Egypt's CIB to boost Tier 2 debt as it looks to African growth

DUBAI, Nov 14 (Reuters) - Egypt’s Commercial International Bank (CIB) plans to boost Tier 2 capital through dollar-denominated subordinated loans as it seeks to diversify its equity base and back expansion plans in Africa, its chairman and managing director said on Tuesday.

CIB, Egypt’s largest listed bank, has agreed a $100 million subordinated loan with the European Bank for Reconstruction and Development (EBRD), and it plans to raise a loan of a similar amount with another multilateral financial institution, Hisham Ezz al-Arab told Reuters in an interview.

The EBRD loan is the first subordinated facility raised by the Egyptian bank, which aims to increase its Tier 2 capital base “to leverage on recent regulatory changes about Tier 2 capital” by the Central Bank of Egypt.

The additional Tier 2 loan the bank is targeting could be finalised before the end of the year, said al—Arab.

CIB will partly use the new funds to back its regional expansion in Africa. The bank received approval from the Central Bank of Egypt about two weeks ago to expand across Africa and is looking at opportunities in countries such as Kenya, Rwanda, Tanzania, and Uganda, said al-Arab. “There are a lot of synergies and relations between Egypt and those markets.”

The bank’s growth and expansion plans will very much depend on inflation, said al-Arab.

Egypt’s inflation dropped for the third month in a row in October after reaching a record high as a result of energy price rises. This means the central bank is expected to begin loosening monetary policy in the coming months.

Lower inflation would lead to higher corporate spending and capex plans, said the bank’s managing director, adding he expects loan growth to improve next year, and in particular in the second half of 2018.

“Interest rates will obviously remain high and that will impact capex. Now with a clear picture for inflation for 2018 we have more confidence.”

In 2015, CIB bought Citigroup’s consumer banking business in Egypt, growing its share of the market by 33 percent, the lender told Reuters at the time.

In its third-quarter results, the bank reported funding to businesses and individuals grew by 4 percent in the year to date, although the rate shrunk by 3 percent during the third quarter, it said last week. (Editing by David Evans)