We did it, folks: Our final IMF loan tranche is coming

We did it, ladies and gentlemen — we survived the full duration of the IMF’s Extended Fund Facility. The fund’s Executive Board approved yesterday the disbursal of our final USD 2 bn tranche of the total USD 12 bn financing package, bringing to an end the three-year arrangement. We have more in this morning’s Speed Round and Last Night’s Talk Shows, below.

Expect the biggest news of the day to come out of the East Med Gas Forum being held here at home, with officials from the US, Israel, Greece, Cyprus, Italy, Jordan, Palestine, and Egypt all set to attend. The oil and gas news already started flowing yesterday as Delek Drilling disclosed it is looking along with Noble Energy to amend the terms of their natural gas export agreement with Alaa Arafa’s Dolphinus Holding. The full story is also in this morning’s Speed Round, below.

Across the pond, all eyes were on special counsel Robert Mueller’s congressional testimony on his two-year investigation into potential Russian interference in the 2016 US presidential elections. “With his terse, one-word answers, and a sometimes stilted and halting manner, Mueller made clear his desire to avoid the partisan fray and the deep political divisions roiling Congress and the country,” the Associated Press says. Mueller spent the better part of the seven-hour hearing avoiding falling victim to leading questions from Democrats and Republicans alike, but was clear in his denial of completely exonerating The Donald of criminally conspiring with the Russians.

The first of two major central bank meetings takes place today when the European Central Bank meets to review key interest rates. Bank chief Mario Draghi signaled last month to expect further stimulus, and with the weak PMI data coming out of Germany yesterday (see below) and the IMF’s downbeat global outlook, the stage could be set tomorrow for a move deeper into negative interest rate territory. The FT is out with an article looking at what negative rates mean for the real economy and how the ECB can use them as a policy tool to encourage lending.

The blockbuster event is coming up: The US Federal Reserve meeting that everyone and their mother has been talking about for weeks will take place on Tuesday and Wednesday next week.

It wasn’t a great day for Germany, whose manufacturing PMI fell to seven-year lows in July, raising fears that the eurozone’s largest economy could be heading for recession. The sector dropped deeper into contraction territory, registering 43.1 in July compared to 45.0 the month prior. IHS Markit blamed Brexit, trade disputes and falling demand for German products for the slowdown. Reuters has more.

Deutsche Bank posted larger-than-expected losses of EUR 3.15 bn in 2Q2019, prompting shares to fall 5% at the start of trading yesterday, CNBC reports. The bank had predicted a quarterly loss of EUR 2.8 bn and research firm Refinitiv estimated a loss of EUR 1.7 bn. Deutsche blamed the costs of overhauling its investment banking arm for the losses. The bank earlier this month cut 18k jobs, closed much of its overseas equity business and created a ‘bad bank’ to hold its junk assets.

Jared Kushner isn’t done pushing his “Peace to Prosperity” plan: Donald Trump’s son-in-law will be back in Egypt in the coming weeks to persuade the government to back his Israel-Palestine peace plan, the Jerusalem Post reports. Egypt would receive USD 9 bn under the economic plan released by the White House last month, but if — as many people suspect — Kushner’s plan involves trying to persuade us to give up a chunk of the Sinai, we can’t see it being anything other than a non-starter. Kushner will also visit Israel, Jordan, Saudi Arabia, the United Arab Emirates and Qatar to drum up regional support for the plan.

In miscellany this morning:

• The Hyperloop is coming to the Arabian desert: Saudi Arabia will play host to the world’s longest Hyperloop test track, Virgin Hyperloop One said in a press statement.
• US government regulators are launching an antitrust review of Big Tech — including the usual culprits Facebook, Google and Amazon — to see to what extent it has “reduced competition, stifled innovation, or otherwise harmed consumers,” Vox reports.
• Facebook has agreed to pay a USD 5 bn fine imposed by the US’ Federal Trade Commission for the social media giant’s privacy violations. The penalty, the largest the commission has ever handed, imposes other restrictions on El Face to protect user privacy.
• Netflix is looking to India’s mobile users to grow its subscriber base, and is planning to offer subscriptions for less than half of the country’s cheapest rate, and around a third of the cheapest subscription available in the US, according to CNN. As Netflix’s subscriber growth fell short of expectations in 2Q2019, a country with 400 mn smartphone users looks like a good market to go after, if you ask us.

The IMF’s executive board sign off on the final USD 2 bn tranche of the USD 12 bn facility to Egypt was the topic du jour on the airwaves last night. We have the full story in this morning’s Speed Round, below.

Egypt has “largely” achieved the goals of reform, IMF director for the area Jihad Azour told Sherif Amer in a phone-in to Yahduth Fi Misr. Azour praised the government’s efforts to give a larger role to the private sector, boost investor confidence, and prop up tourism and exports, but stressed that reform is an ongoing process (watch, runtime: 18:44).

Azour reiterated that the IMF will remain engaged with Egypt through post-program monitoring. “If the government is looking to continue through any other type of cooperation, the IMF will be open,” he added. This could be in the form of technical or policy advice.

This week’s Cabinet meeting was in New Alamein,Al Hayah Al Youm’s Lobna Assal noted (watch, runtime: 2:32). Assal phoned Cabinet Spokesman Nader Saad, who praised the city for being the first of its kind in the North Coast (watch, runtime: 12:24). We have a rundown of key decisions made at the meeting in Speed Round, below.

Paying your taxes doesn’t have to put a damper on your summer plans: The Finance Ministry is collaborating with the Arab Organization for Industrialization to set up new real estate tax collection kiosks in North Coast, Ain Sokhna, Taba, and Ras Sudr for vacationing taxpayers to avoid commuting back to Cairo (watch, runtime: 2:17).

IMF signs off on final USD 2 bn tranche disbursal: The IMF’s Executive Board approved yesterday disbursing the final USD 2 bn tranche of the institution’s USD 12 bn facility to Egypt, after completing its fifth and final review of the country’s economic reform program, the institution said in a statement. Egypt had reached a staff-level agreement with the IMF over the tranche in May, and the tranche has been pending the board’s approval since then.

Lots of tub-tubs for our reform program from the fund: “Egypt has successfully completed the three-year arrangement,” IMF First Deputy Managing Director David Lipton said, adding that the economy has seen marked improvements since 2016, “supported by the authorities’ strong ownership of their reform program.” The program successfully corrected “large external and domestic imbalances,” growth and employment picked up, and public debt is on “a clearly declining trajectory,” Lipton said.

We also earned a pat on the back for achieving a 2% primary budget surplus and slashing fuel subsidies, “which are regressive, will encourage energy efficiency, help protect the budget from unexpected changes in oil prices, and free up fiscal space for social spending,” Lipton pointed out.

Don’t expect lower interest rates anytime soon: “Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits. Core inflation appears to be well contained, but the central bank should remain cautious until disinflation is firmly entrenched. Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness,” Lipton said.

Looking ahead: The IMF sees the economic outlook as supportive for further structural reforms that would promote inclusive private-sector led growth. “Deepening and broadening of effective reforms is critical to underpin the positive outlook for growth and unemployment.”

The money will be in the bank this week, CBE Governor Tarek Amer told Bloomberg yesterday, referring to either today or tomorrow. CBE board member Fakhry El Fekky also said the government is expecting to receive the tranche “within two days” of the board’s approval. Egypt will repay the loan over several installments, with the first due late 2021, El Fekky reminds us.

Reminder: This may not be the end of the road for our relationship with the fund. The government is probing a potential non-financial post-program IMF agreement that it hopes to have in place by October, Finance Minister Mohamed Maait told Bloomberg last month. The institution’s assistant communications director Camilla Andersen, however, said at a press briefing a few days later that the IMF will not open talks until the government finishes the current program. It is still unclear whether the IMF will expect the country to remain committed to further measures before new talks take place.

Israeli gas partners want to amend their export agreement with Egypt: Israeli gas partners Noble Energy and Delek Drilling are looking to tweak their USD 15 bn natural gas export agreement with Egypt to allow them to reach peak undisrupted supply levels later than initially agreed, Delek CEO Yossi Abu said on a call with investors yesterday, according to Bloomberg. Under the current stipulations of the contract, Noble and Delek would export 7 bcm annually by 2020, with half of that amount subject to potential interruptions during peak times or under adverse conditions. The Israeli partners are now looking to supply about 4.5 bcm of non-interruptible gas next year and reach 7 bn “later,” according to Abu. People familiar with the matter told Bloomberg that they are considering ramping up exports to 5.5 bn in 2021 and 7 bn in 2022.

Israeli gas exports to Egypt shall begin within four months, Israeli Energy Minister Yuval Steinitz told Reuters. An agreement to buy stakes in the East Mediterranean Gas Company’s pipeline between Ashkelon in Israel and El-Arish in Sinai will be completed “within weeks” and more connections could be built between them, according to Steinitz.

Background: Delek and its US-based partner Noble Energy partnered together last year with other Israeli energy companies to form the Tamar Gas Consortium. The consortium then signed a USD 15 bn agreement to supply Alaa Arafa-led Dolphinus Holding with gas from each of the Leviathan and Tamar gas fields. Trial shipments from Israel’s Tamar and Leviathan gas fields were originally supposed to come in March of this year, but capacity restrictions posed by Israel’s domestic pipeline network meant that the imports had to be delayed. Delek then announced last month that it would begin commercial natural gas sales to Egypt by the end of June. According to Steinitz, the holdup was a result of Israel’s “complex regulatory regime,” but tells Reuters that the causes for delay are mostly resolved.

Meanwhile, everyone is gearing up for the East Med Gas forum today. Oil Minister Tarek El Molla met yesterday with US Secretary of Energy Rick Perry, who will be attending the forum as a monitor, and discussed increasing cooperation and US investments in Egypt, according to Mubasher. El Molla also met with Greek Energy Minister Konstantinos Hatzidakis to discuss cooperation, according to State Information Service (SIS).

Egypt’s economic growth to slow slightly to 5.5% in FY2019-2020 -poll: Egypt’s economic growth will slow slightly to 5.5% in FY2019-2020, from 5.6% last year, according to a Reuters poll of economists. The government’s budget eyes GDP growing at a 6% clip over the next 12 months. “Even as leading economic indicators point toward weak consumer spending and stress on local firms, rising investment and government spending are supporting higher economic growth,” Nadene Johnson, an economist at NKC African Economics, told Reuters. “Medium-term growth prospects remain promising thanks to the natural gas sector and higher investment, while consumption is expected to recover following the completion of inflationary reforms.”

Inflation is expected to average 13% in FY2019-2020, 10.9% in FY2020-2021 and 9.0% in FY2021-2022, economists predicted. Egypt’s inflation rate dropped to 9.4% in June, but is expected to pick up again this month on the back of the last round of subsidy cuts, which prompted the central bank to leave interest rates on hold earlier this month.

Almost two-thirds of Egyptian factories are operating below 75% capacity, government sources told the local press. The government aims to raise industrial production by 17% this fiscal year to EGP 237 bn, up from EGP 203 bn last year. Industrial production is responsible for 15% of jobs in Egypt and accounts for 80% of all non-oil exports.

It could just be a result of the rising cost of production over the past eight years, which has forced manufacturers to hike their prices in the midst of weakened purchasing power from consumers, 10th of Ramadan Investors Association boss Samir Aref says. The issue here is compounded because we import many products that are also produced locally, which puts additional strain on domestic manufacturers. A lack of competitiveness in prices also makes it difficult for manufacturers to export their wares, Aref says.

But it could be market saturation in the wrong places: Federation of Egyptian Industries board member Mohamed Saad Eldin told the press that the slowdown in output levels is likely a result of an increase in the number of manufacturers producing goods that are seeing weaker local demand. The natural laws of supply and demand therefore dictate that these manufacturers reduce their output. Saad Eldin stressed that manufacturers need to look at either changing what they produce or move more aggressively towards exports to clear their stockpiles, while the government should be more wary of handing out manufacturing licenses before thoroughly studying market needs.

Cement seems to be a case in point here. Industry experts have been warning that the cement market was in oversupply, having produced some 18 mn tonnes more than the local market wanted to buy in 2016, but the Industrial Development Authority (IDA) continued to tender cement licenses at the end of that year. El Nahda Cement and Tourah Portland Cement Company had both temporarily suspended operations, with the former specifically pointing the finger of blame at falling sales due to oversupply. The government is now looking specifically at the struggling cement industry, whose oversupply issues clearly have not been resolved.

Egypt inks agreements to receive second tranche of USD 3 bn loan for new capital’s business district: Egypt has signed agreements with eight Chinese banks to receive the second tranche of a USD 3 bn loan to finance the construction of the business district in the new administrative capital, Housing Minister Assem El Gazzar said, according to Amwal Al Ghad. El Gazzar did not disclose the size of the tranche. The New Urban Communities Authority (NUCA) lined up the facility from a group of lenders led by state-owned Industrial and Commercial Bank of China during the Belt and Road Forum in May. The first USD 834 mn tranche is being used to finance construction during the initial 600k sqm phase of the district, which included two administrative and five residential skyscrapers.

DISPUTE WATCH- Raya’s case against the FRA adjourned to 22 September: The Justice Ministry’s dispute resolution committee has adjourned a case filed by Raya Holding’s Chairman Medhat Khalil against the Financial Regulatory Authority (FRA) to 22 September, sources close to the matter told Al Mal. A fresh dispute has arisen between the two sides after the FRA insisted that its own committee should mediate the dispute, instead of the dispute resolution committee, the sources said. Khalil, who is looking to reduce or overturn the EGP 11 mn fine imposed by the FRA in connection with a mandatory tender offer, had requested that the dispute resolution committee act as the mediator.

Background: The FRA filed the lawsuit against Khalil in May alleging that he failed to pay an EGP 11 mn fine handed out after he exceeded the maximum ownership limit in Raya without making a mandatory tender offer (MTO). The FRA had ordered Khalil at the end of last year to submit an MTO for Raya or sell down his stake, arguing that he and related parties controlled a combined 42% of the company — a level of control that triggers the requirement for an MTO under securities regulations. Khalil bought 26.7% (56.919 mn shares) of Raya Holding through his El Pharonia Real Estate Investment at a cost of EGP 314.76 mn in an MTO. An administrative court will separately look into charges brought by the FRA against Raya Holding founder Medhat Khalil on 29 July.

CABINET WATCH- The Madbouly Cabinet has agreed to let an unnamed French consulting firm advise on a tender to develop the Abu Qir railway line, it said in a statement on Wednesday following its weekly meeting. The winning company would be granted the right to design, supply, construct and finance the project. The cabinet also agreed to:

• Grant a 20k square meter land plot in Roubiki Leather City to glue factories who were removed from the Magra El Oyoun historical area;
• Launch an online platform providing services to pilgrims under the auspices of the Tourism Ministry.

The IMF’s signoff on disbursing Egypt’s final loan tranche is topping coverage in the foreign press, marking the first time in what feels like eons that a business-related story is the most newsworthy story on Egypt.

It’s safe to say that Human Rights Watch doesn’t hold the new NGOs Act in high regard: The newly-approved legislation features many of the same “draconian restrictions” on the work of NGOs as the 2017 law it is replacing, and should be sent back to parliament to “address its fundamental flaws,” the organization says.

Immigration Minister Nabila Makram is catching some flak in the foreign press for saying that Egypt will not tolerate anybody who criticizes the country, and “drawing her finger across her neck in a throat-cutting gesture,” the Independent says. Makram defended herself against accusations that she was insinuating support for violence against dissidents.

‘Mauritius Leaks’ reveal Africa’s loss of revenue to offshore tax haven: A new investigation by the International Consortium of Investigative Journalists (ICIJ) dubbed the ’Mauritius Leaks’ reveals how western corporations use the Indian Ocean island to avoid paying taxes in poor African countries. The investigation, based on analysis of 200k confidential records from the Mauritius office of offshore law firm Conyers Dill & Pearman, finds that companies use the country’s low tax rates and tax treaties with 46 other African countries to ship untaxed income out of Africa.

How do companies profit? Mauritius has a headline corporate tax rate of 15%, which can drive down to 3% (or even 0%) by using foreign tax credits, and through its Global Business License 1 allows companies with operations outside the country to instead pay its low rates. For a company ‘resident’ in Mauritius there is “almost always” no capital gains tax, which otherwise could amount to 30-35% in many African countries. Mauritius has signed double taxation agreements (DTA) with 46 countries, allowing companies to avoid capital gains tax and withholding taxes on dividends, interest and royalties. Despite Mauritius making some concessions to tax reform in January, tax advisers who spoke to ICIJ said that “reforms may be little more than box-checking designed to keep the country off international blacklists.”

How is Egypt affected? Egypt and Mauritius entered into a DTA back in 2014 which made Mauritian residents “generally exempt” of capital gains tax, and reduced withholding taxes on royalties and interest to 10% from 20%. And of course companies that should be paying tax at the rate set by the Egyptian government are able to instead reside in Mauritius and drastically reduce their tax bill. It is unknown how much tax revenue Egypt is missing out on, but Tax Authority officials interviewed by ICIJ said the Mauritius treaty is having a crippling effect.

Could ride-hailing apps and driverless cars bring an end to urban car ownership? The rise of the phenomenon of “mobility as a service” is making access to on-demand transportation and (soon) self-driving cars all the more simplified. Some of us urban dwellers have already started to wonder, why own a car? This may now be just a random musing as it still does make some sense to own one. But down the line, the cost of a ride could be slashed significantly to as little USD 0.70 from USD 2-3 a mile as “robo-taxis” make their way into cities. Soon enough, it may not be all that financially wise to have your own car parked in a garage, says Bloomberg in a fresh take on the theme (watch, runtime: 2:25).

Egypt has condemned Israel’s demolition of a number of Palestinian homes earlier this week in the Wadi Al Hummus area of East Jerusalem, the Foreign Ministry said in a statement.

Twenty-seven new solar power plants in the Benban solar power park with a joint capacity of 1.2 GW have been brought online and linked to the national grid, Electricity Ministry sources told the local press. Twenty-five of the plants have begun selling power to the Egyptian Electricity Transmission Company while the other two are conducting trial runs, and are expected to begin commercial operations within days. The 32 plants at Benban will produce a 1.46 GW of electricity by September, the sources said.

Investment Minister Sahar Nasr signed yesterday a USD 14 mn loan agreement with OPEC Fund for International Development (OFID) CEO Abdulhamid Alkhalifa to establish two wheat silos in the port of West Port Said, the ministry said in a statement. The silos, which will be built and owned by the General Company for Silos and Storage, will be used to store imported grain and wheat used to produce subsidized bread. We noted yesterday that OFID is planning to increase its financing for Egypt by USD 55 mn until the end of the year.

Mintra is planning to begin operations at its new USD 50 mn Cairo sports shoes factory in October, according to the local press. The facility will initially produce 16 mn pairs of shoes in the first year, before increasing to 100 mn a year after five years.

Saudi menswear manufacturer Ajlan & Bros is planning to set up a textiles and garment production facility in Qena, Vice Chairman Mohamed Ajlan told Prime Minister Moustafa Madbouly during a meeting yesterday, according to a Cabinet statement. Ajlan requested land plots for the facility and for a separate industrial and residential complex the company wants to construct on the Fayoum Desert Road. No details were provided on the expected investment value of either project.

Orascom Development Egypt (ODE) will launch a new real estate project in El Gouna to coincide with the El Gouna Film Festival in September, Investor Relations Manager Sarah El Gawahergy told Al Mal. The company aims to invest USD 2 mn on development projects in the resort town, including renovating hotels and building conference halls, she added.

Correction: 27/07/2019.

A previous version of this article incorrectly spelled Sara El Gawahergy’s name

The Grand Egyptian Museum is close to being fully built, phase 3 project director Laurens Schokking told Construction Week. Concrete, steel works, mechanical, engineering, plumbing, and finishing work at the museum are all reportedly near completion, and the bulk of the building work is expected to be finished before the end of the year. Phase 3 construction is being undertaken as a joint venture between Belgian company Besix and Egypt’s Orascom Construction, which was awarded the tender in 2012.

The Transportation Ministry will finish the construction of Heliopolis metro station on Metro Line 3 in October, it said in a statement. The El Nozha and Hisham Barakat stations will be inaugurated by the end of December.

Global Telecom Holding’s (GTH) board has approved the updated valuation report prepared by independent financial advisor Grant Thornton in relation to Veon’s bid to acquire GTH’s operating assets and the mandatory tender offer (MTO), the company said in a bourse filing (pdf). The report valued GTH at EGP 4.93 per share, slightly lower than the EGP 5.08 MTO price. Veon has nearly completed its purchase of the remaining 42.3% of GTH in an MTO after it reached a USD 136 mn settlement with the tax authority last month. You can read Grant Thornton’s full report here (pdf).

The Financial Regulatory Authority has granted Premiere Securities a short selling license, the local press reported. The company joins a growing list of brokerages authorized to short sell — including Arqaam, EFG Hermes, CI Capital, the Arab African International Securities, Prime Holdings, and HC Securities. Short selling transactions are expected to begin in 3Q2019, FRA deputy head Khaled El Nashar said earlier this month.

USAID and PepsiCo have signed an MoU to improve the potato supply chain in Egypt, the US embassy said in a press release (pdf). The two organizations will work together to increase the quality and yield of potato crops, support reliable trading relationships, and help farmers to introduce more sustainable agricultural methods.

The administrative court has rejected all pending appeals to bring back a 15% import duty on iron billets, reports Masrawy. Eight appeals had been lodged by the State Lawsuits Authority on behalf of the ministry and 16 by Beshay Steel and Delta Steel, after twenty-one iron factories won a case at the court reversing the ministry’s decision to impose the duties. The authority, as well as the two companies who stand to lose if the tariffs are not reintroduced, also took their plea to the Supreme Administrative Court — which is scheduled to look into them on 4 August.

Aston Villa have completed the signing of Egypt international winger Trezeguet, Reuters reports. The UK club did not disclose any financial details related to the transfer, but reports last week suggested that it will pay GBP 8.75 mn for the player.

Soha El-Turky, chief financial officer at Banque du Caire (BdC): My Morning Routine looks each week at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Soha El-Turky, chief financial officer at Banque du Caire (BdC), which is a full-service bank headquartered in Cairo.

My name is Soha El-Turky and I am the CFO at Banque du Caire (BdC), a position I have held for a little over a year. Before assuming this role, I spent most of my career at Citibank and Barclays, holding CFO roles at these organizations in Egypt and the UK. Most importantly, I am a wife, daughter, and mother of two great girls (Farida, 22, and Malak, 16) and, together with my husband, they have been my greatest supporters throughout my career.

I start my day by checking my email and WhatsApp before I get out of bed (a very bad habit), and I often fire off a few emails before getting ready for work, as my brain starts quickly running through my to-do list. I’m not a coffee person, but I have tea every morning while I check the news. I enjoy swimming and I’m trying to get back into the routine of swimming a couple of times a week before going to work. My kids are grown up now, so thankfully I no longer have to get anyone ready for school.

Every day is like a marathon. As soon as I get to the office, I plug in my laptop and review my plan for the day. We have a lot on our plate as a management team, and there are many projects going on at BdC, so I spend a large part of the day in meetings. There are always people coming in and going out of my office, and I enjoy the engagement.

I try not to stay late at the office, aiming to leave around 6 pm. I usually head to an open-air lounge near home, often to do some of my solo work (which is a lot more productive than working at the office). I’m usually joined by my husband on his way back from work, and sometimes my younger daughter. Then we head home to spend some time together and have a light dinner. I don’t watch TV. Sometimes I’ll watch a movie or a show online, and I often read before sleeping to clear my mind. Weekends are spent with my family and catching up with friends.

Free time is sparse during workweeks, so I make a point of taking short breaks every few months to go on holiday with family or friends and recharge. I enjoy nature very much and also love capturing it in photos. My last trips were to Cape Town and Wales, which both have amazing scenery.

Reading, especially fiction, is the most effective way for me to disconnect. I actually collect good books from different genres, even if I don’t read them immediately, to ensure that I always have ample choice. My favorite works of fiction include A Thousand Splendid Suns and The Rosie Project. The last non-fiction book I read was Sheryl Sandberg’s Lean In, which resonated with me in many ways. I also enjoy watching TED talks. A couple of my favorites are The Paradox of Choice and The Surprising Science of Happiness.

BdC has a deep-rooted history in Egypt. It was established in 1952, with three branches in the country. It is currently the sixth-largest bank in Egypt by balance sheet size, with around 220 branches across the country, and over 3 mn customers — the fourth largest customer base in the market.

In 2018, BdC set about implementing a strategy designed to diversify operations, capture new market opportunities and ensure greater profitability. The idea was to reposition BdC within the Egyptian banking market, and the results of the turnaround have been impressive. In 2018, our profit after tax (PAT) grew 207% to reach EGP 2.5 bn on the back of our growing lending by nearly 50%, improving net interest margins and reducing cost-to-income ratio, as well as investing in people, technology and infrastructure. In 1Q2019 we delivered the highest revenue growth in our peer group, resulting in a bottom line of EGP 1.2 bn — a 200% growth in PAT.

I see BdC as a truly universal bank which serves a wide spectrum of customers, ranging from microfinance borrowers to large corporations. One of our real strengths is in the area of microfinance, where we have a leading market share of roughly 25%. This is a segment not widely served by many commercial banks. Since 2002 the bank has developed a successful model for serving this segment, and we continue to see it as a key growth area going forward.

We are very close to our customers. Our brand is well-recognized and trusted, and we have long-standing relationships with a large client base of around 3 mn customers. Our distribution network comprises over 220 branches across the country (65% of which are outside Cairo), and this isn’t matched by many private banks operating in the market. This provides BdC with access to a wide — largely untapped — customer base, allowing us to play a very active role in promoting financial inclusion.

I believe the key factor driving our success is our people; we share a single-minded focus on transforming BdC. Our management team is highly regarded, with solid experience that positions it very well to lead the current phase of transformation.

Until recently, the broader market wasn’t fully aware that BdC is going through a complete transformation, building our capacity in technology, expanding our branch network and customer segments, revamping our infrastructure, and introducing new products like internet and mobile banking. This is all intended to help us serve a broader client base. It’s often thought that we mostly target mass and lower-mass retail customers, but in reality it’s the corporations that occupy over 50% of our loan book, and we have a sizeable affluent customer base on the retail deposit side. Thanks to our rebranding efforts, external communication and marketing strategies, the market has started to understand this transformation.

It’s no secret that technology, innovation and the power of fintech are already disrupting the industry globally. Banking will be completely revolutionized over the coming years and it’s only the banks that adopt a forward-looking strategy, embracing these changes, that will remain relevant. What we’ll see is a very different industry, demanding a progressive mindset and a really dynamic talent base.

I’ve learned a lot from some great leaders throughout my career. One important lesson that I learned firsthand years ago was that if you take bold decisions and do the right thing for your customers and your employees, profitability will automatically follow. Sometimes you see management teams that are tempted to protect short-term profitability above all else, but true success is achieved when we look beyond short-term gains. This sounds like a simple concept, but it can be extremely difficult to implement. On a personal level, I think the best piece of advice I ever received during the early days of my career was to go beyond my functional role and play an active part in steering the business strategy and decision-making in a broader sense.