NI Capital, a subsidiary of National Investment Bank, is a leading financial services holding company comprising a broad range of non-banking financial services to cater to the needs of its private, institutional, corporate and government clients. The company’s latest acquisition of Arabeya Online, a leading retail brokerage company in Egypt, has transformed it into a full-fledged investment bank providing clients with a broad range of investment banking advisory services, investment management and private equity, in addition to the latest financial brokerage service.
Chief Executive Officer and Managing Director of NI Capital Mohamed Metwally, in an exclusive interview with International Finance, spells out the company’s current and future strategic plans, and sheds light on the Egyptian economy and capital markets.
NI Capital’s latest acquisition was Arabeya Online. Why was the retail brokerage company chosen for the acquisition in particular and how does it fit in with NI Capital’s strategy?
Acquiring Arabeya Online comes at a strategic juncture for NI Capital, after a year-long of analysis and negotiations that were finally concluded last November. We chose Arabeya Online because of its distinguished electronic trading platform and wide retail customer base. The company operates through 13 branches and 90 percent of its client base conduct their trades online. Arabeya Online was ranked fourth as it relates to retail brokerage and seventh in its overall ranking YTD relying on a wide network of retail clients and its dedicated team of employees. It has executed transactions exceeding 16 billion Egyptian Pounds YTD.
The synergies between NI Capital and Arabiya Online will lead to an obvious expansion in the business of both companies. There will be further expansion in the latter’s institutional client base, in addition to playing the role of the distribution arm for financial products generated by NI Capital. Arabeya Online will act as a platform for promoting investments in the Egyptian capital market through public offerings and secondary trading.
At NI Capital, we strive to expand the breadth and depth of service products provided to our corporate, institutional and government affiliated clients, as well as diversifying our revenue stream through a well-established retail client base.
After finalising the acquisition, what lies in the pipeline for NI Capital in the near future and for 2021?
We are in the process of executing an ambitious expansion plan in our asset management business by launching a new money market fund, and significantly increasing our Assets Under Management. For this year, we have increased our assets under management from EGP1 billion to EGP1.5 billion through launching the National Investment Education Fund, in addition to getting a mandate on a EGP300 million equity portfolio. We expect to double our assets under management from EGP1.5 billion to EGP3 billion by the end of 2021 through launching new funds and acquiring new portfolios—to leverage the distinguished performance of our asset management team.
NI Capital will continue to expand its non-banking financial activities through 2021, by adding a consumer finance line of business to its activities. It is worth noting that NI Capital owns 30 percent of the shares of Tamweely Microfinance, one of the leading microfinance companies operating in Egypt with 61 branches, portfolio of loans exceeding EGP1 billion, and 70,000 customers. Furthermore, we are currently studying expanding into nano-insurance services, as part of our efforts to build an integrated non-banking financial platform and contribute to the financial inclusion initiative of the government.
Where does NI Capital currently stand on the Egyptian government’s IPO programme and when is it expected to go live?
NI Capital has been assigned to coordinate a public offering programme for state-owned companies to stimulate investments into Egypt’s capital markets, expand the depth and breadth of the Cairo stock exchange and diversify sources of income to the Egyptian government through monetising some of its stakes in state-owned companies. However, the Covid-19 breakout that unraveled in the first quarter of 2020 caused waves of economic uncertainties and a “flight to quality” among international and domestic investors.
Consequently, liquidity was diverted towards T-bills and CDs in state-owned banks that offered an annual return of 15 percent tax free risk free. This offering managed to raise more than EGP350 billion in just six months and resulted in a slowdown for investment activities in equity capital markets and housing markets. To put this figure into perspective, this is more than the aggregate free float on the Cairo Stock Exchange today. This liquidity should be released back into the capital and housing markets between March and September of 2021.
The team at NI Capital and other investment banks which are mandated to manage some of the offerings, used the slowdown in capital markets’ investment activities to continue and finalise the preparation work for the offerings. We expect to see a resumption of the marketing activities in the first quarter of 2021.
Based on your market expertise, what is your current assessment of the Egyptian financial market?
As previously stated, Covid-19 has negatively affected the Egyptian stock exchange and financial market as it did to the rest of the world. However, the Egyptian economy has performed well despite the pandemic, thanks to a well-diversified economy, and the swift actions of the government through a balanced social welfare programme and monetary subsidies to mitigate the impact of Covid-19 on those affected by an almost shut down of the tourism and hospitality sectors, and temporary workers who were affected the most by the partial lockdown of general economic activities.
Additionally, the government has embarked on a comprehensive economic stimulus package through an easing monetary policy and financial sector initiatives to alleviate debt pressure on businesses and individuals during the lockdown. The central bank of Egypt has lowered interest rates by 4 percent since March 2020 to stimulate the economy and reduce the impact of the Covid-19 situation on the badly affected sectors, mainly tourism.
The average monthly tourism revenues for 2020 declined around 90 percent, with tourism bringing in between $80 million and $150 million a month compared to an average of $1 billion a month last year. Nevertheless, there has been a slight increase in foreign reserves recording $39.221 billion by the end of November 2020, compared to $38.425 billion during September 2020, mainly through an increase in the flow of workers remittances.
Going forward, we expect the release of the EGP350 billion of liquidity back into the real economy and capital markets at the maturity of the 15 percent certificates of deposits from March to September 2021, and the resumption of flow of international investors in 2021 to reinvigorate the capital market. We also expect tourism activities to resume normalcy toward mid-2021 pushing GDP growth rate to between 4 to 5 percent levels. This is anticipated to have a positive impact on the financial performance of companies listed and traded on the Cairo Stock Exchange and on investors appetite.