Arab African International Bank (AAIB) has announced profits of $10.2 million for 1994 and says the bank has finally written-off the bad debts incurred during the 1980s. The Cairo-based institution is now embarking on a new strategy to increase its customer base and develop new areas of activity, including the investment banking division with the launch of an Egyptian mutual fund. 'Now the focus is on building a new image for the bank,' says Hany Hassan, manager of correspondent banking.

In 1994, the banks assets rose by six per cent to $718 million, although loans and advances fell by almost 40 per cent to $179 million. Syndicated loans fell to $39 million in 1994, down from $112 million a year earlier. Hassan says much of the portfolio was made up of non-performing loans with developing countries. 'One of the challenges has been to get rid of these syndicated loans,' he says.

The bank has now provided for its bad debts, using shareholders' subordinated deposits. The last tranche of these deposits, worth $107 million, was used to provide for non-performing loans in 1994. As a result, shareholders' equity fell to $122 million last year, from $209 million in 1993. However, Hassan says the bank's overall capital base has been improved because of increased reserves.

The bank launched a new investment banking division at the end 1993 and the mutual fund will be its first product in July. The Nile Fund is expected to raise up to £E 100 million ($29.2 million), and the minimum participation will be £E 10,000 ($2,924). It will invest up to 70 per cent of the capital in Egyptian equities, and the remainder will be invested in European and American stocks and foreign currencies. AAIB will be signing a contract with a US fund manager before the end of June.

The bank is also focusing on building up its activities in the Egyptian retail and commercial market. Customer deposits in 1994 rose by 28 per cent to $444 million, mainly due to increased Egyptian deposits since AAIB was granted a licence to take deposits in the local currency. AAIB has four branches in Egypt now, and will be opening two more in Cairo before the end of 1995. It also has a licence for two further branches in Hurghada and Luxor, which the bank plans to open in 1996/7.

Hassan says the bank's international activities have been doing well through its branches in Lebanon, the UAE and London. AAIB is owned by the Central Bank of Egypt, the Kuwaiti Finance & Planning Ministry and other Arab interests.