CIIC intends to create an integrated financial group offering an array of financial services including investment banking, retail banking, insurance, mortgages, and leasing. Some of the components are already in place, with EFG-Hermes in investment banking, Orix in leasing, and the new joint venture with ACE International in insurance. Looking ahead, we anticipate that the passing of the mortgage law will afford opportunities for the securitization of residential mortgages.

The financial sector suffered from the slower growth and liquidity squeeze that prevailed in the year 2000. Loan growth slowed to 10% from the previous year's 12% and the 16% average of the three years before that. Competitive pressures have been aggravated by the market entrance of prestigious multinational institutions like CitiBank, HSBC, and Arab Banking Corporation, with more expected to follow. Domestic banking, with average returns on equity of 26% and substantial growth potential in an underdeveloped retail segment, will naturally attract new competitors. The accessible number of "bankable" customers has been pegged at 16 million, compared to the current 6 million depositors. International banks are keen to gain market share at the expense of local banks. The result will be fewer, stronger banks better able to efficiently provide a full range of services.

Investment banking in its various aspects bore the brunt of the Cairo Stock Exchange slump. The year saw only a handful of placements, mainly in the cement sector. With trading volume at very low levels, brokerage and asset management are biding their time and waiting for better days. These would be signaled by resumption of the government's delayed privatization program. This is essential both to revive trading and to allow hitherto small private sectors to be consolidated into a critical mass. The recent alliance with EFG-Hermes places CIIC to leverage its influence over the sector (see the news).

The insurance sector is showing faint signs of encouraging change. Egypt is a tremendously underinsured market. It needs insurance not only to protect against life and casualty losses but to collect and mobilize savings. The establishment of a vigorous insurance (and especially life insurance) industry would be an important positive step in the development of local capital markets. CIIC has teamed up with ACE International to assist, and capitalize on, this process. Leasing is in the early stages of development. We are partners with Orix, a prominent Japanese company.