AAIB 2018

1 Annual Report 2018
THE WATER
the active world of the depths goes
unseen by those on the surface
Annual Report 2018 4 5 Annual Report 2018
and a
TREE puts down
ROOTS
before it reaches for the
SUN
In the natural world, change can be

imperceptible until it’s suddenly crystal
clear that something is transformed.
So too in our world.
IT TAKES A ROBUST PLATFORM TO REACH NEW HEIGHTS

Behind the scenes of our
everyday business, we’re
cultivating seeds of change.
What does
it take to
TRANSFORM
while
maintaining the
strengths we’re
known for?
We’re proud of our many

“firsts”, but it takes more than
past accomplishments to keep
a bank relevant and ensure a
successful future.
Taking our AAIB has been a leader in full-service banking in Egypt for
culture of
more than 50 years, and one of the country’s fastest-growing
banks in profitability over the past decade. We have built
a strong franchise serving top-tier clients with innovative
products and services.
trailblazing
Building on our strengths, we will continue planting flags
in new territory, using the skills we have acquired over the
past five decades—like reading the map of our environment,
planning for shifts in conditions, preparing and provisioning
wisely, perfecting our practice before pushing higher.
to the next Becoming the bank for tomorrow’s needs isn’t easy, but we
know that our innovations will continue to contribute to our
clients’ success and lift up our country and the communities in
level
which we operate.
First Bank to sell protection on Egyptian Eurobonds
Finalized the first securitization deal in the market
First Bank to initiate Corporate Social Responsibility through

establishing our “We Owe It to Egypt” Foundation
First Bank to launch standalone microcredit arm
First Bank to extend working hours till 5 pm

Transforming to address clients’

future needs requires technology
infrastructure of unimpeachable
security, flawless functioning and
a high degree of flexibility.
Many of AAIB’s 2018 customer service enhancements came

from the realm of technology. We laid the groundwork
to implement a new core banking system, which will
facilitate retail banking from any branch and across multiple
channels while streamlining processes and expediting many
Utilizing transactions. In other service upgrades, retail customers can
FORESIGHT
now elect to receive e-statements and choose their own
card PINs. Technology enables us to provide an integrated
digital experience, while preserving a high personal touch for
complex issues.
In 2019, we will leverage technology to even greater

as the catalyst for transformation advantage. Our strategic roadmap includes customer-facing
digital launches that address demand for enhanced speed
and convenience. The technology fueling improved efficiency
also yields abundant information that empowers insights into
specific customer needs.
The expanded data analytics made possible by technology

will strengthen our ability to anticipate what our clients want
and to proactively offer exquisitely tailored and relevant
experiences in real time.
An adaptive culture is a prerequisite

for proactive innovation.
Agility has always distinguished AAIB from its peers. For

decades, we’ve strived to remain several steps ahead of the
market as it has evolved.
Our market leadership is based on our abundant track record

of creating new products and related businesses that have
continually expanded the services and advice that we can offer
Capitalizing on our our clients. The many subsidiaries that we’ve built—such as
leasing, brokerage, asset management and mortgage finance—
AGILITY
enable us to serve our clients’ diverse needs for solutions in
a comprehensive manner, across sectors, geography and the
business cycle.
We’ve also earned early-mover status in initiatives that also

support Egypt’s development goals. We have been a key player
in renewable energy, financing the new solar park in Benban.
to respond to change and take We’re supporting new cities outside greater Cairo with savvy
expansion, and have just become the first bank with full-
advantage of new opportunities fledged, on-the-ground microfinance operations through our
new Sandah subsidiary.
Today, the pace of change is undeniably accelerating,

demanding more of both traditional banks and their clients.
We are proving equal to this challenge with our aggressive
integration of technology, which turbo-charges our ability to
innovate and to make deft adjustments as markets shift. By
setting information free, technology expands our understanding
of our clients and their needs, giving us the opportunity to
serve in a coordinated and deeply informed way.
At AAIB, agility means deploying speed, flexibility and

judgment to continually elevate our service offerings, making
life easier and better for our clients.
Change is non-negotiable, and so

is our commitment to our clients’
and our country’s success.
Going
ABOVE
AAIB was well ahead of the curve in anticipating clients’ desire
to incorporate social and ethical considerations into their
financial decisions. In 2005, we became the first Egyptian bank
to sign on to the UN Global Compact and since then have led
our industry in corporate social responsibility and sustainable
&
finance initiatives.
Today, the value of these commitments has become clear

to government and corporate decision-makers, who are
prioritizing projects that enhance economic and financial
inclusion and that have a positive impact on the environment.
BEYOND
One of our proudest 2018 accomplishments occurred at
the intersection of investment banking and “green” finance:
providing direct financing and contingent facilities to the
landmark renewable energy project underway in the city of
Benban, Upper Egypt. This project capitalizes on Egypt’s
enormous potential for solar energy and will ultimately become
the world’s largest solar farm, generating 15 gigawatts of
our customers’ needs today, electricity and reducing the country’s reliance on expensive
and polluting fossil fuels.
while transforming to exceed the Our early adoption of sustainable principles ultimately
expectations they’ll have tomorrow positioned us to participate in breakthrough projects like
Benban and to build a responsive subsidiary like Sandah. We
are confident that today’s transformation agenda will position
us to lead on future milestone initiatives.
In this era of accelerating change, transformation happens as

we continually and iteratively:
Analyze the environment to formulate a perspective on the future
Allocate resources and know-how to align with expected new realities
Anticipate,
Perfect our practice for maximum efficiency and results
And then do it again
innovate,
We’re transforming every aspect of our operations, from
corporate strategy to customer service, supported by our
investment in technology infrastructure.
optimize,
While we’ve historically been known as bankers to high-end
corporate clients, our strategic scope has broadened to include
consumer banking. Technology underpins the convenience,
security and mobility that is critical for retail banking success.
repeat
At the same time, tech-enabled data mining allows us to
closely observe trends and behavior in real time, to continually
refine our marketing propositions and to foster individual
customers’ emotional connection with the AAIB brand.
The opportunities made possible by technology have also

inspired internal restructuring. Corporate banking functions
that previously resided in silos are now interlinked so that
At AAIB, transformation isn’t a we can offer a more holistic suite of services to our clients.
one-time project—it’s an ongoing At the same time, we’ve sharpened our ability to work with
enterprises across the size spectrum with the creation of a
imperative. unit specializing in lending to SMEs.
Today, we’re primed to serve a highly dynamic and

demanding client base, leveraging our status as a financial
group offering not only retail, corporate and investment
banking, but also asset management, brokerage, mortgage
finance, leasing and microfinance.
IS THE WILL TO
TRANSFORM
ENOUGH TO PULL IT OFF?
At AAIB, no one is a spectator to

change. Identifying and preparing
to meet our clients’ future needs is
the job of every employee.
We ended 2018 with a headcount of 2,346 team members who

serve, advise and partner with our clients. Whether they are client-
facing or making things run smoothly behind the scenes, our
employees put relationships at the heart of everything they do.
Not quite. The will to transform Our team brings diverse yet complementary skills and points of
view. We are proud that more than 25% of our managers and
opens the door to the future. 36% of 2018 hires are females, and that we employ people with
disabilities.
OUR PEOPLE AAIB’s learning and development philosophy is founded on the

belief that our most profitable investment as an institution lies
in the development of our staff, who are the catalyst for AAIB’s
sustainable growth.
carry us through. Our annual employee retention rate of 94% is consistent
with a corporate culture in which employees both value the
opportunities they have at AAIB and feel valued for their
contributions.
Our employees’ outstanding productivity compared to peers

confirms that our team is truly exceptional.
AAIB Peer Average Productivity Ratios vs. Peers
97,868
74,670
36,314 37,955
31,024
15,858
Customer Net Loans / Employee Customer Deposits / Employee Assets / Employee

Our markets are brimming

with opportunity.
Some say that transforming a large, mature company can

be like turning an ocean liner. Others might say new market
entrants, unencumbered by legacy processes and habits forged
over decades, will have an advantage over incumbents.
GREAT
We say that our foresight and agility, in the context of a track
record of innovation and a strong service culture, are a potent
combination.
CHALLENGES
The opportunities are clear. In our home market, we see
robust potential in the expansion of the retail market as more
individuals open bank accounts. The country’s demographic
structure, which features a sizable segment of young adults, is
INSPIRE
another source of future growth, as are the smaller enterprises
that have the potential to expand economic activity and
participation.
The path to capitalize on these opportunities is also clear—
US
by enhancing our ability to respond. Flexible systems and
processes, shorter product development cycles, faster
decision-making and a willingness to experiment—that’s what
we mean when we speak of transformation.
Challenging? Yes. But worth all of our effort.
84% of the population remains unbanked
Young people ages 18-29 are more than 20% of the population
97% of the youth population use mobile phones
More than 5 million micro, small and medium enterprises in need of credit
2.3%
RETURN ON
AVERAGE ASSETS
$11.5 BILLION
$4.3 BILLION
TOTAL LOANS
417 IN ASSETS
ATMS
1% 6%
YOY
GROWTH YOY
GROWTH
93
BRANCHES
19.9%
OPERATING
RATIO
15.2% $1.9 BILLION

RETURN ON IN SHAREHOLDERS’
AVERAGE EQUITY EQUITY
$8.8 BILLION
TOTAL DEPOSITS
2%
YOY
GROWTH $264 MILLION
NET PROFIT
238,655
AAIB
TOTAL CUSTOMERS
3%
BY THE NUMBERS YOY
GROWTH
AS OF DECEMBER 31, 2018

Bader M. Al Humaidhi
Chairman
BOARD OF Sherif Mohamed Elwy

Vice Chairman &
Managing Director
Ibrahim Safwat Lotfy
Representative,
Central Bank of Egypt
DIRECTORS Sulaiman M. Al Wadaani

Representative, Kuwait
Investment Authority
Meshal M. Al Hammad
Representative, Kuwait
Investment Authority
May Aboul Naga Ahmed Ashraf

Representative, Ali Kouchouk
Representative,
Adnan S. Al Sager
Representative, Kuwait Salah El-Din El Baroudi
Investment Authority General Secretary to the Board
A More Encouraging
Business Climate
To our clients, business partners and shareholders,
On behalf of the Board of Directors, I am proud to report that AAIB recorded

impressive results in 2018 on a wide range of performance measures, further
strengthening its leadership position in the Egyptian banking market.
There were a number of positive developments in our home market in 2018. Egypt
posted its strongest GDP growth in over a decade at an estimated 5.3%, with even
higher growth expected for 2019. Unemployment declined from 12% to 10%, while
ongoing fiscal consolidation began to show results, with public revenues rising and
debt/GDP falling. The EGP/USD exchange rate remained stable at EGP 17.8/USD 1, and
key overnight lending rates, while still high in absolute terms, eased early in the year
and then held firm through year-end.
While headwinds remain, the business environment has undeniably improved.

Structural economic and fiscal reforms are supporting a sustainable path, as are
initiatives pertaining to Egypt’s Sustainable Development Strategy—Vision 2030.
In response, Moody’s upgraded its outlook on Egypt’s sovereign issuer rating from
Stable to Positive in August and subsequently upgraded the rating itself from B3 to
B2 in April 2019.
Egypt’s strong economic performance diverged from worldwide trends. Global

economic activity slowed notably in the second half of 2018, reflecting increasing
CHAIRMAN’S
trade tensions and tightening financial conditions. Overall global growth is expected to
slow in 2019, with advanced economies showing more pronounced deceleration than
emerging economies.
LETTER
Transformation Means
Building the Capabilities
for Future Success in a
Fast-Moving Marketplace
Sustained Profitable Growth, Solid Financial Our most pioneering accomplishment of 2018 was right person in Mr. Sherif Elwy, who was named Our progress in 2018 resulted from the
Position the launch of our newest subsidiary Sandah, which Vice Chairman and Managing Director of AAIB in commitment and hard work of AAIB’s more
is Egypt’s first standalone microfinance company November. Mr. Elwy joined AAIB last year from than 2,000 employees. I offer them my most
AAIB grew both loans and deposits in 2018, owned by a bank and represents a thoughtful Arab Bank, where he was country manager for sincere thanks as well as enduring support for
retaining its position as Egypt’s third-largest private end-to-end reinvention of the process of lending to the past four years. Before that, he was Vice the essential work of transformation ahead. My
bank by assets with a 3.8% market share. Operating micro-entrepreneurs. Chairman for business at the National Bank of gratitude also extends to our board members for
efficiency and productivity logged peer-group- Egypt for seven years with more than 10,000 their counsel and wisdom during a transitional
leading levels. Net profit for the year was USD On the technological front, we put into place employees under his management. In addition to year, and as always to our clients for the trust they
264 million, a gain of 3% over 2017, and return on systems to enhance sales, service, risk profiling his track record in our sector and his demonstrated have placed in us.
average assets was 2.3%. and enterprise connectivity, as well as made final leadership skills, he has served on the boards of
preparations for the implementation of a new core directors of several major companies. The AAIB Bader M. Al Humaidhi
AAIB’s balance sheet remains strong. We continued banking system and a new branching concept, the board of directors is confident in his ability to Chairman
our strategic direction of diversifying our loan digital kiosk, in 2019. initiate change and inspire our more than 2,000
portfolio, reducing the concentration of our fifty employees to excellence.
largest borrowers from 64% to 56% and assertively An Ambitious Agenda
pursuing the middle market. As of year-end, Additionally, I would like to welcome three new
we held a 4.2% share of the loans to customers Moving into 2019, AAIB’s Board of Directors is board members: Mr. Ibrahim Safwat Lotfy, Mr.
market. On the liability side, strong growth in united behind an agenda of transformation, in Ahmed Kouchouk, and Ms. May Aboul Naga, all of
current account deposits supported our strategy to which we continue to manage and shape our core whom represent the Central Bank of Egypt, one
increase access to inexpensive funding. business for growth, while building the capabilities of our major shareholders. I would like to thank
required for future success in an evolving Mr. Mahmoud Abdel Aziz, Ms. Lobna Helal, and
Our total equity stood at USD 1.9 billion, with a marketplace. In addition to our ongoing operations, Mr. Abdel Salam Al Anwar, whose terms ended in
return on average dollar-based equity of slightly we intend to expand our visibility in new market 2018, for their dedicated service as directors.
above 15%, indicating continued productive use segments. On the corporate banking side, that I would also like to thank Mr. Hassan Abdalla for
of capital to generate returns, while our capital means small and medium-sized enterprises, who his dedication over the past 16 years.
adequacy ratio reached 17.2%, far outstripping the have much to offer the economy as they grow.
10% baseline requirement. On the retail side, Egypt’s enormous digital-native Success Beyond Numbers
youth market presents compelling potential.
2018 Operational Highlights Addressing these currently underserved segments Social responsibility and ethical banking concerns
requires adapting to their needs and demands, have long been integrated into AAIB’s business
2018 was a year of relentless focus on our core rather than attempting to satisfy them with an model through our We Owe It to Egypt Foundation
business across all of our business lines. On the existing menu conceived for large corporate clients and our MOSTADAM platform. We took another
retail side, we continued to extend our reach with or financially established individuals. stride forward in 2018, joining 27 other leading
five new branches and 23 ATMs for a total of 93 global banks as founders of the UN Principles
branches and 417 ATMs, while our Corporate and Leading organizational transformation takes a for Responsible Banking, a framework for the
Institutional Banking Division executed deals with a unique mindset, outlook and set of traits and I am sustainable banking system of the future and a
total value of USD 200 million. delighted to announce that AAIB has found the means by which banks can demonstrate how their
business strategies are aligned with society’s goals.
What Is Driving the Need for

Transformation?
To our clients,
It is my privilege to write this first letter as the Vice Chairman and Managing Director of
Arab African International Bank.
2019 is a pivotal year for AAIB as we assess the future prospects for traditional financial
institutions. Opportunities are abundant but at the same time, the nature of banking is
changing at an accelerating rate. In order to capitalize on opportunities, defend against
competitive threats, and thrive in the future, AAIB must transform.
First of all, technology is increasingly shifting banking activities into the digisphere.
Consumers are demanding self-service options and young generations strongly prefer
tech-enabled convenience to visiting a branch. Digital ledger technology facilitates
fast and efficient global payments for businesses and potentially frees liquidity to go
anywhere.
VICE Second, the competitive landscape is shifting rapidly. Non-bank financial technology
companies (fintechs) are encroaching on traditional bank business with innovative
CHAIRMAN & business and service models and without the costly brick-and-mortar infrastructure of
established banks.
MANAGING And third, the formula for success as a bank has changed. For decades, banks have
built customer relationships through competitive pricing, products and branch
DIRECTOR’S
convenience. Going forward, reputation and market position will rest on fulfilled
expectations—delivering services when, where and how the customer wants them.
The winning banks of the future will be those that can devise not just a single winning
LETTER
formula, but rather tailor a winning formula for each individual customer.
We need to radically reconsider the customer experience, for both retail and corporate
clients. Incremental change and adjustment at the margins will no longer suffice.
We Assess the
Future Prospects for
Traditional Financial
Institutions
What will it take to transform? core system, we will make other investments in card. Digital wallets are wins all around. They’re More convenience, more personalization, better
technology to stay on our forward foot, able to free to users, they save time because information is service—these are just a few examples of the
Our recipe for transformation has three main respond to opportunity, across our financial group. entered only once, and they protect individuals with concrete ways in which transformation will drive
ingredients: foresight, technology infrastructure, and encryption and security measures. Merchants love change at AAIB.
agility. AAIB has immense human capital. Nurturing them because they protect against fraud and reduce
organizational agility means equipping our educated the frequency of abandoned transactions. We are Every day, our clients’ best interests motivate us in
Before joining AAIB, I long admired its well-known and empowered employees with clearly defined working hard to launch this service in 2019. everything we do. We are proud to be your partner.
history of setting tone and trend for the Egyptian objectives, disciplined processes and the tools they On behalf of our entire workforce, I would like to
banking market, of being an early adopter of need to bring transformational projects to fruition— Marketing and sales used to be about casting a thank you for placing your confidence in AAIB and
visionary advances in our industry. The instinct to and then unleashing their talent and energy to wide net with offers aimed at the average customer. I look forward to updating you in next year’s annual
look to where the market is heading is ingrained here. redefine modern banking. Having state-of-the-art technology will improve report on the progress of our transformation agenda.
As the person tasked with executing transformation, our ability to tailor value propositions that fulfill the
I intend to leverage that existing habit of foresight, What will transformation look like? needs and aspirations of the individual customer, Sherif Elwy
integrate it into all aspects of our operations, and whether retail or corporate. Because the needs of Vice Chairman and Managing Director
harness it to faster, highly disciplined execution of AAIB’s transformation will enhance our ability to small and medium enterprises can be more diverse
innovation, without compromising the excellence of serve our customers in appealing new ways. For than the needs of large enterprises, technology will
our existing business. example, in 2019 we plan to launch our first digital improve our service to them as well.
kiosk, which is an unmanned standalone branch that
In five years’ time—possibly sooner—technology customers can use for transactions that go beyond With increased adoption of digital channels,
will be the differentiator between banks that are what can be accomplished with an ATM. Going particularly among younger individuals, the role of
thriving and banks that have withered. No one will forward, always-open digital kiosk in highly trafficked the branch in banking will evolve. As transactions
be able to compete without a robust yet flexible locations can enhance customer convenience at a increasingly shift online, the branch is becoming the
suite of technology that can support the myriad much lower operational cost than a staffed brick- place where customers seek and receive advice on
ways customers want to interact, that is scalable and-mortar brand. financial matters, such as in our Wealth Management
and secure and always available. In 2019 we will hubs. While tactical branch placement will still occur
implement a new core banking system that will Another example of a transformational innovation in the future, aggressive branching strategies are a
upgrade our service, sales, and data management is the digital wallet, which enables consumers to thing of the past.
capabilities to a new level. In addition to our make electronic transactions without a physical
BUSINESS
MOMENTUM
Treasury & Capital Markets
In 2018, AAIB’s Treasury and

Capital Markets (TCM) division
maintained its position as the
leading licensed Primary Dealer
in Egypt and remained among
the five most active domestic
banks in the primary and
secondary markets.
Corporate & Institutional
Banking Division At the same time, TCM managed the bank’s own portfolio in
a manner that optimized yield while exceeding all regulatory
requirements pertaining to liquidity. At year end, TCM was
responsible for USD 7.1 billion in assets under management and a
fixed income portfolio of USD 3.1 billion. Annual turnover was USD
16.6 billion, an increase of approximately 36% over 2017.
AAIB capitalized on its solid leadership in the
TCM’s knowledge of regional and global markets, ability to tune into
Egyptian bank ecosystem in 2018, executing more client needs, and optimal execution make us a trusted partner for both
than USD 200 million in new deals (syndicated traditional and customized financing solutions. Our work with clients
ranges from plain-vanilla cash management and foreign exchange to
loans, securitization bonds and other transactions) sophisticated yield enhancement and hedging instruments such as
our “Fix & Forward” contract. Our trading floor is staffed by one of the
for both private and public sector institutions in an most experienced and well-credentialed teams in the region.
array of industries.
Noteworthy among these transactions was a new providing full-service capital markets advisory
syndicated facility agreement of LE 7 billion for a services. Our demonstrated expertise in
leading chemical manufacturer and producer. This organizing debt funding paired with our strong
deal was one of the largest ever granted to a Public network of relationships with other top-tier
Sector Ministry company. AAIB served as Initial financial institutions have made us a top choice
Mandated Lead Arranger, Underwriter, Book-runner, for corporate clients. Historically, large corporate
Security Agent, Account Bank, and Debt Service clients have been our focus. Going forward, we are
Reserve Account Bank. broadening our scope to include small and medium
enterprises (SMEs), which we see as offering
AAIB has long distinguished itself in the domestic essential fuel to the continued development of a
market as one of the few commercial banks well-rounded and sustainable economy.
Retail Banking and Wealth Management
2018 was a year of growth on a wide range of retail

banking measures. Retail assets and liabilities posted AAIB - UAE
double-digit growth year over year, while we increased
the number of physical touchpoints to 510: 93
branches and 417 ATMs. AAIB also operates four elite AAIB’s UAE branches are
Wealth Management hubs in Cairo and Alexandria to powerhouses, representing 14% of
offer an enhanced banking proposition and advisory total bank assets and contributing
services to high net worth individuals. 16% of net profit.
We implemented numerous customer-facing AAIB has been meticulously planning for a AAIB - UAE, which offers corporate and retail banking along with
improvements that make AAIB even better to digital transformation to expand the unmatched treasury, logged several key firsts in 2018, including offering structured
do business with, such as launching a dollar- services we provide to our customers. In 2018, we finance products to facilitate carry trades and rolling out Real Estate
denominated debit card, introducing e-statements, implemented new initiatives that increased the Trust Accounts. Landmark transactions included providing 40% of the
and making online transactions more secure with volume and number of transactions in the Point funding for an AED 300 million syndicated real estate loan.
MasterCard Secure Code. of Sale (POS) and e-commerce channels by 41%
and 30%, respectively. These initiatives included
Our Western Union business continued to grow at a contactless acceptance on POS, installment option
healthy rate. on POS, and introduction of the Smart POS as well
as new multi-currency terminals. We are working
We also attracted new payroll company to introduce further advanced solutions to the
relationships and new merchant relationships, both market in the coming period.
of which offer excellent cross-selling opportunities.
AAIB
ARAB AFRICAN
INTERNATIONAL BANK
AAIH AAIMF AAIL Sandah For

Arab African Arab African Int’l Arab African Int’I Microfinance
Investment Holding Mortgage Finance Leasing Capital Capital
Capital Capital EGP 100 MM EGP 115 MM
EGP 65 MM EGP 110 MM
AAIB shareholding AAIB Shareholding
AAIB shareholding AAIB shareholding 99.0% 70%
90.0% 95.5%
SUBSIDIARIES AAIM
Arab African
Investment Management Capital
EGP 10 MM
AAIH shareholding
89.5%
AAIS
Arab African
International Securities Capital
EGP 41.6 MM
AAIH shareholding
99.9%
Other
Investments
Investment Management
Securities Brokerage
Arab African Investment Management (AAIM) is one
of the fastest-growing asset management companies
in Egypt. In 2018, AAIM grew its assets under Our brokerage subsidiary, Arab African International Securities (AAIS),
improved its market share in 2018 to 1.9%, and advanced to rank 14th
management by more than 80% to EGP 5.6 billion. Its by turnover among brokerage firms in Egypt. Historically focused
on retail clients, AAIS created an institutional desk in 2018 and by
four open-ended investment funds—Shield (equities), year-end, institutional clients represented 55% of total value traded.
Juman (money market), Gozoor (fixed income) and AAIS also established an equity research department, which currently
covers 20 companies listed on the Egyptian Stock Exchange.
Guard (capital protection)—produced attractive
returns for clients.
AAIM also manages separate portfolio accounts Egyptian institutions including pension funds and
across asset classes, tailored to specific investment insurance companies.
objectives for high net worth individuals and major
Mortgage Finance
Leasing
Arab African International Mortgage Finance
(AAIMF) disbursed EGP 290 million in new Arab African International Leasing (AAIL), one of the top ten players in
mortgage loans in 2018, capturing a 13% share the market, increased its portfolio of leased assets from LE 2.7 billion
in 2017 to LE 3.2 billion in 2018 (through direct and indirect lease
of mortgage lending market volume. AAIMF transactions). Large corporate clients have historically represented
distinguishes itself from its competitors with a AAIL’s main target market; however the company has diversified into
the SME market to expand its reach. Consequently, its presence in the
disbursement cycle as short as five business days machinery and equipment asset class has noticeably expanded.
and with extensive borrower advisory services.

AAIMF has completed its fourth year with almost
no nonperforming loans in its portfolio, illustrating
that nimble loan decision-making doesn’t mean
sacrificing robust due diligence.
Leading By Example
We work to create value for our communities and

country through our sustainable finance initiatives
and corporate philanthropy.
AAIB has long been the Egyptian bank industry’s date the AUC V-Lab has given birth to more than
thought leader, signing on the U.N. Global Compact 100 startups that have in turn created more than
in 2005, the London Benchmark Group in 2007 and
the Equator Principles in 2009.
500 jobs.
Sandah
MOSTADAM is an initiative founded in 2014 by
In 2018, we set the leadership bar even higher, AAIB in conjunction with the U.N. Development
becoming one of the 28 founding banks of the Program and the Egyptian Corporate Responsibility
U.N. Environmental Program Finance Initiative, Center to groom a new generation of bankers
Sandah, AAIB’s microfinance subsidiary, started operations in July
which requires target-setting, disclosure and oriented to the integration of finance with the
2018 and by year-end had made EGP 38 million in loans to more than
accountability pertaining to the Initiative’s environment, society and responsible governance.
1,000 borrowers in Sohag, Minya and Tanta. Sandah differentiates
Principles for Responsible Banking. Sixty-five young bankers from different Egyptian
itself from traditional microlenders with a diverse product portfolio,
banks participated in the program this year.
accelerated turnaround time and customer care and support. We
Investment in renewable energy plays a strategic
see Sandah not only as a profitable venture but also as another pillar
role in sustainable development. We were an AAIB also participated in several environmental
in our corporate social responsibility framework, as it contributes
integral part of the financing of what is expected to projects focused on the clean-up of plastic waste
to financial inclusion, reduces poverty and unemployment, and
become the world’s largest solar park near Aswan from the coast and other environmentally fragile
enhances broader economic well-being.
and actively seek opportunities to finance projects sites.
that contribute to a cleaner, healthier environment.
AAIB’s “We Owe It to Egypt” Foundation was
Support for entrepreneurship is another aspect created in 2007 to support the expansion and
of our leadership. In 2013 AAIB co-founded the refinement of systems of care in public sector
American University in Cairo Venture Lab (AUC hospitals in Egypt. The Foundation engages in a
V-Lab), a start-up accelerator that provides support robust set of activities and donations to problem-
for entrepreneurs, and provides financial and in- solve, automate, equip and boost into excellence
kind support as well as mentoring and advice. To facilities around the country.
CORPORATE
GOVERNANCE
The common goal

of AAIB’s Board,
management and
staff is to achieve
business growth,
sustainability,
profitability, and
AAIB’s Board of Directors consists of eight qualified members: seven
non-executive directors (NEDs) including the Chairman of the Board
and one Executive Director. This structure is consistent with best
practice and CBE directives, which recommend the separation of the
maximize AAIB’s
chairman and chief executive functions.
The Board is responsible for the overall stewardship of the Bank,

including establishing AAIB’s strategic direction, overseeing the
value in the medium

achievement of its long-term goals, and monitoring the effectiveness
of internal controls. The Board of Directors is also responsible for
ensuring that business activities are aligned with the interests of
to long term.
AAIB’s main stakeholders and within the framework of governing laws
and regulations and the Bank’s approved policies.
During 2018, the terms of three non-executive board members

ended. In June, Mr. Mahmoud Abdul Aziz Mahmoud was succeeded
by Mr. Ibrahim Safwat Lotfy and Ms. Lobna Helal was succeeded by
Mr. Ahmed Kouchouk. In October, Mr. Abdel Salam Al Anwar was
succeeded by Ms. May Aboul Naga. These three board positions
represent the interests of the Central Bank of Egypt, whose ownership
position equals 49.37%.
Additionally, the previous incumbent Vice Chairman and Managing

Director, Mr. Hassan Abdalla, was succeeded in November by current
incumbent Mr. Sherif Elwy.
Going forward, the Board of Directors will meet eight times per year,
in accordance with revised Central Bank of Egypt requirements.
The board is
responsible for the
overall oversight of
the Bank
Board Membership
Director Shareholder Affiliation Executive
Mr. Bader M. Al Humaidhi

KIA
Chairman of the Board
Mr. Sherif Elwy

CBE x
Vice Chairman & Managing Director
Mr. Meshal M.N. Al Hammad KIA
Mr. Sulaiman M. Al Wadaani KIA
Mr. Adnan Al Sager KIA
Mr. Ahmed Kouchouk CBE
Mr. Ibrahim Safwat Lotfy CBE
Ms. May Aboul Naga CBE

In 2018, AAIB continued its record of accomplishments in

complying with both local and international regulations
while also finalizing preparations for the implementation of
the new International Financial Reporting Standard (IFRS) 9
accounting standards.
In early 2018, the Central Bank of Egypt announced that

beginning in fiscal year 2019, all Egyptian banks will be
required to present their financial statements in accordance
with IFRS 9. IFRS 9 aligns the measurement of financial assets
with future economic scenarios and the bank’s business model,
and requires the evaluation of how economic and credit
changes will affect portfolios, capital and loss provision levels.
The requirements of IFRS 9 are substantially different from IAS
39 and necessitate a new approach to categorizing, staging
and assessing the bank’s assets and computing the required
RISK
provisioning using risk-based methodologies.
AAIB’s Risk Management Group has devoted significant

attention and resources to developing a concrete process and
MANAGEMENT
solid infrastructure for seamless implementation. Working with
internationally renowned consultants, the Risk Management
Group together with all stakeholders developed prudent
methodologies to define default probabilities for all asset
classes. Complex statistical and economic models are applied
to determine exposures at default, define loss-giving defaults
and estimate expected credit loss by asset.
In April 2019, months of dedicated efforts by all stakeholders

culminated in the successful validation of applied methodologies
and related results by external parties. In May 2019, AAIB’s board
of directors approved the implementation and introduction of
related policies.
Accordingly, AAIB’s Risk Management Group has achieved

another milestone in its continued support of AAIB’s asset
management capabilities and in its contributions to the
preservation of shareholder value within a comprehensive yet
business-supporting risk management framework.
FINANCIAL
STATEMENTS
To: The Shareholders of “Arab African International misstatement.

Bank”
An audit involves performing procedures to
Report on the separate financial statements obtain audit evidence about the amounts and
disclosures in the separate financial statements. Report on Other Legal and Regulatory
We have audited the accompanying separate
financial statements of Arab African
The procedures selected depend on the auditors’
judgment, including the assessment of the
Requirements
International Bank “Egyptian joint stock risks of material misstatement of the separate
company” which comprise the balance sheet financial statements, whether due to fraud or
as of “31 December 2018” and the statements error. In making those risk assessments, the
of income, changes in equity and cash flow auditors consider internal controls relevant to Nothing has come to our attention that indicated that the Bank materially violated any
statement for the year then ended and a the Bank’s preparation and fair presentation of of the provisions of Law No. 88 of 2003 during the year ended 31 December 2018.
summary of significant accounting policies and the separate financial statements in order to
other explanatory notes. design audit procedures that are appropriate in The Bank keeps proper financial records, which include all that is required by the
the circumstances, but not for the purpose of law and Bank’s statute and the accompanying separate financial statements are in
Management’s Responsibility for the separate expressing an opinion on the effectiveness of the agreement therewith.
financial statements Bank’s internal controls.
The financial information included in the Board of Directors report are in agreement
These separate financial statements are An audit also includes evaluating the with the Bank’s accounting records within the limit that such information is
the responsibility of bank management. appropriateness of accounting policies used and recorded therein.
Management is responsible for the preparation the reasonableness of accounting estimates made
and fair presentation of these separate financial by management, as well as evaluating the overall
statements in accordance with the rules of presentation of the separate financial statements.
preparation and presentation of the Bank’s
separate financial statements issued by the We believe that the audit evidence we have
Central Bank of Egypt on 16 December 2008 and obtained is sufficient and appropriate to provide
with the requirements of applicable Egyptian a basis for our audit opinion.
laws and regulations.
Opinion Ashraf Emil Botros Aziz Maher Aziz Barsoum
This responsibility includes designing, Egyptian Financial Supervisory Egyptian Financial Supervisory Authority
implementing and maintaining internal controls In our opinion, the accompanying separate financial Authority registration number “81” registration number “228”
relevant to the preparation and fair presentation statements present fairly, in all material respects,
of separate financial statements that are the financial position of “Arab African International E.Y - Ernst & Young KPMG Hazem Hassan
free from material misstatement, whether Bank” as of 31 December 2018, and of its financial Public Accountants & Consultants Public Accountants & Consultants
due to fraud or error; selecting and applying performance and its cash flows for the year then
appropriate accounting policies; and making ended in accordance with the rules of preparation Cairo, 25 February 2019
accounting estimates that are reasonable in the and presentation of Bank’s separate financial
circumstances. statements issued by the Central Bank of Egypt on
16 December 2008 and with the requirements of
Auditors’ Responsibility applicable Egyptian laws and regulations.
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 comply with ethical
requirements and plan and perform the audit to
obtain reasonable assurance whether the separate
financial statements are free from material
Arab African International Bank Arab African International Bank

(Egyptian joint stock company) (Egyptian joint stock company)
Separate balance sheet as at 31 December 2018 Separate statement of income for the year ended 31 December 2018
Note 31 December 2018 31 December 2017 Note 31 December 2018 31 December 2017
US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000
Assets Interest Income & Similar revenues (6) 1,121,797 941,029

Cash and due from Central Banks (15) 612,535 564,902 Interest Expense & Similar costs (6) (777,228) (624,663)
Due from banks (16) 3,204,281 3,363,108
Net interest income 344,569 316,366
Treasury bills (17) 2,714,799 2,953,789
Fees & Commission income (7) 83,349 87,601
Trading investment (18) 5,168 7,793
Fees & Commission expenses (7) (2,546) (2,409)
Loans to customers (22) 4,269,266 4,237,112
Loans to Banks (21) 999 - Net Fees & Commission income 80,803 85,192
Financial Investments: Dividend income (8) 783 3,347
Available for sale investments (19) 59,450 75,393 Net trading income (9) 29,782 27,966
Held to maturity investments (19) 386,615 437,465
Impairment charge for credit losses (10) (53,244) (22,002)
Investments in subsidiaries and associates (24) 46,251 44,427
Gain on financial investments (19) 53,386 4,509
Investment properties (20) 2,230 2,270
Intangible assets (28) - 437 Administrative expenses (11) (98,968) (71,280)
Other assets (25) 138,615 183,833 Other operating expense (12) (11,257) (9,137)
Deferred tax assets (26) 2,151 4,652 Net Profit before income tax 345,854 334,961
Fixed assets (net of accumulated depreciation) (27) 63,463 58,794
Income tax expense (13) (81,549) (79,458)
Total assets 11,505,823 11,933,975
Net profit for the year 264,305 255,503
Liabilities & owners’ equity
Earnings per share ( dollar / share ) (14) 2.40 2.38
Liabilities
Due to banks (29) 450,036 843,369 * The accompanying notes from (1) to (48) form an integral part of these financial statements and are to be read therewith.
Customers’ deposits (30) 8,778,470 8,583,685
Other liabilities (31) 233,254 291,656
Loans and facilites from banks (32) 117,500 130,000
Other provisions (33) 25,055 37,772
Current income tax liabilities (34) 23,989 29,149
Retirement benefit obligations (35) 4,580 3,904
Subordinated deposits (36) - 300,000
Total liabilities 9,632,884 10,219,535
Owners’ Equity
Paid-in capital (37) 500,000 500,000
Reserves (38) 236,369 249,306
Retained earnings (38) 1,136,570 965,134
Total owners’ equity 1,872,939 1,714,440
Total liabilities and owners’ equity 11,505,823 11,933,975
* The accompanying notes from (1) to (48) form an integral part of these financial statements and are to be read therewith.
Sherif Elwy Bader M. Al Humaidhi

Vice Chairman and Managing Director Chairman
Arab African International Bank Arab African International Bank

(Egyptian joint stock company) (Egyptian joint stock company)
Separate statement of Changes in owners’ equity for the year ended 31 December 2018 Separate statement of cash flows for the year ended 31 December 2018
Paid In Retained Note 31 December 2018 31 December 2017

Reserves Total
Capital Earnings
US$ ‘000 US$ ‘000
US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000
Cash Flows from Operating Activities
Balance as at 31 December 2016 -Before appropriation 100,000 152,838 1,258,358 1,511,196
Profit before income tax 345,854 334,961
Dividends of the year ended 2016 - - (65,585) (65,585)
Adjustments to reconcile net profit to net
Balance as at 31 December 2016 -After appropriation 100,000 152,838 1,192,773 1,445,611 cash provided from operating activities
Bank risk reserve - (16) (47) (63) Depreciation and amortization (11) 9,475 8,573
Currencies translation differences - 7 - 7 Impairment charge for credit losses (10) 54,517 20,730
Capital Reserve - 51 (51) - Other provision charges (12) 2,481 3,030
Transferred to IFRS 9 risk reserve - 83,044 (83,044) - Other provisions charges expcept loans
(33) (15,126) (4,849)
Net change in fair value of available for sale 13,382 13,382 provisions
Impairment charge in Financial
Transferred from Retained Earnings to Paid in Capital 400,000 - (400,000) - (19) (1,017) 68
Investments Available for Sale
Net Profit as at 31 December 2017 - - 255,503 255,503
Impairment charge in Investments in
(19) 211 -
Balance as at 31 December 2017 500,000 249,306 965,134 1,714,440 subsidiaries and associates
Balance as at 31 December 2017 -Before appropriation 500,000 249,306 965,134 1,714,440 Impairement charge in Financial
(19) (1,273) 1,272
Investemnts Held to maturity
Transferred to legal reserve - 25,545 (25,545) -
Gain on sale of investments - available for
Dividends of the year ended 2017 - - (67,285) (67,285) (19) (51,050) (2,850)
Sale
Balance as at 31 December 2017 -After appropriation 500,000 274,851 872,304 1,647,155 Cash dividends (8) (783) (3,347)
Banking risks reserve - (7) (14) (21) Gain on sale of Fixed assets (12) (25) (133)
Currencies translation differences - 16 - 16 Retirement benefit obligations changes (35) 5,978 3,396
Capital Reserve - 25 (25) - Employee benefits (35) (5,302) (4,757)
Reclassification of Available for sale reserve - 1,110 - 1,110 Gain / loss of monetary assets & liabilities
(19) 4,782 (9,764)
Net change in fair value of available for sale - (39,626) - (39,626) revaluation Difference
Net Profit as at 31 December 2018 - - 264,305 264,305 Gain Operating profit before changes in assets
348,722 346,330
and liabilities provided from operating activities
Balance as at 31 December 2018 500,000 236,369 1,136,570 1,872,939
Net Decrease (Increase) in Assets and Liabilities
* The accompanying notes from (1) to (48) form an integral part of these financial statements and are to be read therewith. Due from banks 14,094 72,018
Treasury bills 295,147 (760,114)
Trading financial Investment 2,625 (1,407)
Loans and advances to customers & banks (90,124) (727,207)
Derivative financial instruments (net) - 52
Other assets 52,984 (54,802)
Due to banks (393,333) (14,484)
Customers’ deposits 194,785 1,533,475
Other liabilities (71,182) 82,389
Income taxes paid (84,233) (62,506)

Arab African International Bank

Note 31 December 2018 31 December 2017
(Egyptian joint stock company)
Net cash flows resulted from operating activities 269,485 413,744
Cash Flows From Investing Activities Separate statement of proposed appropriation for the year end as at 31 December 2018
Purchase securities other than trading (19) (105,290) (61,272)

31 December 2018 31 December 2017
Sale / redemption of securities other than
175,103 43,073 US$ ‘000 US$ ‘000
trading
Gain on sale of Financial assets available for Net profit for the year 264,305 255,503
51,050 2,850
sale
Added / Deducted:
Investments in subsidiaries and associates (1,823) (2,252)
General banking risks reserve (14) (47)
Gain on sale of Fixed assets 25 133
Gain on sale of fixed assets transferred to
(25) (51)
Proceeds from dividends paid 783 3,347 capital reserve
Purchase of fixed assets and branches Net profit for the year available to distribution 264,266 255,405
(13,462) (7,977)
leasehold improvements
Add / Subtract
Net cash flows resulted from (used in)
106,386 (22,098) Transferred to IFRS 9 risk reserve** - (83,044)
investing activities
Cash Flows from Financing Activities Retained earnings at beginning of the year 872,304 1,192,773
Loans and advances from Banks (12,500) 30,000 Transferred to paid in capital* - (400,000)
Subordinated deposits (300,000) - Total 1,136,570 965,134
Cash dividends paid (38) (67,285) (65,585) Appropriated as follows:
Net cash flows( used in ) financing activities (379,785) (35,585) Legal reserve 26,428 25,545
Net decrease in cash and cash equivalents Shareholders profit distribution (Part 1) 100 50,000
(3,914) 356,061
during the year
Shareholders profit distribution (additional
Cash and cash equivalents at the beginning of 49,900 50,000
4,055,734 3,699,673 part)
the period
Board of directors remuneration 585 585
Cash and cash equivalents at the end of the
4,051,820 4,055,734 Distributions of employees 23,774 16,700
period
Cash and cash equivalents are represented in: Retained earnings at end of the year 1,035,783 872,304
Cash and due from Central Banks 612,535 564,902 Total 1,136,570 965,134
Due from banks 3,204,281 3,363,108

* On September 12, 2017, the Extraordinary General Meeting of Arab African International Bank shareholders approved
Treasury bills 2,714,799 2,953,789 the increase of the bank’s authorized capital from 500 million USD to 1 billion USD and amended the statement of
Balances with the Central Banks limited to the Article (6) of the Bank’s Articles of Association. Also the increase of the issued and paid in capital from 100 million
(533,727) (469,237) USD to 500 million USD of the retained earning represented in 100 million shares of 5 USD par value.
reserve ratio
Deposits with banks (matured over than three
(141,419) (253,251) ** The IFRS 9 risk reserve is composed of 1% of the total credit risk weighted by the net profit after tax for 2017 in
months)
accordance with the instructions of the Central Bank of Egypt issued on 28 January 2017 and is only used with the
Treasury bills (matured over than three months) (1,804,649) (2,103,577) approval of the Central Bank of Egypt
Cash and cash equivalents at the end of the
(46) 4,051,820 4,055,734
period
* The accompanying notes from (1) to (48) form an integral part of these financial statements and are to be read therewith.
1. General Information B.2. Associates and losses resulting from the settlement of such foreign exchange resulting from the assessment
transactions are recognized in the following items of net investment in foreign branches, loans and
Arab African International Bank (Egyptian Joint Associates are all entities over which the Bank in the income statement: financial instruments in foreign currency to cover
Stock Company) is established by special law has direct or indirect significant influence but not the investment with the same item, recognition
No. 45 for 1964 in the Arab Republic of Egypt. control, generally accompanying a shareholding of • Net trading income for trading assets and of these differences in the income statement on
The Bank carries out all commercial and banking between 20% and 50% of the voting rights. liabilities or net income from financial disposal of foreign branches as the part of other
services. The address of its Head office is as instruments designated at fair value through operating income (expense).
follows: 5 Midan Al-Saray Al Koubra, Garden City, Purchase method of accounting has been applied profit or loss for instruments designated at fair
Cairo. The Bank is not listed in the Egyptian stock to all the acquisition operations. The cost of value through profit or loss according to its E. Financial assets
exchange. acquisition is measured by fair value or the type;
assets offered/ issued equity securities/ liabilities • Other operating income (expense) for the rest The Bank classifies its financial assets in the
Arab African International Bank (Egyptian Joint incurred/ liabilities accepted in behalf of the of items; following categories: financial assets at fair value
Stock Company) provides retail, corporate acquired company, at the date of the exchange, • Changes in the fair value of monetary securities through profit or loss; loans and receivables; held
banking and investment banking services in Egypt plus costs directly attributed to the acquisition. denominated in foreign currency classified to maturity financial assets; and available-for-
and abroad through 93 branches and units, its Identifiable assets acquired and liabilities and as available for sale (debt instruments) are sale financial assets. Management determines
Head Office and network of branches in the Arab contingent liabilities assumed in a business analyzed between translation differences the classification of its investments at initial
Republic of Egypt (89 branches and units), United combination are measured initially at fair values resulting from changes in the amortized cost of recognition.
Arab Emirates (two branches) and (one branch) at the acquisition date, irrespective of the extent the security and other changes in the carrying
in Lebanon and employs 2,346 employees at the of any minority interest. The excess of the cost of amount of the security. Translation differences E.1. Financial assets at fair value through profit
balance sheet date. acquisition over the fair value of the Bank’s share related to changes in the amortization costs are or loss
of the identifiable net assets acquired is recorded recognized in the income statement, and other
These financial statements were approved by the as goodwill. If the cost of acquisition is less changes in the carrying amount are recognized This category includes: financial assets held for
Board of Directors on 19 February 2019. than the fair value of the net assets of the entity in equity (fair value reserve - investments trading, and those designated at fair value through
acquired, the difference is recognized directly in available for sale); profit or loss at inception.
2. Summary of significant accounting policies the income statement into other operating income • Translation differences on non-monetary items,
(expenses). such as equities held at fair value through profit A financial asset is classified as held for trading
The principal accounting policies applied in the or loss, are reported as part of the fair value if it is acquired or incurred principally for the
preparation of these financial statements are set In the separate financial statements, investments gain or loss. Translation differences on non- purpose of selling or repurchasing in the near term
out below. These policies have been consistently in subsidiaries and associates are accounted for monetary items, such as equities classified as or if it is part of a portfolio of identified financial
applied to the years presented, unless otherwise using the cost method. According to this method, available for sale financial assets, are included in instruments that are managed together and for
stated. investments are recognized by the acquisition cost the fair value reserve in equity. which there is evidence of a recent actual pattern
including goodwill and deducting any impairment of short-term profit-taking. Derivatives are also
A. Basis of preparation losses. Dividends are recognized in the income D.2. Foreign branches categorized as held for trading unless they are
statement when they are declared and the Bank’s designated as hedging instruments.
The separate financial statements of the Bank right to receive payment is established. The Bank translates results of business and
have been prepared in accordance with the rules financials for foreign branches to presentation Financial assets are designated at fair value
of preparation and presentation approved by the C. Segment reporting currency (if they don’t operate in accelerating through profit or loss when:
Central Bank of Egypt on 16 December 2008, inflation economy) in which different functional
under the historical cost convention modified to A business segment is a group of assets and currency from the presentation currency of the • Doing so reduces measurement inconsistencies
re-evaluate financial assets and financial liabilities operations engaged in providing products or Bank as follows: that would arise if the related derivative was
held for trading, financial assets and financial services that are subject to risks and returns treated as held for trading and the underlying
liabilities classified at inception at fair value that are different from those of other business Translation of assets and liabilities at each financial financial instruments were carried at amortized
through profits or losses and financial investments segments. A geographical segment is engaged in statement presented to the foreign branch using cost for such as loans and advances to banks
available for sale, and all derivative contracts. providing products or services within a particular the closing price on the date of this financial and clients, and debt securities in issue;
economic environment that are subject to risks statement. • Certain investments, such as equity investments
B. Subsidiaries and associates and returns different from those of segments that are managed and evaluated on a fair
operating in other economic environments. Translation of income and expenditure in each value in accordance with a documented risk
B.1. Subsidiaries income statement presented using the average management or investment strategy, and
D. Foreign currency translation exchange rates, only if the average doesn’t reported to key management personnel on that
Subsidiaries are all entities (including special represent an acceptable approximation of the basis are designated at fair value through profit
purpose entities) over which the Bank has D.1. Transactions in foreign currencies cumulative effect of the rates applicable in and loss;
owned directly or indirectly the power to govern The Bank maintains its accounts in US dollars. the date of transaction, then the translation of • Financial instruments, such as debt
the financial and operating policies, generally Foreign currency transactions are translated using income and expense will be by using exchange instruments held, containing one or more
accompanying a shareholding of more than the exchange rates prevailing at the date of the rate at the transaction date. embedded derivatives, significantly modify the
one half of the voting rights. The existence and transactions. All monetary assets and liabilities cash flows are designated at fair value through
effect of potential voting rights that are currently balances in foreign currencies at the balance Recognition of currency differences resulting in profit and loss.
exercisable or convertible are considered when sheet date are translated at the exchange rates a separate item (foreign exchange transaction
assessing whether the Bank controls another prevailing at that date. Foreign exchange gains differences)in equity, also transfer to equity Gains or losses arising from changes in the fair
entity. value of the financial derivatives that are managed
with financial assets and liabilities are recorded at trade-date, the date on which the Bank commits applicable from Available for sale to Loans and G. Derivative financial instruments
initiation with fair value through profits and losses to purchase or sell the asset. receivables or Held to maturity financial assets Derivatives are recognized at fair value at the date
in the income statement. as the Bank has an intention to hold them for of the derivative contract, and are subsequently
Financial assets are initially recognized at fair the perspective future or to the maturity date. revaluated at fair value. Fair values are obtained
The Bank shall not reclassify a derivative out of value plus transaction costs for all financial assets Reclassifications are made at fair value as of the from quoted market prices in active markets,
the fair value through profit or loss category while not carried at fair value through profit or loss. reclassification date and any profits or losses or according to the recent market deals, or the
it is held or issued, shall not reclassify any financial Financial assets carried at fair value through profit related to these assets to be recognized in the revaluation methods as the discounted cash
instrument out of the fair value through profit or loss are initially recognized at fair value, and owners’ equity as follows: flow modules and the pricing lists modules, as
or loss category if upon initial recognition it was transaction costs are expensed in the income appropriate. Derivatives are carried as financial
designated by the entity as at fair value through statement in net trading income. Financial assets 1. In case of the financial asset which has assets when the fair value is positive and as
profit or loss. are derecognized when the rights to receive cash fixed maturity date, profits and losses are financial liabilities when the fair value is negative.
flows from the financial assets have expired or amortized over the remaining period of
In all cases, the Bank shall not reclassify any where the Bank has transferred substantially all the held to maturity investments using The embedded financial derivatives into other
financial instrument into the fair value through risks and rewards of ownership. Financial liabilities the effective interest rate. Any difference financial instruments like convertible bonds should
profit or loss category or to the held for trading are derecognized when they are extinguished between the value using amortized cost and be treated as if they are separate derivatives when
category after initial recognition. − that is, when the obligation is discharged, the value based on the maturity date to be the economic characteristics and risks of the
cancelled or expires. amortized over the financial asset remaining embedded derivative are not closely related to
E.2. Loans and receivables period using the effective interest rate the economic characteristics and risks of the host
Available for sale financial assets and financial method. contract, and the hybrid (combined) instrument
Loans and receivables are non-derivative financial assets at fair value through profit or loss are 2. In case of the financial asset which does not is not measured at fair value with changes in fair
assets with fixed or determinable payments that subsequently carried at fair value. Loans and have fixed maturity date, profits and losses value recognized in profit or loss. The embedded
are not quoted in an active market, other than: receivables and held-to-maturity investments are remain in the owners’ equity till the selling derivatives are measured at fair value through
carried at amortized cost. or disposing the financial asset. At that time profit or loss. Changes in fair value are recognized
• Those that the Bank intends to sell immediately the profits and losses will be recognized. in net trading income in the income statement.
or in the short term, which are classified as held Gains and losses arising from changes in the In case of the subsequent impairment of The embedded derivatives are not separated
for trading, and those that the Bank upon initial fair value of the ‘financial assets at fair value the financial asset value, any previously because the Bank has chosen to classify the entire
recognition designates as at fair value through through profit or loss’ category are included in recognized profits or losses in owners’ complex contract at fair value through profit or
profit or loss; the income statement in the year in which they equity will be recognized in profits and loss.
• Those that the Bank upon initial recognition arise. Gains and losses arising from changes in the losses.
designates as available for sale; or fair value of available for sale financial assets are Derivatives that do not qualify for hedge
• Those for which the Bank may not recover recognized directly in equity, until the financial If the Bank modified its estimations for the accounting
substantially all of its initial investment, other asset is derecognized or impaired. At this time, the receivables and the payables then the book value
than because of credit deterioration. cumulative gain or loss previously recognized in of the financial asset (or group of financial assets) Changes in the fair value of any derivative
equity is recognized in income statement. will be adjusted to reflect the effective cash flows instrument that does not qualify for hedge
E.3. Held-to-maturity financial assets and the modified assessments to recalculate the accounting are recognized immediately in the
• Interest calculated using the effective interest book value through calculation of the present profit and loss under ‘’ net trading income’’.
Held-to-maturity investments are non-derivative method and foreign currency gains and losses value for the estimated future cash flows using the However, gains and losses arising from changes in
financial assets with fixed or determinable on monetary assets classified as available for effective interest rate of the financial asset and the fair value of derivatives that are managed in
payments and fixed maturities that the Bank’s sale are recognized in the income statement. the adjustment will be recognized as a revenue or conjunction with financial assets or liabilities are
management has the intention and ability to hold Dividends on available for sale equity expense in the profits and losses. included in “net income from financial instruments
to maturity. If the Bank were to sell other than an instruments are recognized in the income at fair value through profit or loss”.
insignificant amount except for specific situations, statement when the entity’s right to receive In all cases if the Bank reclassified a financial
the entire category would be reclassified as payment is established. asset as mentioned before and the Bank H. Recognition of deferred day one profit and loss
available for sale. • The fair values of quoted investments in active subsequently increased the estimated future cash
markets are based on current bid prices. If inflows as a result of the increase of what will be The best evidence of fair value at initial
E.4. Available-for-sale financial assets there is no active market for a financial asset, collected from these receivables, this increase recognition is the transaction price (the fair value
the Bank establishes fair value using valuation is to be recognized as an adjustment of the of the consideration given or received), unless
Available-for-sale investments are non-derivative techniques. These include the use of recent effective interest rate starting from the change the fair value of the instrument is evidenced
financial assets intended to be held for an arm’s length transactions, discounted cash in estimation date and not an adjustment of the by comparison with other observable current
indefinite period of time, which may be sold in flow analysis, option pricing models and other book value in the change in estimation date. market transactions in the same instruments or
response to needs for liquidity or changes in valuation techniques commonly used by based on valuation technique. When the Bank
interest rates, exchange rates or equity prices. market participants, and if the Bank could not F. Offsetting of financial instruments has entered into transactions that come due after
assess the fair value of the equity instruments the lapse of a long period of time, fair value is
The following is followed for financial assets: classified as available for sale, these instruments Financial assets and liabilities are offset when determined using valuation models whose inputs
are measured at cost less impairment. there is a legally enforceable right to offset the do not necessarily come from quoted prices or
Regular-way purchases and sales of financial • The Bank may choose to reclassify the available recognized amounts and there is an intention to market rates. These financial instruments are
assets at fair value through profit or loss, held to for sale financial assets where the definition settle on a net basis, or realize the asset and settle initially recognized at the transaction price, which
maturity and available for sale are recognized on of loans and receivables (bonds and loans) is the liability simultaneously. represents the best index to fair value, despite the
value obtained from a valuation model may be where the return subsequently calculated is K. K.Dividend income • The Bank, for economic or legal reasons relating
different. The difference between the transaction raised in accordance with the loan rescheduling to the borrower’s financial difficulties, granting
price and the model value is not immediately contract, until 25% of the rescheduling Dividends are recognized in the income statement to the borrower a concession that the Bank
recognized, commonly referred to as “day one instalments are repaid, with a minimum of one when the Bank’s right to receive payment is would not otherwise consider;
gains or losses”. It is included in other assets in period of regular repayment scheme. In case established. • Deterioration in the value of collateral;
case of loss, and other liabilities in case of gain. the counterparty persists to regularly pay, • Downgrading the credit status.
the return calculated on the loan outstanding L. Treasury Bills and Sold in an agreement to
Deferred profits and losses are recognized for is recognized in interest income. (interest repurchase The existence of clear data that indicates
each case individually, either by amortization over on rescheduling without deficits) without measurable decrease in estimated future
the lifetime of the transaction or by determining interests aside before rescheduling which Treasury bills are recognized when they are cash flows from a group of financial assets is
the fair value of the instrument using quoted is avoiding revenues except after paying all bought at face value and the issuance cost which considered as objective evidence of impairment
markets or by recognizing it when the transaction the loan balance in the balance sheet before represents the unearned interest on these bills and for that group, irrespective of the ability of
is settled, the financial instruments later measured rescheduling. government bonds is recognized through credit identifying that reduction for each individual asset,
at fair value and it is recognized directly in the balances and other liabilities. These treasury bills e.g. the increase in number of repayment defaults
income statements by changes in the fair value. J. Fees and commission income appear on the financial statement excluding the for a particular banking product.
unearned interest and they are measured by the
I. Interest income and expense Fees and commissions are generally recognized amortized cost using the effective interest rate. The estimated period between a loss occurring
on an accrual basis when the service has and its identification is determined by local
Interest income and expense for all interest- been provided. Fees and commissions are not Financial instruments that are sold in an management for each identified portfolio. In
bearing financial instruments, except for those recognized for the nonperforming or impaired agreement to repurchase those (Repos) are general, the period used varies between three
classified as held for trading or designated at loans, as it is recorded in a separate margin presented in financial statements under Treasury months and twelve months.
fair value through profit or loss, are recognized records outside the financial statements, and Bills and Other Governmental Notes. The
within ‘interest income’ and ‘interest expense’ in it is recorded on a cash basis when fees and difference between the selling and repurchase The Bank first assesses whether objective
the income statement using the effective interest commissions are recognized according to note price is recognized as accrued income over the evidence of impairment exists individually for
method. (2/I) for the fees which are considered a part from agreement’s period using the effective rate of financial assets that are individually significant,
effective interest rate for the financial asset as it is return method. On the other hand, reverse repos and individually or collectively for financial assets
The effective interest method is a method of considered as a part for the effective interest rate. are deducted from Treasury Bills and Other that are not individually significant and the
calculating the amortized cost of a financial Governmental Notes. following is considered:
asset or a financial liability and of allocating the Loan commitment fees for loans that are likely to
interest income or interest expense over the be drawn down are deferred (together with related M. Impairment of financial assets • If the Bank determines that no objective
relevant period. The effective interest rate is the direct costs) and recognized as an adjustment to evidence of impairment exists for an individually
rate that exactly discounts estimated future cash the effective interest rate on the loan. M.1. financial assets carried at amortized cost assessed financial asset, whether significant or
payments or receipts through the expected life And in case that the commitment period was not, it includes the asset in a group of financial
of the financial instrument or, when appropriate, expired without issuing the loan, fees and The Bank assesses at each balance sheet date assets with similar credit risk characteristics and
a shorter period to the net carrying amount of commissions are considered as income at the end whether there is objective evidence that a financial collectively assesses them for impairment using
the financial asset or financial liability. When of the commitment period. asset or group of financial assets is impaired. A historical probabilities of default.
calculating the effective interest rate, the Bank financial asset or a group of financial assets is • Assets that are individually assessed for
estimates cash flows considering all contractual Loan syndication fees are recognized as revenue impaired and impairment losses are incurred only impairment and for which an impairment loss is
terms of the financial instrument (for example, when the syndication has been completed and the if there is objective evidence of impairment as a or continues to be recognized are not included
prepayment options) but does not consider future Bank has retained no part of the loan package for result of one or more events that occurred after in a collective assessment of impairment.
credit losses. The calculation includes all fees and itself or has retained a part at the same effective the initial recognition of the asset (a ‘loss event’) Otherwise it will be added to the group of the
points paid or received between parties to the interest rate as the other participants. and that loss event (or events) has an impact on financial assets.
contract that are an integral part of the effective the estimated future cash flows of the financial
interest rate, transaction costs and all other Commission and fees arising from negotiating, or asset or group of financial assets that can be The amount of the loss is measured as the
premiums or discounts. participating in the negotiation of, a transaction reliably estimated. difference between the asset’s carrying amount
for a third party – such as the arrangement of the and the present value of estimated future cash
Once a financial asset or a group of similar acquisition of shares or other securities or the The criteria that the Bank uses to determine that flows (excluding future credit losses that have
financial assets has been classified as purchase or sale of businesses – are recognized on there is objective evidence of an impairment loss not been incurred) discounted at the financial
nonperforming or impaired, related interest completion of the underlying transaction. Portfolio include: asset’s original effective interest rate. The carrying
income is not recognized and is recorded and other management advisory and service fees amount of the asset is reduced through the use of
in marginal records apart from the financial are recognized based on the applicable service • Significant financial difficulties of the issuer or an allowance account and the amount of the loss
statements, and is recognized as revenues contracts, usually on a time-apportionate basis. obligor; is recognized in the income statement.
according to cash basis as follows: Asset management fees related to investment • Breach of contract such as default in interest or
funds are recognized ratably over the period in principal payment; If a loan or held-to-maturity investment has
• When they are collected, after receiving all which the service is provided. The same principle • It becomes probable that the borrower a variable interest rate, the discount rate for
past due instalments for consumption loans, is applied for financial planning and custody will enter bankruptcy or other financial measuring any impairment loss is the current
mortgage loans, and small business loans. services that are continuously provided over an reorganization; effective interest rate determined under the
• For corporate loans, cash basis is also applied, extended period of time. • Deterioration of the borrower’s competitive contract. As a practical expedient, the Bank
position;
may measure impairment on the basis of an and the decline shall be considered prolonged P. Fixed Assets Q. Impairment of non-financial assets
instrument’s fair value using an observable market if it is continuous for more than nine months.
price. The calculation of the present value of If the mentioned evidences are available, then Land and buildings comprise mainly branches Assets that have an indefinite useful life are
the estimated future cash flows of a collaterized the accumulated loss should be carried over and offices. All property, plant and equipment not subject to amortization—except goodwill—
financial asset reflects the cash flow that may from shareholder’s equity to be recognized in are stated at historical cost less depreciation and are tested annually for impairment. Assets
result from foreseeable less cost for obtaining and the income statement. The impairment in value and impairment losses. Historical cost includes that are subject to amortization are reviewed
selling the collateral. recognized in the income statement concerning expenditure that is directly attributable to the for impairment whenever events or changes in
equity instruments will not be reversed if a later acquisition of the items. circumstances indicate that the carrying amount
For the purposes of a collective evaluation of increase in the fair value occurs. Meanwhile in may not be recoverable.
impairment, financial assets are grouped on the case the fair value of debt instruments classified Subsequent costs are included in the asset’s
basis of similar credit risk characteristics (that available for sale increased, and it is found carrying amount or are recognized as a separate An impairment loss is recognized for the amount
is, on the basis of the Group’s grading process possible to objectively link the mentioned increase asset, as appropriate, only when it is probable by which the asset’s carrying amount exceeds its
that considers asset type, industry, geographical to an event taking place after recognition of that future economic benefits associated with recoverable amount. The recoverable amount is
location, collateral type, past-due status and other impairment in the income statement, then the the item will flow to the Bank and the cost of the the higher of an asset’s fair value less costs to sell
relevant factors). Those characteristics are relevant impairment will be reversed thought the income item can be measured reliably. All other repairs and value in use. For the purposes of assessing
to the estimation of future cash flows for groups statement. and maintenance are charged to other operating impairment, assets are grouped at the lowest
of such assets by being indicative of the debtors’ expenses during the financial year in which they levels for which there are separately identifiable
ability to pay all amounts due according to the N. Investment Property are incurred. cash flows (cash-generating units). Non-financial
contractual terms of the assets being evaluated. assets that suffered impairment are reviewed
. Investments property are represented in lands and Land is not depreciated. Depreciation of other for possible reversal of the impairment at each
The Bank assesses the collective impairment for buildings owned by the Bank for obtaining lease assets is calculated using the straight line method reporting date.
groups of financial assets with similar credit risk income or capital increase, consequently it does to allocate their cost to their residual values over
characteristics and collectively assesses them not include properties assets through which the their estimated useful lives, as follows: R. Lease
for impairment using historical probabilities of Bank executes its operations, or those properties
default, and individually for the impaired loans which reverted to the Bank in the settlements of Finance leases are accounted for according to Law
using discounted cash flows, and compared to the debts, the investments properties are accounted No. 95 of 1995 if the contract gives the right to the
Building 30 Years
obligor risk rating. Differences between the two for similarly with the same accounting treatment lessee to purchase the asset on a specified period
methods are transferred from retained earnings to for the fixed assets. Furniture and safes 5 Years and with specified amount where the contract’s
general banking reserve, if the obligor risk rating Equipment 7 Years
period represents at least 75% of the expected
requires more impairment. O. Intangible Assets useful life of the asset or the present value of total
Transportation 5 Years lease payments represents at least 90% of the
Future cash flows in a group of financial assets O.1. Computers Computers 5 Years asset’s value. Other lease contracts are considered
that are collectively estimates of changes in future operating leases.
cash flows for groups of assets should reflect Computers’ software related development and Installations 7 Years
and be directionally consistent with changes in maintenance expenses are recognized in the E.D.P Systems 5 Years R.1. The Bank as a lessee
related observable data from period to period income statement when incurred. Intangible
(for example, changes in unemployment rates, asset is recognized for specific direct costs of Finance lease contracts are recognized at the
property prices, payment status, or other factors computer programs under the Bank’s control and lease cost, including the cost of maintenance
The assets’ residual values and useful lives are
indicative of changes in the probability of losses in where a probable economic benefit is expected of the leased assets, within the expenses in the
reviewed, and adjusted if appropriate, at each
the group and their magnitude). The methodology to be generated for more than one year. Direct income statement for the period in which they
balance sheet date. Assets that are subject
and assumptions used for estimating future cash costs include program development staff costs occurred. If the Bank decided to exercise the
to amortization are reviewed for impairment
flows are reviewed regularly by the Bank to reduce and appropriate allocation of the overhead costs. right to purchase the leased assets, the cost of
whenever events or changes in circumstances
any differences between loss estimates and actual Development costs are recognized as computer the right to purchase it as an asset is capitalized
indicate that the carrying amount may not be
loss experience. program in which lead to an increase or expansion and amortized over the useful life of the expected
recoverable. An asset’s carrying amount is written
in the performance of computer programs and are remaining life of the asset in the same manner as
down immediately to its recoverable amount if
M.2. Available for sale financial investments added to the original costs of the program. These similar assets.
the asset’s carrying amount is greater than its
costs are amortized on the basis of the expected
estimated recoverable amount.
The Bank assesses at each balance sheet date useful lives, and not more than five years. Lease expenses are recognized in the income
whether there is objective evidence that a financial statement using straight line method over the
The recoverable amount is the higher of the
asset or a group of financial assets classified as O.2. Intangible assets term of contract, after deduction of any discount
asset’s fair value less costs to sell and value in use.
available for sale or held to maturity is impaired. obtained by the Bank at the contract. In case of
Gains (losses) on disposals are determined by
In the case of equity investments classified as Intangible assets other than goodwill are recorded periods when the Bank is exempted from paying
comparing proceeds with carrying amount. These
available for sale, a significant or prolonged at acquisition cost and amortized on a straight line the lease or if the lease is different (more or less)
are included in other operating income (expenses)
decline in the fair value of the security below its basis or based on the expected future economic in different periods, in that case the distribution of
in the income statement.
cost is considered in determining whether the benefits over the expected life. Intangible assets the total lease expected to pay over the contract
assets are impaired. with indefinite life are not amortized but tested for and charge over income statement in equal
impairment at least annually impairment losses are amounts per month, including the periods that the
The decline should be considered significant changed to income statement. Bank does not pay the lease.
when it reaches 10% of the cost of book value,
R.2. The Bank as a Lessor These contracts are initially recognized at fair This fund covers only the Bank employees in the W.4. Board of directors members profit sharing
value on the contract date, and the Bank’s liability Headquarters and branches in the Arab Republic
For assets leased financially, asset are recorded is measured by the higher of the initial recognition of Egypt. The Bank pays percentage of its cash dividends as
in the fixed assets in the financial statement value deducted by the calculated amortization profit sharing to its Board of directors’ members.
and amortized over the expected useful life of of guarantee fees or the best estimated value The Bank is committed to pay the fund its monthly Board of directors’ profit sharing is recognized
this asset in the same manner as similar assets. payments required to settle any financial liability contributions, which calculated according the as a dividend distribution through equity and
Leasing income recorded less any discount given resulting from the financial guarantee on balance fund’s articles of association and its amendments. as a liability when approved by the Bank’s
to the lessee on a straight line method over the sheet date. These estimated values are determined The fund is generally funded through monthly shareholders. No liability is recognized for profit
contract period. based on the Bank’s management experience in contributions payments and other resources as sharing relating to undistributed profits.
similar transactions. identified in the fund’s articles of association.
S. Cash and cash equivalents X. Capital
Any differences in the Bank’s liabilities will be The liability in respect of the fund is the present
For the purpose of the cash flow statement, cash recorded in the income statement in other value of the defined benefit obligation at the X.1. Cost of capital
and cash equivalents comprise balances with operating income (expense). balance sheet date minus the fair value of plan
less than three months’ maturity from the date of assets, together with adjustments for actuarial Issue charges are presented, which is directly
acquisition, including cash and balances due from V. Income tax gains/losses and past service cost. The defined related to the issuance of new shares or shares
Central Banks other than for mandatory reserve, benefit obligation is calculated annually by for the acquisition of an entity or the issuance
due from banks, and treasury bills. The income tax on the Bank’s period’s profits or independent actuaries using the projected unit of options against owners’ equity with the net
losses includes both current tax and deferred credit method. The present value of the defined proceeds after taxes.
T. Other provisions tax. Income tax is recognized in the income benefit obligation is determined by the estimated
statement, except when it relates to items directly future cash outflows using interest rates of X.2. Dividends
Provisions for restructuring costs and legal claims recognized into equity, in which case the tax is government securities, which have terms to
are recognized when: the Bank has a present also recognized directly in equity. Income tax maturity approximating the terms of the related Dividends are deducted from equity in the year in
legal or constructive obligation as a result of past is calculated on the taxable profits using the liability. which the General assembly of the shareholders
events; it is more likely than not that an outflow of prevailing tax rates as of balance sheet in addition acknowledges these distributions. These
resources will be required to settle the obligation; to tax adjustments for previous years. The most basic assumptions used by the actuary distributions include the share of workers in the
and the amount can be reliably estimated. are as follows: profits and remuneration of the board of directors
Deferred income tax is provided on temporary as per regulation and law.
Where there are a number of similar obligations, differences arising between the tax bases of assets • Rates of death from the British Table A49-
the likelihood that an outflow will be required and liabilities and their carrying amounts in the 52ULT; Y. Comparative Figures
in settlement is determined by considering the financial statements. Deferred tax is determined • The rates of disability from the experience of
class of obligations as a whole. A provision is based on the method used to realize or settle the social insurance in Egypt; Comparative figures are reclassified, where
recognized even if the likelihood of an outflow current values of these assets and liabilities, using • Average rates of salaries increases during the necessary, to conform with changes in the current
with respect to any one item included in the same the tax rates prevailing as of the balance sheet year for Egyptian pound and American dollar; year’s presentation.
class of obligations may be small. date. • Method is used estimated additional unit in the
calculation of the commitments and the present 3. Financial Risk management
Reversals of provisions no longer required are Deferred tax assets are recognized when it is value of subscriptions (Unit Projected Method).
presented in other operating income (expense). probable that the future taxable profit will be The Bank’s activities expose it to a variety of
available against which the temporary difference W.2. Bonuses scheme financial risks and those activities involve the
Provisions are measured at the present value of can be utilized. Deferred tax assets are reduced analysis, evaluation, acceptance and management
the expenditures expected to be required to settle to the extent that it is no longer probable that A liability for employees and managers benefits of some degree of risk or combination of risks.
the obligation using a pre-tax rate that reflects sufficient taxable profits will be available to allow in the form of bonus is recognized in other credit Taking risk is core to the financial business,
current market assessments of the time value of all or part of the asset to be recovered. Reversal is balances and other liabilities according to the and the operational risks are an inevitable
money and the risks specific to the obligation. subsequently permitted when there is a probable Bank board of directors’ decisions in this respect consequence of being in business. The Bank’s
If the settlement is within one year or less, from its economic benefit limited to the extent and the payments should be determined before aim is therefore to achieve an appropriate
provisions will be measured by the contractual reduced. the time of issuing the financial statements. balance between risk and return and minimize
value if there is no material variance; otherwise, it potential adverse effects on the Bank’s financial
will be measured at present value. W. Employee benefits W.3. Employees share in profits performance.
U. Financial guarantees contracts W.1. Pension obligations The Bank pays a portion of the profits expected to The most important types of risk are credit risk,
be distributed as a share of the Bank’s personnel liquidity risk, market risk and other operational
The financial guarantees contracts are the The Bank has a special social fund scheme (the determined by the board under the Statute of the risk. Market risk includes currency risk, interest
contracts that the Bank issues as a guarantee for fund) that is not subject to the general law (law Bank, no liability is recognized for undistributed rate and other price risk.
the Bank’s customers for their loans with other 79 for 1975) as it was established under law 64 board of directors’ profit sharing.
parties, and it is required that the Bank pays some for 1980 and this fund has its own alternative The Bank’s risk management policies are designed
claims for the beneficiary as a result of default independent articles of insurable rights (Pension/ to identify and analyze these risks, to set
in repayments. These financial guarantees are Bonuses/one payment compensation) and appropriate risk limits and controls, and to monitor
presented to banks and other financial institutions according to the ministry decree 94 for 1985. the risks and adherence to limits by means of
instead of the Bank’s customers.
reliable and up to date information system. The the assessment of their probability of default The Bank structures the levels of credit risk it Derivatives
Bank regularly reviews its risk management changes. The rating tools are kept under review undertakes by placing limits on the amount of risk
policies and systems to reflect changes in markets, and upgraded as necessary. The Bank regularly accepted in relation to one borrower, or groups The Bank maintains strict control limits on net
products, and emerging best practice. validates the performance of the ratings and their of borrowers, and to geographical and industry open derivative positions (i.e., the difference
predictive power with regard to default cases. segments. Such risks are monitored on a revolving between purchase and sale contracts) by both
Risk management is carried out by a risk basis and subject to an annual or more frequent amount and term. The amount subject to credit
department under policies approved by the Bank’s internal ratings scale and mapping of review, when considered necessary. Limits on the risk is limited to expect future net cash inflows
Board of Directors. Financial risks in close co- external ratings level of credit risk by product, industry sector and of instruments, which in relation to derivatives
operation with the Group are operating units. The by country are approved quarterly by the Board of are only a fraction of the contract, or notional
Board provides written principles for overall risk Directors. values used to express the volume of instruments
Bank’s rating Description of the grade
management, as well as written policies covering outstanding. This credit risk exposure is
specific areas, such as foreign exchange risk, 1-5 Performing loans The exposure to any one borrower including banks managed as part of the overall lending limits with
interest rate risk, credit risk, use of derivative 6 Regular watching
and brokers is further restricted by sub-limits customers, together with potential exposures from
financial instruments and non-derivative financial covering on- and off-balance sheet exposures, and market movements. Collateral or other security is
instruments. In addition, credit risk management 7 Watch list daily delivery risk limits in relation to trading items not usually obtained for credit risk exposures on
is responsible for the independent review of risk 8-10 Nonperforming loans such as forward foreign exchange contracts. Actual these instruments, except where the Bank requires
management and the control environment. exposures against limits are monitored daily. margin deposits from counterparties.
Settlement risk arises in any situation where a
A. Credit risk Exposure to credit risk is also managed through payment in cash, securities or equities is made
The above ratings are reviewed and approved by
regular analysis of the ability of the borrowers and in the expectation of a corresponding receipt in
the Central Bank of Egypt.
The Bank is exposed to credit risk, which is the potential borrowers to meet interest and capital cash, securities or equities. Daily settlement limits
risk of suffering financial loss, should any of the repayment obligations and by changing these are established for each counterparty to cover the
Exposure at default is based on the amounts the
Bank’s customers, clients or market counterparties lending limits when appropriate. aggregate of all settlement risk arising from the
Bank expects to be outstanding at the time of
fail to fulfill their contractual obligations to the Bank market’s transactions on any single day.
default. For example, for a loan this is the face
Bank. Credit risk is the most important risk for Some other specific control and mitigation
value. For a commitment, the Bank includes any
the Bank’s business. Management therefore measures are outlined below: Master Netting Arrangements
amount already drawn plus the further amount
carefully manages its exposure to credit risk.
that may have been drawn by the time of default,
Credit risk arises mainly from lending activities Collateral The Bank further restricts its exposure to
should it occur.
which resulted in loans, facilities and investment credit losses by entering into master netting
activities which result in including the financial The Bank employs a range of policies and arrangements with counterparties with which it
Loss given default or loss severity represents
assets in the Bank’s assets. Credit risk is available practices to mitigate credit risk. The most undertakes a significant volume of transactions.
the Bank’s expectation of the extent of loss on
in the off-balance sheet financial assets such traditional of these is the taking of security for Master netting arrangements do not generally
a claim should default occur. It is expressed as
lending commitment. The credit risk management funds advances, which is common practice. The result in an offset of assets and liabilities shown
a percentage of loss per unit of exposure and
and control are centralized in a credit risk Bank implements guidelines on the acceptability in the balance sheet, as transactions are either
typically varies by type of counterparty, type and
management team, which reports to the Board of of specific classes of collateral or credit risk usually settled on a gross basis. However, the
seniority of claim and availability of collateral or
Directors and head of each business unit regularly. mitigation. The principal collateral types for loans credit risk associated with favourable contracts is
other credit mitigation.
and advances are: reduced by a master netting arrangement to the
A.1. Credit risk measurement extent that if a default occurs, all amounts with the
Debt securities and treasury bills
• Mortgages over residential properties; counterparty are terminated and settled on a net
Loans and advances to banks and customers • Charges over business assets such as premises, basis. The Bank’s overall exposure to credit risk on
For debt securities and treasury bills, external
inventory; derivative instruments subject to master netting
ratings such as Standard & Poor’s rating or their
In measuring credit risk of loans and advances • Charges over financial instruments such as debt arrangements can change substantially within a
equivalents are used by the Bank for managing of
to banks and customers, the Bank reflects the securities and equities. short period, as it is affected by each transaction
the credit risk exposures. In case such ratings are
following component: subject to the arrangement.
unavailable, internal rating methods are used that
Longer-term finance and lending to corporate
are similar to those used for credit customers. The
Probability of default - by the client or entities are generally secured; revolving individual Credit Related Commitments
investment in those securities and bills are viewed
counterparty on its contractual obligations. credit facilities are generally unsecured. In
as a way to gain a better credit quality mapping
addition, in order to minimise the credit loss The primary purpose of these instruments is to
and maintain a readily available source to meet
The Bank assesses the probability of default of the Bank will seek additional collateral from the ensure that funds are available to a customer as
the funding requirements at the same time.
individual customers using internal rating tools counterparty as soon as impairment indicators required. Guarantees and standby letters of credit
tailored to the various categories of counterparty. are identified for the relevant individual loans and carry the same credit risk as loans. Documentary
A.2. Risk limit control and mitigation policies
They have been developed internally and combine advances. and commercial letters of credit – which are
The Bank manages, limits and controls
statistical analysis with credit officer judgment. Collateral held as security for financial assets other written undertakings by the Bank on behalf of a
concentrations of credit risk wherever they
Clients of the Bank are segmented into four rating than loans and advances depends on the nature of customer authorising a third party to draw drafts
are identified − in particular, to individual
classes. The rating scale which is shown below the instrument. Debt securities, treasury and other on the Bank up to a stipulated amount under
counterparties, groups and to industries and
reflects the range of default probabilities- defined eligible bills are generally unsecured, with the specific terms and conditions – are collateralised
countries.
for each rating class. This means that in principle, exception of asset-backed securities and similar by the underlying shipments of goods to which
exposures might migrate between classes as instruments, which are secured by portfolios of they relate and therefore carry less risk than a
financial instruments. direct loan.
Commitments to extend credit represent unused impairment allowances are recognised for financial Collectively assessed impairment allowances credit risk, including commitments related to
portions of authorisations to extend credit in the reporting purposes only for losses that have are provided for portfolios of homogenous credit, on the basis of ratios specified by the
form of loans, guarantees or letters of credit. With been incurred at the balance sheet date based assets using the available historical experience, Central Bank of Egypt. In case the impairment
respect to credit risk on commitments to extend on objective evidence of impairment. Due to the experience judgment and statistical techniques. loss provision required by the Central Bank of
credit, the Bank is potentially exposed to loss in an different methodologies applied, the amount of Egypt exceeds that required for the purpose of
amount equal to the total unused commitments. incurred credit losses provided for in the financial A.4. General Bank Risk Measurement Model financial statement preparation in accordance
However, the likely amount of loss is less than the statements are usually lower than the amount with Egyptian accounting standards, retained
total unused commitments, as most commitments determined from the expected loss model that In addition to the four credit rating levels earnings are decreased to support the General
to extend credit are contingent upon customers is used for internal operational management and (note A.1), management classifies categories Bank risk reserve with the amount of the increase.
maintaining specific credit standards. Central Bank of Egypt regulations purposes. that are more detailed so as to agree with the This reserve is periodically revised for an increase
requirements of the Central Bank of Egypt (CBE). or a decrease to reflect the amount of increase
The Bank monitors the term to maturity of credit The impairment allowance shown in the balance Assets subject to credit risk are classified in between the two provisions.
commitments because longer-term commitments sheet date at year end is derived from each of the these categories in accordance with regulations
generally have a greater degree of credit risk than four internal rating grades. However, the largest and detailed conditions that largely depend on Following is a table of the worthiness levels
shorter-term commitments. majority of the impairment allowance comes from information related to the client, his/her activity, for institutions in accordance with the internal
the lowest grading. financial position, and regularity of repayment. assessment bases compared to the Central Bank
A.3. Impairment and provisioning policies of Egypt assessment bases and the provision
The table below shows the percentage of the The Bank calculates the required provisions ratios required for the impairment of the assets
The internal system for rating previously Bank’s on balance sheet items relating to loans for the impairment of the assets subject to exposed to credit risk:
mentioned in disclosure (A.1) is focused more and advances and the associated impairment
on credit quality mapping from the inception of allowance for each of the Bank’s internal rating
the lending and investment activities. In contrast, categories: CBE rating categorization Rating description Provision % Indication of internal rating
1 Low risk 0% Good loans

2 Average risk 1% Good loans

Loans and Impairment Loans and Impairment
Bank’s rating
advances % Provision % advances % Provision %
3 Satisfactory risk 1% Good loans
Performing loans 67 15 78 22
4 Reasonable risk 2% Good loans

Regular watching 22 10 15 7
5 Acceptable risk 2% Good loans

Watch list 4 3 3 3
6 Marginally acceptable risk 3% Standard monitoring

Nonperforming loans 7 72 4 68
7 Watch List 5% Special monitoring

100 100 100 100
8 Substandard 20% Non-performing
The internal rating tool assists management • Deterioration in the value of collateral; 9 Doubtful 50% Non-performing
to determine whether objective evidence of • Deterioration in credit situation.
impairment exists under EAS 26, based on the
10 Bad Debt 100% Non-performing
following criteria set out by the Bank: The Bank’s policies require the review of individual
financial assets that are above materiality
• Significant financial difficulties facing the threshold at least annually or more regularly when
counterparty; individual circumstances require.
• Breach of loan covenants as in case of default;
• Expecting the bankruptcy of the counterparty, Impairment allowances on individually assessed
liquidation, lawsuit, or finance rescheduling; accounts are determined by an evaluation of the
• Deterioration of the borrower’s competitive incurred loss at balance sheet on a case-by-case
position; basis, and are applied to all individually significant
• Offering exceptions or surrenders due to accounts. The assessment normally encompasses
economic and legal reasons related to financial collateral hold including re-confirmation of its
difficulties encountered by the counterparty not enforceability and the anticipated receipts for that
provided by the Bank in ordinary conditions; individual account.
A.5. Maximum credit risk limit before collaterals • 88.74% of the loans and advances portfolio is • More than 98.79% of the investments in debt
considered to be neither past due nor impaired. instruments are treasury bills represented in
On balance sheet credit risk exposure is shown below: • Loans and advances assessed on an individual debt instruments on the Egyptian government.
basis are valued at USD 295,774 thousand.
• The Bank has implemented more prudent A.6. Loans and advances to banks and customers
processes when granting loans and advances
Balances with the central banks limited to the during the financial year ended in 31 December Loans and advances balances in terms of the
533,727 469,237
reserve ratio 2018. credit worthiness:
Due from banks 3,204,281 3,363,108
Treasury bills 2,714,799 2,953,789 31 December 2018 31 December 2017
Loans and advances to banks 6,059 6,059 Neither past due nor impaired 4,121,286 4,107,834
Past due but not impaired 227,082 278,054

Loans and advances to customers
Subject to impairment 295,774 183,879
Retail:
Total 4,644,142 4,569,767
Overdrafts 258,632 207,024
Less: Unearned discount for commercial
(45,832) (58,524)
Credit cards 12,126 10,865 papers and loans
Personal loans 109,314 95,024 Less: Loans unearned revenues (30) (39)
Direct loans 13,089 19,543 Less: Impairment loss provision (309,977) (256,054)
Less: Interest in suspense (18,038) (18,038)

Mortgage loan 28,721 10,588
Net 4,270,265 4,237,112
Other loans 205,201 261,388
Corporate:
Total impairment loss for loans and advances Loans and advances neither past due nor
Overdrafts 1,237,201 1,189,901
has amounted to USD 54,517 thousand of which impaired
Direct loans 1,436,012 1,462,500 USD 26,420 thousand of impairment on to
individual loans, addition to 28,097 thousand USD The credit quality of the portfolio of loans and
Syndicated loans 1,273,299 1,278,873
representing impairment based on group basis of advances that were neither past due nor impaired
Other loans 64,488 28,002 the credit portfolio. Note (22) provide additional can be assessed by reference to the internal rating
information on the provision of impairment loss on system adopted by the Bank.
Financial investments:
loans and advances to banks and customers.
Debt instruments 425,250 445,414
Other assets 50,463 55,473

31 December 2018
Total 11,572,662 11,856,788
Retail
Off balance sheet credit risk exposure is shown below: Rating Overdrafts Credit cards Personal loans Direct loans Mortgage loan Other loans
Good 258,632 10,151 101,097 9,410 23,823 147,516

Standard monitoring - - - 3,110 - 48,759
Letters of guarantee 1,034,133 1,002,973
Special monitoring - - - 569 - 8,926
Letter of credit 53,601 102,601
Total 258,632 10,151 101,097 13,089 23,823 205,201
Customers acceptances 16,487 38,623
Total 1,104,221 1,144,197

31 December 2018
Corporate
The above table represents maximum credit risk Management is confident in its ability to continue
exposure to the Bank at the end of 31 December to control and sustain minimal exposure Syndicated Total loans & advances to
Rating Overdrafts Direct loans Other loans
loans customer & banks
2018 without taking into account any collateral of credit risk to the Bank resulting from both its
held or other credit enhancements attached. loans and advances portfolio and debt Good 869,276 807,000 800,144 46,360 3,073,409
As shown above, 40.13% of the total maximum Instruments base on the following:
Standard monitoring 287,323 266,736 264,473 15,323 885,724
exposure is derived from loans and advances to
banks and customers, while the investments in • 90% of the loans and advances portfolio is Special monitoring 52,602 48,833 48,418 2,805 162,153
debt instruments represents 3.67%. categorized in the top two grades of the internal
Total 1,209,201 1,122,569 1,113,035 64,488 4,121,286
rating system.
Retail Retail Direct loans Credit cards Personal loans Mortgage loans Total
Personal Mortgage Past due up to 30 days - 965 10,476 634 12,075

Rating Overdrafts Credit cards Direct loans Other loans
loans loan
Past due 30-60 days - 418 2,161 63 2,642
Good 207,024 9,128 80,641 15,875 9,885 212,329
Past due 60-90 days - 162 561 6 729
Standard monitoring - - - 3,053 - 40,830
Total - 1,545 13,198 703 15,446
Special monitoring - - - 615 - 8,229
Total 207,024 9,128 80,641 19,543 9,885 261,388

Corporate Overdrafts Direct loans Syndicated loans Other loans Total
Past due up to 30 days 41 202,403 58,855 - 261,299

31 December 2017
Past due 30-60 days - - - - -
Corporate
Past due 60-90 days - 1,309 - - 1,309
Syndicated Total loans & advances to
Rating Overdrafts Direct loans Other loans
loans customer & banks Total 41 203,712 58,855 - 262,608
Good 966,539 1,001,571 868,670 22,746 3,394,408
Standard monitoring 185,864 192,600 167,043 4,374 593,764 Loans and advances individually impaired thousand at the end of 31 December 2018 (against
Special monitoring 37,457 38,815 33,664 882 119,662 USD 183,879 thousand at the end of December
Loans and advances to customers 2017)
Total 1,189,860 1,232,986 1,069,377 28,002 4,107,834
The individually impaired loans and advances to The following is a breakdown of the gross
customers before taking into consideration the amount of individually impaired loans and
Loans that are backed by collateral are not These loans and advances are past due for up cash flows from collateral held is USD 295,774 advances by class:
considered impaired for the nonperforming to 90 days but not impaired, unless the Bank is
category, taking into consideration the otherwise informed. Loans and advances past due
collectability of the collateral. but not impaired and the fair values of the related Retail
collateral are as follows: Overdrafts Credit cards Personal loans Direct loans Total
Loans and advances past due but not impaired
31 December 2018
- 293 1,407 - 1,700
Individually impaired loans
31 December 2018
31 December 2017
- 192 1,185 - 1,377
Retail Direct loans Credit cards Personal loans Mortgage loans Total Individually impaired loans
Past due up to 30 days - 1,005 4,767 3,820 9,592
Past due 30-60 days - 463 1,417 947 2,827 Corporate
Past due 60-90 days - 214 626 131 971 Syndicated Banks
Overdrafts Credit cards Total
loans loans
Total - 1,682 6,810 4,898 13,390
31 December 2018
- 138,828 149,187 6,059 294,074
Individually impaired loans
31 December 2017
Syndicated - 25,802 150,641 6,059 182,502
Corporate Overdrafts Direct loans Other loans Total Individually impaired loans
loans
Past due up to 30 days 17,374 158,509 11,077 - 186,960

Loans and advances restructure most likely continue. These policies are kept
Past due 30-60 days 10,626 16,106 - - 26,732 under continuous review. Restructuring is most
Past due 60-90 days - - - - - Restructuring activities include extended payment commonly applied to term loans – in particular,
arrangements, approved external management customer finance loan. Total renegotiated loans
Total 28,000 174,615 11,077 - 213,692 plans, modification and deferral of payments. results amounted to USD 17,178 thousand at the
Restructuring policies and practices are based end of 31 December 2018 (31 December 2017 was
on indicators or criteria that, in the judgment of USD 18,996 thousand).
local management, indicate that payment will
A.8. Concentration of risks of financial assets credit exposure at their carrying amounts by
Loans and advances to customers 31 December 2018 31 December 2017
with credit risk exposure geographical regions at the end of the year. For
Corporate this table, the Bank has allocated exposures to
Geographical sectors regions based on the country of domicile of its
Syndicated loans 12,740 14,134
clients.
Direct loans 4,420 4,845 The following table breaks down the Bank’s
Retail
Credit Card 2 3 Arab Republic of Egypt
Personal loans 16 14 Sinai,Red

Alex& Upper Gulf Other
Cairo sea & Canal Total Total
Delta Egypt countries countries
Total 17,178 18,996 towns
Balances with the

central banks limited 442,540 - - - 442,540 91,117 70 533,727
A.7. Debt securities and treasury bills securities and treasury bills based on Standard & to the reserve ratio
Poor’s assessment or equivalent at 31 December
Due from banks 2,270,158 - - - 2,270,158 931,264 2,859 3,204,281
The table below presents an analysis of debt 2018:
Treasury bills and
other governmental 2,624,935 - - - 2,624,935 83,729 6,135 2,714,799
31 December 2018 papers
Treasury bills Investment in debt instruments securities Total Loans and advances
992 - - - 992 - 5,067 6,059
to bank
AA+ - 6,744 6,744
Loans and advances to customers:
AA - 19,346 19,346
Retail
A - 8,249 8,249
Overdrafts 235,117 11,854 1,616 4,953 253,540 5,092 - 258,632
AA- - 3,684 3,684
Credit cards 9,202 2,124 225 575 12,126 - - 12,126
Less than BBB 2,714,799 387,227 3,102,026
Personal loans 66,193 22,058 6,865 13,902 109,018 296 - 109,314
Total 2,714,799 425,250 3,140,049
Direct loans 13,062 - - - 13,062 27 - 13,089
Mortgage loan 28,437 6 - 1 28,444 277 - 28,721

31 December 2017
Other loans 205,201 - - - 205,201 - - 205,201
Treasury bills Investment in debt instruments securities Total
Corporate
AA+ - 884 884
Overdrafts 807,867 158,947 2 1,733 968,549 249,378 19,274 1,237,201
AA - 5,404 5,404
Direct loans 1,133,764 131,665 - 180 1,265,609 170,403 - 1,436,012
A - 65,351 65,351
Syndicated loans 988,099 125,028 - - 1,113,127 160,172 - 1,273,299
Less than BBB 2,953,789 373,775 3,327,564
Other loans 41,048 578 - - 41,626 22,862 - 64,488
Total 2,953,789 445,414 3,399,203
Investment securities
Debt instruments 418,764 - - - 418,764 - 6,486 425,250
Other assets 9,527 29,626 4,155 2,968 46,276 4,108 79 50,463
Total as at 31
9,294,906 481,886 12,863 24,312 9,813,967 1,718,725 39,970 11,572,662
December 2018
Total as at 31
9,948,338 609,719 11,113 23,927 10,593,097 1,224,005 39,686 11,856,788
December 2017
Industry sectors long term (liability products) to meet fixed rate B.2. Foreign exchange risk
income risk.
The following table breaks down the Bank’s credit exposure at carrying amounts by industry sectors of the The Bank takes on exposure to the effects of
Bank’s clients. Floating rate financial assets fluctuations in the prevailing foreign currency
variable cost is free risk free due to their exchange rates on its financial position and
Financial compatibility with the prices prevailing at the grant. cash flows. The Board sets limits on the level of
Manufacturing Agriculture Commercial Service Constructions Government Individual Others Total
Intuitions exposure by level of currency and in aggregate
Balances with Foreign exchange fluctuation risk for both overnight and intra-day positions which
the central
- - - - 533,727 - - - - 533,727 Monitor foreign currency instantly by responsible are monitored daily. The table on the following
banks limited
department to keep the allowed limits with page summarises the Bank’s exposure to foreign
to the reserve
currency position, whether by the Central Bank of currency exchange rate risk at the end of the
Due from
- - - - 3,204,281 - - - - 3,204,281 Egypt or Bank board of directors. The Bank does financial year.
banks
not open position on foreign currency except on
Treasury bills
clients’ requirement.
and other
- - - - - - 2,714,799 - - 2,714,799
governmental
papers
The following table includes the carrying value at the financial instruments distributed by its original currencies.
Loans and
Foreign currency risk concentration on financial instruments
advances to - - - - 6,059 - - - - 6,059
banks
Loans and advances to customers: 31 December 2018 USD EGP EUR GBP OTHER TOTAL
Loans to Individuals Financial assets
Overdrafts - - - - - - - 258,632 - 258,632 Cash and balances with central

55,874 485,180 6,854 2,158 62,469 612,535
banks
Credit cards - - - - - - - 12,126 - 12,126
Personal loans - - - - - - - 109,314 - 109,314

Due from banks 2,249,707 616,777 84,955 69,330 183,512 3,204,281
Direct loans - - - - - - - 13,089 - 13,089 Treasury bills 1,195,198 1,360,791 152,675 - 6,135 2,714,799
Mortgage loan - - - - - - - 28,721 - 28,721 Trading investment - 5,168 - - - 5,168
Other loans - - - - - - - 205,201 - 205,201 Loans and advances to customers 1,571,425 2,464,044 89,474 1,576 143,746 4,270,265
Loans to Corporate Investment securities

Overdrafts 664,451 1,928 175,721 157,886 173,274 39,919 24,022 - - 1,237,201 Available for sale 19,253 39,327 870 - - 59,450
Direct loans 440,318 - 74,998 545,286 183,226 58,437 133,747 - - 1,436,012
Held to maturity 6,486 380,129 - - - 386,615
Syndicated
267,275 30,433 12,576 293,350 13,711 43,383 612,571 - - 1,273,299 Other financial assets 42,450 48,972 701 233 94,354 186,710
loans
Other loans 2,438 - 62 31,999 16,521 462 13,006 - - 64,488 Total financial assets 5,140,393 5,400,388 335,529 73,297 490,216 11,439,823
Investment securities Financial liabilities

Debt Due to banks 341,563 4,924 31,963 6,994 64,592 450,036
- - - 2,140 42,370 - 380,740 - - 425,250
instruments
Customers deposits 2,665,506 5,201,583 300,078 65,882 545,421 8,778,470
Other assets - - - - - - - - 50,463 50,463
Total as at 31 Loans and facilities from banks 117,500 - - - - 117,500

December 1,374,482 32,361 263,357 1,030,661 4,173,169 142,201 3,878,885 627,083 50,463 11,572,662
Other financial liability 59,156 211,560 1,570 416 14,176 286,878
2018
Total as at 31 Total financial liabilities 3,183,725 5,418,067 333,611 73,292 624,189 9,632,884
December 1,518,695 36,204 273,640 1,067,370 4,149,606 143,174 4,001,530 604,432 62,137 11,856,788
2017 Net on balance sheet financial position 1,956,668 (17,679) 1,918 5 (133,973) 1,806,939
Credit commitments 221,423 397,759 304,263 122 180,654 1,104,221
B. Market risk (floating rate) therefore interest rate fluctuation 31 December 2017
is mitigated on foreign currency increasing or
Total financial assets 5,736,902 5,265,936 466,757 64,333 338,211 11,872,139
B.1. Interest rate fluctuation risk decreasing taking into consideration hedging price
fluctuation risk resorting to financial derivatives Total financial liabilities 3,837,583 5,266,531 464,860 64,249 586,312 10,219,535
Interest rate risk is controlled by asset and liability Interest Rate Swap (IRS).
Net on balance sheet financial
committee (ALCO). 1,899,319 (595) 1,897 84 (248,101) 1,652,604
position
Financial assets in local currency
Financial assets in foreign currency Fixed income financial assets: the risk of fixed Credit commitments 263,483 398,226 262,755 55 219,678 1,144,197
The interest rate is determined on the basis of income assets is covered by issuing medium and
B.3. Interest rate risk such changes but may reduce profits in the event C. Liquidity risk liabilities when they fall due and to replace funds
that unexpected movements arise. The board sets when they are withdrawn. The consequence
Cash flow interest rate risk is the risk that the limits on the level of mismatch of interest rate Liquidity risk is the risk that the Bank is unable to may be the failure to meet obligation to repay
future cash flows of a financial instrument will repricing and value at risk that may be undertaken, meet its obligations associated with its financial depositors and fulfil commitments to lend.
fluctuate because of changes in market interest which is monitored daily by the respective Bank’s
rates. Fair value interest rate risk is the risk that department.
the value of a financial instrument will fluctuate Up to 1 1-3 3-12 1-5 Over 5
31 December 2018 Total
because of changes in market interest rates. The tables below summaries the Bank’s exposure Months Months Months Years Years
The Bank takes on exposure to the effects of to the interest rate fluctuations risk that include Assets
fluctuations in the prevailing levels of market carrying value of the financial instruments
interest rates on both its fair value and cash flow categorized based on the repricing dates or the Cash and balances with
170,145 - - 442,390 - 612,535
risks. Interest margins may increase because of maturity date – whichever is earlier. central bank
Due from banks 2,397,098 665,764 141,419 - - 3,204,281
Up to 1 1-3 3-12 1-5 Over 5 Non Interest Treasury bills 153,633 756,517 1,804,469 180 - 2,714,799
31 December 2018 Total
Months Months Months Years Years Bearing
Trading investment 5,168 - - - - 5,168
Financial assets
Loans and advances to
274,999 144,384 1,083,989 1,624,545 1,142,348 4,270,265
Cash and balances with customers
92,476 - - 442,390 - 77,669 612,535
central bank
Due from banks 2,368,433 665,764 141,418 - - 28,666 3,204,281
Available for sale 14,849 - 6,312 36,311 1,978 59,450
Treasury bills 153,633 756,517 1,804,469 180 - - 2,714,799
Held to maturity - - 17,516 236,159 132,940 386,615
Trading investment - - - - - 5,168 5,168
Other assets 181,221 5,489 - - - 186,710
Loans and advances to
1,977,571 1,252,716 788,903 194,982 54,953 1,140 4,270,265 Total financial assets 3,197,113 1,572,154 3,053,705 2,339,585 1,277,266 11,439,823
customers
Financial liabilities
Due to banks 294,318 47,098 108,620 - - 450,036
Available for sale 12,263 - 4,197 28,327 57 14,606 59,450
Customers deposits 4,051,574 1,353,185 1,110,728 2,232,362 30,621 8,778,470
Held to maturity - - 17,516 236,159 132,940 - 386,615
Loans and facilities from
Other financial assets 509 5,489 - - - 180,712 186,710 - - 25,000 92,500 - 117,500
banks
Total financial assets 4,604,885 2,680,486 2,756,503 902,038 187,950 307,961 11,439,823
Other liabilities 282,000 4,878 - - - 286,878
Total financial liabilities 4,627,892 1,405,161 1,244,348 2,324,862 30,621 9,632,884
Due to banks 263,383 47,098 108,620 - - 30,935 450,036
Total liquidity gap (1,430,779) 166,993 1,809,357 14,723 1,246,645 1,806,939
Customers deposits 5,207,693 1,134,510 658,473 1,024,248 109,415 644,131 8,778,470
Loans and facilities from

- - 117,500 - - - 117,500 Liquidity risk management process • Managing the concentration and profile of debt
banks
maturities.
Other financial liabilities 2,260 4,878 - - - 279,740 286,878 The Bank liquidity management process, as
Total financial liabilities 5,473,336 1,186,486 884,593 1,024,248 109,415 954,806 9,632,884 carried out within the Bank and monitored by Monitoring and reporting take the form of cash
assets and liability committee, includes: flow measurement and projections for the next
Total interest repricing gap (868,451) 1,494,000 1,871,910 (122,210) 78,535 (646,845) 1,806,939 day, week and month respectively, as these are
• Day-to-day funding, managed by monitoring key periods for liquidity management. The starting
future cash flows to ensure that requirements point for those projections is an analysis of the
can be met. This includes replenishment of contractual maturity of the financial liabilities
funds as they mature or are borrowed by and the expected collection date of the financial
customers. The Bank maintains an active assets.
presence in global money markets to enable
this to happen. Assets and liability management also monitors
• Maintaining a portfolio of highly marketable unmatched medium-term assets, the level and
assets that can easily be liquidated as type of undrawn lending commitments, the usage
protection against any unforeseen interruption of overdraft facilities and the impact of contingent
to cash flow. liabilities such as standby letters of credit and
• Monitoring the liquidity ratios against internal guarantees.
and regulatory requirements by the Central
Bank of Egypt.
Funding approach gross basis include: D. Fair value of financial assets and liabilities D.2. Financial instruments not measured at fair
value
Sources of liquidity are regularly reviewed by a Foreign exchange derivatives: currency forward, D.1. Financial instruments measured at fair value
separate team in the Bank’s treasury to maintain currency swaps. using valuation techniques The table below summarizes the carrying
a wide diversification by currency, geography, amounts and fair values of those financial assets
provider, product and term. The table below analyzes the Bank’s derivative No change in the assessed fair value using the and liabilities not presented on the Bank’s
financial instruments that will be settled on a gross valuation techniques through the financial year statement of financial position at their fair value:
Derivatives basis into relevant maturity groupings based on ended on 31 December 2018 and the financial year
the remaining period at the date of the statement ended on 31 December 2017.
Derivatives settled on a gross basis of financial position to the contractual maturity
date. The amounts disclosed in the table are the
The Bank’s derivatives that will be settled on a contractual undiscounted cash flows. Book Value Fair Value
31 December 31 December 31 December 31 December

2018 2017 2018 2017
31 December 2018 Up to 1 Month 1-3 Months 3-12 Months Total
Financial assets
Derivatives held for trading
Due from banks 3,204,281 3,363,108 3,204,281 3,363,108
Foreign exchange derivatives
Loans and advances to banks 6,059 6,059 999 -
Outflow - - - 0
Loans to customers
Inflow - - - 0
Individual 627,083 604,432 623,479 600,907
Swap derivatives
Corporate entities 4,011,000 3,959,276 3,704,627 3,706,747
Outflow - - - 0
Financial investments
Inflow - - - 0
Available for sale-equity
Total outflow 0 13,030 15,390 13,030 15,390
instruments
Total inflow 0
Held to maturity 386,615 437,465 365,352 431,384
31 December 2017 Up to 1 Month 1-3 Months 3-12 Months Total
Due to banks 450,036 843,369 450,036 843,369
Derivatives held for trading
Customer deposits:
Foreign exchange derivatives
Individual 3,088,041 2,781,661 3,088,041 2,781,661
Outflow - - - 0
Corporate entities 5,690,429 5,802,024 5,690,429 5,802,024
Inflow - - - 0
Loans and facilities from banks 117,500 130,000 117,500 130,000
Swap derivatives
Outflow - - - 0
Due from banks available for sale securities and held-to-maturity
Inflow - - - 0 assets is based on market prices or broker/dealer
Total outflow 0 The fair value of due from banks represents price quotations. Where this information is not
the book value, where all balances are current available, fair value is estimated using quoted
Total inflow 0 balances matured during the year. market prices for securities with similar credit,
maturity and yield characteristics.
Off-balance sheet items Loans and advances to customers
Due to banks
31 December 2018 31 December 2017 Loans and advances are net of charges for
No later than 1 year No later than 1 year impairment loan losses. Loans and advances The fair value of due to banks represents the book
to customers are divided into current and non- value, where all balances are current balances
Letter of guarantee 1,034,133 1,002,973 current balances. The book value of the current matured during the year.
Letter of credit (import and export) 53,601 102,601 balances is considered the fair value.
Deposits due to customers:
Customs acceptance 16,487 38,623 Investment securities
Total 1,104,221 1,144,197 The customer deposits are divided into current
Investment securities disclosed in the table above and non-current balances. The book value of the
comprise only those financial assets classified current balances is considered the fair value.
as held to maturity.The fair value for loans and
Other loans: • 45% of the increase in the fair value of the The Bank has committed to all local capital requirements in the countries in which they operate foreign
book value of financial investments (fair value branches over the past period.
The other loans are divided into current and non- reserve if it is positive, financial investments
current balances. The book value of the current held to maturity, investments in subsidiaries and According to the new regulations issued on 18 December 2012
balances is considered the fair value. associates).
• 45% of the special reserve. 31 December 2018 31 December 2017
E. Capital management • 45% of the reserve foreign currency translation
differences positive. Capital
The Bank’s objectives when managing capital, • Hybrid financial instruments. Tier 1 Going Concern Capital (1)
which is a broader concept than the ‘equity’ on • Loans (deposits) support.
the face of the statement of financial position, are: • Provision for impairment losses for loans and Share capital (net of the treasury shares) 500,000 500,000
advances and liabilities regular (must not Reserves 137,826 112,205
• To comply with the capital requirements set by exceed 1.25% of the total credit risk of the
the Arab Republic of Egypt and countries in assets and liabilities of regular risk-weighted, Retained earnings 872,265 792,726
which Bank branches operate. must also be dedicated impairment losses IFRS 9 risk reserve 83,044 83,044
• To safeguard the Bank’s ability to continue as a for loans and credit facilities and contingent
going concern so that it can continue to provide liabilities irregular enough to meet the liabilities Total Deducted from the continuous core capital (51,022) (49,610)
returns for shareholders and benefits for other component for which LCA). Total common equity capital 1,542,113 1,438,365
stakeholders.
Tier 2 (Gone Concern Capital) (2)
• To maintain a strong capital base to support the Deducted 50% of the Tier 1 and 50% of the Tier 2:
development of its business. 45% of the value of the special reserve 1,224 1,224
• Capital adequacy and the use of regulatory • Investments in non-financial companies - each
Subordinated deposits - 300,000
capital (Central Bank of Egypt) are monitored company alone, which amount to 15% or more
by the Bank’s management, employing of continuous core capital of the Bank by 45% fair value of financial investment 6,063 21,669
techniques based on the guidelines developed regulatory amendments.
Provision for impairment losses for performing loans
by the Basel Committee and the European • The total value of the Bank’s investments in 100,098 103,805
and advances and contingent liabilities
Community Directives, as implemented by the non-financial companies - each individual
Central Bank of Egypt (CBE) or supervisory company and that at least 15% of the basic Total impairment losses from tier 2 (92) (86)
purposes, the required information is filed with capital continued by regulatory amendments
Total (Gone Concern Capital) 107,293 426,612
the Authority on a quarterly basis. provided that exceed those investments
• The Bank maintains a ratio of 10% or more of combined for 60% of the core capital continued Total capital base after deducted (1+2) 1,649,406 1,864,977
total regulatory capital to its risk-weighted by regulatory amendments.
Total Credit Risk, Market Risk and Operational Risk
assets and contingent liabilities. • Securitization portfolios.
• The Bank’s branches operating outside the • Regarding the value of the assets that devolved Credit Risk 8,815,396 10,213,507
Arab Republic of Egypt are subject to banking to the Bank settlement of debts a general Market Risk 44,640 27,332
supervision rules in countries which they banking risks reserve.
operate. Operational Risk 725,354 607,607
• The Central Bank of Egypt approved on 18 When calculating the total extension of capital Total Credit Risk, Market Risk and Operational Risk 9,585,390 10,848,446
December 2012 at the instructions for the adequacy standard, shall not exceed loans
minimum standard for the standard capital (deposits) support for 50% of the first slide after Capital Adequacy Ratio % 17.21% 17.19%
adequacy in line with the implementation Basel the disposals.
(2) and under these instructions the Bank must
abide by such instructions as of December 2012. And are weighted assets and contingent liabilities Net stable funding ratio (NSFR) reached 148.52 • As a guidance ratio starting from end of
The Bank provides the data in accordance with weighted credit risk, market risk, operational risk. % (128.26% local currency and 167.9% foreign September 2015 till December 2017;
the previous instructions. The shrine consists capital adequacy standard form. currency) and liquidity coverage ratio (LCR) • As an obligatory ratio starting from the year 2018.
reached 309.81 % (148.7 % local currency and
According to the new regulations issued on 18 1. Credit risk 206.4% foreign currency). This ratio will be included in Basel requirement
December 2012 2. Market risk Tier 1 in order to maintain the effectiveness of the
3. Operational risk Financial Leverage Ratio Egyptian banking system, as well as keep up with
Tier 1 capital: the best international regulatory practices.
The assets are weighted risk weights ranging from Central Bank of Egypt Board of Directors had
Tier 1 capital consists of two parts: Going Concern zero to 100% classified according to the nature approved in its meeting held on July 14, 2015 Financial leverage ratio reflects the relationship
Capital and Additional Going Concern. of the debtor each asset to reflect the credit special supervisory instructions related to leverage between Tier 1 for capital that are used in capital
risk associated with it, and taking cash collateral ratio of maintaining a minimum level of leverage adequacy ratio (after exclusions) and the Bank’s
Tier 2 capital: account. ratio of 3% to be reported on a quarterly basis as assets (on and off-balance Sheet items) that are
follows: not risk weighted assets.
Gone Concern Capital consists of The treatment is used for extra-budgetary funds
after making adjustments to reflect the episodic
nature of the potential losses of those amounts.
Ratio Components including the following totals: C. Fair value of derivatives 5. Segment reporting analysis
The Numerator Components • On balance sheet exposure items after The fair values of financial instruments where Segment activity involves operating activities,
The numerator consists of the Tier 1 for capital deducting Tier 1 exclusions for capital base; no active market exists or where quoted prices assets used in providing banking services, and
that are used in capital adequacy ratio (after • Derivatives contracts exposure; are not otherwise available are determined by risk and return management associated with this
exclusions) in accordance with the requirements • Financing financial securities operations using valuation techniques. In these cases, the activity, which might differ from other activities.
of the Central Bank of Egypt. exposure; fair values are estimated from observable data in Segment analysis for the banking operations
• Off-balance sheet exposures “weighted respect of similar financial instruments or using involves the following:
The Denominator Components exchange transactions”. models. Where market observable inputs are not
The denominator consists of all Bank assets (on available, they are estimated based on appropriate Large, medium, and small enterprises:
and off-balance sheet items) according to the The Financial leverage ratio as follow: assumptions. Where valuation techniques (for
financial statements, called “Bank Exposures” example, models) are used to determine fair Includes current accounts, deposits, overdraft
values, they are validated and periodically accounts, loans, credit facilities, and financial
reviewed by qualified personnel independent of derivatives activities.
31 December 2018 31 December 2017 those that sourced them. All models are certified
before they are used, and models are calibrated Investment:
to ensure that outputs reflect actual data and
Tier 1 Capital after exclusion 1,542,113 1,438,365
comparative market prices. To the extent practical, Includes mergers, purchase of investments and
models use only observable data; however, areas financing the restructuring of companies and
Total Tier 1 Capital after exclusion 1,542,113 1,438,365 such as credit risk (both own credit risk and financial instruments.
counterparty risk), volatilities and correlations
Total on balance sheet exposures items including derivatives require management to make estimates. Changes Retail:
11,601,629 12,043,482
contracts and financial securities in assumptions about these factors could affect
the reported fair value of financial instruments. Includes current account, saving accounts,
Total off-balance sheet exposures 1,521,224 1,431,462 deposits, credit card, personal loans, and real
D. Held-to-maturity investments estate loans activities.
Total exposures on and off-balance sheet 13,122,853 13,474,944
The Bank classifies some non-derivative financial Other activities:
assets with fixed or determinable payments
Financial leverage ratio 11.75% 10.67%
and fixed maturity as held to maturity. This Includes other banking operations, such as money
classification requires significant judgment. In management.
making this judgment, the Bank evaluates its
4. Critical accounting estimates and judgments on assets in the Bank. Management uses estimates intention and ability to hold such investments Transactions among segments are performed
based on historical loss experience for assets with to maturity. If the Bank were to fail to keep according to the Bank’s operating cycle, and
The Bank makes estimates and assumptions credit risk characteristics and objective evidence these investments to maturity other than for the include operating assets and liabilities as
that affect the presented amounts of assets and of impairment similar to those in the portfolio specific circumstances – for example, selling an presented in the Bank’s statement of financial
liabilities within the next financial year. Estimates when scheduling its future cash flows. The method insignificant amount close to maturity – the Bank position.
and judgments are evaluated on a continuous and assumptions used to estimate the amount and is required to reclassify the entire category as
basis, and are based on past experience and other the timing of future cash flows are reviewed on available for sale. Accordingly, the investments
factors, including expectations with regard to a regular basis in order to reduce any difference would be measured at fair value instead of
future events believed to be reasonable during the between the expected and the actual loss based amortized cost, in addition to changing the
current conditions and available information. on experience. classification of any investments in this category.
A. Impairment losses on loans and advances B. Impairment of available-for-sale equity E. Income taxes
investments
The Bank reviews its loan portfolios to assess The Bank is subject to income taxes in numerous
impairment at least on a quarterly basis. In The Bank determines that available-for-sale jurisdictions. Significant estimates are required
determining whether an impairment loss should be equity investments are impaired when there in determining the worldwide provision for
recorded in the income statement, the Bank makes has been a significant or prolonged decline in income taxes. There are many transactions
judgments as to whether there is any observable the fair value below its cost. This determination and calculations for which the ultimate tax
data indicating an impairment trigger followed by of whether they are significant or prolonged determination is uncertain. The Bank recognizes
measurable decrease in the estimated future cash requires judgment. In making this judgment, liabilities for anticipated tax audit issues based
flows from a portfolio of loans before the decrease the Bank evaluates, among other factors, the on estimates of whether additional taxes will be
can be identified with that portfolio. This evidence volatility in share price. In addition, objective due. Where the final tax outcome of these matters
may include observable data indicating that there evidence of impairment may be deterioration in is different from the amounts that were initially
has been an adverse change in the payment the financial health of the investee, industry and recorded, such differences will impact the income
status of borrowers in a group, or national or local sector performance, changes in technology, and tax and deferred tax provisions in the period
economic conditions that correlate with defaults operational and financing cash flows. where the differences exist.
A. Segment reporting analysis B. Geographical sector analysis
Corporate Investment Wealth Alex Upper Other

31 December 2018 Retail Total 31 December 2018 Cairo Other Total Gulf Total
banking banking management Delta Egypt Countries
Revenues and expenses according to the sector activity Revenues and expenses according to the geographical sectors
Revenues of the sector activity 702,370 266,672 310,542 23,670 1,303,254 Revenues of the
geographical 1,043,315 128,599 21,090 18,267 1,211,271 91,278 705 1,303,254
Expenses of the sector (563,118) (209,987) (48,794) (21,067) (842,966)
sectors
Result of the sector operations 139,252 56,685 261,748 2,603 460,288
Expenses of the
Uncategorized expenses (114,434) geographical (788,850) (96,544) (18,924) (16,161) (920,479) (36,709) (212) (957,400)
sectors
Profit before tax 345,854
Result of sector
Income taxes (81,549) 254,465 32,055 2,166 2,106 290,792 54,569 493 345,854
operations
Net profit after tax 264,305 Profit before tax 345,854
Assets and liabilities according to the sector activity Tax (81,549)
Assets of the sector activity 3,740,499 1,007,931 5,938,059 44,958 10,731,447 Profit of the year
264,305
after tax
Uncategorized assets 774,376
Assets and liabilities according to the geographical sectors
Total assets 11,505,823
Geographical
Liabilities of the sector activity 5,651,403 643,172 3,390,158 348,105 10,032,838 9,276,269 511,540 41,771 29,176 9,858,756 1,627,310 19,757 11,505,823
sectors assets
Uncategorized liabilities 1,472,985
Total assets 9,276,269 511,540 41,771 29,176 9,858,756 1,627,310 19,757 11,505,823
Total liabilities 11,505,823
Geographical
9,276,269 511,540 41,771 29,176 9,858,756 1,627,310 19,757 11,505,823
sectors liabilities
Total liabilities 9,276,269 511,540 41,771 29,176 9,858,756 1,627,310 19,757 11,505,823
Corporate Investment Wealth
31 December 2017 Retail Total
banking banking management
Revenues and expenses according to the sector activity

Alex Upper Other
31 December 2017 Cairo Other Total Gulf Total
Revenues of the sector activity 548,420 47,397 476,795 3,471 1,076,083 Delta Egypt Countries
Expenses of the sector (437,532) (6,155) (213,034) (2,394) (659,115) Revenues & expenses according to the geographical sectors
Result of the sector operations 110,888 41,242 263,761 1,077 416,968 Revenues of the
910,381 75,679 4,160 4,596 994,816 80,534 733 1,076,083
geographical sectors
Uncategorized expenses (82,007)
Expenses of the
Profit before tax 334,961 (675,972) (42,908) (2,633) (3,166) (724,679) (16,063) (380) (741,122)
geographical sectors
Income taxes (79,458)
Result of sector
234,409 32,771 1,527 1,430 270,137 64,471 353 334,961
Net profit after tax 255,503 operations
Assets and liabilities according to the sector activity Profit before tax 334,961
Assets of the sector activity 3,952,424 731,668 6,460,648 29,734 11,174,474 Tax (79,458)
Uncategorized assets 759,501 Profit of the year 255,503
Total assets 11,933,975 Assets and liabilities according to the geographical sectors
Liabilities of the sector activity 5,786,371 552,031 2,954,518 323,643 9,616,563 Geographical sectors
9,609,277 645,193 27,500 29,808 10,311,778 1,602,509 19,688 11,933,975
assets
Uncategorized liabilities 2,317,412
Total assets 9,609,277 645,193 27,500 29,808 10,311,778 1,602,509 19,688 11,933,975
Total liabilities 11,933,975
Geographical sectors
9,609,277 645,193 27,500 29,808 10,311,778 1,602,509 19,688 11,933,975
liabilities
Total liabilities 9,609,277 645,193 27,500 29,808 10,311,778 1,602,509 19,688 11,933,975
6. Net interest income 9. Net trading income
31 December 2018 31 December 2017 31 December 2018 31 December 2017
Interest on loans and similar income Foreign exchange:
Loans and advances to customers 617,195 501,394 Gains from foreign currencies transactions 33,258 25,484
Treasury bills and bonds 341,676 309,277 (Loss) on revaluation of swap rate contracts (337) -
Deposits and current accounts 155,313 124,873 (Loss) on revaluation of forward rate contracts - (40)
Investments in held to maturity and available for sale debt Change in the fair value of the equity instruments held for
7,613 5,485 (3,139) 2,522
instruments trading
1,121,797 941,029 Total 29,782 27,966
Interest expenses and similar charges

10. Impairment charge for credit losses
Deposits and current accounts:
To banks (26,663) (16,559) 31 December 2018 31 December 2017
To customers (739,339) (595,812) Loans loss impairment (note.22) (54,517) (20,730)
Other loans (6,842) (5,039) Impairment loss on held to maturity investment 1,273 (1,272)
Others (subordinated deposit) (4,384) (7,253) (53,244) (22,002)
Total (777,228) (624,663)

11. Administrative expenses
Net interest income 344,569 316,366
7. Net fees and commission income Salaries, wages and staff benefits (33,090) (27,353)
Staff medical expenses (752) (613)

Social insurance and pension (10,505) (6,865)
Fees and commissions income:
Merchandise supplies (6,587) (5,573)
Credit related fees and commissions 52,089 59,233
Services supplies (16,824) (15,742)
Funding institutions services fees 10,160 9,576
Stamp duty taxes and fees (15,906) (6,176)
Trust and other fiduciary fees 2,087 1,339
Depreciation and amortization (9,475) (8,573)
Western Union service fees 7,742 6,575
Donation (4,819) (385)
Transfers fees 5,558 4,710
Insurance expense (1,010) -
fees collected of customer service 4,346 3,812
Other fees 1,367 2,356 (98,968) (71,280)
Total 83,349 87,601

12. Other Operating expense
Fees and commissions expense:
Other fees and commissions paid (2,546) (2,409) 31 December 2018 31 December 2017
Net fees and commissions 80,803 85,192 Gain/(Loss) on translation of monetary assets and liabilities
825 (756)
balances in foreign currencies other than trading
8. Dividend Income Gain on sale of fixed assets 25 133
Other operating income 8,347 8,800

Other operating expenses (17,973) (14,284)
From Available for trade 248 273
Other provision expense (2,481) (3,030)
From Available for sale 535 3,074
(11,257) (9,137)
Total 783 3,347
13. Income tax expense 16. Due from banks
Current income taxes-Local Branches (67,844) (61,012) Current accounts 92,182 169,398
Current income taxes-Foreign Branches (11,204) (13,369) Deposits 3,112,099 3,193,710
Deferred tax (2,501) (5,077) 3,204,281 3,363,108
(81,549) (79,458) Central banks apart from Legal Reserve 882,568 619,896
Local banks 1,207,146 951,923

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’s profits realized from local and overseas Foreign banks 1,114,567 1,791,289
units as follows: 3,204,281 3,363,108
Non-interest bearing balances 139,182 169,398

Variable interest bearing balances 3,065,099 3,193,710
Net accounting profit before taxes 345,854 334,961
3,204,281 3,363,108
The tax rate according to the average tax rates of local and
22.50% 22.50%
foreign branches Current balance 3,204,281 3,363,108
Income tax computed based on the average tax rates of local

77,817 75,366
and foreign branches on the profit in several tax circuits
17. Treasury bills
Add/(Deduct)
Revenues not subject to taxation (36,325) (27,205) 31 December 2018 31 December 2017
Expenses not deducted for tax purposes 26,264 23,268 Treasury bills 2,742,399 3,012,772
Treasury bills taxes 11,292 2,952 Sales of treasury bills with a commitment to repurchase (27,600) (58,983)
Used in deferred tax asset has not been recognized 2,501 5,077 Net treasury bills 2,714,799 2,953,789
Income tax 81,549 79,458 Treasury bills issued from Central Bank of Egypt 2,708,664 2,947,621
Actual tax rate 23.58% 23.72% Treasury bills issued from Central Bank of Lebanon 6,135 6,168
Net treasury bills 2,714,799 2,953,789

14. Earnings per share
Treasury bills represent the following according to maturities:
31 December 2018 31 December 2017 Treasury bills, maturity 91 days 70,661 63,531
Net profit for the year 264,305 255,503 Treasury bills, maturity 182 days 146,465 461,229
Expected distributions of employees (23,774) (16,700) Treasury bills, maturity 273 days* 335,233 119,609
Expected board of directors remuneration (585) (585) Treasury bills, maturity 364 days* 2,347,399 2,535,864
239,946 238,218 Treasury bills, maturity more than 1 year* 959 1,284
Weighted average for the expected number of shares 100,000 100,000 Total nominal value 2,900,717 3,181,517
Earnings per share 2.40 2.38 Unearned interest (158,318) (168,745)
Total (1) 2,742,399 3,012,772
Sales of treasury bills with a commitment to repurchase

15. Cash and due from the Central Banks
Sales of treasury bills with commitment to repurchase in 91
(27,600) (58,983)
days
Total (2) (27,600) (58,983)
Cash in hand 78,808 95,665
Total (1-2) 2,714,799 2,953,789
Balances with the Central Banks limited to the reserve ratio 533,727 469,237
612,535 564,902
* Include treasury bills in dollar and euro at 31 December 2018 amounting to 1,347,873 thousand U.S dollar (1,377,419
Non-interest bearing balances 612,535 564,902 thousand USD as 31 December, 2017)
* Includes treasury bills sold with a commitment to resell amounting to 27,600 thousand U.S dollar against the Central
612,535 564,902 Bank of Egypt’s mortgage finance initiative for low income
18. Trading investment The movement in financial investments during the year may be summarized as follows:
31 December 2018 31 December 2017 Available for sale Held to maturity Total
Listed equity securities in the stock market Balance at 1 January 2017 144,229 328,624 472,853
Local companies shares 5,168 7,793 Additions 12,655 48,617 61,272
Total equity securities 5,168 7,793 Reclassification* (73,877) 73,877 -
Total trading investment 5,168 7,793 Disposals (sale/redemption/amortization) (21,420) (21,653) (43,073)
All trading investment are listed in the stock market Impairment losses for equity securities held to
- (1,272) (1,272)
maturity
19. Financial investment Impairment losses for equity securities available for sale (68) - (68)
Valuation exchange difference of monetary assets 492 9,272 9,764

Net changes in fair value for equity securities
Available for sale investment 13,382 - 13,382
available for sale
Debt instrument: Balance at 31 December 2017 75,393 437,465 512,858
Listed at fair value 45,016 14,398 Balance at 1 January 2018 75,393 437,465 512,858
Equity securities Additions 43,703 61,587 105,290
Listed at fair value 1,404 45,605 Disposals (sale/redemption/amortization) (65,619) (109,484) (175,103)
Non listed at cost value 13,030 15,390 Impairment losses for equity securities held to
- 1,273 1,273
Total available for sale investment (1) 59,450 75,393 maturity
Impairment losses for equity securities available for sale 1,017 - 1,017
Held to maturity investment 31 December 2018 31 December 2017 Valuation Exchange difference of monetary assets (556) (4,226) (4,782)
Debt securities – at amortized cost Net changes in fair value for equity securities
5,512 - 5,512
available for sale
Listed debt instruments – at amortized cost 380,234 368,538
Balance at 31 December 2018 59,450 386,615 446,065
Non listed debt instruments – at amortized cost - 62,478
Mutual fund certificates - according to law requirements 6,381 6,449 * The Bank has disposed, on 30th of September 2018, corporate bonds classified as Held to Maturity, at USD 41,192
Total held to maturity investments (2) 386,615 437,465 thousands. As the sale was in conformity with Central Bank of Egypt rules of preparation and presentation of the
Bank’s financial statement pertaining to disposals for Held to Maturity Investment.
Total financial investments(1+2) 446,065 512,858
Current balances 22,339 32,471 Gain from financial investments
Non-current balances 423,726 480,387

446,065 512,858
Gain on sale of available for sale investments 51,050 2,850
Debt instruments with fixed interest rates 412,816 382,936
Gain on sale treasury bills 1,530 1,727
Debt instruments with variable interest rates 12,434 62,478
Impairment loss of associates and subsidiaries
425,250 445,414 (211) -
investment
Available for sale investments impairment losses 1,017 (68)
53,386 4,509
* The Bank has disposed of Available for Sale equity instruments for USD 52,377 thousands during the third quarter, and
recognized gains from sale amounting to USD 48,982 thousands in income statement reclassified position changing
fair value from equity.
20. Investment property (net of accumulated depreciation) Allowance for impairment

Movement of allowance account for losses on loans and advances to banks and customers by class is as
Land Building Total
follows:
Balance at 1 January 2018

31 December 2018 Retail Corporate Total
Cost 958 2,177 3,135
Balance at the beginning of the year 3,525 252,529 256,054
Accumulated depreciation - (865) (865)
Impairment charges 184 54,333 54,517
Net book value as of 1 January 2018 958 1,312 2,270
Proceeds from written off debts 65 5 70
Depreciation expense - (40) (40)
Provision uses during the financial year (153) - (153)
Net book value as of 31 December 2018 958 1,272 2,230
Foreign currencies translation
(17) (494) (511)
Net book value as of 31 December 2017 958 1,312 2,270 differences
Balance at the end of year 3,604 306,373 309,977

21. Loans and advances to banks

31 December 2017 Retail Corporate Total
Loans 6,059 6,059
Balance at the beginning of the year 2,550 232,427 234,977
Less:
(4,992) (5,991) Impairment charges 869 19,861 20,730
Impairment loss provision
Proceeds from written off debts 152 41 193
Interest in suspense (68) (68)
Provision uses during the financial year (46) (938) (984)
999 -
Foreign currencies translation
- 1,138 1,138
22. Loans and advances to customers differences
Balance at the end of year 3,525 252,529 256,054

Retail
23. Financial Derivatives The Bank’s credit risk represents the potential cost
Overdrafts 258,632 207,024
to replace the swap contracts if counterparties
Credit cards 12,126 10,865 Derivatives failto fulfill their obligations. This risk is monitored
Personal loans 109,314 95,024 Currency forwards represent commitments on an ongoing basis with reference to the current
Direct loans 13,089 19,543 to purchase foreign and domestic currency, fair value, and a proportion of the notional amount
including undelivered spot transactions. Foreign of the contracts. In order to control the level of
Mortgage loan 28,721 10,588
currency and interest rate futures are contractual credit risk taken, the Bank assesses counterparties
Other loans 205,201 261,388 obligations to receive or pay a net amount based using the same techniques as for its lending
Total (1) 627,083 604,432 on changes in currency rates or interest rates, activities.
Corporate or to buy or sell foreign currency or a financial
instrument on a future date at a specified price, The notional amounts of certain types of financial
Overdrafts 1,237,201 1,189,901
established in an active financial market. instrument provide a basis for comparison with
Direct loans 1,436,012 1,462,500
instruments recognized on the balance sheet but
Syndicated loans 1,273,299 1,278,873 Forward rate agreements are individually do not necessarily indicate the amounts of future
Other loans 64,488 28,002 negotiated interest rate futures that call for a cash flows involved or the current fair value of
cash settlement at a future date for the difference the instruments and, therefore do not indicate the
Total (2) 4,011,000 3,959,276
between a contracted rate of interest and the Bank’s exposure to credit or price risks.
Total loans and advances (1+2) 4,638,083 4,563,708
current market rate, based on a notional principal
Less : unearned discount for commercial papers and loans (45,832) (58,524) amount. The derivative instruments become favorable
Less : prepaid interest for loans (30) (39) (assets) or unfavorable (liabilities) as a result of
Less: allowance for impairment (304,985) (250,063)
Currency and interest rate swaps are fluctuations in market interest rates or foreign
commitments to exchange one set of cash flows exchange rates relative to their terms. The
Less : suspense interest (17,970) (17,970)
for another. Swaps result in an economic exchange aggregate contractual or notional amount of
Net distributed as follows: 4,269,266 4,237,112 of currencies or interest rates (for example, fixed derivative financial instruments on hand, the
Current balances 1,503,372 1,464,915 rate for floating rate) or a combination of all extent to which instruments are favorable or
Non-current balances 2,765,894 2,772,197 these (i.e., cross-currency interest rate swaps). unfavorable, and thus the aggregate fair values
No exchange of principal takes place, except for of derivative financial assets and liabilities, can
4,269,266 4,237,112
certain currency swaps. fluctuate significantly from time to time.
24. Investment in subsidiaries and associates Company

liabilities Company
The Bank’s interest in its subsidiary and associates is as follows: 31 December Nature of Company Company Participation Participation
Country without profit/
2018 relation assets revenues value percentage
owners’ (loss)
Company equity
liabilities Company Universal for
31 December Nature of Company Company Participation Participation
Country without profit/ Investment and
2018 relation assets revenues value percentage
owners’ (loss) Development Subsidiary Egypt 418 53 524 60 224 90%
equity Company
(S.A.E.)*
Universal for
Investment and Arab African
Development Subsidiary Egypt 543 94 532 66 224 90.0% Holding
Subsidiary Egypt 9,502 1,763 3,288 1,184 9,498 89.63%
Company Company
(S.A.E.)* (S.A.E.)
Arab African Arab African

Holding Real Estate
Subsidiary Egypt 11,580 3,202 3,078 914 9,498 89.63% Mortgage Subsidiary Egypt 29,132 17,574 5,817 2,078 17,787 95.46%
Company
(S.A.E.) Company
(S.A.E.)
Arab African
Real Estate Arab African
Mortgage Subsidiary Egypt 28,469 15,428 4,465 1,757 17,787 95.46% Financial Subsidiary Egypt 37,474 28,250 8,509 1,627 14,086 99%
Company Leasing (S.A.E.)
(S.A.E.) Sandah Fund
for MSME Subsidiary Egypt - - - - 2,252 67%
Arab African
(S.A.E.)
Financial Subsidiary Egypt 42,870 32,173 8,268 1,646 14,086 99%
Leasing (S.A.E.) Nuun Fund
Associates Egypt 92 12 27 (9) 33 20%
Services*
Sandah Fund
for MSME Subsidiary Egypt 5,462 33 248 (723) 4,309 67% Egyptian
(S.A.E.) Modern Matches
Associates Egypt 1,694 1,035 2,518 133 125 23.40%
Company
Nuun Fund (S.A.E.)*
Associates Egypt 81 14 28 (8) 0 20%
Services*
Egyptian
Egyptian Matches
Modern Matches Company
Associates Egypt 1,567 1,101 1,759 (9) 125 23.4%
Company (S.A.E.)*
(S.A.E.)*
Total 80,847 50,024 23,100 5,213 44,427
Egyptian
Matches * Created for the Bank’s contribution to Egyptian Matches Company (S.A.E.) was impaired by USD 243 thousand.
Company * Created for the Bank’s contribution to New Egyptian Matches Company (S.A.E.) was impaired by USD 289 thousand.
(S.A.E.)* * Created for the Bank’s contribution to universal for Investment and Development company (S.A.E.) impairment with
USD 280 thousand.
Total 93,261 53,544 20,475 3,648 46,251
* Investments in subsidiaries and associates are not listed in the stock exchange.
* Created for the Bank’s contribution to Egyptian Matches Company (S.A.E.) was impaired by USD 443 thousand.
25. Other assets
* Created for the Bank’s contribution to New Egyptian Matches Company (S.A.E.) was impaired by USD 289 thousand.
* Created for the Bank’s contribution to Nuun Fund Services was impaired by USD 11 thousand and USD 22 thousand
currency translation difference. 31 December 2018 31 December 2017
* Created for the Bank’s contribution to Universal for Investment and Development Company (S.A.E.) was impaired by
Accrued revenues 50,463 55,473
USD 280 thousand.
* Investments in subsidiaries and associates are not listed in the stock exchange. Prepaid expenses 4,084 5,110
Advance payments for purchase of fixed assets 5,754 6,706
Assets reverted to the Bank in settlement of debts 307 335
Insurance and custody 715 524
Other debit balances 77,292 115,685
138,615 183,833
26. Deferred tax assets 28. Intangible assets
Deferred tax assets resulting from tax differences of the assets and liabilities items comprise the following: Intangible assets presented at the financial position date are resulted from the acquisition of ex- Misr
America International Bank by the Bank (during year 2005), which are subjected annually to the impairment
test, and represented as follows:
Assets Liabilities Assets Liabilities

Fixed assets - (1,655) - (1,412)
Cost 11,309 11,309
Other provisions 3,806 - 5,778 -
Accumulated amortization cost (11,309) (10,872)
Equity instruments available for sale impairment loss - - 286 -
NBV at the end of the year - 437
Total tax assets (liabilities) 3,806 (1,655) 6,064 (1,412)
Net deferred tax assets 2,151 - 4,652 - 29. Due to banks
Deferred tax assets and liability movements are as follows: 31 December 2018 31 December 2017
Current accounts 124,751 307,497

31 December 2018 31 December 2017 Deposits 325,285 535,872
Balance at the beginning of the year 4,652 9,729 450,036 843,369
Deferred tax movement during the year (2,501) (5,077) Central banks 100,976 30,538
Balance at the end of the year 2,151 4,652 Local banks 87,151 288,267
Foreign banks 261,909 524,564

27. Fixed assets
450,036 843,369
Land and Machinery and Balance as of
Other Non-interest bearing balances 124,751 307,497
building equipment 1 January 2017
Balance as of 1 January 2017 Interest bearing balances 325,285 535,872
Cost 66,407 12,984 32,073 111,464 450,036 843,369
Accumulated depreciation (37,239) (5,447) (12,283) (54,969) Current balances 450,036 843,369
Net book value as of 1 January 2017 29,168 7,537 19,790 56,495
Additions 417 2,064 7,915 10,396 30. Customers’ deposits
Depreciation expense (1,058) (1,752) (5,287) (8,097)

Net book value as of 31 December 2017 28,527 7,849 22,418 58,794
Demand deposits 1,002,572 1,028,768
Balance as of 1 January 2018
Time and call deposits 5,873,527 5,868,332
Cost 66,821 13,888 38,253 118,962
Certificates of deposits 713,022 668,298
Accumulated depreciation (38,294) (6,039) (15,835) (60,168)
Saving accounts 1,080,051 845,351
Net book value as of 1 January 2018 28,527 7,849 22,418 58,794
Other deposits 109,298 172,936
Additions 4,071 3,543 6,800 14,414
Total 8,778,470 8,583,685
Disposals - - (747) (747)
Corporate deposits 5,690,429 5,802,024
Depreciation expense (1,145) (2,057) (5,796) (8,998)
Retail deposits 3,088,041 2,781,661
8,778,470 8,583,685
Balance as of end of year
Non-interest bearing balances 1,124,564 1,202,607
Cost 70,883 16,680 42,856 130,419
Interest bearing balances 1,693,204 1,176,342
Accumulated depreciation (39,430) (7,345) (20,181) (66,956)
Fixed rate interest balances 5,960,702 6,204,736
8,778,470 8,583,685
• Fixed assets (net of accumulated depreciation) at the financial position date include USD 7,194 thousand representing Current balances 6,515,487 5,413,805
assets not registered yet in the Bank’s name as the legal procedures are currently undertaken to register such assets.
Non-current balances 2,262,983 3,169,880
• Assets fully depreciated amounted to USD 2,210 thousand at the end of 31 December 2018.
8,778,470 8,583,685
31. Other liabilities 34. Current income tax liabilities
Accrued interest 158,609 161,812 Current tax obligation for bills and treasury bonds 12,975 15,915
Prepaid revenue 1,498 2,969 Current tax obligation foreign branches 11,014 13,234
Accrued expenses 8,690 6,481 23,989 29,149
Creditors 29,214 31,642
Other credit balances 35,243 88,752 35. Retirement benefit obligations The most important was the basic assumptions
Total 233,254 291,656 used by the actuary as follows:
The Department of Social Fund for employees in
the Arab African International Bank conducted • Death rates from the British Table A49-52 ULT
32. Loans and facilities from banks
an actuarial study to determine the net present • Disability rates from the experience of the
value of the obligations of the fund and thus Egyptian Social Security.
Interest Rate 31 December 2018 31 December 2017 determine the surplus or deficit in the fund as • Unity method is used in the calculation of the
Loan for a period of 5 years from EBRD 2.9% over Libor for 6 of 31 December 2017 under which the Bank will estimated additional commitments and the
30,000 30,000 compensate any shortfall that may arise from the present value of subscriptions (Unit Projected
renewal months
investment fund. method).
Loan for a period of 5 years from IFC 3.15% over Libor for 6
87,500 100,000
renewal months
Total 117,500 130,000 The following table shows the movement on the income statement:
Non current balance - -

Total 117,500 130,000
Beginning balance 3,904 5,265
33. Other provisions Provided during the year 5,978 3,396
Used during the year (5,302) (4,757)

31 December 2018
Balance at the end of the year 4,580 3,904
Balance Foreign
Provided Transferred Balance at
at the exchange Used during Amounts recognized in the balance sheet
Description during the from other the end of
beginning currency the year
year accounts the year
of the year difference
Claims provision 9,751 672 (15) - (6,584) 3,824
The present value of funded obligations 92,020 104,521
Contingent liabilities
15,133 2,583 (57) - - 17,659
provision The fair value of the assets system 51,759 63,445
Employees’ incentives Deficit of funded system 40,261 41,076

12,888 (774) - - (8,542) 3,572
provision
Unrealized actuarial losses (35,681) (38,938)
Total 37,772 2,481 (72) - (15,126) 25,055
The liabilities in the Financial Position statement 4,580 2,138
Amounts recognized in the balance sheet

31 December 2017
Balance Foreign 31 December 2018 31 December 2017

Provided Transferred Balance at
at the exchange Used during
Description during the from other the end of Liabilities 4,580 2,138
beginning currency the year
year accounts the year
of the year difference Assets - -
Claims provision 17,344 (2,793) 49 - (4,849) 9,751 The liabilities in the financial position statement 4,580 2,138
Contingent liabilities
13,236 1,823 74 - - 15,133
provision The Bank committed to pay the monthly pensions of 70 thousand U.S. dollar.
Employees’ incentives
8,888 4,000 - - - 12,888
provision
Total 39,468 3,030 123 - (4,849) 37,772

The actuarial bases used: 38. Reserves and retained earnings

The pension and remuneration system for employees who receive their salaries in Egyptian pounds.
Reserves 31 December 2018 31 December 2017
Average assumptions for determining employee benefits liabilities EGP % USD %
Legal reserve 125,545 100,000
Average discount rate 15.75 2.83
General reserve 10,000 10,000
Increase rate of compensation 13.50 2.00
Special reserve 13,583 13,583
Price inflation rate 13.50 2.20
General banking risks reserve 185 192
Rate of pension increase 4.00 2.00
Capital reserve 2,281 2,256
Currencies translation reserve 1 (15)

Average assumptions for determining net cost
Fair value reserve – available for sale investments 1,730 40,246
Average discount rate 17.50 2.78
IFRS 9 risk reserve 83,044 83,044
The long-term rate of return on the assets of the system during the fiscal year 11.99 2.95
Total reserves at the end of the year 236,369 249,306
Increase rate of compensation 13.75 1.60
Price inflation rate 13.50 1.30 Movements in reserves were as follows:
Rate of pension increase 5.00 2.00

A. Legal reserve 31 December 2018 31 December 2017
Balance at the beginning of the year 100,000 100,000

36. Subordinated deposit B. Issued and paid-in capital Transferred from retained earning 25,545 -
• On July 2008, the Bank has taken from the The issued, subscribed and paid-in capital Balance at the end of the year 125,545 100,000
Bank`s principal shareholders subordinated amounts to 500 million USD represented in 100
deposit amounting 300 MM U.S. dollar divided million shares of 5 USD par value. • In accordance with the Bank’s articles of association, 10% of annual net profit is transferred to the legal reserve. Such
equally between them for ten years, with transfer will be stopped when the legal reserve reaches 100% of the issued capital and this reserve is not able to
interest rate 0.5% over LIBOR for six months. On September 12, 2017, the Extraordinary General distribute.
Interests are paid semiannually during the first Meeting of Arab African International Bank
five years and then become 1% above LIBOR for shareholders approved the increase of the Bank’s B. General reserve 31 December 2018 31 December 2017
six months in the next five years. authorized capital from 500 million USD to 1
• On June 2018, the subordinated deposits due to billion USD and amended the statement of Article Balance at the beginning of the year 10,000 10,000
the shareholders amounted with 300 MM USD. (6) of the Bank’s Articles of Association. Also, the Balance at the end of the year 10,000 10,000
increase of the issued and paid-in capital from 100
37. Capital million USD to 500 million USD of the retained
earning represented in 100 million shares of 5 USD C. Special reserve 31 December 2018 31 December 2017
A. Authorized capital par value. Balance at the beginning of the year 13,583 13,583
The authorized capital for the Bank is 1 Billion USD. C. Shareholders Balance at the end of the year 13,583 13,583
In compliance with the Central Bank of Egypt guidelines, the balance of the special reserve is not to be
Ownership Interest disposed off without recourse to the Central Bank of Egypt
Central Bank of Egypt 49.37%

D. Banking risk reserve 31 December 2018 31 December 2017
Kuwait General Investment Authority 49.37%
Balance at the beginning of the year 192 208
Others 1.26%
Transferred from retained earning 14 (22)
100%
Foreign exchange differences (21) 6
Balance at the end of the year 185 192

In compliance with the Central Bank of Egypt guidelines, the balance of the banking risk reserve is not to be On September 12, 2017, the Extraordinary General (6) of the Bank’s Articles of Association. Also the
disposed off without recourse to the Central Bank of Egypt. Meeting of Arab African International Bank increase of the issued and paid in capital from 100
shareholders approved the increase of the Bank’s million USD to 500 million USD of the retained
E. Capital reserve 31 December 2018 31 December 2017
authorized capital from 500 million USD to 1 earning represented in 100 million shares of 5 USD
billion USD and amended the provisions of Article par value.
Balance at the beginning of the year 2,256 2,205
Transferred from retained earning 25 51 39. Contingent liabilities and commitments

Balance at the end of the year 2,281 2,256
F. Currencies translation reserve 31 December 2018 31 December 2017 Letters of guarantee 1,034,133 1,002,973
Balance at the beginning of the year (15) (22) Commercial letters of credit (import and export) 53,601 102,601
Foreign exchange difference 16 7 Letters of acceptances 16,487 38,623
Balance at the end of the year 1 (15) Total 1,104,221 1,144,197
In accordance with the Central Bank of Egypt guidelines, the results of the business and budget of the
foreign branches are translated into the presentation currency, which is different from the presentation 40. Tax status 3. Year 2017
currency of the Bank. Exchange differences arising from a separate item (foreign currency translation The tax return for 2017 has been submitted
differences) are recognized in equity as currencies translation reserve. First: Corporate tax according to law for the year according to law number 91 for the year 2005 and
2005 the tax difference has been paid by the Bank.
G. Fair value reserve – available for sale investments 31 December 2018 31 December 2017
1. Years until 2012 Third: Stamp Duty Tax:
Balance at the beginning of the year 40,246 26,864 The tax return has been submitted according
to law number 91 for the year 2005, and the tax 1. Years until 31/7/2006 (according to law
Revaluation of fair value reserve – investments 1,110 -
authority has performed the tax examination for number 111 for the Year 1980)
Net (loss)/gain transferred to income statement due to the year and the Bank paid the difference of tax. The tax examination of all the Bank’s branches
(45,138) -
disposals So, there is no disagreement between the Bank has been finalized. The follow-up on the disputed
and the tax authority. items with the tax authority in the judicial courts
Net change of fair value reserve - available for sale
5,512 13,382 of different grades are still pending. Further
investments
2. Years 2013/2016 provisions for disputed items are included at the
Balance at the end of the year 1,730 40,246 The tax return for 2013 till 2016 has been contingent liabilities provisions.
submitted according to law number 91 for the year
2005. The Bank was notified document processing 2. Years from 1/8/2006 To 31/12/2018 (according
H. IFRS 9 risk reserve 31 December 2018 31 December 2017
and checked and the owed tax has been paid from to law number 143 for the year 2006):
Balance at the end of the year 83,044 - by the Bank, tax settlement for these years are The examination of the stamp duty for this year
under way. ended in accordance with law number 143 of
Balance at the end of the year 83,044 -
2006, law number 115 of 2008 and law number 9
3. Year 2017 of 2013. The internal committee has completed
The IFRS 9 risk reserve is composed of 1% of the total credit risk weighted by the net profit after tax for The tax return for 2015 has been submitted its work for these years. All financial obligations
2017 in accordance with the instructions of the Central Bank of Egypt issued on 28 January 2018 and is only according to law number 91 for the year 2005. We have been fulfilled and all disputes with the
used with the approval of the Central Bank of Egypt. are preparing the documents and the information tax authority have been settled. The Bank has
required for the tax inspection. obtained final acknowledgment of pay for these
Retained earnings 31 December 2018 31 December 2017 years.
Second: Salary tax:
Balance at the beginning of the year 965,134 1,258,358
41. Related party transactions
Distributions of cash dividends of the year profit 2017 /2016 (67,285) (65,585) 1. Years until 2012
Transferred to legal reserve (25,545) - The Bank has been examined by the tax authority Related parties include the major shareholders,
until the year 2012, the Bank has obtained final subsidiaries and associates. During the year
Transferred to capital reserve (25) (51)
acknowledgment of pay for these years the Bank has dealt with related parties within
Transferred to capital increase - (400,000) its ordinary operations. The nature of these
Transferred to banking risk reserve (14) (47) 2. Years 2013/2016 transactions and balances on the financial position
The tax return for 2013 till 2016 has been date are as follows:
Profit of the year 264,305 255,503
submitted according to law number 91 for the year
Balance at the end of the year 1,136,570 1,048,178 2005. The Bank was notified document processing
Transferred to IFRS 9 reserve - (83,044) and checked and the owed tax has been paid
by the Bank, tax settlements for these years are
Balance at the end of the year 1,136,570 965,134
underway.
42. Arab African International Bank Mutual Fund law No. 95 of 1992 and its executive regulations. The
31 December 31 December
2018 2017
“shield” Bank shares are currently amounting to 2,807,009
certificates equivalent to 56.7 MM EGP and the
Due from banks -Central Bank of Egypt (shareholder) 882,568 619,896 The Bank owns “Shield” mutual fund which was certificates value per certificates at the balance
established in accordance with the capital law sheet date was 20.20 EGP.
No. 95 of 1992 and its executive regulations. The
Investments in subsidiaries and associates 46,251 44,427
Bank shares are currently amounting to 322,839 45. Arab African International Bank Mutual Fund
certificates equivalent to 66.97 MM EGP and the Fixed debt instrument “Guard”
Loans to customers (subsidiaries and associates) 41,521 42,173 value per certificates at the Balance Sheet date
was 207,44 EGP. The Bank owns fixed debt instrument mutual fund
Customers’ deposits (subsidiaries and associates) 6,959 6,462
which was established in accordance with the capital
43. Arab African International Bank Mutual Fund law No. 95 of 1992 and its executive regulations. The
“Juman” Bank shares are currently amounting to 500,000
Due to banks -Central Bank of Egypt (shareholder) 100,976 30,538 certificates equivalent to 6.43 MM EGP and the
The Bank owns “Juman” mutual fund which was certificates value per certificates at the balance
Held to maturity investment (mutual fund certificates) “Shield” 1,631 1,648 established in accordance with the capital law sheet date was 12.86 EGP.
No. 95 of 1992 and its executive regulations. The
Bank shares are currently amounting to 439,259 46. Cash and cash equivalents
Held to maturity investment (mutual fund certificates) “Juman” 2,791 2,821
certificates equivalent to 111.81 MM EGP and the
value per certificates at the balance sheet date For the purposes of the cash flow statement
Held to maturity investment (mutual fund certificates) “fixed debt instruments” 1,680 1,698 was 245.53 EGP. presentation, cash and cash equivalents comprise
the following balances with a maximum maturity
Held to maturity investment (mutual fund certificates) “Guard” 279 282 44. Arab African International Bank Mutual Fund of three months from the date of acquisition.
Fixed debt instrument “Gozor”
The Bank owns fixed debt instrument mutual fund

31 December 31 December which was established in accordance with the capital
2018 2017
Fees and commission income (AAIB mutual fund)“ Shield” 106 77

Fees and commission income (AAIB mutual fund)“Juman” 350 200

Cash and balances with central banks 612,535 564,902
Fees and commission income (AAIB mutual fund)“Gozor” 16 34

Due from banks 3,204,281 3,363,108
Fees and commission income (SME fund) - 1

Treasury bills 2,714,799 2,953,789
Board of directors and top management benefits*

Due from the central banks “obligatory reserve ratio” (533,727) (469,237)
31 December 2018 31 December 2017 Deposits at banks (141,419) (253,251)
Salaries and Employee benefit 3,693 3,283 Treasury bills ( maturity more than three months) (1,804,649) (2,103,577)
Employee benefits 1,572 880 Cash and Cash equivalents 4,051,820 4,055,734
5,265 4,163
* 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 outside 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. 535 thousand on 31 December 2018 (394 thousand U.S. dollars
in 31 December 2017).
Annual Report 2018 122
47. Material Events The assessment of whether credit risk has

increased significantly since initial recognition is
IFRS 9: Financial Instruments performed for each reporting period by the Bank.

The IASB issued IFRS 9 ‘Financial Instruments’ The assessment of credit risk and the estimation
in its final form in July 2014 and Central Bank of of ECL are required to be unbiased and
Egypt (“CBE”) issued a circular on 28 January probability-weighted, and should incorporate
2018 instructing banks to implement the all available information which is relevant to the
standard with effect from 1 January 2019. IFRS assessment including information about past
9 sets out the requirements for recognizing and events, current conditions and reasonable and
measuring financial assets, financial liabilities supportable forecasts of economic conditions
and some contracts to buy or sell non- financial at the reporting date. In addition, the estimation
assets, impairment of financial assets and of ECL should take into account the time value
hedge accounting. This standard replaces IAS of money. As a result, the recognition and
39 Financial Instruments: Recognition and measurement of impairment is intended to be
Measurement. more forward-looking than under IAS 39 and the
resulting impairment charge will tend to be more
A. Classification and measurement volatile.
The adoption of this standard will have an effect According to the Central Bank of Egypt
on the classification and measurement of the instructions, the banks set up the IFRS 9 risk
Bank’s financial assets but is not expected to reserve at 1% from credit risk ‎weighted assets
have a significant impact on the classification deducted from net profit after tax for 2017
and measurement of financial liabilities. The amounted to 83 MM USD (through statement of
classification and measurement of financial assets change in equity) included in the capital (tear 1)
will depend on how these are managed (the in the capital adequacy and it is not used unless
entity’s business model) and their contractual obtaining the approval of the Central Bank of
cash flow characteristics. These factors determine Egypt.‎
whether the financial assets are measured
at amortised cost, fair value through other The final instructions of the Central Bank
comprehensive income or fair value through regarding the application of IFRS 9 as of the date
statement of income. The standard eliminates the of approval of these financial statements have not
existing IAS 39 categories of held to maturity, been issued.
loans and receivables and available for sale.
48. Translation
B. Impairment of financial assets
These financial statements are translated into
The impairment requirements apply to financial English from the original Arabic statements. The
assets measured at amortised cost, fair value original Arabic statements are the official financial
through other comprehensive income, and lease statements.
receivables and certain loan commitments and
financial guarantee contracts. At initial recognition,
allowance is required for expected credit losses
resulting from default events that are possible
within the next 12 months (“12-month ECL”). In
the event of a significant increase in credit risk,
allowance is required for ECL resulting from all
possible default events over the expected life of
the financial instrument (“lifetime ECL”).
Financial assets where 12-month ECL is recognised

are considered to be ‘stage 1’; financial assets which
are considered to have experienced a significant
increase in credit risk are in ‘stage 2’; and financial
assets for which there is objective evidence of
impairment are considered to be in default or
otherwise credit impaired are in ‘stage 3’.
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1 Annual Report 2018

TREE puts down

In the natural world, change can be

IT TAKES A ROBUST PLATFORM TO REACH NEW HEIGHTS

We’re proud of our many

First Bank to sell protection on Egyptian Eurobonds

Finalized the first securitization deal in the market

First Bank to initiate Corporate Social Responsibility through

First Bank to launch standalone microcredit arm

First Bank to extend working hours till 5 pm

Transforming to address clients’

Many of AAIB’s 2018 customer service enhancements came

In 2019, we will leverage technology to even greater

The expanded data analytics made possible by technology

An adaptive culture is a prerequisite

Agility has always distinguished AAIB from its peers. For

Our market leadership is based on our abundant track record

We’ve also earned early-mover status in initiatives that also

Today, the pace of change is undeniably accelerating,

At AAIB, agility means deploying speed, flexibility and

Change is non-negotiable, and so

Today, the value of these commitments has become clear

In this era of accelerating change, transformation happens as

Analyze the environment to formulate a perspective on the future

Allocate resources and know-how to align with expected new realities

And then do it again

The opportunities made possible by technology have also

Today, we’re primed to serve a highly dynamic and

At AAIB, no one is a spectator to

We ended 2018 with a headcount of 2,346 team members who

OUR PEOPLE AAIB’s learning and development philosophy is founded on the

Our employees’ outstanding productivity compared to peers

AAIB Peer Average Productivity Ratios vs. Peers

Customer Net Loans / Employee Customer Deposits / Employee Assets / Employee

Our markets are brimming

Some say that transforming a large, mature company can

The path to capitalize on these opportunities is also clear—

Challenging? Yes. But worth all of our effort.

84% of the population remains unbanked

97% of the youth population use mobile phones

15.2% $1.9 BILLION

AS OF DECEMBER 31, 2018

BOARD OF Sherif Mohamed Elwy

DIRECTORS Sulaiman M. Al Wadaani

May Aboul Naga Ahmed Ashraf

To our clients, business partners and shareholders,

On behalf of the Board of Directors, I am proud to report that AAIB recorded

While headwinds remain, the business environment has undeniably improved.

Egypt’s strong economic performance diverged from worldwide trends. Global

What Is Driving the Need for

Treasury & Capital Markets

In 2018, AAIB’s Treasury and

Retail Banking and Wealth Management

2018 was a year of growth on a wide range of retail

AAIH AAIMF AAIL Sandah For

and with extensive borrower advisory services.

We work to create value for our communities and

The common goal

The Board is responsible for the overall stewardship of the Bank,

value in the medium

During 2018, the terms of three non-executive board members

Additionally, the previous incumbent Vice Chairman and Managing

Director Shareholder Affiliation Executive

Mr. Bader M. Al Humaidhi