WHEN one of Egypt's leading banks offered 1.5 million shares for sale in September 1993, few appreciated the significance of the event. For the investors - overwhelmingly individual Egyptian savers - the subsequent gains have exceeded the most optimistic expectations. For Egypt, the share offer, by Commercial International Bank (CIB - Egypt), showed the potential of a privatisation programme both geared towards giving Egyptian investors, and others, the opportunity to invest in solidly performing assets, and governed by pragmatic commercial considerations.

The CIB shares were offered at £E 260 ($77). They are now quoted on the stock exchange at about £E 550 ($162). This gives the bank a market capitalisation of some £E 2,000 million ($590 million). According to the most recent data provided by CIB, total assets had reached just over £E 6,000 million ($1,770 million) by 30 June 1994.

Top-tier

CIB has been one of the fastest growing of Egyptian banks, catching up with the four public sector commercial banks that dominate the banking scene. CIB has also been the most profitable, with a return on average assets comfortably over 2 per cent in both 1992 and 1993.

The Cyprus-based Capital Intelligence gives CIB a long term rating of A and a short term rating of A-2. The agency commends the bank for its high performance standards and its ability to attract top-tier customers, as well as for its good asset quality stemming from strict lending criteria. The agency identified a small branch network as the only weakness. This is currently being rectified with five new branches to be opened shortly. However, the bank has had little difficulty in maintaining deposit growth, and has laid the basis for growth through its capital increase.

Structure CIB started life in 1975 as a joint venture between National Bank of Egypt (51 per cent) and Chase Manhattan Overseas Banking Corporation (49 per cent). It was named Chase National Bank of Egypt. The American bank sold its stake to National Bank of Egypt in 1987 as part of a global review of its investments. The decision was also related to problems in Egypt's banking and foreign exchange sectors at the time. CIB managers attribute some of the later success to the solid grounding and internal systems provided for the bank during the Chase period.

CIB's management developed independently of National Bank of Egypt, despite the public sector bank's dominant ownership position. That dominance has been reduced, first with the sale of 30 per cent of the bank to employees in CIB and its parent, and then, in 1993, with the capital increase share offering in which the National Bank of Egypt did not participate.

National Bank of Egypt's stake is now down to about 40 per cent. The International Finance Corporation, and two Saudi-based institutions - The Arab Investment Company and Arab Petroleum Investments Corporation (Apicorp) - own small stakes. Individual shareholders account for more than 50 per cent of the £E 400 million ($118 million) paid-up capital.

The bank has 16 branches, almost all of them in Greater Cairo and Alexandria.

Strategy CIB has carved out a niche as a top corporate bank, numbering most of the multinational companies present in Egypt among its clients. The bank has risen to the challenge of tighter margins in the loan market, increasing its lending at a time when most of its competitors have been content to keep a stable loan portfolio and build up treasury bill holdings. CIB is one of the few leading banks with a loan/asset ratio of more than 50 per cent.

CIB has also gone its own way in responding to privatisation and the revival of Egypt's capital market. The bank has taken direct stakes in at least two newly privatised industrial firms, and has set up its own investment banking department that has acquired a number of key stocks, as well as undertaking advisory assignments for the government and private sector clients.

It has sufficient capital resources to carry out these activities internally, rather than through the medium of mutual funds, the chosen path of some other banks.

Performance CIB has been by far the most profitable Egyptian bank for the past few years, and has recorded steady increases in profits since 1985. From its £E 130.4 million ($38.5 million) net profit in 1993, it paid out a generous dividend of £E 40.80 ($12) a share for existing shareholders and one quarter of that for new subscribers. This followed several years of much more modest payouts as the bank was seeking to retain profits to consolidate its capital base.

Outlook CIB is well positioned to take full advantage of any improvement in Egypt's growth prospects. Once it carries out its announced plans for an increased branch network, there seems little that could stop it becoming Egypt's largest privately owned bank, in terms of assets.

Personnel CIB's executive chairman is Mahmoud Abdel-Aziz, chairman of National Bank of Egypt. Chief general manager is Mahmoud Helal, formerly of National Bank of Egypt, and general manager is Adel el-Labban, who worked previously as a vice-president in the corporate finance division of Morgan Stanley. Both Helal and El-Labban are on the board.

It is the stated policy of the bank to become Egypt's first fully diversified financial services group. A separate managed investment banking affiliate, Commercial International Investment Company, capitalised at £E 100 million ($29.5 million), will undertake all merchant banking, advisory work and equity investment. This company was created in November 1994. Plans are also under way to establish shareholding links with domestic insurance companies.