The banking sector in Egypt witnessed an economic shock following the decision to dismiss the President of the Commercial International Bank, Hisham Ezz Al-Arab, and the leak of a letter from the Central Bank regarding violations in the bank.
The decision resonated with global stock exchanges, as the bank's GDRs fell by 17% on the London Stock Exchange yesterday, before rising again at noon on Friday.
Observers have questioned the motives of the decision, considering that it is part of the ongoing struggle between wings of government and centers of power and influence, as Ezz Al-Arab is one of the most successful banking figures, and has made a shift in the bank’s performance and succeeded in grabbing many international awards.
Yesterday, the Central Bank of Egypt sent a letter to the Board of Directors of the Commercial International Bank (CIB) - the largest bank listed on the stock exchange in Egypt - demanding the removal of Hisham Ezz Al-Azab from his position as president of the bank, according to a set of observations contained in the speech.
Users of social media platforms circulated a letter attributed to the Central Bank, which includes reference to "grave breaches of the provisions of the Central Bank and Banking System Law, in addition to the severe weakness in the control procedures for granting and monitoring credit operations and their credibility and wasting all banking bases."
The letter pointed out that there is a "severe deficiency in the internal control environment, which resulted in huge financial losses in the bank. This poses a danger to the bank from these practices, financial crimes and deviations from honest banking."
On Thursday morning, the Egyptian Stock Exchange suspended trading in Commercial International Bank shares during the morning trading of the market, and traders waited for a disclosure statement from the bank over the course of the session, but the dealings ended without issuing an explanatory statement.
Hard landing
With the continuation of dealing in international depositary certificates in dollars on foreign exchanges, the Commercial International Bank's certificate of deposit fell significantly by 17% at once during Thursday's session on the London Stock Exchange, bringing its price to 3.50 dollars compared to 4.30 dollars for the opening price, before the certificate of deposit returned The CIB increased by 14% in the middle of trading on Friday, up from a drop of 41% in the beginning of today's trading.
Among those who were sent, according to banking sources, was Amr Al-Ganaini, a member of the bank’s board of directors, who is also a member of the Football Association.
He was referred with the president of the bank and others to administrative control, after a leak circulated in his voice criticizing President Abdel Fattah El-Sisi’s lack of knowledge of football conditions, but press reports denied the news of his dismissal.
The head of the central bank has the right to dismiss the heads of public and private banks and members of the boards of directors, according to a law recently ratified.
The Commercial International Bank in Egypt said - on Friday - that its Chairman Hisham Ezz Al-Arab decided to leave his post immediately, after the bank received a letter from the Central Bank to remove him.
Tweeters criticized the dismissal of Hisham Ezz Al-Arab (communication sites)
With the shock caused by the decision of the Commercial International Bank, leaflets spread on the communication sites questioning the existence of other motives behind the decision other than the declared ones that included the existence of financial irregularities, indicating that Ezz Al-Arab is one of the personalities "who are not satisfied with them from the circles of authority for mysterious reasons." He became angry after the audio leak.
Tweeters criticized the timing of the decision and the method of its issuance, which "damaged the image of the banking sector internationally and caused an earthquake in the local market, which causes investors to fear the investment climate in Egypt and push them to refrain due to such vague decisions."
Other decisions
Observers saw that the decision paves the way for more dangerous decisions previously disclosed by the government, such as the desire to merge banks and reduce their numbers to less than 20 banks, and empty the banking market of successful private banks to make the stage for government banks.
Al-Tijari International is considered one of the largest banks in Egypt, and economic analysts describe it as one of the most successful banks in competing with the National Bank, which is owned and supported by the state.
Al-Tijari International has won several awards over the past few years, including the award for best emerging market bank in the world.
Tweeters considered that the dismissal of the bank’s president in this sudden manner and without procedural steps specified by the laws contradicts the central bank’s role aimed at preserving the stability of the banking sector rather than causing shocks in it.
A professor at the Faculty of Economics and Political Science, Alia Al Mahdi, considered "the reason for the extreme jealousy of Hisham Ezz Al Arab, that he is one of the best bank leaders in Egypt, and without him, the Commercial International Bank would not have become one of the best Egyptian banks and won the award for the best bank in developing economies."
The bank achieved profits of 4.997 billion pounds (the dollar is equivalent to 16 pounds) during the first six months of this year, compared to profits amounting to 5.35 billion pounds in the comparative period last year.
During the first half of this year, net income rose from the yield to 12.47 billion pounds, compared to 10 billion pounds in the first half of last year.
The Commercial International Bank has large foreign holdings, and it holds the largest market capitalization on the Egyptian Stock Exchange, by a large margin from its closest affiliates, according to what Reuters reported today.
The bank’s annual report in 2019 said that it constitutes more than 43% of the EGX30 blue-chip index.