Summary

A Possible Merger with AAIB
CIB and Arab African International Bank (AAIB) agreed to exchange confidential information on an exclusive basis that could lead to a possible merger.

"CIB-Algeria"
CIB's Algerian subsidiary, which was established as a joint venture with the Sawiris family, is to begin operations during 2008 as soon as the local authorities grant final license approval.

9M07 Results: Solid Operational Performance
CIB booked a consolidated bottom line of EGP943.2 million in 9M07, up by an impressive 44.4% YoY. Growth in bottom line was driven by a 20.8% YoY increase in net interest income and a 36.7% YoY increase in fees and commissions. The bank booked EGP148.4 million from the sale of a 16.9% stake in CI-Capital Holding.

Venture Into Retail and SMEs to Drive Value
With an established position among Egyptian corporations, CIB is increasing its focus on the higher-margin retail and SMEs lending. The bank targets a ratio of corporate to non-corporate lending of 60:40 by 2011, up from the current 90:10. Judging from a strong start in FY07 and its inspired management, we believe CIB is set to achieve these targets that are to drive loans growth, and accordingly enhance value, over the coming years.

We Recommend "Accumulate" on CIB
We update our coverage on CIB with an "Accumulate" recommendation based on a target price of EGP103.2 per share, which offers a 15.6% premium to the current market price. Our valuation neither factors in the potential merger with AAIB nor "CIB-Algeria".