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1964E 1964E
19641964EE
annualREPORT
2012
table ofContents
1964e ablished on
table ofCONTENTS
Shareholders4Board of Directors6
Board of Directors’ Report8Financial Statements20
90 Auditors’ Report
96 Addresses
Balance SheetIncome StatementStatement Of Changes In Shareholders’ EquityStatement Of Cash FlowsStatement of ProÞt AppropriationNotes to the Financial Statements
TABLE OF CONTENTS
5
SHAREHOLDERS
Shareholders
Percentage of Holding
Central Bank of Egypt, Egypt49.37
49.37
Others1.26
5
SHAREHOLDERS
Shareholders
Percentage of Holding
Central Bank of Egypt, Egypt49.37
49.37
Others1.26
5
6
board ofdireCtors
Mahmoud A. Al NouriChairman
Hassan E. AbdallaVice Chairman & Managing director
Mahmoud A. Mahmoud representative, Central bank of egypt, egypt
Dr. Hala H. El Saidrepresentative, Central bank of egypt, egypt
Abdullah Bou-Qammaz representative, Kuwait inves tment authority, Kuwait
Saad M. Al Henaidirepresentative, Kuwait inves tment authority, Kuwait
Osamah O.E. Al Furaihrepresentative, Kuwait inves tment authority, Kuwait
Tarek Mohamed Badawy El kholy representative, Central bank of egypt, egypt
Board Secretariat Salah El-Din El Baroudi
General secretary to the board
7
BOArD OF DirEcTOrS
8
board of direCtors’rePort
9
Introduction
On behalf of the Board of Directors and myself, it gives me great pleasure to present to you Arab African International Bank’s Annual Re-port and Financials for FY2012. This report in-cludes an overview of The Bank’s activities and operational milestones during FY2012. These are validated through profits that reflect the solidity of our financial base, the professional-ism present in all our dealings and The Bank’s pioneering efforts during the tumultuous times Egypt is witnessing.
The Global Economy
In 2012, the world economy was affected by the economic slowdown in both developing and established economies alike, which led to a continued rise in unemployment rates in most of these countries.
The after shocks of the global financial crisis are still being felt across the world, especially within the Eurozone. Additionally, Public debt continued to rise in most developed econo-mies.
BOArD OF DirEcTOrS’ rEPOrT
World GDP Growth 2011 - 2014
3.9 3.5 4.1
1.4
-0.4 -0.2
11.8 2
7.88.2 8.5
3.5 3.4 3.8
5.2
2.3 33.2
World Euro Area USA China MEnA
n 2011 3.9 1.4 1.8 9.3 3.5
n 2012 3.2 -0.4 2.3 7.8 5.2
n 2013 3.5 -0.2 2 8.2 3.4
n 2014 4.1 1 3 8.5 3.8
11
9
7
5
3
1
-1
-3
-5
(Ref: The World Bank January 2013)
9.3
10
The Egyptian Economy
Since early 2011, the Egyptian economy has faced many challenges, due mainly to the ex-tended transitional period, which has taken its toll on the economy as a whole. Despite the turbulence in the Egyptian market, GDP growth in FY2012 reached 2.2% by year-end, as op-posed to 1.8% during the previous year. The banking sector seems to be on solid financial ground, in terms of fulfilling its commitments to its customers and financial integrity indica-tors. Capital adequacy reached approximately 15.7% during the year, surpassing Basel II cap-ital requirements.
Our hope is that the banking sector maintains its standing as a pillar of the Egyptian economy, aiding in its swift recovery and placing Egypt in its worthy position as a regional financial hub.
The Bank’s Financials FY2012
Stellar Performance Despite Economic Challenges
Financial indicators for the year 2012 serve as a testament to the solidity of The Bank’s financial strategy and foresight, which takes into account market dynamics and fluctua-tions. Despite the exceptional times Egypt is witnessing, The Bank successfully maintained the growth of its core business, which rein-forces The Bank’s financial integrity, especially during the tough times Egypt is going through. In 2012, The Bank continued to improve and raise the levels of service provided to its cli-ents across all lines of business, and contin-ued to generate even higher net profits than previous years.
Real GDP Growth 2010 - 2014
2.21.8
5.1
2.9
6.2
11.4
5
1.3
5.2
33.5
4.54.6
Egypt Kuwait UAEn 2010 5.1 11.4 1.3
n 2011 1.8 9.3 4.2
n 2012 2.2 5 3
n 2013* 2.9 4.6 3.5
n 2014** 6.2 5.2 4.5
10
12
8
6
4
2
0
(Ref: Economist Intelligence Unit "EIU" December 2012)
9.3
4.2
11
Profits
The Bank’s Net Profit for FY2012 reached US$144 million, up from US$121 million in FY2011, an increase of 19%, validating The Bank’s ability to optimally allocate its assets and resources to align with its income diversi-fication strategy, which led to maximizing rev-enues and optimizing operating costs, reaching an average ratio of 30% up from 33% in 2011.
Deposits and Loans
Customer deposits rose from US$5.5 billion in FY2011 to reach US$6 billion in FY2012, an in-crease of 9%, driven by the maintained confi-dence in The Bank’s integrity. The Bank contin-ued throughout the year on its path to identify and fulfill its customer’s needs through the launch of an innovative array of products and services that maximize returns for its customers.
In light of market conditions and the lingering uncertainty, The Bank continued in its credit re-straint policies. This resulted in a slight drop in its loan and credit portfolio to reach US$3.412 million in FY2012, down from US$3.480 million in FY2011 a drop of 1.95%.
Capital Base and Shareholders’ Equity
The Bank continues to maintain its solid capi-tal base, with shareholder equity at US$891 million in FY2012, as opposed to US$771 mil-lion in FY2011; an increase of 16%. This rise in shareholder equity resulted in the growth of The Bank’s capital adequacy to reach 19.7%, a substantially higher percentage than the CBE’s minimum capital requirements, which would indicate that The Bank would indeed meet its growth projections for 2013. The Bank also maintained its average return on shareholder equity also increased from 20% in FY2011 to reach 20.6% in FY2012 buoyed by The Bank’s rising profits.
Total Assets
Net Asset Value rose to US$8.2 billion in FY2012 from US$7.4 billion in FY2011, a 10% increase. The year also saw a rise in average return on assets, up by 1.9% in FY2012 from 1.5% in FY2011, a more than satisfactory increase within the current mar-ket conditions.
Proposed Dividends
Finally, due to the more than satisfactory re-sults achieved during the year, and in line with its commitment to maximize its shareholders’ long-term returns, The Bank’s Board of Direc-tors decided to distribute up to US$35 million -, 24% of profits - as opposed to US$ 30 mil-lion in the year 2011.This also comes as a trib-ute to the continued support and confidence The Bank’s shareholders have demonstrated throughout the years.
The Bank enters 2013 with confident strides, implementing its growth and expansion strat-egy, with the express purpose of increasing its market share and playing a proactive role in Egypt’s economy through creative initiatives and the highest quality services.
The Bank’s Key Achievements 2012
1. Investment Banking and Corporate Banking
Despite the economic challenges the Egyptian market faced in 2012, The Bank continued in its efforts to expand its array of investment ve-hicles. Some of The Bank’s key achievements include:
The Bank continues its pioneering efforts • in the Investment Banking field in the Egyptian market; where it arranged a loan valued at US$1,400 million for invest-ments in several sectors, such as Tour-ism, Industry and others.
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The Bank continues to lead the market • in advisory services as well as financ-ing medical services. The Bank has also been commissioned to conduct a com-plete evaluation of Egypt’s largest Health-care and Hospital Groups that caters to the needs of middle and low-income citi-zens. The Bank also prepared a feasibility study for the expansion of a number of pharmaceutical companies, with total in-vestments of up to approximately EGP1.8 billion.
The Bank acted as runner, promoter and • underwriter to an EGP814 million offering ‘9th issuing’ for one of Egypt’s automo-tive financing giants. This offering is the only one of its kind in the market for the year and is also the largest the company has undertaken in its history, despite the political and economic turbulence the country is going through.
In continuing its efforts to expand its array of investment vehicles, The Bank launched its lat-est investment fund ‘Gozoor’, which invests in diverse fixed income securities. Making it ideal for individuals, corporations, insurance firms, mutual funds, and pension funds to invest in, due to its numerous advantages that include risk diversification, liquidity provision and an alternative to CDs for corporate clients; and is managed by Arab African Investment Manage-ment (AAIM); the volume of IPOs increased to 886 million EGP.
In recognition of its pioneering efforts, The Bank received the award for ‘Best Investment Bank in Egypt 2012 by the renowned Global Finance Organization.
2. Subsidiaries
The Bank continued in its successes through-out the year with the exceptional performance
of its subsidiaries, The Bank’s strategy was fully committed towards catering to its clients needs through banking operations within The Bank or its subsidiaries. The year was a mile-stone year for AAIB’s subsidiaries, through their operational highlights, adherence to Corporate Governance guidelines, increasing their market shares and recording substantial profitability numbers. AAIM’s ROAEs increased from 20% in FY2011 to reach 63% in FY2012.
Following suit, Arab African Mortgage Finance (AAIMF) - established in 2010 - managed to raise its profits from EGP7 million in FY2011 to EGP12 million in FY2012.
In spite of the economic challenges and shrink-ing domestic market conditions, Arab African International Securities (AAIS) successfully increased its market share to 31% in FY2012 from the previous year.
3. Financial Institutions
2012 represented a real test of The Bank’s Fi-nancial Institutions Division and its mandate to create and enhance relationships with some of the world’s largest, most renowned names in banking and finance over the past decade. The success of the division is reflected through the continued credit lines these institutions provide to this day, despite the turbulent times Egypt is going through and successive downgrades from international Credit ratings agencies.
In spite of the negative impact of rising costs of credit facilities in general, especially in import finance and issuing LCs and LGs, the Finan-cial Institutions Division’s team lived up to their reputations through their unrelenting negotia-tion and expertise, to close some large scale deals linked to vital sectors of the Egyptian economy.
For the 5th consecutive year, The Bank received awards from JP Morgan Chase and Commer-
13
zbank for its excellence in ‘Fully Automated Straight Through Processing’ for US Dollar and Euro, which reflects the professionalism inher-ent in the Financial Institutions Division’s op-erations and trading room back office and their commitment to achieving optimal operational efficiency through minimizing payment orders costs and managing external accounts.
4. Treasury
The Bank’s Treasury Division managed to main-tain target liquidity levels and cash manage-ment restraints, despite the dire times Egypt is witnessing. The Division positively contributed to ensuring the flow of liquidity and maximiz-ing revenues, in line with The Bank’s budgetary objectives.
Parallel to that, The Treasury Division contin-ued to meet its clients’ needs in terms of prod-uct and services it has on offer. It also managed to forward The Bank’s standing to become the primary destination for foreign currency trans-actions, building on The Bank’s existing reputa-tion as a powerhouse of competition and inno-vation in the local market and a market maker of solid standing, according to many interna-tional correspondent banks.
5. Retail Banking
The Retail Banking Division continued to build on its previous years’ successes and adapt to the changing local market conditions, which represented a challenge to The Bank as a whole.
To this end, The Bank decided to strengthen its customer relationship in 2012 by expanding its branch network through establishing four new branches in El Gouna, 5th Settlement, Obour and Zamalek. Currently, The Bank’s branch net-work includes 62 branches and banking units and 242 ATM machines.
The Bank’s Achievements 2012:
a. Best Bank in the Middle East for Credit Cards (Visa4U)
Upon the launch of the ‘Visa4U’ card, The Bank’s efforts were recognized by Visa Inter-national, who presented The Bank with “Best Bank in the Middle East” award. The award re-flects The Bank’s commitment towards raising the bar in the Credit Card industry, the empha-sis it places on creating innovative solutions, and providing products and services that cater to clients’ needs and preferences.
b. Dynamic Currency Converter Program (DCC)
In line with its pioneering efforts, The Bank be-came the first in Egypt to introduce its unique Merchant Services Program. During this year, The Bank expanded its Merchant Services Pro-gram features by signing an agreement with FEXO to apply the Dynamic Currency Conver-sion Program (DCC). The Program allows card-holders to track their transactions from abroad, by using The Bank’s POS machines as a means of payment. In addition, the program facilitates payment according to the available currency to the cardholder, based on published and up to date exchange rates.
c. Value Plus Program : The Latest Financial Solutions
The Bank’s strategy continues to be one that emphasizes constant growth and innovation through providing high-end performance and quality customer service, all of which are aimed at adding value to its clients.
The Bank launched its latest product ‘Value Plus’, which combines savings and personal loans. In addition, it provides optimal financial solutions for managing assets and liquidity. The Value Plus Program is a tailored product that
14
caters to clients’ unique lifestyle needs while their savings remain intact.
The Value Plus Program is a one of a kind pro-gram that operates in a unique manner by com-bining various special features for assets and liabilities that provides added value for clients. The program balances between securing the client’s savings and providing them with the ability to acquire the proper funding needed to pursue their needs. For instance Value Plus facilitates the purchase of the clients’ desired car with no advance cash payment by simply investing its cash value in an Emerald CD.
The Value Plus Program is a distinctive pro-gram that consists of a variety of products with different features that enhances the return and value of clients’ savings as well as catering to their unique personal needs.
d. Wallety
The Bank continues to take huge leaps in the E-commerce industry through pioneering new products and services; the latest of which is the “Wallety” online payment solution. Wallety was launched in cooperation with Cloud lock Inter-national with the purpose of ensuring safe and secure online transactions to avoid piracy and fraud attempts for both cardholders and mer-chants alike.
e. Western Union
In 2012, The Bank became a direct agent for Western Union Money Transfer Services, after being a sub-agent since 2005. The Bank be-gan expanding its Western Union services to reach 60 fully operational branches in Egypt. It also created a dedicated Hotline for its West-ern Union services to receive customer inqui-ries and to provide them with the best service possible.
Furthermore, The Bank focused on expan-
sion, by establishing Western Union branches to reach a wider network of potential clients. The service also offers foreign exchange facili-ties due mainly to the transactions of Egyptians abroad, which represent 83% of the Western Union’s activities in Egypt.
6. Wealth Management
During 2010, The Bank launched its unique Private Banking Services under the Corporate Brand ‘Wealth Management‘. Since its launch, The Bank continues in its path of distinctive services by offering the latest financial solu-tions, as well as providing HNW clients with the best customer care they deserve. In addition, the Wealth Management department continues to focus on expanding its services and geo-graphic presence by implementing its strategic plan for its Wealth Management service to be available throughout its branch network.
During the year, The Bank managed to achieve its objectives and tackle obstacles that sur-faced due to the economic and political unrest in Egypt. The Bank recorded a 31% increase, generated through new clients who invested in several of The Bank’s programs such as Ju-man, Gozoor, Shield Mutual Funds Program, and Treasury Bills.
The Bank continues to provide cutting edge financial services through utilizing the latest technology to cater to clients’ needs and ex-ceed their expectations.
7. Marketing
The Bank strives to maintain its leading posi-tion in the financial industry and retail services in Egypt and the region. The Bank implemented the concept of ‘The Art of Growth’ in all its deal-ings. As a direct result of that, The Bank is now Egypt’s fastest growing bank in terms of size and profitability. These growth rates substan-tiated The Bank’s strategic vision to become
15
the leading Financial Group in Egypt. Based on The Bank’s ability to create innovative financial products and services and with its strong re-gional presence, The Bank established itself as a gateway for international investments into the region.
The Bank takes pride in maintaining its brand persona over the years. In 2012, its efforts were recognized for the 5th consecutive year by ‘Su-perbrands’, which presented it with “The Best Brand 2012” Award.
Finally, The Bank takes pride in the launch of its latest in a long line of innovative services, the ‘AAIB Mobile Application’. The Bank’s Mo-bile Application allows clients and non-clients alike to easily download the application on their smart phones for free. The application has several unique features that enable users to lo-cate and get directions to The Bank’s nation-wide network of branches and ATMs by using Google Maps. It also provides users with daily foreign exchange rates and a user-friendly loan calculator. Additionally, The Bank’s Mobile Ap-plication regularly updates users on The Bank’s latest products and services.
8. Information Technology
In 2012, The Bank added a variety of tools aimed at enhancing its services. With technol-ogy regarded as its backbone for providing innovative and high standard services for its clients. The Information Technology Division enabled The Bank to serve its clients more ef-fectively in several aspects, including sending out SMS updates as well as the amounts de-ducted from clients’ Credit Card transactions, allowing clients to check their account balance and transactions, the ability to issue cheques and view other pertinent information regarding their cheques status over the internet.
The Bank also took steps towards enhancing
its own facilities to improve customer service, such as increasing Internet service speed at The Bank and implementing a new program for customer database entry according to the re-quirements of the Egyptian Central Bank and honoring The Bank’s commitment towards in-novation and improvement.
The Information Technology Division’s efforts ex-tended to cooperating with several local banks in implementing a special project for transfers from Egyptian laborers in Iraq. The project was conducted through The Bank’s branches and other external facilities such as Luxor Club and Al Mahala Al Kobra Club. Resulting in 114,262 successful transactions, adding up to a total of approximately US$72.5 million.
9. Human Resources
The Bank holds the belief that its staff is its most valuable asset, which drives The Bank’s continued successes. The Bank emphasizes on developing its staff’s skill set, which is an integral part of The Bank’s strategy. Hence, it focuses on investing in them, since they repre-sent the Bank’s future leaders.
The Bank placed major investments in its hu-man resources development, reaching their peak levels in 2012, in terms of enhancing employees’ capabilities and competencies. The Bank launched 1,993 training programs that included more than 1,000 employees. The program also involved training for employees involved in financial and treasury procedures, to enable them to detect securities fraud other corrupt practices. Additionally, The Bank pro-vided to support employees who chose to pur-sue higher education, through assistance in en-rolling and funding for MBA Programs or other programs.
The Human Resources department successful-ly developed The Bank’s Organizational Chart
16
during 2012 that complies with The Bank’s strategy, resulting in optimal performance lev-els. The Bank also adjusted its salary scales according to the wages and salaries in the Egyptian market.
Additionally, the department also enhanced its evaluation process, by creating objectives for each position within The Bank. This procedure facilitates measuring the outcomes against The Bank’s overall objectives as well as measur-ing the performance levels of the employees in order to achieve optimum performance levels and standards.
In 2012, The Bank hired 146 employees; it also places focus towards attracting, training motivating, and retaining its high caliber staff. Moreover, The Bank has only a 1% turnover rate which is the lowest turnover rate in the Egyptian finance sector.
The Bank understands the importance of hu-man resources and regards it as the most influ-ential factor in its success.
Corporate Social Responsibility and Sustainability
The Bank continues to hold a deep commit-ment towards Social Responsibility. It believes that brands should go beyond seeking prof-it by instigating a positive impact in various fields through supporting different events and causes. Hence, in 2012 The Bank was one of the main sponsors in the World Open Squash Tournament.
The Bank is proud to announce its 10 years of strategic Corporate Social Responsibility (CSR) that has positively impacted the society and community in Egypt. The Bank began adopt-ing the concept of CSR in 2002 and launched several programs in two main areas: Health and Education. As of 2005, The Bank joined sev-eral worldwide organizations that aim towards
spreading Human Rights awareness as well as allocating and organizing resources for environ-mental and community development. The Bank strategically integrated Sustainability in its daily operations, setting an example for other finan-cial institutions. It also plays an integral role in spreading awareness by publishing its CSR and Sustainability activities, in order to encour-age both local and global financial and educa-tional institutions to participate and cooperate in making a difference in Egypt. The Bank be-came a pioneer in establishing concept of CSR and Sustainability in the financial sector under the title “Sustainable Finance”.
The Bank’s efforts were recognized during the Arabia CSR Network Awards Ceremony in 2012, where it was presented with an award for ‘Best Corporate-NGO Collaboration’. The Bank received the Award in recognition of its pioneering efforts in establishing the first Social Development Foundation of its kind,‘ We Owe It to Egypt’; a Foundation dedicated to raising the levels of education and healthcare in Egypt and The Middle East. The vision to make Sus-tainable Finance a reality in today’s market is a goal The Bank continues to pursue with a de-termination to implement with a clear road map that positioning The Bank as a local, regional, and global leader in Sustainable Finance.
We Owe it to Egypt Foundation
We Owe it to Egypt foundation was founded and launched in 2007, and is considered The Bank’s flagship CSR project. It is the first foun-dation of its kind launched by an Egyptian Bank in the private sector that aims towards social development. We Owe it to Egypt’sobjective is to be an effective sustainable development tool that effectively impacts the community in two main areas: Health and Education. The Bank covers all administrative and operating costs, making room for the allocation of financial con-tributions to fund The Foundation’s projects.
17
The Bank’s support is not only limited to fund-ing but also upgrading services, providing hu-man resources and development opportunities. In addition, The Foundation appointed highly experienced professionals to monitor and eval-uate the progress and performance of each stage in The Foundation’s projects to comply with The Foundation’s vision and its develop-ment.
In 2012, The Foundation dedicated its efforts towards public hospital development in Egypt. The Foundation’s vision is to raise the level of medical services in public hospitals to reach in-ternational levels of excellence in medical care; thus, it launched several initiatives and pro-grams that were successfully implemented.
Forward Looking Statement
In 2012, The Bank underwent various challeng-ing political and economic obstacles on local and global arenas. However, we are positive that despite the challenges 2013 will present us with, our clarity of vision and forward-looking strategy will carry us through yet another year.
Thank You note
I would like to end this note by thanking our Shareholders for the continued loyalty and support they have shown The Bank. I would also like to thank our clients for their faith in The Bank and in our ability to continue to grow their savings and investments.
More importantly, I would like to express my gratitude on behalf of the Board of Directors to The Bank’s Management Team and Staff for their continued efforts, especially during the rough times the country is witnessing. Our success would not have been possible without them and their dedication.
We hope that 2013 will be a better year and that our deeply rooted pillars of success will carry The Bank to continue in its journey of growth.
Mahmoud A. Khalek Al Nouri
Chairman
Vision
Artist
George SeuratPainting: Sunday Afternoon on the Island of La Grande Jatte.Georges Pierre Seurat was a French Post-Impressionist painter and draftsman noted for his innovative technique of painting, known as ‘Pointil-lismartist - propelled by a vision in mind - draws different colored spots that blend to form coherent shapes and forms. This ability to imagine the big picture when he Þrst starts adding dots to a blank canvas reßects his profound vision. 1964
Growth starts with a vision. AAIB’s vision to become a full-ßedged Þnancial group has been transformed into a reality with the establishment of AAIB’s subsidiaries over the past few years. Still, AAIB sees further opportunities for expansion and leveraging its rapid growth during the past decade to further expand regionally and globally.
Vision
Artist
George SeuratPainting: Sunday Afternoon on the Island of La Grande Jatte.Georges Pierre Seurat was a French Post-Impressionist painter and draftsman noted for his innovative technique of painting, known as ‘Pointil-lismartist - propelled by a vision in mind - draws different colored spots that blend to form coherent shapes and forms. This ability to imagine the big picture when he Þrst starts adding dots to a blank canvas reßects his profound vision. 1964
Growth starts with a vision. AAIB’s vision to become a full-ßedged Þnancial group has been transformed into a reality with the establishment of AAIB’s subsidiaries over the past few years. Still, AAIB sees further opportunities for expansion and leveraging its rapid growth during the past decade to further expand regionally and globally.
20
finanCialstateMent
21
Separate Balance Sheet for the year ended 31 december, 2012
Note 31/December/2012 31/December/2011
US$ ‘000 US$ ‘000AssetsCash and due from Central Banks (15) 241,893 212,033Due from banks (16) 1,966,029 1,954,866Treasury bills (17) 2,046,684 1,188,229Loans to banks (20) - 4,081Loans to customers (21) 3,412,043 3,476,710Financial Derivatives (22) 580 1,783Financial Invesmtents:Available for sale investments (18) 282,745 348,074Held to maturity investments (18) 112,014 116,752Investments in subsidiaries and associates (23) 30,380 28,784Investment Properties (19) 2,472 2,512Intangible assets (27) 11,309 11,309Other assets (24) 62,788 63,107Deferred tax assets (25) 5,971 5,606Fixed assets (net of accumulated depreciation) (26) 22,136 22,659
Total Assets 8,197,044 7,436,505 Liabilities & owners equityLiabilitiesDue to banks (28) 726,967 591,495Customers’ deposits (29) 5,970,838 5,495,040Financial Derivatives (22) 401 1,764Other liabilities (30) 205,867 170,393Loans from banks (31) 79,126 82,893Other provisions (32) 17,971 17,577Current income tax liability (33) 4,632 6,544Subordinated Deposits (35) 300,000 300,000Total Liabilities 7,305,802 6,665,706 Owner’s EquityPaid-in capital (36) 100,000 100,000 Reserves (37) 122,375 105,826Retained earnings (37) 668,867 564,973Total owners equity 891,242 770,799 Total liabilities and owners equity 8,197,044 7,436,505
Hassan Abdalla Mahmoud Abd EL Khalek El Nouri Vice Chairman & Managing Director Chairman
Audit report attached.
Date 18 February 2013The accompanying notes from an integral part of these financial statements and are to be read therewith.
22
Separate income Statementfor the year ended 31 december 2012
Note 31-Dec-2012 31-Dec-2011
US$ ‘000 US$ ‘000
Interest Income & Similar revenues (6) 510,294 454,391
Interest Expense & Similar costs (6) (300,995) (291,752)
Net interest income 209,299 162,639
Fees & Commission income (7) 59,885 61,159
Fees & Commission expenses (7) (2,425) (1,895)
Net Fees & Commission income 57,460 59,264
Dividend income (8) 2,153 1,491
Net trading income (9) 16,238 16,367
Impairment charge for credit losses (10) (23,103) (5,444)
Gain (Losses) on financial investments (18) 2,401 (356)
Administrative expenses (11) (72,188) (71,580)
Other operating expense (12) (8,180) (8,346)
Profit before income tax 184,080 154,035
Income tax (13) (40,001) (33,328)
Net profit for the period 144,079 120,707
Earnings per share ( dollar / share ) (14) 6.81 5.71
The accompanying notes from an integral part of these financial statements and are to be read therewith.
23
Statement Of changes in Owners Equityfor the year ended 31 december, 2012
Paid in Capital
Reserves RetainedEarnings
Total
US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000
Balance as at 31 December 2010 - Beforeappropriation
100,000 99,313 497,328 696,641
Dividends of the year ended 2010 - - (30,200) (30,200)
Transferred to Legal reserve - 14,351 (14,351) 0
Balance as at 31 December 2010-Afterappropriation
100,000 113,664 452,777 666,441
Transferred to general banking risks reserve - 8,511 (8,511) 0
Net Changes in FMV for Afs investments - (16,349) - (16,349)
Net Profit as at 31 December 2011 - - 120,707 120,707
Balance as at 31 December 2011 100,000 105,826 564,973 770,799
Balance as at 31 December 2011 - Before appropriation
100,000 105,826 564,973 770,799
Dividends of the year ended 2011 - - (36,558) (36,558)
Transferred to Legal reserve - 12,071 (12,071) 0
Balance as at 31 December 2011-Afterappropriation
100,000 117,897 516,344 734,241
Transferred from general banking risks reserve (8,444) 8,444 0
Net Changes in FMV for Afs investments - 12,922 - 12,922
Net Profit as at 31 December 2012 - - 144,079 144,079
0
Balance as at 31 December 2012 100,000 122,375 668,867 891,242
The accompanying notes from an integral part of these financial statements and are to be read therewith.
24
Note 31-Dec-2012 31-Dec-2011
US$ ‘000 US$ ‘000Cash Flows from Operating ActivitiesProfit before income tax 184,080 154,035 Adjustments to reconcile net profit to net cash provided from operating activitiesDepreciation and Amortization 6,663 7,389 Impairment charge for credit losses 23,103 5,444 Other provision charges 433 1,970 Impairment charge in Financial Investments Available for Sale 311 5,233 Gain on sale Investments Available for Sale (115) (4,539)Subsidiaries and associates investments impairment reversal (1,173) -Cash dividends (2,153) (1,491)Used Retirement benefit obligations (971) (14,633)Retirement benefit obligations 971 908 Foreign currencies revaluation differences of provisions other than loan loss provision 3,301 2,403 Operating profit before changes in assets and liabilities provided from operating activities 214,450 156,719Net Decrease (Increase) in Assets and LibilitiesDue from banks 186,045 34,238Treasury bills (372,370) 434,090Held for trading investments - 6,619Loans and advances to customers 45,833 686,006Derivative financial instruments (net) (161) (51)Other assets 3,892 (4,905)Due to banks 135,472 (433,851)Customers’ deposits 475,798 (700,768)Other liabilities 35,470 23,318 Income taxes paid (42,278) (29,665)Net cash flows resulted from operating activities (1) 682,151 171,750Cash Flows from Investing ActivitiesPurchase securities other than trading (15,912) (211,081)Sale / redemption of securities other than trading 91,637 104,228Investments in subsidiaries and associates (1,524) (5,120)Proceeds from disposals of subsidiaries associates 1,101 -Proceeds from dividends paid 2,153 1,491Purchase of fixed assets and branches leasehold improvements (9,895) (3,949)Net cash flows resulted from (used in) investing activities (2) 67,560 (114,431)Cash Flows from Financing ActivitiesCash dividends paid (36,558) (30,200)Net cash flows used in financing activities (3) (36,558) (30,200)Net Increase in cash and cash equivalents during the year (1+2+3) 713,153 27,119Cash and cash equivalents at the beginning of the year 2,136,027 2,108,908Cash and cash equivalents at the end of the year 2,849,180 2,136,027Cash and cash equivalents are represented in:Cash and due from Central Banks 241,893 212,033 Due from banks 1,966,029 1,954,866 Treasury bills 2,046,684 1,188,229 Balances with the Central Banks limited to the reserve ratio (157,085) (163,084)Deposits with banks (2,011) (182,057)Treasury bills (matured over than three months) (1,246,330) (873,960)Cash and cash equivalents at the end of the year (45) 2,849,180 2,136,027
Separate Statement Of cash Flows for the year ended 31 december, 2012
The accompanying notes from an integral part of these financial statements and are to be read therewith.
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31-Dec-2012 31-Dec-2011
US$ ‘000 US$ ‘000
Net profit for the year 144,079 120,707
Added / Deducted :
General banking risks reserve 8,444 (8,511)
Net profit for the year available to distribution 152,523 112,196
Add:
Retained earnings at beginning of the year 516,344 452,777
Total 668,867 564,973
Appropriated as follows:
Legal reserve* 1,804 12,071
Shareholders profit distribution 35,000 30,000
Board of directors remuneration* 375 358
Distributions of employees* 7,500 6,200
Retained earnings at end of the year 624,188 516,344
Total 668,867 564,973
Separate Statement of Proposed Appropriation for the year ended as at 31 december, 2012
* In accordance with the Statute of the Bank are held 10% of the net profits of the financial year to feed the legal reserve and is off the legal reserve when equals 100% of the issued capital, has reached tally before distributions amount 98,196 thousand dollars’ According to this has been proposed feed reserveslegal $ 1,804 thousand U.S. dollars for the equivalent of 100% of the share capital of the bank.
The accompanying notes from an integral part of these financial statements and are to be read therewith.
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1. General InformationArab African International Bank (Egyptian joint stock Company) is established by special law No. 45 for 1964 in the Arab Republic of Egypt.The bank carries out all commercial and bank-ing services. The address of its Head office is as follows: 5 Midan Al-Saray Al Koubra, Garden City, Cairo
The Bank is not listed in the Egyptian stock ex-change.
Arab African International Bank (Egyptian joint stock Company) provide retail, corporate bank-ing and investment banking services in Egypt and abroad through 62 branches and units its Head Office and network of branches in the Arab Republic of Egypt (58 branches and units), United Arab Emirates (2 branches)and one branch in Lebanon and employs over 1,456 employees at the balance sheet date.
2. Summary of significantaccounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been con-sistently applied to the years presented, unless otherwise stated.
A. Basis of preparation The separate financial statements of the Bank
have been prepared in accordance with the rules of preparation and presentation ap-proved by the Central Bank of Egypt on 16 December 2008, under the historical cost convention modified to re-evaluate financial assets and financial liabilities held for trading, financial assets and financial liabilities classi-fied at inception at fair value through profits or losses and financial investments available for sale, and all derivative contracts.
B. Subsidiaries and associates
B/1 Subsidiaries Subsidiaries are all entities (including spe-
cial purpose entities) over which the Bank has owned directly or indirectly the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether The Bank controls another entity.
B/2 Associates
Associates are all entities over which The Bank has direct or indirect significant influ-ence but not control, generally accompa-nying a shareholding of between 20% and 50% of the voting rights.
Purchase method of accounting has been applied to all the acquisition operations. The cost of acquisition is measured by fair value or the assets offered/ issued equity securi-ties / liabilities incurred/ liabilities accepted in behalf of the acquired company, at the date of the exchange, plus costs directly at-tributed to the acquisition. Identifiable assets acquired and liabilities and contingent liabili-ties assumed in a business combination are measured initially at fair values at the acqui-sition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of The Bank’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acqui-sition is less than the fair value of the net as-sets of the entity acquired, the difference is recognized directly in the income statement into other operating income (expenses).
Notes to the separate financial statementsfor the year ended 31 december 2011
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In the separate financial statements, invest-ments in subsidiaries and associates are accounted for using the cost method. Ac-cording to this method, investments are recognized by the acquisition cost includ-ing goodwill and deducting any impairment losses. Dividends are recognized in the in-come statement when they are declared and The Bank’s right to receive payment is es-tablished.
C. Segment reporting A business segment is a group of assets and
operations engaged in providing products or services that are subject to risks and returns that are different from those of other busi-ness segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of segments operating in other economic environments
D. Foreign currency translation
D/1 Transactions in foreign currencies The Bank maintains its accounts in US dollar.
Foreign currency transactions are translated using the exchange rates prevailing at the date of the transactions. All monetary assets and liabilities balances in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at that date. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the following items in the in-come statement:
Net trading income for trading assets and li-• abilities or net income from financial instru-ments designated at fair value through profit or loss for instruments designated at fair value through profit or loss.
Other Operating income (expense) for the • rest of items.
Changes in the fair value of monetary secu-• rities denominated in foreign currency clas-sified as available for sale (debt instruments)
are analyzed between translation differenc-es resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Trans-lation differences related to changes in the amortization costs are recognized in the in-come statement, and other changes in the carrying amount are recognized in equity, (fair value reserve - investments available for sale).
Translation differences on non-monetary • items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differ-ences on non-monetary items, such as equi-ties classified as available for sale financial assets, are included in the fair value reserve in equity.
D/2 Foreign branches
- The bank translates result of business and financials for foreign branches to presenta-tion currency (if they don’t operate in accel-erating inflation economy) in which different functional currency from the presentation currency of the bank as follows:
Translation of assets and liabilities at each financial statement presented to the foreign branch using the closing price on the date of this financial statement.
Translation of income & expenditure in each income statement presented using the av-erage exchange rates, only if the average doesn’t represent an acceptable approxima-tion of the cumulative effect of the rates ap-plicable in the date of transaction,then the translation of income & expense will be by using exchange rate at the transaction date.
Recognition of currency differences result-ing in a separate item (foreign exchange transaction differences) in equity, also transfer to equity foreign exchange result-ing from the assessment of net investment in foreign branches,loans and financial in-struments in foreign currency to cover the investment with the same item, recognition
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of these differences in the income state-ment on disposal of foreign branches as the part of other operating income (expense).
E. Financial assets The Bank classifies its financial assets in the
following categories: Financial assets at fair value through profit or loss; loans and re-ceivables; held to maturity financial assets; and available-for-sale financial assets. Man-agement determines the classification of its investments at initial recognition.
E/1 Financial assets at fair value through profit or loss
This category includes: financial assets held for trading, and those designated at fair val-ue through profit or loss at inception.
A financial asset is classified as held for trad-ing if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if it is part of a portfolio of iden-tified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorized as held for trading unless they are designated as hedging instruments.
Financial assets are designated at fair value through profit or loss when:
Doing so reduces measurement inconsis-• tencies that would arise if the related de-rivative was treated as held for trading and the underlying financial instruments were carried at amortized cost for such as loans and advances to banks and clients, and debt securities in issue;
Certain investments, such as equity invest-• ments that are managed and evaluated on a fair value in accordance with a document-ed risk management or investment strategy, and reported to key management person-nel on that basis are designated at fair value through profit and loss.
Financial instruments, such as debt instru-•
ments held, containing one or more em-bedded derivatives, significantly modify the cash flows are designated at fair value through profit and loss
Gains or losses arising from changes in the fair value of the financial derivatives that are managed with financial assests and liabili-ties are recorded at initation with fair value through profits and losses in the income statement
The bank shall not reclassify a derivative out of the fair value through profit or loss cat-egory while it is held or issued, shall not re-classify any financial instrument out of the fair value through profit or loss category if upon initial recognition it was designated by the entity as at fair value through profit or loss.
In all cases, the bank shall not reclassify any financial instrument into the fair value through profit or loss category or to the held for trading category after initial recognition.
E/2 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:
- Those that The Bank intends to sell imme-diately or in the short term, which are clas-sified as held for trading, and those that The Bank upon initial recognition designates as at fair value through profit or loss;
- Those that The Bank upon initial recognition designates as available for sale; or
- Those for which The Bank may not recover substantially all of its initial investment, other than because of credit deterioration.
E/3 Held-to-maturity financial assets
Held-to-maturity investments are non-deriv-ative financial assets with fixed or determin-able payments and fixed maturities that The Bank’s management has the intention and ability to hold to maturity. If The Bank was to
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sell other than an insignificant amount except for specific situations, the entire category would be reclassified as available for sale.
E/4 Available-for-sale financial assets
Available-for-sale investments are non-de-rivative financial assets intended to be held for an indefinite year of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.
The following is followed for financial assets:
- Regular-way purchases and sales of finan-cial assets at fair value through profit or loss, held to maturity and available for sale are recognized on trade-date, the date on which The Bank commits to purchase or sell the asset.
- Financial assets are initially recognized at fair value plus transaction costs for all finan-cial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially rec-ognized at fair value, and transaction costs are expensed in the income statement in net trading income. Financial assets are derec-ognized when the rights to receive cash flows from the financial assets have expired or where The Bank has transferred substan-tially all risks and rewards of ownership. Financial liabilities are derecognized when they are extinguished − that is, when the ob-ligation is discharged, cancelled or expires.
- Available for sale financial assets and finan-cial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity invest-ments are carried at amortized cost.
- Gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are in-cluded in the income statement in the year in which they arise. Gains and losses arising from changes in the fair value of available for
sale financial assets are recognized directly in equity, until the financial asset is derecog-nized or impaired. At this time, the cumu-lative gain or loss previously recognized in equity is recognized in income statement.
- Interest calculated using the effective inter-est method and foreign currency gains and losses on monetary assets classified as available for sale are recognized in the in-come statement. Dividends on available for sale equity instruments are recognized in the income statement when the entity’s right to receive payment is established.
- The fair values of quoted investments in ac-tive markets are based on current bid pric-es. If there is no active market for a finan-cial asset, The Bank establishes fair value using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pric-ing models and other valuation techniques commonly used by market participants, and if The Bank could not assess the fair value of the equity instruments classified as available for sale, these instruments measured at at cost less impairment.
- The Bank may choose to reclassify the avail-able for sale financial assets where the defi-nition of loans and receivables (bonds and loans) is applicable from Available for sale to Loans and receivables or Held to maturity financial assets as The Bank has an inten-tion to held them for the perspective future or to the maturity date. Reclassifications are made at fair value as of the reclassifica-tion date and any profits or losses related to these assets to be recognized in the owners’ equity as follows:
- In case of the financial asset which has fixed maturity date, profits and losses are amor-tized over the remaining year of the for the held to maturity investments using the Ef-fective interest rate. Any difference between the value using amortized cost and the value based on the maturit date to be amortized over the financial asset remaining year using the effective interest rate method.
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- In case of the financial asset which does not have fixed maturity date, profits and losses remain in the owners’ equity till the selling or disposing the financial asset. At that time they will be recognized the profits and loss-es. In case of the subsequently impairment of the financial asset value, any previously recognized profits or losses in owners’ eq-uity will be recognized in profits and losses.
- If The Bank modified its estimations for the receivables and the payables then the book value of the financial asset (or group of fi-nancial assets) will be adjusted to reflect the effective cash flows and the modified assessments to recalculate the book value through calculation the present value for the estimated future cash flows using the effec-tive interest rate of the financial asset and the adjustment will be recognized as a rev-enue or expense in the profits and losses.
- In all cases if The Bank reclassified a fi-nancial asset as mentioned before and The Bank subsequently increased the estimated future cash inflows as a result of the increase of what will be collected from these receiv-ables, This increase is to be recognized as an adjustment of the effective interest rate starting from the change in estimation date and not an adjustment of the book value in the change in estimation date.
F. Offsetting of financial instruments
Financial assets and liabilities are offset when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or real-ize the asset and settle the liability simulta-neously.
G. Derivative financial instruments Derivatives are recognized at fair value at the
date of the derivative contract, and are sub-sequently revaluated at fair value. Fair values are obtained from quoted market prices in active markets, or according to the recent market deals, or the revaluation methods as the discounted cash flow modules and the
pricing lists modules, as appropriate. Deriva-tives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The embedded financial derivatives into other financial instruments like convertable bonds should be treated as if they are sepa-rate derivatives when the economic charac-teristics and risks of the embedded deriva-tive are not closely related to the economic characteristics and risks of the host con-tract, and the hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in profit or loss. The embedded derivatives are measured at fair value through profit or loss. Changes in fair value are recognized in net trading income in the income statement.
G/1 Derivatives that do not qualify for hedge accounting
Derivative instruments that do not qualify for hedge accounting, changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognized immediately in the profit and loss under “net trading income”. However, gains and losses arising from changes in the fair value of de-rivatives that are managed in conjunction with financial assets or liabilities are included in “net income from financial instruments at fair value through profit or loss”.
H. Recognition of deferred day one profit and loss
The best evidence of fair value at initial recog-nition is the transaction price(the fair value of the consideration given or received), unless the fair value of the instrument is evidenced by comparison with other observable current market transactions in the same instruments or based on valuation technique. When The Bank has entered into transactions that come due after the lapse of a long year of time, fair value is determined using valuation models whose inputs do not necessarily come from quoted prices or market rates. These finan-cial instruments are initially recognized at
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the transaction price, which represents the best index to fair value, despite the value ob-tained from a valuation model may be differ-ent. The difference between the transaction price and the model value is not immediately recognized, commonly referred to as “day one gains or losses”. It is included in other assets in case of loss, and other liabilities in case of gain.
Deferred profits and losses are recognised for each case individually, either by amorti-zation over the lifetime of the trasaction or by determing the fair value of the instrument using quoted markets or by recognizing it when the transaction is settled, the financial instruments later measured at fair value and it is recognized directly in the income state-ments by changes in the fair value
I. Interest income and expense
Interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading or des-ignated at fair value through profit or loss, are recognised within ‘interest income’ and ‘interest expense’ in the income statement using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter year to the net carrying amount of the financial asset or financial liability. When calculating the effec-tive interest rate, The Bank estimates cash flows considering all contractual terms of the financial instrument (for example, pre-payment options) but does not consider fu-ture credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
Once a financial asset or a group of simi-lar financial assets has been classified as nonperforming or impaired, related interest income is not recognized and is recorded in marginal records apart from the financial statements, and is recognized as revenues according to cash basis as follows:
- When they are collected, after receiving all past due instalments for consumption loans, mortgage loans, and small business loans.
- For corporate loans, cash basis is also ap-plied, where the return subsequently calcu-lated is raised in accordance with the loan rescheduling contract, until 25% of the re-scheduling instalments are repaid, with a minimum of one year of regular repayment scheme. In case the counterparty persists to regularly pay, the return calculated on the loan outstanding is recognized in interest in-come. (interest on rescheduling without defi-cits) without interests aside before resched-uling which is avoiding revenues except after paying all the loan balance in the balance sheet before rescheduling.
J. Fees and commission income
Fees and commissions are generally recog-nised on an accrual basis when the service has been provided, fees and commission are not recognized for the nonperforming or im-paired loans, as it is recorded in a separate margin records outside the financial state-ments, and it is recorded on a cash basis when fees and commission are recognzied according to note (I/2) for the fees which is considered a part from effective interest rate for the financial asset as it is considered as a part for the effective interest rate.
Loan commitment fees for loans that are like-ly to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan.
And in case of the commitment year was ex-pired without issuing the loan, fees and com-mission are considered as income at the end of the commitment year,
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Loan syndication fees are recognised as rev-enue when the syndication has been com-pleted and The Bank has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants.
Commission and fees arising from negoti-ating, or participating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on comple-tion of the underlying transaction. Portfolio and other management advisory and ser-vice fees are recognised based on the ap-plicable service contracts, usually on a time-apportionate basis. Asset management fees related to investment funds are recognised rateably over the year in which the service is provided. The same principle is applied for financial planning and custody services that are continuously provided over an extended year of time.
K. Dividends income
Dividends are recognized in the income statement when The Bank’s right to receive payment is established.
L. Treasury Bills
Treasury bills are recognised when they are bought at face value and the issuance cost which represents the unearned interest on these bills and government bonds is recogn-ised through credit balances and other liabil-ities. And these treasury bills appear on the financial statement excluding the unearned interest and they are measured by the amor-tized cost using the effective interest rate.
M. Impairment of financial assetsFinancial assets carried at amortized cost
The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment
losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the finan-cial asset or group of financial assets that can be reliably estimated.
The criteria that The Bank uses to determine that there is objective evidence of an impair-ment loss include:
- Significant financial difficulties of the issuer or obligor;
- Breach of contract such as default in interest or principal payment;
- It becomes probable that the borrower will enter bankruptcy or other financial reorgani-zation;
- Deterioration of the borrower’s competitive position;
- The Bank, for economic or legal reasons re-lating to the borrower’s financial difficulties, granting to the borrower a concession that The Bank would not otherwise consider;
- Deterioration in the value of collateral; and
- Downgrading the credit status.
The existence of clear data that indicates measurable decrease in estimated future cash flows from a group of financial assets are considered as objective evidence of im-pairment for that group. irrespective of the ability of identifying that reduction for each individual asset.e.g, the increase in number of repayment defaults for a particular bank-ing product.
The estimated year between a losses occur-ring and its identification is determined by The Bank for each identified portfolio.
The estimated year between a loss occurring and its identification is determined by local management for each identified portfolio. In general, the years used vary between three months and twelve months.
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The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually sig-nificant, and individually or collectively for financial assets that are not individually sig-nificant and the following is considered:
- If The Bank determines that no objective evi-dence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of fi-nancial assets with similar credit risk charac-teristics and collectively assesses them for impairment using historical probabilities of default.
- Assets that are individually assessed for im-pairment and for which an impairment loss is or continues to be recognised are not in-cluded in a collective assessment of impair-ment, Otherwise it will be added to the group of the financial assets.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) dis-counted at the financial asset’s original ef-fective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the cur-rent effective interest rate determined un-der the contract. As a practical expedient, The Bank may measure impairment on the basis of an instrument’s fair value using an observable market price. The calculation of the present value of the estimated future cash flows of a collaterized financial asset reflects the cash flow that may result from foreseeable less costs for obtaining and selling the collateral.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (that is, on the basis of the Group’s grading
process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such as-sets by being indicative of the debtors’ abil-ity to pay all amounts due according to the contractual terms of the assets being evalu-ated.
The Bank assess the collective impairment for group of financial assets with similar credit risk characteristics and collectively assesses them for impairment using his-torical probabilities of default, and individu-ally for the impaired loans using discounted cash flows, and compared to the obligor risk rating. Differences between the two meth-ods are transferred from retained earnings to general banking reserve, if the obligor risk rating requires more impairment.
Future cash flows in a group of financial assets that are collectively Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observ-able data from year to year (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by The Bank to reduce any differ-ences between loss estimates and actual loss experience
Available for sale financial assets
The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of finan-cial assets classified as available for sale or held to maturity is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired.
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The decline should be considered significant when it reaches 10% of the cost of book value, and the decline shall be considered prolonged if it continuous for more than 9 months. If the mentioned evidences are available, then the accumulated loss should be carried over from shareholder’s equity to be recognized in the income statement. The impairment in value recognized in the income statement concerning equity’s instrument will not be reversed if a later increase in the fair value occurs. Meanwhile in case the fair value of debt instruments classified available for sale increased, and it is found possible to objectively link the mentioned increase to an event taking place after recognition of im-pairment in the income statement, then the impairment will be reversed thought the in-come statement.
n. Investement Property Investments property are represented in
lands and buildings owned by the bank for obtaining lease income or capital increase, consequently it does not include properties assets through which the bank executes its operations, or those properties which revert-ed to the bank in the settlements of debts, the investments properties are accounted for similarly with the same accounting treat-ment for the fixed assets.
O. Intangible Assets1. Computer programs:
Computers’ software related development and maintenance expenses are recognized in the income statement when incurred In-tangible asset is recognized for specific direct costs of computer programs under The Bank’s control and where a probable economic benefit is expected to be gener-ated for more than one year. Direct costs include program development staff costs, and appropriate allocation of the overhead costs.
Development costs are recognized as com-puter program in which lead to an increase
or expansion in the performance of comput-er programs.
These costs are amortised on the basis of the expected useful lives, and not more than five years.
The cost of the computer software is am-ortized over its expected useful life with a maximum of five years.
P. Fixed Assets Land and buildings comprise mainly branch-
es and offices. All property, plant and equip-ment is stated at historical cost less depre-ciation & impairment losses. Historical cost includes expenditure that is directly attribut-able to the acquisition of the items.
Subsequent costs are included in the as-set’s carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the bank and the cost of the item can be measured re-liably. All other repairs and maintenance are charged to other operating expenses during the financial year in which they are incurred.
Land is not depreciated.Depreciation of oth-er assets is calculated using the straight line method to allocate their cost to their residual values over their estimated useful lives, as follows:
Building 20 years
Leasehold improvement 3 years, or over the year of the lease if less
Furniture andsafes
3 years
Typewriters, calculators & air- conditions
3 years
Transportation 3 years
Computers 3 years
Fixtures and fittings 3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate,
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at each balance sheet date. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount is written down immedi-ately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Gains and losses on disposals are de-termined by comparing proceeds with carry-ing amount.These are included in other op-erating expenses in the income statement.
Q. Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortization-except good-will- and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount ex-ceeds its recoverable amount. The recover-able amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
The impairment test also can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. Non-financial assets that suffered im-pairment are reviewed for possible reversal of the impairment at each reporting date.
R. Lease Finance lease are accounted for according to
Law No. 95 of 1995 if the contract gives the right to the lessee to purchase the asset on a specified year and with specified amount where the contract’s year represents at lease
75% of the expected useful life of the asset or the present value of total lease payments represents at least 90% of the asset’s value. Other lease contracts are considered oper-ating leases.
The Bank as a lessee
Finance lease contracts recognized the lease cost, including the cost of mainte-nance of the leased assets, within the ex-penses in the income statement for the year in which they occurred. If the bank decided to exercise the right to purchase the leased assets, the cost of the right to purchase it as an asset are capitalized and amortized over the useful life of the expected remain-ing life of the asset in the same manner as similar assets.
Lease expenses are recognized in the in-come statement using straight line method over the term of contract, after deduction of any discount obtained by the bank at the contract. In case of years when the bank is exempted from paying the lease or if the lease is different (more or less) in different years, in that case the distribution of the to-tal lease expected to pay over the contract and charge over income statement in equal amounts per month, including the years that the bank does not pay the lease.
The Bank as a Lessor
For assets leased financially, asset are recorded in the fixed assets in the finan-cial statement and amortized over the ex-pected useful life of this asset in the same manner as similar assets. Leasing income recorded less any discount given to the lessee on a straight line method over the contract year.
S. Cash and cash equivalents For the purpose of the cash flow statement,
cash and cash equivalents comprise balanc-es with less than three months’ maturity from the date of acquisition, including cash and balances due from Central Banks other than for mandatory reserve, Due from banks, and treasury bills and other eligible securities.
36
T. Other provisions Provisions for restructuring costs and legal
claims are recognized when: The Bank has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.
Where there are a number of similar obliga-tions, the likelihood that an outflow will be required in settlement is determined by con-sidering the class of obligations as a whole. A provision is recognized even if the likeli-hood of an outflow with respect to any one item included in the same class of obliga-tions may be small.
Reversals of provisions no longer required are presented in other operating income and (expense).
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. If the settlement is within one year or less, provisions will be measured by the con-tractual value if there is no material vari-ance otherwise, it will be measured at present value.
U. Financial guarantees contracts The financial guarantees contracts are the
contracts that the bank issue as a guaran-tee for banks customers for their loans with other parties, and it is required that the bank pays some claims for the beneficiary as a re-sult of default in repayments. These financial guarantees are presented to banks and oth-er financial institutions instead of the banks’ customers.
These contracts are initialy recognized at fair value on the contract date, and bank’s liability is measured by the higher of the ini-tial recognition value deducted by the calcu-lated amortization of guarantee fees or the
best estimated value payments required to settle any financial liability resulted from the financial guarantee on balance sheet date. And these estimated values are determined based on bank’s management experience in similar transactions.
And any differences in bank’s liabilities will be recorded in income statement in other operating expenses.
V. Income tax
The income tax on The Bank’s year profits or losses includes both current tax, and deferred tax Income tax is recognized in the income statement, except when it re-lates to items directly recognized into equi-ty, in which case the tax is also recognized directly in equity. Income tax is calculated on the taxable profits using the prevailing tax rates as of balance sheet in addition to tax adjustments for previous years.
Deferred income tax is provided on tem-porary differences arising between the tax bases of assets and liabilities and their car-rying amounts in the financial statements. Deferred tax is determined based on the method used to realize or settle the current values of these assets and liabilities, using the tax rates prevailing as of the balance sheet date.
Deferred tax assets are recognized when it is probable that the future taxable profit will be available against which the tempo-rary difference can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Reversal is sub-sequently permitted when there is a prob-able from its economic benefit limited to the extend reduced.
37
W. Employee benefits1-Pension obligations
The bank has a special social fund scheme (the Fund) that is not subject to the general law (law 79 for 1975) as it was established under law 64 for 1980 and this Fund has its own alternative independent articles of insurable rights (Pension / Bonuses / one payment compensation) and according to the ministry decree 94 for 1985. This fund covers only the bank employees in the Head Quarter and branches in the Arab Republic of Egypt.
The bank is committed to pay the Fund its monthly contributions, which calculat-ed according the Fund’s articles of asso-ciations and its amendments. The Fund is generally funded through monthly contri-butions payments and other resources as identified in the Fund’s article of associa-tions.
The liability in respect of the Fund is the present value of the defined benefit obliga-tion at the balance sheet date minus the fair value of plan assets, together with adjust-ments for actuarial gains/losses and past service cost. The defined benefit obligation is calculated annually by independent actu-aries using the projected unit credit meth-od. The present value of the defined benefit obligation is determined by the estimated future cash outflows using interest rates of government securities, which have terms to maturity approximating the terms of the re-lated liability.
The most basic assumptions used by the ac-tuary are as follows:
- Rates of death from the British Table A24-29ULT
- The rates of disability from the experience of social insurance in Egypt.
- Rates of salaries increases ranging from 5% to zero%.
- Method is used estimated additional unit in
the calculation of the commitments and the present value of subscriptions (Unit Project-ed Method).
2- Bonuses scheme
A liability for employees and managers ben-efits in the form of bonus is recognized in other credit balances and other liabilities according to the bank board of directors’ decisions in this respect and the payments should be determined before the time of is-suing the financial statements.
3- Employees share in profits
The bank pays a portion of the profits ex-pected to be distributed as a share of the bank’s personnel determined by the board under the Statute of the Bank, no liability is recognized for undistributed board of direc-tors profit sharing.
4- Board of directors members profit sharing
The bank pays percentage of its cash divi-dends as profit sharing to its Board of direc-tors’ members. Board of directors’ Profit sharing is recognized as a dividend distribu-tion through equity and as a liability when approved by the bank’s shareholders. No li-ability is recognized for profit sharing relating to undistributed profits.
X CapitalV/1- Cost of capital
Issue charges are presented, which is direct-ly related to the issuance of new shares or shares for the acquisition of an entity or the issuance of options against owners equity with the net proceeds after taxes.
V/2- Dividends Dividends deducted from equity in the year,
which the General assembly of the share-holders acknowledges these distributions. These distributions include the share of workers in the profits and remuneration of the board of directors as per regulation and law.
38
Comparatives Comparative figures are reclassified, where
necessary, to conform with changes in the current year’s presentation.
1. Financial Risk management The Bank’s activities expose it to a variety of
financial risks and those activities involve the analysis, evaluation, acceptance and man-agement of some degree of risk or combina-tion of risks. Taking risk is core to the finan-cial business, and the operational risks are an inevitable consequence of being in busi-ness. The Bank’s aim is therefore to achieve an appropriate balance between risk and re-turn and minimize potential adverse effects on The Bank’s financial performance.
The most important types of risk are credit risk, liquidity risk, market risk and other op-erational risk. Market risk includes currency risk, interest rate and other price risk.
The Bank’s risk management policies are de-signed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up to date infor-mation system. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products, and emerging best practice.
Risk management is carried out by a risk department under policies approved by the Board of Directors. financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as for-eign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments. In addition, credit risk management is respon-sible for the independent review of risk man-agement and the control environment.
A. Credit risk The Bank is exposed to credit risk, which is
the risk of suffering financial loss, should any
of The Bank’s customers, clients or market counterparties fail to fulfill their contractual obligations to The Bank. Credit risk is the most important risk for The Bank’s busi-ness. Management therefore carefully man-ages its exposure to credit risk. Credit risk arises mainly from lending activities which resulted in loans, facilities and investment activities which result in including the finan-cial assets in bank’s assets. Credit risk is available in the off-balance sheet financial assets such lending commitment. The credit risk management and control are centralized in a credit risk management team, which re-ports to the Board of Directors and head of each business unit regularly.
A.1 Credit risk measurement
Loans and advances to banks and cus-• tomers
In measuring credit risk of loans and ad-vances to banks and customers, The Bank reflects three components:
- Probability of default - by the client or coun-terparty on its contractual obligations.
- (Current exposures to the counterparty and its likely future developments, from which The Bank derive the exposure at default.
- Loss given default
The Bank assesses the probability of default of individual customers using internal rating tools tailored to the various categories of the counterparty. They have been developed in-ternally and combine statistical analysis with credit officer judgment. clients of The Bank are segmented into four rating classes. The rating scale which is as shown below reflects the range of default probabilities- defined for each rating class. This means that in prin-cipal, exposures might migrate between classes as the assessment of their probabil-ity of default changes. The rating tools are kept under review and upgraded as neces-sary. The Bank regularly valid date the per-formance of the rating and their predictive power with regard to default cases.
39
Bank’s internal ratings scale andmapping of external ratings
Description of the grade Bank’s rating
1-5Performing loans
6Regular watching
7Watch list
8-10Nonperforming loans
The above ratings are reviewed and ap-proved by the Central Bank of Egypt.
Exposure at default is based on the amounts The Bank expects to be outstanding at the time of default. For example, for a loan this is the face value. For a commitment, The Bank includes any amount already drawn plus the further amount that may have been drawn by the time of default, should it occur.
Loss given default or loss severity repre-sents the bank’s expectation of the extent of loss on a claim should default occur. It is expressed as a percentage of loss per unit of exposure and typically varies by type of counterparty, type and seniority of claim and availability of collateral or other credit miti-gation.
Debt securities and other bills
For debt securities, and other bills external rat-ing such as (Standard & Poor’s) rating or their equivalents are used by the bank for manag-ing of the credit risk exposures. In case such ratings are unavailable, internal rating meth-ods are used that are similar to those used for credit customers. The investment in those se-curities and bills are viewed as a way to gain a better credit quality mapping and maintain a readily available source to meet the funding requirements at the same time.
A.2 Risk limit control and mitigation policies
The Bank manages, limits and controls con-centrations of credit risk wherever they are identified − in particular, to individual coun-terparties, groups and to industries and countries.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographi-cal and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and by country are approved quarterly by the Board of Directors.
The exposure to any one borrower includ-ing banks and brokers is further restricted by sub-limits covering on- and off-balance sheet exposures, and daily delivery risk lim-its in relation to trading items such as for-ward foreign exchange contracts. Actual ex-posures against limits are monitored daily.
Exposure to credit risk is also managed through regular analysis of the ability of the borrowers and potential borrowers to meet interest and capital repayment obligation and by changing these lending limits when appropriate.
Some other specific control and mitigation measures are outlined below:
Collateral
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advances, which is common prac-tice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collat-eral types for loans and advances are:
- Mortgages over residential properties.
- Charges over business assets such as prem-ises, inventory.
- Charges over financial instruments such as debt securities and equities.
- Longer-term finance and lending to corpo-rate entities are generally secured; revolv-ing individual credit facilities are generally
40
unsecured. In addition, in order to minimise the credit loss The Bank will seek additional collateral from the counterparty as soon as impairment indicators are identified for the relevant individual loans and advances.
Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. Debt securities, treasury and other eligible bills are gener-ally unsecured, with the exception of asset-Backed Securities and similar instruments, which are secured by portfolios of financial instruments.
Derivatives
The Bank maintains strict control limits on net open derivative positions (ie,, the differ-ence between purchase and sale contracts) by both amount and term. The amount sub-ject to credit risk is limited to expected future net cash inflows of instruments, which in re-lation to derivatives are only a fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, to-gether with potential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where The Bank requires margin deposits from counterpar-ties
Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a corresponding receipt in cash, securities or equities. Daily settlement limits are es-tablished for each counterparty to cover the aggregate of all settlement risk arising from The Bank market’s transactions on any single day.
Master netting arrangements
The Bank further restricts its exposure to credit losses by entering into master net-ting arrangements with counterparties with
which it undertakes a significant volume of transactions. Master netting arrangements do not generally result in an offset of assets and liabilities shown in the balance sheet, as transactions are either usually settled on a gross basis. However, the credit risk associ-ated with favourable contracts is reduced by a master netting arrangement to the extent that if a default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Banks overall exposure to credit risk on derivative instruments subject to master netting arrangements can change substantially within a short year, as it is af-fected by each transaction subject to the ar-rangement.
Credit Related Commitments
The primary purpose of these instruments is to ensure that funds are available to a cus-tomer as required. Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which are written undertakings by The Bank on behalf of a customer authoris-ing a third party to draw drafts on The Bank up to a stipulated amount under specific terms and conditions – are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorisations to ex-tend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, The Bank is potentially exposed to loss in an amount equal to the total unused commit-ments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are con-tingent upon customers maintaining specific credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater de-gree of credit risk than shorter-term commit-ments.
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A.3 Impairment and provisioning policies
The internal systems for rating previously mentioned in disclosure (A.1) is focused more on credit quality mapping from the in-ception of the lending and investment activi-ties.In contrast impairment allowances are recognised for financial reporting purposes only for losses that have been incurred at the balance sheet date based on objective evidence of impairment due to the differ-ent methodologies applied the amount of incurred credit losses provided for in the fi-nancial statements are usually lower than the amount determined from the expected loss
model that is used for internal operational management and Central Bank of Egypt regulations purposes.
The impairment allowance shown in the bal-ance sheet date at year end is derived from each of the four internal rating grades How-ever, the largest majority of the impairment allowance comes from the lowest grading.
The table below shows the percentage of The Banks on balance sheet items, relating to loans and advances and the associated impairment allowance for each of The Bank internal rating categories:
The internal rating tool assists management to determine whether objective evidence of impairement exists under EAS 26, based on the following criteria set out by The Bank:
- Significant financial difficulties facing the counterparty;
- Breach of loan covenants as in case of de-fault;
- Expecting the bankruptcy of the counterpar-ty, liquidation, lawsuit, or finance reschedul-ing;
- Deterioration of the borrower’s competitive position;
- Offering exceptions or surrenders due to economic and legal reasons related to finan-cial difficulties encountered by the counter-
party not provided by The Bank in ordinary conditions;
- Deterioration in the value of collateral; and
- Downgrading below good loans grade.
The Bank policies require the review of indi-vidual financial assets that are above ma-teriality threshold at least annually, or more regularly when individual circumstances re-quire. Impairment allowance on individually assessed accounts are determined by an evaluation of the incurred loss at balance sheet on case-by –case basis. and are ap-plied to all individually significant accounts. The assessment normally encompasses col-lateral hold including re- confirmation of its enforceability and the anticipated receipts for that individual account.
31 December 2012 31 December 2011
Loans andfacilities
Loan loss provision
Loans andfacilities
Loan loss provision
Bank’s rating % % % %
Performing loans 70 18 79 19Regular watching 22 12 13 8Watch list 5 11 4 9Nonperforming loans 3 59 4 64
100 100 100 100
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Collectively assessed impairment allowanc-es are provided for portfolios of homogenous assets using the available historical experi-ence, experience judgment and statistical techniques
A.4 General Bank Risk Measurement Model
In addition to the four credit rating levels, management classifies categories that are more detailed so as to agree with the require-ments of the Central Bank of Egypt (CBE). Assets subject to credit risk are classified in these categories in accordance with regula-tions and detailed conditions that largely de-pend on information related to the client, his/her activity, financial position, and regularity of repayment.
The Bank calculates the required provisions for the impairment of the assets subject to credit risk, including commitments related to
credit, on the basis of ratios specified by the Central Bank of Egypt. In case the impair-ment loss provision required by the Central Bank of Egypt exceeds that required for the purpose of financial statement preparation in accordance with the Egyptian accounting standards, retained earnings is decreased to support the General Bank risk reserve with the amount of the increase. This reserve is periodically revised by increase and de-crease to reflect the amount of increase be-tween the two provisions. This reserve is not subject to distribution. Note number (34/A) shows the movement in The Bank Risk Re-serve during the financial year.
Following is a table of the worthiness levels for institutions in accordance with the inter-nal assessment bases compared to the Cen-tral Bank of Egypt assessment bases and the provision ratios required for the impair-ment of the assets exposed to credit risk.
CBE RatingCategorization
Rating description Provision %
Bank’s descriptionof the grade
1 Low Risk 0% Good2 Average Risk 1% Good3 Satisfactory Risk 1% Good4 Reasonable Risk 2% Good5 Acceptable Risk 2% Good6 Acceptable Risk Marginally 3% Standard monitoring7 Watch List 5% Special monitoring8 Substandard 20% non-performing9 Doubtful 50% non-performing
10 Bad Debt 100% non-performing
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A.5 Credit risk exposure before guarantees31 December
201231 December
2011
Balances with central Banks limited to reserve ratio 157,085 163,084Due from banks 1,966,029 1,954,866Treasury Bills 2,046,684 1,188,229Loans and advances to Banks 6,059 11,510Loans and advances to customers:Retail:- Overdrafts 160,923 130,532- Credit Cards 17,298 18,723- Personal Loans 86,674 88,949Corporate:- Overdrafts 1,027,259 1,184,889- Direct Loans 879,699 833,147- Syndicated loans 1,313,680 1,313,318- Other Loans 142,747 95,504Financial Derivatives 580 1,783Financial InvestmentsDebt Instruments 349,270 426,575Other assets 30,279 32,906Total 8,184,266 7,444,015
Credit risk exposures relating to off-balance sheet items are as follows :
31 December2012
31 December2011
Letters of guarantee 713,951 876,931Letter of credit 159,908 265,490Customers Acceptances 22,387 259,600
Total 896,246 1,402,021
The above table represents a worse case scenario of credit risk exposure to The Bank at
“31 December 2012”, without taking into account of any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on net carrying amounts presented on the Balance Sheet.
44
As shown above, 44 % of the total maximum exposure is derived from loans and advances to banks and customers; 4 % represents investments in debt Instruments.
Management is confident in its ability to continue to control and sustain minimal exposure
of credit risk to the bank resulting from both its loan and advances portfolio and debt
Instruments base on the following:
- 92 % of the loans and advances portfolio is categorized in the top two grades of the internal rating system.
- 92 % of the loans and advances portfolio are considered to be neither past due nor impaired.
- Loans and advances assessed on an in-dividual basis valued USD 128,277 thou-sand
- The bank has implemented more prudent processes when granting loans and ad-vances during the financial year ended in December. 31. 2012.
- More than 95 % of the investments in debt Instruments are represented in governmen-tal instruments.
A.6 Loans and AdvancesLoans and advances balances in terms of the credit worthiness:
31 December2012
31 December2011
Loans & Advances to
customers and Bankes
Loans & Advances to
customers and Bankes
Neither past due nor impaired 3,350,395 3,447,756Past due but not impaired 155,667 78,157Subject to impairment 128,277 150,659Total 3,634,339 3,676,572
Less: Unearned discount for commercial papers and Loans (32,611) (16,766)
Less: Loans Unearned revenues (2,338) (2,774)Less: allowance for Impairment (167,997) (156,924)Less: Interest in suspense (19,350) (19,317)Net 3,412,043 3,480,791
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Total impairment loss for loans and advances has amounted to 23,103 thousand USD of which 3,369 thousand USD of impairment on to individual loans, and the remaining 19,734 USD thousand represents impairment losses based on group basis of the credit portfolio. Note 21 provide additional information on the provision of impairment loss on loans and advances to banks and customers.
Loans and advances neither past due nor impaired
The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the bank.
31 December 2012
Retail Corporate
Grades Overdrafts Credit
cards
Personal
loans
Overdrafts Direct
loans
Syndicated
loans
other
loans
Total
loans &
advances
to
customer
Total
loans &
advances
to banks
Total
Loans &
advances
to
customers
& Banks
1. Good 160,923 13,784 68,706 725,170 578,974 836,681 103,013 2,487,251 - 2,487,251
2. Standard
monitoring- - - 227,911 181,963 261,053 32,376 703,303 - 703,303
3. Special
monitoring- - - 51,798 41,355 59,330 7,358 159,841 - 159,841
Total 160,923 13,784 68,706 1,004,879 802,292 1,157,064 142,747 3,350,395 - 3,350,395
31 December 2011
Retail Corporate
Grades Overdrafts Credit
cards
Personal
loans
Overdrafts Direct
loans
Syndicated
loans
other
loans
Total loans
&advances
to
customer
Total
loans &
advances
to banks
Total
Loans &
advances
to
customers
& Banks
1. Good 130,532 13,400 64,459 953,254 581,152 1,054,768 78,592 2,876,157 - 2,876,157
2. Standard
monitoring- - - 156,865 95,633 171,675 12,933 437,106 - 437,106
3. Special
monitoring- - - 48,266 29,425 52,823 3,979 134,493 - 134,493
Total 130,532 13,400 64,459 1,158,385 706,210 1,279,266 95,504 3,447,756 - 3,447,756
Loans that are backed by collateral are not considered impaired for the nonperforming category, taking into consideration the collectability of the collateral.
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Loans and advances past due but not impaired
These loans and advance are past due for less than 90 days, but not impaired unless the bank is otherwise informed. Loans and
advance past due but not impaired and the fair values of the related collateral are as follows:
31 December 2012
Retail Overdrafts Credit cards Personal Loans Total
Past due up to 30 days - 1,616 11,259 12,875
Past due 30-60 days - 578 1,831 2,409
Past due 60-90 days - 213 677 890
Total - 2,407 13,767 16,174
Corporate Overdrafts Direct loans Syndicated loans Other loans
Total
Past due up to 30 days 22,380 - 73,177 - 95,557
Past due 30-60 days - - 43,936 - 43,936
Past due 60-90 days - - - - -
Total 22,380 - 117,113 - 139,493
31 December 2011
Retail Overdrafts Credit cards Personal Loans Total
Past due up to 30 days - 1,739 12,891 14,630
Past due 30-60 days - 676 3,667 4,343
Past due 60-90 days - 293 1,968 2,261
Total - 2,708 18,526 21,234
Corporate Overdrafts Direct loans Syndicated loans
Other loans Total
Past due up to 30 days 26,504 19 - - 26,523
Past due 30-60 days - - - - -
Past due 60-90 days - 30,400 - - 30,400
Total 26,504 30,419 - - 56,923
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Loans and advances individually impaired
• Loans and advances to customers
The individually impaired loans and advances to customers before taking into consideration the cash flows from collateral held is 128,277 thousand USD at the end of December 2012 (31 December 2011:150,659 thousand USD).
The breakdown of the gross amount of individually impaired loans and advances by class, along with the fair value of related collateral held by the Group as security, are as follows:
31 December 2012
Retail Corporate Total
Over-drafts
Credit cards
Personal Loans
Over-drafts
Direct loans
Syndicat-ed loans
banks loans
Individually impaired loans - 1,107 4,201 - 77,407 39,503 6,059 128,277
31 December 2011
Retail Corporate Total
Over-drafts
Credit cards
Personal Loans
Over-drafts
Direct loans
Syndicated loans
banks loans
Individually impaired loans - 2,615 5,964 - 96,518 34,052 11,510 150,659
Loans and advances renegotiated
Restructuring activities include extended payment arrangements, approved external management plans, modification and deferral of payments. Restructuring policies and practices are based on indicators or criteria that, in the judgment of local management, indicate that payment will most likely continue.
These policies are kept under continuous review. Restructuring is most commonly applied to term loans – in particular, customer finance loan. Total renegotiated loans results amounted to 23,871 thousand USD at the end of December 2012 (31 December 2011: 28,540 thousand USD).
31 December2012
31 December2011
Corporate
Syndicated Loans 17,261 17,543
Direct Loans 6,455 10,712
Retail
Credit Card 1 3
Personal loans 154 282
Total 23,871 28,540
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A.7 Debt securities and treasury bills
The table below presents and analysis of debt securities according to the rating agencies at year end based on Standard & poor assessment or equivalent at 31 December 2012:
31 December 2012
Treasury Bills Investment in Securities Total
A- to A+ - 62,073 62,073BB to BBB 2,046,684 272,538 2,319,222Less than BB - 9,774 9,774
Unquoted - 4,885 4,885
Total 2,046,684 349,270 2,395,954
31 December 2011
Treasury Bills Investment in Securities Total
A- to A+ - 93,295 93,295
BB to BBB 1,188,229 326,440 1,514,669
Unquoted - 6,840 6,840
Total 1,188,229 426,575 1,614,804
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A.9 Concentration of risks of financial assets with credit risk exposure
Geographical sectors•
The following table breaks down the bank’s credit exposure at their carrying amounts as categorised by geographical region as of 31 December 2012. For this table, the bank has allocated exposures to regions based on the country of domicile of its clients.
Arab Republic of Egypt Other countries
Cairo Alex& Delta
Upper Egypt
Sinai, Canal towns
Total Gulf countries
Other countries
Total
Balances with central bank limited to reserve ratio 125,982 - - - 125,982 30,997 106 157,085
Due from banks 1,622,613 - - - 1,622,613 340,493 2,923 1,966,029Treasury bills and other govermental papers
2,042,949 - - - 2,042,949 - 3,735 2,046,684
Loans & advances to bank 992 - - - 992 5,067 - 6,059Loans and advances to customers : Retail:- Overdrafts 133,001 18,506 563 3,004 155,074 5,849 - 160,923- Credit cards 13,821 2,481 88 902 17,292 6 - 17,298- Personal Loans 58,480 18,239 605 7,409 84,733 1,941 - 86,674Corporate- Overdrafts 676,200 225,557 118 1 901,876 107,374 18,009 1,027,259- Direct loans 833,321 35,607 - - 868,928 10,771 - 879,699
- Syndicated loans 938,716 113,630 - - 1,052,346 261,334 - 1,313,680- Other loans 142,103 - - - 142,103 644 - 142,747- Derivatives 580 - - - 580 - - 580
Investment securities - Debt instruments 328,237 - - - 328,237 14,659 6,374 349,270
- Other assets 26,530 2,053 3 51 28,637 1,394 248 30,279
As at 31 December 2012 6,943,525 416,073 1,377 11,367 7,372,342 780,529 31,395 8,184,266
As at 31 December 2011 6,487,694 400,673 1,731 10,490 6,900,588 514,351 29,076 7,444,015
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Industry sectors
The following table breaks down the bank’s credit exposure at carrying categorized by the industry sectors of the Bank’s clients.
TotalOthersIndividualGovernmentConstructionsFinancial
InstitutionsServiceCommercialAgricultureManufacturing31 December 2012
157,085----157,085----
Balances with central bank limited to the reserve
1,966,029----1,966,029----Due from banks
2,046,684--2,046,684------Treasury bills
6,059----6,059----Loans and
advances to banks
Loans and
advances to
customers:Loans to
Individuals:
160,923-160,923-------Overdrafts
17,298-17,298-------Credit cards
86,674-86,674-------Personal Loans
Loans to
Corporate:
1,027,2594,215-18,41342,18546,213100,828212,87485,817516,714Overdrafts
879,69940,023-101,652-26,568345,78451,20830,017284,447Direct Loans
1,313,680--292,414107,57466,778269,00413861,327516,445Syndicated Loans
142,747142,020----727---Other loans
580----580----
Financial
instruments
derivatives
Investment
securities
349,270----72,438275,155--1,677Debt instruments
30,27930,279--------Other assets
8,184,266216,537264,8952,459,163149,7592,341,750991,498264,220177,1611,319,283
As at 31
December 2012
7,444,015458,798238,2041,634,107287,3532,311,0661,045,374216,575186,4761,066,062
As at 31
December 2011
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B. Market risk
B.1 Interest rate f luctuation risk
Interest rate risk is controlled by asset and liability committee (ALCO)
Financial assets by foreign currency
The interest rate is determined on the basis of floating rate therefore interest rate fluctuation is mitigated on foreign currency increasing or decreasing taking into consideration hedging price fluctuation risk resorting to financial derivatives (Interest rate swap).
Financial assets in local currency
Fixed income financial assets
The risk of fixed income assets is coverd by issuing liability product med and long term to meet fixed rate income risk.
Floating rate financial assets
Variable cost is free risk free due to their compatibility with the prices prevailing at the grant.
Foreign exchange f luctuation risk
Monitor foreign currency instantly by responsible department to keep the allowed limits with currency position, whether by the central bank of Egypt or Bank board of directors. The Bank does not open position on foreign currency except on clients requirement.
B.2 Foreign exchange riskThe bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Board sets limits on the level of exposure by level of currency and in aggregate for both overnight and intra-day positions which are monitored daily. The table below summarises the bank’s exposure to foreign currency exchange rate risk.
Included in the table are the bank’s financial instruments at carrying amounts, categorised by currency:
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Foreign currency risk concentration on financial instruments
31 December 2012 USD EGP EUR GBP OTHER TOTAL
Assets
Cash and balances with central banks 19,780 179,671 5,243 1,713 35,486 241,893
Due from banks 1,170,367 314,266 196,425 76,107 208,864 1,966,029
Treasury bills 956,447 925,055 161,447 - 3,735 2,046,684
Loans and advances to banks - - - - - -
Loans and advances to customers 1,418,949 1,870,687 17,738 730 103,939 3,412,043
Financial derivatives 580 - - - - 580
Investment securities:
Available for sale 63,818 224,288 954 - (6,315) 282,745
Held to maturity 48,448 42,533 - - 21,033 112,014
Other financial assets 131,917 23,087 498,327 (2,625) (515,650) 135,056
Total financial assets 3,810,306 3,579,587 880,134 75,925 (148,908) 8,197,044
Financial liabilities
Due to banks 393,953 20,515 189,354 47,281 75,864 726,967
Customers deposits 2,231,493 3,321,582 193,411 31,473 192,879 5,970,838
Financial derivatives 401 - - - - 401
Long-term loans - 79,126 - - - 79,126
Subordinated deposit 300,000 - - - - 300,000
Other financial liability 64,163 156,004 839 91 7,373 228,470
Total financial liabilities 2,990,010 3,577,227 383,604 78,845 276,116 7,305,802Net on balance sheet financial position 820,296 2,360 496,530 (2,920) (425,024) 891,242
Credit commitments 359,545 192,742 145,509 634 197,816 896,246
As at 31 December 2011
Total financial assets 3,496,286 3,428,018 286,110 44,770 181,321 7,436,505
Total financial liabilities 2,716,263 3,416,307 285,883 44,832 202,421 6,665,706Net on balance sheet financial position
780,023 11,711 227 (62) (21,100) 770,799
Credit commitments 748,263 218,300 213,235 1,431 220,792 1,402,021
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31 December 2012
Up to 1 month
1-3 months
3-12 Months
1-5years
Over 5 years
Non-interest bearing
Total
AssetsCash and balances with central bank - - - - - 241,893 241,893
Due from banks 1,130,988 408,283 - - - 426,758 1,966,029
Treasury bills 399,247 401,107 1,246,330 - - - 2,046,684
Loans and advances to banks - - - - - - -Loans and advances to customers 708,902 44,730 430,389 1,600,283 627,739 - 3,412,043
Financial derivatives 354 65 161 - - - 580
Investment securities
Available for sale 78 - 65,930 157,508 28,393 30,836 282,745
Held to maturity 27,871 - 63,107 6,383 - 14,653 112,014
Other assets - - - - - 97,874 97,874
Total financial assets 2,267,440 854,185 1,805,917 1,764,174 656,132 812,014 8,159,862
Financial liabilities
Due to banks 384,427 102,016 18,144 - - 222,380 726,967
Customers deposits 2,464,927 702,483 215,231 841,686 780,309 966,202 5,970,838
Financial derivatives 343 58 - - - - 401
Other loans - - - 79,126 - - 79,126
Subordinated deposit - - - - 300,000 - 300,000
Other Liabilities - - - - - 228,470 228,470
Total financial liabilities 2,849,697 804,557 233,375 920,812 1,080,309 1,417,052 7,305,802
Total interest repricing gap (582,257) 49,628 1,572,542 843,362 (424,177) (605,038) 854,060
B.3 Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instru-ment will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Inter-est margins may increase because of such changes but may reduce profits in the event that unexpected movements arise.
The Board sets limits on the level of mis-match of interest rate repricing and value at risk that may be undertaken, which is moni-tored daily by the assets and liabilities man-agement department.
The tables below summarise the bank’s ex-posure to the interest rate fluctuations risk that include carrying value of the financial in-struments categorized based on the repric-ing dates or the maturity date – whichever is earlier.
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C. Liquidity risk
Liquidity risk is the risk that the bank is un-able to meet its obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn.
The consequence may be the failure to meet obligation to repay depositors and fulfil com-mitments to lend.
31 December 2012
Up to 1 month
1-3 months 3-12 Months
1-5years
Over 5 years
Total
Assets
Cash and balances with central bank 241,893 - - - - 241,893
Due from banks 1,557,746 408,283 - - - 1,966,029
Treasury bills 399,247 401,107 1,246,330 - - 2,046,684
Loans and advances to banks - - - - - -
Loans and advances to customers 708,902 44,730 430,389 1,600,283 627,739 3,412,043
Financial derivatives 354 65 161 - - 580
Investment securities
Available for sale 30914 - 65,930 157,508 28,393 282,745
Held to maturity 42,524 - 63,107 6,383 - 112,014
Other assets 97,874 - - - - 97,874
Total financial assets 3,079,454 854,185 1,805,917 1,764,174 656,132 8,159,862
Financial liabilities
Due to banks 606,807 102,016 18,144 - - 726,967
Customers deposits 3,431,129 702,483 215,231 841,686 780,309 5,970,838
Financial derivatives 343 58 - - - 401
Other loans - - - 79,126 - 79,126
Subordinated deposit - - - - 300,000 300,000
Other Liabilities 228,470 - - - - 228,470
Total financial liabilities 4,266,749 804,557 233,375 920,812 1,080,309 7,305,802
Total liquidity gap (1,187,295) 49,628 1,572,542 843,362 (424,177) 854,060
55
As at 31 December 2012 Up to 1 month
1-3 months
3-12 months
Total
Derivatives held for trading
Foreign exchange derivatives
− Outflow - (522) - (522)
− Inflow - 526 - 526
Swap derivatives
− Outflow (43,333) (19,995) (3,803) (67,131)
− Inflow 43,344 19,999 3,959 67,302
Total outflow (43,333) (20,517) (3,803) (67,653)
Total inflow 43,344 20,525 3,959 67,828
Liquidity risk management process
The bank liquidity management process, as carried out within the bank and monitored by assets and liability committee, includes:
- Day-to-day funding, managed by monitor-ing future cash flows to ensure that require-ments can be met. This includes replenish-ment of funds as they mature or borrowed by customers. The bank maintains an active presence in global money markets to enable this to happen;
- Maintaining a portfolio of highly marketable assets that can easily be liquidated as pro-tection against any unforeseen interruption to cash flow;
- Monitoring the liquidity ratios against inter-nal and regulatory requirements by the Cen-tral Bank of Egypt.
- Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key years for liquidity manage-ment. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected col-lection date of the financial assets.
Assets and Liability management also mon-itors unmatched medium-term assets, the level and type of undrawn lending commit-ments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.
Funding approach
Sources of liquidity are regularly reviewed by a separate team in bank’s Treasury to main-tain a wide diversification by currency, geog-raphy, provider, product and term.
Derivatives
a) Derivatives settled on a gross basis
The bank’s derivatives that will be settled on a gross basis include:
- Foreign exchange derivatives: currency for-ward, currency swaps; and
The table below analyzes the bank’s deriva-tive financial instruments that will be settled on a gross basis into relevant maturity group-ings based on the remaining year at the date of the statement of financial position to the contractual maturity date. The amounts dis-closed in the table are the contractual undis-counted cash flows.
56
Off-balance sheet items
As at 31 December 2012 As at 31 December 2011
No later than 1 year No later than 1 year
Letter of guarantee 713,951 876,931
Letter of credit (Import &export) 159,908 265,490
Acceptance 22,387 259,600
Total 896,246 1,402,021
D. Fair value of financial assets and liabilities
D.1 Financial instruments measured at fair value using valuation techniques
The change in the assessed fair value using the valuation techniques through the finan-cial year is nill on 31 December 2012 against the same year
D.2 Financial instruments not measured at fair value
The table below summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the group’s consolidated statement of financial position at their fair value:
Book Value Fair Value
31 December 2012
31 December2011
31 December 2012
31 December2011
Financial AssetsDue from banks 1,966,029 1,954,866 1,966,029 1,954,866Loans to banks 6,059 11,510 6,059 11,510Loans to customers
- Individual 264,895 238,204 264,895 238,204
- corporate entities 3,363,385 3,426,858 3,363,385 3,426,858
Financial investements- available for sale 16,653 16,694 16,653 16,694- held to maturity 112,014 116,752 114,434 116,335
Financial liabilitiesDue to banks 726,967 591,495 726,967 591,495Customers deposits: - Individual 2,646,572 2,368,685 2,646,572 2,368,685- corporate entities 3,324,266 3,126,355 3,324,266 3,126,355Other loan 79,126 82,893 79,126 82,893
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Due from BanksThe fair value of due from banks represents the book value, where all balances are current balances matured during the year.
Loans and advances to customers
Loans and advances are net of charges for impairment loan losses. Loans and advances to customers are divided into current and noncurrent balances. The book value of the current balances is considered the fair value.
Investment securitiesInvestment securities disclosed in the table above comprise only those financial assets classified as held to maturity.The fair value for loans and receivables and held-to-maturity assets is based on market prices or broker/dealer price quotations. Where this information is not available, fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.
Due to BanksThe fair value of due to banks represents the book value, where all balances are current balances matured during the year
Deposits due to customers:The customer deposits are divided into current and non current balances. The book value of the current balances is considered the fair value.
Other loans:The other loans are divided into current and non current balances. The book value of the current balances is considered the fair value.
E. Capital managementThe bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position, are:
- To comply with the capital requirements set by Arab Republic of Egypt and countries in which Bank branches operate.
- To safeguard the bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and ben-efits for other stakeholders.
- To maintain a strong capital base to support the development of its business.
Capital adequacy and the use of regulatory capital (Central Bank of Egypt) are monitored daily by the bank’s management, employing techniques based on the guidelines developed by the Basel Committee and the European Community Directives, as implemented by the Central Bank of Egypt (CBE) or supervisory purposes, the required information is filed with the Authority on a quarterly basis.
The CBE requires the bank to:
1) The bank maintains a ratio of 10% or more of total regulatory capital to its risk-weighted assets and contingent liabilities.
Bank’s branches operating outside Arab Re-public of Egypt subject to banking supervi-sion rules in countries which they operate.
The Central Bank of Egypt approved on 18 December 2012 at the instructions for the minimum standard for the standard capital adequacy in line with the implementation Basel (2) and under these instructions Bank must abide by such instructions as of De-cember 2012 can set a transition period for a maximum of six monthsduring which the banks to provide data in accordance with the previous issuance controls on capital ad-equacy standard along with the new controls in parallel.
The capital adequacy ratio numerator com-prises two tiers:
First: According to the above regulations issued on capital adequacy standard
Tier 1 capital:
Share capital (net of any book values of the treasury shares), general bank reserve, statu-
58
tory reserve, retained earnings and reserves created by appropriations of retained earn-ings. The forwarded losses and the book value of goodwill is deducted in arriving at Tier 1 capital; and
Tier 2 capital:
Qualifying subordinated loan capital, con-sists of general risk reserve provision based on the credit worthiness issued by the Cen-tral Bank of Egypt with no more of 1.25% of total assets and contingent liabilities with risks weight, loans/subordinated deposits with maturity of more than 5 years (with am-ortizing its value with a percentage of 20% for each year for the last five years before its maturity) and 45% from the increase of the fair value and the book value for the available for sale and held to maturity and in associate and subsidiaries companies.
When calculating the numerator of the capi-tal adequacy ratio, Qualifying subordinated capital must not exceed the share capital and subordinated loans (deposits) must not exceed half of the share capital
The risk weighted assets are between zero and 100% classified according to the nature of the debit party for each assets which reflect the assets related credit risk taking into consideration the cash guaran-tees. The same treatment is used for the off balance sheet amounts after perform-ing the adjustments to reflect the contin-gent nature and the expected losses for these amounts.
The bank complied with local capital require-ments and with the countries requirements where outside branches were operating in end of this year.
The table below summarizes the compo-nents of the main and additional capital at the end of this year.
Second: According to the new regula-tions issued on December 18, 2012
Tier 1 capital:
Tier 1 capital consists of two parts Go-ing Concern Capital and Additional Going Concern.
Tier 2 capital:
Gone Concern Capital consists of
- 45% of the increase in the fair value of the book value of financial investments (fair value reserve if it is positive, financial investments held to maturity, investments in subsidiaries and associates).
- 45% of the special reserve.
- 45% of the reserve Foreign currency transla-tion differences positive.
- Hybrid financial instruments.
- Loans (deposits) support.
- Provision for impairment losses for loans and advances and liabilities regular (must not exceed 1.25% of te total credit risk of the assets and liabilities of regular risk - weighted, must also be dedicated impair-ment losses for loans and credit facilities and contingent liabilities irregular enough to meet the liabilities component for which LCA).
Deducted 50% of the Tier 1 and 50% of the Tier 2:
- Investments in non-financial companies - each company alone, which amount to 15% or more of continuous core capital of the bank by regulatory amendments.
- The total value of the bank’s investments in non-financial companies - each individual company and that at least 15% of the basic capital continyed by regulatory amendments provided that exceed those investments combined for 60% of the core capital con-tinued by regulatory amendments
- Governor Securitization.
- Regarding the value of the assets that de-volved to the Bank settlement of debts a general banking risks reserve.
When calculating the total extension of capital adequacy standard, shall not ex-ceed loans (deposits) support for 50% the first slide arter the disposals.
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The shrine consists capital adequacy stan-dard from
1- Credit Risk
2- market Risk
3- Operational Risk
The assets are weighted risk weights rang-ing from zero to 100% classified according to the nature of the debtor eack asset to re-flect the credit risk associated with it, and
taking cash collateral account.
The treatment is used for extra-budgetary funds after making adjustments to reflect the episodic nature of the potential losses of those amounts.
The Bank has committed to all local capi-tal requirements in the countries in which they operate foreign branches over the past year.
The following tables summarize the components of each of the components of the first Tier 1 and the Tier 2 and the capital adequacy ratio:
First: According to the above regulations issued on capital adequacy standard
31 December2012
31 December2011
Tier 1 capitalShare capital (net of the treasury shares) 100,000 100,000General Reserve 10,000 10,000Legal Reserve 98,196 86,125Other Reserves 14,112 1,191Retained earnings 524,788 444,266
Total qualifying Tier 1 capital 747,096 641,582
Tier 2 capital
Equivalent general risk provision 70,866 66,462
Subordinated deposits 300,000 300,000
45% of the Increase in the fair value of financial investments available for sale which held to maturity and in subsidiaries and associates - -
Total qualifying Tier 2 capital 370,866 366,462
Total Capital 1,117,962 1,008,044
Risk-weighted assets and contingent liabilities
On-balance sheet 5,303,503 4,636,599
Contingent liabilities 365,750 680,343
Total risk-weighted assets and contingent liabilities 5,669,253 5,316,942
Capital Adequacy Ratio % 19.72% 18.96%
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Second: According to the new regulations issued on December 18, 2012
31 December2012
Tier 1 Going Concern Capital (1)Share capital (net of the treasury shares) 100,000Reserves 109,778Retained earnings 524,788Total Deducted from the continuous core capital (3,536)
Total Common Equity capital 731,030
Tier 2 (Going - Concern Capital) (2)
45% of the value of the Special Reserve 6,112
Subordinated deposits 300,000
Provision for impairment losses for performing loans and advances and contingent liabilities 70,969
Tier Going - Concern Capital 377,081
Total Capital base after deducted (1+2) 1,108,111
Total Credit Risk, Market Risk and Operational Risk
Credit Risk 5,677,702
Market Risk 190,380
Operational Risk 381,200
Total CreditRisk, Market Risk and Operational Risk 6,249,282
Capital Adequacy Ratio % 17.73%
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4. Critical accounting estimates and judgmentsThe bank makes estimates and assumptions that affect the presented amounts of assets and liabilities within the next financial year. Estimates and judgments are evaluated on a continuous basis, and are based on past ex-perience and other factors, including expec-tations with regard to future events which believed to be reasonable during the current conditions and available information.
A. Impairment losses on loans and advancesThe bank reviews its loan portfolios to as-sess impairment at least on a quarterly basis. In determining whether an impairment loss should be recorded in the income statement, the bank makes judgments as to whether there is any observable data indicating an impairment trigger followed by measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with that portfolio. This evi-dence may include observable data indicat-ing that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the bank. Management uses estimates based on his-torical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the port-folio when scheduling its future cash flows. The method and assumptions used to es-timate the amount and the timing of future cash flows are reviewed on a regular basis in order to reduce any difference between the expected and the actual loss based on experience
B. Impairment of available-for-sale equity investmentsThe bank determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This deter-mination of whether they are significant or prolonged requires judgment. In making this
judgment, the bank evaluates among other factors, the volatility in share price. In addi-tion, objective evidence of impairment may be deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.
C. Fair value of DerivativesThe fair value of financial instruments where no active market exists or where quoted prices are not otherwise available are de-termined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar fi-nancial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate as-sumptions. Where valuation techniques (for example, models) are used to determine fair values, they are validated and yearically re-viewed by qualified personnel independent of those that sourced them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only ob-servable data; however, areas such as credit risk (both own credit risk and counterparty risk), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could af-fect the reported fair value of financial instru-ments.
D. Held-to-maturity investmentsThe bank classifies some non-derivative fi-nancial assets with fixed or determinable payments and fixed maturity as held to ma-turity. This classification requires significant judgment. In making this judgment, the bank evaluates its intention and ability to hold such investments to maturity. If the bank were to fail to keep these investments to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – the bank is required to
62
reclassify the entire category as available for sale. Accordingly, the investments would be measured at fair value instead of amortised cost, in addition to hanging the classification of any investments in this category.
If investment classification suspended as held to maturity the book value will be de-creased by 417 thousand USD in order to reach fair value and that by recording a con-tra entry in fair value reserve in owner’s eq-uity.
E. Income taxesThe bank is subject to income taxes in nu-merous jurisdictions. Significant estimates are required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The bank recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially record-ed, such differences will impact the income tax and deferred tax provisions in the year where the differences exist.
5. Segment analysisSegment activity involves operating ac-tivities, assets used in providing banking services, and risk and return management
associated with this activity, which might differ from other activities. Segment analy-sis for the banking operations involves the following:
Large, medium, and small enterprises:
includes current accounts, deposits, over-draft accounts, loans, credit facilities, and financial derivatives activities.
Investment:
includes mergers, purchase of investments and financing the restructuring of companies and financial instruments
Retail:
includes current account, saving accounts, deposits, credit card, personal loans, and real estate loans activities,
Other activities:
includes other banking operations, such money management
Transactions among segments are per-formed according to the bank’s operating cycle, and include operating assets and lia-bilities as presented in the bank’s statement of financial position.
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A. Segment reporting analysis
At 31 December 2012 Corporate banking
Retail Investment banking
Wealth management
Total
Revenues and expenses according to the sector activityRevenues of the sector activity 342,493 139,776 103,055 6,109 591,433
Expenses of the sector (142,303) (124,437) (54,888) (6,078) (327,706)
Result of the sector operations 200,190 15,339 48,167 31 263,727
Uncategorized expenses - - - - (79,647)
Profit before tax 184,080
Taxes (40,001)
Net profit 144,079
Assets and Liabilities according to the sector activityAssets of the sector activity 3,163,424 2,153,679 2,558,608 5,274 7,880,985Uncategorized assets - - - - 316,059Total assets 8,197,044Liabilities of the sector activity 3,495,547 1,992,759 1,232,309 101,827 6,822,442Uncategorized liabilities - - - - 1,374,602Total Liabilities 8,197,044
At 31 December 2011
Corporate banking
Retail Investment banking
Wealth management
Total
Revenues and expenses according to the sector activityRevenues of the sector activity 317,897 118,850 92,310 6,026 535,083Expenses of the sector (126,623) (105,668) (63,283) (6,229) (301,803)Result of the sector operations 191,274 13,182 29,027 (203) 233,280Uncategorized expenses (79,245)Profit before tax 154,035
Taxes (33,328)
Net profit 120,707
Assets and Liabilities according to the sector activityAssets of the sector activity 3,338,366 273,345 3,535,403 5,968 7,153,082Uncategorized assets - - - - 283,423Total assets 7,436,505Liabilities of the sector activity 3,263,170 225,503 2,573,238 99,499 6,161,410Uncategorized liabilities - - - - 504,296Total Liabilities 6,665,706
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B. Geographical sector analysis
At 31 December 2012
Cairo Alex Delta Upper Egypt Other Total Gulf Other countries
Total
Revenues & Expenses according to the geographical sectorsRevenues of the Geographical sectors 522,693 38,145 279 1,971 563,088 27,095 787 590,970Expenses of the Geographical sectors (370,853) (25,936) (399) (2,284) (399,472) (7,077) (341) (406,890)Result of sector operations 151,840 12,209 (120) (313) 163,616 20,018 446 184,080
Profit before tax 151,840 12,209 (120) (313) 163,616 20,018 446 184,080Tax - - - - - - - (40,001)Profit of the year 144,079Assets & liabilities according to the geographical sectorsGeographical sectors assets 6,576,587 839,025 16,010 116,303 7,547,925 639,909 9,210 8,197,044
Total assets 6,576,587 839,025 16,010 116,303 7,547,925 639,909 9,210 8,197,044Geographical sectors liabilities 6,576,587 839,025 16,010 116,303 7,547,925 639,909 9,210 8,197,044
Total liabilities 6,576,587 839,025 16,010 116,303 7,547,925 639,909 9,210 8,197,044
At 31 December 2011
Cairo Alex Delta Upper Egypt Other Total Gulf Other countries
Total
Revenues & Expenses according to the geographical sectorsRevenues of the Geographical sectors 453,862 49,654 837 6,245 510,598 21,314 1,140 533,052Expenses of the Geographical sectors (324,437) (41,097) (1,093) (6,604) (373,231) (5,199) (587) (379,017)Result of sector operations 129,425 8,557 (256) (359) 137,367 16,115 553 154,035
Profit before tax 134,658 8,557 (256) (359) 137,367 16,115 553 154,035Tax - - - - - - - (33,328)Profit of the year 120,707
Assets & liabilities according to the geographical sectorsGeographical sectors assets 6,499,189 416,247 2,725 15,900 6,934,061 484,820 17,624 7,436,505
Total assets 6,499,189 416,247 2,725 15,900 6,934,061 484,820 17,624 7,436,505Geographical sectors liabilities 6,499,189 416,247 2,725 15,900 6,934,061 484,820 17,624 7,436,505
Total liabilities 6,499,189 416,247 2,725 15,900 6,934,061 484,820 17,624 7,436,505
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6. net interest income31 December
201231 December
2011
Interest on loans and similar incomeTo banks - 24To customers 304,248 282,918Treasury bills and bonds 169,764 144,268Deposits and current accounts 31,361 23,724Investments in held to maturity and available for sale debt instruments
4,921 3,457
510,294 454,391
Interest expenses and similar chargesDeposits and current accounts:- To banks (3,207) (9,601)- To customers (285,760) (274,257)- Other loans (8,165) (5,061)- Others (subordinated deposit) (3,863) (2,833)
(300,995) (291,752)
Net interest income 209,299 162,639
7. net fee and commission income31 December
201231 December
2011
Fees and Commissions income :Credit related fees and commissions 39,441 41,466Funding institutions services fees 7,281 7,492Trust and other fiduciary fees 2,830 2,882
Other fees 10,333 9,319
Total 59,885 61,159Fees and Commissions expense :Other fees and commissions paid (2,425) (1,895)
(2,425) (1,895)Net fees and Commissions 57,460 59,264
8. Dividend Income31 December
201231 December
2011
Trading investments - 119Available for sale investments 2,056 1,301Subsidiaries and associates investments
97 71
2,153 1,491
66
9. net trading income
31 December 2012
31 December 2011
Foreign exchange:Gains from foreign currencies transactions 14,741 15,289(Loss) / Gain on revaluation of forward rate contracts 1,180 1,021Gain / (Loss) on revaluation of currency swap contracts 317 57
16,238 16,367
10. Impairment charge for credit losses
31 December 2012
31 December 2011
Loans and advances impairment (note. 21) (23,103) (5,444)
(23,103) (5,444)
11. Administrative expenses
31 December 2102
31 December 2011
Wages and salaries (31,477) (28,911)Social insurance costs, medical & other expenses (8,263) (7,144)Merchandise supplies (3,432) (3,280)Services (14,025) (14,725)Stamp duty taxes (8,328) (10,131)Deperciation and amortization (6,663) (7,389)
(72,188) (71,580)
12. Other Operating expenses
31 December 2012
31 December 2011
Gain / (loss) on revaluation of monetary assets & liabilities balances in foreign currencies other than trading
(325) (579)
Other operating expenses (7,422) (5,797)Other provision expense (433) (1,970)
(8,180) (8,346)
67
13. Income tax expense
31 December 2012
31 December 2011
Current taxes-Local Branches (36,031) (26,645)Current taxes-Foreign Branches (4,335) (3,051)Deferred tax 365 (3,632)
(40,001) (33,328)
Current income tax on profit before income tax differs from the theoretically expected current income tax when applying the average tax rate applicable to the bank profits realized from local and overseas units as follows:
31 December 2012
31 December 2011
Net accounting profit before taxes 184,080 154,035The tax rate according to the average tax rates of local and Foreign branches 24.40% 25%Income tax computed based on the average tax rates of local and Foreign branches on the profit in several tax circuits 44,916 38,509
Add/ (Deduct)Revenues not subject to taxation (17,330) (17,179)Expenses not deducted for tax purposes 14,339 8,541Defferd tax assets not recognized before (1,924) -Defferd tax reversal - 3,457
Income tax 40,001 33,328
Actual tax rate 21.70% 20.93%
14. Earnings per share
31 December 2012
31 December 2011
Net profit for the year 144,079 120,707
Distributions of employees (7,500) (6,200)
Board of directors remuneration (375) (358)
Total 136,204 114,149
Weighted average number of shares 20,000 20,000
Earnings per share (Dollar / share) 6.81 5.71
68
15. Cash and due from the Central Banks
31 December 2012
31 December 2011
Cash in hand 84,808 48,949
Balances with the Central Banks limited to the reserve ratio 157,085 163,084
241,893 212,033
Non-interest bearing balances 241,893 212,033241,893 212,033
16. Due from banks
31 December 2012
31 December 2011
Current accounts 424,737 51,898
Placements with other banks 1,541,292 1,902,968
1,966,029 1,954,866
Central banks 335,892 201,088Local banks 456,646 318,109Foreign banks 1,173,491 1,435,669
1,966,029 1,954,866
Non-interest bearing balances 426,758 51,898Variable interest bearing balances 1,539,271 1,902,968
1,966,029 1,954,866Current balance 1,966,029 1,954,866
Due from central bank includes other debit balances amounting $ 38 million U.S dollars (against $ 22 U.S Dollars million as of 31 December 2011) value of bonds that matured and not replaces by other bonds to complete collateral value and that against credit linked note agreement (note 18)
69
17. Treasury bill
31 December 2012
31 December 2011
Treasury bills 2,046,684 1,303,726Treasury bills with a commitment to repurchase
- (115,497)
Net treasury bills 2,046,684 1,188,229
Treasury bills issued from central bank of Egypt 2,042,949 1,184,962
Treasury bills issued from central bank of Lebanon 3,735 3,267
Net treasury bills 2,046,684 1,188,229
Treasury bills represent the following according to maturities:Treasury bills, maturity 91 days 132,394 21,316
Treasury bills, maturity 182 days 235,433 111,528
Treasury bills, maturity 273 days 227,568 371,077
Treasury bills, maturity 350 days - 19,894
Treasury bills, maturity 362 days - 200,000
Treasury bills, maturity 363 days* 739,385 142,700
Treasury bills, maturity 364 days* 775,884 483,334
Treasury bills, maturity 371 days - 11,771
Treasury bills, maturity 728 days - 346
Total nominal value 2,110,664 1,361,966
Unearned interest (63,980) (58,240)
Total (1) 2,046,684 1,303,726Treasury bills with a commitment to repurchaseIn 1 week
- (115,497)
Total (2) - (115,497)
Total (1+2) 2,046,684 1,188,229
* U.S dollars Euro treasury bonds.
70
18. Financial investments
31 December 2012
31 December 2011
Available for sale investmentsDebt instruments
Listed at fair value 251,909 320,185
Equity securities:
Listed Equity securities – at fair value 14,183 11,195
Unlisted Equity securities at cost 16,653 16,694
Total available for sale Investments (1) 282,745 348,074
Held to maturity investment
Debt securities – at amortized cost
Listed Debt instruments – at amortized cost 97,361 106,390
Mutual fund Certificates - according to law requirements 14,653 10,362
Total held to maturity investments (2) 112,014 116,752
Total Financial investments(1+2) 394,759 464,826
Current Balances 156,986 70,413
Non-current balances 237,773 394,413
394,759 464,826
Debt instruments with fixed interest rates 247,503 287,181
Debt instruments with variable interest rates 101,767 139,394
349,270 426,575
Debt instrument of financial investment avail-able for sale includes $ 5 million U.S dollars in which it’s custody are pledged with one of the higly rated financial instuition, also due from banks includes $ 38 million U.S dollars value of bonds that matured and not replace by other bonds to complete collateral value and that against credit linked not agreement (note 16) with 90 million U.S. dollars issued from one of first class institution matured in July 2013 ensuring the rest of the amount of 45 million U.S dollars worth of bonds subject to possessory item is included in the finan-cial investments held to maturity, this finan-
cial instruments “Credit linked note” includes financial guarantee issued from The Bank guarantee Arab republic of Egypt credit risk that represented in Egyptian treasury bonds due July 2013, the financial guarantee con-tract has reached in the balance sheet date the amount of 3,465 thousand U.S dollars recorded in other liabilities item (note 30).
Fair value of these financial instruments pur-chased in December 31, 2012 the amount of 88,953 thousand U.S dollars (against 83,991 thousand U.S dollars).
71
The movement in financial investments during the year may be summarized as follows:
Available for sale
Held to maturity
Total
Balance at 1 January 2011 133,770 145,210 278,980
Additions 211,070 11 211,081
Transfer from financial assets held for trading* 101,680 - 101,680
Disposals (sale / redemption) (73,407) (26,282) (99,689)
Equity securities available for sale impairment losses (5,233) - (5,233)
Valuation Exchange difference on monetary assets (3,457) (2,187) (5,644)
changes in fair value (16,349) - (16,349)
Balance at 31 December 2011 348,074 116,752 464,826
Available for sale
Held to maturity
Total
Balance at 1 January 2012 348,074 116,752 464,826
Additions 11,309 4,873 15,912
Disposals (sale / redemption) (83,472) (8,050) (91,522)
Available for sale investments impairment losses (311) - (311)
Valuation Exchange difference of monetary assets (5,507) (1,561) (7,068)
changes in fair value 12,922 - 12,922
Balance at 31 December 2012 282,745 112,014 394,759
Gains / Losses from financial investments
31 December 2012
31 December 2011
Gain on sale of available for sale investments 115 4,539
Gain on sale Treasury bills 1,420 338
Gain on sale mutual funds 4 -
Available for sale investments impairment losses (311) (5,233)
Subsidiaries and associates investments impairment reversal 1,173 -
2,401 (356)
72
* In 1 March 2011 there a transfer from fi-nancial investment held for trading to the finacial investment available for sale, the transfer carry out by fair value for these investments in the date of transfer by 101,680 thousand dollars, the impact of this transfer was charging revaluation differ-encies on fair market value reserve amount-ing 8,836 Thousnad dollars and if the bank didn’t make this transfer, the effect would have been charged on the income state-ment at net trading income section.
Noting that this transfer from trading invest-ment portfolio doesn’t occurs unless rare circumistances have been happened.
Bank considers the circumstances as re-ferred in 2011 as part of rare circumstances which are allowed by Egyptian accounting standard no. (26) Financial instruments - rec-ognition & measurments and instructions is-sued by the CBE.
* Based on a decision by the General Assem-bly unusual on May 3, 2012 private Egyptian Company for shoes and leather products (SLAB) first distributed was from the account of the result of the liquidation The share our bank where the amount of thousand dollars $ 1173.
19. Investments Property (not of accumulated depreciation)
Land building Total
Balance at 1 January 2012
Cost 958 2,177 3,135
Accumulated Depreciation - (623) (623)
Net book value as of 1 January 2012 958 1,554 2,512
Depreciation expense - (40) (40)
Net book value as of 31 December 2012 958 1,514 2,472
Net book value as of 31 December 2011 958 1,554 2,512
20. Loans & advanced to banks
31 December 2012
31 December 2011
Loans 6,059 11,510
Less: impairment loss provision (5,993) (7,363)
Less : suspense interest (66) (66)
Net distributed as follows - 4,081
Non-current balances - 4,081
- 4,081
73
21. Loans & advanced customers
31 December 2012
31 December 2011
Retail
Overdrafts 160,923 130,532
Credit cards 17,298 18,723
Personal Loans 86,674 88,949
Total (1) 264,895 238,204
Corporate
Overdrafts 1,027,259 1,184,889
Direct Loans 879,699 833,147
Syndicated loans 1,313,680 1,313,318
Other Loans 142,747 95,504
Total (2) 3,363,385 3,426,858
Total Loans and advances (1+2) 3,628,280 3,665,062
Less : unearned discount for commercial papers and loans (32,611) (16,766)
Less : prepaid interest for loans (2,338) (2,774)
Less: allowance for impairment (162,004) (149,561)
Less : suspense interest (19,284) (19,251)
Net Distributed as follows 3,412,043 3,476,710
Current Balances 1,184,021 1,769,340
Non-Current Balances 2,228,022 1,707,370
3,412,043 3,476,710
74
Allowance for impairment
Reconciliation of allowance account for losses on loans and advances to banks & customers by class is as follows:
31 December 2012
Retail Corporate Total
Balance at the beginning of the year 7,499 149,425 156,924
Impairment charges (738) 23,841 23,103
Proceeds from written off debts 328 132 460
Used During the year (2,103) (10,372) (12,475)
Transferred from (to) other provision 39 - 39
Foreign currencies revaluation differences - (54) (54)
Balance at the year end 5,025 162,972 167,997
31 December 2011
Retail Corporate Total
Balance at the beginning of the year 10,333 141,065 151,398
Impairment charges (62) 5,506 5,444
Proceeds from written off debts 225 3,693 3,918
Used During the year (2,997) (598) (3,595)
Proceeds from written off debts - (26) (26)
Foreign currencies revaluation differences - (215) (215)
Balance at the year end 7,499 149,425 156,924
75
22. Financial Derivatives
Derivatives
- Currency forwards represent commitments to purchase foreign and domestic curren-cy, including undelivered spot transactions. Foreign currency and interest rate futures are contractual obligations to receive or pay a net amount based on changes in currency rates or interest rates, or to buy or sell for-eign currency or a financial instrument on a future date at a specified price, established in an active financial market.
- Forward rate agreements are individually ne-gotiated interest rate futures that call for a cash settleme nt at a future date for the dif-ference between a contracted rate of inter-est and the current market rate, based on a notional principal amount.
- Currency and interest rate swaps are com-mitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies or interest rates (for example, fixed rate for floating rate) or a combination of all these (i.e., cross-currency interest rate swaps). No exchange of princi-pal takes place, except for certain currency swaps.
- The Bank’s credit risk represents the po-tential cost to replace the swap contracts if counterparties fail to fulfill their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, and a proportion of the notional amount of the contracts. To control the level of credit risk taken, the Bank assesses counterparties us-ing the same techniques as for its lending activities.
- The notional amounts of certain types of fi-nancial instrument provide a basis for com-parison with instruments recognized on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Bank’s expo-sure to credit or price risks.
- The derivative instruments become favor-able (assets) or unfavorable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate contractual or notion-al amount of derivative financial instruments on hand, the extent to which instruments are favorable or unfavorable, and thus the ag-gregate fair values of derivative financial as-sets and liabilities, can fluctuate significantly from time to time.
Derivatives held at fair value:
31 December 2012 Contractual / notional amount
Assets Liabilities
Derivatives held for trading
Currency forwards 525 6 3
Currency swaps 67,302 574 398
Total derivatives held for trading 67,827 580 401
31 December 2011 Contractual / notional amount
Assets Liabilities
Derivatives held for tradingCurrency forwards 1,316 37 29
Currency swaps 102,746 1,746 1,735
Total derivatives held for trading 104,062 1,783 1,764
76
23. Investment in subsidiaries and associates
The bank’s interest in its subsidiary and associates is as follows:
31 December 2012 Nature of relation
Country Company assets
Company liabilities (without owners’ equity)
Company revenues
Company profit/(Loss)
Participation value
Participation percentage
Universal for investment and
development
company (S.A.E) Subsidiary Egypt 605 134 56 27 - 90
Arab African Holding
company (S.A.E) Subsidiary Egypt 8,761 3,353 2,373 (525) 6,360 90
Arab African Real estate
mortgage company (S.A.E) Subsidiary Egypt 36,497 18,961 3,486 1,194 17,787 95.46
Arab African financial leasing Subsidiary Egypt - - - - 5,120 99
Nuun Fund Services Associates Egypt - - - - 33 20
Egyptian modern matches
company (S.A.E) Associates Egypt 3,699 1,679 7,980 348 414 23.40Egyptian matches company
(S.A.E) Associates Egypt 7,996 3,847 9,458 336 666 39.60
Slap (S.A.E) under liquidation Associates Egypt 6,494 7,479 - (77) - 37.70
Total 64,052 35,453 23,353 1,303 30,380
The Bank on January 18, 2012 to purchase • the number of 40.000 shares representing 20% of the capital “Nuun” for manage-ment services in the field of investment funds.
The Bank on January 6, 2011 with accor-• dance of Board of Director approval founded Arab African financial leasing company (un-der establishment) in accordance with law no.95 of 1995 and, with initial capital of 30 million Egyptian pounds increase gradually to reach 60 million Egyptian pounds, to be our Bank contribution in company capital 99% and the rest of 1% will be equal be-tween Arab African Holding company and Arab African International Bank staff pension fund.
The revaluation differences for Universal • Investment & Development Company and Egyptian Matches Company are 504 thou-sands US dollars and 72 thousand US dol-lars respectively.
The investment in Slap (S.A.E) was fully im-• paired by US dollars 3,549 thousand in pre-vious years.
Based on a decision by the General Assem-• bly unusual on May 3, 2012 private Egyptian Company for shoes and leather products (SLAB) first distributed was from the account of the result of the liquidation The share our bank where the amount of thousand dollars $ 1173.
Investments in subsidiaries and associates • are not-listed in the stock exchange.
77
31 December 2011 Nature of relation
Country Company assets
Company liabilities (without owners’ equity)
Company revenues
Company profit/(Loss)
Participation value
Participation percentage
Universal for investment and
development
company (S.A.E) Subsidiary Egypt 605 134 56 27 - 90
Arab African Holding
company (S.A.E) Subsidiary Egypt 8,761 3,353 2,373 (525) 4,869 90
Arab African Real estate
mortgage company (S.A.E) Subsidiary Egypt 36,497 18,961 3,486 1,194 17,787 95.46
Arab African financial leasing Subsidiary Egypt - - - - 5,120 99
Egyptian modern matches
company (S.A.E) Associates Egypt 3,699 1,679 7,980 348 342 23.40Egyptian matches company
(S.A.E) Associates Egypt 7,996 3,847 9,458 336 666 39.60
Slap (S.A.E) under liquidation Associates Egypt 6,494 7,479 - (77) - 37.70
Total 64,052 35,453 23,353 1,303 28,784
24. Other assets
31 December2012
31 December2011
Accrued revenues 30,279 32,906Prepaid expenses 1,840 1,401Advance payments for purchase of fixed assets 6,286 2,491
Assets reverted to the Bank in settlement of debts(after deducting impairment in value with 70 thousand US dollars) 1,264 1,490
Deposits with others and imprest fund 515 482Other debit balances 22,604 24,337
Total 62,788 63,107
78
25. Deferred tax assets
Deferred tax assets resulting from tax differences of the assets and liabilities items comprise the following:
31 December 2012 31 December 2011Assets Liabilities Assets Liabilities
Fixed assets 3,300 - 2,652 -Intangible assets 59 - - (230)Other provisions 2,007 - 2,579 -Equity instruments available for sale impairment loss 605 - 605 -
Total tax assets (liabilities) 5,971 - 5,836 (230)
Net Deferred tax assets 5,971 - 5,606 -
Deferred tax assets and liability movements are as follows:
31 December 2012 31 December 2011
Balance at the beginning of the year 5,606 9,238Deferred tax movement during the year 365 (3,632)
Balance at the end of the year 5,971 5,606
79
26. Fixed Assets
Land &building
Machinery &equipment
Other Total
Balance as of 1 January 2011
Cost 47,163 5,029 12,224 64,416
Accumulated Depreciation (32,921) (1,386) (3,301) (37,608)
Net book value as of 1 January 2011 14,242 3,643 8,923 26,808
Additions - 1,082 2,114 3,196
Depreciation expense (848) (1,675) (4,822) (7,345)
Net book value as of 31 December 2011 13,394 3,050 6,215 22,659
Balance as of 1 January 2012
Cost 47,163 6,111 14,338 67,612
Accumulated Depreciation (33,769) (3,061) (8,123) (44,953)
Net book value as of 1 January 2012 13,394 3,050 6,215 22,659
Additions 580 1,128 4,392 6,100
Depreciation expense (851) (1,657) (4,115) (6,623)
Net book value as of 31 December 2012 13,123 2,521 6,492 22,136
Balance as of 31 December 2012
Cost 47,743 6,072 15,047 68,862
Accumulated Depreciation (34,620) (3,551) (8,555) (46,726)
Net book value as of 31 December 2012 13,123 2,521 6,492 22,136
- Fixed assets (net of accumulated depreciation) at the financial position date include US $ 966 thousands representing assets not registered yet in the Bank’s name as the legal procedures are currently undertaken to register such assets.
- Assets fully depreciated amounted 4,850 thousands U.S. dollars.
80
27. Intangible assets- Intangible Assets presented at the financial position date has resulted from the acquisition of ex-
Misr America International Bank by the The Bank (during year 2005), which is subjected annually to the impairment test, and represented as follows:
31 December2012
31 December2011
Money transfer license (Western Union) 10,436 10,436Benefits realized from branches lease contracts 873 873
11,309 11,309
28. Due to banks
31 December2012
31 December2011
Current accounts 222,380 31,557Deposits 504,587 559,938
726,967 591,495
Central Banks 59,035 14,058Local banks 327,591 482,009Foreign banks 340,341 95,428
726,967 591,495
Non-interest bearing balances 222,380 31,557Interest bearing balances 504,587 559,938
726,967 591,495
Current Balances 726,967 591,495
81
29. Customers’ deposits
31 December 2012
31 December 2011
Demand deposits 891,248 589,181Time and call deposits 2,952,264 2,857,900Certificates of deposits 1,309,443 1,241,144Saving accounts 743,088 729,472Other deposits 74,795 77,343
Total 5,970,838 5,495,040
Corporate Deposits 3,324,266 3,126,355Retail Deposits 2,646,572 2,368,685
5,970,838 5,495,040
Non-interest bearing balances 966,202 666,415Interest bearing balances 397,697 310,533Fixed rate interest Balances 4,606,939 4,518,092
5,970,838 5,495,040
Current Balances 4,348,843 4,075,028Non-current balances 1,621,995 1,420,012
5,970,838 5,495,040
30. Other Liabilities
31 December2012
31 December2011
Accrued interest 111,470 82,967Deferred revenue 7,225 9,720Accrued expenses 8,357 8,085Creditors 31,204 27,281Other credit balances 44,146 38,875Financial Guarantees’ liabilities* 3,465 3,465
205,867 170,393
- Fair value of the obligations of the contract of financial security at the initial recognition of the amount of 10,051 thousand U.S. dollars, representing the balance at December 31, 2012 minus the value of the obligation during the year of consumption of 6,586 thousand U.S. dollars on income statement under the item of fees and commissions income.
82
31. Loans & advances from Banks
Loan interest rate
31 December2012
31 December2011
Fixed rate loan matured February 2014 9.75% 79,126 82,893
79,126 82,893
During 2007, the bank obtained LE 500 million long term debt (equivalent to $79,126 thousands at 31 December 2012 compared with $82,893 thousands at 31 December 2011) from a local bank in Egyptian Pound and has to be re-paid once on February 2014, bearing a fixed interest rate of 9.75% to be paid semi annually.
32. Other provisions
31 December 2012
DescriptionBalance at the beginning of
the year
Provided during
the year
Transfers between provisions’ accounts
Transfers to other
accounts
Used during
the year
Balance at the end of the year
Claims provision 7,636 - - - - 7,636
Contingent liabilities provision 9,902 (1,227) - - - 8,675
Employees’ incentives provision - 1,660 - - - 1,660
Credit cards risk contingent provision 39 - (39) - - -
Total 17,577 433 (39) - - 17,971
31 December 2011
DescriptionBalance at
the beginningof the year
Provided during
the year
Transfers between provisions’ accounts
Transfers to other
accounts
Used during
the year
Balance at the end of the year
Claims provision 7,685 - - - (49) 7,636
Contingent liabilities provision 7,906 1,970 26 - - 9,902
Employees’ incentives provision 4,937 - - (4,937) - -
Credit cards risk contingent provision 39 - - - - 39
Total 20,567 1,970 26 (4,937) (49) 17,577
83
33. Current income tax liabilities
31 December2012
31 December2011
Current tax obligation local branches* 687 3,489Current tax obligation forigen branches 3,945 3,.055
4,632 6,544
* The current income tax obligations due on the Treasury bills and bonds.
34. Retirement benefit obligations- The Department of Social Fund for employees in the Arab African International Bank to conduct
an actuarial study to determine the net present value of the obligations of the Fund and thus determine the surplus or deficit in the fund as at December 31, 2012 under which the bank will compensate any shortfall that may arise from the investment fund. The study showed, according to the data of employees at 31 December 2012 and actuarial bases used by the reality of the report of the actuary to calculate the present value of the benefits of insurance as follows:
The results of the actuarial calculations
31 December2012
31 December2011
EGP 000 EGP 000
Old age and disability insurance and death 281,287 270,961Insurance reward leaving the service (death + retired) 241,003 209,185Pensions menu (alive + beneficiaries) 104,423 81,926
Total Laibilities 626,713 562,072
The present value of the contributions 237,754 208,614Accrued balance 34,001 29,424Actuarial reserve 354,958 324,034
Balance at the end of the year 626,713 562,072
The previous table shows the following:
Reserve money at the end of the year 360,000 327,463Actuarial reserve 354,958 324,034
The surplus product at the end of the end of year 5,042 3,429
84
As the following table shows the movement on the liability:
31 December2012
31 December2011
Balance at the beginning of financial year - 13,725Provided during the year 971 908Used during the year (971) (14,633)
Balance at the end of the year - -
35. Subordinated depositOn July 2008, the bank has taken from the Bank’s principal Shareholders subordinated deposit amounted $300 MM divided equally between them for ten years, with interest rate 0.5% over LIBOR for 6 months, interests are paid semi annually.
36. Share capital and reservesA. Authorized Capital
The authorized capital for the Bank is US $500 million.
B. Issued and Paid-in Capital
The issued, subscribed and paid-in capital amounts to US $100 million represented in 20 million shares of US $5 par value.
C. Shareholders
Ownership Interest
1. Central Bank of Egypt 49.37%2. Kuwait General Investment Authority 49.37%3. Others 1.26%
100%
37. Reserves and retained earning
Reserves31 December
201231 December
2011
General risk banking reservesLegal reserve 98,196 86,125General reserve 10,000 10,000Special reserve 13,583 13,583General banking risks reserve 67 8,511Capital reserve 1,582 1,582Fair value reserve – available for sale investments (1,053) (13,975)
Total reserves at the end of the year 122,375 105,826
85
Movements in reserves were as follows:
a. Legal reserve31 December
201231 December
2011
Balance at the beginning of the year 86,125 71,774Transfer from retained earnings 12,071 14,351
Balance at the end of the year 98,196 86,125
- In accordance with the bank’s articles of Association, 10% of annual net profit is transferred to the legal reserve. Such transfer will be stopped when the legal reserve reaches 100% of the is-sued capital.
31 December2012
31 December2011
b. General reserve
Balance at the beginning of the year 10,000 10,000
Balance at the end of the year 10,000 10,000
31 December2012
31 December2011
c. General banking risks reserve
Balance at the beginning of the year 8,511 -
Transfer to retained earnings (8,444) 8,511
Balance at the end of the year 67 8,511
d. Capital reserve
31 December2012
31 December2011
Balance at the beginning of the year 1,582 1,582
Balance at the end of the year 1,582 1,582
31 December2012
31 December2011
e. Special Reserve
Balance at the beginning of the year/end of year 13,583 13,583
Balance at the end of the year 13,583 13,583
86
f. Fair value reserve – available for sale investments 31 December2012
31 December2011
Balance at the beginning of the year (13,975) 2,374
Revaluation of differences in investments during the year 12,922 (16,349)
Balance at the end of the year (1,053) (13,975)
Retained earnings31 December
201231 December
2011Balance at the beginning of the year 564,973 497,328
Transferred to the legal reserve (12,071) (14,351)
Transferred to general banking risks reserve 8,444 (8,511)
Distributions of cash dividends of the year profit 2010/2011 (36,558) (30,200)
Profit of the year 144,079 120,707
Balance at the end of the year 668,867 564,973
38. Contingent liabilities and commitments31 December
201231 December
2011
Letters of guarantee 713,951 876,931
Commercial letters of credit (import and export) 159,908 265,490
Letters of Acceptances 22,387 259,600
Total 896,246 1,402,021
87
39. Tax status
First: Corporate tax
Years until 31/12/2004
Corporate tax has been owed by the bank to the tax authority until 31/12/2001 has been set-tled and paid.
Second: Retail Tax according to the law for the year 2005:
1-Years 2005/2006:
The tax approval has been submitted ac-cording to tax law number 91 for the year 2005 and the tax authority has performed the tax examination for these years and ap-proved the bank’s tax approval. There are no differences between the bank and the tax authority until 31/12/2006.
2-Year 2007:
The tax approval has been submitted ac-cording to law number 91 for the year 2005, and the tax authority has performed the tax examination for this year. An internal com-mittee is being formed in order to end the dispute for this year.
3-Years 2008/2011
The tax approval has been submitted ac-cording to law number 91 for the year 2005, and the retail tax owed by the bank has been paid until the date 31/12/2011 from the bank’s point of view.
Third: Salary Tax:
1-Years until 31/12/2008
The bank has been examined by the tax au-thority unti the year 2008 and the bank has owed tax differences for these years
2-Year 2008:
The bank has been examined by the tax au-thority in 2008 and an internal committee is being formed in order to resolve the dispute for this year
3-Years from 2009/2011:
The tax approval for 2009/2011 has been submitted according to law number 91 for the year 2005 and the owed tax has been paid from the bank’s point of view. No ex-amination has been made until this date.
Fourth: The tax status for Misr America International Bank (Previously)
1-Years until 31/12/2004:
Corporate tax owed by the to the tax authority has been settled and paid until 31/12/2004
2-Years from 1/1/2005 until 30/9/2005 (Merge date):
The tax approval has been submited accord-ing to law number 91 for the year 2005 and the tax authority has performed the tax ex-amination for this year. An internal commit-tee was formed and the dispute for this year has been settled.
Fifth: Stamp Duty Tax:
1-Years until 31/7/2006 (according to law number 111 for the year 1980)
Stamp duty tax has been examined accord-ing to law number 111 for the year 1980 (which is applied until 31/7/2006) for all Arab African International Bank branches and reporting some cases to specialized court laws.
2-Years from 1/8/2006 (according to law number 143 for the year 2006):
The stamp duty tax has been calculated ac-cording to the new law number 143 for the year 2006 for each quarter and it has been provided to the tax authority and it is current-ly under examination until the year 2009.
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40. Related party transactions
A- The Bank deals with its related parties on an basis as with other parties. The nature of such transactions and its balances are represented at the financial position date as follows:
31 December2012
31 December2011
Due from banks - Central Bank of Egypt (Shareholder)335,892 201,088
Investments in subsidiaries and associates 30,380 28,784Loans to customers (subsidiaries and associates) 25,110 16,932Customers’ deposits (subsidiaries and associates) 7,314 5,857Due to banks - Central Bank of Egypt (Shareholder) 59,035 14,058Held to maturity investment (mutual fund certificates) “shield” 4,624 4,844Held to maturity investment (mutual fund certificates) “goman” 7,011 4,689Held to maturity investment (mutual fund certificates) “fixed debt instruments” 3,018 829
Fees and commission income (AAIB mutual fund)“goman” 458 284Fees and commission income (AAIB mutual fund)“shield” 926 449Fees and commission income (AAIB mutual fund)“gozor” 138 -
B- Board of directors and top management benefits
31 December2012
31 December2011
Salaries and employee benefit 3,434 3,579
Employee benefits 467 586
3,901 4,165
* The value of the remuneration of the biggest twenty owners of bonuses and salaries in the bank together, including senior management and staff branches of the bank inside and out-side Egypt (on the basis of monthly average for the year), according to the stated rules to strengthen corporate governance and internal control of banks and issued by the Central Bank of Egypt on 23/8 / 2011 amount to U.S. $ 394 thousand on 31 December 2012 (334 thousand U.S. dollars in 31 December 2011).
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41. Arab African International Bank Mutual Fund “shield”
The The Bank owns “shield” mutual fund which was established in accordance with the capital law No. 95 of 1992 and its ex-ecutive regulations. The bank shares are currently amounting 322,839 certificates equivalent to 35 MM EGP and the value per certificate at the Balance sheet date was 108.42 EGP.
42. Arab African International Bank Mutual Fund “Juman”
The The Bank owns “Juman” mutual fund which was established in accordance with the capital law No. 95 of 1992 and its ex-ecutive regulations. The bank shares are currently amounting 397,915 certificates equivalent to 54 MM EGP and the value per certificate at the Balance sheet date was 136.14 EGP.
43. Arab African International Bank Mutual Fund Fixed debt instrument“Gozor”
The The Bank owns “Fixed debt instrument mutual fund which was established in ac-cordance with the capital law No. 95 of 1992 and its executive regulations. The bank shares are currently amounting 1,823,024
certificates equivalent to 20 MM EGP and the value per certificate value at the Balance sheet date was 10.97 EGP.
44. Explanatory paragraph
In the December 6, 2012 issued several res-olutions laws to amend certain provisions of the tax laws and published in the Offi-cial Gazette on that date, has issued state-ments of some officials from freezingwork those decisions, due to the lack of solid in-formation to the Bank’s management for the date of those decisions or canceled, neither whereby the Bank’s management influence their own tax outlays and what related as-sets and liabilities and well business results and what the resulting net profit available for distribution during the year Finance.Those values may vary and the result if there is reli-able information about the validity of those decisions and activated.
45. Cash and cash equivalents
For the purposes of the cash flow state-ment presentation, cash and cash equiva-lents comprise the following balances with a maximum maturiy of three months from the date of acquisition.
31 December2012
31 December2011
Cash and balances with central banks 241,893 212,033Due from banks 1,966,029 1,954,866Treasury bills 2,046,684 1,188,229Due from the Central Banks "obligatary reserve ratio" (157,085) (163,084)Due to banks (2,011) (182,057)
Treasury bills (maturity more than 3 months) (1,246,330) (873,960)
Cash and cash equivalents 2,849,180 2,136,027
46. Translation
These financial statements are a translation into English from the original Arabic statements. The original Arabic statements are the official financial statements.
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auditors’rePort
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independent Auditors’ reportto : the shareholders of “arab afriCan international banK”
Report on the separate financial statements
We have audited the accompany-ing separate financial statements of “Arab African International Bank” which comprise the balance sheet as of “31 December 2012”and the state-ments of income, changes in equity and cash flow statement for the year then ended and a summary of signifi-cant accounting policies and other ex-planatory notes.
Management’s Responsibility for the separate financial statements
Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with the rules of prepa-ration and presentation of the Bank’s separate financial statements issued by the Central Bank of Egypt on 16 December 2008 and with the require-ments of applicable Egyptian laws and regulations. This responsibility in-cludes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of separate financial statements that
are free from material misstatement, whether due to fraud or error; select-ing and applying appropriate account-ing policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these separate financial statements based on our audit. We conducted our audit in accordance with Egyptian Standards on Auditing. Those Standards require that we com-ply with ethical requirements and plan and perform the audit to obtain rea-sonable assurance whether the sepa-rate financial statements are free from material misstatement.
An audit involves performing proce-dures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on the auditors’ judgment, including the as-sessment of the risks of material mis-statement of the separate financial statements, whether due to fraud or
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error. In making those risk assess-ments, the auditors consider internal control relevant to The Bank’s prep-aration and fair presentation of the separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of The Bank’s internal control. An audit also includes evaluating the appropriate-ness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presen-tation of the separate financial state-ments.
We believe that the audit evidence we have obtained is sufficient and appro-priate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying separate financial statements pres-ent fairly, in all material respects, the financial position of “Arab African In-ternational Bank” as of 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with the rules of preparation and presentation of Bank’s separate financial statements issued by the Central Bank of Egypt on 16 December 2008 and with the require-ments of applicable Egyptian laws and regulations.
Explanatory paragraph
Without qualifying our opinion, and as described in note 44 of the notes to the financial statements, have been issued in the December 6, 2012 several resolutions laws to amend certain provisions of the tax laws and published in the Official Gazette on that date, has issued statements of some officials from freezingwork those decisions, due to the lack of solid information to the Bank’s man-agement for the date of those deci-sions or canceled, neither whereby the Bank’s management influence their own tax outlays and what re-lated assets and liabilities and well business results and what the result-ing net profit available for distribution during the year Finance.
Those values may vary and the result if there is reliable information about the validity of those decisions and acti-vated.
Report on Other Legal and Regulatory Requirements
Nothing has come to our attention that indicated that The Bank violat-ed any of the provisions of Law No. 88 of 2003 during the year ended 31 December 2012.
The Bank keeps proper financial re-cords, which include all that is re-quired by the law and Bank’s statute
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Mohamed Yehia AbdelhamedAhmed Gamal Hamd Allah Al Atres
Egyptian Financial Supervisory Authority registration number “12”
Egyptian Financial Supervisory Authority registration number “136”
KPMG Hazem Hassan Mansour & Co.Pricewaterhouse Coopers
Public Accountants and Consultants Public Accountants and Consultants
Cairo, 2013
Auditors
and the accompanying separate fi-nancial statements are in agreement therewith.
The financial information included in the Board of Directors report, pre-pared according to the provisions of
Law No. 159 of 1981 and its executive regulations are in agreement with The Bank’s accounting records within the limit that such information is recorded therein.
Distinction
Artist
Vincent van GoghPainting: Starry Night Over the Rhone.Vincent van Gogh’s unique style of painting differen-tiated his paintings from all other artists. Rarely can paintings be recognized instantly as a certain artist’s work as those painted by Van Gogh. His works are characterized by swirls and densely painted impasto and are unlike any others. Truly, Van Gogh is a master of distinction in every sense of the word. 1964
Distinction is doing things in a unique style that deÞnes AAIB as a one of a kind organization. AAIBÕs trendsetting innovations date back decades when it became the Þrst to introduce Credit Cards and Chip Technology to the Egyptian market, extend working hours and implement online payment systems, Þrst multinational bank, First to launch mid and long term foreign time deposits.
Distinction
Artist
Vincent van GoghPainting: Starry Night Over the Rhone.Vincent van Gogh’s unique style of painting differen-tiated his paintings from all other artists. Rarely can paintings be recognized instantly as a certain artist’s work as those painted by Van Gogh. His works are characterized by swirls and densely painted impasto and are unlike any others. Truly, Van Gogh is a master of distinction in every sense of the word. 1964
Distinction is doing things in a unique style that deÞnes AAIB as a one of a kind organization. AAIBÕs trendsetting innovations date back decades when it became the Þrst to introduce Credit Cards and Chip Technology to the Egyptian market, extend working hours and implement online payment systems, Þrst multinational bank, First to launch mid and long term foreign time deposits.
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banKaddresses
97
HEAD OFFICE5 Midan Al-Saray Al Koubra, Garden City, CairoTel: (202) 27945094/5/6 (202) 27922881/2/3Fax: (202) 27958493P.O. Box: 60 Magless El Shaab(11516) Cairo, EgyptSWIFT: ARAIEGCXXXXReuters: AAFESite: www.aaib.comCall center: 19555 CAIROGarden City Branch5 Midan Al-Saray Al Koubra, Garden City, Tel: (202) 27924770Fax: (202) 27925599P.O. Box: 60 Magless El Shaab(11516) Cairo, Egypt
Four Seasons BranchFour Seasons Hotel (Nile Plaza)1089 Corniche El Nil, Garden CityTel: (202) 27945283Fax: (202) 27945287
Kasr El Aini Branch8 Ibrahim Naguib St., Garden CityTel: (202) 27957071/3 - 27952247Fax: (202) 27952445P.O. Box: 1003 - CairoSWIFT: ARAIEGCXGRD
Cairo Branch (Downtown)44 Abdel Khalek Tharwat St.,DowntownTel: (202) 23916710 - 23917747- 23908029Fax: (202) 23914269P.O. Box: 1143 Cairo SWIFT: ARAIEGCXCAI
Kasr El-Nil Branch29 Kasr El-Nil St., DowntownTel: (202) 23924371 - 23924198Fax: (202) 23920950P.O. Box: 1003 - CairoSWIFT: ARAIEGCXTWN
El Alfy Branch54 D El Gomhoria St., DowntownTel: (202) 25909699Fax: (202) 25909690P.O.Box: 1003 - CairoSWIFT: ARAIEGCXALF
Mokattam BranchLand #354 D, El Nafoura Sq, El Mokattam.Tel: (202) 26678071/2/3/4Fax: (202) 26678075
Heliopolis Branch24 Cleopatra St., HeliopolisTel: (202) 24188053/4Fax: (202) 24188056PO Box: 5842, Heliopolis west, CairoSWIFT: ARAIEGCXHEL
Sheraton Heliopolis Branch13 Khalid ibn Elwaleed Sheraton HeliopolisTel: (202) 22676509/11Fax: (202) 22676510
Roxy Branch33 El Hegaz St., HeliopolisTel: (202) 22568353 - 373 - 388Fax: (202) 22568390P.O.Box: 1003 - CairoSWIFT: ARAIEGCXHLP
El Merghany Branch140 El Merghany St., HeliopolisTel: (202) 22906244/18 - 22907862Fax: (202) 22906289P.O.Box:1003SWIFT: ARAIEGCXMRG
Golf Branch13 Tag El din Al Sobky, off Nozha St., Ard El Golf Tel: (202) 26907233/4/5Fax: (202) 26907231SWIFT: ARAIEGCXGLF
Nasr City Branch33 Abo Dawood Al Zahery St. from Makram EbeidTel: (202) 26720101/2/3/4/5/6Fax: (202) 26720107 - 26714947
Zamalek Branch3 Hassan Sabry St.Tel: (202) 27377201/2/3/4/5/6/7Fax: (202) 27377208
Al GEIZAMohandeseen Branch48 Gezirat El Arab St., Mohande-seenTel: (202) 33040922/3Fax: (202) 33040924P.O.Box: 259 Imbaba (12411) GizaSWIFT: ARAIEGCXMOH
National Research Center Branch (NRC) National Research CenterEl Behos St. (Formerly El-Tahrir St.), DokkiTel: (202) 37624771/2/4Fax: (202) 37624773
Nady El-Seid Branch12 Nady El-Seid St., DokkiTel: (202) 37616623/13Fax: (202) 33352393 - 37616614PO.Box: 1003, Dokki, GizaSWIFT: ARAIEGCXDOK
Bank Addresses
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First Mall Branch Four Seasons Hotel(First Residence)35 Giza St., Four Seasons Hotel, First ResidenceTel: (202) 35720274/98Fax: (202) 35720268
Al Haram Branch 85 Al Haram St. Tel.: (202) 37423664/33820156Fax: (202) 33820281P.O.Box 281 Al Haram (12556) Giza
HELWANMaadi BranchSt. No 9, Maadi Palace Building,Station Sq Tel: (202) 23786474/6Fax: (202) 23786469 - 23787904P.O. Box: 541 Maadi (11728) CairoSWIFT: ARAIEGCXMAA
Chevron Egypt Company44 El Nadi St., at 77A St., MaadiTel: (202) 23590411Fax: (202) 23590571P.O. Box: 9 New Maadi (11728)
El Rehab City Branch Banks District, Building No. (4),El Rehab CityTel: (202) 26923101/2/3/4Fax: (202) 26923106
El Shourouk Branch (BUE) El Shourouk CityTel: (202) 26300246Fax: (202) 26300023
Kattameya Branch Shooting Club - Kattameya,Ring RoadTel: (202) 27275197/8Fax: (202) 27275196
New Cairo Branch:Piot 116 - 118 First SectorParaller to road 90, new cairoTel: 01025555030 / 01206555577Fax: 01025555025
INDUSTRIAL ZONES6th of October Branch4th Industrial Zone – 2/3 Bank AreaTel: (202) 38320431/2/3Fax: (202) 38320435P.O.Box: 210SWIFT: ARAIEGCXOCT
10th of Ramadan Branch3rd Industrial Zone, Area MC3Tel: (2015) 375023/4/5Fax: (015) 375021/2P.O.Box:1110 Tenth of RamadanSWIFT: ARAIEGCXASH
El Obour Branch:Unit 60, 61 Golf City - Mall El Obour City, Cairo - EgyptTel: (202) 46104620 / 01200008824
01205745555Fax: (202) 46104621
ALEXANDRIASmouha Branch74 Albert Al Awal St, SmohaTel: (203) 4258701/2/3/4Fax: (203) 4291120P.O. Box: 21511 AlexandriaSWIFT: ARAIEGCXALX
El-Horreya Road Branch68 Fouad St., End of El-Horreya RoadTel: (203) 4854581/2Fax: (203) 4855912SWIFT: ARAIEGCXALE
El-Horreya Road Branch73 Fouad St., End of El-Horreya RoadTel: (203) 3920661/900Fax: (203) 3906004SWIFT: ARAIEGCXALE
Roushdy Branch431 El Horreya Road - RoushdyTel: (203) 5446413/6/9Fax: (203) 5446426
Petroleum Complex BranchPetroleum Complex BuildingKilo 17 Alexandria-Cairo Desert Rd.Tel: (203) 2020348/7Fax: (203) 2020349
San Stefano BranchSan Stefano MallGround Location A30Tel: (203) 4690551/2/3Fax: (203) 4690554
Alexandria Port BranchAlexandria Sea Port In Front of the LogisticBuilding, door Number 54,El WardianTel.: (203) 4816901/33Fax: (203) 4816967
Borg El-Arab BranchNew Borg El-Arab CityBanks DistrictTel: (203) 4594042/3/4Fax: (203) 4594041P.O. Box: 33- Postal Code: 21934SWIFT: ARAIEGCXBRG
NORTH COASTPorto Marina BranchMarina, Gate 3Tel: (2046) 4453966/7/8Fax: (2046) 4453970
DELTAMahallah Branch10 Shoukry El Quatly St. Elmahalla El-Koubra –Gharbia-EgyptTel: (2040) 2252835
/ 53 / 01002188764Fax: (2040) 2252845
Damietta BranchAl Sanania Taqseem Zaher,Ras El Bar- Damietta RoadCorniche El NilTel: (2057) 2370470/8Fax: (2057) 2370471
Tanta Branch95 El Gueish St.,Tel: (2040) 3310253/172Fax: (2040) 3310346SWIFT: ARAIEGCXTNT
Port Said Branch21, 23rd July St., El Sharkdistrict- PortsaidTel: (2066) 3323635/8/9Fax: (2066) 3323642
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Mansoura Branch195 El Gomhouria St.,Borg Kasr El Nil, MansouraTel: (2050) 2227223/4/5Fax: (2050) 2227228/9
UPPER EGYPTLuxor BranchEnd of Khaled Ibn El Walid St.,Tel: (2095) 2366014 - 2369675 - 2363842Fax: (2095) 2364927
Aswan Branch1 Abtaal Al Tahrir., Tel: (2097) 2335210/11/12 /13Fax: (2097) 2335209
SOUTH SINAI AND RED SEAPorto El Sokhna Branch18 Mall Porto El Sokhna,Elzaafranna Road. Ein El Sokhna High WayTel: (2062) 3210200-201-202Fax: (2062) 3210203
Sharm El Sheikh BranchHyatt Regency Sharm El Sheikh HotelThe Gardens BayP.O.Box: 58 Sharm El SheikhTel: 01272005000 -(2069) 3601234 - (int) 70322Fax: 01271030858
Neama Bay BranchSharm Trade Center, Mall 14, Neama BayTel: (2069) 3600127/8Fax: (2069) 3600125
Mercato BranchEl Fannar St., HadabetOm El Sid-Mercato MallTel: 01008000042/43 Fax: (2069) 3663777
El Tor Branch - South SinaiDiwan El Mohafza - El TorTel: (2069) 3777242 Fax: (2069) 3777243P.O. Box: 33 South Sinai, Egypt
Nabq BranchRehana Mall, Royal Rehana ResortTel: (2069) 3710935 Fax: (2069) 3710934P.O. Box: 33 South Sinai, Egypt
Hurghada BranchAl Kawaher area, Al LotusCompoundTel: (2065) 3449070/9Fax: (2065) 3449081
Gouna Branch102 , 103 104 Building (H2)Dawntawn, El GounaTel: 065 358019495Fax: 065 3580 196
Porto Ghaleb BranchShop 51019 Marina CornichePort Ghalib – Marsa AllamTel: (2065) 3700111/2Fax: (2065) 3700110
Foreign BranchesUnited Arab EmiratesDubai BranchART Tower, Opposite DubaiCustoms,Al Mina Road, Bur Dubai,Tel: (+9714) 3937773Fax: (+9714) 3937774P.O. Box: 1049 Deira, Dubai CitySWIFT: ARAIAEADXXX
Abu Dhabi BranchArab Monetary Fund Bldg,El Corniche St., Tel: (+9712) 6323400Fax: (+9712) 6216009P.O. Box: 928, Abu Dhabi,SWIFT: ARAIAEADAUH
LEBANONBeirut BranchArab African Intl Bank Bldg,Riad El Solh St.,Tel: (+9611) 980162/3Fax: (+9611) 980910Tlx: arafro 20507 leP.O. Box: 11-6066 BeirutSWIFT: ARAILBBEXXXE-Mail: [email protected]
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annualREPORT
2012
