Egypt Banking Sector 2008 GIH

Banking
Egypt
Global Research
Egypt Banking Sector

Heating Competition ...
September 2008
Global Investment House KSCC

Sharq, Global Tower
P.O. Box 28807 Safat
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Tel: (965) 295 1000
Fax: (965) 295 1005
E-mail: research@global.com.kw
http://www.globalinv.net
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Omar M. El-Quqa, CFA

Executive Vice President
omar@global.com.kw
Phone No: (965) 295 1110
Faisal Hasan, CFA

Head of Research
fhasan@global.com.kw
Phone No: (965) 295 1270
Mahmoud Soheim
Manager-Egypt Research
msoheim@global.com.kw
Phone No:(202) 37609526
Cherine Fayez Farkouh, CFA

Financial AnalystSenior Financial
cfarkouh@globalinv.com.eg
Phone No: (202) 37609526
Naveed Ahmed
Financial Analyst
nahmed@global.com.kw
Phone No: (965) 295 1280
Table of Contents
Investment Summary .......................................................................................................... 1
Economic Overview ............................................................................................................. 4
Background on the Banking Sector ................................................................................... 8
Financial Performance of the Banking Sector ................................................................ 15
Peer Group Comparison ................................................................................................... 28
Banking Sector Outlook .................................................................................................... 33
Valuation & Recommendation ......................................................................................... 34
Players Profile
Commercial International Bank................................................................................... 37
National Societe Generale Bank.................................................................................. 58
Credit Agricole-Egypt ............................................................................................... 78
The Egyptian Gulf Bank ............................................................................................. 98
Export Development Bank of Egypt.......................................................................... 115
Global Research - Egypt
Global Investment House
Investment Summary
The Egyptian banking sector has gone through major reforms in the last few years. The main
reasons triggering such reforms were to eliminate disturbed banks and to enhance the assets
quality and capital adequacy of the banking sector.
The problem rose when the large four public banks, constituting approximately 50% of the
sectors total assets in 2003, had a huge amount of Non Performing Loans NPLs, resulting
mainly from extending large portions of loans to distressed public enterprises, in addition to
having a lack of adequate risk management practices.
Therefore, the government decided to restructure the banking system through several
methods. One of which was to sell stakes of public banks in other joint ventures in order to
solve the NPLs problem. Another form was to amend regulations concerning the minimum
required paid-in capital and the capital adequacy ratio.
A consolidation trend prevailed in the banking sector, during the last few years. Small banks
and poor performers were easy acquisition targets, as they couldnt abide by the regulations
modified by the Central Bank of Egypt CBE, while foreign banks were involved in such
actions, in an attempt to enter the Egyptian banking sector, especially after the governments
announcement that no banking licenses will be granted for the time being.
This foreign interest in the Egyptian banking sector reflects how the sector is perceived as
having a promising growth potential, given the fact that there is a low banking penetration rate
and many of the Egyptians do not have banking accounts. Besides, a large proportion of the
population is in the youth age, lying between 20 and 45 years old, implying a potential growth
of demand from this group. Another factor drawing the foreign interest is the continuing
growth of the economy, which was reflected on many sectors. This growth, in turn, provided
an improved business climate and encouraged investments by Egyptians and foreigners as
well. The result was greater lending opportunities necessary to finance emerging projects,
boosting the performance of the banking sector and implying promising aspects.
Foreign interest was illustrated by the participation of foreign players, whether international
or regional banks in the bids that took place to acquire stakes in the Egyptian banks. These
banks include BNP Paribas, Barclays, Piraeus, Credit Agricole, Societe Generale, BLOM and
Audi. Foreign banks expressed their desire to enter the Egyptian banking sector by offering
higher premiums in bids over local banks. The latest acquisitions that took place in 2007
were the acquisition of a 51.3% stake in the National bank for Development by Abu Dhabi
Islamic Bank, as well as the acquisition of a 98.1% stake in Al Watany Bank of Egypt by the
National Bank of Kuwait.
Another attempt by the Egyptian government to enhance the performance of the banking
system was the privatization of Bank of Alexandria in 2006, where the Italian Intesa San
Paolo Bank acquired an 80% stake in the Bank, reflecting again the attractiveness of the
banking sector in Egypt.
Banque du Caire was about to be privatized, but the deal was cancelled in June 2008, as
the presented bids did not match the value set by the government for the Bank. It is worth
September 2008
mentioning that there were 5 International and regional banks competing to acquire a stake
in the Bank, which was set to be a maximum of 67% of the Banks shares. These banks were
the Saudi Samba Bank, the National Bank of Greece, the British Standard Chartered Bank,
a consortium composed of the Jordanian Arab Bank group and the Saudi Arab National
Bank, and another consortium led by Mashreq Bank. The Saudi Samba Bank and the British
Standard Chartered Bank did not participate in the auction, as they did not present bids. On
the other hand, the three remaining banks presented their bids, with the highest price being
that presented by the National Bank of Greece, amounting to US$1.4bn. Surprisingly, the
government declined to sell the Banks stake at that price, revealing that the Banks intrinsic
value is much higher.
As for the regulatory intervention in the banking system, the CBE has moved towards
targeting inflation through employing a tight monetary policy and assigning the Monetary
Policy Committee MPC, which main responsibility was to set each six weeks the deposit
and lending rates at the CBE. This is done in accordance to the prevailing rate of inflation.
Given the economic growth that the country is witnessing, along with skyrocketing food
and energy prices internationally and in the local market, inflation reached 23.6% in August
2008, forcing the CBE to raise its rates to reach 11.5% and 13.5% in September 2008,
respectively.
Our outlook for the Egyptian banking sector is positive, on the back of the promising prospects
of the Egyptian economy and the resulting attractive investment climate. This climate
is expected to spur projects in various sectors along with attracting foreign investments,
representing enormous lending opportunities for banks in Egypt.
Additionally, there are still plenty of hidden opportunities in the sector. These are represented
by many segments that do not participate extensively in the banking activity. The most apparent
opportunities rely in the retail segment, which is almost unexploited. Large percentage of the
population has no banking accounts. This represents a great potential for Egyptian banks, as
they can capitalize on growth opportunities in this segment, given the growing demographics
and the fact that more than half of the population is in the working age. Hence, demand from
this segment is huge and is expected to increase furthermore. This is one of the reasons that
triggered almost all private banks to announce the expansion of their branches in 2007 to
satisfy larger client base.
Other untapped segments are the mortgage lending and lending to the Small and Medium
Enterprises (SMEs). These segments constitute a minor fraction of the banks loans due to
the high risks associated with them. However, the latest government regulations concerning
the registration of the housing units and the SMEs, along with the establishment of the credit
bureau are expected to boost lending to such segments.
Another key driver for potential growth is the fierce competition existing among local
players. Though the number of banks was reduced from 62 banks in 2000 to 41 banks now,
local lenders compete harshly to gain more market shares, through introducing new products
and services, as well as investing in their infrastructural system.
The growth of the banking activity over the last few years supports our positive vision for the
banking sector. This is expressed by the development of the total deposits and loans in the
September 2008
sector. Total deposits (including government deposits) grew at a CAGR of 14.6% over the
period from 2002/03 to 2006/07, reaching LE658.2bn, while total loans increased at a CAGR
of 5.6% during the same period, reaching LE352.4bn in 2006/07.
Table 01: Global Valuation Matrix
Price (LE)
Target (LE)
Reco.
CIB
46.9
49.0
Hold
NSGB
30.0
34.3
Buy
CAE
15.2
17.0
2.6
2.0
21.1
20.6
EGBE (US$)
EDBE
Upside
Potential BVPS* (LE)
4.5
14.6
EPS* (LE)
P/BV* (x) P/E* (x)
5.0
3.2
9.5
14.4
13.2
4.0
2.3
7.5
Buy
11.8
5.8
1.7
2.6
8.7
Sell
-22.5
0.9
0.1
2.8
23.0
Hold
-2.2
12.8
2.9
1.6
7.2
Source: Global Research, market prices as of September 7th, 2008.

* Based on 2008E for all banks and 2008/09E for EDBE, adjusted for goodwill and extraordinary items, if any.
September 2008
Economic Overview
The Economy is Still Gaining Momentum
Following the sound performance of the Egyptian cabinet led by Prime Minister Ahmed Nazif
since 2004, the Egyptian economy has strengthened and showed positive signs. Effective
means were carried out resulting in a buoyant GDP growth and major improvements in various
sectors. The government implemented several economic reforms including privatization,
cutting tax rates, attracting foreign investments, financial sector reforms, as well as public
and private sector reforms. These reforms were reflected by a better investment climate.
Nominal GDP went up at a CAGR of 14.1% during the 5-year period from 2001/02 to
2006/07, whereas real GDP witnessed a 5.1% CAGR over the same period. Considering yo-y growth, nominal GDP grew by 18.4% in 2006/07, reaching LE731.2bn, while real GDP
increased by 7.1%, reaching LE486.5bn.
Moreover, nominal GDP grew by 21.0% y-o-y, over the 9M period ending March 2008, as
it reached LE652.7bn, compared to LE539.4bn, realized in the same period of the previous
year.
The development in the general economy was transmitted to a better standard of living for
Egyptians, as the per capita GDP rose at a CAGR of 6.3% in the last five years and at 16.8%
y-o-y, from US$1,460 in 2005/06 to US$1,706 in 2006/07.
Contributing Sectors
The sectors that showed major contribution to the GDP in 2006/07 were the agriculture
sector with 13.8% of GDP, the extractive industry (compromising petroleum and natural
gas), contributing to 15.2%, whilst the manufacturing industry alone constituted 16.8% of
GDP. Finally, the wholesale and retail trade portion of GDP was 11.4%.
The extensive efforts of the Egyptian government resulted in better than planned figures, as
the actual fiscal deficit in 2006/07 amounted to LE54.7bn, compared to an estimated figure
of LE62.2bn. Such decline was a result of the 9.9% increase in the actual revenues over the
budgeted figure, reaching LE180.2bn instead of LE163.9bn, which was a consequence of an
8.2% rise in tax revenues. The actual fiscal deficit realized in 2006/07 represented 7.5% of
GDP, compared to 8.2% in 2005/06, showing evidence of the significant efforts implemented
by the government.
Current Account
Egypt has proven competitiveness in the export market illustrated by the increase of the
exports by 19.3% y-o-y in 2006/07, reaching US$22.0bn and a 25.3% CAGR from 2001/02
to 2006/07.
It is worth mentioning that the major component of exports in 2006/07 included fuels, mineral
oil and products, constituting 46.6% of total exports. Finished goods, in turn, attributed to
34.2% of total exports in the same year.
The major export market for Egypt in 2006/07 was the European Union, with a share of
33.8%. The second highest market was the USA with a 31.1% share, followed by Asia, with
September 2008
13.5%. Exports to the USA, growing by 21.4% from 2005/06 to 2006/07, have significant
importance in the external trade market for Egypt. One of the main reasons that led to
increasing exports to the USA was the Qualified Industrial Zones (QIZ) Protocol that Egypt
entered in 2004, which helped boost exports to the USA, given the fact that Egypt could
export goods to the USA without quota or duties. Exports to the Arab countries were 12.4%
in the same year, while the remaining 9.2% of total exports were distributed among Europe,
Africa and other countries.
On the other hand, imports grew by 24.3% y-o-y in 2006/07, realizing US$37.8bn. The major
portion of imports was directed to the intermediate goods, which constituted 27.6% of the
total Egyptian imports, then came the investment goods with 26.0%, while consumer goods
reached 14.0%. It is worthy to note that the major export markets were the same main import
markets, the European Union, the USA and Asia, with 34.4%, 21.8% and 15.9% of total
imports, respectively.
The fact that imports reached US$37.8bn in 2006/07, while exports reached only US$22.0bn,
resulted in a preliminary trade deficit of US$15.8bn. Fortunately, this deficit was compensated
by a 39.8% increase in the services account, which was mainly attributed to receipts from
transportation, especially from the Suez Canal, as well as growth in investment income.
Such improvements in the services account along with the 27.3% y-o-y increase of net
transfers, contributed to a rise in the current account surplus by 53.9% y-o-y in 2006/07,
reaching US$2.7bn, compared to US$1.8bn recorded the previous year.
In March 2008, exports proceeds surged by 31.1% y-o-y, reaching US$20.8bn. This incline
was pushed by the 35.4% increase in oil exports and the 27.4% rise in other exports. As for
imports, they amounted to US$37.6bn, realizing a y-o-y growth of 43.1%. This was attributed
to the significant surge in oil imports, growing by 138.1% y-o-y, reaching US$6.8bn, along
with the 31.5% rise in other imports, amounting to US$30.8bn. The fact that growth in
imports surpassed that of exports resulted in an increase in the trade deficit balance, reaching
US$16.8bn, compared to US$10.4bn, over the same period a year before.
It is worth mentioning that this deficit was compensated by a surplus in the service and
transfers accounts by US$10.9bn and US$6.4bn, respectively. This led to a surplus in the
current account, amounting to US$488.4mn.
September 2008
Accelerated Inflation
After the floatation of the Egyptian pound in 2003 and the enhanced confidence in the
Egyptian economy, as a result of the economic reforms adopted by the government, the
demand for investing in Egypt increased, causing an appreciation of the local currency
against the US$ starting from 2005. The exchange rate reached LE5.5:US$1 in Nov 2007,
compared to LE5.8:US$1 in 2005. Fortunately, the appreciation of the Egyptian pound did
not negatively affect the Egyptian exports, as shown earlier.
In 2005, the Central Bank of Egypt moved towards inflation targeting. For this purpose, it
established the Monetary Policy Committee, which was scheduled to meet every six weeks to
identify the corridor range, representing the overnight deposit and lending rates at the CBE,
which were set initially at 9.5% and 12.5%, respectively. In June 2006, rates were reset at
8.0% and 10.0%. Since then, these rates have been moving according to the development of
the inflation rate. In April 2008, the inflation reached 16.4%, while deposit and lending rates
reached 10.0% and 12.0% in May 2008, respectively.
In May 2008, the government announced the removal of tax exemption on treasury bills,
private schools and universities, as well as extensive energy consuming industries, operating
under the free-zones system, mainly fertilizers, cement, steel and petrochemicals. In addition,
energy subsidies have been reduced for all energy intensive industries. Moreover, new fees
were imposed on car licensing, with different categories according to the engines types. Later
on, the tax exemption on newly issued treasury bonds was also removed.
These decisions were reflected on higher inflation, reaching 23.6% in August 2008, pushing
the MPC to further raise the corridor range, which reached 11.5% and 13.5% in September
2008, respectively.
Hikes in inflation during the last few years were also a result of the increased money supply
in the Egyptian economy, which was illustrated by the jump of the Domestic Liquidity (M2)
by 18.3% in 2006/07, reaching LE662.7bn. This could be attributed to the 20.1% growth in
Narrow Money Supply (M1) and the 17.8% rise in Quasi Money. These rises were a result
of the growth realized in the economy, which triggered the development of many investment
projects, leading to the current increase in liquidity witnessed in the banking system.
On the other side, interest rates reflected a slight decrease over the period from 2003/04
to 2006/0 7, where deposit rate for less than one year declined to 6.9% in June 2007 from
7.77%. Also, the lending rate for less than one year went down from 13.27% to 12.60%.
September 2008
Outlook for the Egyptian Economy

Our outlook for the Egyptian economy is positive given the strong growth realized since the
appointment of the current cabinet in 2004. The achievements made in various sectors of the
economy and the thriving investment climate are all signs of continuing development in the
years to come.
The continuous efforts of the government towards improving the economys growth support
our positive vision for the Egyptian economy, as the government announced many objectives
to be achieved within the 5-year governmental plan ending mid 2012. Such objectives are
represented by shifting the annual GDP growth to 8%, decreasing inflation to 6%, reducing
unemployment to 5.5% down from 9% along with other objectives, which if achieved should
bring fruitful benefits to the Egyptian economy. We believe such objectives could be realized
relying on the fact that the Egyptian cabinet has proven to be successful in reaching planned
goals.
Currently, the main challenges facing the Egyptian economy are the rising inflation rate and
the weakening US Dollar. Up till now, the government has been successful in dealing with
both problems, which are more external than internal.
September 2008
Background on the Egyptian Banking Sector

Banking Structure Development
The first Egyptian bank was the National Bank of Egypt NBE, which was established in
1898, with a capital of GB1mn. It used to perform the duties of a central bank in the 1950s.
Banque Misr BM was then established in 1920 followed by Banque du Caire BdC in 1952
and Bank of Alexandria BoA in 1957. The Central Bank of Egypt CBE was established
in 1961. During the 1960s, banks were nationalized and NBE acted as a commercial bank,
while still carrying out some of the duties that were not covered by the CBE at that time.
The open door policy adopted in Egypt in the 1970s to attract foreign investments resulted
in an expansion of the banking system, which was composed at that time of 4 public banks,
3 investment banks and 19 specialized banks. Meanwhile, the banking law was established,
identifying the three types of banks, along with the functions of each type.
The banking structure swelled significantly since then and until the 1990s, as the number
of banks soared from 26 to 63 banks in 1999. The branch network also expanded from 527
to 2,434 branches. As a result of the consolidation movement that took place in the sector
during the last few years, represented by mergers and acquisitions actions, and the fact that
7 branches of foreign banks ended their business in Egypt, the number of banks shrank to 41
by 2007 and the branch network expanded to compromise currently 3,252 branches in order
to cover larger client base.
Table 02: Banking Structure Development
End of June
1970
Commercial
Banks
5
Investment Banks Specialized Banks Total # of Banks

0
20
25
1975
19
26
1980
19
29
52
1985
43
33
80
1990
44
33
81
1995
28
32
64
2000
28
31
62
2005
27
22
52
2006
23
17
43
Source: CBE, Global Research
Chart 01: Banking Structure in 2006/07

It is worthy to note that the private and
joint venture banks constituted 68.3%
of the total number of banks in 2006/07,
whereas off-shore banks and public
banks shares were 17.1 and 14.6%,
respectively.
Off-Shore Banks
17.1%
Public Sector
14.6%
Private and Joint

Ventures 68.3%
September 2008
Poor Performance Triggered Reforms

The Egyptian banking sector was dominated by the four large public banks NBE, BM, BdC
and BoA. As a result of long existence in the Egyptian market and accordingly, having huge
number of branches serving greater share of the population compared to the private banks,
the public banks constituted approximately half of the sectors assets in 2003. This being
the case along with the fact that these banks provided large portion of their loans to public
enterprises had negatively impacted the performance of the four banks and resulted in a
combined non-performing loans/ total assets ratio of approximately 12% in 2002.
That said, the Egyptian government was urged to alleviate the banking systems turmoil,
realizing its importance in the development of the economy. Therefore it devoted significant
efforts to make major reforms in the sector, including amendments in some regulations,
accompanied by privatization and consolidation actions. The main objective behind these
reforms was to improve the sectors efficiency, in terms of asset quality as well as capital
adequacy.
Public Banks Being the Primary Concern
The Government adopting several reforms tools, began with selling stakes of public banks in
joint venture banks to curb the problem of hefty bad debts. The following table summarizes
the public stakes sold over the period from 2004 to 2007.
Table 03: Sale of Public Banks Stakes in Joint Ventures
Divested Public Bank
Acquirer
Acquired Shares in Joint Ventures
Ripplewood Consortium
Commercial International Bank
National Bank of Egypt Arab Banking Corporation International
Suez Canal Bank
Societe Generale
National Societe Generale Bank
Banque Misr
Misr International Bank
BLOM Bank
Egypt Romania Bank
Arab African International Bank
Misr America International Bank
Banque du Caire
Audi
Cairo Far East
Union National Bank
Alexandria Commercial and Maritime
Bank of Alexandria
Barclays
Cairo Barclays
Piraeus
Egypt Commercial Bank
Credit Agricole
Egypt American Bank
Shareholders in Delta International Bank Delta International Bank
National Investment Bank
Misr Iran Development Bank
Source: Ministry of Finance, Global Research
In 2005, Non-performing Loans NPLs owed by public enterprises to public banks amounted
to LE 26bn. The government paid as fractional settlements for these loans LE6.9bn in January
2006 and LE9.1bn in December 2006, with the remaining amount to be finalized by 2009,
according to the governments plan.
Moreover, the government has appointed skilled management and staff, along with improving
internal processes of state-owned banks, in order to raise their competitiveness.
September 2008
Notable Reforms to the Whole System

Aiming at enhancing the banking systems competitiveness in terms of adequate capital
together with improving the capabilities of banks to meet default on their loans, the government
has set regulations for increasing the minimum required paid-in capital and capital adequacy
ratio. Additionally, the government enhanced the role of the CBE in regulating the sector and
assigned it more responsibilities.
As an additional attempt to control NPLs for the whole banking system, the CBE issued a
decree in September 2004 to establish a unit in the CBE to monitor the banks NPLs books and
asked banks to establish a similar internal unit. The role of the CBE would be to continuously
monitor these units to make sure that they are well implemented and well performing to deal
with NPLs. The efforts performed by this unit resulted in the settlement of 67% of NPLs in
private banks over the period from 2004 to March 2007.
Recently, a credit bureau, under the supervision of the CBE, has been established with the aim
of providing information to banks regarding personal and financial information on borrowers,
as well as their financial history, including loans defaults, bankruptcies, court judgments and
late payments. Other positive information such as timely settlements is also included. The
objective of establishing this bureau was to facilitate time saving procedures. According to
this process, borrowers will not have to wait for a long time until the bank investigates their
financial position and approves loans requests. Furthermore the risk of default will diminish
by providing banks with accurate information that will help them in their decision making.
Moreover, the government motivated the consolidation of the sector through privatization,
mergers and acquisitions to get rid of disturbed banks.
Consolidation Dominated the Sector
The Government aimed at consolidating the banking sector in order to increase the players
competitiveness and eliminate lowly performers. An important factor contributing to the
consolidation of the banking sector was the amendments of regulations by the CBE.
According to the Unified Banking Law of 2003, the minimum required paid-in capital was
raised to LE500mn from LE100mn. In addition, the capital adequacy ratio was raised from
8% to 10% of the risk-weighted assets. It is worthy to note that this law gave the CBE
more responsibilities as a regulatory organization, where the governor directly reports to the
countrys President.
Meanwhile, these amended regulations spurred local banks, especially small ones and poor
performers to opt for mergers and acquisitions in order to conform to the new laws.
10
September 2008
Table 04: Banks Mergers during the Period from 2004 to 2007
First Bank
American Express Bank (Branches in
Egypt)
Misr Exterior Bank
Second Bank
New Entity
Date
Egyptian American Bank
Banque Misr
Banque Misr
Sep-04
Credit Lyonnais Branch
Credit Agricole Indosuez
Calyon
Mar-05
Misr America International Bank
Arab African International Bank
Arab African International Bank Sep-05
Mohandes Bank
National Bank of Egypt
Oct-05
Bank of Commerce and Development

Nile Bank with Islamic International
Bank for Investment and Development
Dec-05
United Bank of Egypt
United Bank of Egypt
Jun-06
Calyon
Credit Agricole Egypt
Sep-06
Misr International Bank
National Societe Generale Bank Nov-06
Banque du Caire
Banque Misr
Banque Misr
Sep-04
Feb-07
Source: Ministry of Finance, Global Research
Foreigners Chasing Opportunities in the Sector

Foreign banks have shown continuous interest in the booming banking sector in Egypt
in the last few years. This was due to a number of reasons, the majority of which were a
pure result of the economic reforms, as well as the banking reforms that Egypt is currently
witnessing. Such reforms helped boost the banks profitability over the last few years, along
with decreasing NPLs gradually and entailing good lending prospects.
The major inducement for the foreign interest was the escalating demographics in Egypt and
its resulting potential for the retail segment, as the population rose at a CAGR of 2% over
the last 5 years, reaching 75mn in 2006/07, with a high percentage of youth, almost in the
working age group. We believe that a wide range of the population in Egypt has a low or
even zero banking penetration. This could be attributed to the low income levels, the lack of
awareness of the importance of participation in banking activities, in addition to the informal
job market. Foreign attention was thus stimulated by the short of saturation of the retail
segment in an attempt to capitalize on the huge unfulfilled demand.
In addition, foreign players were enticed to participate in mergers and acquisitions, especially
after the Governments announcement regarding not granting any new banking licenses.
The foreign interest was divulged by the flow of international foreign and Arab banks
acquisitions of local lenders since the banking sector reforms were initiated in 2004. It began
when the British bank Barclays acquired from banque du Caire its 40% remaining stake in
Cairo Barclays. Other foreign banks that acquired stakes in the sector over the last few years
were Credit Agricole, Societe Generale, Piraeus, BLOM Bank, Abu Dhabi Islamic Bank and
National Bank of Kuwait. Yet there was a larger range of foreign banks that revealed their
interest in the Egyptian banking sector and strived to obtain stakes in it, but they did not reach
their target to win the related bids.
September 2008
11
Table 05: Most important Acquisitions over the Period from 2005 to 2007
Acquired Bank
Acquirer
Acquisition
Date
May-05
100.0
239.5
Jun-05
88.0
Aug-05
Misr America
Arab African
International Bank
International
Egyptian Commercial
Piraeus
Bank**
Arab International
Suez Canal Bank
Bank
Misr International
NSGB
Bank
Misr Romania ***
BLOM Bank
Egyptian American
Credit Agricole
Bank
A consortium led by
CIB****
Ripplewood Holdings
Cairo Far East
Audi Bank
Misr Iran
National Investment
Development Bank
Bank
Delta International
A consortium led by
Bank
Ahli United Bank
Alexandria
Union National Bank
Commercial Maritime
Bank of Alexandria
San Paolo
National Development Abu Dabi Islamic
Bank
Bank
A consortium led
Al Watany Bank of
by National Bank of
Egypt
Kuwait
Total
Acquisition
Price (LE)
Deal
BV per BV P/BV
Value
share Weights *
(LEmn)
239.5 146.0 18.2%
1.6
20.0
169.0
18.0
2.2%
1.1
16.8
10.0
48.2
29.4
3.7%
0.3
Sep-05
90.7
43.2
2,204.0
21.4
2.7%
2.0
Dec-05
99.4
11.8
590.0
13.7
1.7%
0.9
Feb-06
74.6
45.0
2,176.6
11.8
1.5%
3.8
Feb-06
18.7
53.5
1,302.5
16.3
2.0%
3.3
Mar-06
99.7
205.3
540.1
70.6
8.8%
2.9
Apr-06
29.9
223.4
107.7 411.8 51.4%
0.5
Aug-06
89.3
37.0
1,652.0
11.5
1.4%
3.2
Aug-06
94.8
23.0
244.5
15.3
1.9%
1.5
Dec-06
80.0
72.0
9,215.0
10.4
1.3%
6.2
Jul-07
51.3
11.0
159.1
11.2
1.4%
1.0
Dec-07
98.1
77.0
5,660.2
13.8
1.7%
5.6
801.3
100%
Average P/BV (Simple)
2.3
Average P/BV (Weighted)
1.3
Source: News Announcements, Global Research

* P/BV Calculation (Equity less net profit of the year /outstanding number of shares).
**In June 2005, Piraeus acquired around 69% of the Egyptian Commercial Bank, bringing its total stake to
88.0%.
***In December 2005, Blom Bank acquired around 84% of Misr Romania Bank, in which it originally owned
12.5%, bringing its total stake to 96.7%.Later on, it raised its stake to 99.4%.
****Currently, the Consortiums stake in CIB is 5.6%
Two Major Acquisition Bids in 2007

The year 2007 witnessed two acquisitions of local lenders by Arab banks mainly from the
GCC countries, attracted by the positive sentiment on the Egyptian banking sector. In June
2007, the CBE announced its approval for three foreign banks to conduct due diligence on Al
Watany Bank of Egypt. The three banks were National Bank of Kuwait NBK, Commercial
Bank of Kuwait and the Greek EFG Eurobank. NBK won the bid and acquired 70.3mn shares
of Al Watany Bank of Egypt at LE77.0 per share in November 2007, implying a P/BV of
5.6x. In addition, NBK acquired a 2.1% additional stake in the Bank in December 2007,
where its total stake reached 98.1%.
12
September 2008
In July 2007, a consortium led by Abu Dhabi Islamic Bank acquired 51.3% of the National
Development Bank at LE11 per share, which was close to the shares book value. The
National Development Bank had NPLs of LE2bn, exceeding 50% of the Banks total loans,
which- according to the acquirer- will be covered over a 5-year period, during which no cash
dividends will be distributed.
It is worth mentioning that the Egyptian Gulf Bank and the Arab Investment Bank are
potential acquisition targets, due to their relatively low market shares, low capital base and
modest performance, compared to large peers in the market.
One of the Big Four Privatized
The foreign appetite in the Egyptian banking sector was again revealed in the privatization
deal of BoA. In February 2006, the government announced its intention to privatize BoA, the
smallest bank of the large four public banks, through selling a stake of 75-80% of the Banks
shares to a strategic investor, 15-20% to the general public through an IPO and 5% to be
allocated to the Banks employees. There were 13 banks that submitted requests to purchase
the announced stake, comprising international, regional and local banks, of which 8 banks
presented preliminary offers. The CBE allowed 6 of these banks to perform due diligence
on BoA, among which were Mashreq Bank, Intesa San Paolo Bank, Arab Bank, CIB and
BNP Paribas. The final purchase offers presented were from 4 European and Arab banks
not including any local bank. Finally, in October 2006, the Italian Bank Intesa San Paolo
won the bid and acquired after 2 months, 80% of the Banks shares at a total of LE9.2bn
(US$1.6bn), representing US$12.6 per share, which was more than 5.5 times the shares
book value. The second highest premium was presented by the Arab Bank, which offered
LE7.9bn (US$1.4bn).
The government is currently awaiting the right time to offer the remaining 15% of BoA
shares through an IPO.
The privatization of BoA revealed the foreign players will to acquire a local bank at a high
premium, just to ensure a seat in an under-banked country with robust growth potential.
Privatization of BdC Postponed Surprisingly
Still attracting foreign lenders, the government was about to privatize the third largest public
bank BdC. The story began in May 2007 when the government announced the merge
of BdC with BM. Three months later, it was announced that BdC, which captures a 6%
market share in terms of total deposits and also of total assets of the banking sector, would
be privatized. The privatization would have occurred through selling a maximum stake of
67% to a strategic investor, offering a 28% stake through an IPO in the stock exchange, with
the 5% remaining stake to be distributed among the Banks employees. Among 14 financial
advisory institutions, JP Morgan was assigned responsible for the sale. The preliminary offers
presented, amounting to 12 offers illustrated the flow of foreign interest to gain presence in
the market. These offers were represented by the Arab Bank Consortium, Deutsch Bank,
Mashreq Bank, Kuwaits Noor Financial Investment Company, Commercial Bank of
Kuwait and other foreign and Arab banks. In March 2008, the CBE announced the short-list
consisting of 5 banks that were allowed to make the due diligence on BdC, these banks were
the Saudi Samba Bank, the National Bank of Greece, the British Standard Chartered Bank, a
consortium composed of the Jordanian Arab Bank group and the Saudi Arab National Bank,
and another consortium led by Mashreq Bank.
September 2008
13
Surprisingly, the deal was cancelled in June 2008 and it was announced that the privatization
of the Bank would be postponed, as the bids presented were below the minimum price set
for acquisition.
Two of the competing banks, Saudi Samba Bank and the British Standard Chartered Bank,
were disqualified and did not participate in the bid. National Bank of Greece presented
the highest bid, at US$1.4bn, followed by Mashreq Bank and the consortium composed of
the Jordanian Arab Bank group and the Saudi Arab National Bank, presenting a price of
US$0.9bn and US$0.8bn, respectively.
Though the cancellation of the deal was surprising and raised questions regarding the reasons
for not undergoing the privatization procedures, this event ensures the existence of inherent
opportunities in the Banking sector, as the government viewed that the presented bids did not
meet the real value of the Bank.
Furthermore, the government announced that it was not planning to privatize the two
remaining public banks (NBE and BM) in the coming five years to let the banks strengthen
their institutional performance.
14
September 2008
Financial Performance of the Banking Sector

Performance Positively Affected by Reforms
The reforms taking place in the Egyptian banking sector since 2004 had positively influenced
the performance of the banks in terms of improved consolidated assets and liabilities and
resulting performance ratios. The period under analysis in our report is from 2002/03 to
2006/07 to show how the adopted reforms positively affected the banks performance. We
will analyze the development of the consolidated assets, liabilities, deposits, loans of the
banking sector, along with some performance indicators.
Increased Money Supply
The acceleration of the Egyptian economy, accompanied by the banking sector reform
program, stimulated investments in various business sectors leading to an increase in the
money supply in the market, which was translated into the incline of the consolidated assets
and liabilities of the banking system.
Domestic Liquidity (M2) increased by 18.3% y-o-y in 2006/07, reaching LE662.7bn,
compared to LE560.4bn in 2005/06. Narrow Money Supply (M1), represented by currency
in circulation and demand deposits in local currency, rose by 20.1%, reaching LE131.3bn,
while Quasi Money, which consisted of time and saving accounts in local currency along
with demand, time and saving deposits in foreign currency, moved up by 17.8% reaching
LE531.4bn in the same year.
Chart 02: Domestic Liquidity Development
LEmn
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
2002/03
2003/04
2004/05
M1
2005/06
2006/07
Quasi Money
Vast Funding Base

The increased money supply in the banking system was reflected in rising figures of the
aggregate assets and liabilities. The funding base, representing the key driver for the banks
good performance has ameliorated in 2006/07 by 23.2% y-o-y, reaching LE937.9bn,
compared to LE761.6bn in 2006.
September 2008
15
Table 06: Aggregate Systems Liabilities

In LEmn
2002/03
2003/04
2004/05
2005/06
2006/07
Capital
18,155
20,346
22,949
27,112
33,037
Reserves
11,805
11,454
12,419
13,418
12,552
Provisions
40,099
44,584
49,541
54,950
53,469
Long-term loans and bonds
14,866
15,012
14,254
17,526
26,351
Obligations to banks in Egypt
35,579
29,933
22,671
21,488
82,619
Obligations to banks abroad

Total deposits
16,247
10,332
12,262
8,770
10,006
403,144
461,697
519,649
568,841
649,953
Other liabilities
38,043
40,078
49,883
49,457
69,936
Total Liabilities
577,938
633,436
703,628
761,562
937,923
Since 2002/03, total deposits have been the major component of the banking system liabilities,
reaching around LE650bn in 2006/07 and representing 69.3% of total liabilities.
Chart 03: Composition of Aggregate Liabilities-2006/07
Other liabilities 7.5%
Capital 3.5%
Reserves 1.3%
Provisions 5.7%
Long-term loans and bonds 2.8%
Obligations to banks in Egypt 8.8%
Obligations to banks abroad 1.1%
Total deposits 69.3%

Deposits Moving Up
The aggregate deposits balance of the banking system, including government deposits,
grew at a 15.2% y-o-y in 2006/07. The main driver behind the increase in total deposits was
the escalating non-government deposits, which grew by 18.8% y-o-y in 2006/07, reaching
approximately LE581.3bn and representing 88.3% of the total deposits.
16
September 2008
Chart 04: Government and Non-Government Deposits Growth

LEbn
700
600
500
400
300
200
100
0
2002/03
2003/04
Total Government Deposits
2004/05
2005/06
2006/07
Total Non-Government Deposits
It is worth mentioning that deposits in local currency represented 71.6% of total deposits in
the banking system in 2006/07, while deposits in foreign currency represented 28.4% in the
same year. The household sector contributes to 75.5% of total non-government deposits in
local currency and 62.9% in foreign currency. The private sector comes second with 18.2%
in local currency and 31.4% in foreign currency.
Chart 05: Non-Government Deposits in Local
Currency in 2006/2007 (Including cheques and
drafts)
Non-Residents
0.8%
Chart 06: Non-Government Deposits in Foreign

Currency in 2006/2007 (Including cheques and
drafts)
Public Sector
5.5%
Non-Residents
1.4%
Public Sector
4.3%
Private
Sector
18.2%
Household
Sector
75.5%
Private
Sector
31.4%
Household
Sector
62.9%
Rise in Deposits Reflected on Total Assets

The aggregate banking system figures in 2006/07 illustrate remarkable growth in total assets
on the back of the realized incline in the sources of funds, namely deposits. Total assets grew
by 23.2% y-o-y, reaching LE937.9bn. Looking at the components of assets, we realize that
the securities and investments in treasury bills declined by 9.2% in 2006/07 and the loans and
discount balances went up by the same percentage, which can be explained by the decrease in
treasury bills yields, which was compensated by the increase in lending rates.
September 2008
17
Table 07: Aggregate Systems Assets

In LEmn
2002/03
2003/04
2004/05
2005/06
2006/07
5,557
5,412
6,594
6,813
7,705
Securities and investments in treasury bills
111,337
137,431
170,659
193,965
176,098
Balances with banks in Egypt
110,874
116,290
124,986
121,695
217,363
Cash
Balances with banks abroad
29,798
43,290
51,204
72,554
124,366
Loans and discount balances
284,722
296,199
308,195
324,041
353,746
Other assets
35,650
34,814
41,990
42,494
58,645
Total Assets
577,938
633,436
703,628
761,562
937,923
Loans and advances have always captured the lions share of the banking systems total assets.
The growth in total assets in 2006/07 was mainly driven by the acceleration of the loans and
discount balances, constituting 37.7% of the total aggregate asset base of the sector.
Chart 07: Composition of Aggregate Assets-2006/07
Other assets 6.3%
Cash 0.8%
Securities and investments in
treasury bills 18.8%
Loans and discount

balances 37.7%
Balances with banks
in Egypt 23.2%
Balances with banks

abroad 13.3%
Growing Loans Books

Egyptian banks benefited strongly from the large available funding base to expand their
lending capabilities in 2006/07. Loans books witnessed a y-o-y growth of 9.1%, which was
stimulated by the reforms that have been occurring in Egypt over the past few years, impacting
various sectors, where the need rose for loans to fund necessary investments. Alternatively,
the reforms that took place in the banking system positively affected the banks performance
and enhanced their ability to fulfill required loans.
18
September 2008
Chart 08: Loans Growth

LEbn
360
350
340
330
320
310
300
290
280
2002/03
2003/04
2004/05
2005/06
2006/07
Government loans in 2006/07 accounted for a minor fraction of the total loans in the banking
system, representing only 7.6% and amounting to LE26.7bn, while the major component,
consisting of 92.4% of total loans consisted of non-government loans reaching LE325.8bn.
On the other hand, loans denominated in local currency represented 70.3% of the total loans
in the same year.
Most of the non-government loans in 2006/07 went to the industrial sector, as this sector
contributed to 31.3% of the non-government loans in local currency and 41.1% in foreign
currency. Then comes the services sector with 26.3% of loans in local currency and 36.7%
in foreign currency. It is worthy to note that the retail lending represented only 17.0% of the
total loans in 2006/07, which could be explained by the huge risk associated with lending
to individuals compared to institutions, as probability of default is much higher. Besides,
information on the financial position of borrowers was not yet available, but should be
accessible shortly, as the credit bureau that will be responsible for gathering data on the
financial position of the banks clients has been recently established. When such information
will be available, retail lending is expected to ameliorate, especially with the huge unfulfilled
demand for loans in the household sector.
Chart 09: Non-Government Loans in Local Currency2006/07
Agriculture Sector
2.9%
Household &
External Sector
23.7%
Chart 10: Non-Government Loans in Foreign Currency2006/07

Household & External
Sector 8.1%
Agriculture Sector
1.0%
Industry Sector
31.3%
Industry Sector
41.1%
Services Sector
36.7%
Services Sector
26.3%
Trade Sector
15.8%
Trade Sector 13.2%
September 2008
19
Projected Banking Figures

We assumed future figures of the Egyptian banking system based on the forecasted figures
of GDP by the International Monetary Fund. We took the average of the annual M2 as a %
of GDP to project future balances of M2. We also projected future deposits balances based
on the annual average of deposits/M2. It is worth mentioning that we have added a slight
premium to this ratio to take into account the expected increase in deposits balances, as a
result of the amendments on the corridor range. In addition, we projected future loans based
on the average of the annual loans/deposits ratio, with a minor incline to reflect the increase
that is expected to occur in loans balances as well.
Table 08: Projected Figures of the Banking System
In LEmn
Jun-05
Jun-06
Jun-07
GDP
538,528.0
617,676.4
731,201.6
857,633.0 1,005,339.0 1,161,365.0 1,337,537.0
M2
493,884.0
560,356.0
662,688.0
780,617.6
91.7%
90.7%
90.6%
91.0%
91.0%
91.0%
91.0%
13.5%
18.3%
17.8%
17.2%
15.5%
15.2%
521,745.0
571,461.0
658,215.0
819,648.4
105.6%
102.0%
99.3%
105.0%
105.0%
105.0%
105.0%
9.5%
15.2%
24.5%
17.2%
15.5%
15.2%
308,195.0
324,041.0
353,746.0
463,148.4
576,487.5
665,956.9
766,978.5
59.1%
56.7%
53.7%
56.5%
60.0%
60.0%
60.0%
5.1%
9.2%
30.9%
24.5%
15.5%
15.2%
% of GDP
% change y-o-y
Deposits (including
government deposits)
% of M2
% change y-o-y
Loans
Loans/Deposits
% change y-o-y
Jun-08 E
Jun-09 E
Jun-10 E
Jun-11 E
915,059.6 1,057,074.4 1,217,426.2
960,812.5 1,109,928.1 1,278,297.5
Source: International Monetary Fund, CBE and Global Research
Performance Indicators
As illustrated in the previous section, the banking reforms have positively influenced the
performance of the banking sector, which was shown by the acceleration of the aggregate
banking system figures over the period from 2002/03 to 2006/07. To highlight the effect of
these reforms, we will present some performance indicators, including interest rate spread, a
couple of profitability ratios and loans/deposits ratio.
Interest Rate Spread
The interest rate spread is the best indicator to show banks performance, as it illustrates the
income generated from core banking activities.
This income is generated through realizing a spread between the lending rate and the cost of
funds, represented by interest rates on different deposits. The spread has been relatively stable
over the last 4 years, as the rates are more or less moving together in the same direction.
Banks generate additional income through other sources, one of which is reaping fees and
commissions from lending activities and contingent liabilities offered to clients, in addition
to fees from investment banking activities. Banks have other sources of income, but these are
volatile. These sources encompass dividend income, gains on sale of financial investments,
profits realized from foreign exchange operations, financial investments valuation differences
and other items.
20
September 2008
Chart 11: Interest Rate Spread

% 14
13
12
11
10
9
8
7
6
5
2003/04
2004/05
2005/06
Less than three-months deposits

Less than one year deposits
2006/07
Less than six-months deposits

Loans of one year or less
ROAA and ROAE Moving Positively

Profitability of the banking sector, measured by Return on Average Equity (ROAE) and
Return on Average Assets (ROAA), have been positively affected by the reforms in the
sector and the economy as a whole. ROAE and ROAA moved in an upward trend since
2003/04, reaching 14.3% and 0.8% in 2006/07, up from 9.8% and 0.5%, respectively.
Chart 12: Profitability Indicators (2003/04-2006/07)
%
15.0
14.0
13.0
12.0
11.0
10.0
9.0
8.0
2003/04
2004/05
ROAE
2005/06
2006/07
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
ROAA (right scale)
A Significantly Unleveraged Sector

Total loans witnessed a modest CAGR of 5.6% over the period from 2003/04 to 2006/07,
compared to a CAGR of 14.6% in total deposits. As a result, the loans/deposits ratio declined
from 64.2% to 54.4%. This implies that banks are still reluctant to use great portions of
deposits in providing loans and having to bear the risk of default. Alternatively, banks prefer
to invest more of their funds in less risky assets like treasury bills and other investments,
while they have to abide by the minimum required liquidity ratio. They have to keep a
minimum of 20% in liquid assets denominated in local currency and 25% in foreign currency.
Meanwhile, the tax exemption previously exerted on treasury bills pushed banks to augment
their investments in these instruments and put a break on their lending activity. This was
another reason leading to the decline of the loans/deposits ratio.
September 2008
21
As these practices were far away from the core banking activities, the government decided in
May 2008 to remove the tax exemption shield on treasury bills gains, in an attempt to push
banks to expand their lending facilities and restrain from investing their funds in a way that
deviates from their core business. The tax exemption on treasury bonds was also cancelled
afterwards.
In the meantime, the relatively low loans/deposits ratio indicates that banks have enough
room if they decide to direct more of their funds to lending opportunities.
Chart 13: Loans/Deposits Ratio Development
%
66.0
64.0
62.0
60.0
58.0
56.0
54.0
52.0
2003/04
2004/05
2005/06
2006/07
CBE and Regulatory Intervention

Inflation on the Rise
As described earlier, the growth in the Egyptian economy since 2004 led to an enhanced
investment climate and increased money supply. This in turn led to a rise in aggregate
demand and consumption, uncoupled with local production, resulting in soaring commodity
prices. Simultaneously, the improvements achieved in many sectors resulted in increased
raw material prices. Meanwhile, economic growth decreased the rate of unemployment
and raised demand for labor, shifting wages upward. In addition, the increase in food and
energy prices internationally was reflected on domestic prices. All these factors combined
attributed to hiking prices and inflation reaching 23.6% in August 2008, compared to 6.9%
in December 2007.
Tight Monetary Policy Targeting Inflation
The Unified Banking Law of 2003, which identified the various functions of the CBE, gave it
a free-hand to implement the appropriate monetary policy. The policy adopted by the CBE is
a tight one aiming at decreasing inflation, which if not adjusted would harm the economy.
Counteracting Inflation through the Corridor Range
In 2005, the CBE decided that its main tool to adjust inflation would be the overnight deposit
and lending rates at the CBE, which is the corridor range that is adjusted every six weeks
according to the MPC meeting. In 2005, deposit and lending rates at the CBE were set at
9.5% and 11.5%, respectively. In June 2006, rates were readjusted to be 8% and 10%. The
MPC continuously amended the corridor range, in response to the accelerating inflation. Of
late, precisely in September 2008, the deposit and lending rates stood at 11.5% and 13.5%,
respectively, as the inflation reached 23.6% in August 2008.
22
September 2008
Chart 14: Development of the Inflation and Corridor Range

%
29
24
23.6
22.1
19.7
19
20.2
16.4
14.4
14
10.5
7.2
12.1
8.6
6.9
4.7
Deposit Rate at the CBE
Lending Rate at the CBE
September-08
August-08
July-08
June-08
May-08
April-08
March-08
February-08
January-08
December-07
June-07
June-06
June-05
Ination Rate
Will the Tight Monetary Policy Succeed in Targeting Inflation?

It is not certain whether the restrictive monetary policy will succeed to decrease the inflation
rate, especially in the short run, as the government plans to expand the growth of the economy
could alternatively lead to higher levels of inflation. Besides, the fiscal policy is contradicting
with the monetary policy, where the governments plan to decrease its expenditures through
cutting subsidies, especially those concerning the energy intensive industries, in addition to
removing some tax exemptions, could have a significant impact on rising prices and thus
increasing inflation. Nevertheless, if inflation continues to rise, which will mostly be the
case, the CBE is expected to further raise interest rates gradually.
Combined Effect on Interest Rate Spread
Not surprisingly, many banks have raised the interest rates on their deposits, following the
consecutive climbs of the corridor range. This is expected to be followed by a similar or
greater increase in rates posed on the banks loans. Albeit the banks will be able to widen
their spread in 2008 and 2009, as a result of these practices, it is plausible that spreads will
contract thereafter, as a result of the intensifying competition in the sector. This competition
will push banks to decrease the rates on loans, while posing higher rates on deposits to be
able to maintain their market shares, which will be negatively reflected on the banks interest
rate spread.
The same goes for treasury bills yields, as they are expected to grow higher till 2009,
compensating for the removed tax shield, then to decline afterwards, as banks will probably
be less relying on these instruments in their investment portfolios.
September 2008
23
Chart 15: Lending Rates vs. Treasury Bills Rates

%
13.4
14
13
12.5
12.7
13.1
12.5
12.0
12
11
10
9
9.0
9.4
8.7
8.5
8.5
2010 E
2011 E
2012 E
7
6
6.9
2007
2008 E
2009 E
Commercial banks lending rate (average)
3-month Treasury-bill rate (year-end)
Source: Economic Intelligence Unit, Global Research
Other CBE Tools of Regulatory Intervention

The most important regulations of the CBE governing the banking sector are those related to
liquidity, reserves, extended credit, capital adequacy and provisions. These are presented in
more details below.
Capital Adequacy
The Unified Banking Law of 2003 requires banks in Egypt to raise the ratio of capital
adequacy from 8% to 10%.
Minimum Paid-In Capital
The Unified Banking Law of 2003 also obligated banks to raise their minimum paid-in
capital from LE100mn to LE500mn, which was the main motive for small local banks and
poor performers to opt for the mergers and acquisitions in the last few years.
Reserve Requirement
Banks are required to keep 14% of their deposits denominated in local currency as reserves
with the CBE to provide enough liquidity in case deposits are withdrawn by customers. It is
worthy to note that these reserves are not interest earning.
This explains why banks seek to invest their excess liquidity in interest earning instruments
like treasury bills and other government securities to decrease their cost of unused funds.
Though banks should focus on exerting more lending activity and orienting fewer funds to
investments in treasury bills, this has not been the case for several years, due to the banks
unwillingness to get exposed to the risk of default.
It is worth mentioning that banks should also keep 10% of their deposits denominated
in foreign currency as reserves with the CBE, but these reserves earn interest related to
LIBOR.
Liquidity Ratio
Banks must keep at least 20% liquid assets denominated in local currency and 25% of assets
denominated in foreign currency.
24
September 2008
Extending Credit
Banks must not extend credit to a single borrower in excess of 20% of the banks book
value. In addition, banks are not allowed to extend credit to one particular borrower and his
affiliates in excess of 25% of the banks total equity.
Provisions
Banks are required to keep provisions according to the credit risk level associated with each
loan. Loans are classified into two categories related to regular and irregular settlements. For
regular settlements, loans are categorized under many risk levels ranging from low to watch
list risk, where each level has a corresponding provision required rate ranging from 0% to
5%. For irregular loans, they are classified into three types, substandard debt, for which a
20% provision must be kept, doubtful debt, with a required 50% provision. Finally, loss debt
must have a 100% provision. More conservative banks usually keep higher provision rates
than required.
Untapped Segments as Key Prospects
Retail Segment
The retail banking activities in Egypt are considered an unexploited segment, promising high
potentials for the banking sector. There is a great unfulfilled demand for banking activities in
this sector. This comes from the fact that large percent of the population, which amounted to
75mn in 2006/07, after a 2% y-o-y increase, still does not participate in banking activities or
even have a slight participation, which could be a result of low income levels or not enough
understanding of the importance of banking activities. Moreover, 61.1% of the population
is in the working age, which implies further increase of demand of the retail segment in the
future. From the banks side, they have always been reluctant to direct great portions of
their loans to individuals fearing of the risk of default, but this is expected to change in the
future, especially after the establishment of the credit bureau that should facilitate the flow of
necessary information to banks concerning clients history and would therefore minimize the
risk of default. Lending to individuals is only provided according to salaries and usually not
exceeding 20% of the monthly salary.
Currently, a large number of banks are expanding their branch networks to fulfill unsatisfied
needs from the retail segment. As of March 2008, there were 3,252 branches in Egypt with
each branch serving an average of 23.1 thousand people.
As for branch network, it is important to note that around 65% of the existing branches
in Egypt are owned by the public banks. Some of the private banks that announced their
intention to expand their branches were Commercial International Bank, National Societe
Generale Bank, BoA, Audi, HSBC, Piraeus, Blom, Barclays, Export Development Bank of
Egypt, BNP Paribas and Credit Agricole.
SMEs Segment
Small and Medium Enterprises SMEs are defined as companies whose revenues do not
exceed LE1mn. Banks are usually hesitant to lend to SMEs due to the high risk associated
with these companies, in terms of lack of adequate capital and assets, in addition to the fact
that they are usually not registered. As for the SMEs, interest rates could be high, making
the cost of finance through banks higher. These factors explain the low banking penetration
of this segment.
September 2008
25
Recently, the government encouraged the registration of SMEs, which could reduce the
reluctance of banks to SMEs lending, through the provision of collateral. If this happens,
along with the presence of the credit bureau and its role in minimizing default risk, growth
potential in this segment is expected to be high, as banks will be able to expand their banking
activities for this sector and hence increase their client base, enabling them to realize higher
margins.
Mortgage Segment
The Mortgage Financing Law was launched in Egypt in 2001. Mortgage loans represent
a small fraction of banks loans due to many factors. The fact that most properties were
not registered due to high registration fees, made banks hesitant to extend mortgage loans,
fearing of loans default, especially that unregistered properties could not be used as collateral.
Another factor can be attributed to the high rates on mortgage loans reaching 14%, coupled
with low purchasing power and low wages.
In 2005, the government reduced the registration fees on properties to 3% down from 12% of
the propertys price or a maximum fee of LE2,000. Also, property taxes were cut from 46%
to 10% of the annual rental value. Such regulations should facilitate property registration
and thereby would give more confidence to banks or mortgage finance companies to extend
mortgage loans now that they can rely on registered properties as collateral. Moreover,
developers are now targeting middle and upper-middle class level, which may facilitate
mortgage lending in the coming few years.
Mortgage lending opportunities are expected to boost, after the establishment of the
governmental institution the Egyptian Company for Mortgage Refinancing, along with the
emergence of new lending mortgage companies, in addition to the newly established credit
bureau.
The potential growth expected in the mortgage segment induced the CBE to allow banks
increasing the share of loans allocated to the real estate sector from 5% to 15% of their total
loan books, to be equally distributed among real estate developers, mortgage borrowers and
touristic development companies.
An Additional Key Prospect
The restructuring that occurred following the banking sector reform program, resulted in a
reduction of the number of banks from 61 banks in 2004 to 41 banks in 2007 and raising the
number of branches from 2,783 branches to a current number of 3,252 branches.
The major influence on the sector was the heating competition among lenders, which
accelerated substantially in the last few years, especially with the emergence of foreign
expertise. To boost competency, most banks currently provide a wide range of products and
services including house and car loans, credit and ATM cards services, automated machines
and 24-hour services, capital markets and investment banking activities, along with the
traditional banking activities. This intense competition is expected to enhance the banks
profitability by attracting greater client base through providing better quality of products and
services to the public.
26
September 2008
Issues to be Considered
As the Egyptian banking sector was ruled by the public sector banks for decades, the service
was never an issue. These banks were serving the government in financing mainly public
enterprises. Now that most of the banks became private, ameliorating the service became a
must in order to boost, or at least maintain their market shares.
Another important issue is the dissemination of information to the public. As most of the
banks are publicly traded now, there is a need for a minimum of disclosure for shareholders
about the banks operations and performance in any given period. Still the fear of fierce
competition stops banks from operating liberally.
The sector is shaping and these issues will improve with competition, which pours at the end
in the clients interests.
September 2008
27
Peer Group Comparison

Banks Current Market Shares of The Total Branching Network
As of March 2008. The banking system branch network encompassed 3,252 branches. It
is worthy to note that public banks and other private banks outside our coverage universe,
account for 90% of the branching network, approximately.
As for our covered banks, Commercial International Bank CIB captures the highest market
share, represented by 4.2%, which is explained by the long presence of the Bank in the
market, relative to the other banks. National Societe Generale Bank NSGB followed, with
a market share of 3.6%.
Chart 16: Banks Branches Market Shares
CIB 4.2%
NSGB 3.6%
CAE 1.6%
EGBE 0.3%
EDBE 0.3%
Public & other Private

Banks 89.9%
Source: Global Research
Balance Sheet Performance

Major Source of Funds
In terms of deposits market share, also CIB was able to make the highest contribution to the
total deposits of the banking system, 6.0%, followed by NSGB, contributing to 4.8% of total
deposits.
On the other hand, the highest growth realized in deposits over 2007, was performed by
Credit Agricole Egypt CAE, which witnessed a 36.5% increase. This stems from the banks
intention to increase its market share, as it stood at 2.6% in H1 2008, lagging far behind the
two major players, CIB and NSGB.
28
September 2008
Chart 17: Deposits market shares-H1 2008
Chart 18: Deposits Growth (2006-2007)
CIB 6.0%
NSGB 4.8%
CAE 2.6%
EGBE 1.1%
EDBE 0.5%
LEmn
45,000
40%
36.5%
40,000
35%
35,000
30,000
30%
25.1%
25%
21.4%
25,000
18.0%
20%
20,000
13.0%
15,000
10%
5,000
5%
0%

Banks 85.0%
15%
10,000
CIB
Deposits-2006
NSGB
Deposits-2007
CAE
EDBE
% change y-o-y (right scale)
EGBE
Source: Banks financials, Global Research
Comparative Growth in Balance Sheet

Not surprisingly, the major contribution to total assets came from the two largest banks,
CIB and NSGB, contributing to 5.2% and 4.1% of the total assets of the banking system,
respectively. This was attributed to the large funding base of these banks, which was founded
on the relatively immense deposits balances.
In the mean time, the highest y-o-y growth in deposits that CAE was able to realize in 2007,
was translated into the highest growth realized in total assets in the same year, as well. That
said, total assets of CAE swelled by the same growth of deposits realized in 2007.
Chart 19: Total Assets Market Shares-H1 2008
CIB 5.2%
NSGB 4.1%
CAE 2.1%
EDBE 1.2%
EGBE 0.5%
Chart 20: Total Assets Growth (2006-2007)
LEmn
60,000
40%
36.5%
35%
50,000
27.2%
30%
40,000
19.8%
20%
11.9%
20,000
25%
19.7%
30,000
15%
10%
10,000

Banks 87.0%
5%
0%
CIB
Total assets-2006
NSGB
CAE
Total assets-2007
EDBE
Resulting Acceleration in Lending Activity

As for loans, major share went to the two large players, as well. CIB and NSGB contributed
to 6.4% and 6.1% of the total loans in the banking system, respectively.
The major growth in loans over the year was realized by NSGB and CAE, realizing 22.8%
and 22.5%, respectively. This illustrates the two banks target of expanding their market
shares, relative to their peers.
September 2008
29
EGBE
Chart 21: Loans Market Shares-H1 2008
Chart 22: Loans Growth (2006-2007)
CIB 6.4%
NSGB 6.1%
CAE 1.8%
EDBE 1.9%
LEmn
25,000
45%
39.3%
EGBE 0.7%
20,000
40%
35%
30%
15,000
10,000
22.8%
22.5%
25%
20.8%
20%
16.7%
15%
10%
5,000
5%

Banks 83.1%
0%
CIB
Loans-2006
NSGB
CAE
Loans-2007
EDBE
Most Conservative While Having Lowest NPLs Ratio

Although CIB has the lowest NPLs ratio, 3%, it adopts the most conservative provisioning
policy, as its coverage ratio stood at 166% in 2007. It is worth mentioning that the NPLs
ratios of NSGB and CAE are magnified, as they inherited bad debts from the acquisitions of
MIBank and EAB, respectively. Nevertheless, they are performing well, as their coverage
ratios are close to 100%.
Chart 23: Provisioning Policies Adopted-2007
180%
160%
140%
120%
100%
80%
60%
40%
20%
3.0%
9.0%
9.6%
24.2%
19.6%
EDBE
EGBE
0%
CIB
NSGB
CAE
Coverge Ratio
NPLs/Gross Loans
Income Statement Performance

Spreads were suppressed over the year
Net spread, representing the core income of banking activity, has narrowed for almost all
banks under coverage in 2007, except for CAE and Export Development Bank of Egypt
(EDBE), as it inclined from 2.7% to 2.8% and from 1.5% to 1.6%, respectively. The decline
in spreads could be a result of the intensifying competition. Nevertheless, we expect spreads
to rise until 2009, as a response to the successive jumps in the corridor range. Beyond 2009,
the spreads are projected to decline, as a result of the foreseen competition.
30
September 2008
EGBE
As a consequence, net interest margin decelerated over the year for almost all banks, except
for EDBE, which was able to raise its margin from 2.2% in 2006 to 2.5% in 2007.
Table 09: Net Interest Margin and Net Spread
Net Interest Margin
2006
2007
CIB
3.5%
3.5%
NSGB
4.1%
3.3%
CAE
3.0%
3.0%
EDBE*
2.2%
2.5%
EGBE
3.3%
2.8%
Net Spread
2006
3.9%
4.3%
2.7%
1.5%
2.8%
2007
3.9%
3.3%
2.8%
1.6%
2.3%
Source: Banks Financials, Global Research

* EDBEs fiscal year ends in June.
Growing Profits
Looking at net profit, we realize that all banks witnessed increases in their net income, except
for EGBE, as its income grew at lower pace than the previous year, as a result of higher added
provisions. On the other hand, the highest growth was realized by EDBE, which income rose
by 104.6% in 2007. This growth was amplified, as the Bank realized losses the previous
year. These losses were due to the large amount of provisions added that year, as required by
the CBE. It is worth mentioning that growth in net income is calculated after adjusting for
extraordinary items and goodwill amortization.
Chart 24: Net Profit Growth (2006-2007)
LEmn
1400
120%
104.6%
1200
100%
1000
80%
800
60.7%
60%
600
36.6%
400
40%
20%
200
2.8%
CIB
NSGB
0%
CAE
EDBE
-200
-400
EGBE
-17.3%
-20%
-40%
2006
2007
Profitability Ratios
Regarding profitability ratios, the best performers were the two largest banks along with
CAE. In terms of ROAA, CAE was the best performer followed by CIB then NSGB, where
each one realized a ratio of 3%, 2.7% and 2.5% respectively.
Concerning ROAE, NSGB realized the highest ratio, which stood at 40.5%, followed by
CAE and CIB, with 38.1% and 30%, respectively. It is worthy to note that these ratios are
adjusted for extraordinary items and goodwill amortization.
September 2008
31
Chart 25: Profitability Ratios-2007

45%
40%
35%
40.5%
38.1%
30%
25%
30.0%
20%
15%
10%
5%
2.7%
2.5%
3.0%
NSGB
ROAA
CAE
0.1% 1.0%
0%
CIB
EDBE
ROAE
1.4%
10.7%
EGBE
Capital Adequacy Ratios

The Egyptian Gulf Bank EGBE was able to realize the highest equity/total assets ratio in
2007, as it stood at 13.4%. This could be explained by the fact that the Bank has the lowest
market share of total assets, compared to its peers, reaching 0.5%.
In the mean time, equity/gross loans ratio was the highest in CAE, as it reached 30.4%. This
in turn can be explained by the relatively low market share of the Bank, in terms of the loans
of the total banking system relative to other players, as it ranked fourth in 2007, with a market
share of 1.5%.
Chart 26: Capital Adequacy Ratios-2007
35%
30%
25%
20%
15%
10%
13.4%
9.2%
9.1%
CIB
NSGB
7.3%
9.8%
5%
0%
CAE
Equity/Gross Loans
EDBE
EGBE
Equity/Total Assets
Banks Performance in H1 2008

The following table summarizes the performance of the banks under coverage during H1
2008, in terms of growth in assets and in net profit.
32
September 2008
Table 10: H1 2008 Performance
Assets (LEmn)
2007
Net Profit (LEmn)
H1 2008 q-o-q change
H1 2007
H1 2008 y-o-y change
CIB
47,763.2
56,342.7
18.0%
663.4
961.7
45.0%
NSGB
47,256.7
44,233.3
-6.4%
339.3
549.4
61.9%
CAE
21,521.1
22,253.2
3.4%
211.5
215.5
1.9%
EDBE*
8,782.9
13,376.1
52.3%
7.5
310.7
4026.9%
EGBE
5,135.0
4,917.2
-4.2%
65.2
67.0
2.7%

* EDBE results are for the FYE June 2008, compared to the FYE June 2007.
Banking Sector Outlook

With the banking sector being primarily influenced by the economic status of the country,
we maintain a positive outlook for the sector in Egypt. As GDP is expected to reach 7.4%
in 2008, compared to 7.1% in June 2007, we believe the banking industry in Egypt will
be significantly enhanced. An accelerated growth of GDP will tempt investors to explore
investment prospects, which represent potential lending opportunities to the banking sector.
Moreover, improvements in several business sectors including tourism, real estate,
telecommunication and financial services, will be translated into better investments in the
country, as projects will expand in such sectors and financing needs will grow and thus better
lending opportunities will be available for the banking sector, especially with the current
extremely low loans/deposits ratio.
Meanwhile, these developments will attract foreigners to invest in the country, which will
result in better Foreign Direct Investment (FDI). The latest figures support our opinion, as
the FDI increased by more than 100% y-o-y from 2004/05 to 2005/06, then rose by 44%,
amounting to US$13.1bn in 2006/07. This improvement came on the back of the growth
experienced in the economy and the various sectors mentioned previously.
Alternatively, demographics outlook support the sectors potential. With a population CAGR
of 2% over the 5-year period from 2001/02 to 2006/07 and the fact that large percentage of
the population is not engaged in the banking activity, the huge unfulfilled demand in the
retail segment is expected to increase and sequentially be absorbed by the sector in the form
of retail lending and mortgage financing. Banks will be encouraged to explore such fields
together with lending to SMEs, as risk of default will be diminished, especially after the
establishment of the credit bureau.
In addition, most of the banks are currently updating their IT systems and expanding their
branch networks to improve their competency. This is expected to have a positive impact on
the quality of products and services provided to the public, which will increase the client base
coverage and will therefore enhance the banks profitability.
Though we believe the sector in Egypt has a promising growth, resulting from the inherent
opportunities in the unexploited segments, there is a prevalent discomfited sentiment for the
sector, stemming from the cancellation of the sale of Banque du Caire, in addition to the fail
of the merge between CIB and AAIB.
September 2008
33
The rising inflation rate in Egypt has been reflected in higher costs of equities for Egyptian
banks valuations.
Valuation & Recommendation

For arriving at the fair value of the banks under review, we have used two valuation
methods:
1. Cash flow approach represented by the Dividend Discounting Model.
2. P/BV target multiple approach using an adaptation of the Gordon Growth Model.
Dividend Discounting Model - DDM
The DDM is based on a 4-year forecast of dividends as cash flows (2008-11), except for EDBE
Bank, as the Banks fiscal year ends in June 2008. That is why we have made a projection
period for the Bank from 2008/09 to 2011/12. The dividends for the forecast period and the
terminal value are then discounted back at the cost of equity to arrive at the total net present
value (NPV) of the company. In our calculations, we have made the following assumptions
in order to arrive at the equity value of individual banks:
1. Cost of Equity (COE) derived using Capital Asset Pricing Model.
a. Risk free rate of 8.4% (YTM of 2011 government bonds), except for EGBE, as we
used a risk free rate of 4.7% (YTM of 2011 sovereign Eurobond) and EDBE, as we
used the rate of 8.8% (YTM of 2012 government bonds)
b. Market risk premium of 7.8% for all banks and 6.5% for EGBE, taking into
consideration that the Banks stock is traded in US dollars.
c. Beta of 5 years monthly figures. If the actual beta of the bank is less than 1 or if the
data available is of less than 5 years, to more appropriately reflect the market risk, we
have taken it as 1.
2. Terminal growth rate of 7.0%, which is close to the expected growth rate of GDP, taking
into account the inherent opportunities in the banking sector, relying on the economic growth
witnessed in the country, which is reflected in a stable investment climate, expected to boost
lending opportunities.
34
September 2008
Table 11: Value as per DDM Approach
DDM based price (LE)
CIB
49.1
NSGB
34.3
CAE
17.0
EGBE (US$)
2.1
EDBE
20.5
Source: Global Research, market prices as of September 7th, 2008
The adaptation of the Gordon Growth model uses the sustainable return on average equity
(ROAE), cost of equity (COE) and expected growth in earnings (g) to calculate the target
P/BV of the bank using the formula:
P/BV = (ROE - g) / (COE - g)
This P/BV is then multiplied with the BVPS of the bank at the next full year to arrive at the
fair value of the bank over a medium term investment horizon. In our case, we calculated the
BVPS at December 31, 2008, except for EDBE, as we calculated it at the end of the Banks
next fiscal year in June 30th, 2009,
In our calculations, we have made the following assumptions in order to arrive at the equity
value of individual banks:
1. Sustainable ROE calculated as the average ROAE of the forecasted 4 years for all
banks.
2. Cost of Equity derived using Capital Asset Pricing Model taking the same assumptions
as in the DDM.
3. Terminal growth rate of 7%, similar to the DDM.
Table 12: Value as per GGM Approach
P/BV based price (LE)
CIB
48.7
NSGB
34.6
CAE
16.9
EGBE (US$)
1.8
EDBE
20.8
September 2008
35
Weighted Price
As the book value multiples vary with time and are dependent on several factors such as
market sentiment and other qualitative factors, we have provided 20% weight to the P/BV
multiple and 80% to the DDM method.
Table 13: Valuation
Weighted DDM Price (LE) Weighted P/BV Price (LE) Weighted Final Price (LE)
CIB
39.3
9.7
49.0
NSGB
27.4
6.9
34.3
CAE
13.6
3.4
17.0
EGBE (US$)
1.7
0.4
2.0
EDBE
16.4
4.2
20.6
Table 14: Global Valuation Matrix

CIB
Price
(LE)
46.9
Target
(LE)
49.0
NSGB
30.0
34.3
CAE
15.2
17.0
EGBE (US$)
2.6
2.0
EDBE
21.1
20.6
Hold
Upside
Potential
4.5
BVPS*
(LE)
14.6
EPS*
(LE)
5.0
P/BV*
(x)
3.2
P/E*
(x)
9.5
Buy
14.4
13.2
4.0
2.3
7.5
Buy
11.8
5.8
1.7
2.6
8.7
Sell
-22.5
0.9
0.1
2.8
23.0
Hold
-2.2
12.8
2.9
1.6
7.2
Reco.
Source: Global Research, Market prices as of September 7th, 2008

* Based on 2008E for all banks and 2008/09E for EDBE, adjusted for goodwill and extraordinary items, if any.
36
September 2008

Recommendation
Tickers:
COMI.CA (Reuters)
COMI EY (Bloomberg)
HOLD
Listing:
The Egyptian Exchange
Abu Dhabi Securities Exchange
Kuwait Stock Exchange
London Stock Exchange
CMP:
LE46.9 (September 7th, 2008)
Key Data
EPS* (LE)
BVPS** (LE)
P/E* (x)
P/BV** (x)
5.0
14.6
9.5
3.2
Avg. daily vol. (000)

52 week Hi/Lo (LE)
Market Cap (LE mn)
Target Price (LE)
842.4
66.0/ 43.3
13,715.3
49.0
Source: Mubasher, Global Research, market prices as of September 7th, 2008

*Estimated (2008), earnings are adjusted for extraordinary items, goodwill amortization, number of shares and
before minority interest.
** Estimated (2008), book value represents the book value for equity shareholders, adjusted for goodwill and
number of shares.
Background
Commercial International Bank CIB was established in 1975 under the name of Chase
National Bank of Egypt, as a joint venture between NBE and the Chase Manhattan Bank,
owning 51% and 49% of the Banks shares, respectively. In 1987, Chase Manhattan sold
its share to NBE, where the latters share reached 99.9% and the Banks name became
Commercial International Bank. The Bank went public for the first time in 1993, through an
IPO, resulting in a decline of NBEs share to 43%. NBEs shares in CIB declined furthermore
by 20% in 1996, through the listing of its Global Depository Receipts GDRs on the London
Stock Exchange. It is worthy to note that the Bank is currently listed in Egyptian, Kuwait and
Abu Dhabi stock exchanges. Meanwhile, the Bank is traded internationally through GDRs
in London and American Depository Receipts ADRs in the USA. As part of the program
set by the government for selling public stakes in joint ventures, NBE sold a stake of 18.7%
in the Bank to a consortium led by Ripplewood Holdings in February 2006. Currently the
consortiums stake constitutes 5.6% of the Banks capital, while NBEs stake is only 0.3%.
As of June 30th, 2008, the consortium led by Ripplewood Holdings, owns a stake of 5.6% in
the Bank, while the free float constitutes 91.4% of the Banks shares.
It is worth mentioning that CIB announced that Dubai Capital Group acquired 5.2% of the
Banks capital on July 31st, 2008.
September 2008
37
Chart 01: Shareholders structure

Ripplewood Consortium 5.6%
Others 3.1%
Free-Float 91.4%
Source: EGID, as of June 30th, 2008, Global Research
High Quality Services

The Banks long presence in the Egyptian market and its exposure to International expertise
through its start with Chase Manhattan, allowed it to gain extensive experience in providing
a variety of products and services with high quality, satisfying clients of different classes.
Services cover all segments including corporations, retail, mortgage finance and SMEs.
Corporate Segment Prioritized
The corporate segment captures the lions share of activities covered by the CIB. This stems
from the Banks focus on realizing higher profits, while ensuring low risk of default, which
was realized through serving big corporations, with sound business performance. This is
illustrated through the orientation of 90% of the Banks loan book to big corporations.
The CIB extends loans to corporations of good reputation in sectors like tourism, petroleum
and telecommunication, as they are all experiencing successful growth, which is expected to
further boost lending to these sectors.
Services offered to the corporate segment include funding projects and capital expenditures,
investment banking services, syndicated loans, letters of credit, letters of guarantee, along
with various other services.
Growing Attention to Retail
The Bank plans to approach retail services more aggressively by 2010, responding to the
huge unfulfilled demand arising from this segment. Currently, retail lending is executed
through the corporate sector by offering payroll system -ATM cards for employees salariesto corporations, in line with the Banks policy of lowering its exposure to risk of default.
Other retail services include ATM cards, electronic banking services, car loans, life insurance
services, current and saving accounts, in addition to student cards, which provide discounts to
students abroad in their visits to museums and their hotel accommodation.
In addition, new services will be provided through a new segment for high net worth
individuals, by offering them priority service in branches, and later on, investment products
in Egypt and abroad.
38
September 2008
Minor Focus on Mortgage Finance and SMEs

Due to the high risk associated with mortgage lending, the Bank extends a minor percentage
of its loans to finance housing units.
In July 2008, the Bank announced that it will be granted a loan, worth LE1.3bn from Overseas
Private Investment Corporation (OPIC) and US government agency. CIB will use this loan
in its mortgage finance activity, as it will direct 80% of it to other banks and companies
operating in the mortgage finance field, whereas the rest of the loan will be used in the same
field, according to the management discretion.
Concerning SMEs, the Bank established an SME business line in 2006, since this division is
considered a potential segment for profitable lending opportunities.
Highest Market Shares
CIB is the largest private bank in Egypt. As of June 2008, it captured the highest market
shares of the aggregate banking system, in terms of total assets, customer deposits and gross
loans, at 5.2%, 6.0% and 6.4%, respectively.
Meanwhile, the number of branches reached 137 branches, implying a market share of 4.2%,
as the total number of branches in the banking system amounted to 3,252 branches in March
2008.
Investments in Affiliates
As of June 30th, 2008, CIB owns a stake of 50.09% in CI Capital Holding, which was reduced
from 66.98% after the Bank sold 9.3mn shares of its stake in 2007. It is worth mentioning that
CI Capital Holding obtained its license to begin activities in 2006. It was formed through a
strategic alliance between CIB and an investment group led by Naguib Sawiris to combine
their investment activities through the formation of CI Capital holding.
Table 01: Stakes of CI Capital Holding in Other Companies
Company Name
Number of Shares
CI Capital Stake (%)
CIBC Co.
539,880
90.0
CI Assets Management
445,499
89.1
Concept Co.
448,500
89.7
In Search Co.
Dynamic Brokerage Co.
Blue Nile Co. for Consultant*
United Brokerage Co.-Dubai
448,500
89.7
3,392,000
99.9
50,000
100.0
5,000,000
49.0
Source: CIB Financials, Global Research

*CI Capital sold Blue Nile Co. in July 2008
In July 2008, CIB fully acquired CI Capital Holding, in a deal worth LE768.2mn, where it
acquired 27.4mn shares of CI Capital, at a price of LE28/share. The transaction was executed
through a swap between CIB and Sawiris, where the latter used the proceeds from selling its
shares in CI Capital Holding to acquire shares in CIB.
CI Capital Holding is considered a leading investment bank. Bringing it under the control of
CIB is expected to boost the Banks performance in the investment banking domain.
September 2008
39
CIB has also investments in several associated Companies. It is worth mentioning that the
Bank sold its stake in Contact for Cars Trading Company during Q1 2008.
Table 02: Investments in Affiliates
2007
June 2008
Stake
Amount (000LE)
Amount (000LE)
(%)
31,000.0 38.4
0.0
Company Name
Contact for Cars Trading
Stake
(%)
0.0
Commercial International Life Insurance Co.
32,000.0
40.0
32,000.0
40.0
Corplease Co.
18,400.0
40.0
21,600.0
40.0
48.8
39.0
48.8
39.0
Cotecna Trade Support

Haykala for Investment
Egypt Factors
International Co. for Appraisal & Collection
International Co. for Security & Services
601.3
47.5
601.3
47.5
3,763.6
39.0
10,399.5
39.0
400.0
40.0
1,000.0
40.0
4,500.9
45.0
4,500.9
45.0
Recent Developments
Capital Structure
The CIB has an authorized capital of LE5bn, while its issued and paid-in capital amounted to
LE1.95bn, distributed over 195mn shares, at a par value of LE10/share.
In July 2008, the Bank increased its capital by LE 975mn to reach LE2.93bn through a 1:2
stock dividend distribution, financed from reserves. This capital increase will provide further
growth to the Banks operations, as it will further enhance its lending activity after expanding
equity.
Expected Regional Exposure
CIB has a 51% stake in its Algerian subsidiary Commercial International Bank-Algeria,
which is expected to start operations during 2008, according to the Banks announcement in
2007.
The new entity, which is a joint venture between the Bank and the Sawiris family, is expected
to present promising opportunities to the Bank in Algeria, as the Bank aims at benefiting from
the Sawiris operations in Algeria by providing the necessary funding to its infrastructure and
construction projects.
It is worthy to mention that the Algerian market is seen as a promising location for banks,
with significant lending opportunities for the booming industrial sector, mainly oil and gas.
Long Awaited Merge Failed
Following the announcements of studying the possibility of a merge between CIB and Arab
African International Bank AAIB in 2007, many have projected that the result of the merge
would be a strong entity that would capture the lions share in the Egyptian banking sector, as
well as regionally. It is worth mentioning that AAIB shares in total assets, deposits and loans
of the aggregate system reached 4.5%, 4.3% and 4.7%, respectively, as of March 2008.
40
September 2008
After extensive due diligence acts from both parties in May 2008, the merge proposition was
abandoned. Though nothing was disclosed on why the merge did not go through, it seems
that the promising outlook of the sector in the short run was a far more important goal for
both banks than undergoing legalities of the merger, which could hinder the two banks
growth and miss the upside period.
2007 Financial Performance and Forecast Assumptions

Balance Sheet Analysis
Substantial Deposits Balances
The Banks long and successful presence in the market enabled it to be highly experienced in
maintaining a large client base and capturing the highest market shares in the banking system
in terms of customer deposits, which represent the main source of funds and value driver for
the Bank.
Deposits constituted 82.6% of total equity and liabilities in 2007 and realized a y-o-y increase
of 25.1%, reaching LE39.5bn, up from LE31.6bn the previous year. The y-o-y surge was
mainly a result of the increase in time and demand deposits, as they rose over the year by
23.5% and 31.1%, respectively. Time deposits contribution to total deposits decreased slightly
from 34.9% in 2006 to 34.5% 2007, whereas demand deposits contribution witnessed a minor
increase from 27.9% to 29.3%.
Chart 02: Deposits by Type-2006
Other Deposits
3.8%
Other Deposits
4.6%
Demand Deposits
29.3%
Demand Deposits
27.9%
Time Deposits
34.5%
Time Deposits
34.9%
CDs 15.1%
CDs 16.4%
Savings Deposits 16.9%
The household sector reported the highest share of total deposits in 2007. Its contribution was
52.0% of total deposits, decreasing slightly from 54.1% the previous year. The services sector
followed with a 19.3% contribution, falling from 21.5% in 2006. The remaining deposits
were distributed among industrial, trade and other sectors.
September 2008
41
Chart 04: Deposits by Sector-2006
Agriculture 0.1%
Others 9.7%
Industrial 10.4%
Agriculture 0.2%
Others 9.4%
Industrial 13.0%
Trade 4.2%
Trade 6.1%
Services
21.5%
Services
19.3%
Household
52.0%
Household
54.1%
Accelerating Total Assets

The surge in deposits in accelerating total assets balances, reaching LE47.8bn in 2007,
compared to LE37.6bn the previous year, realizing a y-o-y increase of 27.2%. The major
contributors to the increase in total assets over the year were gross loans and liquid assets,
representing 45.7% and 47.0% of total assets, respectively.
Growing Loans
As a consequence of the surge realized in deposits, the Bank was able to expand its loan
books by 16.7% y-o-y, reaching LE21.9bn, compared to LE18.7bn in 2006. During 2007,
loans to other banks declined by 23.2%, whereas loans to customers grew by 18.4%. This
could be explained by the fact that other banks needs for funding shrank, as a result of
the excess liquidity existing in the banking sector. Meanwhile, the encouraging investment
climate in Egypt led to the start of many projects, causing an increase in demand for credit.
Table 03: Loans and Advances Growth
Loans and Advances (in LEmn)
2006
2007
y-o-y Growth
Discounted Bills
345.2
369.4
7.0%
17,719.3
20,979.6
18.4%
652.5
501.4
-23.2%
18,717.0
21,850.4
16.7%
6.1
33.3
442.9%
1,038.9
1,090.0
4.9%
207.6
248.6
19.7%
17,464.4
20,478.6
17.3%
Loans and Overdrafts to Customers

Loans and Overdrafts to Banks
Gross Loans and Advances
Unearned Bills Discount
Provision for Loan Losses
Unearned Interest & Commission
Net Loans and Advances
Loans Composition
The industrial sector captured the highest share of the Banks total loan portfolio in 2007,
representing 40.0%, compared to 45.3% in 2006. The services sector followed with 37.3%
of total loans, down from 37.8% the previous year. It is worthy to note that 50% of the total
loan portfolio was denominated in foreign currency.
42
September 2008
Chart 06: Loans by Sector-2006

Others 5.1%

Agriculture 0.3%
Agriculture 0.4%
Others 8.5%
Household
7.7%
Household
9.5%
Industrial
40.0%
Industrial
45.3%
Services
37.3%
Services
37.8%
Trade 4.4%
Trade 3.7%
Conservative Provisioning Policy

Provision for loan losses rose by 4.9% in 2007. The CIB has a coverage ratio of around 166%
of its NPLs, which represent approximately 3% of the Banks total loan portfolio. We believe
that the Bank adopts a conservative provisioning policy and accordingly, we have forecasted
future provisions based on the Banks historical practices, assuming that the Bank will keep
a stagnant rate of NPLs and will maintain its coverage ratio at its current level.
Chart 08: NPLs, Loan Loss Provision and Coverage Ratio
LEmn
3,000
180%
175%
2,500
170%
2,000
165%
1,500
160%
155%
1,000
150%
500
145%
140%
2007
2008 f
NPLs
2009 f
Loan Loss Provision
2010 f
2011 f
Coverage Ratio (right scale)
Source: CIB, Global Research
Greater Space for Lending Based on Low Loans/Deposits Ratio

The Banks loans, growing at a lower pace, relative to its deposits, resulted in a reduction
of the gross loans/deposits ratio, as it decreased from 59.3% in 2006 to 55.4% in 2007.
Meanwhile, the ratio has been moving in a declining trend, as it reached 65.2% in 2003,
illustrating the Banks reluctance to extending large proportions of loans, to avoid the
exposure to risk of default. Alternatively, the low loans/deposits ratio provides the Bank with
a greater opportunity for lending, as a result of the available excess funds, after satisfying the
reserve and liquidity ratios, required by the CBE.
September 2008
43
This low ratio along with the latest governmental decision concerning the cancellation of tax
exemptions on treasury bills are expected to encourage the Bank to orient more of its excess
funds towards extending loans and lessening their investments in treasury bills. Relying
on these assumptions, we expect an increasing growth of the loans/deposits ratio, reaching
around 61% by 2011, on the back of rising loans and deposits balances.
Concerning deposits, we assumed that they would grow at an average of around 19% over our
forecast period, which is in line with the Banks target. In addition, the latest developments
of the corridor range are expected to boost interest rates on deposits and consequently on
deposits balances.
On the other hand, the Banks target of approaching the retail segment by extending it greater
share of its loan portfolio, especially by 2010, led us to assume that loans will grow at an
average of 22% during the projection period, supported by the expected greater demand
by the household sector, in addition to other sectors, represented by telecom, tourism and
petroleum sectors.
Chart 09: Gross Loans, Deposits and Loans/Deposits
LEmn
90,000
70%
80,000
65%
70,000
60,000
60%
50,000
40,000
55%
30,000
20,000
50%
10,000
45%
2003
2004
2005
Goss Loans
2006
Deposits
2007
2008 f
2009 f
2010 f
2011 f
Loans/Deposits Ratio (right scale)
Liquid Assets Incline

As the surge in deposits had its effect on loans, it also affected the Banks liquid assets to
a great extent. The low loans/deposits ratio resulted in an ample liquidity with the Bank,
leading it to orient more of its excess funds towards liquid assets, rather than to increase its
loans portfolio.
Liquid assets reached LE22.5bn in 2007, up from LE14.4bn in 2006, realizing a growth of
55.6% y-o-y. This surge resulted mainly from the hike in treasury bills and interbank assets
by around 296.0% and 142.2%, respectively.
Treasury Bills expected to decline
The surge in treasury bills was a result of the Banks intention to get rid of its excess liquidity
through investing in safe instruments, while enjoying the tax exemption benefit. However,
we do not expect this to be the case in the future, after the latest governmental decision
concerning the cancellation of the tax exemption on treasury bills, which should discourage
banks from investing large proportions of their funds into such instruments.
44
September 2008
We assumed the CIB would orient a portion of its funds in the future to invest in other liquid
assets. The Bank would be urged to do so in order to comply with the minimum liquidity ratio
required by the CBE and in the mean time to compensate for the expected decline in income
generated from treasury bills.
Good Presence in the Interbank Market
The Interbank assets were the other item contributing to the hike in liquid assets. They were
also affected by the low loans/deposits ratio and the resulting excess liquidity with the Bank,
enabling it to be a net lender within the banking sector.
The Bank has been in a net lending position in the interbank market at all times. Its net
lending position grew by 151.5% y-o-y, reaching LE13.6bn in 2007. This hike came on
the back of the slow growth of gross loans, which lagged far behind the surge in deposits,
allowing the Bank to lend other banks more aggressively.
Table 04: Interbank Market
In LEmn
2003
Interbank Assets
3,782.0
Interbank Liabilities
151.3
Net Balance
3,630.8
y-o-y Growth
39.3%
2004
4,650.0
222.9
4,427.1
21.9%
2005
3,405.6
544.0
2,861.7
-35.4%
2006
5,732.1
324.9
5,407.2
89.0%
2007
13,883.2
285.8
13,597.4
151.5%
Improving Capital Adequacy Ratios in 2007

According to the Bank, the capital adequacy ratio, which relates tier 1 capital (excluding
profits) to risk-weighted assets, reached 12.1% in 2007, which is more than the 10% required
ratio by the CBE. This implies an adequate and sufficient capital for covering the Banks
risky assets. It is worthy to note that the Bank has no tier 2 capital.
Meanwhile, the equity/total assets ratio was 9.2% in 2007, up from 9.0% the previous year.
This rise was a result of the 29.8% increase in equity, which exceeded the 27.2% rise in total
assets. This ratio indicates that the Banks equity can cover 9.2% of its total assets. Looking
at the historical performance of the Bank, we can realize that this ratio has improved, as it
was 7.9% in 2003, which indicates the enhancement of the capital adequacy of the Bank over
time.
In the mean time, the equity/gross loans ratio reached 20.1% in 2007, compared to 18.0% in
2006. This was also a result of the rise in equity that exceeded the 16.7% increase in gross
loans. Again this ratio confirms the adequacy of the Banks equity, as it illustrates that about
20% of the gross loans can be supported by equity in case of a delinquency. Also, the ratio
has been moving in an upward trend, as it accelerated from 14.3% in 2003.
As we project more aggressive policy for lending activities by the CIB, we believe the ratios
are to decline, as the loans are expected to grow at a higher pace than the Banks equity. That
is why we projected the equity/total assets and equity/gross loans to reach around 6% and
11%, respectively, by the end of our projection period.
September 2008
45
Other Balance Sheet Items

Goodwill
The Bank reported a goodwill balance of LE130.2mn in June 2008, representing the share
of CIB in the acquisition of CI Capital Holding over 2 companies. We assumed this balance
would be fully amortized by 2009.
Investments Held to Maturity and Investments in Affiliates
These investments combined represented an amount of LE357.0mn in the Banks balance
sheet in June 2008. We assumed a stable balance over our projected period, close to that of
the H1 2008 results.
Income Statement Analysis
The Banks net income adjusted for extraordinary items and before minority interest witnessed
a 36.7% y-o-y increase in 2007. The bottom line income was boosted by a non-recurring item
represented by the LE148.4mn gain realized from selling 9.3mn of the Banks shares in its
subsidiary CI Capital Holding the same year.
Net income was affected also by the growth of net interest income and the non-interest
income, which grew by 27.5% and 46.9%, respectively.
The rise in net interest income comes mainly from the increase in loans and interbank
assets balances, which resulted in an increase of the income generated from these items by
48.3%, offsetting the 30.7% incline in interest expense resulting from the rise in deposits.
Alternatively, interest income generated from treasury bills and bonds dropped by 29.4%,
due to the decline of the bonds balances and the reduction of the treasury bills yields during
2007. We expect that this income will decrease, as the Bank is to orient more of its funds
towards loans, as a result of the latest decision taken by the government that were aimed
at pushing banks to extend greater amounts of loans, through removing tax exemption on
treasury bills.
On the other hand, non-interest income was affected by income generated from fees and
commissions, rising by 50.7%, from LE441.3mn in 2006 to LE665.2mn in 2007. This incline
came from the rise in loans, as well as the 67.9% climb in contingent liabilities. We projected
future income from fees and commissions, assuming fees structure close to the Banks
practices in 2007 and H1 2008.
Other items contributing to the non-interest income were the volatile items, represented by
income generated from dividends, foreign exchange profits, financial investments valuation
differences and gains from selling investments, which grew by 43.7%, 54.1%, 1718.1% and
19.9%, respectively.
Concerning expenses, SG&A (excluding depreciation) accelerated by around 28.8%, reaching
LE575.2mn in 2007, compared to LE446.6mn in 2006. We assumed that SG&A will increase
at declining rates, with an average of 20% over our forecast period.
The provisions rose by approximately 29% during the year, reaching LE251mn in 2007,
compared to LE194mn the previous year, illustrating the conservative policy adopted by the
46
September 2008
Bank. We projected future provisions assuming that the Bank will apply its same provisioning
policy in the future.
Cost-Income Relationship
The results of the Bank realized in 2007exhibited a drop in the cost to income ratio to 33.2%,
from 35.2% in 2006. This decrease was attributed to the higher increase of income over cost.
Gross revenues, which are composed of net-interest income and total non-interest income,
grew by 36.2%in 2007, while the non-interest expense, composed of SG&A, depreciation
and other expenses, grew at a lower pace by 28.4%. We expect that the Bank will be able
to maintain its cost to income ratio, excluding goodwill amortization, below 35%, reaching
around 32% by 2011.
Chart 10: Cost and Income Development
LEmn
3,000
40%
2,500
35%
2,000
30%
1,500
25%
1,000
20%
500
-
15%
2003
2004
2005
2006
Net Interest Income

Total Non-Interest Expense
2007
2008 f
2009 f
2010 f
2011 f
Total Non-Interest Income

Cost to Income Ratio (right scale)

The Banks interest rate spread was kept within the range of 3.5% to 4% during the last
4 years. In 2007, the spread was 3.9%, following the rise in the cost of funds, which was
balanced by a jump in the interest income. As mentioned earlier, such income came mainly
from loans and interbank assets, as income from treasury bills was decelerating during the
year, due to the decline in yields.
After the latest decision concerning the increase of the corridor range, we expect interest
on deposits to incline, as well as interest on loans, causing a widening in the spread in 2008
and 2009, as it is expected to reach more than 4%. Nevertheless, the forecasted intense
competition in the banking sector is to suppress the Banks spread afterwards, bringing it
back to around 4% by 2011.
September 2008
47
Chart 11: Interest Rate Spread Development

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
2003
2004
2005
2006
Interest Income / AVG Earning Assets

Interest Spread (right scale)
2007
2008 f
2009 f
2010 f
2011 f
Interest Expense / AVG Interest-Bearing Funds
Net Income Development

As per our estimates, we believe the CIB would be able to raise its net income by an average
of 18% over our forecast period, reaching around LE2.2bn by 2011. It is worthy to note that
net income is adjusted for extraordinary items, goodwill amortization and before minority
interest.
Chart 12: Net Income Development
2011 f
2010 f
2009 f
2008 f
2007
2006
2005
2004
2003
-
500
1,000
1,500
2,000
2,500
LEmn
The 36.7% rise in net income, realized in 2007, exceeded the increase in average equity and
average assets, which grew by 31.4% and 25.6%, respectively. The higher pace of increase
in income over equity and assets resulted in an acceleration of ROAE and ROAA, reaching
30.0% and 2.7% in 2007, compared to 28.4% and 2.5% in 2006, respectively. Thus, the ratios
under analysis proved improving performance of the Bank.
We expect ROAA to witness minor declines over our projection period, which could be
attributable to the expected competition in the sector. That is why we expect it to reach
around 2.6%, which is close to its current level. Alternatively, we expect ROAE to ameliorate,
reaching around 42% by 2011, due to the lower increase expected in average equity over the
projection period, compared to the expected growth in net income. It is worth mentioning
that net income, average equity and average assets are adjusted for extraordinary items and
goodwill.
48
September 2008
Chart 13: ROAA-ROAE

ROAE
45.0%
ROAA
2.9%
40.0%
35.0%
2.7%
30.0%
2.5%
25.0%
2.3%
20.0%
2.1%
15.0%
1.9%
10.0%
1.7%
5.0%
0.0%
1.5%
2003
2004
2005
2006
ROAE
2007
2008 f
2009 f
2010 f
2011 f
ROAA
Stable Payout Ratio

When using the DDM method for valuation, we assumed a stable payout ratio of around 67%
of net attributable income during the projection period. We took into consideration the stock
dividends distributed for the capital increase when assuming the payout ratio, not only cash
dividends.
H1 2008 Financial Performance

The Banks results in June 2008 showed a 15.6% increase in deposits, compared to year
end 2007. They constituted 81.0% of the Banks total equity and liabilities. The huge jump
in deposits realized in H1 2008 supports our assumption for the deposits growth, especially
after the amendments made on the overnight deposit and lending rates at the CBE.
Following the jump in deposits, the Bank was able to exhibit an 18.0% rise in total assets,
compared to year end 2007. This was realized by the 17.3% YTD growth of gross loans,
which constituted 45.5% of total assets. The loans growth affirms the ability of the Bank to
extend greater amounts of loans due to its low loans/deposits ratio.
In turn, the interbank assets, representing 26.0% of the Banks total assets in June 2008, grew
by 5.7% YTD. This comes from the excess funds available at the Bank after meeting the
required liquidity and reserve ratios, along with the Banks low loans/deposits ratio, which
enabled the Bank to be a net lender in the interbank market.
On the other hand, the Banks balances of treasury bills declined by around 6% from year end
2007, reaching LE2.8bn. This decline supports our assumption for the expected fall in treasury
bills balances after the governmental decisions in May 2008 concerning the cancellation of
tax exemption on these instruments. We believe investment in treasury bills is to decline
considerably starting 2008, while other liquid investments are to experience minor growth.
September 2008
49

Net income reached LE961.7mn in H1 2008, compared to LE663.4mn realized in H1 2007,
implying a y-o-y growth of 76.9%, after adjusting for extraordinary items. This growth was
fueled by the rise of net interest income and total non-interest income by 53.3% and 50.7%,
respectively.
The growth in deposits led to an increase in interest expense by 4.3% y-o-y, but the Bank was
able to compensate for such rise by increasing its income generated from loans and interbank
assets by 30.8%, resulting from the inclination realized in these balances over the year.
Lower yields on treasury bills resulted in a decline in income generated from treasury bills
and bonds by 17.8%, which we expect will decline furthermore, after the cancellation of tax
exemption on treasury bills.
On the other hand, non-interest income was affected by the growth of fees and commissions,
which rose by 30.7%, compared to the same period in the previous year, following the rise of
loans. In the mean time, contingent liabilities grew by 12.1%, y-o-y. Another item contributing
to the growth of non-interest income was dividend income, which grew by 191.1% y-o-y.
Finally, other income encompassing gain from selling investments, foreign exchange profits,
investments valuation differences and other items realized a growth of 54.2%.
Concerning expenses, SG&A-excluding depreciation- increased by 52.9%, compared to H1
2007. Meanwhile, cost/income ratio reached 31.1%. On the other hand, provisions declined
by approximately 53%, caused by the provisions no longer used, amounting to LE95.1mn.
It is worth mentioning also that net profit was affected by a non-recurring gain amounting to
LE50.3mn, resulting from selling CIBs stake in Contact for Cars Trading Company, which
was included in our projections for net income in 2008.
Valuation Assumptions
methods:
- Cash flow approach represented by the Dividend Discounting Model.
- P/BV target multiple approach using an adaptation of the Gordon Growth Model.
The DDM is based on a 4-year forecast of dividends as cash flows (2008-11). The dividends
for the forecast period and the terminal value are then discounted back at the cost of equity to
arrive at the total net present value (NPV) of the company. In our calculations, we have made
the following assumptions in order to arrive at the equity value of individual banks:
- Cost of Equity derived using Capital Asset Pricing Model comes out to be 16.2% based
on the following assumptions:
Risk free rate of 8.4% (YTM of 2011 government bonds).
Market risk premium of 7.8%.
Beta of 5 years monthly figures. If the actual beta of the bank is less than 1 or
if the data available is of less than 5 years, to more appropriately reflect the
market risk, we have taken it as 1.
- Terminal growth rate of 7.0%, which is close to the expected growth of GDP.
50
September 2008
Table 05: DDM Valuation

(000LE)
Dividends Expected
2008F
2009F
2010F
2011F
975,046.1 1,078,946.4 1,286,136.5 1,516,932.6
NPV of dividends expected
Terminal
Value
17,613,867.6
3,646,602.2
NPV of Terminal Value
10,706,454.1
NPV of the Firm

No. of Outstanding Shares
(000)
DDM Value per share (LE)
14,353,056.3
292,500.0
49.1
Sensitivity DDM
We have also prepared a sensitivity analysis for the estimated fair price based on various
terminal growth rates and COE.
Table 06: DDM Sensitivity
Cost of Equity
Terminal Growth Rate
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
14.2%
56.0
59.0
62.4
66.3
70.9
76.3
15.2%
50.0
52.3
54.9
57.9
61.2
65.1
16.2%
45.2
47.0
49.1
51.4
53.9
56.8
17.2%
41.2
42.7
44.4
46.2
48.2
50.4
18.2%
37.9
39.2
40.5
42.0
43.6
45.4
19.2%
35.1
36.2
37.3
38.5
39.8
41.2
Gordon Growth Model - GGM

P/BV of the Bank using the formula:
P/BV = (ROE - g) / (COE - g)
This P/BV is then multiplied with the BVPS of the Bank at the next full year, in our case the
BVPS at December 31st, 2008 to arrive at the fair value of the Bank over a medium term
investment horizon.
- Sustainable ROE calculated as the average ROAE of the forecasted 4 years, represented
by 37.7%.
- Cost of Equity derived using Capital Asset Pricing Model taking the same assumptions
as in the DDM.
- Terminal growth rate of 7.0%, similar to the DDM.
September 2008
51
Table 07: Gordon Growth Model
Sustainable ROE
37.7%
COE
16.2%
Terminal Growth Rate (g)
7.0%
2008: P/BV target multiple (x)
3.3
2008: BV/share (LE)
14.6
GGM Value per share (LE)
48.7
Sensitivity GGM
Table 8: GGM Sensitivity
Cost of Equity
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
14.2%
56.4
59.2
62.2
65.8
69.9
74.7
15.2%
50.3
52.4
54.7
57.3
60.2
63.6
16.2%
45.4
47.0
48.7
50.7
52.9
55.4
17.2%
41.3
42.6
44.0
45.5
47.1
49.0
18.2%
38.0
39.0
40.0
41.2
42.5
44.0
19.2%
35.1
35.9
36.8
37.7
38.7
39.9
This sensitivity shows the movement in fair value as a consequence of different ROE and
COE assumptions.
Cost of Equity
ROE
35.7%
36.7%
37.7%
38.7%
39.7%
40.7%
14.2%
58.2
60.2
62.2
64.3
66.3
68.3
15.2%
51.1
52.9
54.7
56.4
58.2
60.0
16.2%
45.5
47.1
48.7
50.3
51.9
53.5
17.2%
41.1
42.5
44.0
45.4
46.8
48.3
18.2%
37.4
38.7
40.0
41.3
42.7
44.0
19.2%
34.4
35.6
36.8
38.0
39.2
40.4
Valuation
Based on the current market price of LE46.9/share, as of September 7th, 2008, CIB is trading
at 2008E P/E and P/BV multiple of 9.5x and 3.2x, respectively, after adjusting for goodwill,
extraordinary items, number of shares and minority interest.
52
September 2008
Table 10: Valuation

Method
Value
Weight
Weighted Value
DDM
49.1
80%
39.3
GGM
48.7
20%
Final Value
9.7
49.0
Our estimated value for this banking scrip is worked out to be LE49.0 based on DDM (80%)
and adaptation of the Gordon Growth Model (20%). According to our fair value the banking
scrip offers an upside of 4.5% on the closing price of LE46.9/share (as of September 7th,
2008); we therefore recommend a HOLD on the scrip.
Outlook
CIB is considered the largest private bank in Egypt in terms of its assets, deposits and loans
market shares. Due to its long and successful existence in the market and its international
experience, we expect a continuing positive performance of the Bank.
As the CIBs loan portfolio has been mostly oriented to large entities, along with the current
low loans/deposits ratio of 55.4%, the Bank is projected to increase its lending facilities
easily, even with the coming up competition within the sector.
The Banks emergence in the Algerian market is another issue that is expected to positively
propel its performance, due to the low banking penetration rate and the growing population
in Algeria. CIBs reliance on funding Sawiris projects in Algeria should further support the
Banks prospects in such market.
The capital increase executed lately is expected to boost the Banks total assets, increasing its
market shares and in the mean time ameliorating its capital adequacy.
The latest acquisition by Dubai Capital Group of a 5.2% stake in CIB is a positive sign,
indicating the confidence of a regional investment management company in the Banks
business.
September 2008
53
54
17,464,380.8
1,212,903.7
14,039,137.2

948,000.0
98,271.0
Other Provisions
Medium and Long-Term Loans
September 2008
37,552,954.6
30,389,543.3
47,763,248.1
4,387,213.5
4,381,950.3
1,315,496.5
1,116,453.8
1,950,000.0
5,263.2
43,376,034.6
161,356.2
397,924.5
2,300.8
959,786.9
2,378,613.4
39,476,052.8
47,763,248.1
1,179,202.3
51,900.2
140,613.8
620,238.9
20,478,590.8
534,608.7
2,286,201.6
683,832.9
2,951,621.1
13,883,232.5
4,953,205.4
56,283,746.3
4,356,560.0
4,354,341.7
74,250.7
1,355,091.0
2,925,000.0
2,218.3
51,927,186.3
125,900.6
457,613.2
970,722.4
2,859,044.3
47,513,905.7
56,283,746.3
1,444,743.8
37,835.2
70,306.9
708,040.0
25,112,676.7
357,118.6
2,375,190.8
904,243.2
1,963,004.2
16,521,240.5
6,789,346.4
2008 F
8,088,429.7
2009 F
66,214,192.7
4,626,320.1
4,626,320.1
84,230.9
1,617,089.2
2,925,000.0
61,587,872.6
84,128.0
526,255.2
981,782.5
3,390,421.8
56,605,285.1
66,214,192.7
1,473,638.7
20,243.6
760,925.3
31,029,481.4
357,118.6
2,422,694.6
1,077,262.4
2,063,477.9
18,920,920.5

2007 A
77,058,843.7
4,954,804.6
4,954,804.6
100,191.9
1,929,612.7
2,925,000.0
72,104,039.1
42,355.3
605,193.5
992,968.6
3,955,858.2
66,507,663.5
77,058,843.7
1,503,111.4
21,904.9
744,133.8
38,042,986.1
357,118.6
2,471,148.5
1,265,715.8
2,262,826.7
20,886,499.6
9,503,398.2
2010 F
89,532,096.8
5,341,389.6
5,341,389.6
118,213.5
2,298,176.1
2,925,000.0
84,190,707.1
7,747.0
695,972.5
1,004,282.2
4,621,392.1
77,861,313.3
89,532,096.8
1,533,173.7
5,295.7
725,663.1
45,156,556.6
357,118.6
2,520,571.5
1,481,788.6
2,649,118.2
23,977,069.4
11,125,741.4
2011 F

*This account includes net profit of the year in 2006 and 2007 of LE851.6mn and LE1.29bn, respectively. Retained earnings represent LE29.7mn in 2007 and all the figures in the projected period.
3,382,478.3
2,527,260.1
3,376,653.2
2,527,260.1
Total Equity & Minority Interest

Total Equity & Minority Interest &
Liabilities
851,580.4
575,072.7
1,950,000.0
5,825.2
34,170,476.2
99,166.9
342,342.2
948,974.6
1,212,600.6
31,567,391.9
37,552,954.5
962,466.8
40,497.1
23,118.2
506,815.9
901,082.4
Total Equity
1,227,260.1
Reserves
Net Profit of the Year *
1,300,000.0
Paid-in Capital
34,049.5
Taxes Payable
27,862,283.2
200,165.8
Dividends Payable
Minority Interest
991,858.8
Total Liabilities
719,680.1
24,870,258.0
Customer Deposits
Other Liabilities
30,389,543.3
Total Assets
Due to Central Bank & Other Banks
33,531.0
727,687.9
Other Assets
Deferred Taxes
Goodwill
376,401.6
930,344.4
2,183,075.8
Available for Sale Investments

Investments Held to Maturity &
Net Fixed Assets
3,185,837.5
1,839,129.5
Trading Investments
3,317,992.1
1,081,742.7
Government Securities
745,417.9
5,732,125.0
2,412,554.0
3,405,645.0
Due from Banks
3,742,876.5
2006 A
Treasury Bills
3,077,735.0
2005 A
Cash & Balances with the CBE
(000LE)
Balance Sheet

September 2008
145,618.2
16,534.0
26,505.4
(15,812.5)
772,864.4
38,198.6
142,301.2
75,602.0
(20,191.6)
10,769.2
(35,559.9)
554,094.4
356,879.8
68,239.6
Dividend Income
Gains
from
Foreign
Exchange
Transactions
Gain On Sale of Financial Investments
Trading
Investments
Valuation
Differences
Other Operating Income
Other Financial Investments Valuation
Differences
General & Administrative Expenses
Depreciation
55
610,137.0
610,137.0
851,580.4
1,055.3
852,635.7
18,273.1
834,362.6
82,503.3
418.0
916,447.9
603,970.2
63,653.8
93,764.8
446,551.5
441,311.8
747,553.7
1,285,775.4
2,746.3
1,288,521.7
148,393.6
1,140,128.1
170,117.1
1,269.9
1,308,975.3
775,537.9
77,832.7
122,518.0
575,187.2
1,134,988.9
4,185.4
43,362.3
8,210.8
174,663.4
167,845.0
71,536.3
665,185.6
949,524.3
250,988.0
1,200,512.4
1,797,842.9
2,998,355.3
2007 A
1,425,571.5
3,044.9
1,428,616.4
50,259.0
1,378,357.4
341,073.1
504.0
1,718,926.5
1,073,922.5
100,501.3
70,306.9
149,619.1
753,495.2
1,463,620.4
4,394.6
44,229.6
8,621.3
186,889.9
226,977.0
119,695.6
872,812.4
1,329,228.6
300,177.6
1,629,406.2
2,312,871.8
3,942,278.0
2008 F
2009 F
1,536,117.1
3,281.0
1,539,398.1
1,539,398.1
380,451.6
514.1
1,919,335.6
1,220,225.5
107,536.3
70,306.9
160,792.9
881,589.4
1,607,423.1
4,614.4
45,114.2
9,052.4
199,972.2
231,516.5
113,321.9
1,003,831.6
1,532,138.0
379,385.0
1,911,523.0
2,792,111.8
4,703,634.8

* The extraordinary gains posted in 2008 represent the proceeds realized from selling 3.1mn shares in Contact for Cars Trading Company.
Net Income after Minority Interest
Minority Interest
Net Income before Minority Interest
610,137.0
NPAT
Extraordinary Items*
10.1
518.5
610,645.4
Net Operating Income
Taxes
474,415.8
Other Non-Operating Income
49,296.4
Other Operating Expenses
108,916.7
342,974.8
Fees & Commissions Income
Goodwill Amortization
49,790.8
530,966.8
Net Interest Income after Provisions
194,312.8
364,885.7
Provisions
941,866.5
1,375,481.4
895,852.5
1,132,317.9
2006 A
2,317,347.9
Net Interest Income
Interest Expense
2005 A
2,028,170.4
Interest Income
(000LE)
Income Statement
2010 F
1,835,375.8
3,920.2
1,839,296.0
1,839,296.0
459,408.7
524.4
2,298,180.3
1,320,576.3
112,913.2
180,611.5
1,027,051.7
1,844,725.1
4,845.1
46,016.4
9,505.0
213,970.2
236,146.9
122,643.7
1,211,597.8
1,774,031.6
447,176.2
2,221,207.7
3,316,877.1
5,538,084.8
2011 F
2,163,886.6
4,621.9
2,168,508.5
2,168,508.5
537,974.8
534.9
2,705,948.5
1,484,683.0
115,171.4
198,672.7
1,170,838.9
2,091,534.4
5,087.4
46,936.8
9,980.3
228,948.1
240,869.8
132,981.0
1,426,731.0
2,099,097.1
464,251.0
2,563,348.1
3,901,406.4
6,464,754.5

56
September 2008
(1,168,188.7)
7,891,568.6
6,723,379.9
Change in Cash
Beginning Cash*
Ending Cash
2,904,571.5
6,723,379.9
9,627,951.5
2006 A
851,580.4
93,764.8
1,055.3
194,312.8
(145,618.2)
15,812.5
(16,534.0)
(18,273.1)
(418.0)
89,552.3
(7,049.0)
1,058,185.8
1,580,086.0
(2,236,249.4)
954,581.1
(1,018,574.2)
(3,425,243.6)
82.9
(234,778.9)
6,697,133.9
492,920.5
(123,601.7)
(799,970.5)
(42,884.2)
2,901,687.7
428,177.5
(224,179.1)
(23,118.2)
180,880.2
(853,408.4)
18,273.1
418.0
895.9
5,825.2
650,000.0
(177,996.3)

*Cash balances represent cash and balances with the CBE, due from banks and 3-months treasury bills.
2005 A
610,137.0
68,239.6
364,885.7
(75,602.0)
35,559.9
20,191.6
(10.1)
34,049.5
(33,531.0)
1,023,920.2
(174,682.8)
(407,456.8)
(1,186,119.2)
32,766.5
(644,659.3)
(166,211.3)
891,052.1
495,030.8
(204,812.2)
536,710.6
195,538.5
(899,626.4)
(149,851.0)
(1,049,477.4)
(291,488.6)
10.1
(22,771.3)
(314,249.8)
(000LE)
Net Income After Tax
Depreciation
Minority Interest
Provisions
Gain on Sale of Financial Investments
Available for Sale Investments Valuation Differences
Trading Investments Valuation Differences
Extraordinary Items
Provision for Income Tax
Provision for Deferred Taxes
Net Income After Adjustments
Treasury Bills
Trading Investments
Deferred Taxes
Other Assets
Customer Deposits
Taxes Payable
Provisions
Other Liabilities
Cash Flow from Operations
Investments Held to Maturity & Investments in Affiliates
Change in Fixed Assets
Goodwill
Cash Flow from Investing Activities
Dividend Paid
Extraordinary Items
Medium & Long-Term Loans
Minority Interest
Change in Capital
Cash Flow from Financing Activities
Cash Flow Statement
10,522,236.5
9,627,951.5
20,150,187.9
4,110,677.0
20,150,187.9
24,260,865.0
3,739,077.7
24,260,865.0
27,999,942.7

2007 A
2008 F
2009 F
1,285,775.4
1,425,571.5
1,536,117.1
122,518.0
149,619.1
160,792.9
70,306.9
70,306.9
2,746.3
3,044.9
3,281.0
250,988.0
300,177.6
379,385.0
(174,663.4)
(186,889.9)
(199,972.2)
(4,185.4)
(4,394.6)
(4,614.4)
(8,210.8)
(8,621.3)
(9,052.4)
(148,393.6)
(50,259.0)
(1,269.9)
(504.0)
(514.1)
181,576.4
341,073.1
380,451.6
(11,459.4)
1,495,421.7
2,039,124.2
2,316,181.4
(1,045,403.1)
625,145.0
(60,159.3)
3,317,992.1
225,460.3
(211,789.0)
(163,966.8)
903,821.3
(84,594.6)
(42,889.4)
(3,014,210.0) (4,634,085.9) (5,916,804.6)
56.3
14,065.0
17,591.6
(216,735.4)
(265,541.5)
(28,894.9)
7,908,660.9
8,037,852.9
9,091,379.4
1,166,012.7
480,430.9
531,377.5
(181,576.4)
(341,073.1)
(380,451.6)
(195,405.7)
(240,488.9)
(310,743.0)
10,812.3
10,935.5
11,060.1
10,374,907.0
5,429,980.5
5,063,680.3
570,399.1
364,380.0
199,972.2
(235,941.0)
(237,420.2)
(213,678.2)
(117,495.6)
216,962.5
126,959.7
(13,706.0)
(280,923.7) (2,433,525.8) (1,267,419.7)
148,393.6
50,259.0
1,269.9
504.0
514.1
62,189.4
(35,455.6)
(41,772.7)
(562.0)
(3,044.9)
(2,218.3)
975,000.0
(69,633.0) (1,446,263.2) (1,310,896.5)
3,553,839.2
27,999,942.7
31,553,781.9
2010 F
1,835,375.8
180,611.5
3,920.2
447,176.2
(213,970.2)
(4,845.1)
(9,505.0)
(524.4)
459,408.7
2,697,647.7
(26,057.2)
(178,948.4)
(43,608.8)
(7,013,504.7)
(1,661.3)
(29,472.8)
9,902,378.3
565,436.4
(459,408.7)
(368,237.9)
11,186.1
5,055,748.7
213,970.2
(163,820.0)
50,150.3
(1,510,811.5)
524.4
(41,772.7)
(1,552,059.8)
4,911,601.9
31,553,781.9
36,465,383.8
2011 F
2,163,886.6
198,672.7
4,621.9
464,251.0
(228,948.1)
(5,087.4)
(9,980.3)
(534.9)
537,974.8
3,124,856.4
(187,602.6)
(206,092.5)
(44,335.6)
(7,113,570.5)
16,609.2
(30,062.2)
11,353,649.9
665,533.9
(537,974.8)
(373,472.0)
11,313.6
6,678,852.7
228,948.1
(180,202.0)
48,746.2
(1,781,923.5)
534.9
(34,608.3)
(1,815,997.0)

2005 A
2006 A

2007A
2008 F
2009 F
September 2008
57

Historical prices are based on respective year-end prices, while those for future years are based on the current market price as of September 7th, 2008.
* ROAA and ROAE are adjusted for extraordinary items and goodwill. Net income is before minority interest. Equity represents equity to shareholders.
** Cost to income ratio is adjusted for goodwill amortization.
2010 F
2011 F
Profitability
Return on Average Assets*
2.1%
2.5%
2.7%
2.8%
2.6%
2.6%
2.6%
Return on Average Equity*
26.2%
28.4%
30.0%
34.0%
36.1%
38.4%
42.1%
Net Interest Income/Operating Income
146.7%
102.8%
91.7%
94.8%
99.6%
96.7%
94.7%
Non-Interest Income/Operating Income
90.7%
84.3%
86.7%
85.1%
83.7%
80.3%
77.3%
Margins
Interest Expense to Interest Income
55.8%
59.4%
60.0%
58.7%
59.4%
59.9%
60.3%
Interest Income to Interest Earning Assets
8.6%
8.6%
8.7%
9.2%
9.3%
9.2%
9.2%
Interest Expense to Interest Bearing Funds
4.5%
4.7%
4.8%
5.0%
5.1%
5.1%
5.1%
Net Spread
4.1%
3.9%
3.9%
4.2%
4.2%
4.2%
4.1%
Net Interest Margin
3.8%
3.5%
3.5%
3.8%
3.8%
3.7%
3.6%
Efficiency
Cost to Income**
32.7%
35.2%
33.2%
32.4%
32.7%
32.5%
31.9%
Liquidity
Gross Loans to Interest Earning Assets
67.7%
65.0%
56.0%
58.7%
60.7%
63.1%
63.9%
Gross Loans to Customer Deposits
61.0%
59.3%
55.4%
56.1%
58.1%
60.6%
61.4%
Customer Deposits to Equity
984.1%
934.9%
900.9%
1091.2%
1223.5%
1342.3%
1457.7%
Due from Banks to Due to Banks
364.8%
252.2%
162.8%
191.9%
192.8%
194.2%
194.6%
Credit Quality
NPLs (000LE)
N/A
N/A
655,512.4
800,143.5
987,025.8 1,208,485.7 1,433,093.4
Provision for Loan Losses (000LE)
948,900.5 1,038,908.0 1,089,969.2 1,330,458.1 1,641,201.1 2,009,439.0 2,382,911.0
NPLs to Gross Loans
N/A
N/A
3.0%
3.0%
3.0%
3.0%
3.0%
Provision for Loan Losses to Gross Loans
6.3%
5.6%
5.0%
5.0%
5.0%
5.0%
5.0%
NPLs Coverage
N/A
N/A
166.28%
166.28%
166.28%
166.28%
166.28%
Capital Adequacy
Equity to Total Assets
8.3%
9.0%
9.2%
7.7%
7.0%
6.4%
6.0%
Equity to Gross Loans
16.7%
18.0%
20.1%
16.3%
14.1%
12.3%
11.2%
Constitution of Total Income
Interest Income to Operating Income
332.1%
252.9%
229.1%
229.3%
245.1%
241.0%
238.9%
Fees & Commissions Income to Operating Income
56.2%
48.2%
50.8%
50.8%
52.3%
52.7%
52.7%
Dividend Income to Operating Income
6.3%
5.4%
5.5%
7.0%
5.9%
5.3%
4.9%
FX Income to Operating Income
23.3%
11.9%
12.8%
13.2%
12.1%
10.3%
8.9%
Other Income to Operating Income
28.3%
30.7%
30.4%
27.4%
25.5%
22.2%
19.7%
Operating Performance
Change in Interest Income
25.4%
14.3%
29.4%
31.5%
19.3%
17.7%
16.7%
Change in Fees and Commissions Income
-14.1%
28.7%
50.7%
31.2%
15.0%
20.7%
17.8%
Change in FX Income
35.5%
-23.5%
54.1%
35.2%
2.0%
2.0%
2.0%
Change in Other Income
167.9%
62.9%
41.3%
18.3%
4.1%
4.1%
4.2%
Ratios Used For Valuation
Issued Shares
130,000.0
195,000.0
195,000.0
292,500.0
292,500.0
292,500.0
292,500.0
EPS adjusted for Number of Shares
4.7
4.4
6.6
4.9
5.3
6.3
7.4
EPS adjusted for Goodwill, Extraordinary Items, Minority Interest and Number
4.7
4.3
5.8
5.0
5.5
6.3
7.4
of Shares
BVPS adjusted for Number of Shares
19.4
17.3
22.5
14.9
15.8
16.9
18.3
BVPS adjusted for Goodwill and Number of Shares, before Minority Interest
19.4
17.2
21.8
14.6
15.8
16.9
18.3
Market Price
39.1
57.9
91.8
46.9
46.9
46.9
46.9
P/E adjusted for Number of Shares
8.3
13.3
13.9
9.6
8.9
7.5
6.3
P/E adjusted for Goodwill, Extraordinary Items, Minority Interest and Number
8.3
13.5
15.7
9.5
8.5
7.5
6.3
of Shares
P/BV adjusted for Number of Shares
2.0
3.3
4.1
3.1
3.0
2.8
2.6
P/BV adjusted for Goodwill and Number of Shares, before Minority Interest
2.0
3.4
4.2
3.2
3.0
2.8
2.6
Fact Sheet


Recommendation
Tickers:
NSGB.CA (Reuters)
NSGB EY (Bloomberg)

Listing:

CMP:
BUY
Key Data
EPS* (LE)
BVPS** (LE)
P/E* (x)
P/BV** (x)
4.0
13.2
7.5
2.3
Avg. daily vol.(000)

52 week Hi/Lo (LE)
Market Cap (LE mn)
Target Price (LE)
158.3
45.5/ 25.3
9,088.2
34.3
Source: Mubasher, Global Research, market prices as of September 7th, 2008.

*Estimated (2008), earnings are adjusted for goodwill amortization and number of shares.
** Estimated (2008), book value is adjusted for goodwill and number of shares.
Background
National Societe Generale Bank NSGB was established in 1978, as a joint venture between
the National Bank of Egypt NBE and Societe Generale SG, which is one of the major
lenders in France and Europe.
In 1994, NBE sold 20% of its stake in NSGB to its staff. Two years later, it sold an additional
stake of 10.4% to the staff, whereas SGs stake in the Bank reached 51% in the same year.
In line with the consolidation trend prevalent in the Egyptian banking sector since 2004, SG
acquired 90.6% of Misr International Bank MIBank in 2005, in a deal worth LE2.2bn. The
acquisition price per share was LE43.2, implying a P/BV of 2.0x. In November 2006, NSGB
and MIBank announced their legal merger, which has been reflected on the Banks financial
statements starting January 2006. Currently, SG has a controlling stake of 77.2% in NSGB.
Capital and Shareholders Structure
The Bank has an authorized capital amounting to LE5bn.
As of March 31st, 2008, the Bank had an issued and paid-in capital of LE2.8bn, distributed
over 275.4mn shares, at a par value of LE10.
In June 2008, NSGB increased its issued and paid-in capital by LE275.4mn, reaching
LE3.0bn, through a 1:10 stock dividends distribution, financed from reserves.
As mentioned earlier, NSGB is 77.2% owned by SG, while the free float constitutes 21.4%
of the Banks capital.
58
September 2008
Chart 01: Shareholders Structure

Free Float 21.4%
Others 1.5%
Societe Generale 77.2%

Societe Generale at a Glance

SG is one of the leading corporate and investment banks in Europe. It operates in 45 countries
in Europe, Africa, the Americas and Asia Pacific. Its main focus is on the corporate division
and investment banking services. Meanwhile, it also presents retail banking and investment
management services worldwide.
Business Lines of NSGB

Pursuing the Same Strategy as Societe Generale
The business strategy of NSGB is affected by its parent bank, as it concentrates on the
corporate segment, viewing it as the most lucrative business line. Several products and services
are presented to this division. Medium and long-term loans are provided to trustworthy
corporations, to finance capital expenditures and investment projects. Such loans are oriented
to the sectors featuring high growth, in order to lessen the Banks exposure to higher risk of
default. These sectors include fertilizers, cement, petrochemicals, telecom and infrastructure.
The Bank is reluctant to providing loans to corporations in risky sectors, even though they
may be more profitable, unless if they have diversified assets or expected cash flows.
The Bank also provides investment banking services to its corporate clients, represented
by equity and acquisition finance, finance advisory, syndicated loans and other services.
Also equipment and real estate leasing services are offered through the Banks joint venture
company with NBE and SG, Sogelease Egypt, in which NSGB has a stake of 40%.
NSGB seeks high profits through exploring many areas, providing promising opportunities.
One of which was the one realized by establishing an investment fund Themar in 2006.
Being a subsidiary of a leading international bank also provides NSGB with an advantage
over local banks, as it is able to provide services to multinational companies, benefiting from
the international client relationships of SG.
Growing Attention to Retail
Though the Bank perceives the retail segment profits as being minimal, compared to the
corporate line, there is a greater orientation towards the retail activities, in an attempt to
benefit from the huge opportunities inherent in this segment, resulting from unfulfilled
demand for banking activities.
September 2008
59
Retail banking include many products and services, represented by deposits and accounts,
loans and credit facilities, in addition to electronic banking services. Other retail products and
services are represented by ATM cards, credit cards and payroll cards, which are provided
through the corporate line to prevent risks of default.
The Bank also provides its retail clients with life insurance savings plans through its 25%
owned subsidiary NSGB Life Insurance, which is a joint venture between NSGB and its
parent bank. In the mean time, specific offers are presented to high net worth individuals, as
being a profitable and trustworthy client segment.
In order to satisfy a larger retail client base, the Bank improved the IT system for its entire
branch network, as well as the automated service network, where 210 ATM machines are
currently available.
The Bank initiated new products and services, with the aim of granting more benefits to
the retail clients. These are represented by a new type of credit cards, with higher security
features and added benefits, call center services available 24/7, as well as benefits associated
with credit cards, including discounts at specific stores and other services.
Second Largest Private Bank
NSGB is the second largest private bank after CIB in terms of its market shares. As of June
2008, the Banks shares in the total assets, deposits and loans of the banking system were
4.1%, 4.8% and 6.1%, respectively.
In terms of the Banks branch network, comprising 117 branches, NSGB contributed to 3.6%
of the total branch network of the banking system.
Recent Developments
Expanding Branch Network
Major developments were made in 2007, aiming at targeting more retail clients. A primary
tool used by the Bank was to expand its branch network, which reached 117 branches in
2007, compared to 96 branches in 2006. The network covers Cairo, Alexandria and many
governorates in Egypt. Moreover, the Bank is planning to launch more branches in 2008 and
2009, at an average of 20 branches per year. The priority is to cover big cities in Upper Egypt,
then open new ones in Cairo and Alexandria.
Promoting New Products and Services
The Parent Bank provides NSGB with experienced management and necessary assistance,
which has enabled it to provide services with high quality to attract more clients and increase
its client base.
Among the services that were offered to professionals in 2007 were the packages for health
care providers. Also, following the success realized by the investment fund Themar, the
Bank aims at establishing additional funds in 2008.
In addition, new mortgage offers are expected to be launched in the same year. It is worthy to
note that mortgage activity is minimal, compared to the main areas of focus of the Bank, due
to the high risks associated with it.
60
September 2008

Since the effects of the merge between NSGB and MIBank were reflected on the Banks
financial statements starting 2006, the period under analysis will start from 2005 results, to
show how the Banks historical performance was affected by the merger.
Acceleration in Deposits Balances
After the merge in 2006, the Bank has realized a substantial growth in its main source of
funds, represented by deposits. This was a result of merging the deposit balances of the
two banks. In 2006, deposits grew by 154.2%, reaching LE33.3bn, compared to LE13.1bn,
posted the previous year.
In 2007, the Bank was able to further raise its deposits balances by 18.0% y-o-y, reaching
LE39.3bn and constituting 83.2% of the Banks total liabilities and shareholders equity.
This surge came as a result of the 30.3% increase in time deposits balances, contributing to
54.4% of the total deposits in 2007, compared to 49.2% in 2006. Also, the rise in deposits
balances in 2007 was a result of the incline of demand deposits by 22.7% in the same year,
which contribution remained stagnant at 22%, approximately.
Chart 02 : Deposits by Type-2006

Other Deposits 4.2%
Other Deposits 4.6%

Demand Deposits
21.5%
Time
Deposits 49.2%
CDs 16.4%
Time
Deposits
54.4%
Savings
Deposits 8.2%
Demand
Deposits
22.4%
CDs
11.8%
Savings
Deposits
7.3%
Source: NSGB Financials, Global Research
On the other hand, the industrial and services sectors had the greatest contribution in NSGB
deposits in 2007. The industrial sectors share represented 27.4% of total deposits, rising
from 19.4% in 2006. Meanwhile, the services sectors share remained stable at around 13%.
In the mean time, deposits in foreign currency represented 44.5% of the total deposits in
2007, compared to 42.6% a year before. The industrial and services sectors had also the
highest shares in deposits denominated in foreign currency in 2007, with 32.6% and 14.9%,
respectively.
September 2008
61
Agriculture 0.4%
Agriculture 1.3%
Industrial
19.4%
Industrial
27.4%
Trade
11.6%
Household
55.4%
Household
52.2%
Trade
6.4%
Services
13.2%
Services
12.6%
Resulting Rise of Assets Balances

The increase in deposits balances that the Bank was able to realize in 2007 had a positive
effect on the Banks assets in the same year, as they grew by 19.8%, reaching LE47.3bn,
compared to LE39.4bn in 2006. The major effects were on gross loans and liquid assets,
which represented 46.9% and 44.5% of the Banks total assets, respectively.
Higher Balances in Uses of funds
The rise in the Banks deposits was translated into a higher use of the accumulated funds,
by extending more loans to the Banks clients in 2007. This was illustrated by the 22.8%
increase realized in gross loans and advances, as they reached LE22.2bn in 2007, compared
to LE18.1bn in 2006. The overwhelming majority of loans were the ones extended to
customers, which constituted 98.1% of gross loans and advances in 2007, as the Bank did not
extend any loans to other banks during the same year. This was a result of the ample liquidity
experienced by all banks in the banking sector, which did not derive demand for loans in the
interbank market.
2006
Discounted Commercial Papers

Loans to Customers
Loans to Banks
331.2
418.5
26.4%
17,591.5
21,752.2
23.7%
131.3
-100.0%
18,054.0
22,170.7
22.8%
Unearned Commercial Papers Discount

Provision for Doubtful Debts
Unearned Interest
2007 y-o-y Growth
20.5
N/A
2,036.0
2,073.0
1.8%
382.2
341.6
-10.6%
15,635.8
19,735.6
26.2%
The industrial sector had the lions share in terms of NSGBs loans in 2007, as its contribution
reached 46.7% of total loans, compared to 39.2% in the previous year. The services sector
62
September 2008
came second, with a contribution of 23.6%, down from 26.9% in 2006. It is worth mentioning
that loans denominated in foreign currency accounted for 38.2% of total loans in 2007, up
from 35.0%, a year before. The main contribution to loans in foreign currency went also to
the industrial and services sector in 2007, representing 58.6% and 24.6%, respectively.

Agriculture 1.1%
Agriculture 1.2%
Others
18.8%
Others 15.4%
Industrial
39.2%
Industrial
46.7%
Services
23.6%
Services
26.9%
Trade 14.0%
Trade 13.2%
Sufficient Provisioning for Inherited Bad Debts

The Bank had an approximate ratio of bad debts to gross loans of 10% in 2007. This was
mainly attributed to an inheritance of MIBanks loan portfolio, which represented a negative
outcome of the executed merge. Nevertheless, the Bank was able to effectively set an adequate
provisioning policy by covering around 97% of its NPLs.
We assumed declining ratios of NPLs over our forecast period, along with the same
provisioning practices adopted historically by the Bank. The result was a coverage ratio,
reaching around 110% by 2011, as a result of the accelerating loan balances.
Chart 08: NPLs, Loan Loss Provisions and Coverage Ratio
LEmn
3,000
115%
2,500
110%
2,000
105%
1,500
100%
1,000
95%
500
90%
2007
2008 f
NPLs
2009 f
Loan Loss Provisions
2010 f
2011 f
Source: NSGB, Global Research
September 2008
63
Expected Greater Ability to Extend Loans

As mentioned earlier, the deposits and loans balances grew by 18.0% and 22.8% in 2007,
respectively. The Bank extended greater amounts of loans, realizing a higher increase over
that realized in deposits. This was easily achieved, as the Banks loans/deposits ratio reached
54.2% in 2006, implying an availability of excess funds for use in lending opportunities, after
satisfying the reserve and liquidity ratios required by the CBE. As the rise in loans exceeded
that realized in deposits in 2007, the loans/deposits ratio was pushed up further to 56.4% in
the same year. Still, this ratio indicates little utilization of available funds and a strong ability
for expanding the Banks loan books.
We believe this low utilization of excess funds comes from the Banks target of diminishing
its risk of default, which urged it to use the available unused funds through investing in safer
and profitable instruments, represented by treasury bills. This was the case with almost all
banks in the banking system, which was the reason behind the latest decisions in May 2008,
concerning canceling the tax exemption on such instruments, as the government aimed at
encouraging banks towards directing more of their funds to customer loans.
Our projections for the Banks loans were based on its low loans/deposits ratio and also
the effects of the latest governmental decisions on treasury bills, which will induce it to
orient more amounts of its excess funds towards loans. Meanwhile, we expect an average
growth rate of 16% in the Banks deposits, relying on the expectations that Banks will raise
their rates on deposits, in response to the increases in the CBE rates, which was actually the
case with NSGB. This is expected to increase the Banks deposits balances. Based on these
assumptions, we projected an average growth rate of loans of 20% over our projection period,
implying a growing loans/deposits ratio, reaching more than 60% by 2011.
Chart 09: Loans, Deposits and Loans/Deposits Ratio
LEmn
80,000
70,000
60,000
50,000
65%
40,000
30,000
20,000
10,000
-
55%
60%
50%
45%
2005
2006
2007
Goss Loans
2008 f
Deposits
2009 f
2010 f
2011 f
Liquid Assets Surge following the Rise in Deposits

The rise in the Banks major source of funds has also accelerated the Banks liquid assets
by 12.0%. This was a result of the inclination that occurred in the interbank assets and the
treasury bills balances, where each one grew by 53.6% and 35.6%, respectively.
Dominant Excess liquidity
The surge realized in the Banks deposits balances, especially after the merger with MIBank,
64
September 2008
along with the Banks relatively low loans/deposits ratio, led to a surplus of funds available
with the Bank, which it had to invest in order to maximize spreads. That is how NSGB
became a net lender in the interbank market in 2006 and its net balance jumped by 292.7%.
The case was different before the merger took place, as deposits balances in 2005 were far
less than those achieved after the merge. Its net lending position was even declining by
30.4% than the previous year prior to the merge.
In LEmn
Interbank Assets
Net Balance
y-o-y Growth
2005
3,582.4
1,584.6
1,997.8
-30.4%
2006
8,812.2
966.8
7,845.4
292.7%
2007
13,537.5
1,580.0
11,957.5
52.4%
Higher Treasury Bills Balances

The rise in deposits also had its effect on the increased balances of treasury bills. The common
practices adopted by the banks in 2007 were also undertaken in NSGB, as it invested greater
portions of its excess funds in treasury bills, which balances grew by 35.6% in the same
year. This resulted from the Banks intention to invest in safe instruments with associated
tax benefits instead of having to bear greater exposure to credit risk through extending more
loans to customers. We expected lower balances of treasury bills over our projection period,
in response to the cancellation of tax shield.
Sufficient Capital Adequacy
The Bank gained the fruits of the merge in 2006, through realizing higher capital adequacy
ratios, where equity to total assets and equity to total loans rose from 7.4% and 17.2%,
prior to the merge to 8.5% and 18.5%, after the merge, respectively. This resulted from the
169.8% increase in equity, which far exceeded the increases realized in total assets and gross
loans, growing by 136.2% and 151.5%, respectively. The ratios rose further in 2007, where
equity to total assets reached 9.1%, while equity to gross loans was 19.4%. The case was the
same as the previous year, as the equity rose by 29.0%, exceeding the acceleration of total
assets and gross loans, as they inclined by 19.8% and 22.8%, respectively. Such increasing
ratios indicate the ability of the Bank to maintain an adequate capital supporting its assets.
According to the Bank, the capital adequacy ratio relating its capital to its risk-weighted assets
is 11.2%, exceeding the CBE required ratio. Our projections for the Banks performance
over the coming three years, including growth of equity, assets and loans resulted in an
expected equity to total assets ratio exceeding 6% and an equity to loans ratio expected to
hover at around 12%. Such decrease compared to the Banks historical performance could be
attributed to the expected high growth in loans over the forecast period.
Goodwill
The acquisition of MIBank by NSGB in 2005 resulted in a goodwill balance of LE1.8bn,
which should be amortized over five years, where the annual amortization costs amount to
LE361.9mn. In our projection, we applied these annual costs, implying that goodwill will be
fully amortized by 2010.
September 2008
65
Subordinated Debt
In December 2006, SG provided NSGB with a subordinated debt, worth LE799.1mn, with a
7 years maturity and an annual interest expense, implying a 0.9% over LIBOR 12 months.
Gross Fixed Assets
The Banks plan to expanding its branch network, to gain a larger client base and increase
its market share of the deposits and loans, led us to assume an average growth rate of around
18%, in the gross fixed assets balance over the forecast period.
The Bank reported net income of LE147.9mn in 2006, the first year reflecting the merge with
MIBank, implying a negative growth of 70.0%, compared to the previous year prior to the
merge.
The main reason behind the sharp decline in net income growth in 2006 was the accelerated
expenses incurred by the Bank, which were related to the merger process. The major contributor
was the extraordinary item related to the liquidation of MIBank employees pension fund,
which resulted in a deficit of LE497.9mn that the Bank had to report as an expense in 2006
results. The second factor behind the decline was the goodwill amortization recorded in the
same years income statement, amounting to LE361.9mn. Also SG&A jumped by 194.4%,
reaching LE513.9mn in 2006, compared to LE174.6mn the year before the merge. This was
also a result of the increased costs associated with the merge. Adjusting for the effect of
extraordinary items and goodwill amortization, we end up with a 104.0% increase in net
income in 2006.
On the other hand, NSGB posted net income of LE674.2mn in 2007, implying a 2.8% rise in
net income, adjusted for extraordinary items and goodwill amortization.
After accounting for the extraordinary costs associated with the merge, the modest increase
in net income was attributed to a 25.6% increase in net interest income and a 10.1% increase
in non-interest income.
In terms of net interest income, the surge in deposits balances increased the Banks interest
expense by 9.1%. In addition, the declining yields of treasury bills experienced in 2007
resulted in a lower income from treasury bills and bonds by 4.5%. Nevertheless, the Bank
was able to overcome these additional costs through increasing its income from loans and
interbank assets by 21.9%. This was easily achieved given the Banks net lending position
and its high loans growth realized in 2007.
On the other hand, non-interest income was mainly affected by fees and commissions income,
which grew by 15.7%, as a result of the growth in loans and the 32.5% increase in contingent
liabilities. We projected future income generated from fees and commissions, assuming the
Bank will utilize the same structure adopted last year.
Other volatile non-interest income, represented by gain from sale of investments, income from
foreign exchange operations, investments valuation differences and other income grew only
by 2.4%, from LE102.9mn in 2006 to LE105.4mn in 2007. Meanwhile, investment income
declined by 45.3%, resulting from a decrease in some trading investments, along with the
66
September 2008
decline in investments held to maturity and investments in affiliates. Long-term investments

declined, as the Bank has eliminated its stakes in Egycap for Investment Company and
Alexandria Company for Commerce and Development, which represented 53.3% and 20.0%
of the Companies shares, respectively. Meanwhile, the Banks stake in SGAM Company
was transferred to sundry debit balances, as the Company was under liquidation.
On the other hand, the Bank faced a surge in its depreciation expense, in addition to goodwill
amortization. Gross fixed assets grew by 56.6%, as a result of the launch of 21 branches
in that year. This expansion had its effect on depreciation costs, which rose by 288.3%.
We projected depreciation costs over our forecast period assuming practices close to those
used in 2007, taking into consideration the branch expansion plan of the Bank. Meanwhile,
SG&A-excluding depreciation expense and goodwill amortization- grew by 3.2% over the
previous year, due to the costs associated with the launching of new branches. We assumed
that SG&A will grow by an annual rate of 12%, relying on the expected costs associated with
the branch expansion, as well as the Banks costs incurred in H1 2008.
Concerning provisions, they increased by 187.5%, reflecting a conservative provisioning
policy applied by the Bank. As explained earlier, we relied on the Banks historical
provisioning practices to project future provisions.
Cost and Income Relationship
In 2007, the Banks cost to income ratio was 35.2%, down from 36.5%, realized the previous
year. This decline was a result of the higher increase of the Banks net interest and noninterest income over its non-interest expense. Non-interest expense, composed of SG&A,
depreciation and other expenses, excluding goodwill amortization, rose by 15.9%, whereas
the net interest income and the non-interest income combined, grew by 20.2%.
According to our assumptions concerning the Banks future income and expense, we expect
a cost to income ratio reaching around 32% by 2011.
LEmn
2,500
38%
36%
2,000
34%
32%
1,500
30%
28%
1,000
26%
24%
500
22%
20%
2005
Net Interest Income
2006
2007
2008 f
2009 f
2010 f
2011 f
Cost to income Ratio (right scale)

The Bank realized an interest rate spread of 3.3% in 2007, as a result of the rise in income
from interest earning assets, which exceeded the costs of funds incurred over the year, as
described earlier.
September 2008
67
The interest rate spread is expected to widen starting 2008, justified by the rise of interest
rates on loans and interbank assets, following the rise in the CBE lending rates. We expect the
Bank will be able to raise its lending rates higher than its deposits rates, which are expected to
increase also, in response to the CBE deposits rates. Meanwhile, we expect a modest income
from treasury bills, as a result of the cancellation of tax exemption on them.
We expect the spread is to narrow after 2009, due to the intense competition that will exist at
that time, bringing the spread again to a level close to its current one.
12%
5.0%
10%
4.5%
8%
4.0%
6%
3.5%
4%
3.0%
2%
2.5%
0%
2005
2006
2007
2008 f
2009 f
2010 f
2011 f
Net Income
Based on our assumptions for the Banks performance over the forecast period, we project
net income to grow at an average of 11% approximately, reaching around LE1.6bn by 2011.
It is worthy to note that net income is adjusted for non-appropriation items, extraordinary
items and goodwill amortization.
2011 f
2010 f
2009 f
2008 f
2007
2006
2005
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
LEmn
The Banks profitability ratios (adjusted for extraordinary items and goodwill) witnessed
a decline in 2007, as ROAA was 2.5%, down from 3.7% in the previous year. Meanwhile,
ROAE declined to 40.5%, compared to 64.4%. This was attributed to the minor increase
in net income by 2.8%, which lagged far behind the increase of average assets and average
equity by 53.9% and 63.4%, respectively.
68
September 2008
We expect further decline of the ROAA and ROAE-adjusted for goodwill, reaching around
2% and 30% by 2011, respectively. This would be a result of the higher increase that will be
witnessed in average assets and average equity over net income, which is in turn, attributed
to the effect of our 20% assumptions for income tax.
Chart 13: ROAA-ROAE
ROAE
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
ROAA
3.8%
3.3%
2.8%
2.3%
1.8%
2005
2006
2007
2008 f
2009 f
ROAE
2010 f
2011 f
ROAA
Assumed Payout Ratio

In 2006, NSGB did not make any dividend distribution, due to the costs associated with the
merge with MIBank. The following year, it applied a payout ratio of around 10%. When
using the DDM method for valuation, we assumed a payout ratio of around 72%, taking into
account the stock dividends that were distributed for the capital increase.

The Banks deposits balances decreased by 7.3% in H1 2008, reaching LE36.4mn, compared
to LE39.3mn in 2007. Nevertheless, we made our projections for the deposits growth based
on the assumption that the Banks orientation towards increasing its deposit rates, responding
to the rise in the CBE rates, will have its effect on increasing the Banks deposits balances by
2008. In turn, the Banks total assets declined by 6.4% YTD, reaching LE44.2bn.
The Bank was able to increase its loan portfolio by 10.2%, resulting from its current low
loans/deposits ratio, which enabled it to raise its lending facilities, despite the decrease in
deposits, which supports our expectations for loans growth.
Concerning treasury bills, they were affected by the cancellation of tax exemption, as
their balances declined by 36.9%, compared to 2007, reaching LE2.5bn. We expect lower
investments in these instruments during the forecast period. Meanwhile, we assumed the
Bank will extend a minor portion of its excess funds to other liquid assets, to compensate
for the decrease in treasury bills balances and to abide by the liquidity ratio required by the
CBE.
Net income reached LE549.4mn in H1 2008, realizing an increase of 40.4% y-o-y, after
adjusting for goodwill amortization. This achievement was a result of a 17.7% y-o-y
increase in net interest income, accompanied by a 106.8% y-o-y increase in total non-interest
income.
September 2008
69
While the income from treasury bills fell by 34.7% y-o-y in the same period, the Bank was
able to realize a 17.3% y-o-y increase in income from loans and interbank assets, which
resulted from the increased loans balances, compared to the same period last year, as they
grew by 26.4% y-o-y. In addition, the Bank was able to decrease its interest expense by 3.6%,
compared to the same period the previous year.
The surge in total non-interest income was mainly affected by volatile income, including gain
from sale of investments, profits from foreign exchange operations, financial investments
valuation differences and other income. These items combined surged by 257.6%. The
other incomes rise was primarily a result of provisions reversal of around LE278.6mn. In
addition, fees and commissions income rose by 39.2%, compared to H1 2007, as a result of
the increased loans balances, as well as the 14.0% y-o-y surge in contingent liabilities. Also,
investment income grew to LE6.0mn in H1 2008, up from LE4.1mn, realized in the same
period the previous year.
methods:
Risk free rate of 8.4% (YTM of 2011 bonds).
Beta of 5 years monthly figures. If the actual beta of the bank is less than 1 or if the
have taken it as 1.
(000LE)
Dividends Expected
NPV of the Firm
No. of Outstanding Shares (000)
2008F
2009F
2010F
2011F
607,096.3 659,485.4 795,037.1 1,134,067.0
Terminal
Value
13,168,222.8
2,371,691.8
8,004,638.6
10,376,330.4
302,941.0
34.3
70
September 2008
Sensitivity DDM
6.0%
14.2%
39.2
15.2%
34.9
16.2%
31.4
17.2%
28.6
18.2%
26.2
19.2%
24.2
Cost of Equity
6.5%
41.4
36.6
32.8
29.7
27.1
25.0

7.0%
7.5%
43.8
46.7
38.5
40.6
34.3
35.9
30.9
32.2
28.1
29.2
25.8
26.7
8.0%
50.0
43.0
37.7
33.6
30.3
27.6
8.5%
53.9
45.8
39.8
35.2
31.6
28.6

P/BV = (ROE - g) / (COE - g)
This P/BV is then multiplied with the BVPS of the Bank at the next full year, in our case
the BVPS at December 31st, 2008 to reach at the fair value of the Bank over a medium term
investment horizon.
In our calculations, we have made the following assumptions in order to attain the equity
- Sustainable ROE calculated as the average ROAE of the forecasted 4 years, which
represented 31.2%.
- Cost of Equity derived using Capital Asset Pricing Model taking the same assumptions as
in the DDM.
Sustainable ROE
COE
2008: BV/share (LE)
31.2%
16.2%
7.0%
2.6
13.2
34.6
Sensitivity GGM
September 2008
71
Cost of Equity
6.0%
14.2%
40.4
15.2%
36.0
16.2%
32.5
17.2%
29.6
18.2%
27.1
19.2%
25.1
6.5%
42.1
37.3
33.4
30.3
27.7
25.6

7.0%
7.5%
8.0%
44.1
46.4
49.1
38.8
40.4
42.3
34.6
35.8
37.2
31.2
32.1
33.1
28.4
29.1
29.9
26.1
26.6
27.2
8.5%
52.3
44.5
38.7
34.3
30.7
27.9
COE assumptions.
Cost of Equity
29.2%
14.2%
40.5
15.2%
35.6
16.2%
31.7
17.2%
28.6
18.2%
26.0
19.2%
23.9
30.2%
42.3
37.2
33.1
29.9
27.2
25.0
ROE
31.2%
44.1
38.8
34.6
31.2
28.4
26.1
32.2%
46.0
40.4
36.0
32.5
29.6
27.1
33.2%
47.8
42.0
37.4
33.7
30.7
28.2
34.2%
49.6
43.6
38.8
35.0
31.9
29.3
Valuation
Based on the current market price of LE30.0/share, as of September 7th, 2008, NSBG is
trading at 2008E P/E and P/BV multiple of 7.5x and 2.3x, respectively, after adjusting P/E
for extraordinary items, goodwill and number of shares and adjusting P/BV for goodwill and
number of shares.
Table 08: Valuation
Method
DDM
GGM
Final Value
Value
34.3
34.6
Weight
80.0%
20.0%
Weighted Value
27.4
6.9
34.3
2008); we therefore recommend a BUY on the scrip.
72
September 2008
Outlook
Our outlook for NSGB is positive. We believe the Bank possesses various key prospects,
which will enable it to maintain its current well established position in the Egyptian market.
The fact that its majority stake is owned by Societe Generale, a sound international lender,
provides confidence that the parent bank will provide it with the necessary financial support,
in case needed, in addition to the qualified management as technical assistance. The fact that
the Bank was not negatively affected by the fraud crisis that happened in Societe Generale in
the beginning of this year assures that NSGB is well positioned in the Egyptian market.
Despite being the second largest private bank in Egypt, the Bank still plans to expand its
branch network, in an attempt to enlarge its client base and gain higher market shares, which
is expected to boost its lending opportunities and consequently its future profits. Besides, the
latest capital increase that occurred in June 2008 is expected to enhance the Banks growth
and to ameliorate its capital adequacy.
September 2008
73
74

85,600.0
56,172.6
294,357.1
Taxes Payable
Other Provisions
38,796.2
September 2008
Secondary Capital (Subordinated Loan)
Total Equity & Liabilities
Total Equity
39,435,700.2
16,695,382.4
799,120.0
3,337,007.7
1,237,011.3
2,537,887.7
69.9
1,237,011.3
176.5
Total Primary Capital
Retained Earnings
509,865.8
2,027,952.1
660,000.0
576,834.8
36,098,692.5
Paid-in Capital
15,458,371.1
764,331.1
Reserves
Total Liabilities
983,702.5
333,282.7
Other Liabilities
Dividends Payable
966,757.0
1,584,590.7
33,311,605.7
13,104,368.0
Customer Deposits
Deferred Taxes
423,511.2
39,435,700.2
143,299.9
16,695,382.4
Other Assets
Total Assets
33,500.0
106,921.7
1,447,670.7
15,635,784.3
6,779,068.9
526,317.2
504,572.7
2,688,960.5
165,016.3
1,999,674.5
186,227.0
323,034.1
2,841.9
Deferred Taxes
Goodwill
Net Fixed Assets

Investments Held to Maturity &
17,870.9
Trading Investments
2,911,081.6
3,799,208.0
1,329,004.4
854,490.4
8,812,204.2
2,945,720.1
2006 A
3,582,383.2
946,219.1
2005 A
Treasury Bills
Due from Banks
(000LE)
Balance Sheet
3,315,680.4
47,256,669.3
4,304,404.3
772,030.0
3,532,374.3
438.4
777,926.9
2,754,009.0
42,952,265.0
58,845.7
740,082.1
130,350.2
1,143,595.5
1,580,000.0
39,299,391.5
47,256,669.3
556,880.9
77,639.9
1,085,753.0
676,055.3
19,735,569.6
452,394.1
3,632,105.6
241,144.8
3,945,977.3
13,537,468.3
53,749,512.7
4,711,249.8
744,940.0
3,966,309.8
453.5
936,446.5
3,029,409.9
49,038,262.9
59,126.4
777,086.2
1,240,801.1
1,190,318.7
45,770,930.4
53,749,512.7
696,101.1
97,942.0
723,835.3
795,526.7
23,816,110.3
294,056.2
4,176,921.5
280,854.8
2,493,453.1
16,513,029.1
3,861,682.6
2008 F
4,156,709.9
2009 F
61,496,094.5
4,856,397.9
717,850.0
4,138,547.9
492.6
1,108,645.4
3,029,409.9
56,639,696.6
43,563.6
815,940.5
1,302,841.2
1,296,899.3
53,180,452.0
61,496,094.5
800,516.3
133,475.3
361,917.7
888,974.7
29,443,963.8
264,650.6
4,803,459.7
306,989.8
2,871,462.0
17,463,974.8
National Societe General Bank

2007 A
70,492,531.3
5,037,002.2
690,760.0
4,346,242.2
593.9
1,316,238.4
3,029,409.9
65,455,529.1
28,625.7
3,121.5
856,737.5
1,328,898.0
1,475,149.8
61,762,996.6
70,492,531.3
920,593.7
0.0
934,042.6
35,385,339.3
269,943.6
5,338,032.4
338,004.6
3,126,444.2
19,661,404.0
4,518,726.9
2010 F
80,950,031.3
5,306,283.0
663,670.0
4,642,613.0
847.1
1,612,355.9
3,029,409.9
75,643,748.4
14,312.9
4,270.3
899,574.4
1,355,476.0
1,659,173.0
71,710,941.8
80,950,031.3
1,012,653.1
0.0
908,740.7
42,272,892.9
188,960.5
5,934,196.5
392,445.8
3,595,437.9
21,756,716.6
4,887,987.4
2011 F

September 2008
-

53,330.7
493,350.2
Taxes
NPAT
75
493,375.8
(25.6)

* Extraordinary items in 2006 represent deficit of the MIBank employees pension fund.
** Non-appropriation items represent gain from sale of fixed assets.
Net Income
Non-Appropriation Items**
546,680.9
Extraordinary Items*
205,183.4
30,620.3
Depreciation
174,563.1
269,158.4
20.0
Provisions No longer Used
Other Financial Investments Valuation Differences
6,388.7
50,958.0
Gains from Foreign Exchange Transactions
4,865.2
206,926.5
Dividend Income
20,849.7
482,706.0
503,555.7
Net Interest Income
558,058.3
Provisions
1,061,613.9
Interest Expense
2005 A
Interest Income
(000LE)
Income Statement
147,924.3
(1,134.7)
(497,851.5)
644,641.1
(97,614.3)
547,026.8
901,760.0
2,145.5
361,917.7
23,763.2
513,933.7
514,413.0
(9,776.5)
76,648.7
12,220.1
(11,980.2)
35,821.5
24,844.1
386,635.2
934,373.9
31,426.3
965,800.2
1,681,726.5
2,647,526.6
2006 A
674,180.8
(1,841.5)
672,339.2
29,281.8
701,621.1
987,402.9
2,869.0
361,917.7
92,265.8
530,350.3
566,425.9
9,687.7
3,154.8
22,203.2
54,626.1
15,696.0
13,601.6
447,456.5
1,122,598.1
90,342.5
1,212,940.6
1,834,358.2
3,047,298.7
2007 A
842,750.9
842,750.9
205,612.2
1,048,363.1
1,075,942.1
2,926.4
361,917.7
117,105.7
593,992.4
786,156.9
10,172.1
130,000.0
3,217.9
23,313.4
55,718.6
10,816.8
14,502.2
538,416.0
1,338,148.3
117,832.4
1,455,980.6
2,259,258.5
3,715,239.1
2008 F
2009 F
915,498.4
915,498.4
219,991.3
1,135,489.7
1,173,303.2
2,984.9
361,917.7
143,129.1
665,271.5
747,980.7
10,680.7
3,282.3
24,479.1
56,833.0
11,033.1
15,110.7
626,561.8
1,560,812.1
138,891.9
1,699,704.0
2,626,604.1
4,326,308.1
1,103,725.5
1,103,725.5
241,782.2
1,345,507.7
1,277,917.8
3,044.6
361,917.7
167,851.4
745,104.1
855,815.9
11,214.7
3,347.9
25,703.0
57,969.6
11,253.8
16,824.1
729,502.7
1,767,609.6
152,233.8
1,919,843.4
3,069,304.6
4,989,148.0
2010 F
1,574,499.2
1,574,499.2
393,337.6
1,967,836.8
1,026,162.1
3,105.5
188,540.1
834,516.5
974,880.3
11,775.5
3,414.9
26,988.2
59,129.0
11,478.9
18,543.2
843,550.6
2,019,118.7
180,380.3
2,199,499.0
3,567,445.5
5,766,944.6
2011 F

76
September 2008
595,967.6
3,962,784.6
4,558,752.3
2005 A
493,375.8
30,620.3
20,849.7
(20.0)
(6,388.7)
(25.6)
56,172.6
(2,841.9)
591,742.2
52,115.8
(854,490.4)
679.4
(158,816.9)
(859,764.1)
(68,573.3)
3,086,549.4
1,477,201.7
(25,509.7)
(23,698.7)
124,307.2
3,341,742.7
(2,533,488.5)
(58,312.2)
25.6
(2,591,775.1)
(264,000.0)
110,000.0
(154,000.0)
7,823,197.1
4,558,752.3
12,381,949.3
2006 A
147,924.3
23,763.2
361,917.7
31,426.3
11,980.2
9,776.5
(12,220.1)
497,851.5
(1,134.7)
(97,614.3)
973,670.5
(988,202.3)
(2,944,717.5)
(292,943.1)
(1,813,447.4)
(8,856,715.4)
(6,465.6)
(280,211.3)
20,207,237.7
(617,833.7)
(56,172.6)
438,547.7
650,419.8
6,413,166.8
2,162,631.1
(385,064.0)
(1,809,588.3)
1,134.7
(30,886.5)
(267,100.0)
(497,851.5)
38,796.2
799,120.0
1,367,952.1
1,440,916.8

* Cash balances represent cash and balances with the CBE, due from banks and 3-months treasury bills.
Change in Cash
Beginning Cash*
Ending Cash
(000LE)
Depreciation
Provisions
Extraordinary Items
Non-Appropriation Items
Provision for Deferred Tax
Treasury Bills
Trading Investments
Deferred Taxes
Other Assets
Customer Deposits
Taxes Payable
Provisions
Other Liabilities
Goodwill
Dividend Paid
Extraordinary Items
Change in Secondary Equity
Change in Capital
Cash Flow Statement
4,818,874.4
12,381,949.3
17,200,823.7
3,402,742.6
17,200,823.7
20,603,566.3
1,256,430.4
20,603,566.3
21,859,996.7

2007 A
2008 F
2009 F
674,180.8
842,750.9
915,498.4
92,265.8
117,105.7
143,129.1
361,917.7
361,917.7
361,917.7
90,342.5
117,832.4
138,891.9
(54,626.1)
(55,718.6)
(56,833.0)
(9,687.7)
(10,172.1)
(10,680.7)
(22,203.2)
(23,313.4)
(24,479.1)
(1,841.5)
205,612.2
219,991.3
29,281.8
1,159,630.1
1,556,014.7
1,687,435.6
(1,311,245.7)
1,333,703.8
(367,551.5)
3,799,208.0
104,092.5
(16,396.6)
(1,656.0)
(1,632,431.2)
(544,815.8)
(626,538.2)
(4,099,785.3) (4,080,540.7) (5,627,853.6)
(20,302.1)
(35,533.3)
(133,369.7)
(139,220.2)
(104,415.2)
5,987,785.8
6,471,538.9
7,409,521.6
613,243.0
(389,681.2)
106,580.6
(205,612.2)
(219,991.3)
(114,591.5)
(80,828.3)
(100,037.6)
159,893.0
97,205.6
62,040.1
4,532,428.9
3,981,065.9
2,182,001.3
116,492.4
224,228.6
96,919.3
(242,004.0)
(236,577.1)
(236,577.1)
1,841.5
(123,670.1)
(12,348.4)
(139,657.8)
(308,900.9)
(814,566.5)
(743,260.3)
20,049.5
280.7
(15,562.9)
(27,090.0)
(27,090.0)
(27,090.0)
726,056.9
275,400.9
410,115.5
(565,974.9)
(785,913.2)
2,567,186.1
21,859,996.7
24,427,182.8
2010 F
1,103,725.5
167,851.4
361,917.7
152,233.8
(57,969.6)
(11,214.7)
(25,703.0)
241,782.2
1,932,623.3
(247,242.3)
(5,311.7)
(534,572.7)
(5,941,375.5)
136,596.7
(120,077.4)
8,582,544.6
178,250.5
(241,782.2)
(111,436.8)
26,056.8
3,654,273.3
63,891.4
(212,919.4)
(149,028.0)
(896,031.3)
(14,937.9)
(27,090.0)
(938,059.1)
2,468,509.5
24,427,182.8
26,895,692.3
2011 F
1,574,499.2
188,540.1
180,380.3
(59,129.0)
(11,775.5)
(26,988.2)
393,337.6
2,238,864.6
(465,057.4)
(27,453.0)
(596,164.0)
(6,887,553.6)
1,148.8
(92,059.4)
9,947,945.3
184,023.1
(393,337.6)
(137,543.4)
26,578.0
3,799,391.4
151,887.6
(163,238.2)
(11,350.6)
(1,278,128.5)
(14,312.9)
(27,090.0)
(1,319,531.3)

September 2008

434.3%
63.8%
1.9%
2.2%
15.0%
15.1%
15.7%
-56.2%
2.4%
275,400.9
2.4
3.8
15.6
11.7
45.9
18.8
12.2
2.9
3.9
484.0%
70.7%
4.5%
6.5%
18.8%
149.4%
86.8%
-29.7%
79.4%
202,795.0
0.7
5.0
16.5
9.3
34.6
47.5
7.0
2.1
3.7
55.3%
56.4%
913.0%
139.8%
52.9%
54.2%
998.2%
209.3%
9.1%
19.4%
35.2%
36.5%
8.5%
18.5%
60.2%
8.2%
4.9%
3.3%
3.3%
63.5%
11.2%
6.9%
4.3%
4.1%
2,137,087.9
2,072,975.3
9.6%
9.4%
97.0%
2.5%
40.5%
172.9%
80.7%
3.7%
64.4%
176.6%
94.0%
N/A
2,036,014.5
N/A
11.3%
N/A
2007 A
2006 A
302,941.0
2.8
4.0
15.6
13.2
30.0
10.8
7.5
1.9
2.3
21.9%
20.3%
-31.1%
121.4%
354.4%
51.4%
1.4%
1.0%
22.2%
8.8%
17.8%
2,165,941.8
2,153,803.6
8.2%
8.2%
99.4%
57.4%
57.7%
971.5%
216.1%
31.8%
60.8%
8.6%
5.1%
3.5%
3.4%
2.4%
33.4%
138.9%
75.0%
302,941.0
3.0
4.2
16.0
14.8
30.0
9.9
7.1
1.9
2.0
16.4%
16.4%
2.0%
-54.4%
381.0%
55.2%
1.3%
1.0%
9.4%
7.9%
15.1%
2,192,378.0
2,253,841.1
6.8%
7.0%
102.8%
60.6%
60.6%
1095.1%
205.0%
33.1%
60.7%
8.7%
5.2%
3.5%
3.4%
2.2%
30.1%
149.7%
65.9%

2008 F
2009 F

* ROAA and ROAE are adjusted for extraordinary items and goodwill.
Profitability
Margins
Net Spread
Net Interest Margin
Efficiency
Cost to Income **
Liquidity
Credit Quality
NPLs (000LE)
NPLs to Gross Loans
NPLs Coverage
Capital Adequacy
Change in FX Income
Issued Shares
EPS adjusted for Goodwill, Extraordinary Items and Number of Shares
BVPS adjusted for Goodwill and Number of Shares
Market Price
P/E adjusted for Goodwill, Extraordinary Items and Number of Shares
P/BV adjusted for Goodwill and Number of Shares
Fact Sheet
302,941.0
3.6
4.8
16.6
16.6
30.0
8.2
6.2
1.8
1.8
15.3%
16.4%
2.0%
3.0%
370.8%
54.2%
1.3%
0.8%
8.1%
7.1%
13.1%
2,227,180.7
2,365,277.9
5.8%
6.2%
106.2%
62.0%
62.2%
1226.2%
188.4%
33.0%
61.5%
8.6%
5.2%
3.4%
3.3%
2.2%
30.8%
142.7%
63.6%
2010 F
302,941.0
5.2
5.2
17.5
17.5
30.0
5.8
5.8
1.7
1.7
15.6%
15.6%
2.0%
3.0%
293.1%
42.9%
0.9%
0.6%
5.7%
6.6%
11.6%
2,277,434.4
2,502,821.3
5.0%
5.5%
109.9%
63.4%
63.5%
1351.4%
172.9%
32.3%
61.9%
8.6%
5.2%
3.4%
3.3%
2.1%
30.4%
111.8%
49.5%
2011 F

77
Credit Agricole-Egypt
Tickers:
CIEB.CA (Reuters)
CIEB EY (Bloomberg)
Recommendation
BUY
Listing:
CMP:
Key Data
EPS* (LE)
BVPS* (LE)
P/E* (x)
P/BV* (x)
1.7
5.8
8.7
2.6

52 week Hi/Lo (LE)
Market Cap (LE mn)
Target Price (LE)
399.2
28.5/ 13.0
4,362.4
17.0

* Estimated (2008).
Background
Credit Agricole-Egypt CAE was established in September, 2006. The history of the Bank
begins in 1977, when it started-up under the name of Credit International dEgypte. In 2001,
Calyon-France, formerly Credit Agricole Indosuez-France, acquired a 72.4% stake in the
Bank, that is why it was renamed Credit Agricole Indosuez-Egypt. The latter merged with
Credit Lyonnais-Egypt in 2004. A year later, the Bank was renamed Calyon-Egypt, as it was
52.9% owned by Calyon-France and 29.5% owned by Credit Lyonnais-France.
In January 2006, Credit Agricole Group along with El Mansour and El Maghraby Investment
and Development Group acquired a majority stake in Egyptian American Bank EAB. In
August 2006, Calyon-Egypt was merged with EAB forming one entity under the name of
Credit Agricole-Egypt, starting from the beginning of September 2006.
Capital and Shareholders Structure
The Bank has an authorized capital of LE3.5bn, whereas its issued and paid-in capital amounts
to LE1.1bn, distributed over 287mn shares, at a par value of LE4.
CAE is 59.3% owned by Credit Agricole Group and 17.1% by El Mansour and El Maghraby
Group. The free float constitutes 21.0%.
78
September 2008

Free Float 21.0%
Others 2.6%
Credit Agricole
Group 59.3%
El Mansour and El Maghraby

Investment and Development
Group 17.1%
Synopsis on Credit Agricole-France

Credit Agricole France is a reputable French Bank that operates in 66 countries and is
specialized in retail banking. After reaching 9,000 branches in France, which became a
saturated market, the Bank decided to expand its branch network by acquiring other banks
outside France. Since 2005, more than 12 mergers and acquisitions were executed by the
Bank internationally.
Business Strategy of the CAE

Influenced by parent bank core practices
CAE follows the business strategy of Credit Agricole-France and focuses on retail banking
in Egypt. Its target is to gain growth in several business lines, taking the retail segment as a
starting point, as it perceives it as the fastest growing segment, which could lead to further
growth in other divisions.
Among the products and services that the Bank was able to offer to its clients, since the
merge in 2006, are electronic services, deposits and savings accounts, cash and car loans,
investments in mutual funds, credit cards and long term investments including marriage,
retirement and other plans.
The Bank also has a private banking division, which main role is to provide products and
services to special, high net worth individuals. These customers could also be foreigners who
are interested in investing in Egypt. Services provided include deposits and savings accounts,
investments in mutual funds, electronic services, as well as other services.
Seeking growth in the corporate segment
Though the Banks main focus is on the retail banking, it still aims at increasing its activities
in other business lines. Concerning the corporate segment, the Bank recognizes its importance
as a profitable line and presents high quality services to corporations, including short and
long-term financing, participation in syndicated loans, as well as funding projects in many
growing sectors, like food and tourism.
The Bank also provides services related to other financial institutions around the globe, as it
aims at promoting a banking network enabling it to serve clients in different banks worldwide,
in addition to participating in trade financing and other activities.
September 2008
79
Enterprises banking is another segment, which finances the investments of corporations,

through overdrafts, letters of credit, bank guarantees, foreign exchange services, swaps,
short-term and long-term financing and other services.
Also, the Bank serves the retail segment through its business with corporations by providing
payroll system and loans to employees.
Increasing Focus on Mortgage Finance and SMEs
Mortgage and SMEs segments comprise a minor percent of the Banks activities, due to the
limitations set on mortgage lending and the risks associated with funding SMEs.
Nevertheless, the Bank aims at increasing its services to SMEs. The main current services
are represented in deposits but the Bank expects more lending opportunities to be presented
to this division afterwards. In addition, the Bank has appointed a team in 2007, devoted
especially to serve this segment.
As for mortgage finance, the Bank relies on its sister company the Egyptian Company
for Mortgage Finance, in which it owns a stake of 50.0%, to expand its activities in this
domain.
Relatively Small Market Shares
CAE captures lower market shares than NSGB and CIB, in terms of total assets, loans and
deposits, but higher than those of EGB and EXPA, except that EXPA has a market share of
loans slightly higher than that of CAE. As of June 2008, the Banks shares of the total assets,
loans and deposits in the banking system were 2.1%, 1.8% and 2.6%, respectively.
The same goes for the Banks market share of the aggregate branch network, as its branches
reached 53 branches, implying a market share of 1.6%, taking into consideration that the
banks number of branches reached 3,252 branches in March 2008.
Recent Developments
Targeting Higher Market Shares
Aiming at increasing its market shares relative to its peers, the Bank plans to aggressively
expand its branch network, which will in turn increase its client base and consequently its
sources of funds and lending opportunities. In order to achieve this goal, the Bank launched
7 new branches in 2007. Currently, CAE operates through 53 branches, which are targeted
to reach around 100 branches by 2011. According to the Banks plan, the new branches will
serve mainly retail clients and in the mean time services will be promoted to private banking
segment, through representatives that will serve high net worth individuals.
New Products Launched
The intense competition taking place among banks induced CAE to initiate new products and
services. Among such products offered in 2007, was the launching of Visa Platinum. Other
products have been offered in the same year and the Bank plans to promote more services in
2008 and thereafter. The Banks ability to provide products and services with high quality
can be assured on the back of the international experience acquired through its parent bank.
80
September 2008

As 2007 is the first year to fully reflect the Banks performance after the merger, for analysis
purposes, we concentrated on comparing FY 2006 and 2007, as before that the results were
not representative of the Banks current status.
Major increase in the major source of funds
The first year for the merged entity exhibited an impressive growth in the deposits balances,
constituting 87.1% of the Banks total liabilities and equity, as they reached LE18.7bn in
2007, compared to LE13.7bn in 2006, realizing a 36.5% y-o-y. This growth was mainly
attributed to the 46.6% rise in time deposits, which represented around 63.8% of total deposits
in 2007, compared to 59.4% a year before. This indicates the ability of the Bank, supported
by its international expertise, to effectively collect the sources of funds, on which the entire
business of the Bank relies.

Other Deposits 1.9%
Other Deposits 2.7%

Demand Deposits
18.6%
Demand Deposits
16.8%
CDs 5.5%
CDs 4.9%
Time Deposits
59.4%
Savings Deposits
14.5%
Savings Deposits
12.0%
Time Deposits
63.8%
Source: CAE Financials, Global Research
On the other hand, the household sector had the highest contribution to total deposits in 2007,
as it had a share of around 45.6% in 2007, compared to 56.1% in 2006. The public services
sector share was 17.1% in 2007, down from 18.3% the previous year. The remaining deposits
were distributed among the mutual funds, with no contribution the previous year, services
sector and other sectors.
September 2008
81

Others 2.2%
Mutual Funds 0.0%
Agriculture 0.1%
Others 1.9%
Industrial 5.5%
Public Services
18.3%
Trade 6.9%
Mutual Funds 15.1%
Services 11.0%
Agriculture 0.1%
Industrial 3.5%
Trade 5.1%
Services 11.6%
Public Services
17.1%
Household 45.6%
Household 56.1%
Affected Assets Balances

The notable growth in deposits led to an amelioration of the total assets balances in 2007,
which rose by 36.5%, from LE15.8bn in 2006 to LE21.5bn in 2007. The major acceleration
was in the loans and advances, as well as the liquid assets, which when combined represented
the majority of total assets for the same year.
Boosted Loan Books
The sources of funds generated by the Bank in 2007 enabled it to extend greater amounts
of loans during the same year, enhancing its gross loans and advances balances by 22.5%,
from LE4.2bn in 2006 to LE5.2bn in 2007. This rise mainly came from the customer loans,
constituting 94.6% of the gross loans, as they grew by 22.4% in 2007. This was an indication
of the accelerating demand arising from various sectors to fund their investments and projects,
in addition to the growing demand taking place in the retail segment.
On the other hand, loans to banks dropped by 19.6%, which was a common phenomenon
in many banks in 2007, due to the excess liquidity that the banking sector was and is still
experiencing.
Discounted Bills
Customer Loans
Banks Loans
Unearned Bills Discount
Unearned Interest
2006
16.3
4,006.8
205.7
4,228.8
0.1
538.7
45.7
3,644.3
2007
113.2
4,902.9
165.4
5,181.5
0.1
471.1
48.0
4,662.3
y-o-y Growth
595.9%
22.4%
-19.6%
22.5%
46.5%
-12.6%
5.1%
27.9%
The major portion of the Banks loans in 2007 went to the industrial sector, as it contributed
82
September 2008
to 44.0% of total loans, down from 47.3% in 2006. The household sector ranked second, as
its share increased from 22.5% in 2006 to 25.9% in 2007, giving rise to promising lending
opportunities to the Bank from this sector, as noted earlier.
Others 0.8%
Banks 4.9%

Others 0.5%
Banks 3.2%
Agriculture 2.4%
Household
22.5%
Agriculture 2.2%
Household
25.9%
Industrial
44.0%
Industrial
47.3%
Services
9.6%
Services
14.1%
Trade 10.1%
Trade 12.4%
Adequate Provisioning Policy...

CAE has inherited bad debts, mainly from EAB, resulting in a NPLs ratio of 9%. The Bank
adopted a successful policy in terms of providing adequate provisions to such inflated ratio in
2007, as the coverage ratio reached around 101% of NPLs during the same year. The 12.6%
decrease in loan loss provision was partly attributed to the provision reversal made by the
Bank, reducing the balance from LE538.7mn in 2006 to LE471.1mn in 2007.
We projected the provisioning practices over the forecast period to be somehow close to
those adopted in 2007, while assuming declining rates of NPLs, which brings the coverage
ratio around 106% by 2011, in response to growing loans balances.
LEmn
1,200
108%
1,000
106%
800
104%
600
102%
400
100%
200
98%
96%
2007
NPLs
2008 f
2009 f
Lo an Lo s s Pro v is io n
2010 f
2011 f
Co v erag e Ratio (rig h t s cale)
Source: CAE, Global Research
September 2008
83
Insufficient Orientation to Lending opportunities

The Banks loans/deposits ratio decreased from 30.8% in 2006 to 27.7% in 2007, as a result
of the growth in deposits that was not matched by a relative growth in loans. After satisfying
the reserve and liquidity ratio, the Bank did not orient a significant portion of its excess funds
to loans, which could be a result of the Banks intention to minimize the risk of default, in
order not to be exposed to the NPLs crisis witnessed in the sector between 2000 and 2003.
The government decision of May 2008 concerning canceling the tax exemption on treasury
bills was mainly announced in order to encourage banks to increase their lending portfolios,
through decreasing the Banks investments in other instruments that do not represent the core
business of banks.
We relied on this view along with our expectations on the Banks loans and deposits in the
coming few years and assumed an inclining loans/deposits ratio, reaching around 44% by
2011.
This anticipated positive trend came on the back of our expectations for an average growth
rate of around 18% in deposits over the forecast period, which comes in line with the Banks
target and the expected rise in interest rates on deposits, following the successive climbs in
the corridor range, which are expected to boost the deposits balances. On the other hand, we
expected an average growth rate of approximately 34% in the Banks loan portfolio over the
same period, which also corresponds to the Banks target and the expected inclination of the
Bank towards orienting more of its excess funds to loans, in response to the cancellation of
the tax shield on treasury bills. This could be easily achieved by the Bank, given its current
low loans/deposits ratio, which gives it greater ability to extend more loans in the future.
LEmn
50%
40,000
35,000
40%
30,000
25,000
30%
20,000
20%
15,000
10,000
10%
5,000
0%
2006
2007
Gross Loans
2008 f
Deposits
2009 f
2010 f
2011 f
Loans/Deposits ratio (right scale)
Boosted Deposits Triggering Enhancement in Liquid Assets

Liquid Assets were, in turn, affected by the huge growth realized in deposits. They inclined
by 44.4%, mainly fueled by the growth in treasury bills and interbank assets by 196.3% and
42.1%, respectively.
84
September 2008
Common Trend in Treasury Bills

As was the case in almost all players in the banking sector, treasury bills represented a
significant portion of the CAEs balance sheet assets in 2007, amounting to LE3.4bn This was
coming from the Banks intention to invest the excess liquidity, arising from the acceleration
of deposit balances along with the low loans/deposits ratio, in safe instruments, to benefit
from the lower risk of default and the tax exemption benefit as well.
The latest decision concerning the cancellation of tax exemption on treasury bills led us to
assume that the Bank will lower its investments in such instruments in the coming few years
and compensate this by a minor increase in other liquid assets to satisfy its liquidity ratio,
ending up with more space for lending opportunities.
Rising Interbank Assets
Liquid assets growth was also affected by the rise in interbank assets, which was also a result
of the growth in the main source of funds, represented by deposits, accompanied by the low
loans/deposits ratio. This helped the Bank to use its available funds to lend other banks and
realize a net lending position, with a balance of LE10.5bn in 2007.
In LEmn
2006
2007
7,528.0
10,700.1
84.3
241.1
Net Balance
7,443.7
10,459.0
y-o-y Growth
30.8%
40.5%
Interbank Assets
Capital Adequacy Ratios

The capital adequacy ratios relating equity to total assets and gross loans declined over 2007,
as a result of the low increase in equity by 12.0%, compared to the rise in total assets and
gross loans. Meanwhile, the capital adequacy ratio relating capital to risk-weighted assets
reached 21%, according to the Bank, which is higher than the ratio set by the CBE, indicating
sound capital, supporting risk-weighted assets. We expected declining capital adequacy
ratios, as equity/total assets is expected to reach around 5% by 2011, while equity to gross
loans is expected to be around 12%. This could be justified by the high growth in loans that
is expected to exceed the equity growth.
Goodwill
Before the merge, EAB executed an acquisition over American express Bank in 2005,
resulting in a goodwill balance, amounting to LE51.4mn. The Bank fully amortized the
remainder of this balance in 2007, which reached approximately LE36mn.
CAE results in 2007 showed an enormous jump in net income, illustrating the successful
performance of the Banks management, taking into consideration that 2007 was the first full
year representing the Banks results as a new entity after the merge.
September 2008
85
The Bank reported a net income of LE523.9mn in 2007, compared to LE20.7mn, realized in
the previous year. It is worth mentioning that the Bank experienced an extraordinary loss in
2006, resulting from the deficit witnessed in the EAB employees pension fund, amounting
to LE317.5mn. This has negatively affected the Banks results in 2006 and consequently
boosted the growth in net income realized the following year.
Though the Bank had fully amortized the remaining goodwill balance, amounting to LE36mn
in 2007, it was able to realize an impressive growth in net profit over 2006, reaching 60.7%,
after eliminating the effects of unusual items and goodwill amortization.
Excluding these items, net income surged over the previous year, as a result of the rise in net
interest income and total non-interest income by 23.1% and 64.6%, respectively.
Concerning net interest income, the Bank experienced a 55.5% increase in its interest expense,
resulting from the increase in its deposits balances. Though interest income from treasury
bills and bonds dropped by 36.5%, as a result of the declining yields on treasury bills, the
Bank was able to generate income from loans and interbank assets, realizing an interest
income growth of 78.8%, which compensated for the drop in income from treasury bills and
bonds and the cost associated with deposits and interbank liabilities. This was a result of the
rise of the loans balances and interbank assets.
In the mean time, the rise in non-interest income was partially attributed to income generated
from fees and commissions, which rose by 12.2%, in response to the increase in loans
balances, along with the 162.5% increase in contingent liabilities. We projected future
income from fees and commissions by assuming that the Bank will apply the same fees
structure of 2007.
Other contributing factors to non-interest income were some volatile factors, represented
by dividend income, gain on sale of investments, foreign exchange operations, financial
investments valuation differences and other income, which grew by 838.2%, 317.1%, 41.3%,
777.9% and 322.7%, respectively.
Other important factor affecting the rise in net income was the reversal of provisions in 2007,
amounting to LE57.4mn, which has been the Banks strategy in 2006 also.
Regarding expenses, SG&A-excluding depreciation and goodwill amortization- rose by
10.0%, reaching around LE371.9mn in 2007, compared to LE338.3mn the previous year. This
could be attributed to the costs related to the branch network expansion and the launching of
new products and services. We projected SG&A to grow at an average of 16%, on the back
of the Banks target of expanding its branch network.
The Bank was able to bring down its cost to income ratio from 57% in 2006 to 45% in
2007. This was partially a result of the Banks ability to raise its net-interest income and
non-interest income, which combined, grew by 39%, over its operating expenses, which
increased by only 10% and was composed of SG&A, Depreciation and other expenses,
excluding goodwill amortization. Meanwhile, 2006 results were negatively affected by the
costs associated with the merger, implying a higher cost to income ratio. We believe the Bank
will be able to further decrease its cost to income ratio, bringing it to around 42% by 2011.
86
September 2008

LEmn
1,200
60%
1,000
50%
800
40%
600
30%
400
20%
200
10%
0%
2006
2007
2008 f
Net Interest Income

2009 f
2010 f
2011 f


The Bank was able to realize an interest spread of around 2.8% in 2007, compared to 2.7%
the previous year.
We projected an interest spread reaching approximately 3% by 2011. We forecasted the
spread based on many assumptions concerning interest rates applied by the Bank. We
assumed that interest income on treasury bills and bonds will not accelerate much, due to
lower investments in these instruments after the cancellation of the tax exemption. Then,
following the rise in the CBE deposit and lending rates, we assumed that the Bank would
increase its deposit and lending rates, realizing a higher spread in 2008, reaching more than
3%. This ratio is to decline in the future, taking into consideration the fierce competition that
will squeeze interest spread thereafter.
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
2006
2007
2008 f

2009 f
2010 f
2011 f
Net Income
Our assumptions regarding net income implies a net income of more than LE660mn by
2011, taking into account that we expect a negative growth in the bottom line income in
2008, as a result of the provisions added during the year, in contrast with the Banks previous
practices towards reversing provisions. It is worthy to note that net income is adjusted for
extraordinary items and goodwill amortization.
September 2008
87

2011 f
2010 f
2009 f
2008 f
2007
2006
100
200
300
400
500
600
700
LEmn
The Bank was able to increase its ROAA and ROAE - adjusted for extraordinary items
and goodwill - from 2.4% and 25.7% in 2006, to 3.0% and 38.1% in 2007, respectively.
This surge resulted from the remarkable growth in net income during the year, which far
exceeded the growth of average assets and average equity, represented by 25.3% and 4.9%,
respectively. Based on our assumptions, we believe the Banks ROAA and ROAE will reach
around 2% and 36% respectively by 2011.
Chart 13: ROAA-ROAE
ROAA
ROAE
40%
3.5%
30%
3.0%
2.5%
20%
2.0%
10%
1.5%
0%
1.0%
2006
2007
2008 f
2009 f
ROAE
2010 f
2011 f
ROAA

CAE did not make any dividend distribution in 2006, due to the low net income reported that
year, resulting from the expenses associated with the merger. Alternatively, a payout ratio of
around 46% was used in 2007. In our DDM method, we assumed that the Bank would apply
the same payout ratio over the projected period.

The Bank raised its customer deposits by around 4% in H1 2008, compared to year end 2007,
keeping its same contribution of 87% to total liabilities and equity.
This surge resulted in a 3.4% growth in total assets, reaching LE22.3bn in H1 2008, which
mainly came from the rise in gross loans. The Bank was able to extend greater amounts of
88
September 2008
loans, relying on the availability of funds resulting from its low loans/deposits ratio, which
pushed loans to grow by 40.1%, compared to year end 2007, supporting our assumption for
loans growth over 2008.
On the other hand, treasury bills balances declined by 8.0% YTD in H1 2008. We expect
these balances would not reach their previous levels, as a result of the cancellation of the tax
exemption on such instruments.
The Bank posted a net income of LE215.5mn in H1 2008, compared to LE211.5mn, realized
in the same period of the previous year, implying a growth of 1.9%. This increase was a
result of the rise of the net interest income and total non-interest income by 8.6% and 28.3%,
respectively. It is worth mentioning that after adjusting for goodwill amortization, net income
witnessed a negative growth of 0.5% in H1 2008, compared to H1 2007.
The rise in deposits resulted in a rise in interest expense by 41.7% y-o-y. Nevertheless, the
Bank was able to compensate for the increase in costs through generating a 30.3% boost
in income from loans and interbank assets, mainly fueled by the hike in loans balances. In
addition, income generated from treasury bills and bonds accelerated by 12.2%, as a result
of the increase in treasury bills balances over the year. We expect a modest increase in this
income, due to the expected decline in treasury bills over our projection period, compared
to 2007.
The rise in non-interest income was triggered by the growth in fees and commissions
income by 15.8%, compared to H1 2007, following the rise in the loans balances and the
157.2% y-o-y growth in contingent liabilities. As for other accounts such as gain from sale
of investments, foreign exchange profits, investments valuation differences and other items,
they grew combined by 77.7%, compared to the H1 of 2007. During the same period, the
dividend income dropped by 77.7%. Another contributor to the surge in net income was the
provision reversal, amounting to LE20.7mn.
Alternatively, SG&A (excluding depreciation) jumped significantly by 23.5%, compared to
H1 2007, as a result of the expansions taking place in the Banks branch network and the
newly initiated products and services. We relied on these incurred expenses in our projections
for SG&A over the forecast period.
Other expenses, amounting to LE50.5mn in H1 2008, included LE48.0mn, representing
expenses associated with interest rate swap contracts restructuring. We posted the whole
amount as other expenses in 2008, while assuming lower expenses over the following three
years.
September 2008
89
methods:
Beta of 5 years monthly figures. If the actual beta of the bank is less than 1 or if
the data available is of less than 5 years, to more appropriately reflect the market
risk, we have taken it as 1.
Table 03: DDM valuation
(000LE)
Dividends Expected
1,312,382.2
3,574,033.0
NPV of the Firm
4,886,415.2
No. of Outstanding Shares (000)

2008F
2009F
2010F
2011F
350,672.3
415,271.5
465,851.5
506,372.0
Terminal
Value
5,879,740.4
287,000.0
17.0
90
September 2008
Sensitivity DDM
Cost of Equity
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
14.2%
19.4
20.4
21.6
22.9
24.5
26.3
15.2%
17.3
18.1
19.0
20.0
21.2
22.5
16.2%
15.7
16.3
17.0
17.8
18.7
19.7
17.2%
14.4
14.9
15.4
16.0
16.7
17.5
18.2%
13.2
13.7
14.1
14.6
15.2
15.8
19.2%
12.3
12.6
13.0
13.4
13.9
14.4

P/BV = (ROE - g) / (COE - g)
investment horizon.
by 33.8%
in the DDM.
33.8%
16.2%
7.0%
Sustainable ROE
COE
2.9
2008: BV/share (LE)
5.8
16.9
September 2008
91
Sensitivity GGM
Cost of Equity
14.2%
15.2%
16.2%
17.2%
18.2%
19.2%
6.0%
19.6
17.5
15.8
14.4
13.2
12.2
6.5%
20.5
18.2
16.3
14.8
13.5
12.5

7.0%
7.5%
21.6
22.7
18.9
19.8
16.9
17.5
15.2
15.7
13.9
14.3
12.7
13.0
8.0%
24.1
20.8
18.2
16.3
14.7
13.4
8.5%
25.7
21.9
19.0
16.9
15.1
13.7
COE assumptions.
Cost of Equity
`
14.2%
15.2%
16.2%
17.2%
18.2%
19.2%
31.8%
20.0
17.5
15.6
14.1
12.8
11.8
32.8%
20.8
18.2
16.3
14.7
13.4
12.3
ROE
33.8%
34.8%
21.6
22.4
18.9
19.6
16.9
17.5
15.2
15.8
13.9
14.4
12.7
13.2
35.8%
23.2
20.4
18.1
16.4
14.9
13.7
36.8%
24.0
21.1
18.8
16.9
15.4
14.2
Valuation
Based on the current market price of LE15.2/share, as of September 7th, 2008, CAE is trading
at 2008E P/E and P/BV multiple of 8.7x and 2.6x, respectively.
Table 08: Valuation
Method
DDM
GGM
Final Value
Value
17.0
16.9
Weight
80%
20%
Weighted Value
13.6
3.4
17.0
and adaptation of the Gordon Growth Model (20%). According to our fair value, the banking
2008); we therefore recommend a BUY on the scrip.
92
September 2008
Outlook
Carrying the name of an international reputable lender, promote a positive outlook for the
Bank, ensuring promising growth, supported by international expertise, as well as financial
support, if needed.
The results of the Bank in its first year after the merger supports our positive view, as it was
able to quickly overcome the costs associated with the merge and furthermore realize high
net income growth.
The Banks target of expanding its network should provide CAE with greater opportunities,
resulting from extended client base and consequently, increasing the Banks market shares in
terms of total assets, deposits and loans relative to the banking system.
September 2008
93
94
1,333,582.8
388,098.9
526,789.4
124,191.2
Trading Investments

15,761,631.0
121,212.7
Retained Earnings
1,405,263.8
136,051.0
Reserves
Total Equity
1,148,000.0
Capital
1,893.1
14,356,367.2
Deferred Taxes
Total Liabilities
2,065.5
187,873.6
Other Provisions
322,849.7
Dividends Payable
117,755.4
Other Liabilities
13,723,929.9
Customer Deposits
154,896.7
15,761,631.0
Total Assets
35,969.3
Goodwill
Other Assets
157,879.4
Net Fixed Assets
3,644,258.0
1,154,537.8
Treasury Bills
7,527,992.3
713,435.3
2006 A
Due from Banks
(000LE)
Balance Sheet
21,521,092.9
1,573,154.8
262,906.6
162,248.2
1,148,000.0
19,947,938.1
1,893.1
130,831.7
336,774.6
458,349.4
284,893.6
18,735,195.7
21,521,092.9
360,232.4
145,691.1
4,662,307.7
257,911.0
46,058.8
223,841.5
3,421,099.2
10,700,079.1
1,703,872.1
2007 A
25,112,959.7
1,663,491.1
328,151.6
187,339.5
1,148,000.0
23,449,468.6
133,448.3
595,854.2
339,711.0
22,380,455.1
25,112,959.7
367,437.0
179,130.0
6,590,737.9
309,493.3
70,426.5
343,827.4
1,899,274.9
12,754,728.7
2,597,903.9
2008 F
29,718,631.9
1,753,655.1
389,442.7
216,212.3
1,148,000.0
27,964,976.8
136,117.2
744,817.8
380,680.0
26,703,361.9
29,718,631.9
374,785.7
219,256.7
8,790,383.8
355,917.2
77,870.7
410,239.5
2,266,130.2
14,124,344.9
3,099,703.2
2009 F
Credit Agricole - Egypt
34,570,910.1
1,833,478.7
437,942.9
247,535.8
1,148,000.0
32,737,431.4
138,839.6
893,781.3
413,943.3
31,290,867.2
34,570,910.1
382,281.5
216,581.6
11,605,469.1
391,509.0
82,225.9
480,716.6
2,655,440.1
15,124,469.5
3,632,216.8
2010 F
39,991,702.0
1,905,619.6
476,767.2
280,852.4
1,148,000.0
38,086,082.4
141,616.4
1,027,848.5
443,071.1
36,473,546.4
39,991,702.0
389,927.1
213,639.0
15,124,224.2
411,084.4
84,175.2
560,337.3
3,095,258.4
15,879,238.7
4,233,817.8
2011 F

September 2008
September 2008
95
20,654.8
523,943.5
523,943.5
538.8
523,404.7
449,039.2
13.1
35,969.3
41,109.3
371,947.5
972,443.9
405,903.2
(3,140.0)
33,919.5
25,021.0
26,755.4
77,078.5
50,167.7
196,101.2
566,540.7
(57,442.5)
509,098.2
811,651.3
1,320,749.5
2007 A
501,826.0
501,826.0
124,983.2
497.9
626,311.3
529,915.1
50,147.3
40,869.8
438,898.0
1,156,226.4
498,465.8
(1,570.0)
34,597.8
26,272.1
27,290.5
96,348.1
26,177.1
289,350.1
657,760.6
72,369.2
730,129.8
1,074,811.6
1,804,941.4
577,456.4
577,456.4
144,364.1
507.9
721,312.6
568,686.8
1,743.4
49,043.7
517,899.7
1,289,999.4
560,686.6
(785.0)
35,289.8
27,585.7
27,836.3
98,275.1
31,010.2
341,474.6
729,312.9
123,854.3
853,167.1
1,307,360.5
2,160,527.6

2008 F
2009 F

*Provisions in 2006 and 2007are reversed, as they are no longer used.
** Other operating expenses in 2008 include LE48mn, representing expenses incurred for the restructuring of interest rate swap contracts.
*** Extraordinary items in 2006 represent deficit of the EAB employees pension fund.
Net Income
(317,475.2)
338,130.0
Extraordinary Items***
NPAT
457.0
2,559.1
Taxes
Other Non-Operating Income (Expense)
340,232.1
10,276.9
252.0
36,965.7
Depreciation
385,779.9
338,285.3
726,012.0
Total Operating Income
Other Operating Expenses**
246,578.7
8,025.2

(11,767.9)
9,275.4
6,414.4
5,347.4
54,545.0
174,739.2
479,433.4
Dividend Income
413,611.0
(65,822.3)
Provisions*
521,946.6
Net Interest Income
935,557.7
Interest Expense
2006 A
Interest Income
(000LE)
Income Statement
626,468.1
626,468.1
156,617.0
518.0
782,567.2
647,952.8
1,369.8
56,177.4
590,405.6
1,430,520.0
630,318.6
(392.5)
35,995.6
28,964.9
28,393.0
100,240.6
35,644.9
401,472.0
800,201.4
170,407.8
970,609.2
1,557,904.6
2,528,513.7
2010 F
666,333.5
666,333.5
166,583.4
528.4
832,388.4
729,706.9
753.4
61,795.1
667,158.4
1,562,095.3
707,023.7
(196.3)
36,715.5
30,413.2
28,960.9
102,245.4
39,835.3
469,049.6
855,071.6
183,709.2
1,038,780.8
1,873,365.0
2,912,145.8
2011 F

96
September 2008
1,491,482.9
6,749,944.7
8,241,427.6
Change in Cash
Beginning Cash*
Ending Cash
4,194,623.6
8,241,427.6
12,436,051.2
2007 A
523,943.5
41,109.3
35,969.3
(57,442.5)
(26,755.4)
3,140.0
(25,021.0)
(538.8)
494,404.4
(2,234,461.5)
1,333,582.8
189,278.4
480,730.6
(1,018,049.8)
(205,335.7)
5,011,265.7
167,138.3
400.6
135,499.7
4,354,453.7
(110,104.5)
(28,921.1)
(139,025.6)
(21,343.3)
538.8
(20,804.5)

*Cash balances represent cash and balances with the CBE, due from banks and 3-months treasury bills.
2006 A
20,654.8
36,965.7
10,276.9
(65,822.3)
(6,414.4)
11,767.9
(9,275.4)
317,475.2
(457.0)
2,559.1
1,814.7
319,545.2
215,215.0
(493,239.2)
(278,535.6)
16,773.7
214,343.0
(0.0)
10,095.4
2,197,647.9
(154,416.5)
(2,559.1)
51,035.4
33,872.7
2,129,777.8
(20,400.6)
(45,771.8)
(66,172.4)
(344,341.6)
(317,475.2)
457.0
89,237.3
(572,122.5)
(000LE)
Depreciation
Provisions
Extraordinary Items
Treasury Bills
Trading Investments
Deferred Taxes
Other Assets
Customer Deposits
Taxes Payable
Provisions
Other Liabilities
Goodwill
Dividend Paid
Extraordinary Items
Change in Capital
Cash Flow Statement
2,916,581.5
12,436,051.2
15,352,632.6
1,871,415.4
15,352,632.6
17,224,048.1

2008 F
2009 F
501,826.0
577,456.4
40,869.8
49,043.7
72,369.2
123,854.3
(27,290.5)
(27,836.3)
1,570.0
785.0
(26,272.1)
(27,585.7)
(497.9)
(507.9)
124,983.2
144,364.1
687,557.7
839,573.7
1,489,724.3
(366,855.3)
(93,713.8)
(38,826.5)
(24,367.7)
(7,444.1)
(1,928,430.2)
(2,199,645.9)
(1,893.1)
(7,204.6)
(7,348.7)
3,645,259.4
4,322,906.8
54,817.4
40,968.9
(124,983.2)
(144,364.1)
(69,752.5)
(121,185.3)
137,504.8
148,963.6
3,764,518.3
2,466,743.1
(25,861.7)
(19,372.7)
(74,308.7)
(89,170.4)
(100,170.4)
(108,543.1)
(748,264.4)
(487,292.4)
497.9
507.9
(747,766.5)
(486,784.5)
1,532,638.3
17,224,048.1
18,756,686.4
2010 F
626,468.1
56,177.4
170,407.8
(28,393.0)
392.5
(28,964.9)
(518.0)
156,617.0
952,186.9
(389,309.9)
(41,512.2)
(4,355.3)
(2,815,085.3)
(7,495.7)
4,587,505.4
33,263.3
(156,617.0)
(167,685.5)
148,963.6
2,139,858.3
(7,591.2)
(53,502.2)
(61,093.5)
(546,644.5)
518.0
(546,126.5)
1,356,370.1
18,756,686.4
20,113,056.5
2011 F
666,333.5
61,795.1
183,709.2
(28,960.9)
196.3
(30,413.2)
(528.4)
166,583.4
1,018,714.9
(439,818.2)
(49,207.5)
(1,949.3)
(3,518,755.1)
(7,645.6)
5,182,679.2
29,127.8
(166,583.4)
(180,932.4)
134,067.2
1,999,697.6
9,189.2
(58,852.5)
(49,663.3)
(594,192.5)
528.4
(593,664.1)

September 2008
97
252.3%
37.5%
9.6%
14.7%
30.5%
41.2%
12.2%
41.3%
140.1%
287,000.0
1.8
2.0
5.5
5.5
26.0
8.3
7.8
2.8
4.7
275.0%
51.4%
1.6%
16.0%
19.5%
11.4%
-7.8%
-2.0%
-40.9%
287,000.0
0.1
1.2
4.9
4.8
16.2
225.7
13.4
3.3
3.4
26.8%
27.7%
1190.9%
393.7%
29.3%
30.8%
976.6%
325.9%
7.3%
30.4%
45.1%
56.9%
8.9%
33.2%
61.5%
7.7%
4.9%
2.8%
3.0%
55.8%
6.8%
4.1%
2.7%
3.0%
466,336.9
471,087.5
9.0%
9.1%
101.0%
3.0%
38.1%
97.3%
77.6%
2.4%
25.7%
121.6%
72.5%
N/A
538,747.3
N/A
12.7%
N/A
2007 A
2006 A
287,000.0
1.7
1.7
5.8
5.8
15.2
8.7
8.7
2.6
2.6
36.7%
47.6%
25.0%
14.6%
288.2%
46.2%
4.2%
15.4%
29.2%
6.6%
23.2%
538,228.2
540,840.0
7.5%
7.5%
100.5%
32.7%
32.1%
1345.4%
560.0%
43.1%
59.5%
8.6%
5.2%
3.5%
3.5%
2.2%
31.0%
116.6%
79.6%
287,000.0
2.0
2.0
6.1
6.1
15.2
7.6
7.6
2.5
2.5
19.7%
18.0%
2.0%
2.9%
299.5%
47.3%
4.3%
13.6%
26.1%
5.9%
18.5%
645,600.7
662,025.3
6.8%
7.0%
102.5%
36.5%
35.6%
1522.7%
596.2%
40.2%
60.5%
8.9%
5.3%
3.6%
3.5%
2.1%
33.8%
118.3%
77.7%

2008 F
2009 F
* ROAA and ROAE are adjusted for extraordinary items and goodwill.
Profitability
Margins
Interest Expense to Interest Bearing Liabilities
Net Spread
Net Interest Margin
Efficiency
Cost to Income**
Liquidity
Credit Quality
NPLs (000LE)
NPLs to Gross Loans
NPLs Coverage
Capital Adequacy
Change in FX Income
Issued Shares
EPS
EPS adjusted for Extraordinary Items and Goodwill
BVPS
BVPS adjusted for Goodwill
Market Price
P/E
P/E adjusted for Extraordinary Items and Goodwill
P/BV
P/BV adjusted for Goodwill
Fact Sheet
287,000.0
2.2
2.2
6.4
6.4
15.2
7.0
7.0
2.4
2.4
17.0%
17.6%
2.0%
2.7%
323.1%
51.3%
4.6%
12.8%
24.7%
5.3%
14.7%
798,391.7
829,710.8
6.4%
6.7%
103.9%
41.0%
39.9%
1706.6%
642.5%
40.5%
61.6%
8.9%
5.3%
3.6%
3.4%
1.9%
34.9%
124.0%
80.5%
2010 F
287,000.0
2.3
2.3
6.6
6.6
15.2
6.5
6.5
2.3
2.3
15.2%
16.8%
2.0%
2.6%
349.9%
56.3%
4.8%
12.3%
23.8%
4.8%
11.8%
954,256.2
1,010,643.2
5.9%
6.2%
105.9%
45.8%
44.3%
1914.0%
699.7%
41.8%
64.3%
8.8%
5.5%
3.3%
3.1%
1.8%
35.6%
124.8%
84.9%
2011 F

Egyptian Gulf Bank

Recommendation
SELL
Tickers:
EGBE.CA (Reuters)
EGBE EY (Bloomberg)
Listing:
CMP:
US$2.6 (September 7th, 2008)
Key Data
EPS* (US$)
BVPS* (US$)
P/E* (x)
P/BV* (x)
0.1
109.0
0.9
23.0
2.8
52 week Hi/Lo (US$)

Market Cap (US$ mn)
Target Price (US$)
4.1/ 2.2
367.8
2.0
Source: Mubasher, Global Research, market prices as of September 7th, 2008

* Estimated 2008
Background
The Egyptian Gulf Bank EGBE was established in 1981. Through a network composed
of 11 branches, the Bank provides a wide variety of products and services to its retail and
corporate clients.
Retail products include current and savings accounts, internet banking, ATM network and
other services. On the other hand, corporate products cover short and medium-term financing,
letters of credit, letters of guarantee, trade finance and other activities. Meanwhile, the Bank
provides services to the retail segment through its corporate clients, represented by payroll
systems.
In addition, the Bank presents Islamic products to its clients, represented by morabahat.
A morabaha is defined as an agreement between the Bank and its client to perform a sale
transaction, where the Bank acts as the seller of goods or products, which it buys from its
original owner and resells it to the client. There are no interest payments in this transaction.
The customer pays the Bank a higher price for the purchased commodity on installments, as
per a predetermined schedule.
Shareholders Structure
EGBE is 19.4% owned by public companies, whereas private companies ownership is 14.9%.
Top management has a stake of 2.4%, while shares owned by individuals and physical shares
represent 14.5% of the Banks capital. The remaining stocks, representing 49.0%, constitute
the free float.
98
September 2008

Top Management 2.4%
Individuals 14.3%
Free Float 49.0%

Public Companies 19.3%
Private Companies 14.8%

Physical Shares 0.2%
Potential Acquisition Target

EGBE is viewed as a potential acquisition target. Being among the banks with small caps, its
market shares are very small, compared to large banks under our coverage. This is expected
to present an attractive opportunity for acquisition by foreign banks, having an intention to
enter the Egyptian market, or even local players planning to augment their market shares.
As of June 2008, the Banks market shares of the aggregate banking systems total assets,
deposits and loans were 0.5%, 0.5% and 0.7%, respectively. In terms of branches, the Bank
has a market share of 0.3% of the banking system branch network.
Recent Developments
Seeking Growth through Capital Increase
EGBE has an authorized capital of US$250mn, whereas its issued and paid-in capital reached
US$140.4mn, equivalent to LE575.3mn, distributed over 140.4mn shares, at a par value of
US$1.
The Bank announced that it would increase its issued and paid-in capital in September 2008, to
reach US$150.2mn, through a 7:100 stock dividends distribution, financed from distributable
net income of 2007. Such increase clarifies the Banks intention towards ameliorating its
growth and capital adequacy.
Expand Banking Activities
The Bank plans to expand its banking activities, aiming at widening the range of products and
services offered to its clients, in an attempt to increase its market shares and consequently,
realize higher profits.
This was illustrated through the latest announcement in July 2008, concerning the Banks
contribution in the capital of Prime Holding, which should be executed through the
subscription in the Companys capital increase shares, amounting to 16mn shares, at a price
of LE6.75/per share and a total value of LE108mn.
September 2008
99
Higher Stakes in Affiliate Companies

Another way adopted by the Bank to diversify its range of products and services is done
through exploring many fields and acquiring stakes in affiliates companies, on which the
Bank will rely to implement its activities. This was shown when the Bank announced in
February 2008 that it would participate in the establishment of some companies working in
real estate finance and car trading services. This would in turn help the Bank to promote more
lending facilities related to mortgage and car loans.
The latest contribution of the Bank in affiliate companies was posted in the Q2 2008 balance
sheet, showing a 26% stake in the Arab Investment Urbanization Company.

Boosted Sources of Funds
EGBE was able to expand its main source of funds, realizing a y-o-y increase of 13.0%
in its deposits balances, reaching LE4.3bn, compared to LE3.8bn in 2006. This increase
implies a reasonable ability of the Bank for collecting funds and in the mean time presenting
attractive products to its clients. The main contributors to this increase were the time deposits,
constituting 43.0% of the Banks total deposits in 2007, as they rose by 46.4%, compared to
2006.
Other Deposits 5.7%
Other Deposits 3.5%

Demand Deposits
34.3%
Time Deposits
33.2%
Demand Deposits
27.1%
Time Deposits
43.0%
CDs 8.3%
CDs 9.4%
Savings Deposits
18.2%

Source: EGBE Financials, Global Research
Assets Balances on the Rise

The rise of the Banks deposits in 2007 had its effect on the total assets, which surged by
11.9% y-o-y, reaching LE5.1bn, compared to LE4.6bn in 2006. The main items affected by
the surge in deposits were gross loans and interbank assets, constituting 44.9% and 42.3% of
total assets in 2007, respectively.
Rising Loan Portfolio
The Bank was able to extend greater proportions of loans in 2007, in response to the rise in
its deposits balances. Gross loans rose by 39.3% y-o-y, reaching LE2.3bn, up from LE1.7bn,
the previous year. The major contributor to the incline of the gross loans was the amplified
customer loans balances, growing by 39.1%, as they constituted 96.5% of gross loans.
100
September 2008
Table 01: Loans Growth

Loans (in LEmn)
Discounted Bills
Customer Loans
Morabahat
Unearned Interest
Loan Loss Provision
Prepaid Morabahat Interest
Prepaid Interest
Net Loans
2006
1,599.1
56.7
1,655.8
87.0
426.8
0.0
0.0
1,141.9
2007
3.2
2,224.4
78.3
2,305.9
92.2
466.2
1.8
2.6
1,743.1
y-o-y Growth
N/A
39.1%
38.1%
39.3%
6.0%
9.2%
6502.1%
6428.5%
52.6%
Adequate Provisions Policy

We believe EGBE adopts an adequate policy when it applies provisions for its NPLs, which
we believe represented a considerable amount in 2007, exceeding more than LE450mn and
representing around 20% of gross loans. The coverage ratio for NPLs reached around 103%
in the same year, as total provisions for loan losses exceeded LE460mn.
Based on the Banks practices in 2007, we assumed the Bank will adopt the same provisioning
policy over our projected period, maintaining a somehow stable coverage ratio, while
assuming a declining growth of NPLs.
LEmn
800
700
600
500
400
300
200
100
0
105%
100%
95%
90%
85%
80%
2007
2008 f
NPLs
2009 f
Loan Loss Provision
2010 f
2011 f
Source: EGBE, Global Research
Accelerating Loans/Deposits Ratio

As described earlier, EGBE was able to increase its lending facilities at a higher pace than the
growth in deposits realized the same year. This implied a higher loans/deposits ratio of 53.9%
in 2007, compared to 43.8%, the previous year.
Based on the latest climbs of the CBE rates, the Bank increased its interest rates on deposits,
which is expected to attract more clients and increase deposits balances. That is why we
projected an average growth rate of 14% for deposits balances over the forecast period.
Meanwhile, the latest released government decision of canceling the tax exemption on
treasury bills is expected to discourage banks from increasing their investments in these
instruments and direct greater amounts of their excess funds to loans. We relied on this
assumption and the fact that the Bank has an ability to extend large amounts of loans, even
exceeding the growth of its deposits, as was shown in 2007, and assumed an average loan
growth of 17% over the projection period.
September 2008
101
Relying on our expectations for loans and deposits growth, the loans/deposits ratio is to grow
over our projected period, reaching around 60% by 2011.
LEmn
8,000
65%
7,000
60%
6,000
55%
5,000
4,000
50%
3,000
45%
2,000
40%
1,000
35%
2003
2004
2005
2006
Goss Loans
2007
Deposits
2008 f
2009 f
2010 f
2011 f
Another Effect on Assets

The second effect of the rise of deposits on total assets was the rise of interbank assets, as
they grew by 9.1% in 2007, reaching LE2.27bn, compared to LE2.0bn in 2006. As was the
case for almost all banks in 2007, the excess liquidity existing in the banking system was the
main reason behind the boosted interbank assets balances.
LE mn
2003
Interbank Assets
1,312.0
10.7
Net Balance
1,301.3
y-o-y Growth
76.4%
2004
995.9
57.5
938.4
-27.9%
2005
1,273.6
585.6
688.0
-26.7%
2006
1,992.5
37.2
1,955.3
184.2%
2007
2,174.3
14.7
2,159.6
10.5%
Decelerating Capital Adequacy Ratios

In 2007, the Banks equity rose by 9.5%, reaching LE686.7mn, compared to LE627.2mn in
2006. As total assets grew by 11.9%, a higher growth, the equity/total assets ratio witnessed
a slight decline, as it reached 13.4%, down from 13.7% in 2006.
Meanwhile, the jump of gross loans by 39.3% in the same year was behind the sharp decline
of the equity/gross loans ratio from 37.9% in 2006 to 29.8% in 2007. Nevertheless, the
accelerating loans growth that we expect will happen during the forecast period would have
its effect on capital adequacy ratios, declining the equity/total assets and equity/gross loans
ratios, reaching around 10% and 18%, respectively.

Treasury Bills
Treasury bills balances declined by 18.2% from LE245.1mn in 2006 to LE200.4mn in 2007.
We projected low balances of treasury bills in the future, affected by the removal of the tax
shield, according to the latest government decision in May 2008.
102
September 2008
Investments Held to Maturity and Investments in Affiliates

These investments were boosted from LE20.2mn at year end 2007, to LE86.2mn in June
2008, as a result of the LE66.0mn contribution of the Bank in 26% of the Arab Investment
Urbanization Companys capital. We projected future long-term investments based on this
new affiliate, in addition to an amount of LE5mn, which EGBE plans to use as a contribution
in the capital of First Gas Company, which is currently under establishment. Also, we raised
the balance by LE108mn, representing the Banks contribution in the capital of Prime
Holding, in addition to LE8.6mn, representing the Banks contribution in Union Capital
Equity Fund, which is now under establishment. Moreover, we added LE20mn, representing
the acquisition of a stake of 13.3% in National Glass and Crystal Company, through a
consortium led by Prime Holding.
EGBE reported net income of LE70.5mn in 2007, compared to LE86.1mn, realized in 2006,
implying a negative growth of 17.3%. This negative growth is mainly a result of the high
amount of provisions added during the year, amounting to LE77.7mn. EGBE had to orient
great proportions of its income to provisions to cover its high ratio of NPLs.
The Bank was able to generate income from its core business, represented by interest income,
which grew by 2.9% in 2007, amounting to LE131.3mn, up from LE127.6mn in 2006. This
minor increase was a consequence of the 10.0% increase in interest expense, resulting from the
surge in deposits, along with the decline in income generated from treasury bills and bonds,
which in turn came on the back of the decline in treasury bills over the year. Nevertheless,
EGBE compensated for such costs by generating income from loans and interbank assets,
which rose by 37.5%, resulting from their rising balances as well.
Non-interest income witnessed a 31.9% increase, reaching LE91.4mn in 2007, compared to
LE69.3mn, the previous year. Fees and commissions income grew by 9.4% y-o-y, resulting
from the accelerating loans balances during the year and also the contingent liabilities, which
increased by 91.9%. We projected future income from fees and commissions, assuming the
Bank will employ the same strategy set for these items over the projection period.
Other sources contributing to non-interest income were the volatile items, represented by
dividend income, which grew by 10.2% and other income, which in turn grew by 61.2%.
It is worth mentioning that other income includes gain from sale of investments, foreign
exchange profits, financial investments valuation differences and other items.
It is worthy to note that we raised our projections for investment income, taking into
consideration the Banks announcement of its contribution in the capital of Prime Holding
by LE108mn, representing a stake of 22% approximately.
Concerning SG&A, it grew by 27.7%, reaching LE68.4mn, up from LE53.6mn in 2006.
As for depreciation, it grew by 68.5%, from LE3.0mn in 2006 to LE5.1mn in 2007. We
projected future SG&A and depreciation expenses assuming they would grow by an average
of 11% and 9%, respectively, over our projection period.
The Banks gross revenues composed of interest and non-interest income grew by 13.1% in
September 2008
103
2007, whilst its total operating expenses, including SG&A, depreciation and other expenses,
realized a higher growth in the same year, represented by 29.9%. The higher surge in costs
over income resulted in an acceleration of the cost/income ratio to 33.1%, up from 28.8% in
2006.
Based on our expectations for the Banks future income and costs, we forecasted a somehow
stable cost/income ratio, reaching around 32% by 2011.
LEmn
250
70%
65%
200
60%
55%
150
50%
45%
100
40%
35%
50
30%
25%
20%
2003
2004
2005
2006
2007
Net Interest Income

2008 f
2009 f
2010 f
2011 f


In 2006, the Banks net interest income increased by 55.0%. The interest expense surged by
39.6%, but this surge was compensated by a 45.9% increase in interest income, realizing a
spread of 2.8%. In 2007, the 10.0% increase in the interest expense was compensated by only
6.9% increase in interest income, leading to a decrease in the Banks spread to 2.3%.
We projected a higher interest rate spread in the first couple of years, reaching around 2.9%,
based on the assumptions that the Bank will increase its deposit and lending rates, following
the increases in the CBE overnight deposit and lending rates. The following years are to
experience lower spreads, resulting from the forecasted rising competition.
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4%
3%
2%
1%
0%
-1%
2003
2004
2005
2006
2007
2008 f
2009 f
2010 f
2011 f
-2%
Net Income
Our assumptions for the Banks performance resulted in an expected average growth of
net income of around 17% over our forecast period. It is worthy to note that net income is
adjusted for non-appropriation items.
104
September 2008

2011 f
2010 f
2009 f
2008 f
2007
2006
2005
2004
2003
20
40
60
80
100
120
140
LEmn
The negative growth in net income witnessed in 2007, resulted in a decline of the Banks
profitability ratios, represented by ROAA and ROAE, reaching 1.0% and 10.7%, compared
to 2.1% and 14.3% the previous year, respectively.
According to our assumptions for the Banks future performance, we believe ROAA and
ROAE are expected to reach around 2% and 17% by 2011, respectively.
Chart 09: ROAA-ROAE
ROAE
18%
ROAA
3.0%
16%
2.5%
14%
12%
2.0%
10%
1.5%
8%
6%
1.0%
4%
0.5%
2%
0%
0.0%
2003
2004
2005
2006
2007
2008 f
ROAE
2009 f
2010 f
2011 f
ROAA
Payout Ratio
EGBE announced in its general assembly, held in March 2008, that it will distribute 74.9%
of 2007 distributable income to shareholders in the form of cash and stock dividends, for the
purpose of increasing the Banks capital. We assumed in the DDM method used for valuation
that the Bank will apply a payout ratio of 55% over the projection period.
September 2008
105

The Banks results in June 2008 showed a 6.6% decline in the Banks deposits balances,
compared to year end 2007, as they reached LE4.0bn, down from LE4.3bn. Despite the
decrease of deposits, we maintain our projections for the 13% deposits growth in 2008. We
believe the increase in interest rate on the Banks deposits, as a response to the announcements
related to the CBE rates increases, will have its effect on boosting the Banks deposits
balances.
As a result of the fall in deposits balances over the period, total assets declined by 4.2%,
reaching LE5.0bn. Nevertheless, the Bank was able to boost its loan books by 23.3%,
reaching LE2.8bn. This indicates the Banks ability to extend great amounts of its excess
funds, despite the growth in deposits balances, which is due to the current low loans/deposits
ratio.
As for treasury bills, their balances decreased by 76.7%, compared to year end 2007. We
expect small balances of treasury bills in the future, as a result of the elimination of the tax
exemption, which shall discourage banks from investing in these instruments.
Income Statement
EGBE realized a slight increase in net income by 2.7% y-o-y, reaching LE67.0mn, compared
to LE65.2mn in H1 2007. This rise was a result of the increase in net interest income and
non-interest income, where each one grew by 23.5% and 59.2%, respectively.
Concerning net interest income, interest expense grew by 2.1% y-o-y, resulting from the
increase in deposits over the year. Meanwhile, income from treasury bills declined by
5.7%, but the Bank was able to control its added costs and realize a positive spread through
increasing its income from loans by 15.6%, leading to the rise in net interest income.
As for fees and commissions income, it rose by 60.7%, as a result of the jump in loans balances
and also the 102.1% y-o-y surge in contingent liabilities. On the other hand, dividend income
grew by 23.0%, while other income, including gains on sale of investments, foreign exchange
profits, financial investments valuation differences and other items, grew by 63.9%.
Alternatively, SG&A and depreciation grew by 20.3% and 50.8%, respectively. Other
expenses, amounting to LE1.4mn in H1 2008, were assumed to remain stable over the
projection period. Meanwhile, total non-interest expense rose by 25.6%, bringing the cost to
income ratio to 30.0%.
As for provisions, they grew by 416.1% y-o-y, reaching LE38.3mn, compared to LE7.4mn in
the same period the previous year. This huge increase was the reason behind the net income
growing by a small percent, despite the jump realized in net interest income and non-interest
income.
106
September 2008
methods:
Risk free rate of 4.7% (YTM of 2011 sovereign Eurobonds).
Market risk premium of 6.5%, taking into consideration that the stock is traded in a
foreign currency.
have taken it as 1.
(000US$)
Dividends Expected
2008F
2009F
2010F
2011F Terminal Value
8,762.8 11,337.2 12,713.2 14,223.6
363,228.8
38,298.9
255,619.2
NPV of the Firm
293,918.1
No. of Outstanding Shares (000) 140,366.5

DDM Value per share (US$)
2.1
September 2008
107
Sensitivity DDM
Cost of Equity
9.2%
10.2%
11.2%
12.2%
13.2%
14.2%
6.0%
2.8
2.1
1.7
1.5
1.3
1.1
6.5%
3.3
2.4
1.9
1.6
1.3
1.2

7.0%
7.5%
4.0
5.1
2.7
3.2
2.1
2.4
1.7
1.9
1.4
1.5
1.2
1.3
8.0%
7.2
3.9
2.7
2.1
1.7
1.4
8.5%
12.2
5.0
3.1
2.3
1.8
1.5

P/BV = (ROE - g) / (COE - g)
investment horizon.
by 14.9%
in the DDM.
14.9%
11.2%
7.0%
1.9
0.9
1.8
Sustainable ROE
COE
2008: BV/share (US$)
GGM Value per share (US$)
Sensitivity GGM
108
September 2008
Cost of Equity
9.2%
10.2%
11.2%
12.2%
13.2%
14.2%
6.0%
2.6
2.0
1.6
1.4
1.2
1.0
6.5%
2.9
2.1
1.7
1.4
1.2
1.0

7.0%
7.5%
8.0%
3.4
4.1
5.5
2.3
2.6
3.0
1.8
1.9
2.0
1.4
1.5
1.6
1.2
1.2
1.3
1.0
1.0
1.1
8.5%
8.7
3.6
2.2
1.6
1.3
1.1
COE assumptions.
Cost of Equity
9.2%
10.2%
11.2%
12.2%
13.2%
14.2%
12.9%
2.5
1.7
1.3
1.1
0.9
0.8
13.9%
3.0
2.0
1.6
1.3
1.1
0.9
ROE
14.9%
15.9%
3.4
3.8
2.3
2.6
1.8
2.0
1.4
1.6
1.2
1.4
1.0
1.2
16.9%
4.3
2.9
2.2
1.8
1.5
1.3
17.9%
4.7
3.2
2.5
2.0
1.7
1.4
Valuation
Based on the current market price of US$2.6/share, as of September 7th, 2008, EGBE is
trading at 2008E P/E and P/BV multiple of 23.0x and 2.8x, respectively.
Table 08: Valuation
Method
DDM
GGM
Final Value
Value
2.1
1.8
Weight
80%
20%
Weighted Value
1.7
0.4
2.0
Our estimated value for this banking scrip is worked out to be US$2.0 based on DDM (80%)
scrip implies a downside potential of 22.5% on the closing price of US$2.6/share (as of
September 7th, 2008); we therefore recommend a Sell on the scrip.
Outlook
Though there is a positive sentiment for EGBE, stemming from the managements efforts
targeting promising opportunities, we initiate our coverage for the Bank with a sell
recommendation. We believe the scrip is currently overvalued, as its market price exceeds its
fair value. This could be a result of the Bank being viewed as a potential acquisition target,
which attracts investors to purchase the stock, driving its price higher.
September 2008
109
The increase of the capital base presents a promising potential for growth, as EGBE will be
able to extend greater portions of loans, and hence realizing higher profits.
The Banks 22% contribution in Prime Holdings capital is expected to boost investment
income. In the mean time, H1 results showed the incline in the Banks investments in other
affiliates, in addition to its intention to contribute in other companies and mutual funds,
which is expected to enhance the Banks performance and realize higher profits throughout
our projection period.
110
September 2008
September 2008

21,874.1
30,254.9
199.2
28,259.1
3,148,344.9
500,000.0
65,391.1
565,391.1
3,713,735.9
Dividends Payable
Other Provisions
Deferred Taxes
Total Liabilities
Paid-in Capital
Reserves
Retained Earnings
Total Equity
41,822.6
36,219.4
Net Fixed Assets
585,608.8
1,043,291.6
Other Liabilities
104,807.4
578,085.2
2,440,326.1
24,702.3
Trading Investments
Customer Deposits
482,752.3
3,713,735.9
Treasury Bills
58,594.1
1,273,646.7
Due from Banks
Total Assets
111,636.9
Other Assets
2005 A
(000LE)
Balance Sheet
4,587,122.6
627,159.2
2,358.6
87,610.5
537,190.1
3,959,963.4
28,183.8
604.9
33,312.6
24,302.4
52,747.5
37,214.0
3,783,598.3
4,587,122.6
60,948.0
38,333.6
1,141,915.5
20,214.7
402,947.4
17,661.2
496,416.1
245,072.3
1,992,490.2
171,123.5
2006 A
5,134,991.2
686,687.9
206.8
111,138.1
575,343.1
4,448,303.2
28,925.5
1,462.7
65,294.8
11,000.0
51,161.3
14,694.0
4,275,765.0
5,134,991.2
78,135.4
48,204.3
1,743,133.8
20,214.7
555,972.8
197,461.6
200,400.3
2,174,306.3
117,162.0
2007 A
5,740,632.0
709,527.4
4,288.5
129,895.8
575,343.1
5,031,104.5
21,694.1
2,130.4
52,235.8
58,119.2
14,047.5
4,882,877.5
5,740,632.0
100,169.7
54,264.6
2,130,698.8
227,748.9
742,086.7
225,499.0
47,721.5
2,078,644.9
133,797.8
2008 F
6,443,864.2
735,055.7
5,950.5
153,762.1
575,343.1
5,708,808.5
14,462.8
2,164.8
54,325.3
60,444.0
14,931.8
5,562,479.8
6,443,864.2
102,173.1
52,394.0
2,560,183.5
227,748.9
828,202.6
256,884.1
54,363.5
2,209,494.7
152,419.8
2009 F
Egyptian Gulf Bank
7,221,858.9
762,540.8
6,786.8
180,410.9
575,343.1
6,459,318.1
7,231.4
2,316.4
56,498.3
62,861.8
16,447.0
6,313,963.3
7,221,858.9
104,216.6
50,392.4
2,970,658.7
227,748.9
908,822.0
291,588.8
61,707.9
2,433,712.0
173,011.5
2010 F
8,088,889.0
793,162.1
7,606.1
210,212.9
575,343.1
7,295,727.0
2,478.5
58,758.2
65,376.2
18,757.2
7,150,356.9
8,088,889.0
106,300.9
48,250.7
3,380,748.0
227,748.9
954,263.1
330,214.7
69,882.2
2,775,550.6
195,929.9
2011 F

111
112

73,113.7
Non-Appropriation Items*
Net Income

*Non-appropriation items represent gains from sale of fixed assets.
71,455.3
(1,658.4)
NPAT
199.2
71,654.6
Taxes
48,874.9
124.5
2,924.4
Depreciation
45,825.9
80,804.2
3,128.5
4,234.7
Dividend Income
5,568.0
28,833.2
20,528.5
39,725.3
42,600.1
Provisions
Gain On Sale of Trading Investments
82,325.4
Net Interest Income
18,511.2
119,651.3
201,976.6
Interest Expense
2005 A
Interest Income
(000LE)
Income Statement
86,070.5
(943.9)
85,126.6
405.6
85,532.3
56,794.1
180.5
3,018.3
53,595.3
69,285.7
(1,106.8)
3,161.7
(6,638.0)
27,570.4
6,987.8
6,466.0
32,844.5
73,040.6
54,577.6
127,618.1
166,983.0
294,601.1
2006 A
70,528.7
(105.9)
70,422.8
857.8
71,280.6
73,752.5
232.2
5,085.5
68,434.8
91,370.8
1,042.1
5,471.9
9,998.5
21,871.3
9,940.7
7,125.5
35,920.8
53,662.4
77,675.1
131,337.5
183,665.3
315,002.8
2007 A
85,149.7
85,149.7
21,120.5
106,270.2
88,878.5
1,402.7
7,407.1
80,068.8
104,872.7
1,094.2
5,581.4
10,498.4
22,308.7
10,368.4
7,516.6
47,505.1
90,276.1
67,587.6
157,863.6
230,950.1
388,813.7
2008 F
Egyptian Gulf Bank
106,144.0
106,144.0
26,527.4
132,671.4
96,233.8
631.2
7,526.9
88,075.6
127,814.5
1,148.9
5,693.0
11,023.3
22,754.9
10,747.4
20,476.4
55,970.6
101,090.7
70,768.7
171,859.4
268,017.6
439,877.0
2009 F
117,884.9
117,884.9
29,433.3
147,318.3
104,624.4
568.1
8,053.8
96,002.4
139,027.6
1,206.3
5,806.9
11,574.5
23,210.0
11,091.1
21,884.1
64,254.7
112,915.0
73,025.6
185,940.6
307,185.0
493,125.6
2010 F
131,761.7
131,761.7
32,899.9
164,661.6
111,879.9
539.7
8,617.6
102,722.6
150,903.9
1,266.6
5,923.0
12,153.2
23,674.2
11,409.4
23,441.0
73,036.5
125,637.6
76,176.1
201,813.6
351,175.6
552,989.3
2011 F

September 2008
September 2008
113
257,416.7
1,127,867.0
1,385,283.6
2005 A
73,113.7
2,924.4
42,600.1
(5,568.0)
(1,658.4)
199.2
111,611.1
95,559.6
(436,629.9)
5,638.1
(169,636.2)
(210,430.2)
(7,112.7)
152,267.1
528,123.9
(43,116.9)
(3,898.7)
22,375.3
9,917.0
(1,242.1)
1,658.4
10,333.3
(15,694.9)
2,478.4
237,924.6
224,708.1
778,330.1
1,385,283.6
2,163,613.7
2006 A
86,070.5
3,018.3
54,577.6
1,106.8
6,638.0
(943.9)
405.6
150,872.8
(245,072.3)
(13,663.8)
403.2
174,031.1
(98,624.0)
(2,353.9)
1,343,272.2
(548,394.9)
(51,519.8)
10,924.9
719,875.5
84,592.7
(5,132.5)
943.9
80,404.1
(59,064.3)
(75.4)
37,190.1
(21,949.5)

*Cash Balances represent cash and balances with the CBE, due from banks and 3-months treasury bills.
Change in Cash
Beginning Cash*
Ending Cash
(000LE)
Depreciation
Provisions
Treasury Bills
Trading Investments
Deferred Taxes
Other Assets
Customer Deposits
Taxes Payable
Provisions
Other Liabilities
Dividend Paid
Change in Capital
Cash Flow Statement
177,854.6
2,163,613.7
2,341,468.3
(104,611.3)
2,341,468.3
2,236,857.0
152,869.9
2,236,857.0
2,389,726.9
Egyptian Gulf Bank

2007 A
2008 F
2009 F
70,528.7
85,149.7
106,144.0
5,085.5
7,407.1
7,526.9
77,675.1
67,587.6
70,768.7
(1,042.1)
(1,094.2)
(1,148.9)
(9,998.5)
(10,498.4)
(11,023.3)
(105.9)
21,120.5
26,527.4
857.8
143,000.7
169,672.3
198,794.8
94,672.0
127,093.1
(3,243.9)
496,416.1
(169,801.9)
(17,539.0)
(20,361.8)
(151,983.3)
(185,019.7)
(84,967.0)
(601,218.2)
(387,565.0)
(429,484.6)
0.0
667.7
34.5
(17,187.4)
(22,034.3)
(2,003.4)
492,166.7
607,112.5
679,602.3
(22,520.0)
(646.5)
884.3
(21,120.5)
(26,527.4)
(45,693.0)
(80,646.5)
(68,679.3)
(1,586.2)
6,957.9
2,324.8
216,265.5
196,931.9
246,373.3
(207,534.2)
(14,956.2)
(13,467.4)
(5,656.3)
105.9
(14,850.3)
(221,001.6)
(5,656.3)
(62,455.3)
(73,310.2)
(80,615.8)
741.7
(7,231.4)
(7,231.4)
38,153.0
(23,560.6)
(80,541.6)
(87,847.1)
248,566.5
2,389,726.9
2,638,293.4
2010 F
117,884.9
8,053.8
73,025.6
(1,206.3)
(11,574.5)
29,433.3
215,616.8
(3,587.0)
(23,130.2)
(79,413.0)
(410,475.3)
151.5
(2,043.5)
751,483.4
1,515.3
(29,433.3)
(70,852.6)
2,417.8
352,249.9
(6,052.2)
(6,052.2)
(90,399.8)
(7,231.4)
(97,631.2)
368,938.9
2,638,293.4
3,007,232.3
2011 F
131,761.7
8,617.6
76,176.1
(1,266.6)
(12,153.2)
32,899.9
236,035.4
(3,992.3)
(26,472.8)
(44,174.4)
(410,089.2)
162.1
(2,084.3)
836,393.6
2,310.1
(32,899.9)
(73,916.1)
2,514.5
483,786.6
(6,475.9)
(6,475.9)
(101,140.4)
(7,231.4)
(108,371.8)

114
September 2008
2.1%
14.3%
149.2%
81.0%
56.7%
7.7%
4.8%
2.8%
3.3%
28.8%
37.7%
43.8%
603.3%
363.7%
N/A
426,828.3
N/A
25.8%
N/A
13.7%
37.9%
344.4%
38.4%
7.6%
8.2%
35.0%
45.9%
13.9%
-62.3%
-37.2%
133,682
0.1
0.8
2.7
24.4
3.4
59.2%
7.1%
4.4%
2.7%
2.9%
30.0%
45.7%
61.5%
431.6%
13.8%
N/A
375,838.6
N/A
25.0%
N/A
15.2%
37.7%
281.9%
40.2%
5.9%
25.8%
66.6%
39.3%
-11.1%
267.7%
1015.6%
63,602
0.2
1.5
1.4
7.2
0.9
2006 A
2.2%
16.7%
114.9%
112.8%
2005 A
140,367
0.1
0.9
3.5
38.6
4.0
6.9%
9.4%
42.3%
61.2%
441.9%
50.4%
10.0%
13.9%
67.8%
13.4%
29.8%
452,644.1
466,223.5
19.6%
20.2%
103.0%
49.2%
53.9%
622.7%
460.7%
33.1%
58.3%
6.8%
4.5%
2.3%
2.8%
1.4%
10.7%
184.3%
128.2%
140,367
0.1
0.9
2.6
23.1
2.8
23.4%
32.2%
4.3%
3.2%
365.9%
44.7%
7.1%
9.8%
46.9%
12.4%
25.0%
529,863.9
546,870.0
18.7%
19.3%
103.2%
57.1%
58.0%
688.2%
550.3%
33.8%
59.4%
7.7%
5.0%
2.7%
3.1%
1.6%
12.2%
148.5%
98.7%
Egyptian Gulf Bank

2007 A
2008 F

Profitability
Return on Average Assets
Return on Average Equity
Margins
Net Spread
Net Interest Margin
Efficiency
Cost to Income
Liquidity
Credit Quality
NPLs (000LE)
NPLs to Gross Loans
NPLs Coverage
Capital Adequacy
Change in FX Income
Issued Shares
EPS (US$) adjusted for Number of Shares
BVPS (US$) adjusted for Number of Shares
Market Price US$
P/E (US$) adjusted for Number of Shares
P/BV (US$) adjusted for Number of Shares
Fact Sheet
140,367
0.1
1.0
2.6
18.6
2.7
13.1%
17.8%
3.7%
3.0%
331.6%
42.2%
15.4%
8.1%
38.7%
11.4%
22.3%
595,561.7
615,549.2
18.1%
18.7%
103.4%
59.2%
59.2%
756.7%
589.8%
32.1%
60.9%
8.0%
5.1%
2.9%
3.1%
1.7%
14.7%
129.5%
96.3%
2009 F
140,367
0.2
1.0
2.6
16.7
2.6
12.1%
14.8%
3.2%
3.0%
334.7%
43.6%
14.9%
7.5%
35.9%
10.6%
20.1%
663,108.9
686,401.8
17.5%
18.1%
103.5%
60.3%
60.0%
828.0%
607.8%
32.2%
62.3%
8.0%
5.2%
2.8%
3.0%
1.7%
15.7%
126.2%
94.4%
2010 F
140,367
0.2
1.1
2.6
15.0
2.5
12.1%
13.7%
2.9%
2.9%
335.8%
44.4%
14.2%
6.9%
33.1%
9.8%
18.5%
733,733.3
760,317.9
17.1%
17.7%
103.6%
60.1%
60.0%
901.5%
603.5%
31.7%
63.5%
7.9%
5.2%
2.7%
2.9%
1.7%
16.9%
122.6%
91.6%
2011 F

Export Development Bank of Egypt

Recommendation
HOLD
Tickers:
EXPA.CA (Reuters)
EXPA EY (Bloomberg)
Listing:
CMP:
Key Data
EPS* (LE)
BVPS* (LE)
P/E* (x)
P/BV* (x)
2.9
12.8
7.2
1.6

52 week Hi/Lo (LE)
Market Cap (LE mn)
Target Price (LE)
96.4
36.5/ 19.0
2,105.0
20.6

* Estimated (2008/09)
Background
Export Development Bank of Egypt EDBE was established in 1983, in accordance with the
law 95 of 1983. As a specialized bank, EDBE main role is somehow different than the other
commercial banks in our coverage universe. The Banks main activities rely in developing
and encouraging Egyptian exports, through building up an agricultural, industrial and
commercial export sector. In addition, the Bank serves in other areas of commercial business
and investment banking activities.
Products and Services Offered
Main Focus on Supporting Export Related Projects
The Banks main services are provided to projects that are related to exports, either those that
are currently participating in the world trade or those that are in a developing stage targeting
future contribution to the exports market.
The Bank supports exporting industries through many forms, including providing financial
support needed for capital expenditures, which could be provided through short-term
funding, as well as affording credit facilities and facilitating international correspondence.
Aiming at enhancing the exports sector, the Bank also offers medium and long-term loans for
investments in new projects that are expected to direct their future products to exports. The
Bank also participates in syndicated loans for big corporations.
In addition, EDBE offers insurance services to the exporters to lessen their exposure to
commercial and other risks associated with their exporting activities. These services are
provided through the Banks affiliate The Egyptian Company for Exports Insurance.
September 2008
115
Other Banking Activities

The Bank operates in other areas related to commercial banking, including providing
deposits and savings accounts and letters of credit. Also, EDBE provides investment banking
services, including participating in bonds and stocks issuing, along with playing the role of
an underwriter for these issuances.
Also, the Bank has established a department, which main role is to fund projects related to
SMEs. Funding is procured to enterprises having not less than three years of experience
to avoid risky matters associated with this field. These projects are offered sources of
funds needed for raising capital and acquiring capital equipment, along with other banking
services.
Shareholders Structure
The majority of EDBE shares, represented by 75.4% are owned by local banks, as National
Investment Bank, BM and NBE have stakes of 40.8%, 23.1% and 11.4% in the Bank,
respectively. Insurance Companies and physical shares represent 1.3% of the Banks capital,
while the rest of the shares constitute the free float. It is worth mentioning that the Bank
shares trading is restricted to local investors.
Free Float 23.3%
National Investment
Bank 40.8%
Insurance Companies and

Physical Shares 1.3%
Other Public Banks 0.1%
NBE 11.4%
BM 23.1%
Source: EDBE, EGID, as of June 30th, 2008, Global Research
Minor Market Shares

EDBE is among the small caps banks, having relatively minimal market shares, compared to
the large banks under coverage. As of June 2008, the Banks shares in the total assets, deposits
and loans of the aggregate banking system represented 1.2%, 1.1% and 1.9%, respectively.
EDBE operates through a network composed of 10 branches, representing only 0.3% of the
banking system branches, as the total number of branches reached 3,252 branches in March
2008.
Recent Developments
Latest Capital Increase
The Bank has an authorized capital of LE2bn. In December 2007, its issued and paid-in
capital was LE800mn, distributed over 80mn shares, at a par value of LE10. In February
116
September 2008
2008, the Bank increased its issued and paid-in capital to LE1bn, through a 1:4 rights issue.
This in turn shows the Banks intention to grow its loan portfolio, as legally any bank is
limited by a 20% cap of its equity to be granted per single client.
The Banks current network is composed of 10 branches. Aiming at increasing its client
base and its branch network, it plans to launch 3 new branches by 2010. These branches are
expected to open in areas that are close to producers and exporters, to facilitate rendering
banking services, with the aim of easing and enhancing exports activities.
Meanwhile, EDBE has developed an IT department, which main role is to provide and
promote the internet banking system, which is now a common service offered in almost all
banks.
2007/08 Financial Performance and Forecasted Assumptions

Balance Sheet
Primary Source of Funds
EDBE was able to expand its primary source of funds in 2007/08 the Banks Fiscal Year FY
ends in June-, by increasing its deposits balances by 39.1%, reaching LE8.1bn, compared to
LE5.8bn in 2006/07. Time deposits were the main contributor to the rise in deposits balances,
as they grew by 52.2%, reaching LE4.3bn, compared to LE2.8bn in 2006/07. It is worthy to
note that these deposits constituted 53.6% of total deposits in 2007/08. In addition, CDs and
saving deposits, constituting 26.2% of deposits balances in the same year, rose by 21.6% yo-y, as they amounted to LE2.1bn, up from LE1.7bn the previous year.
Chart 02: Deposits by Type-2006/07
Other Deposits 4.7%
Chart 03: Deposits by Type-2007/08
Demand Deposits
16.3%
CDs & Savings

Deposits 30.0%
Time Deposits
49.0%
Other Deposits 8.5%
Demand Deposits 11.7%
CDs & Savings

Deposits 26.2%
Time Deposits
53.6%
Source: EDBE Financials, Global Research
On the other hand, the household sector captured the highest share of total deposits in 2007/08,
representing 26.7%, down from 31.2% in 2006/07, followed by the industrial sector, which
contributed to 22.8% of total deposits, down from 24.1% in the previous year.
September 2008
117
Chart 04: Deposits by Sector-2006/07
Chart 05: Deposits by Sector-2007/08

Agriculture 0.3%
Agriculture 0.5%
Others 20.7%
Others 25.3%
Industrial 24.1%
Industrial 22.8%
Trade 6.7%
Trade 10.0%
Household 26.7%
Household 31.2%
Services 18.2%
Services 13.5%
Secondary Source of Funds

The Bank was able to collect funds to expand its operations through another source,
represented by medium and long-term loans, extended from many international and local
entities. It is worthy to note that this source of funds amounted to LE1.5bn in June 2008,
constituting 11.1% of the Banks total equity and liabilities, whereas the deposits share was
60.2%.
Resulting Rise in Assets
The rise in deposits and other sources of funds in 2007/08 was followed by a rise in total
assets, which grew in turn by 52.3%. The assets causing the jump in total assets were gross
loans and interbank assets, which combined constituted around 80% of total assets.
Growing Gross loans
The acceleration experienced in the sources of funds in 2007/08 led to an increase in the
available funds at the Bank, which enabled it to extend greater amounts of loans during the
same year. Loans book witnessed a 17.5% y-o-y increase, reaching LE7.6bn, compared to
LE6.5bn the previous year. The main reason behind this surge was the increase in loans to
customers, constituting 94.4% of gross loans during the same year.
Discounted Bills
Loans to Customers
Loans to Banks
Unearned Interest
2006/07
69.8
6,057.6
344.5
6,471.9
1,564.5
0.3
4,907.0
2007/08
140.8
7,178.1
284.5
7,603.4
841.1
6,762.3
y-o-y Growth
101.8%
18.5%
-17.4%
17.5%
-46.2%
-100.0%
37.8%
It is worth mentioning that the industrial sector was extended the largest portion of the Banks
loans portfolio, representing 63.7% in 2007/08. The remaining loans were distributed over
the trade, services and other sectors.
118
September 2008
Chart 06: Loans by Sector-2006/07

Financial 5.3%
Household 0.7%
Chart 07: Loans by Sector-2007/08

Agriculture 4.4%
Financial 3.7%
Household 4.1%
Agriculture 2.8%
Services 12.9%
Services 11.8%
Trade 12.3%
Trade 14.5%
Industrial 63.8%
Industrial 63.7%
Revised Provisions to Cover NPLs

Provision for doubtful debts decreased by 46.2% in 2007/08. It is worthy to note that the
CBE obliged the Bank to modify its annual financial results in 2006/07 to include higher
provisions, as the Bank had a large amount of NPLs exceeding LE1.5bn.
Now that the Banks NPLs are almost fully covered, we assumed EDBE would use a
provisioning policy that will bring the coverage ratio to around 103% by 2011/12, as a result
of the accelerating loans balances and the NPLs that are expected to increase at declining
rates.
LEmn
1400
110%
1200
105%
1000
800
100%
600
400
95%
200
0
2007/08
NPLs
2008/09 f
2009/10 f
Loan Loss Provision
2010/11 f
2011/12 f
90%
Source: EDBE, Global Research
Huge Utilization of Main Source of Funds

The Bank has a great ability to extend loans, which is reflected by its extremely high loans/
deposits ratio, reaching 94.4% in 2007/08. This ratio is the highest one among other banks in
our coverage universe.
We expect the Banks loans/deposits ratio to reach around 92% by the end of our projection
period, on the back of the projected growth in deposits and loans.
September 2008
119
The repeated jumps in the CBE corridor range are expected to boost the Banks interest rates
on deposits and loans. We relied on this assumption and assumed that deposits and loans will
increase by an average of 14%, and 13%, over our projection period, respectively.
Chart 09: Gross Loans, Deposits and Loans/Deposits Ratio
LEmn
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
125%
115%
105%
95%
85%
75%
65%
55%
45%
Goss Loans
Deposits
2011/12 f
2010/11 f
2009/10 f
2008/09 f
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
Boosted Interbank Assets

In response to the rise of the sources of funds, the interbank assets, constituting around 23%
of total assets in 2007/08, rose by 43.1% y-o-y, reaching LE3.1bn, compared to LE2.2bn in
2006/07. Although the Bank has the highest loans/deposits ratio, compared to the other banks
that we cover, it also realized a net lending position in 2007/08. Even though the Bank is
directing great proportion of its funds in loans, it seems that the excess liquidity that was and
still exists in the banking sector is also experienced by EDBE, as it directed its excess funds
to lending other banks in the interbank market.
In LEmn
2003/04
Interbank Assets
1,225.2
380.4
Net Balance
844.8
y-o-y Growth
39.0%
2004/05
1,166.5
231.2
935.2
10.7%
2005/06
682.1
314.3
367.8
-60.7%
2006/07
2,181.1
89.3
2,091.8
468.8%
2007/08
3,121.2
675.1
2,446.0
16.9%
Decelerating Capital Adequacy Ratios

The Banks equity inclined by 59.1% in 2007/08, resulting from the capital increase to
LE1bn, up from LE800mn, the previous year. This rise exceeded the increases witnessed
in total assets and loans, realizing higher capital adequacy ratios in the same year. This was
shown by the increase of the equity/total assets to 10.3%, up from 9.8%, the previous year, as
well as the rise of equity/gross loans to 18.1%, up from 13.4% in 2006/07.
Based on our projections for loans growth, we expect the Banks equity/total assets and equity/
gross loans to decline slightly, reaching around 7% and 11%, respectively by 2011/12.
It is worthy to note that the Banks balances of treasury bills jumped by 284.6% in 2007/08,
reaching LE982.6mn, up from LE255.5mn in 2006/07. We expect the Bank will not extend
120
September 2008
great proportions of its funds in these investments in the coming few years, in response to the
removal of tax exemption on treasury bills.
EDBE was able to increase its net income figures in 2007/08 significantly, as it realized a
net income of LE310.7, compared to LE7.5mn, the previous year, implying a 4 folds y-o-y
growth. This jump was a result of the 100% decline in provisions added during the year. It
is worthy to note that the CBE required adjusting the financials of 2006/07 to add higher
provisions, to cover the Banks financial commitments. According to the Bank, NPLs are
currently fully covered.
The net income realized in 2007/08 was also caused by the increase in net interest income,
which grew by 29.6%, reaching LE268.1mn, compared to LE206.9mn, realized the previous
year. The Bank faced an increase in interest expense during the year as a result of the increased
deposits balances. In addition, the decline of treasury bills yields over the year resulted in a
decline in the interest earned from these instruments by 41.0%. Despite the magnified costs,
the Bank was able to realize a spread through generating more income from its loans and
interbank assets, realizing a growth of 69.1% in income generated from these assets.
On the other hand, the non-interest income increased by 16.8%. This increase was a result
of the rise in fees and commissions income, dividend income and other income, which
grew by 13.2%, 178.1% and 2.6, respectively. We projected future income from fees and
commissions based on the same practices adopted by the Bank historically. It is worthy to
note that other income includes gains from sale of financial investments, profits from foreign
exchange operations, financial investments valuation differences and other items.
As for SG&A (excluding depreciation expense), they grew by 16.4%, reaching LE130.5mn,
compared to LE112.1mn, a year before.
The results of the Bank in 2007/08 showed that non-interest expense, encompassing SG&A,
depreciation and other expenses, grew at 22.6%, which was lower than the growth of gross
revenues, encompassing net interest income and total non-interest income, as they grew by
24.0%. This resulted in a decline of the cost to income ratio, from 32.6% in 2006/07 to 32.2%
in 2007/08.
Based on our projections for the future performance of the Bank, we the cost to income ratio
is to stabilize at a lower rate over our projection period, reaching around 27% by 2011/12.
September 2008
121

LEmn
400
45%
350
40%
300
250
35%
200
30%
150
100
25%
Net Interest Income

2011/12 f
2010/11 f
2009/10 f
20%
2008/09 f
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
50


The Banks interest rate spread jumped to 2.1% in 2007/08, up from 1.6% in the previous
year. This was due to the Banks ability to realize higher income from interest earning assets
than the expense incurred from interest bearing funds. As mentioned earlier, the Banks rise
in interest expense and the decline in income from treasury bills and bonds were compensated
by an increase in income from loans and advances.
We expect the spread to widen in 2008/09, in response to the latest decisions concerning the
increase of the corridor range, then to decline afterwards, as the competition among local
players intensifies. Thus, we expect the interest spread to hover at 2.3% by 2011/12.
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
2011/12 f
2010/11 f
2009/10 f
2008/09 f
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
0.0%
Net Income
Based on our projections for the Banks results over our projection period, we believe the
Banks net income will reach around LE320mn by 2011/12. It is worthy to note that net
income is adjusted for non-appropriation items.
122
September 2008

2011/12 f
2010/11 f
2009/10 f
2008/09 f
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
(170)
(70)
30
130
230
330
LEmn
The jump in net income realized in 2007/08 pushed up the Banks profitability ratios,
represented by ROAE and ROAA, as they reached 27.7% and 2.8%, compared to 0.96% and
0.09% in 2006/07, respectively. We expect ROAE and ROAA are to reach approximately
24% and 2% by 2011/12, respectively.
Chart 13: ROAA-ROAE
ROAE
ROAA
40.0%
5.0%
30.0%
4.0%
20.0%
3.0%
10.0%
2.0%
1.0%
-30.0%
2011/12 f
2010/11 f
2009/10 f
2008/09 f
2007/08
2006/07
2005/06
2004/05
-20.0%
2003/04
-10.0%
2002/03
0.0%
0.0%
-1.0%
-2.0%
-3.0%
ROAE
ROAA

Due to the losses experienced in 2005/06-which were due to the large amount of added
provisions as required by the CBE- and the relatively small net income realized the following
year, the Bank was not able to make any dividend distributions. Assuming the higher net
income that should be realized each year during the forecast period, we projected a stable
payout ratio of 65% in our DDM method for valuation.
For arriving at the fair value of the Banks under review, we have used two valuation
methods:
September 2008
123

The DDM is based on a 4-year forecast of dividends as cash flows (2008/09-2011/12), as
EDBEs fiscal year ends in June. The dividends for the forecast period and the terminal value
are then discounted back at the cost of equity to arrive at the total net present value (NPV) of
the company. In our calculations, we have made the following assumptions in order to arrive
at the equity value of individual banks:
have taken it as 1.
(000LE)
2008/09F
2009/10F 2010/11F 2011/12F
Dividends Expected
210,722.7
614,848.6
1,436,263.8
NPV of the Firm
2,051,112.4
No. of Outstanding Shares
100,000.0
(000)
20.5
210,056.7 216,182.1 230,884.6
Terminal
Value
2,576,084.6
Sensitivity - DDM
Cost of Equity
14.6%
15.6%
16.6%
17.6%
18.6%
19.6%
6.0%
23.3
21.0
19.0
17.4
16.1
14.9

6.5%
7.0%
7.5%
24.5
25.8
27.2
21.8
22.8
23.9
20.5
19.7
21.4
18.0
18.6
19.3
16.6
17.1
17.6
15.3
15.8
16.2
8.0%
28.9
25.2
22.3
20.1
18.2
16.7
8.5%
30.9
26.6
23.4
20.9
18.9
17.3
124
September 2008

P/BV = (ROE - g) / (COE - g)
This P/BV is then multiplied with the BVPS of the Bank at the next full year, in our case
the BVPS at June 30th, 2008/09 to arrive at the fair value of the Bank over a medium term
investment horizon.
- Sustainable ROE calculated as the average ROAE of the forecasted 4 years, which
represented 22.7%.
in the DDM.
22.7%
16.6%
7.0%
1.6
12.8
20.8
Sustainable ROE
COE
2008/09: P/BV target multiple (x)
2008/09: BV/share (LE)
Sensitivity GGM
Cost of Equity
14.6%
15.6%
16.6%
17.6%
18.6%
19.6%
6.0%
24.8
22.2
20.1
18.3
16.9
15.6
6.5%
25.5
22.7
20.4
18.6
17.1
15.8

7.0%
7.5%
8.0%
26.3
27.3
28.4
23.3
23.9
24.7
20.8
21.3
21.8
18.9
19.2
19.5
17.2
17.5
17.7
15.9
16.0
16.1
8.5%
29.7
25.5
22.3
19.9
17.9
16.3
COE assumptions.
September 2008
125
Cost of Equity
ROE
22.7%
23.7%
20.7%
21.7%
24.7%
25.7%
14.6%
23.0
24.7
26.3
28.0
29.7
31.4
15.6%
20.3
21.8
23.3
24.8
26.2
27.7
16.6%
18.2
19.5
20.8
22.2
23.5
24.8
17.6%
16.5
17.7
18.9
20.1
21.3
22.5
18.6%
15.0
16.1
17.2
18.3
19.5
20.6
19.6%
13.9
14.9
15.9
16.9
17.9
18.9
Valuation
Based on the current market price of LE21.1/share, as of September 7th, 2008, EDBE is
trading at 2008/09E P/E and P/BV multiple of 7.2x and 1.6x, respectively.
Table 8: Valuation
Method
DDM
GGM
Final Value
Value
20.5
20.8
Weight
80%
20%
Weighted Value
16.4
4.2
20.6
scrip implies a downside potential of 2.2% on the closing price of LE21.1/ share (as of
September 7th, 2008); we therefore recommend a Hold on the stock.
Outlook
Being a specialized bank, EDBE has a particular position. It directs most of its operations to
the corporations serving the export market, which gives the Bank an advantage over other
players, in terms of the unique services that it can provide. In addition, EDBE performs other
commercial banking and investment banking activities that are expected to further boost its
performance.
The latest capital increase that the Bank has made in February 2008 is expected to have a
positive effect on he Banks performance, as it will be able to accelerate its operations and
investments, relying on the higher equity realized.
126
September 2008
September 2008

202,203.6
Reserves
127
Total Equity
7,339,403.9
648,611.1
(153,592.5)
600,000.0
Retained Earnings
6,690,792.8
Paid-in Capital
112,594.0
1,318,257.5
Total Liabilities
Bonds
Medium and Long -Term Loans
59,669.2
117,793.9
Other Provisions
4,768,164.1
Customer Deposits
Other Liabilities
7,339,403.9
Total Assets
314,314.1
86,407.8
Other Assets
95,214.6
Net Fixed Assets
3,955,240.1
104,394.6
827,008.8
26,176.5
668,344.4
Treasury Bills
704,873.4
682,077.1
Due from Banks
189,666.7
Trading Investments
Jun-06-A
(000LE)
Balance Sheet
8,782,866.2
864,586.5
(147,107.2)
211,693.6
800,000.0
7,918,279.7
1,798,043.6
123,441.5
117,192.0
89,271.7
5,790,331.0
8,782,866.2
202,139.0
107,028.3
4,907,015.2
174,143.5
442,770.1
97,626.4
232,195.1
255,508.8
2,181,076.6
183,363.2
Jun-07-A
13,376,119.5
1,375,286.2
163,592.6
211,693.6
1,000,000.0
12,000,833.2
1,482,545.5
63,231.4
126,178.7
2,275,041.9
8,053,835.7
13,376,119.5
513,218.4
105,531.5
6,762,263.0
181,504.4
1,241,189.3
141,523.1
982,562.8
3,121,155.0
327,171.9
Jun-08-A
14,361,777.5
1,276,531.4
33,972.4
242,559.0
1,000,000.0
13,085,246.1
1,224,983.2
63,863.7
132,487.6
2,446,558.7
9,217,353.0
14,361,777.5
538,879.4
100,584.3
7,895,532.3
189,176.5
1,412,366.4
161,968.6
92,173.5
751,142.1
2,845,516.8
374,437.6
Jun-09-F
15,567,330.8
1,307,191.8
34,015.0
273,176.8
1,000,000.0
14,260,139.0
837,355.3
64,502.3
139,112.0
2,681,628.2
10,537,541.1
15,567,330.8
565,823.3
96,347.1
9,111,516.5
194,851.8
1,511,219.7
185,167.1
105,375.4
649,156.8
2,719,805.4
428,067.8
Jun-10-F

Jun-11-F
17,181,936.6
1,339,694.4
34,959.5
304,734.8
1,000,000.0
15,842,242.2
610,720.4
65,147.4
146,067.6
3,044,996.4
11,975,310.4
17,181,936.6
594,114.5
93,050.2
10,220,824.4
198,748.8
1,586,780.6
210,431.8
119,753.1
592,507.1
3,079,251.5
486,474.4
Jun-12-F
19,210,059.4
1,375,776.2
37,268.7
338,507.6
1,000,000.0
17,834,283.2
509,080.9
65,798.8
153,371.0
3,535,937.5
13,570,095.0
19,210,059.4
623,820.2
89,654.4
11,258,530.5
202,723.8
1,666,119.7
238,455.5
135,700.9
559,510.7
3,884,284.0
551,259.5

128
341,874.2
164,454.7
387,912.6
Interest Expense
Net Interest Income
Provisions
3,266.1
9,708.8

8,120.8
Depreciation
99,667.4
(158,000.0)
7,528.7
(290.5)
7,238.2
7,238.2
120,507.3
654.1
7,736.2
112,117.0
163,108.5
(8,971.4)
11,866.9
23,116.5
11,329.5
13,389.4
6,851.8
105,525.6
(35,363.1)
242,220.4
206,857.3
391,385.3
598,242.6
Jun-07-A
310,699.8
310,699.8
310,699.8
147,691.1
6,650.8
10,534.1
130,506.1
190,556.2
(2,382.5)
(22,890.8)
14,165.7
10,967.4
19,043.3
33,156.1
19,055.8
119,441.2
267,834.6
266.0
268,100.6
566,499.3
834,599.9
Jun-08-A
293,118.8
293,118.8
73,279.7
366,398.4
158,342.2
1,280.4
10,894.9
146,166.9
234,067.9
(2,263.4)
(17,168.1)
14,449.0
11,186.8
20,947.6
33,289.1
27,955.5
145,671.4
290,672.7
66,632.8
357,305.5
728,659.4
1,085,964.9
Jun-09-F
289,191.8
289,191.8
72,298.0
361,489.8
165,144.5
1,306.0
10,363.2
153,475.2
264,557.3
(2,150.2)
(15,451.3)
14,738.0
11,410.5
22,414.0
33,423.5
31,350.1
168,822.7
262,077.0
76,110.4
338,187.4
821,835.3
1,160,022.7
Jun-10-F

* Other operating expenses in June 2008 include 11.1mn, representing differences in valuation of assets assigned to the Bank.
** Non-appropriation items represent gain on sale of fixed assets.
Net Income
(158,000.0)
NPAT
Non-Appropriation Items**
(158,000.0)
Taxes
91,546.6
Other Operating Expenses*
165,125.3
8,819.9
Investments in Affiliates Valuation Differences
(6,286.5)
28,169.2
Gain On Sale of Trading Investments
3,294.0
11,561.6
106,592.3
Dividend Income
(223,457.9)
506,328.9
Interest Income
Jun-06-A
(000LE)
Income Statement
298,572.7
298,572.7
74,643.2
373,215.9
172,087.8
1,332.1
9,606.7
161,149.0
294,434.2
(2,042.7)
(13,906.1)
15,032.7
11,638.7
23,983.0
33,559.3
33,730.6
192,438.8
250,869.6
87,324.8
338,194.4
920,314.1
1,258,508.5
Jun-11-F
320,247.5
320,247.5
80,061.9
400,309.4
180,460.1
1,358.8
9,894.9
169,206.4
321,968.7
(1,940.6)
(12,515.5)
15,333.4
11,871.5
25,661.8
33,696.4
35,772.0
214,089.7
258,800.9
91,145.4
349,946.3
1,038,941.9
1,388,888.2
Jun-12-F

September 2008
September 2008
129
(261,503.1)
3,518,326.9
3,256,823.8
(72,069.3)
3,256,823.8
3,184,754.5
416,897.4
3,184,754.5
3,601,651.9
867,817.9
3,601,651.9
4,469,469.8
1,530,446.0
902,843.8
2,433,289.8
(656,138.5)
1,558,982.3
902,843.8
1,085,037.1
2,433,289.8
3,518,326.9

Jun-07-A
Jun-08-A
Jun-09-F
Jun-10-F
Jun-11-F
Jun-12-F
7,528.7
310,699.8
293,118.8
289,191.8
298,572.7
320,247.5
7,736.2
10,534.1
10,894.9
10,363.2
9,606.7
9,894.9
242,220.4
266.0
66,632.8
76,110.4
87,324.8
91,145.4
8,971.4
22,890.8
17,168.1
15,451.3
13,906.1
12,515.5
2,382.5
2,263.4
2,150.2
2,042.7
1,940.6
(23,116.5)
(10,967.4)
(11,186.8)
(11,410.5)
(11,638.7)
(11,871.5)
(290.5)
73,279.7
72,298.0
74,643.2
80,061.9
243,049.6
335,805.7
452,170.8
454,154.4
474,457.5
503,935.3
450,585.6
(725,904.0)
198,290.1
101,997.3
55,694.2
30,995.7
594,813.7
232,195.1
(92,173.5)
(13,201.9)
(14,377.7)
(15,947.8)
(48,333.4)
(32,929.3)
(9,258.7)
(11,788.0)
(13,625.9)
(16,152.3)
253,131.9
(821,310.0)
(188,345.2)
(114,304.5)
(89,467.1)
(91,854.6)
(951,775.2) (1,855,247.7) (1,133,269.4) (1,215,984.2) (1,109,307.9) (1,037,706.1)
(115,731.2)
(311,079.4)
(25,660.9)
(26,944.0)
(28,291.2)
(29,705.7)
1,022,166.9
2,263,504.7
1,163,517.3
1,320,188.1
1,437,769.3
1,594,784.5
(225,042.5)
2,185,770.2
171,516.7
235,069.6
363,368.1
490,941.1
(73,279.7)
(72,298.0)
(74,643.2)
(80,061.9)
(236,572.8)
(60,476.1)
(66,000.5)
(75,471.8)
(86,679.8)
(90,494.0)
57,522.8
8,986.7
6,308.9
6,624.4
6,955.6
7,303.4
1,043,815.6
1,219,315.9
403,815.9
588,041.5
921,852.0
1,266,037.7
(69,748.9)
(9,743.5)
(9,935.5)
(7,825.5)
(5,939.7)
(5,915.5)
(19,549.9)
(9,037.3)
(5,947.6)
(6,126.0)
(6,309.8)
(6,499.1)
290.5
(89,008.3)
(18,780.8)
(15,883.1)
(13,951.5)
(12,249.5)
(12,414.6)
8,446.7
(0.0)
(391,873.6)
(258,531.4)
(266,070.2)
(284,165.6)
479,786.1
(315,498.1)
(257,562.4)
(387,627.9)
(226,634.9)
(101,639.5)
(112,594.0)
200,000.0
200,000.0
575,638.8
(115,498.1)
(649,436.0)
(646,159.2)
(492,705.1)
(385,805.2)
Jun-06-A
(158,000.0)
8,120.8
387,912.6
6,286.5
(8,819.9)
(3,266.1)
232,233.9
740,906.7
(787,327.1)
121,108.5
(90,186.0)
(281,690.9)
(2,456.8)
56,023.2
83,064.5
(367,881.3)
(25,314.7)
(321,520.0)
0.0
(2,159.8)
(2,159.8)
(50,800.0)
(281,658.7)
(332,458.7)

* Cash balances represent cash and balances with the CBE, due from banks and 3-months treasury bills.
(000LE)
Depreciation
Provisions
Investments in Affiliates Valuation Differences
Treasury Bills
Trading Investments
Other Assets
Customer Deposits
Taxes Payable
Provisions
Other Liabilities
Investments Held to Maturity & in Investments in Affiliates
Dividend Paid
Bonds
Change in Capital
Change in Cash
Beginning Cash*
Ending Cash
Cash Flow Statement

130
September 2008
0.1%
1.0%
2857.9%
2253.4%
65.4%
7.1%
5.5%
1.6%
2.5%
32.6%
70.8%
111.8%
669.7%
175.9%
N/A
1,564,519.1
N/A
24.2%
N/A
9.8%
13.4%
8265.1%
1457.9%
94.7%
185.0%
700.9%
18.2%
-1.0%
15.8%
-8.2%
80,000.0
0.1
10.8
23.6
250.6
2.2
67.5%
6.7%
5.2%
1.5%
2.2%
30.2%
71.1%
112.4%
735.1%
0.0%
N/A
1,401,580.5
N/A
26.2%
N/A
8.8%
12.1%
-320.5%
-67.5%
-2.1%
-7.3%
-35.0%
-9.3%
-17.1%
-2.0%
70.6%
60,000.0
N/A
10.8
6.9
N/A
0.6
Jun-07-A
-2.1%
-21.7%
-104.1%
-104.5%
Jun-06-A
100,000.0
3.1
13.8
24.4
7.8
1.8
39.5%
13.2%
147.6%
2.6%
268.6%
38.4%
6.1%
10.7%
16.8%
10.3%
18.1%
841,124.7
841,124.7
11.1%
11.1%
100.0%
64.9%
94.4%
585.6%
12.8%
32.2%
67.9%
7.9%
5.8%
2.1%
2.5%
2.8%
27.7%
86.3%
61.3%
100,000.0
2.9
12.8
21.1
7.2
1.6
30.1%
22.0%
0.4%
16.1%
296.4%
39.8%
7.6%
9.1%
16.5%
8.9%
14.5%
897,871.1
907,125.2
10.2%
10.3%
101.0%
70.5%
95.5%
722.1%
13.6%
26.8%
67.1%
8.9%
5.9%
3.0%
2.9%
2.1%
22.1%
97.5%
63.9%
100,000.0
2.9
13.1
21.1
7.3
1.6
6.8%
15.9%
0.4%
6.5%
320.9%
46.7%
8.7%
9.2%
17.8%
8.4%
13.0%
963,987.8
982,596.9
9.6%
9.7%
101.9%
74.4%
95.8%
806.1%
14.2%
27.4%
70.8%
8.8%
6.1%
2.7%
2.6%
1.9%
22.4%
93.6%
73.2%

Jun-08-A
Jun-09-F
Jun-10-F

Historical prices are based on respective year-end prices, while those for future years are based on the current market price as of September 7th, 2008
Profitability
Return on Average Assets
Return on Average Equity
Margins
Net Spread
Net Interest Margin
Efficiency
Cost to Income
Liquidity
Credit Quality
NPLs (000LE)
NPLs to Gross Loans
NPLs Coverage
Capital Adequacy
Fees & Commissions Income To Operating Income
Change in FX Income
Issued Shares
Market Price
Fact Sheet
100,000.0
3.0
13.4
21.1
7.1
1.6
8.5%
14.0%
0.4%
6.0%
337.2%
51.6%
9.0%
9.0%
18.3%
7.8%
11.9%
1,044,334.4
1,069,276.7
9.3%
9.5%
102.4%
74.9%
94.3%
893.9%
14.2%
27.2%
73.1%
8.7%
6.2%
2.5%
2.3%
1.8%
22.6%
90.6%
78.9%
Jun-11-F
100,000.0
3.2
13.8
21.1
6.6
1.5
10.4%
11.3%
0.4%
5.6%
347.0%
53.5%
8.9%
8.4%
18.0%
7.2%
11.1%
1,130,065.4
1,159,770.7
9.1%
9.3%
102.6%
73.1%
91.5%
986.4%
13.9%
26.9%
74.8%
8.5%
6.3%
2.3%
2.2%
1.8%
23.6%
87.4%
80.4%
Jun-12-F

The following is a comprehensive list of disclosures which may or may not apply to all our researches.
Only the relevant disclosures which apply to this particular research has been mentioned in the table
below under the heading of disclosure.
Disclosure Checklist
Company
Recommendation
Ticker
Price
Disclosure
Hold
COMI.CA
LE46.9
1,10
Buy
NSGB.CA
LE30.0
1,10
Credit Agricole-Egypt
Buy
CIEB.CA
LE15.2
1,10
The Egyptian Gulf Bank
Sell
EGBE.CA
US$2.6
1,10
Hold
EXPA.CA
LE21.1
1,10
1.
Global Investment House did not receive and will not receive any compensation from the company
or anyone else for the preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
3. Global Investment House makes a market in securities issued by this company.
4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of his/her
household) has a direct ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
7. Within the past year , Global Investment House has managed or co-managed a public offering for
this company, for which it received fees.
8. Global Investment House has received compensation from this company for the provision of
investment banking or financial advisory services within the past year.
9. Global Investment House expects to receive or intends to seek compensation for investment banking
services from this company in the next three months.
10. Please see special footnote below for other relevant disclosures.
Global Research: Equity Ratings Definitions

Global Rating Definition
Buy
Fair value of the stock is >10% from the current market price
Hold
Fair value of the stock is between +10% and -10% from the current market price
Reduce
Fair value of the stock is between -10% and -20% from the current market price
Sell
Fair value of the stock is < -20% from the current market price
This material was produced by Global Investment House KSCC (Global),a firm regulated by the Central Bank of
Kuwait. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any
securities. Global may, from time to time,to the extent permitted by law, participate or invest in other financing
transactions with the issuers of the securities (securities), perform services for or solicit business from such issuer,
and/or have a position or effect transactions in the securities or options thereof. Global may, to the extent permitted
by applicable Kuwaiti law or other applicable laws or regulations, effect transactions in the securities before this
material is published to recipients.
Information and opinions contained herein have been compiled or arrived by Global from sources believed to
be reliable, but Global has not independently verified the contents of this document. Accordingly, no representation
or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy,
completeness or correctness of the information and opinions contained in this document. Global accepts no liability
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This document is not to be relied upon or used in substitution for the exercise of independent judgement. Global
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document and of evaluating the merits and risks involved in the securities forming the subject matter of this or
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Opinions and estimates constitute our judgment and are subject to change without prior notice.Past performance
is not indicative of future results. This document does not constitute an offer or invitation to subscribe for or
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Global Research
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Banking

Egypt Banking Sector

Global Investment House KSCC

Omar M. El-Quqa, CFA

Faisal Hasan, CFA

Cherine Fayez Farkouh, CFA

Global Research - Egypt

Global Investment House

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Egypt Banking Sector

Global Research - Egypt

Global Investment House

P/BV* (x) P/E* (x)

Source: Global Research, market prices as of September 7th, 2008.

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Outlook for the Egyptian Economy

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Background on the Egyptian Banking Sector

Investment Banks Specialized Banks Total # of Banks

Source: CBE, Global Research

Chart 01: Banking Structure in 2006/07

Private and Joint

Source: CBE, Global Research

Egypt Banking Sector

Global Research - Egypt

Global Investment House

Poor Performance Triggered Reforms

Acquired Shares in Joint Ventures

Commercial International Bank

National Bank of Egypt Arab Banking Corporation International

Suez Canal Bank

National Societe Generale Bank

National Societe Generale Bank

Misr International Bank

Egypt Romania Bank

Arab African International Bank

Misr America International Bank

Cairo Far East

Union National Bank

Alexandria Commercial and Maritime

Egypt Commercial Bank

Egypt American Bank

Shareholders in Delta International Bank Delta International Bank

National Investment Bank

Misr Iran Development Bank

Source: Ministry of Finance, Global Research

Egypt Banking Sector

Global Research - Egypt

Global Investment House