Repositioning for Growth

In our interview with Khaled El Bialy, Chief Executive Officer of Banque Misr GCC, he describes their vision and details the ongoing success the bank is achieving in its plan to become one of the region’s leading financial institutions, and how their focus on values and digitisation forms a key element in meeting their objectives

How has Banque Misr performed in the past two years in the UAE and the GCC and how do you see the current global challenges?

Banque Misr UAE began a three-year effort in 2021 to reposition itself as one of the leading financial institutions in the Middle East. Improving the brand’s reach, enhancing the customer experience and assuring sustainable development are fundamental to the strategy. The plan was established to support the Group’s objectives for regional expansions, with the United Arab Emirates selected as the engine that leads that growth.

In 2022, the bank achieved outstanding financial results and maintained a solid financial position and capital structure. The balance sheet size increased by 153 percent, net income increased by a whopping 129 percent, customer deposits increased by 148 percent, and loans and advances increased by 5 percent. The Net Intertest Income (NII) increased by 316 percent, whereas Fees and Commissions increased by more than 70 percent. NonPerforming Loans (NPLs) decreased dramatically to 2 percent, while Return on Average Equity (ROAE) reached a record high of 13 percent. The Cost of Funds was reduced to 0.4 percent and the Capital Adequacy Ratio (CAR) was 20 percent, greatly above the CBUAE’s minimum requirement. The performance trend in 2023, based on H1 run-rate, is exhibiting more robust performance numbers, as we anticipate closing the fiscal year with solid bottom-line growth of 550 percent over 2022, ROAE greater than 17 percent,

NPLs less than 1 percent and a cost-toincome ratio hovering around 20 percent.

We aim to capitalise on the expansion in the region and the UAE in particular. The country’s gross domestic product increased by 7.6 percent in 2022, which was almost twice the rise in 2021. In 2022, the UAE’s international trade reached 2.2 trillion dirhams ($599 billion), a 17 percent increase from the previous year. The UAE’s economy established a firm foundation in 2022, as both the oil and non-oil industries performed well. As a component of international economic relations, this preserves the country’s status as an exceptional environment that draws investments on a continuing basis and supports foreign commerce and openness. The oil and gas sector plays a vital part in the UAE’s economy, accounting for about 30 percent of the country’s GDP and 13 percent of total exports, according to the most recent figures. The year 2022 witnessed a substantial economic recovery, with the fastest growth rate since 2007, reaching record levels. We at Banque Misr UAE want to be among the industry leaders who create that big, successful mark in history.

However, the global economic arena is undergoing a series of severe and mutually reinforcing shocks, such as the rippling effects of the COVID-19 outbreak, the conflict in Ukraine and food and energy shortages, surging inflation, debt consolidation and climate emergency issues. Due to geopolitical tensions, lower global demand and more stringent monetary and fiscal policies, inflation is chronically high in several countries, and the global economy remains under pressure. In 2023, the volume of global trade in goods and services is anticipated to expand by 2.3 percent, which is much slower than the rate before the pandemic. The decrease in commodity prices and early symptoms of a mild recession imply a clearer route for the monetary outlook, notwithstanding the persistence of shortterm worries. Early evidence points to a global economic downturn; China’s path to recovery may not be as promising as it seemed at the beginning of 2023. This trend is expected to continue. The markets are pricing in high inflation over the longer term, and the main central banks continue to hike interest rates; the loosening of monetary policy may not be as aggressive as the tightening cycle. The FED maintains current interest rates, but hints that more rate hikes will be required to lower inflation in 2023.

There are three main pillars to Banque Misr Strategy & Operating Model based on Business Strategy, Operational Strategy and Transformational Strategy:

1 - The Business Strategy Pillar focuses on…

Proper Corporate Governance and Solid Infrastructure

Long term sustainable growth

Value proposition differentiation

Double digit return on capital

Positioning employees for future succe ss through proper career progression is one of our main targets

Positive contribution to the UAE Economy and its people through Emiratisation and educational Schemes

Provide an air cover to the trade corridor between Egypt and the GCC Clear target market and prudent risk acceptance criteria.

2 - Our Operational Strategy Pillar

Develop effective & efficient process improvement

Advance translation of strategic goals into operational capabilities

Smooth, lean and secure workflow

Immaculate process and control environment

3 - Transformational Strategy Pillar involves…

Major strategic cultural change to suit the organisational objectives

Digitalisation and business transformation

Agile and lean process implementation

Our aim is to revamp our business model to foster sustainable growth through the following actions: i. Optimise Capital Allocation ii. Improve Cost Efficiency iii.

Allocate our capital to areas that d eliver the highest risk-adjusted returns.

In Wholesale Banking, continue to rationalise the loan portfolio.

In Consumer Banking, focus on liabilities and prudent lending. We will dispose of non-core assets and redeploy the capital to higher yielding assets.

Improve our cost-income ratio through sustainable cost savings, optimisation, streamlining, digitisation and productivity enhancements.

Reduce bureaucracy and streamline our processes and procedures.

Improve the risk adjusted returns on capital.

Build a quality asset portfolio that strikes a good balance between asset and return.

iv. SMART Control Environment

Enhance the organisational structure and embed an effective three lines of defense, ensuring clear and defined roles and responsibilities with no gaps or overlaps between control functions. Establish a cost-effective control environment that adheres to UAE laws, regulations and best market practices.

Strengthen our safety net pillars, corporate governance, process and control.

Digitalisation is paving the path for simpler and more comfortable client banking. No longer must customers wait in lengthy bank lines or be concerned about banking hours. With the assistance of internet banking and mobile applications, clients may conduct financial transactions at any time, from any location. With mobile banking, the speed of transactions has also increased. Previously, banks required three to four days to transfer consumer funds to other accounts. With online payment options, this step is now completed in a few seconds. People may swiftly and effectively monitor their account balances, transfer funds, pay bills and apply for loans from the comfort of their homes or workplaces.

Digitisation has allowed banks to use the power of data analytics and artificial intelligence (AI) to make more informed business decisions and provide clients with personalised services. By collecting and analysing client data, banks may customise their services to match the unique requirements of each individual customer. Customers may now access financial services from anywhere and at any time thanks to the advent of digital banking, which has made the sector more efficient and comfortable. As digital technologies proliferate, digital banking is poised to become the industry norm.

In addition to enhancing security and operational efficiency, technological developments in the banking business would improve the entire client experience. For instance, anti-money laundering (AML) and know-your-customer (KYC) systems enabled by AI make client profile screening quicker and more accurate, saving time, effort and money.

Digitalisation, fintech and AI are no longer alternatives; they represent the future. They are altering how people interact and do business on a day-to-day basis, and technological innovations in banking are continuing to shape the future of financial services around the world. An increasing demand for a digital banking experience is transforming how the entire banking industry operates. Having said that, we are currently investing heavily in technology infrastructure and cybersecurity crimes prevention measures in order to arrive at a worldclass solid platform and infrastructure.

In the dynamic and competitive world of banking world that we are living in, effective management is key to driving growth, profitability and customer satisfaction. The banking sector is experiencing a major transition in an age of fast technological innovation. Traditional banks are faced with the challenge of adapting to evolving customer expectations, regulatory changes and disruptive fintech startups. However, Banque Misr UAE recognises that time is a precious resource for consumer and corporate customers. Therefore, substantial resources were spent on cutting-edge technology and user-friendly systems to improve the banking experience. Once the banks’ transition is complete, customers will be able to access and manage their accounts, make transactions and monitor their financial health with ease using Banque Misr UAE’s easy online and mobile banking capabilities. We are committed to digital innovation, streamlining complex processes and enabling business owners to concentrate on what they do best: expanding their enterprises.

Climate change is a very serious threat to the world. It not only has a direct impact on business but is also a threat to our continued survival. Organisations measure and report sustainability practices using the ESG strategy. Organisations engaging in ESG activity must meet the needs of the present generation without jeopardising the needs of future generations.

ESG (Environmental, Social and Governance) is now required for firms to assess their sustainability practices and their influence on society and the environment. Banque Misr UAE acknowledges that ESG aspects are crucial for risk management and longterm wealth generation, hence it is one of our strategic objectives. The major purpose of our ESG task force is to ensure that the bank adheres to the most recent standards.

Sustainability may generate company success in addition to mitigating global concerns. ESG indicators are being used by regulators, investors, consumers and society to evaluate an organisation’s ethical impact and sustainability practices. They evaluate a business’s carbon impact, water use, community development activities and diversity. According to research, organisations with a high ESG rating have a reduced cost of financing and equity, and that sustainability initiatives may assist enhancement of financial performance while fostering public support.

ESG is a highly important concern in the banking sector with key considerations that are vital to the success and wellbeing of financial institutions, for example:

Risk management: Banks face a variety of risks, including those associated with climate change, societal challenges and governance policies. Incorporating ESG aspects assists banks in identifying and mitigating these risks, which may otherwise have financial repercussions.

Reputation and trust: Stakeholders, including consumers, investors and regulators, analyse ESG performance extensively. Banks that emphasise ESG efforts show their dedication to sustainable practices, thus enhancing their reputation, fostering trust and attracting customers and investors with a social conscience.

Compliance and regulations: Sustainability and environmental, social and governance (ESG) issues are emerging regulatory frameworks. Banks must change in order to comply with new ESG-related standards and disclosure responsibilities. By integrating ESG into their operations and decision-making processes, banks can remain compliant and avoid legal and reputational risks.

Competitive advantage: Adopting ESG standards may distinguish institutions in a competitive market. Consumers and investors like institutions that share their values and contribute to beneficial social and environmental results. Banks that successfully incorporate environmental, social and governance factors may acquire a competitive advantage and attract a broader client base.

Long-term value creation: ESG integration goes beyond risk management and compliance; it also provides opportunities for innovation, long-term value creation and sustainable growth. Banks can invest in environmentally friendly projects, support social causes and promote good governance practices, leading to positive economic, social and environmental impacts.

Our Vision is to become a peoplecentric financial institution that delivers unmatched customer experience and value preposition, anytime, anywhere. We aim to connect and facilitate the everyday life of people, businesses and partners, enabled by top talent, innovative solutions, digitalisation and long-standing customer relationships.

Our value pillars are Customer Centricity, Innovation, Agility, Stewardship and Pride and our strategic objectives are:

1. Deliv er elite customer-centric service model

2. Re vamp the business model to foster sustainable growth

3. Con tribute significantly to the group’s international endeavors

4. Optimise operational centralisation, autonomy, agility and flexibility

5. Explore and leverage the brand reach in the UAE market and the GCC

6. Deliver value preposition to our community, our stakeholders and people, and contribute positively to the environment

We will always aspire to contributing positively to the group’s mission by offering world-class financial solutions to our customers, elevating our value proposition through embracing digital transformation, service innovation, evolving partnerships and fostering our diverse and competent people.

In the face of disruptive technologies, evolving customer expectations and regulatory changes, effective banking management is paramount for success. By embracing digital transformation, fostering a customer-centric culture, enhancing risk management practices, embracing innovation and collaboration, and investing in talent development, banking executives can navigate the challenges and leverage opportunities in today’s dynamic banking landscape. With a strategic focus on these essential areas, Banque Misr UAE can position itself as industry leaders, deliver exceptional customer experiences and drive sustainable growth in the years to come.

do you feel the GCC, and the wider Middle East will rank by 2030?

By 2030, the GCC and Middle East region are expected to experience substantial transformations in the coming years, as the GCC countries have been actively diversifying their economies beyond oil and gas. They are investing heavily in sectors like tourism, finance, technology, renewable energy and manufacturing. By leveraging their strategic geographic location, abundant natural resources and strong infrastructure, these countries have the potential to become major global players in various industries.

The Middle East has been investing significantly in infrastructure development, including transportation, logistics and smart cities. Large-scale projects like Dubai Expo 2020, Qatar World Cup 2022, and Saudi Arabia’s NEOM and Red Sea tourism projects are expected to attract foreign investment, boost tourism and enhance regional connectivity. Such infrastructure investments can have a positive impact on the region’s economic growth and overall ranking. The Middle East has also embraced emerging technologies, including artificial intelligence, blockchain and Internet of Things (IOT). Governments and private entities are fostering innovation and entrepreneurship through initiatives like Dubai Future Accelerators and the establishment of technology hubs. By capitalising on technology-driven opportunities, the region has the potential to become a global hub for innovation, attracting talent and investments.

The GCC and Middle East have a young and growing population, presenting both opportunities and challenges. To unlock their full potential, governments are focusing on education, skills development, and creating job opportunities for the youth. By nurturing a skilled and entrepreneurial workforce, the region can benefit from a demographic dividend, driving economic growth and innovation.

The geopolitical landscape can significantly impact the ranking of the GCC and Middle East region. Regional stability, political reforms and peace agreements can attract investments and foster economic growth. Conversely, ongoing conflicts or political unrest can hinder progress and deter investors. A favorable geopolitical environment will be crucial for the region’s continued rise.

As stated by Dubai ruler, Sheikh Mohammed Bin Rashid Al Maktoum, the Middle East can become the new Europe if its countries adopt modernity and development.