RNS No 9852m
COMMERCIAL INTERNATIONAL BANK (EGYPT) SAE
5th May 1998
RE: COMMERCIAL INTERNATIONAL BANK (EGYPT) SAE ("CIB") FIRST QUARTER
RESULTS TO MARCH 31, 1998
The first quarter of 1998 was impacted by the change in Tax Law No.157 for 1981,
issued as Law No.5 for 1998, on January 22, 1998. This amendment significantly
reduced the tax deductible generated by investing in treasury and corporate
securties. Under the earlier tax regime, the allowed deductible was equal to
90% of the interest income received from such securities. Under the new tax
amendment, funding interest incurred to acquire securities is netted against the
received tax exempt interest income to calculate the eligible deductible.
As other financial and non financial institutions, CIB has managed its tax
liability by securing a large portfolio of such instruments which enjoyed
favourable treatment under the earlier tax system. Following the issuance of
the amendments to the Tax Law, CIB has progressively reduced its portfolio of
Treasury Bills from EGP 2.5 billion approximately as of December 31, 1997 to EGP
763 million as of March 31, 1998.
The impact of the change in the Tax Law was significant on the first quarter
results. Despite a healthy increase of 17% in net operating income from EGP
108.5 million ($31.9 million) in the quarter to March 31, 1997 to EGP 126.9
million ($37.3 million) in the quarter to March 31, 1998, fuelled by very strong
growth in fee income, foreign exchange trading and investment banking revenues,
net profits dropped by 30% from EGP 67.7 million ($19.9 million) to EGP 47
million ($13.8 million) over the respective quarters.
This drop in profits is attributable to two factors:
(a) A sharp increase in tax provisions from EGP 1.7 million in the first
quarter of 1997 to EGP 24.5 million in the first quarter of the 1998.
As the Tax Authority has not, to date, released the calculation
formula for implementing its amendments, CIB's external tax auditors
(KPMG-Hazem Hassan & Allied Andersen), advised the Bank to provide for
its potential tax liability on a conservative basis.
The applicable gross corporate tax rate for banks in Egypt is 40% plus
a 2% National Development Tax.
(b) The rapid contraction of our portfolio of Treasury Bills during the
quarter affected alternative asset mobilization opportunities and
impacted our net interest income which remained flat at EGP 65.3
million ($19.2 million) for the quarter by comparison to EGP 64.8
million ($19.0 million) for the first quarter of 1997.
The run-off of the proprietary Treasury Bills portfolio and the adjustment in
client loans and deposits following the Tax Law changes also resulted in a 9%
drop in total assets from EGP 13.4 billion ($3.9 billion) in December 31, 1997
to EGP 12.2 billion ($3.6 billion) as at March 31, 1998.
CIB is planning over the course of the year to implement a number of operating
and tax policies to mitigate the impact of the Tax Law change but expects to be
affected by a higher effective tax rate for the year, unless alleviated by the
calculation formula when announced.
COMMERCIAL INTERNATIONAL BANK (EGYPT) SAE
FINANCIAL POSITION
AS OF MARCH 31, 1998
ASSETS
March 31, 1998 March 31, 1997
LE LE
-Cash & Due From Central Bank 1,225,514,768 1,405,936,960
-Due From Other Banks 1,327,205,335 1,104,245,085
-Treasury Bills 763,589,290 1,932,940,280
-Trading Investments (Net of Provisions
For Trading Investments) 87,357,313 38,196,536
-Loans & Overdrafts
(Net of Provisions for Doubtful Debts) 7,939,099,682 6,867,321,782
-Non-trading Investments 559,133,257 479,713,798
-Debit Balances & Other Assets 194,735,548 193,366,466
-Fixed Assets (Net of Depreciation) 109,551,793 75,794,256
Total Assets 12,206,186,986 12,097,515,163
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
-Due to Banks 1,725,921,486 2,037,890,644
-Customer Deposits 7,295,206,557 7,990,782,788
-Credit Balances & Other Liabilities 489,660,482 527,414,438
-Dividends & Profit Sharing 146,930,848 124,000,000
-Medium Term Bonds 300,000,000 -
-Medium Term Loans 680,626,600 -
-Other Provisions 319,765,818 269,356,418
Total Liabilities 10,958,111,791 10,949,444,288
SHAREHOLDERS' EQUITY
-Issued & Paid-in Capital 500,000,000 500,000,000
-Reserves 701,033,085 580,405,450
Total Shareholders'Equity 1,201,033,085 1,080,405,450
Net Profit for the period 47,042,110 67,665,425
Total Sharholders' Equity &
Net Profit for the Period 1,248,075,195 1,148,070,875
Total Liabilities
& Shareholders' Equity 12,206,186,986 12,097,515,163
Contra Accounts 5,421,930,557 5,002,084,463
COMMERCIAL INTERNATIONAL BANK (EGYPT) SAE
STATEMENT OF INCOME
AS OF MARCH 31, 1998
March 31 1998 March 31 1997
LE LE
-Interest Received From Clients
& Banks 195,305,533 171,741,115
-Interest Received From Treasurey
& Corporate Securities 49,937,083 55,320,358
DEDUCT
-Interest Paid to Clients & Banks (179,973,086) (162,228,523)
Net Interest Income 65,269,530 64,832,950
-Banking Fees & Commissions 41,565,004 35,892,671
-Foreign Exchange Income 11,990,996 7,103,854
-Profit from Selling Investments 5,931,157 -
-Dividend Income 17,531 -
-Other Income 2,139,840 764,748
Total Fee Income 61,644,528 43,761,273
Net Operating Income 126,914,058 108,594,223
DEDUCT
Provisions (39,718,006) (11,424,790)
-General, Administrative
Expenses & Depreciation (34,886,046) (27,306,886)
-Other Expenses (5,267,896) (2,197,122)
(79,871,948) (40,928,798)
Net Profit 47,042,110 67,665,425
END
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