Falling Back on Fundamentals
Photo by: Mohamed Allouba
As AUB Egypt makes a place for itself on the banking scene, C-suite officials say they have no fancy tricks up their sleeve
By Ethar El-Katatney
By Ethar El-Katatney
Ahli United Bank (AUB) Egypt is up and running, after an official launch in late May of this year. The newest face on Egypt’s banking scene is the result of the August 2006 sale of Delta International Bank (DIB), established in 1978, to a group of GCC investors led by the Ahli United Group (AUG). The group bought an 89.3% stake of the bank for approximately LE 1.6 billion, representing LE 37 per share; officials have confirmed plans to up that stake to 100% in the near future.
Business Today Egypt sat down with James E. Goold, CEO and managing director of AUB Egypt, and Stewart Lockie, chief general manager of retail and private banking, to see what the Bahrain-based AUG has in store for the new bank’s 17 branches and the Egyptian banking market at large.
Goold comes to Egypt with more than 30 years of experience in the financial services sector in countries such as Scotland, Hong Kong and Singapore. Before relocating to Egypt, he had been managing AUB in Bahrain’s corporate banking business for over a year.
With over a decade’s experience in retail and private banking, Stewart Lockie is responsible for developing and implementing a fully operational retail and private banking operation for AUB Egypt. Before joining Ahli United, Lockie had been working with Barclays Bank UK since 2001, and was relocated to Barclays Bank Egypt in the fall of 2004. Excerpts:
Why was Egypt chosen as a country?
JG: The group has a strategy that is built around having full-service banks in all countries that border the Gulf and in countries with very close economic ties to the Gulf. Egypt is a very obvious country that comes into that second category. There’s also a clear process going on in Egypt of selling some of the smaller, less competitive banks and some of the state-owned banks through privatization.
Why was DIB chosen?
JG: Because it was about the right size and it had a decent spread of branches throughout Egypt. It was of a size that was manageable in terms of transforming the business. AUB as a group could have looked at some of the much larger banks that might have been for sale and in terms of capital, it wouldn’t have been a problem, but in terms of transformation and in terms of changing things, DIB was the right size.
SL: DIB was established in the Egyptian market, but there were masses of opportunities that hadn’t necessarily been grasped, particularly on the retail side. In 17 branches there were only six ATMs. Delta was very much a corporate bank, and while it had branches in quality locations, it didn’t really have a retail presence, compared with modern-day retail banking. It excited us to take something in terms of retail and shape it from scratch and build it into something that would be truly impressive.
What changes have you implemented so far, and what changes do you plan to implement?
JG: We cleaned the balance sheet last year, and this year has been about starting to transform the bank as a business. We have created a lot of the control departments and control functions that the old DIB didn’t have, for example, a risk department and a new compliance department.
SL: There’s a lot to do in terms of developing products, refurbishing the branches and training, developing and up-scaling the staff. It’s not just about setting up products: You’ve got to get the operational platform right, you’ve got to get the system right, you’ve got to get the training right, deal with compliance to make sure that everything you do is regulated by the Central Bank, and you have to do them all together because otherwise you’re setting yourself up for problems.
What about the retail side of the business?
SL: DIB had no retail products, just a credit card. The fundamentals, which everybody needs — card account, credit card, lending proposition — those are the first things we do. We’ve launched our credit card, and that’s been out since the beginning of June. We’ve launched products for auto loans, for credit cards, and for consumer loans.
If you’re building a house, you build a foundation first. The foundation in retail banking is distribution, which is branches — having your people able to serve the clients and having standard products that match everybody’s needs.
The fundamentals are suited to everybody, and it doesn’t matter whether you’re the average guy that earns LE 1,200 a month or you earn LE 40,000 a month. Everyone needs the fundamental requirements, and these are the ones that we’re launching first. More products will be launched at different intervals in the upcoming year, depending on what we see as the client demand, based on client feedback as to what they want.
What are you doing to raise awareness about AUB Egypt?
SL: We had a big promotion in Carrefour and CityStars — that was a combination of launching our credit card but also launching our name. Now we’re doing a “Win a trip to Tahiti” raffle on Tahiti beach in Marina, where if you apply for a credit card in August and it’s approved, you get entered into a drawing for a trip for two to the real Tahiti.
The advertising has gone extremely well. People like the fact that we’re picturing ourselves as a service leader to look after the client. People are in the “wait and see” mode — they’ve seen us launch, they’ve seen a successful promotional campaign, and the awareness is building. Now it’s a case of ‘let’s see what you’re going to do.’
JG: We have quite a few Egyptian expatriates who work for the group in the Gulf, and I’m quite pleased that some of their friends who have just come back from a holiday in Egypt have been telling them how good some of the promotional material has been. So we’re doing quite a bit of promotion in terms of the new brand, and a lot of that is to support the new retail business. We’ve developed the products, and now we’re going to begin on building the distribution network that we need.
Who is AUB Egypt’s target customer?
JG: Middle and upper-class Egyptians. In the Gulf, we have approximately 300,000 customers, and many of them have an interest in doing business in Egypt, or many of them are Egyptian expatriates. So that splits, in a way, our target market into two different ones — one is to serve Egyptian expatriates in the Gulf and the other is to serve Gulf companies doing business here.
SL: The products that we’re designing are based on differing everyday needs. So it’s a case of if you have a banking need, we’ll be interested. We’re not solely after one particular segment. The mistake that I’ve seen happen before is people try and match a product to you, because they have a target for it. That’s not the way it should be; it’s all about matching to the client’s needs.
What obstacles have you faced so far?
JG: The biggest obstacle we faced and to an extent still face is culture. The staff that we had inherited had not been exposed to a lot of the things that we want to do. They hadn’t been exposed to a sales culture and they hadn’t been exposed to a culture with a strong focus on customer service. So these are all changes that we are working quite hard on, but they are changes that have to happen over quite a long period of time.
What is your relationship to the AUB group?
JG: We get a lot of support from the group when we need it. In the early stages of trying to transform what was DIB to AUB Egypt, we got a lot of support from the IT group who helped us take what was a very basic IT system into something that is now very developed.
We get a lot of support from HR in designing packages and HR systems, and so we call on the group quite a bit when we have to.
SL: We [have] very strong support in Bahrain in terms of products.  We work closely together and share ideas as well, so they can tell us what has worked and what hasn’t in other areas of the Gulf.
What do you think are AUB Egypt’s competitive advantages?
JG: I think it’s going to be built through having a very strong focus on customer service. Our commitment here is to provide the type of customer service that you would expect if you walked into one of the major banks in London or New York or Singapore.
People underestimate the power of customer service. Clever innovative products only get you so far because they’re easy to copy, but what’s difficult to copy is creating the right culture within the organization and using it to create your competitive advantage.
SL: Most banks offer similar products; the difference is in the service, because that’s the thing that will make the customers buy and come back to build a relationship. Also, I think a key competitive advantage for us is the fact that we’ve blended local experience and knowledge with regional flavor, and we’ve come in with a group with international experience. If we can get the service right, which isn’t easy, that’ll be the thing that’ll make a difference.
How are you going about making customer service an integral part of the bank?
JG: Training. We take very seriously the need to upgrade the skills of the staff, and we have a new head of training to look at the next phase of how we develop the next set of training seminars, modules, in terms of certification, in terms of skills.
SL: There’s a famous saying that goes “Customer service is a journey, not a destination,” and it’s so true. In all my time in Egypt, in three years, wherever I’ve worked, I’ve found Egyptian people that I’ve worked with to have a very hard work ethic, dedicated, very positive in their attitude and just desperate to be shown how. This is why we’re in the process of developing a very tailored training program depending on what role you do in the bank: English training, product training, organization training and sales training.
What are AUB Egypt’s short-term objectives?
JG: To get a set of financial results that keeps the group happy and keeps the shareholders happy. The installation of all infrastructures, so we’re not still working on building big bits of infrastructure in 2008. We also have some things on the staffing side we want to get done this year.
SL: Definitely the people agenda. There’s still a lot that we need to do in terms of training  and embedding it in the culture. Developing the products, but whatever product you launch, remember it may be the best idea in the world but you’ve only got a competitive advantage on that for a month because everyone copies it. So we have a suite of options — but it’s how we deliver it that matters.
What about AUB Egypt’s long-term objectives?
JG: To create a modern, dynamic, customer-led financial institution that is recognized as being a bank that people want to bank with, but is also recognized within Egypt as a place where good people want to work and gives our shareholders an appropriate return on capital.
SL: Become established as one of the leading banks in Egypt. I’d like to see us firmly implanted as role models for customer service, leaders in products in terms of delivering good quality products to clients on time.
What would you like to see changed about the Egyptian banking system?
JG: We would also like to see a bit more flexibility in how we manage our treasury side of the business. At the moment the rules of what we can and can’t do in Egypt in treasury are quite strict. That probably developed in an era where the banking segment was a bit more fragile and perhaps not quite as well managed as it is now. We’d just like to see a bit of freeing up in terms of regulations to allow us to do more derivates and develop other kind of products that most other banking markets allow you to do and would allow us to better serve our clients’ needs.
SL: The introduction of the credit bureau will be very important because it will straighten out the process. The one thing that we need to be quicker at in Egypt is speed with the client. You should be able to walk into a branch, apply for a loan, and walk out with your money — that’s the nirvana. You’d still fill all the regulatory requirements, but you walk out with a loan.
When I first came to Egypt I saw that the banks ruled the customers in terms of ‘these are our products, take it or leave it,’ but gradually the power shift is changing. The more educated people get financially, the more they realize that there’s more than one option to go to. bt