Introduction en Bourse de CFG Bank: Younès Benjelloun, invité de Boursenews

Summary

In this interview, the CEO of CFG Bank discusses the bank's upcoming IPO and its impressive growth. CFG Bank, having expanded from a business bank to a commercial bank, now seeks to raise 600 million dirhams through a capital increase. The bank's strategic focus on digital banking combined with a limited physical presence allows for agile growth. Despite challenges, CFG Bank has achieved profitability and strong growth, with a projected 15% annual increase. The IPO, opening from November 30 to December 7, offers an opportunity for investors to join a solid, innovative, and rapidly expanding financial institution.

Takeaways

• 😀 CFG Bank is preparing for an IPO, scheduled in a few days, marking a significant milestone in the bank's journey after decades of advising companies on stock market listings.
• 😀 The bank had to wait for the right time to go public, focusing on growth and profitability before introducing itself to the stock market. It has been profitable for the last three years.
• 😀 CFG Bank will raise 600 million dirhams through a capital increase, which will be used to strengthen its equity base, allowing for more credit issuance and supporting continued growth.
• 😀 As a growing bank, CFG needs regular capital increases to match its expanding business and credit portfolio. The IPO offers a way to open up the bank's capital to the public.
• 😀 CFG Bank's journey from being a small operation to a major player in the banking sector highlights its ability to adapt and grow, even without a large number of branches.
• 😀 The bank’s decision to avoid a large branch network in favor of a balanced approach with digital services and a limited physical presence has been key to its success.
• 😀 CFG Bank has benefited from technology investments that have allowed it to grow without needing an extensive physical branch network, unlike many of its competitors who are now closing branches.
• 😀 The Moroccan banking sector is considered very solid and dynamic, with significant opportunities for growth, especially with banks expanding into Africa and embracing digital banking.
• 😀 CFG Bank's growth over the past 6-7 years has been impressive, averaging 25-30% annually, and the bank expects a more conservative but still strong growth rate of around 15% per year moving forward.
• 😀 The IPO offers a rare opportunity for small investors to buy shares in a bank with strong growth prospects, making it an attractive option for those looking to invest in a stable, innovative company.
• 😀 CFG Bank has been valued using a universally recognized method for banks, considering the bank’s equity excess and applying a conservative discount rate, resulting in an IPO share price of 110 dirhams.

Q & A

Why is CFG Bank choosing to go public now?

CFG Bank is choosing to go public because it has reached a sufficient size and profitability, having successfully transitioned from an investment bank to a commercial bank. The bank is now financially stable, having been profitable for three years, and it needs additional capital to support its continued growth. This IPO allows them to raise funds from both institutional and individual investors, which will support further expansion.

How has CFG Bank's strategy evolved over the years?

CFG Bank initially focused on investment banking but expanded into commercial banking in 2015. This transition involved significant investments in technology, human resources, and branch networks. Over time, the bank has also focused on a hybrid model of physical and digital banking, balancing the benefits of both to suit the needs of Moroccan consumers.

How does CFG Bank plan to utilize the capital raised from the IPO?

The capital raised will primarily be used to strengthen the bank's equity base, allowing it to increase the amount of credit it can extend. As a bank grows, it needs more capital to support its expanding loan portfolio. The funds raised will also help CFG Bank continue to grow and meet its regulatory capital requirements.

What is CFG Bank's approach to expanding its branch network?

CFG Bank has chosen to expand its branch network at a slow and steady pace, with an addition of one to two new branches per year. They believe in maintaining a balanced approach between physical and digital banking, allowing customers to access services in-person when necessary, while also providing a strong digital experience.

Does CFG Bank's smaller branch network compared to other banks limit its growth?

No, CFG Bank's smaller branch network is not seen as a disadvantage. The bank invested early in digital technologies, enabling it to operate efficiently with fewer branches. This approach is considered an advantage in the current banking landscape, where larger banks are closing branches as digital services become more widespread.

How does CFG Bank view the future of the banking sector in Morocco?

The Moroccan banking sector is seen as dynamic and fundamental to the economy. CFG Bank believes the sector will continue to grow, with banks playing a key role in financing economic development. The bank also sees the opportunity for the Moroccan stock market to play a larger role in funding businesses, although it acknowledges that the stock market's current contribution to financing is still limited.

What is the growth outlook for CFG Bank in the coming years?

CFG Bank is forecasting continued strong growth, with a projected annual growth rate of around 15%. Historically, the bank has grown at a rate of 25-30% per year, doubling key financial indicators every 3 years. Over the next 3-4 years, CFG Bank expects to double its net profit, aiming to increase its result from 160 million dirhams in 2023 to approximately 310 million dirhams by 2026.

How has CFG Bank valued its stock for the IPO?

CFG Bank's stock was valued using a method specific to banking institutions, based on the concept of excess capital. Instead of using a Discounted Cash Flow (DCF) approach, which is more common for industrial companies, they used a method that calculates the excess funds beyond the regulatory capital requirement. This excess capital is treated as a sort of 'bank cash flow' and was discounted to arrive at a price of 110 dirhams per share.

What makes CFG Bank an attractive investment opportunity for individual investors?

CFG Bank is an innovative, transparent, and fast-growing bank operating in a solid and regulated sector. It offers a unique opportunity for individual investors to invest in a bank that has been growing steadily and is now opening up to the public for the first time in over 20 years. It is seen as a safe and attractive investment with strong growth prospects in a dynamic sector.

What makes the CFG Bank IPO significant for the Moroccan market?

The CFG Bank IPO is highly significant because it is the first time in over 20 years that a bank has gone public in Morocco. The last time was with Banque Populaire, and before that, it was Wafa Bank over 30 years ago. This IPO is a rare opportunity for Moroccan investors to buy shares in a growing bank and for the market to see a significant financial institution listed on the stock exchange.