 0 4 ( , , 1 1 0 2 0 2 8 , , 8 7 7 1 8 8 2 , - - - - - ) 4 6 5 7 7 ( , , 7 9 4 3 6 8 3 4 , , 2 7 9 0 6 7 8 , - - - 0 6 7 5 4 8 , , 4 1 3 2 3 9 0 5 , , 2 2 7 8 0 2 1 , 5 5 1 4 , 9 3 3 8 0 5 , ) 3 1 2 4 4 5 ( , 5 6 4 1 , 9 3 7 6 , ) 4 8 5 9 2 ( , ) 4 2 0 0 5 ( , 9 0 5 6 0 3 , - - ) R I A F Y A M ( 0 2 0 2 y a M 1 n o s e s s o l t i d e r c r o f n o i s i v o r P 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P y g o l o d o h t e m d n a s n o i t p m u s s a l e d o m o t s e g n a h C n i s s o l d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C t l u a f e d t a e r u s o p x e e h t d n a t l u a f e d f o e s a c r a e y e h t g n i r u d ff o e t i r W s e i r e v o c e R d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T ) 0 9 5 8 ( , i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C , 8 1 5 3 0 4 1 , e c n a l a b g n i d n E s d n a s u o h T P G E l a t o T 3 e g a t S e m i t e f i L 2 e g a t S e m i t e f i L 1 e g a t S s h t n o m 2 1 i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E i g n d n a t s t u O L C E I l C O h g u o r h t e u a V r i a F t a s t e s s A l i a c n a n F i - - - , 1 8 8 8 2 7 3 3 , , 0 7 4 6 2 3 9 1 , , ) 9 3 4 5 9 6 4 1 ( , - - - 5 9 3 4 1 4 , 1 2 0 0 7 2 , ) 3 7 2 6 2 1 ( , 3 5 2 4 9 , 4 3 4 1 6 , - - - , 5 6 1 4 5 4 8 3 , - - - 7 7 5 9 1 6 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - , 1 8 8 8 2 7 3 3 , , 0 7 4 6 2 3 9 1 , , ) 9 3 4 5 9 6 4 1 ( , - - - 5 9 3 4 1 4 , 1 2 0 0 7 2 , ) 3 7 2 6 2 1 ( , 3 5 2 4 9 , 4 3 4 1 6 , - - - , 5 6 1 4 5 4 8 3 , - - - , 7 7 5 9 1 6 y g o l o d o h t e m d n a s n o i t p m u s s a l e d o m o t s e g n a h C n i s s o l d n a t l u a f e d f o y t i l i b a b o r p e h t n i s e g n a h C t l u a f e d t a e r u s o p x e e h t d n a t l u a f e d f o e s a c r a e y e h t g n i r u d ff o e t i r W i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e v i t a l u m u C e c n a l a b g n i d n E 0 2 0 2 y r a u n a J 1 n o s e s s o l t i d e r c r o f n o i s i v o r P d e u s s i r o d e s a h c r u p s t e s s a l a i c n a n fi w e N s t e s s a l a i c n a n fi d e s o p s i d r o d e r u t a M 1 e g a t s o t d e r r e f s n a r T 2 e g a t s o t d e r r e f s n a r T 3 e g a t s o t d e r r e f s n a r T : s r o t c a f e s e h t f o t l u s e r a s a r a e y e h t f o d n e d n a g n i n n i g e b e h t n e e w t e b s e s s o l L C E d e t c e p x e d n a s e c n a l a b n i s e g n a h c s w o h s e l b a t g n w o i l l o f e Th 276 | Annual Report 2020 2020 Annual Report | 277 Financial Statements // Consolidated The following table shows changes in expected ECL losses between the beginning and end of the year as a result of these factors: Stage 1 12 months Stage 2 Life time Stage 3 Life time Dec.31, 2019 Due from banks Provision for credit losses on 1 Janu- ary 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 Changes in the probability of default and loss in case of default and the exposure at default Changes to model assumptions and methodology Write off during the year Cumulative foreign currencies trans- lation differences Ending balance Individual Loans: Provision for credit losses on 1 January 2019 Impairment during the year Write off during the year Recoveries Cumulative foreign currencies trans- lation differences Ending balance Corporate and Business Banking loans: Provision for credit losses on 1 January 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 Changes in the probability of default and loss in case of default and the exposure at default Changes to model assumptions and methodology Recoveries Write off during the year Cumulative foreign currencies trans- lation differences Ending balance 160 16,816 (158) - - - (1) - - - 16,817 Stage 1 12 months 72,092 24,377 - - - 96,469 7,155 - (7,155) - - - - - - - - Stage 2 Life time 24,843 (14,449) - - - EGP Thousands Total 7,315 16,816 (7,313) - - - (1) - - - 16,817 - - - - - - - - - - - Stage 3 Life time 127,376 140,974 (118,486) 60,204 - EGP Thousands Total 224,311 150,902 (118,486) 60,204 - 10,394 210,068 316,931 Stage 1 12 months Stage 2 Life time Stage 3 Life time EGP Thousands Total 691,013 6,700,083 4,709,096 12,100,192 751,746 (364,309) 158,357 (3,937) 1,472 1,074,222 (899,007) (359,174) 9,427 (2,560,546) - (772,859) - - 2,409,875 1,825,968 (2,036,175) (200,817) 5,490 (149,199) 93,395 1,509,405 3,051 1,605,851 5,845 401,743 - - - - (124,860) 1,208,722 (551,032) 5,325,121 - 399,429 (1,262,286) (511,193) 407,588 399,429 (1,262,286) (1,187,085) 4,975,113 11,508,956 Financial Assets at Fair Value through OCI Provision for credit losses on 1 January 2019 New financial assets purchased or issued Matured or disposed financial assets Transferred to stage 1 Transferred to stage 2 Transferred to stage 3 "Changes in the probability of de- fault and loss in case of default and the exposure at default" Changes to model assumptions and methodology Write off during the year Cumulative foreign currencies trans- lation differences Ending balance Stage 1 12 months Stage 2 Life time Stage 3 Life time 595,511 183,940 (282,223) 931 - - (83,764) - - - 414,395 3,803 - (773) (3,030) - - - - - - - - - - - - - - - - - - EGP Thousands Total 599,314 183,940 (282,996) (2,099) - - (83,764) - - - 414,395 Loans and advances restructured Restructuring activities include rescheduling arrangements, applying obligatory management programs, modifying and de- ferral 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, which 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 year: Loans and advances to customer Corporate - Direct loans Total EGP Thousands Dec.31, 2020 Dec.31, 2019 5,537,596 5,537,596 4,682,243 4,682,243 3.1.7. Financial investments: The following table represents an analysis of financial investment balances by rating agencies at the end of the period based on Standard & Poor’s valuation and its equivalent. Dec.31, 2020 Amortized cost AAA AA+ to -AA A to -A+ Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 25,285,225 - 25,285,225 “Stage 2: Expected credit losses Over a lifetime that is not creditworthy” “Stage 3: Expected credit losses Over a lifetime Credit default” - - - - - - - - - - - - EGP Thousands “Individually impaired” - - - - - - Total - - - 25,285,225 - 25,285,225 278 | Annual Report 2020 2020 Annual Report | 279 Financial Statements // ConsolidatedDec.31, 2020 EGP Thousands Dec.31, 2019 EGP Thousands Fair value through OCI AAA AA+ to -AA A to -A+ Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 146,212,769 - 146,212,769 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 146,212,769 - 146,212,769 Fair value through OCI AAA AA+ to -AA A to -A+ Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 88,820,722 - 88,820,722 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 88,820,722 - 88,820,722 The following table shows the analysis of impairment on credit losses of financial investments by rating agencies at the end of the period based on Standard & Poor’s valuation and its equivalent. The following table shows the analysis of impairment on credit losses of financial investments by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2020 Fair value through OCI AAA AA+ to -AA A+ to -A Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 38,454,165 - 38,454,165 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - EGP Thousands Dec.31, 2019 EGP Thousands Individually impaired - - - - - - Total - - - 38,454,165 - 38,454,165 Stage 1: Expected credit losses over 12 months Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - 414,395 - 414,395 - - - - - - - - - - - - Fair value through OCI AAA AA+ to -AA A to -A+ Less than -A Not rated Total Individually impaired - - - - - - Total - - - 414,395 - 414,395 The following table represents an analysis of financial investment balances by rating agencies at the end of the year based on Standard & Poor’s valuation and its equivalent. Dec.31, 2019 EGP Thousands Amortized cost AAA AA+ to -AA A to -A+ Less than -A Not rated Total Stage 1: Expected credit losses over 12 months - - - 107,225,613 - 107,225,613 Stage 2: Expected credit losses Over a lifetime that is not creditworthy Stage 3: Expected credit losses Over a lifetime Credit default - - - - - - - - - - - - Individually impaired - - - - - - Total - - - 107,225,613 - 107,225,613 280 | Annual Report 2020 2020 Annual Report | 281 Financial Statements // Consolidated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 year. The Bank has allocated exposures to regions based on the country of domicile of its counterparties. Dec.31, 2020 Cash and balances at the central bank Due from banks Gross loans and advances to banks Less:Impairment provision Gross loans and advances to customers Individual: - Overdrafts - Credit cards - Personal loans - Mortgages Corporate: - Overdrafts - Direct loans - Syndicated loans - Other loans Unamortized bills discount Unamortized syndicated loans discount Impairment provision Suspended credit account Derivative financial instruments Financial investments: -Debt instruments Total Total as at December 31, 2019 Alex, Delta Cairo and Sinai Upper Egypt Outside Egypt (Kenya) EGP Thousands Total 33,620,434 87,021,223 786,605 (9,625) 1,000,304 3,807,958 18,483,815 1,928,463 21,102,760 28,351,287 28,771,413 16,391 (104,176) (210,680) - - - - - - - - 148,115 33,768,549 429,267 - - 87,450,490 786,605 (9,625) 417,515 898,858 7,913,359 85,331 1,433,121 11,285,312 2,218,123 5,000 - 93,402 157,588 1,395,193 11,836 1,006,023 5,110,685 121,277 - - 8,148 - 89,705 7,719 156,880 480,725 - - - 1,519,369 4,864,404 27,882,072 2,033,349 23,698,784 45,228,009 31,110,813 21,391 (104,176) - - - (210,680) (11,851,162) (38,517) 248,759 - 171,024,092 383,949,344 345,106,302 (3,512,766) - - - - 20,743,853 21,081,215 (1,031,821) - - - - 6,864,183 6,648,896 (39,064) - - - 473,902 1,755,397 - (16,434,813) (38,517) 248,759 - 171,497,994 413,312,777 372,836,413 s r o t c e s y r t s u d n I . 2 . . 8 1 3 . s d n a s u o h T P G E l a t o T l l e a s e o h W l r e h t O t n e m n r e v o G l i a t e r d n a l i a c n a n F i 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 e d a r t e t a t s e l a e R g n i r u t c a f u n a M s n o i t u t i t s n i 0 2 0 2 , 1 3 . c e D , 9 4 5 8 6 7 3 3 , , 0 9 4 0 5 4 7 8 , 5 0 6 6 8 7 , ) 5 2 6 9 ( , , 9 6 3 9 1 5 1 , , 4 0 4 4 6 8 4 , , 2 7 0 2 8 8 7 2 , , 9 4 3 3 3 0 2 , , 4 8 7 8 9 6 3 2 , , 9 0 0 8 2 2 5 4 , , 3 1 8 0 1 1 1 3 , 1 9 3 1 2 , , ) 6 7 1 4 0 1 ( , ) 0 8 6 0 1 2 ( - - - - , 9 6 3 9 1 5 1 , , 4 0 4 4 6 8 4 , , 2 7 0 2 8 8 7 2 , - - - - - - , 9 4 3 3 3 0 2 , - - - - - - - - - - - - - - - - - - ) 0 8 6 0 1 2 ( , - - - , 1 5 4 2 4 4 4 , , 4 0 4 0 9 4 6 1 , , 8 9 3 5 1 6 1 , , 4 1 0 1 3 4 2 , , 3 2 8 0 8 3 4 , , 2 9 7 4 3 3 1 2 , - ) 7 1 5 8 3 ( , 9 5 7 8 4 2 , , 4 9 9 7 9 4 1 7 1 , - - - - - - - ) 6 6 ( , ) 3 1 8 4 3 4 6 1 ( , , ) 3 6 7 3 9 0 1 ( , , ) 1 6 8 3 8 0 9 ( , - - - ) 9 6 0 4 3 5 ( , , 6 5 6 4 1 5 3 6 1 , - - - - - - - - 2 2 4 9 4 9 , , 4 1 9 1 3 0 1 , - - - - - - - - - - - - - - - - , 1 5 3 9 6 4 3 , , 8 9 9 6 0 6 1 , , 5 2 3 4 1 0 1 1 , , 7 1 6 7 2 6 0 2 , - - - - - - - ) 9 4 5 6 3 1 ( , ) 9 1 9 6 3 ( , - - - - - - - 1 1 6 8 4 9 , ) 0 3 1 0 8 ( , - - 1 9 3 1 2 , , 2 1 0 2 1 2 7 , , ) 2 4 1 1 2 4 5 ( , - - - ) 2 3 5 1 ( , , 9 4 5 8 6 7 3 3 , , 0 9 4 0 5 4 7 8 , - - - - 5 0 6 6 8 7 , ) 5 2 6 9 ( , , 1 2 2 2 9 3 1 , , 3 5 2 0 9 0 1 , - - - ) 6 7 1 4 0 1 ( , - ) 9 9 2 5 8 ( , - 9 5 7 8 4 2 , , 8 3 3 3 8 9 7 , , 7 7 7 2 1 3 3 1 4 , , 3 1 4 6 3 8 2 7 3 , , 2 3 4 7 1 9 6 2 , , 0 0 4 0 1 0 5 1 , , 3 9 5 2 3 9 2 2 2 , , 8 9 3 4 2 7 1 , , 8 4 4 7 0 3 4 , , 2 3 8 6 9 2 7 3 , , 0 1 3 7 4 6 4 6 , , 1 3 4 5 0 2 5 3 , , 6 4 6 3 5 2 3 1 , , 6 1 2 7 2 1 1 9 1 , , 8 6 8 7 0 8 1 , , 0 3 8 4 4 9 5 , , 1 7 6 2 5 4 3 3 , , 5 1 1 1 2 5 2 3 1 , k n a b l a r t n e c e h t t a s e c n a l a b d n a h s a C s k n a b m o r f e u D 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 s s o r G s k n a b o t s e c n a v d a d n a s n a o l s s o r G n o i s i v o r p t n e m r i a p m I : s s e L s n a o l l a n o s r e P - s d r a c t i d e r C - : l a u d i v i d n I s t f a r d r e v O - s e g a g t r o M - : e t a r o p r o C s n a o l t c e r i D s t f a r d r e v O - - s n a o l d e t a c i d n y S - s n a o l r e h t O - t n u o c s i d s l l i b d e z i t r o m a n U t n u o c s i d s n a o l d e t a c i d n y s d e z i t r o m a n U n o i s i v o r p t n e m r i a p m I s t n e m u r t s n i l a i c n a n fi e v i t a v i r e D t n u o c c a t i d e r c d e d n e p s u S 9 1 0 2 , 1 3 r e b m e c e D t a s a l a t o T : s t n e m t s e v n i l a i c n a n i F s t n e m u r t s n i t b e D - l a t o T 282 | Annual Report 2020 2020 Annual Report | 283 Financial Statements // Consolidated 3.2. Market risk Market risk represents the fluctuations in fair value, future cash flow, foreign exchange rates and commodity prices, in- terest rates, credit spreads and equity prices, and it may reduce the Bank’s income or the value of its portfolios. The bank assigns the market risk management department to measure, monitor and control the market risk. In addition, regular reports are submitted to the Asset and Liability “Management Committee (ALCO), Board Risk Committee and the heads of each business unit. The bank separates exposures to market risk into trading or non-trading portfolios. 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 FVTOCI and amortized cost. 3.2.1. Market risk measurement techniques As part of the management of market risk, the Bank undertakes various hedging strategies and 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 assesses the historical movements in the market prices based on volatilities and correlations. 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 VaR Lim- its, for the 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 is calculating the Market Risk Capital Requirements by applying Basel II “Standardised Measurement Method”, according to the Central Bank of Egypt regulatory requirements. 3.2.1.2. Stress testing Stress tests provide an indication of the potential size of losses that could arise under extreme market conditions. There- fore, the bank computes on a daily basis trading Stressed VaR, combined with the trading VaR, to capture the abnormal movements in financial markets and to give more comprehensive picture of risk. The results of the stress tests are re- viewed 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 Foreign exchange risk Interest rate risk - For non trading purposes - For trading purposes Portfolio managed by others risk Investment fund Total VaR Trading portfolio VaR by risk type EGP Thousands Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium 954 441,614 448,956 290 6,552 - 443,036 High Low 4,940 776,180 790,500 290 14,894 - 780,053 109 260,701 264,703 290 3,337 - 261,342 Medium 410 604,814 609,137 4,346 4,858 76 605,585 High Low 2,426 1,176,577 1,186,564 9,949 9,696 122 1,178,349 50 274,079 271,813 183 1,487 44 274,303 Foreign exchange risk Interest rate risk - For trading purposes Funds managed by others risk Investment fund Total VaR EGP Thousands Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium 954 290 290 6,552 - 6,752 High 4,940 290 290 14,894 - 14,696 Low 109 290 290 3,337 - 3,398 Medium 410 4,346 4,346 4,858 76 5,839 High 2,426 9,949 9,949 9,696 122 10,382 Low 50 183 183 1,487 44 3,475 Non trading portfolio VaR by risk type Last 12 months ended 31/12/2020 Last 12 months ended 31/12/2019 Medium High Low Medium High Low EGP Thousands Interest rate risk - For non trading purposes Total VaR 448,956 448,956 790,500 790,500 264,703 264,703 609,137 609,137 1,186,564 1,186,564 271,813 271,813 The increase in the value at risk, especially the rate of return, is associated with the increase in interest rate sensitivity in the global financial markets. The three previous outcomes of the VAR were calculated independently from the centers involved and historical market movements. The aggregate value at risk for trading and non-trading is not the Bank’s risk value because of the correlation between types of risk and types of portfolios and the consequent variety of impact. 284 | Annual Report 2020 2020 Annual Report | 285 Financial Statements // Consolidated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 monitored daily. The table below summarizes the Bank’s exposure to foreign exchange rate risk and financial instruments at carrying amounts, categorized by currency. Dec.31, 2020 EGP USD EUR GBP Other Total Equivalent EGP Thousands Financial assets Cash and balances at the central bank Gross due from banks Gross loans and advances to banks Gross loans and advances to customers Derivative financial instruments Financial investments Gross financial investment securities Investments in associates Total financial assets Financial liabilities Due to banks Due to customers Derivative financial instruments Other loans Total financial liabilities Net on-balance sheet financial position 30,172,703 44,696,639 - 89,104,919 49,476 2,054,467 41,542,328 786,605 41,040,287 199,283 658,403 611,381 - 5,558,181 - 85,910 370,516 - 63,815 - 797,066 229,626 - 590,989 - 33,768,549 87,450,490 786,605 136,358,191 248,759 152,360,903 139,871 20,439,255 - 316,524,11 106,062225 2,205,197 - 9,033,162 - - 520,241 473,902 - 2,091,583 175,479,257 139,871 434,31,722 106,231 252,811,651 147,168 21,391 253,86,441 8,663,783 78,463,342 183,905 7,725,555 95,036,585 36,225 7,623,289 - - 7,659,514 11,269 931,677 - - 942,946 27 1,339,491 - - 8,817,535 341,169,450 331,073 7,746,946 1,339,518 358,065004 63,438,070 11,025,640 1,373,648 (422,705) 752,065 76,166,718 Total financial assets as of December 31, 2019 Total financial liabilities as of December 31, 2019 Net on-balance sheet financial position as of December 31, 2019 274,14,974 103,22,996 8,402,003 909,285 914,829 387,84,087 216,628,824 93,357,846 8,552,640 878,388 396,698 319,814,396 57,476,150 10,165,150 (150,637) 30,897 518,131 68,039,691 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 the 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. Up to1 Month 1-3 Months 3-12 Months 1-5 years Over 5 years Non- Interest Bearing Total 36,818 - - 77,197,664 10,146,784 86,527 - - 786,605 - - - - - - 33,731,731 33,768,549 19,515 87,450,490 - 786,605 82,486,363 16,852,628 14,007,254 16,976,960 6,034,986 - 136,358,191 7,266 4,737,712 3,870,718 2,466,062 6,418 - 11,088,176 5,432,365 2,600,844 36,844,848 82,746,208 46,668,129 1,186,863 175,479,257 - - - - - 139,871 139,871 165,160,476 34,337,968 55,595,952 102,189,230 52,709,533 35,077,980 445,071,139 1,034,109 177,458,413 7,472,747 32,691,721 78,660 26,372,246 - 54,588,241 - 58,540 232,019 50,000,289 8,817,535 341,169,450 2,423,241 3,756,876 80,072 6,766 4,903,535 - 4,589,135 3,153,656 4,155 - - - 11,170,490 7,746,946 180,915,763 48,510,479 29,684,634 54,599,162 4,962,075 50,232,308 368,904,421 (15,755,287) (14,172,511) 25,911,318 47,590,068 47,747,458 (15,154,328) 76,166,718 107,147,723 64,307,164 94,406,289 61,344,661 39,777,608 29,751,216 396,734,661 187,481,537 38,196,955 21,690,398 34,839,667 1,937,061 44,549,352 328,694,970 (80,333,814) 26,110,209 72,715,891 26,504,994 37,840,547 (14,798,136) 68,039,691 Dec.31, 2020 Financial assets Cash and balances at the central bank Gross due from banks Gross loans and advances to banks Gross loans and advances to cus- tomers Derivatives finan- cial instruments (including IRS notional amount) Financial invest- ments Gross financial in- vestment securities Investments in as- sociates Total financial assets Financial liabili- ties Due to banks Due to customers Derivatives finan- cial instruments (including IRS notional amount) Other loans Total financial liabilities Total interest re- pricing gap Total financial as- sets as of Decem- ber 31, 2019 Total financial liabilities as of De- cember 31, 2019 Total interest re-pricing gap as of December 31, 2019 * After adding Reverse repos and deducting Repos. 286 | Annual Report 2020 2020 Annual Report | 287 Financial Statements // Consolidated3.3. Liquidity risk Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfill commitments to lend. Liquidity Risk Management Organization and Measurement Tools Liquidity Risk is governed by Asset and Liability Committee (ALCO) and Board Risk Committee (BRC) subject to provisions of Treasury Poilcy Guide (TPG). Board Risk Committee (BRC): Provides oversight of risk management functions and assesses compliance to the set risk strategies and policies approved by the Board of Directors (BoD) through periodic reports submitted by the Risk Group. The committee makes recommendations to the BoD with regards to risk management strategies and policies (including those related to capital adequacy, liquidity management,various types of risks: credit, market, operation, compliance, reputation and any other risks the Bank may be exposed to). Asset & Liability Committee (ALCO): Optimises the allocation of assets and liabilities, taking into consideration expectations of the potential impact of future interest rate fluctuations, liquidity constraints, and foreign exchange exposures. ALCO monitors the Bank’s liquidity and market risks, economic developments, market fluctuations, and risk profile to ensure ongoing activities are compatible with the risk/ reward guidelines approved by the BoD. Treasury Policy Guide (TPG): The purpose of the TPG is to document and communicate the policies that govern the activities performed by the Treasury Group and monitored by Risk Group. The main measures and monitoring tools used to assess the Bank’s liquidity risk include regulatory and internal ratios, gaps, Basel III liquidity ratios, asset and liability gapping mismatch, stress testing, and funding base concentration. More conservative internal targets and Risk Appetite indicators (RAI) against regulatory requirements are set for various mea- sures of Liquidity and Funding Concentration Risks.At the end of year, the Basel III Liquidity Coverage Ratio (LCR) and- Net Stable Funding Ratio (NSFR) remained strong and well above regulatory requirements. The Bank maintained a solid LCY & FCY Liquidity position with decent buffers to meet both the global and local increase in risk profile related to the Covid-19 pandemic. CIB will continue with its robust Liability strategy with reliance on cus- tomer deposits (stable funding) as the main contributor of total liabilities, and low dependency on the Wholesale Funding. CIB has ample level of High Quality Liquid Assets (HQLA) based on its LCY & FCY Sovereign Portfolio investments, which positively reflects the Bank’s solid Liquidity Ratios and Basel III LCR & NSFR ratios, with a large buffer maintained above the Regulatory ratios requirements. 3.3.1. Liquidity risk management process The Bank’s liquidity management process is carried by the Assets and Liabilities Management Department and moni- tored independently by the Risk Management Department, and includes projecting cash flows by major currency under various stress scenarios and considering the level of liquid assets necessary in relation thereto: • Maintaining 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 CBE 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 projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. 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 by currency, provider, product and term. 3.3.3. Non-derivative cash flows The table below presents the cash flows payable by the Bank under non-derivative financial liabilities by remaining con- tractual maturities and the maturities assumption for non contractual products on the basis of their behaviour studies, at balance sheet date. Dec.31, 2020 Financial liabilities Due to banks Due to customers Other loans Total liabilities (contractual and non contractual maturity dates) Total financial assets (contractual and non contractual maturity dates) Dec.31, 2019 Financial liabilities Due to banks Due to customers Other loans Total liabilities (contractual and non contractual maturity dates) Total financial assets (contractual and non contractual 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 Thousands 1,266,125 32,904,756 - 7,472,749 33,065,033 10,079 78,661 97,509,535 2,629,252 - 166,850,344 2,445,156 - 10,839,782 2,662,459 8,817,535 341,169,450 7,746,946 34,170,881 40,547,861 100,217,448 169,295,500 13,502,241 357,733,931 84,620,725 49,072,630 59,598,235 157,255,071 82,285,536 432,832,197 Up to 1 month One to three months Three months to one year One year to five years Over five years Total EGP Thousands 5,795,044 34,976,355 2,868 320,830 25,769,297 42,488 5,694,733 71,077,755 14,090 - 161,953,222 1,257,765 - 10,671,826 1,955,535 11,810,607 304,448,455 3,272,746 40,774,267 26,132,615 76,786,578 163,210,987 12,627,361 319,531,808 39,156,322 30,113,707 85,349,273 167,623,442 67,757,445 390,000,189 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 extend- ed. 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. 288 | Annual Report 2020 2020 Annual Report | 289 Financial Statements // Consolidated3.3.4. Derivative cash flows The Bank’s derivatives include: Foreign exchange derivatives: exchange traded options and over-the-counter (OTC) ,exchange traded forwards currency options that will be settled on a gross basis 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 into maturity groupings based on the re- maining period of the balance sheet to the contractual maturity date will be settled on a net basis. The amounts disclosed in the table are the contractual undiscounted cash flows: Up to 1 month One to three months Three months to one year One year to five years Over five years Total EGP Thousands 16,230 - 16,230 30,061 44,100 - 44,100 51,676 80,072 - 80,072 125,307 6,766 - 6,766 - - 183,905 183,905 75,544 147,168 183,905 331,073 282,588 Dec.31, 2020 Liabilities Derivatives financial instruments Foreign exchange derivatives Interest rate derivatives Total Total as of Dec. 31, 2019 Off balance sheet items Dec.31, 2020 Up to 1 year 1-5 years Over 5 years Total Letters of credit, guarantees and other commitments Total Total as of Dec. 31, 2019 49,712,249 23,438,772 9,434,825 82,585,846 49,712,249 50,210,710 23,438,772 14,264,820 9,434,825 5,723,073 82,585,846 70,198,603 EGP Thousands Dec.31, 2020 Credit facilities commitments Total Up to 1 year 3,511,831 3,511,831 1-5 years 5,383,579 5,383,579 EGP Thousands Total 8,895,410 8,895,410 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. Financial assets Due from banks Gross loans and advances to banks Gross loans and advances to customers Financial investments: Amortized cost Total financial assets Financial liabilities Due to banks Due to customers Other loans Total financial liabilities Book value Fair value Dec.31, 2020 Dec.31, 2019 Dec.31, 2020 Dec.31, 2019 87,426,301 786,605 28,353,366 629,780 87,448,058 786,605 28,370,754 629,780 136,358,191 131,244,095 136,164,909 128,740,476 25,285,225 249,856,322 107,225,613 267,452,854 26,437,169 250,836,741 106,016,744 263,757,754 8,817,535 341,169,450 7,746,946 357,733,931 11,810,607 304,448,455 3,272,746 319,531,808 8,700,395 340,481,150 7,746,946 356,928,491 11,702,778 302,292,025 3,272,746 317,267,549 The fair value is considered in the previous note from the second and third level in accordance with the fair value standard Due from banks The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of floating 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. Fair values of financial instruments The following table provides the fair value measurement hierarchy of the assets and liabilities according to EAS. 290 | Annual Report 2020 2020 Annual Report | 291 Financial Statements // ConsolidatedQuantitative disclosures fair value measurement hierarchy for assets as at 31 December 2020: instruments: Level 1 - Quoted prices in active markets for the same instrument (i.e. without modification or repacking); Level 2 - Quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all sig- nificant inputs are based on observable market data; and Level 3 - Valuation techniques for which any significant input is not based on observable market data. Dec.31, 2020 Measured at fair value: Financial assets Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI Total Derivative financial instruments Financial assets Financial liabilities Total Assets for which fair values are disclosed: Amortized cost Loans and advances to banks Loans and advances to customers Total Liabilities for which fair values are disclosed: Other loans Due to customers Total Date of Valuation Total Fair value measurement using Quoted prices in active markets (Level 1) Significant observable inputs (level 2) Valuation techniques (level 3) 31-Dec-20 359,959 359,959 - 31-Dec-20 148,118,372 108,161,597 39,956,775 148,478,331 108,521,556 39,956,775 - - - 31-Dec-20 31-Dec-20 248,950 331,073 580,023 31-Dec-20 31-Dec-20 31-Dec-20 26,340,253 786,605 136,164,909 163,291,767 31-Dec-20 31-Dec-20 7,746,946 341,579,117 349,326,063 - - - - - - - - - - 191 - 191 248,759 331,073 579,832 26,172,861 - - 26,172,861 167,392 786,605 136,164,909 137,118,906 7,746,946 - 7,746,946 - 341,579,117 341,579,117 Dec.31, 2019 Measured at fair value: Financial assets Financial Assets at Fair value through P&L Financial Assets at Fair value through OCI Total Derivative financial instruments Financial assets Financial liabilities Total Assets for which fair values are disclosed: Amortized cost Loans and advances to banks Loans and advances to customers Total Liabilities for which fair values are disclosed: Other loans Due to customers Total Date of Valuation Total Fair value measurement using Quoted prices in active markets (Level 1) Significant observable inputs (level 2) Valuation techniques (level 3) 31-Dec-19 418,781 418,781 - 31-Dec-19 89,897,257 61,689,580 28,207,677 90,316,038 62,108,361 28,207,677 - - - 31-Dec-19 31-Dec-19 216,383 282,588 498,971 31-Dec-19 31-Dec-19 31-Dec-19 106,016,744 629,780 128,740,476 235,387,000 31-Dec-19 31-Dec-19 3,272,746 302,256,825 305,529,571 - - - - - - - - - - - - - 216,383 282,588 498,971 106,016,744 - - 106,016,744 - 629,780 128,740,476 129,370,256 3,272,746 - 3,272,746 - 302,256,825 302,256,825 Fair value of financial assets and liabilities Loans and advances to banks Loans and advances to banks are represented in loans that do not consider 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 dis- counted using 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, financial assets at amortized cost, and fair value through OCI. Fair value for amortized cost assets is based on market prices. 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. 292 | Annual Report 2020 2020 Annual Report | 293 Financial Statements // Consolidated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: • Complying with the legally imposed capital requirements in Egypt. • Protecting the Bank’s ability to continue as a going concern and enabling the generation of yield for shareholders and other parties dealing with the bank. 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 monthly 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 12.75%, calculated as the ratio between total value of the capital elements, and the risk-weighted assets and contingent liabilities of the Bank (credit risk, market risk and opertional risk). While taking into consideration the conservation buffer. Tier one: Tier one comprises 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, interim profits and deducting previously recog- nized goodwill and any retained losses Tier two: Tier two represents the gone concern capital which is compposed of general risk provision according to stage one ECL to the maximum of 1.25% risk weighted assets and contingent liabilities ,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 financial assets fair value through OCI , amortized cost , 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. Assets risk weight scale ranging from zero to 400% is 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 adjustments 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 summarize the compositions of teir 1, teir 2 , the capital adequacy ratio and leverage ratio . 1-The capital adequacy ratio Tier 1 capital Share capital Goodwill Reserves Retained Earnings (Losses) Total deductions from tier 1 capital common equity Net profit for the year Total qualifying tier 1 capital Tier 2 capital Subordinated Loans 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 (%) EGP Thousands Dec.31, 2020 Dec.31, 2019 14,776,813 (178,782) 33,427,234 256,266 (842,792) 8,906,131 56,344,870 4,579,135 2,072,612 6,651,747 62,996,617 165,944,439 701,776 33,923,864 200,570,079 31.41% 14,690,821 - 24,661,076 81,328 (807,709) 8,430,530 47,056,046 3,208,300 1,740,919 4,949,219 52,005,265 169,831,103 766,516 28,851,964 199,449,583 26.07% *Based on consolidated financial statement figures and in accordance with Central Bank of Egypt regulation issued on 24 December 2012. 2-Leverage ratio Total qualifying tier 1 capital On-balance sheet items & derivatives Off-balance sheet items Total exposures *Percentage EGP Thousands Dec.31, 2020 Dec.31, 2019 56,344,870 430,849,350 54,025,891 484,875,241 11.62% 47,056,046 409,689,485 46,195,165 455,884,650 10.32% *Based on consolidated financial statement figures and in accordance with Centeral Bank of Egypt regulation issued on 14 July 2015. For December 2020 NSFR ratio record 250.96% (LCY 301.42% and FCY 168.09%), and LCR ratio record 1358.58% (LCY 1976.64% and FCY 336.99%). For December 2019 NSFR ratio record 217.35% (LCY 255.43% and FCY 156.14%), and LCR ratio record 611.44% (LCY 757.42% and FCY 230.87%). 294 | Annual Report 2020 2020 Annual Report | 295 Financial Statements // Consolidated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 ex- pectations of future events that are believed to be reasonable under the circumstances and available information. 4.1. Fair value of derivatives The fair value of financial instruments that are not quoted in active markets are determined by using valuation tech- niques. these valuation techniques (as models) are validated and periodically reviewed by qualified personnel indepen- dent 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. For practicality purposes, 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 assump- tions about these factors could affect reported fair value of financial instruments. 5. Segment analysis 5.1. By business segment The Bank is divided into four 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 – incorporating financial instruments Trading, structured financing, Corporate leasing,and merger and ac- quisitions 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 –Including other banking business, such as Assets Management. Transactions between the business segments are on normal commercial terms and conditions. Dec.31, 2020 Net revenue according to business segment * Expenses according to business segment Profit before tax Tax Profit for the year Total assets Corporate banking SME’s Investments EGP Thousands Retail banking Asset Liability Mangement Total 11,470,314 1,566,102 7,957,829 6,923,229 636,807 28,554,281 (8,546,440) (880,520) (444,245) (3,443,139) 2,923,874 (974,308) 1,949,566 137,873,519 685,582 (223,965) 461,617 7,513,584 (2,454,966) 5,058,618 1,067,415 182,713,109 3,480,090 (1,139,301) 2,340,789 36,057,380 (1,795) (13,316,139) 15,238,142 (4,999,985) 10,238,157 70,130,744 427,842,167 635,012 (207,445) 427,567 Dec.31, 2019 Revenue according to business segment Expenses according to business segment Profit before tax Tax Profit for the year Total assets at 31 December 2019 Corporate banking SME’s Investments EGP Thousands Retail banking Asset Liability Mangement Total 7,074,284 1,694,437 3,393,932 5,216,412 644,066 18,023,131 (3,263,706) (669,620) (177,131) (2,114,904) (24,044) (6,249,405) 3,810,578 (1,048,033) 2,762,545 1,024,817 (281,597) 743,220 3,216,801 (883,907) 2,332,894 3,101,508 (852,227) 2,249,281 620,022 (170,368) 449,654 11,773,726 (3,236,132) 8,537,594 103,555,078 1,398,063 200,721,627 26,524,730 54,542,870 386,742,368 5.2. By geographical segment Dec.31, 2020 Revenue according to geographical segment Expenses according to geographical segment Profit before tax Tax Profit for the year Total assets Alex, Delta & Cairo Sinai Upper Egypt Outside Egypt (Kenya) Total 24,736,451 3,033,434 756,704 27,692 28,554,281 (11,548,921) (1,471,486) (259,231) (36,501) (13,316,139) 13,187,530 (4,333,015) 8,854,515 395,769,335 1,561,948 (505,857) 1,056,091 22,705,248 497,473 (161,113) 336,360 7,493,258 (8,809) - (8,809) 1,874,326 15,238,142 (4,999,985) 10,238,157 427,842,167 Dec.31, 2019 Revenue according to geographical segment Expenses according to geographical segment Profit before tax Tax Profit for the year Total assets at 31 December 2019 Cairo Alex, Delta & Sinai Upper Egypt Total 15,066,374 2,456,125 500,632 18,023,131 (5,015,999) (1,042,810) (190,596) (6,249,405) 10,050,375 (2,762,593) 7,287,782 358,906,093 1,413,315 (388,348) 1,024,967 21,081,215 310,036 (85,191) 224,845 6,755,060 11,773,726 (3,236,132) 8,537,594 386,742,368 * Represents the net interest income and other income. 296 | Annual Report 2020 2020 Annual Report | 297 Financial Statements // Consolidated 6. Net interest income 9. Net trading income Interest and similar income - Banks - Clients Total Treasury bills and bonds Repos "Financial investments at amortized cost and fair value through OCI" Total Interest and similar expense - Banks - Clients Total "Financial instruments purchased with a commitment to re-sale (Repos)" Other loans Total Net interest income EGP Thousands Dec.31, 2020 Dec.31, 2019 2,204,633 12,696,383 14,901,016 26,597,741 4,067 3,308,719 14,630,606 17,939,325 24,277,671 - 693,411 383,961 42,196,235 42,600,957 (458,210) (16,070,642) (16,528,852) (597,877) (19,893,262) (20,491,139) (209,975) (232,055) (284,988) (17,023,815) 25,172,420 (299,144) (21,022,338) 21,578,619 Profit (Loss) from foreign exchange transactions Profit (Loss) from forward foreign exchange deals revaluation Profit (Loss) from interest rate swaps revaluation Profit (Loss) from currency swap deals revaluation Profit (Loss) from financial assets at fair value through P&L Total 10. Administrative expenses Staff costs Wages and salaries Social insurance Other benefits Other administrative expenses * Total EGP Thousands Dec.31, 2020 Dec.31, 2019 445,272 37,439 (5,744) (5,577) (64,759) 406,631 749,591 (85,657) (29,521) 3,238 50,408 688,059 EGP Thousands Dec.31, 2020 Dec.31, 2019 (2,924,411) (123,625) (125,338) (2,452,509) (5,625,883) (2,604,675) (95,408) (108,367) (2,240,472) (5,048,922) 7. Net fee and commission income *The expenses related to the activity for which the bank obtains a commodity or service, donations and depreciation. 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 Financial assets at fair value through P&L Financial assets at fair value through OCI Associates Total 298 | Annual Report 2020 EGP Thousands Dec.31, 2020 Dec.31, 2019 1,189,068 159,082 1,711,114 3,059,264 (983,450) (983,450) 2,075,814 1,258,672 141,907 2,051,109 3,451,688 (1,170,893) (1,170,893) 2,280,795 EGP Thousands Dec.31, 2020 Dec.31, 2019 10,596 36,879 2,700 50,175 7,307 46,116 - 53,423 11. Other operating (expenses) income Profits (losses) of non-trading assets and liabilities Profits of selling property and equipment Release (charges) of other provisions Other income/expenses Total 12. Impairment release (charges) for credit losses Loans and advances to customers Due from banks impairment provision "Provision for impairment of debt instruments investments" Total EGP Thousands Dec.31, 2020 Dec.31, 2019 24,845 1,094 (1,287,326) (1,481,609) (2,742,996) 91,769 1,439 (361,649) (1,526,309) (1,794,750) EGP Thousands Dec.31, 2020 Dec.31, 2019 (4,806,518) (7,081) (205,182) (1,610,878) (9,503) 184,921 (5,018,781) (1,435,460) 2020 Annual Report | 299 Financial Statements // Consolidated13. Adjustments to calculate the effective tax rate 16. Due from banks Profit before tax Tax rate Income tax based on accounting profit Add / (Deduct) Non-deductible expenses Tax exemptions Withholding tax Income tax / Deferred tax Effective tax rate 14. Earning per share Net profit for the year, available for distribution Board member's bonus Staff profit sharing *Profits attributable to shareholders Weighted average number of shares Basic earning per share By issuance of ESOP earning per share will be: Average number of shares including ESOP shares Diluted earning per share *Based on separate financial statement profits. 15. Cash and balances at the central bank Cash Obligatory reserve balance with CBE - Current accounts Total Non-interest bearing balances EGP Thousands Dec.31, 2020 Dec.31, 2019 15,236,308 22.50% 3,428,169 2,822,920 (4,224,616) 2,973,512 4,999,985 32.82% 16,534,881 22.50% 3,720,348 1,466,387 (1,493,292) 1,040,443 4,733,886 28.63% EGP Thousands Dec.31, 2020 Dec.31, 2019 10,296,070 (73,643) (1,029,607) 9,192,820 1,467,555 6.26 1,473,666 6.24 11,798,161 (176,973) (1,179,816) 10,441,372 1,467,555 7.11 1,473,666 7.09 EGP Thousands Dec.31, 2020 Dec.31, 2019 6,023,849 5,876,652 27,744,700 33,768,549 33,768,549 22,397,310 28,273,962 28,273,962 Current accounts Deposits "Effect of applying IFRS 9 " Expected credit losses Total Central banks Local banks Foreign banks Total Non-interest bearing balances Floating interest bearing balances Fixed interest bearing balances Total Current balances Due from banks Gross due from banks Expected credit losses Net due from banks 17. Treasury bills and other governmental notes 91 Days maturity 182 Days maturity 364 Days maturity Unearned interest Total Repos - treasury bills Net Governmental bonds Governmental bonds Repo Net EGP Thousands Dec.31, 2020 Dec.31, 2019 2,950,002 84,500,488 - (24,189) 87,426,301 54,425,073 1,681,684 31,319,544 87,426,301 19,515 8,872,165 78,534,621 87,426,301 87,426,301 3,704,142 24,666,041 (7,314) (9,503) 28,353,366 9,945,682 1,348,559 17,059,125 28,353,366 1,460 9,085,184 19,266,722 28,353,366 28,353,366 Stage 1 87,450,490 (24,189) 87,426,301 EGP Thousands Dec.31, 2020 Dec.31, 2019 22,425 98,825 42,083,940 (1,948,912) 40,256,278 (758,586) 39,497,692 6,025 749,625 29,112,513 (1,470,340) 28,397,823 (763,761) 27,634,062 Dec.31, 2020 Financial Assets at Fair Value through OCI 106,208,507 (7,472,925) 98,735,582 EGP Thousands Dec.31, 2019 Financial Assets at Fair Value through OCI 58,769,618 (2,406,225) 56,363,393 300 | Annual Report 2020 Treasury bills and other government securities are classified to financial instruments through other comprehensive in- come when applying IFRS 9 Note 21 2020 Annual Report | 301 Financial Statements // Consolidated18. Loans and advances to banks, net 19. Loans and advances to customers, net Time and term loans Impairment provision Net Current balances Net Analysis for impairment provision of loans and advances to banks Beginning balance Additions during the year Ending balance Analysis for impairment provision of loans and advances to banks Beginning Balance Addition during the year Ending balance Below is an analysis of outstanding balance: EGP Thousands Dec.31, 2020 Dec.31, 2019 786,605 (9,625) 776,980 776,980 776,980 629,780 (4,516) 625,264 625,264 625,264 EGP Thousands Dec.31, 2020 Dec.31, 2019 (4,516) (5,109) (9,625) Stage 2 (4,516) (5,109) (9,625) (3,246) (1,270) (4,516) Stage 2 (3,246) (1,270) (4,516) Rating B- Balance 776,980 Rating B- Balance 625264 Individual - Overdraft - Credit cards - Personal loans - Real estate 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 Unamortized syndicated loans discount "Effect of applying IFRS 9 " Impairment provision Unearned interest Suspended credit account Net loans and advances to customers Distributed to Current balances Non-current balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 1,519,369 4,864,404 27,882,072 2,033,349 36,299,194 23,698,784 45,228,009 31,110,813 21,391 100,058,997 136,358,191 (104,176) (210,680) - (16,434,813) - (38,517) 119,570,005 52,980,352 66,589,653 119,570,005 1,462,439 4,264,204 20,219,305 1,330,323 27,276,271 19,100,709 51,163,302 33,642,235 61,578 103,967,824 131,244,095 (55,197) - 716,325 (12,542,212) (8,236) (33,672) 119,321,103 51,682,809 67,638,294 119,321,103 302 | Annual Report 2020 2020 Annual Report | 303 Financial Statements // Consolidatedl a t o T ) 1 3 9 6 1 3 ( , ) 4 2 8 1 ( , ) 5 9 7 9 0 8 ( , 1 6 9 5 7 , ) 4 7 1 1 4 ( , s d n a s u o h T P G E , ) 3 6 7 3 9 0 1 ( , ) 6 9 1 6 ( , , ) 6 5 9 8 0 5 1 1 ( , , ) 4 1 6 1 9 9 3 ( , 4 2 2 2 3 1 , 3 1 2 5 5 1 , ) 1 2 7 1 2 1 ( , , ) 0 5 0 1 4 3 5 1 ( , l a t o T ) 1 1 3 4 2 2 ( , ) 2 0 9 0 5 1 ( , 6 8 4 8 1 1 , ) 4 0 2 0 6 ( , ) 1 3 9 6 1 3 ( , - - ) 9 4 4 1 4 ( , ) 7 3 1 ( ) 1 0 7 0 2 ( , ) 7 8 2 2 6 ( , , ) 3 9 2 9 7 1 ( ) 3 7 6 1 ( , , ) 6 9 3 7 2 6 ( 1 8 8 2 5 , ) 4 2 1 0 2 ( , ) 5 0 6 5 7 7 ( , 0 2 0 2 , 1 3 . c e D - ) 6 7 7 0 9 ( , 0 8 0 3 2 , ) 0 5 0 1 2 ( , ) 1 3 5 3 5 1 ( , ) 7 7 2 2 4 2 ( , - - - - ) 9 9 0 2 ( , ) 6 4 4 3 ( , ) 5 4 5 5 ( , , ) 2 5 5 3 4 7 2 ( , - - 4 7 0 6 3 , - , ) 4 7 4 2 5 7 ( , ) 2 5 9 9 5 4 3 ( , l i a u d v d n i I 4 2 2 2 3 1 , ) 1 2 7 1 2 1 ( , 6 9 0 8 0 1 , , ) 5 6 5 4 5 5 0 1 ( , ) 2 4 0 6 ( , , ) 2 8 4 8 2 8 7 ( , , ) 0 4 6 8 3 8 2 ( , - ) 2 6 7 4 2 ( , ) 7 8 4 5 1 ( , ) 0 0 2 1 ( , ) 9 4 4 1 4 ( , , ) 8 6 7 8 0 1 ( ) 1 4 3 5 1 1 ( , 9 1 2 6 7 , ) 3 0 4 1 3 ( , ) 3 9 2 9 7 1 ( , e t a r o p r o C ) 2 6 1 2 4 ( , ) 0 8 2 3 6 ( , 7 6 2 2 4 , ) 1 0 6 7 2 ( , ) 6 7 7 0 9 ( , l a t o T s n a o l 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 , 6 8 2 2 6 2 1 , , ) 9 2 4 9 9 3 ( , ) 6 0 7 8 5 4 1 ( , , ) 2 9 1 0 0 1 2 1 ( , , 5 8 0 7 8 1 1 , , ) 6 5 9 8 0 5 1 1 ( , - ) 9 9 0 2 ( , - - - ) 9 9 0 2 ( , ) 0 8 6 2 3 9 ( , ) 9 1 5 2 3 2 ( , , ) 1 3 6 8 0 0 2 ( , , ) 7 9 5 9 7 3 9 ( , - - 9 5 7 7 9 1 , , 6 8 2 2 6 2 1 , 7 7 7 0 2 9 , ) 9 2 4 9 9 3 ( , , ) 2 5 5 3 4 7 2 ( , , ) 2 8 4 8 2 8 7 ( , l a t o T s n a o l 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 - - ) 3 1 4 5 ( , ) 4 1 ( ) 7 6 1 8 ( , ) 4 9 5 3 1 ( , ) 3 2 8 4 3 9 ( , ) 4 5 1 ( ) 4 5 0 7 9 3 ( , t f a r d r e v O - - 3 4 0 1 1 , , ) 8 8 9 0 2 3 1 ( , 6 0 2 3 4 , ) 9 1 6 8 4 ( , - - ) 3 1 4 5 ( , ) 4 6 9 1 1 7 ( , ) 8 0 4 1 9 2 ( , t f a r d r e v O - - 9 4 5 8 6 , ) 3 2 8 4 3 9 ( , s n a o l e t a t s e l a e R s n a o l l a n o s r e P s d r a c t i d e r C t f a r d r e v O ) R I A F Y A M ( r a e y e h t g n i r u d d e r i u q c A e c n a l a b g n n n i g e B i r a e y e h t g n i r u d ff o n e t t i r W r a e y e h t g n i r u d e g r a h C e c n a l a b g n i d n E s e i r e v o c e R : s n a o l i g n k n a B s s e n s u B d n a i e t a r o p r o C ) R I A F Y A M ( r a e y e h t g n i r u d d e r i u q c A e c n a l a b g n n n i g e B i r a e y e h t g n i r u d ff o n e t t i r W r a e y e h t g n i r u d e g r a h C s e i r e v o c e R i s e c n e r e ff d n o i t a l s n a r t s e i c n e r r u c n g i e r o f e c n a l a b g n i d n E r a e y e h t g n i r u d ) d e g r a h c ( d e s a e l e R * r a e y e h t g n i r u d s e i r e v o c e R r a e y e h t g n i r u d ff o e t i r W e c n a l a b g n d n E i e c n a l a b g n n n i g e B i 9 1 0 2 , 1 3 . c e D r a e y e h t g n i r u d ) d e g r a h c ( d e s a e l e R i e c n e r e ff d n o i t a u l a v e r e g n a h c x E * r a e y e h t g n i r u d s e i r e v o c e R r a e y e h t g n i r u d ff o e t i r W e c n a l a b g n d n E i e c n a l a b g n n n i g e B i 9 1 0 2 , 1 3 . c e D s t n u o m a ff o n e t t i r w y l s u o i v e r p m o r F * 0 2 0 2 , 1 3 . c e D s e g a g t r o M 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 n a o L l i a u d v d n i I : s w o l l o f s a s a w r a e y e h t g n i r u d e p y t y b 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 n o s e s s o l t i d e r c d e t c e p x e e h t f o s i s y l a n A 20. Derivative financial instruments 20.1. Derivatives The Bank uses the following financial derivatives for non hedging purposes. Forward contracts represent commitments to buy foreign and local currencies including unexecuted spot transactions. Future contracts for foreign currencies and/or interest rates represent contractual commitments to receive or pay net on the basis of changes in foreign exchange rates or interest rates, and/or to buy/sell foreign currencies or financial instru- ments in a future date with a fixed contractual price under active financial market. Credit risk is considered low, and future interest rate contract represents future exchange rate contracts negotiated for case by case, These contracts require 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 are exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign ex- change 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 in order 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 represent contractual agreements for the buyer (issuer) to the seller (holders) as a right not an obligation whether to buy (buy option) or sell (sell option) at a certain day or within certain year for a predetermined 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 is 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 is considered a base to analyze the realized financial instruments on the balance sheet, but it doesn’t provide an indicator for the projected cash flows of the fair value for current instruments, and those amounts don’t reflects credit risk or interest rate risk. Derivatives in the Bank’s benefit that are classified as (assets) are conversely considered (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 as well as the range through which the financial derivatives can be in benefit for 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: 20.1.1. For trading derivatives Foreign currencies derivatives - Forward foreign exchange contracts - Currency swap - Options Total (1) Dec.31, 2020 Dec.31, 2019 Notional amount 9,070,529 3,364,578 1,339 Assets Liabilities 41,790 7,686 - 49,476 142,579 4,589 - 147,168 Notional amount 8,315,292 4,904,151 1,365 Assets Liabilities 52,183 24,756 - 76,939 189,833 16,082 - 205,915 304 | Annual Report 2020 2020 Annual Report | 305 Financial Statements // Consolidated 20.1.2. Fair value hedge Financial investments securities Interest rate derivatives - Customers deposits hedging Total (2) Total financial derivatives (1+2) Dec.31, 2020 Dec.31, 2019 Notional amount 10,839,417 Assets Liabilities 199,283 199,283 248,759 183,905 183,905 331,073 Notional amount 8,880,574 Assets Liabilities 139,444 139,444 216,383 76,673 76,673 282,588 20.2. Hedging derivatives Fair value hedge Losses arose from hedged items at December 31, 2020 reached EGP 7,034 thousand against losses of EGP 29,742 thousand at December 31, 2019. The Bank uses interest rate swap contracts to cover part of the risk of potential increase in fair value of its fixed rate cus- tomer deposits in foreign currencies. Net derivative value resulting from the related hedging instruments is EGP 15,378 thousand at the end of December 31, 2020 against EGP 62,771 thousand at December 31, 2019, resulting in losses from hedging instruments at December 31, 2020 of EGP 47,393 thousand against gains of EGP 87,619 thousand at December 31, 2019. Losses arose from the hedged items at December 31, 2020 reached EGP 55,573 thousand against losses EGP 171,993 thousand at December 31 , 2019. 21. Movement of financial investment securities: Beginning balance Effect of applying IFRS 9 Addition Disposals Exchange revaluation differences for foreign financial assets Profit (losses) from fair value difference Ending Balance as of Dec.31, 2019 Beginning balance Acquired during the year (MAYFAIR) Addition Disposals Profit (losses) from fair value difference Exchange revaluation differences for foreign financial assets Ending Balance as of Dec.31, 2020 Financial Assets at Fair Value through OCI 39,217,890 42,268,972 58,210,468 (54,358,072) (1,588,099) 6,146,098 89,897,257 Financial Assets at Fair Value through OCI 89,897,257 74,353 112,791,966 (54,137,187) (259,602) (248,415) 148,118,372 Amortized cost 73,630,764 1,020,895 76,516,842 (43,937,957) (4,931) - 107,225,613 Amortized cost 107,225,613 136,555 233,765 (82,309,481) - (1,227) 25,285,225 Dec.31, 2020 Investments listed in the market Governmental bonds Other bonds Equity instruments Portfolio managed by others Sukuk * Investments not listed in the market "Treasury bills and other governmental notes" Equity instruments Mutual funds Total Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI - - - 359,959 - 98,735,582 8,008,811 714,003 - 701,732 EGP Thousands Total 123,991,491 8,008,811 714,003 359,959 701,732 Amortized cost 25,255,909 - - - - - 39,468,376 29,316 39,497,692 - - 359,959 243,596 246,272 148,118,372 - - 25,285,225 243,596 246,272 173,763,556 *During the fourth quarter, Commercial International Bank subscribed in 7 million bonds, of the first issuance of Tharwa Company, with a nominal value of 100 EGP per unit - excluding the issuance fees - with a variable return paid from the month following the closing of the subscription, and the deposit was made with the custodian: Commercial International Bank (Egypt) Dec.31, 2019 Investments listed in the market Governmental bonds Other bonds Equity instruments Portfolio managed by others Investments not listed in the market Treasury bills and other governmental notes Equity instruments Mutual funds Total Financial Assets at Fair Value through P&L Financial Assets at Fair Value through OCI Amortized cost - - - 418,781 56,363,393 4,823,267 502,920 - 107,225,613 - - - EGP Thousands Total 163,589,006 4,823,267 502,920 418,781 - 27,634,062 - 27,634,062 - - 418,781 344,929 228,686 89,897,257 - - 107,225,613 344,929 228,686 197,541,651 306 | Annual Report 2020 2020 Annual Report | 307 Financial Statements // Consolidateddisclosure and measurement of financial assets and financial liabilities: 22. Investments in associates The following table shows the financial assets and the net financial commitments according to the business model classification: Dec.31, 2020 Cash and balances with central bank Due from banks Treasury bills Loans and advances to customers, net Derivative financial instruments Financial Assets at Fair value through OCI Amortized cost Financial Assets at Fair value through P&L Total 1 Due to banks Due to customers Derivative financial instruments Other loans Other provisions Total 2 Amortized cost 33,768,549 87,426,301 29,316 119,570,005 - - 25,285,225 - 266,079,396 8,817,535 341,169,450 - 7,746,946 3,223,501 360,957,432 21.1. Profits (Losses) on financial investments Debt financial Assets at Fair value through OCI Equity financial Assets at Fair value through OCI Financial Assets/ Liabilities at Fair value through P&L - - 39,468,376 - - 107,679,336 - - 147,147,712 - - - - - - - - - - - 970,660 - - 970,660 - - - - - - - - - - 248,759 - - 359,959 608,718 - - 331,073 - - 331,073 Total book value 33,768,549 87,426,301 39,497,692 119,570,005 248,759 108,649,996 25,285,225 359,959 414,806,486 8,817,535 341,169,450 331,073 7,746,946 3,223,501 361,288,505 Company’s country Company’s assets Company’s liabilities (without equity) Company’s revenues Company’s net profit (loss) Investment book value Stake % EGP Thousands Egypt Egypt 82,094 122,518 49,824 143,914 49,254 45,506 7,140 (11,011) 27,724 - 39.34 23.50 Egypt 1,062,033 799,693 472,714 723 112,147 30.00 1,266,645 993,431 567,474 (3,148) 139,871 Company’s country Company’s assets Company’s liabilities (without equity) Company’s revenues Company’s net profit (loss) Investment book value Stake % EGP Thousands Egypt Egypt 42,920 45,557 17,399 (19,917) 5,563 23.50 741,875 501,413 511,163 22,437 102,130 32.50 784,795 546,970 528,562 2,520 107,693 Dec.31, 2020 Associates - Al Ahly Computer - Fawry Plus - International Co. for Security and Services (Falcon) Total Dec.31, 2019 Associates - Fawry Plus - International Co. for Security and Services (Falcon) Total EGP Thousands Dec.31, 2020 Dec.31, 2019 23. Other assets Profit (Loss) from selling FVOCI financial instruments Released (Impairment) charges of FVOCI Released (Impairment) charges of investments in associates and subsidiaries Total 1,018,469 (79,126) (16,511) 922,832 497,894 (47,197) - 450,697 Accrued revenues Prepaid expenses Advances to purchase of fixed assets Accounts receivable and other assets (after deducting the provision)* Assets acquired as settlement of debts Insurance Gross Impairment of other assets Net EGP Thousands Dec.31, 2020 Dec.31, 2019 6,759,229 291,468 1,195,099 830,266 169,855 40,608 9,286,525 (111,000) 9,175,525 4,011,196 217,484 942,985 4,333,966 356,382 36,130 9,898,143 (150,000) 9,748,143 *A provision with amount EGP 69 million has been charged against pending installments. This item includes other assets that are not classified under specific items of balance sheet assets, such as: accrued income and prepaid expenses, custodies, debit accounts under settlement and any balance that has no place in in another asset category. 308 | Annual Report 2020 2020 Annual Report | 309 Financial Statements // Consolidateds d n a s u o h T P G E e r u t i n r u F i s e n h c a M 0 2 0 2 , 1 3 . c e D l a t o T i g n h s n r u f i d n a t n e m p u q e i t u o - d n a g n i t t i F l s e c h e V i T I i s e s m e r P d n a L , 8 9 1 3 7 8 4 , 5 1 7 9 3 8 , ) 9 0 1 3 9 ( , , 4 0 8 9 1 6 5 , , 4 3 7 8 6 6 2 , 2 3 0 3 3 7 , ) 9 0 1 3 9 ( , , 7 5 6 8 0 3 3 , , 7 4 1 1 1 3 2 , , 4 6 4 4 0 2 2 , 4 9 5 5 1 1 , 0 4 1 2 2 , ) 1 2 0 3 ( , 3 1 7 4 3 1 , 2 4 9 7 7 , 5 7 3 5 1 , ) 1 2 0 3 ( , 6 9 2 0 9 , 7 1 4 4 4 , 2 5 6 7 3 , 0 2 % 6 2 0 7 6 5 , 1 0 8 4 7 1 , ) 7 6 3 8 ( , 0 6 4 3 3 7 , 5 3 5 1 5 3 , 2 6 4 9 2 1 , ) 7 6 3 8 ( , 0 3 6 2 7 4 , 0 3 8 0 6 2 , 1 9 4 5 1 2 , 0 2 % 7 9 3 9 6 7 , 1 2 5 4 0 1 , ) 0 3 3 1 4 ( , 8 8 5 2 3 8 , 0 4 8 4 8 4 , 5 3 8 8 4 1 , ) 0 3 3 1 4 ( , 5 4 3 2 9 5 , 3 4 2 0 4 2 , 7 5 5 4 8 2 , . 3 3 3 % - 4 9 6 3 2 , 9 8 7 9 0 1 , 0 4 6 1 4 , 4 1 3 2 1 , 3 8 4 3 3 1 , - 4 5 9 3 5 , 9 2 5 9 7 , 9 4 1 8 6 , 0 2 % , 2 5 4 2 7 1 2 , , 1 3 2 4 7 0 1 , 9 0 7 4 6 , 1 7 1 9 3 4 , ) 1 5 0 4 2 ( , 8 8 3 5 7 , ) 0 4 3 6 1 ( , - - , 2 7 5 7 8 5 2 , , 9 1 5 0 9 2 1 , 2 4 3 3 7 3 , ) 1 5 0 4 2 ( , , 0 1 8 9 3 6 1 , . 3 3 3 % 2 6 7 7 4 9 , 3 3 9 1 8 8 , 4 0 7 3 5 , 8 5 2 2 2 4 , ) 0 4 3 6 1 ( , 2 2 6 9 5 4 , 7 5 6 3 7 6 , 3 7 9 1 5 6 , 5 % , 9 7 2 3 3 1 1 , 9 0 7 4 6 , - - - - 9 0 7 4 6 , 9 0 7 4 6 , ) 3 ( r a e y e h t i f o g n n n i g e b t a n o i t a i c e r p e d d e t a l u m u c c A ) 4 ( r a e y e h t f o d n e t a n o i t a i c e r p e d d e t a l u m u c c A * r a e y e h t g n i r u d s l a s o p s i D r a e y e h t r o f n o i t a i c e r p e D ) 3 - 1 ( s t e s s a t e n g n i n n i g e B ) 4 - 2 ( s t e s s a t e n g n i d n E s e t a r n o i t a i c e r p e D r a e y e h t g n i r u d s n o i t i d d A * r a e y e h t g n i r u d s l a s o p s i D ) 2 ( r a e y e h t f o d n e t a t s o C ) 1 ( 0 2 0 2 , 1 0 n a J t a t s o C i t n e m p u q e d n a y t r e p o r P . 4 2 . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r h c i h w r o f d n a s u o h t 5 3 3 , 8 6 2 P G E f o e u l a v t e n a h t i w s t e s s a s e d u l c n i e t a d t e e h s e c n a l a b e h t t a t n e m p i u q e d n a y t r e p o r P s d n a s u o h T P G E l a t o T d n a d n a e r u t i n r u F i s e n h c a M , 6 6 6 6 9 7 3 , , 3 3 1 9 2 1 1 , ) 1 0 6 2 5 ( , , 8 9 1 3 7 8 4 , , 1 9 7 4 4 1 2 , 4 4 5 6 7 5 , ) 1 0 6 2 5 ( , , 4 3 7 8 6 6 2 , , 4 6 4 4 0 2 2 , , 5 7 8 1 5 6 1 , 1 0 8 8 8 , 0 3 6 7 2 , ) 7 3 8 ( 6 6 8 8 6 , 4 9 5 5 1 1 , 3 1 9 9 , ) 7 3 8 ( 2 4 9 7 7 , 2 5 6 7 3 , 5 3 9 9 1 , 0 2 % i g n h s n r u f i 3 2 8 9 4 4 , 6 5 3 2 2 1 , ) 3 5 1 5 ( , 6 2 0 7 6 5 , 3 9 3 7 7 2 , 5 9 2 9 7 , ) 3 5 1 5 ( , 5 3 5 1 5 3 , 1 9 4 5 1 2 , 0 3 4 2 7 1 , 0 2 % t n e m p u q e i t u o - g n i t t i F 3 2 3 5 2 5 , 0 7 5 4 8 2 , ) 6 9 4 0 4 ( , 7 9 3 9 6 7 , 1 3 4 6 0 4 , 5 0 9 8 1 1 , ) 6 9 4 0 4 ( , 0 4 8 4 8 4 , 7 5 5 4 8 2 , 2 9 8 8 1 1 , . 3 3 3 % l s e c h e V i T I i s e s m e r P d n a L - 7 4 1 2 6 , 2 4 6 7 4 , 0 5 7 8 , 0 9 8 2 3 , 9 8 7 9 0 1 , - 0 4 6 1 4 , 9 4 1 8 6 , 7 5 2 9 2 , 0 2 % , 5 9 4 0 8 5 1 , , 8 6 3 5 2 0 1 , 8 1 7 3 9 5 , ) 1 6 7 1 ( , 7 1 2 3 5 , ) 4 5 3 4 ( , , 2 5 4 2 7 1 2 , , 1 3 2 4 7 0 1 , 0 8 2 2 8 9 , 0 0 0 0 1 3 , ) 1 6 7 1 ( , . 3 3 3 % 3 3 9 1 8 8 , 5 1 2 8 9 5 , , 9 1 5 0 9 2 1 , 1 3 9 6 7 3 , 1 8 6 9 4 , ) 4 5 3 4 ( , 8 5 2 2 2 4 , 3 7 9 1 5 6 , 7 3 4 8 4 6 , 5 % - - 9 0 7 4 6 , 9 0 7 4 6 , - - - - 9 0 7 4 6 , 9 0 7 4 6 , ) 3 ( r a e y e h t i f o g n n n i g e b t a n o i t a i c e r p e d d e t a l u m u c c A ) 4 ( r a e y e h t f o d n e t a n o i t a i c e r p e d d e t a l u m u c c A n o i t a i c e r p e d r a e y t n e r r u C * r a e y e h t g n i r u d s l a s o p s i D ) 3 - 1 ( s t e s s a t e n g n i n n i g e B ) 4 - 2 ( s t e s s a t e n g n i d n E s e t a r n o i t a i c e r p e D r a e y e h t g n i r u d s n o i t i d d A * r a e y e h t g n i r u d s l a s o p s i D ) 2 ( r a e y e h t f o d n e t a t s o C ) 1 ( 9 1 0 2 , 1 0 n a J t a t s o C 9 1 0 2 , 1 3 . c e D . d n u o p e n o n i d e d r o c e r e r a n o i t a r e p o n i l l i t s h c i h w s t e s s a r o f d n u o p s t e s s a d e t a i c e r p e d y l l u F * . s t e s s a d e x fi r o f d e g r a h c n o i s i v o r p t n e m r i a p m i o n s a w e r e Th . s s e c o r p n i e r a s e r u d e c o r p s n o i t a r t s i g e r h c i h w r o f d n a s u o h t 8 1 7 1 9 2 P G E f o e u , l a v t e n a h t i w s t e s s a s e d u l c n i e t a d t e e h s e c n a l a b e h t t a t n e m p i u q e d n a y t r e p o r P 25. Due to banks Current accounts Deposits Total Central banks Local banks Foreign banks Total Non-interest bearing balances Floating bearing interest balances Fixed interest bearing balances Total Current balances 26. Due to customers Demand deposits Time deposits Certificates of deposit Saving deposits Other deposits Total Corporate deposits Individual deposits Total Non-interest bearing balances Floating interest bearing balances Fixed interest bearing balances Total Current balances Non-current balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 392,725 8,424,810 8,817,535 114,786 5,233,885 3,468,864 8,817,535 232,019 871,427 7,714,089 8,817,535 8,817,535 420,500 11,390,107 11,810,607 111,967 10,476,614 1,222,026 11,810,607 289,069 4,908,538 6,613,000 11,810,607 11,810,607 EGP Thousands Dec.31, 2020 Dec.31, 2019 107,514,953 58,877,291 100,027,684 70,806,502 3,943,020 341,169,450 140,615,573 200,553,877 341,169,450 50,113,153 33,602,396 257,453,901 341,169,450 240,170,103 100,999,347 341,169,450 98,755,641 47,843,715 85,344,897 68,579,440 3,924,762 304,448,455 120,553,214 183,895,241 304,448,455 44,260,283 39,592,933 220,595,239 304,448,455 217,358,718 87,089,737 304,448,455 310 | Annual Report 2020 2020 Annual Report | 311 Financial Statements // Consolidated 27. Other loans 29. Provisions Interest rate % Loan duration Due within one year CDC subordinated loan European Bank for Reconstruction and Development (EBRD) Floating rate 10 years Floating rate 2 years International Finance Corporation (IFC) Floating rate Environmental Compliance Project (ECO) Agricultural Research and Development Fund (ARDF) Social Fund for Development (SFD) European Bank for Reconstruction and De- velopment (EBRD) subordinated Loan International Finance Corporation (IFC) subordinated Loan Balance 1 renewable year 3-5 years Fixed rate Fixed rate 3-5 years* Floating rate 04/01/2020* Floating rate 10 years Floating rate 10 years EGP Thousands Dec.31, 2020 Dec.31, 2019 EGP Thousands EGP Thousands - - - 314 17,000 - - - 1,432,715 1,573,210 1,573,210 1,391 20,000 - - - - - 61,578 2,868 1,573,210 1,604,150 1,573,210 1,604,150 17,314 7,746,946 3,272,746 Dec.31, 2020 Provision for legal claims Provision for contingent Provision for other claim* Total Beginning balance 66,106 1,790,692 154,571 2,011,369 Charged during the year Exchange revaluation difference Utilized during the year - 1,145,420 89,560 1,234,980 (44) (5,369) (1,780) (7,193) (185) - (2,197) (2,382) Dec.31, 2019 Provision for income tax claims Provision for legal claims Provision for contingent Provision for other claim Total Beginning balance 6,910 57,677 1,449,690 180,330 1,694,607 Charged during the year Exchange revaluation difference Utilized during the year - 11,299 444,786 5,784 461,869 - (244) (103,784) (6,034) (110,062) - (2,626) - (25,509) (28,135) EGP Thousands Reversed amounts (13,273) - - (13,273) Ending balance 52,604 2,930,743 240,154 3,223,501 EGP Thousands Reversed amounts (6,910) - - - (6,910) Ending balance - 66,106 1,790,692 154,571 2,011,369 Interest rates on variable-interest subordinated loans are determined in advance every 3 months. Subordinated loans are not repaid before their repayment dates. *To face the potential risk of banking operations. *Represents the date of loan repayment to the lending agent. 30. Equity 28. Other liabilities Accrued interest payable Accrued expenses Accounts payable Other credit balances Total EGP Thousands Dec.31, 2020 Dec.31, 2019 1,165,714 1,319,652 3,127,411 122,492 5,735,269 1,090,649 1,027,526 6,097,077 181,542 8,396,794 30.1. Capital The authorized capital is EGP 50 billion according to the extraordinary general assembly decision on 12 June 2019. • Issued and Paid in Capital increased by an amount of EGP 85,992 thousand on September 21 ,2020 to reach EGP 14,776,813 thousand according to Board of Directors decision on January 5, 2020 by issuance of eleventh tranche for E.S.O.P program. • Issued and Paid in Capital increased by an amount of EGP 105,413 thousand on November 18,2019 to reach EGP 14,690,821 thousand according to Board of Directors decision on February 4, 2019 by issuance of tenth tranche for E.S.O.P program. • Issued and Paid in Capital increased by an amount of EGP 2,917,082 thousand on February 14, 2019 to reach 14,585,408 according to Ordinary General Assembly Meeting decision on March 4 ,2018 by distribution of a one share for every four outstanding shares by capitalizing on the General Reserve. 30.2. Reserves According to The Bank status 5% of net profit is used to increase the legal reseve to reaches 50% of The Bank’s issued and paid in capital. Central Bank of Egypt concurrence for usage of special reserve is required. 312 | Annual Report 2020 2020 Annual Report | 313 Financial Statements // Consolidated31. Deferred tax assets (Liabilities) Deferred tax assets and liabilities are attributable to the following: Assets (Liabilities) Dec.31, 2020 EGP Thousands Assets (Liabilities) Dec.31, 2019 Fixed assets (depreciation) Other provisions (excluded loan loss, contingent liabilities and income tax provi- sions) Other investments impairment Reserve for employee stock ownership plan (ESOP) Interest rate swaps revaluation Trading investment revaluation Forward foreign exchange deals revaluation Balance (84,418) 210,526 97,925 239,545 1,292 (20,059) (7,039) 437,772 (79,162) 146,675 76,407 216,709 6,642 (35,477) 18,545 350,339 Movement of Deferred Tax Assets and Liabilities: Beginning Balance Effect of applying IFRS 9 Additions / disposals Ending Balance Assets (Liabilities) Dec.31, 2020 350,339 - 87,433 437,772 EGP Thousands Assets (Liabilities) Dec.31, 2019 308,370 136,491 (94,522) 350,339 32. Share-based payments According to the extraordinary general assembly meeting on June 26, 2006, the Bank launched new Employees Share Ownership 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 vesting 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 instru- ments is measured using the Black-Scholes pricing model. Details of the rights to share outstanding during the year are as follows: Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Outstanding at the end of the year 314 | Annual Report 2020 Dec.31, 2020 No. of shares in thousand EGP Thousands Dec.31, 2019 No. of shares in thousand 27,428 11,313 (1,196) (8,599) 28,946 29,697 9,152 (880) (10,541) 27,428 Details of the outstanding tranches are as follows: Maturity date Exercise price Fair value EGP EGP 2021 2022 2023 Total 10.00 10.00 10.00 54.51 50.53 72.71 No. of shares in thousand 9,323 8,560 11,063 28,946 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% 14th tranche 13th tranche 10 83.02 3 13.66% 1.50% 25% 10 59.26 3 18.14% 1.70% 26% Volatility is calculated based on the daily standard deviation of returns for the last five years. 33. Reserves and retained earnings Legal reserve General reserve Capital reserve Retained earnings Reserve for transactions under common control Reserve for financial assets at fair value through OCI Reserve for employee stock ownership plan Banking risks reserve Cumulative foreign currencies translation differences General risk reserve Ending balance 33.1. Banking risks reserve Beginning balance Transferred to banking risk reserve Ending balance EGP Thousands Dec.31, 2020 Dec.31, 2019 2,778,135 24,765,658 14,906 10,539,715 8,183 3,975,514 1,064,648 6,423 (3,684) 1,549,445 44,698,943 2,188,029 16,474,429 13,466 11,881,657 - 4,111,781 963,152 5,164 2,501 1,549,445 37,189,624 EGP Thousands Dec.31, 2020 Dec.31, 2019 5,164 1,259 6,423 4,323 841 5,164 2020 Annual Report | 315 Financial Statements // Consolidated33.2. Legal reserve Beginning balance Transferred to legal reserve Ending balance 33.3. Reserve for financial assets at fair value through OCI EGP Thousands Dec.31, 2020 Dec.31, 2019 2,188,029 590,106 2,778,135 1,710,293 477,736 2,188,029 EGP Thousands Dec.31, 2020 Dec.31, 2019 Beginning balance Transferred from reserve on disposal of financial assets at fair value through OCI Net unrealised gain/(loss) on financial assets at fair value through OCI Effect of applying IFRS 9 Effect of ECL in fair value of debt instruments measured at fair value through OCI Ending balance 4,111,781 (76,717) (264,732) - 205,182 3,975,514 (3,750,779) - 6,157,553 1,889,928 (184,921) 4,111,781 33.4. Retained earnings EGP Thousands Dec.31, 2020 Dec.31, 2019 11,881,657 (8,431,833) 45,727 (3,370,464) 10,238,157 (1,259) - 101,013 76,717 9,637,083 (6,854,370) (2,700,544) 11,800,995 (841) (666) - - Beginning balance Transferred to reserves Change in retained earnings from acquisition of subsidiaries Dividend paid Net profit of the year Transferred ( from) to banking risk reserve Cumulative foreign currencies translation differences Transferred from previous years' outstanding balances Transferred from reserve on disposal of financial assets at fair value through OCI Ending balance 33.5. Reserve for employee stock ownership plan Beginning balance Transferred to reserves Cost of employees stock ownership plan (ESOP) Ending balance 33.6. General risk reserve Beginning balance Effect of applying IFRS 9 Transferred to general risk reserve Ending balance 316 | Annual Report 2020 34. Cash and cash equivalent Cash and balances at the central bank Due from banks Treasury bills and other governmental notes Obligatory reserve balance with CBE Due from banks with maturities more than three months Treasury bills with maturities more than three months Total 35. Contingent liabilities and commitments 35.1. Legal claims EGP Thousands Dec.31, 2020 Dec.31, 2019 33,768,549 87,450,490 39,497,692 (27,744,700) (16,974,367) (40,201,289) 75,796,375 28,273,962 28,370,183 27,634,062 (22,397,310) (10,593,903) (28,391,977) 22,895,017 • There is a number of existing cases against the bank on December 31, 2020 and 2019 for which no provisions are made as the bank doesn’t expect to incur losses from it. • A provision for legal cases that are expected to generate losses has been created. (Note No. 29) 35.2. Capital commitments 35.2.1. Financial investments The capital commitments for the financial investments reached on the date of financial position EGP 27,512 thousand as follows: Financial Assets at Fair value through OCI Financial investments in subsidiaries Investments value 157,321 157,318 Paid 129,809 157,318 Remaining 27,512 - Fixed assets and branches constructions 35.2.2. The value of commitments for the purchase of fixed assets, contracts, and branches constructions that have not been imple- mented till the date of the financial statements amounted to EGP 751,736 thousand against EGP 911,159 thousand in 2019. 10,539,715 11,881,657 35.3. Letters of credit, guarantees and other commitments EGP Thousands Dec.31, 2020 Dec.31, 2019 963,152 (450,942) 552,438 1,064,648 738,320 (239,707) 464,539 963,152 EGP Thousands Dec.31, 2020 Dec.31, 2019 1,549,445 - - 1,549,445 - 117,251 1,432,194 1,549,445 Letters of guarantee Letters of credit (import and export) Customers acceptances Total 35.4. Credit facilities commitments Credit facilities commitments EGP Thousands Dec.31, 2020 Dec.31, 2019 74,023,239 5,861,017 2,701,590 82,585,846 61,143,216 5,866,630 3,188,757 70,198,603 EGP Thousands Dec.31, 2020 Dec.31, 2019 8,895,410 6,857,510 2020 Annual Report | 317 Financial Statements // Consolidated36. Mutual funds Osoul fund 37.1. Loans, advances, deposits and contingent liabilities • CIB established an accumulated return mutual fund under license no.331 issued from capital market authority on Febru- ary 22, 2005. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 4,049,086 with redeemed value of EGP 1,855,534 thousands. • The market value per certificate reached EGP 458.26 on December 31, 2020. • The Bank portion got 137,112 certificates with redeemed value of EGP 62,833 thousands. Loans, advances and other assets Deposits Contingent liabilities Istethmar fund 37.2. Other transactions with related parties • 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 369,394 with redeemed value of EGP 62,132 thousands. • The market value per certificate reached EGP 168.20 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 8,410 thousands. Aman fund ( CIB and Faisal Islamic Bank Mutual Fund) • CIB 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 281,716 with redeemed value of EGP 24,887 thousands. • The market value per certificate reached EGP 88.34 on December 31, 2020. • The Bank portion got 34,596 certificates with redeemed value of EGP 3,056 thousands. 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 90,255 with redeemed value of EGP 23,498 thousands. • The market value per certificate reached EGP 260.35 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 13,018 thousands. Thabat fund • CIB bank established an accumulated return mutual fund under license no.613 issued from financial supervisory author- ity on September 13, 2011. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 152,949 with redeemed value of EGP 51,688 thousands. • The market value per certificate reached EGP 337.94 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 16,897 thousands. Takamol fund • CIB bank established an accumulated return mutual fund under license no.431 issued from financial supervisory author- ity on February 18, 2015. CI Assets Management Co.- Egyptian joint stock co - manages the fund. • The number of certificates issued reached 131,456 with redeemed value of EGP 23,086 thousands. • The market value per certificate reached EGP 175.62 on December 31, 2020. • The Bank portion got 50,000 certificates with redeemed value of EGP 8,781 thousands. 37 . Transactions with related parties All banking transactions with related parties are conducted in accordance with the normal banking practices and regula- tions applied to all other customers without any discrimination. EGP Thousands Dec.31, 2020 125,540 709,933 1,210 EGP Thousands Income Expenses 70 80 739 17 5 5 213,668 279 - - 9,469 57 EGP Thousands Dec.31, 2020 Dec.31, 2019 (750,477) 100,004 3,518 (8) 2,175 (219,313) (387,742) (79,511) 248 6 484 32,890 International Co. for Security & Services CVenture Capital Fawry plus Mayfair bank Damietta shipping & marine services Al ahly computer 38. Main currencies positions Egyptian pound US dollar Sterling pound Japanese yen Swiss franc Euro Main currencies positions above represents what is recognized in the balance sheet position of the Central Bank of Egypt. 39. Tax status Corporate income tax • Settlement of corporate income tax since the start of activity till 2017 • 2018 examined & paid • The yearly income tax return is submitted in legal dates Salary tax • Settlement of salary tax since the start of activity till 2019 Stamp duty tax • The period since the start of activity till 31/07/2006 was examined & paid, disputed points have been transferred to the court for adjudication • The period from 01/08/2006 till 31/12/2019 was examined & paid in accordance with the protocol signed between the Fed- eration of Egyptian Banks & the Egyptian Tax Authority 318 | Annual Report 2020 2020 Annual Report | 319 Financial Statements // Consolidated40. Other assets - net increase (decrease) Total other assets by end of 2019 Assets acquired as settlement of debts Advances to purchase of fixed assets Total 1 Total other assets by end of year Assets acquired as settlement of debts Advances to purchase of fixed assets Impairment charge for other assets Total 2 Change (1-2) Total other assets by end of 2018 Assets acquired as settlement of debts Advances to purchase of fixed assets Total 1 Total other assets by end of 2019 Assets acquired as settlement of debts Advances to purchase of fixed assets Impairment charge for other assets Total 2 Change (1-2) EGP Thousands Dec.31, 2020 9,747,939 (356,382) (942,781) 8,448,776 9,175,525 (169,855) (1,195,099) 69,217 7,879,788 568,988 EGP Thousands Dec.31, 2019 9,563,218 (276,520) (768,733) 8,517,965 9,746,431 (356,382) (942,781) (93,236) 8,354,032 163,933 41. Significant events during the year Based on both banks’ Board of Directors’ approval, and after obtaining all necessary approvals from the Central Bank of Egypt and the Central Bank of Kenya, in May 2020, CIB has acquired 51% of what is to be renamed as Mayfair CIB Bank Limited in Kenya in the form of a capital increase, for a total transaction value of USD 35.35 million. The bank has consoli- dated financial results starting from the second quarter of 2020. In May 2020, CIB gained significant influence in “Damietta Shipping and Marine Services” Company, upon controlling majority seats in the Company’s Board of Directors, besides 32% of the Company’s shares previously owned by the Bank. The Company’s financial results have been consolidated starting Q2 2020. Starting from Q3 2020, CIB has combined AL-Ahly Computer company financial results as an associate using the equity method. Loans: During the period, CIB has obtained a total debt of $300mn USD as follows: • $100mn USD subordinated debt from CDC. • $100mn USD senior debt from the European Bank for Reconstruction and Development (EBRD). • $100mn USD senior debt from the International Finance Corporation (IFC). • In September 2020, the Central Bank and Banking Institutions Law No. 194 for the year 2020 was issued which cancelled the Central Bank, Banking and Monetary Institutions Law No. 88 for the year 2003. Article No. 4 of Law No. 194 for the year 2020 allows the addressees a transition period for the compliance with the new law. On Thursday October 22nd 2020 the Bank’s Directors received a letter from the Central Bank of Egypt (CBE) informing them that in light of the findings of a limited review inspection, the CBE Board of Directors agreed on a resolution to discharge the Chairman and Managing Director of CIB and that its Board should elect a Non-Executive Chairman from among its Non-Executive Directors. On the following day the CIB Board convened, during that meeting the Chairman and Managing Director stepped down from his position and resigned from the board with immediate effect and Mr. Sherif Samy was elected Non-Executive Chairman. CBE issued its report to the Bank on 10 November 2020 and it covered a number of areas that needed immediate remedia- tion covering the Internal Control Environment, Credit facilities and provisions, Governance and Compliance and also referred to instances of violations of certain provisions of the applicable laws (Articles 57, 64 and 111 of Law 88 for year 2003, and Articles 19 and 42 of the Executive Regulation of the said law), and other instances of violations of CBE regula- tions. The Board of the Bank mandated management to review the CBE report findings and propose necessary corrective actions. The Bank carefully assessed all the findings and other similar matters. Since 22 October the Bank management and Board met with the CBE several times to address the matters raised, the findings and compliance requirements. The Bank also engaged external legal counsel to support in the characterization and assessment of the findings. The Bank’s management applied its judgement and experience and included in these financial statements, their assessment of the impact of the CBE findings, including credit losses and legal and other charges. (see notes 19 and 29). The Board of the Bank assessment is that the design of the internal controls over financial reporting remain appropriate and continue to operate effectively to ensure fair presentation of the financial position of the Bank and its financial performance. Management developed a corrective action plan for the CBE to address all the findings and to further enhance regulatory compliance and strengthen controls. Additionally, as directed by the Non-Executive Directors, the Audit Committee ap- pointed an independent international professional services firm to conduct an in depth review of the Bank’s controls and lending functions with a view to addressing specific and related areas from the CBE inspection, based on best practice and to further enhance regulatory compliance and strengthen controls at CIB, as part of the Bank’s commitment to enhancing risk management and the governance culture at the Bank. The said review is currently ongoing up to the date of issue of the financial statements. Any additional recommendations of the said review will be considered in the Bank’s future actions. Impact of COVID-19 The coronavirus (“COVID-19”) pandemic has spread across various geographies globally, causing disruption to business and economic activities. COVID-19 has brought about uncertainties in the global economic environment. The fiscal and monetary authorities, both domestic and international, have announced various fiscal and stimulus measures across the globe to counter possible adverse implications. Business continuity planning The Bank is closely monitoring the situation and taking rightful measures to ensure the safety and security of the bank’s staff and an uninterrupted service to its customers. Remote working arrangements have been implemented and part of the Bank staff are working from home in line with government directions. Business continuity plans are in place. The Bank has taken measures to ensure that services levels are maintained, cus- tomer complaints are resolved, and the Bank continues to serve its customers as they would do in normal conditions. CIB regularly conducts stress tests to assess the resilience of the statement of position and the capital adequacy. CIB is closely monitoring the situation and has activated its risk management practices managing the potential business disruption COVID-19 outbreak may have on its operations and financial performance. Impact on expected credit losses In the determination of the impact over the ECL, CIB has considered the potential impact of the uncertainties considering the available information caused by the Covid-19 pandemic and taken into account the economic support and relief measures taken by the Central Bank of Egypt. The Bank has reviewed the potential impact of COVID-19 outbreak on the inputs and as- sumptions for ECL measurement. In addition, the Bank has analyzed the risk of the credit portfolio y focusing on economic sec- tor wise segmentation analysis using both a top-down approach and the Bank own experience. Overall, the COVID-19 situation remains fluid and is rapidly evolving at this point, which makes it challenging to reliably reflect impacts in our ECL estimates. In addition to the assumptions outlined above, CIB has given specific consideration to the relevant impact of COVID-19 on the qualitative and quantitative factors when determining the significant increase in credit risk (SICR) leading to reclassifying loans from stage 1 to stage 2 and assessing the indicators of impairment for the exposures in potentially affected sectors. The bank has implemented the CBE initiative of payment relief for the customers by deferring interest/principal due for six months. 320 | Annual Report 2020 2020 Annual Report | 321 Financial Statements // ConsolidatedGoodwill at acquisition date Amortization Net book value EGP Thousands Mayfair Bank Dec.31, 2020 206,287 (27,505) 178,782 According to Central Bank of Egypt regulation issued on Dec 16, 2008, an amortization of 20% annually has been applied on Goodwill starting from acquisition date. 43. Intangible assets Intangible Assets at acquisition date Amortization Net book value EGP Thousands Mayfair Bank Dec.31, 2020 51,831 (6,911) 44,920 The relief offered to customers may at some cases indicate a SICR. However, the bank believes that the extension of these payment reliefs does not automatically trigger a SICR and a stage migration for the purposes of calculating ECL, as these are being made available to assist borrowers affected by the Covid-19 outbreak to resume regular payments. The Bank has reassessed its ECL models, underlying assumptions including relevant available macroeconomic data, and the judg- mental overlays on the basis of macroeconomic variations reflected in models pertaining to particular industries rather than on customer- account basis. The ECL amounts recognized in the bank’s financial statements for the period ending December 31, 2020 were mainly increased as a result of the Covid 19 impact . The impact of current uncertain economic environment is judgmental and management will keep assessing the current position and its related impact regularly. It should be also considered that the assumptions used about economic forecasts are subject to high degree of inherent uncertainty and therefore the actual outcome may be significantly different from forecasted information. CIB has consid- ered potential impacts of the current economic volatility in determination of the reported amounts of the bank’s financial and non-financial assets and these are considered to represent management’s best assessment based on observable infor- mation. Markets however remain volatile and the recorded amounts remain sensitive to market fluctuations. Liquidity management The Bank’s approach is to maintain a prudent Liquidity position with a Liability driven strategy, as almost the entire fund- ing base is customer based rather than wholesale funding; which is a core component of the Risk Appetite. This is coupled with ample amounts of Liquid Assets. To limit potential Liquidity shocks, the Bank has a well-established Contingency Funding Plan (CFP), where Liquidity Risk is assessed in line with all Regulatory and Internal Liquidity Measurements, and Basel II and III requirements; including Liquidity Stress Testing; and Basel III Ratios; Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR). 42. Goodwill • Based on both banks’ Board of Directors’ approval, and after obtaining all necessary approvals from the Central Bank of Egypt and the Central Bank of Kenya, in May 2020, CIB has acquired 51% of what is to be renamed as Mayfair CIB Bank Limited in Kenya in the form of a capital increase, for a total transaction value of USD 35.35 million. The bank has consolidated financial results starting from the second quarter of 2020. In May 2020, CIB gained significant influence in “Damietta Shipping and Marine Services” Company, upon controlling majority seats in the Company’s Board of Directors, besides 32% of the Company’s shares previously owned by the Bank. The Company’s financial results have been consolidated starting Q2 2020. • Starting from Q3 2020, CIB has combined AL-Ahly Computer company financial results as an associate using the equity method. Acquisition cost Net assets value *Goodwill EGP Thousands Mayfair Bank Dec.31, 2020 560,963 354,676 206,287 *The bank applied provisional fair value accounting as allowed under the Egyptian accounting standards, the bank will revise the fair value during a period of 12 months from the acquisition date. 322 | Annual Report 2020 2020 Annual Report | 323 Financial Statements // Consolidated324 | Annual Report 2020 2020 Annual Report | 325 Financial Statements // Consolidated

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