INDEX

Notes to the Separate Housing & Development Bank Financial Statements

Vision & Mission 4 Notes to the Separate Financial Statements 56

Shareholding Structure 6

Financial Highlights 8

Chairman’s Forward 10 Head Office and Branches

Head Office and Branches 117

Management of the Bank

Board of Directors 18 Housing & Development Heads of Divisions, Regionals and Zones 22 Bank Group

Bank’s Committees 26 Auditors’ Report 138 Board Statement 30 Consolidated Balance Sheet 140

Consolidated Income Statement 142

Consolidated Cash Flows Statement 144

Separate Financial Reports Consolidated Changes in Shareholders’ Statement 146

Independent Auditors’ Report 42

Separate Balance Sheet 44

Separate Income Statement 46

Separate Cash Flows Statement 48 Notes to Consolidated Financial Statements Separate Changes in Shareholders’ Equity Statement 50

Profit Dividends Statement 52 Notes to Consolidated Financial Statements 150

2 Annual Report 2018 Annual Report 2018 3 Vision & Mission

HDBank Vision HDBank Mission

To be within the top ten ranked commercial banks in the Striving to excel in providing both banking and real banking sector, while working on sustaining the current estate services as well as mortgage while continuously high operating efficiency. upgrading our human capital to reach a distinguished level of services for our clients to serve their needs and aspirations of the shareholders.

4 Annual Report 2018 Annual Report 2018 5 Shareholding Structure as at 31/12/2018

Share per unit Total share Government Institutions Public Sector Institutions Government Institutions 42.25% New Urban Communities 29.81% Private Sector Houses Finance Fund 7.41% Individuals Egyptian Endowments Authority 5.03% Foreigners

Public Sector Institutions 17.23% Misr Company for Life Insurance 8.92% Misr Insurance Company 8.29% Others 0.02% 42.25%

Private Sector 2.07% Others 2.07%

Individuals 15.68% Yassin Ahmed Mohamed El Shokiery 4.62% Others* 11.06%

Foreigners 22.77% Rimco EGT Investment LLC 9.74% 15.68% Rolaco AGB for Investment (owned by Aly El Dayekh) 6.32% Neon Liberty Lorikeet Master 3.57% 17.23 % Norges Bank 2.02% NasRussell Investment Company PLC 1.12% Total 100% 2.07% 22.77%

*Others in Individuals are shareholders who own less than 1% of the bank’s shares.

6 Annual Report 2018 Annual Report 2018 7 Financial Highlights

2018 2017 2016 2015 2014 2018 2017 2016 2015 2014

Return Analysis Income (000 EGP) Return on Assets (ROA) % %3.4 2.07 2.01 1.94 1.44 Interest Paid 2 960 642 2 132 732 1 050 717 804 116 687 964 Return on Equity (ROE) % %33.33 30.19 22.68 19.86 13.62 Net Interest Earned 3 147 610 2 554 110 1 690 055 1 028 789 501 307 Earnings per Share (EPS) EGP 12.89 8.50 4.53 3.31 2.02 Stock Dividends 82 502 75 951 64 684 61 591 60 389 Price Earnings (P/E) 3.40 5.65 5.36 6.73 12.98 Activities Gains (Losses) 2 116 701 1 475 785 960 585 661 615 454 413 Assets Allocation Strategy % Other Gains (Losses) 78 384 13 747 (40 544) 13 062 (15 909) Total Investments/Total Assets %12.89 9.13 19.18 19.89 20.34 Net Profit Before Taxes 2195 084 1 489 533 920 041 674 678 438 504 Net Loans/Total Assets %28.48 22.02 29.12 29.63 30.66 Taxes 570 249 414 000 275 879 183 494 132 350 Total Cash /Total Assets %34.85 38.20 34.05 17.67 31.86 Net Profit After Taxes 1 624 835 1 075 533 644 162 491 184 306 154 Income Structure Analysis % Dividend per share 5.0 1.5 2.0 1.5 1.5 Loans Interest Income/Total Income %86.06 81.47 75.08 71.16 65.98 Investment Revenues/Total Income %1.16 1.32 1.77 2.39 3.35 Banking Revenues/Total Income %4.69 5.30 6.95 7.92 7.37 Liquidity Analysis % Cash/Total Deposits %48.8 48.52 47.78 38.16 44.70 Investments/Total Deposits %18.06 11.60 26.92 42.96 28.54 Net Loans/Total Deposits %39.88 27.98 40.86 63.98 43.02 Interest Rate Risk Analysis % Loans Interest/Total Loans %11.97 10.75 10.09 10.03 10.61 Interest Paid/Total Deposits %8.68 5.22 4.61 6.85 4.54 Net Interest/Total Assets %6.59 4.92 5.28 4.06 2.36 Capital Adequacy Analysis % Shareholders’ Equity/Total Assets %10.2 6.86 8.88 9.76 10.57 Deposits/Total Assets %71.4 78.72 42.65 46.31 71.27 Balance Sheet (000 EGP) Cash and Due from Banks 11 235 638 18 560 376 5 520 820 8 523 674 3 424 575 Treasury Bills and Governmental Papers 14 166 957 14 902 696 8 726 807 2 563 942 5 410 470 Loans and Overdrafts (net) 13 609 254 11 439 176 9 313 556 7 506 378 6 514 696 Fixed Assets (net) 696 266 509 761 327 680 242 520 161 634 Total Assets=Liabilities & Shareholders’ Equity 47 791 078 51 939 002 31 985 422 25 337 982 21 250 411 Customers’ Deposits 34 122 070 40 884 974 22 792 304 11 733 151 15 145 097 Total Liabilities 42 916 164 48 376 477 29 145 429 22 864 400 19 003 263 Paid up Capital 1 265 000 1 265 000 1 265 000 1 265 000 1 265 000 Shareholders’ Equity 4 874 914 3562525 2 839 993 2 473 581 2 247 147

8 Annual Report 2018 Annual Report 2018 9 At the beginning of a new fiscal year, I am where the Turkish lira against the dollar fell Chairman’s Forward honored to review a summary of the results 40% since the beginning of 2018, while the of the Housing and Development Bank for the Argentine peso fell by 105%, and the South fiscal year of 2018, where the global economy African rand fell by 15%. in 2018 faced major challenges. Interestingly, US Federal Reserve policy and the growth of geopolitical risk have had a It witnessed commercial challenges and a negative impact on the US stock market itself collapse in stock exchanges and currency as share prices have fallen on fears of a global markets and digital markets throughout the economic slowdown as US stock indexes year in addition to the sharp fluctuations in hit their worst performance since the 2008 oil prices. Although the beginning of 2017 financial crisis. was filled with optimism, supported by the improvement in industrial and commercial Oil prices recorded standard levels in 2018. activity all over the world in 2017, but In July, Brent hit $ 87 per barrel. To protect industrial production and trade slowed down the market from the risk of high price hikes soon and business confidence declined due as a result of the decline in crude production to the increase of borrowing costs in US in Venezuela and Mexico and the decline in dollars, rising of debts and trade conflicts Iran’s oil exports, the OPEC member countries between the United States and China. The decided to reduce production constraints and International Monetary Fund (IMF) mentioned pumped additional quantities of oil into the in its report on 2018 that one of the reasons market. for the loss of momentum is the emergence of major economies, especially the United However, after October, the market was hit by States by imposing customs duties, and other oversupply due to a drop in demand for black economies’ taking of defensive measures and gold. Prices fell in the period between October tightening of its monetary policies on imports, and December by 35% and Brent hit $ 56 a such as China. barrel. In this regard, OPEC decided to resume production cuts. With the rising tone of protectionism in trade, concern over global trade has increased, The report pointed out that Britain’s exit affecting investment decisions and negatively negotiations from the EU are one of several impacting on world economies. potential risks affecting the outlook, especially for countries that rely mainly on selling to But despite trade tensions, the US economy Europe. expanded rapidly in 2018 as tax cuts and higher spending boosted demand, which led The IMF States that “the increased trade the federal reserve bank to raise the basic barriers and re-regulation, if resulted by the interest rate. The US interest rate hike to 2.25% renegotiation process, may have an impact on - 2.5% in 2018 has been accompanied by a global investment and efficiency reduction.” steady increase in US bond yields, which has The report warned that any failure to achieve stimulated the flow of capital from emerging global growth could increase pressure on markets and invested in US Treasuries, which “policies focused on Internal growth”, which has put some economies under pressure the IMF describes as new trade hurdles that

10 Annual Report 2018 Annual Report 2018 11 are damaging the economic growth. 2017-2018 fell to 9.8%, compared to 10.9% desert, which could show results during the with growth rate of 51.1%. In the area of in fiscal year of 2016-2017. It was the lowest first quarter of 2019 and which may contribute housing activity (projects owned by the bank), At the local level, the year of 2018 was marked deficit in 6 years. to improve the resources of the state and the profits of the bank’s housing projects by important figures in the Egyptian economy, increase investment rates. amounted to LE 444.8 million compared to reflecting the success of the economic The overall budget deficit during the first four The Banking sector has continued to play LE 361.9 million in 2017, with a growth rate of reform programs approved by the Egyptian months of the fiscal year 2018-2019 shrank to a pivotal and main role in supporting the 23%. As for the national housing project, the government in succession since 2013, with 2.5% of GDP, compared with 2.7% in the same Egyption economy by providing finance for number of units financed by the bank at the progress of most of the indicators according to period of the last year. economically viable national and investment end of 2018 reached 41645 units and the total international rating agencies. projects, adopting financial inclusion bank financing amounted to LE 1.031 billion. Whereas the deficit of the Egyptian trade initiatives, digital transformation supporting As for the real estate finance activity under Analysts mentioned that; “ By looking at the balance with the world’s countries fell to about small and medium industrial, enhancing the the initiative of the Central Bank of Egypt, growth figures, trade balance, cash reserves $ 31 billion during the period from January to opportunities of start-up projects and creating the bank granted real estate financing for and currency stability against the dollar in the September 2018, compared to $ 50 billion in an investment climate for entrepreneurship 54309 units with total funding of 4.9 billion year of 2018, we could say that the Egyptian the same period in 2015. projects to invest the liquidity in the bank pounds until 31/12/2018. As the value of the economy has passed from bottleneck stage which reached approximately LE 2 trillion. investment portfolio reached a total of LE 1.7 into wider horizons.” Whereas the remittances of Egyptians working billion at the end of 2018. abroad increased to reach 26.4 billion dollars As for the performance of the bank during 2018, The Egyptian government approved an in the fiscal year 2017-2018, by an increase of despite the challenges and difficulties facing It includes major real estate companies such as ambitious budget for this year. It was the 4.6 billion dollars compared to the previous the Egyptian economy, the Bank continued City Edge Real Estate Development Company, largest budget in the history of the country, fiscal year, which contributed to support the to maintain its outstanding performance and Hyde Park Real Estate Development Company which reached 1 trillion and 412 million pounds economy and stability of exchange rates in the move ahead with its ambitious strategy of and Al Taameer Real Estate Investment (94 billion dollars). Egyptian market. expanding payments and digital inputs to Company. meet customer requirements and provide the Egypt achieved a growth rate of 5.3% during The government announced the creation best financial and banking services, which Due to the large assets managed by these the fiscal year of 2017-2018, which is the of the “Egyptian Sovereign Fund”, with the contributed to the expansion of the customer companies, it is expected to achieve high highest annual growth rate since 10 years and aim of maximizing the state’s revenues base in order to support the principle of revenues in the future. The portfolio achieved it is considered as a success for the economic and developing its wealth by investing in financial coverage adopted by the State and a net profit of 668 million pounds in 2018. reform program. government assets and companies. applied by the Central Bank of Egypt. In general, the Bank has maintained its The foreign exchange reserves of the Central The Egyptian government and the Central This matter led to the achievement of the bank’s excellent performance, which is confirmed Bank of Egypt increased to 44 billion and 513 Bank are adopting several initiatives to raise outstanding results, the most prominent of by the Bank’s key financial performance million dollars at the end of last November, investment rates by supporting medium and which was the growth of the loan portfolio indicators, with a return on equity of 50% the highest balance of reserves in its history. small enterprises as well as national projects, by 17% with a total loan portfolio of LE 15.7 compared to 43.25% in 2017 and a return on as this will contribute to raise investment billion compared to LE 13.4 billion in 2017, and assets of 2.4% compared to 2.07% in 2017. According to the indicators, the situation of the rates that increase development. net income of the return reached LE 3.1 billion Egyptian economy has changed completely compared to LE 2.6 billion pounds in 2017 Finally, I would like to thank all those who in 2018 after the economic reform, where In 2019, the Egyptian government will seek with a growth rate of 23.2%. Net income from contributed to the good results and success of unemployment rate fell to 9.5%, in addition to curb inflation rates and reduce the rise of fees and commissions amounted to LE 304.1 our bank, especially the Board of Directors, the to the ability of the Egyptian economy to the external debt, by supporting domestic million compared to LE 278.1 million in 2017 deputy of Chairman and Managing Director, generate employment opportunities of up to production and exports. with growth rate of 9.3%. Net profit before tax the Assistant to Chairman for Engineering and 700 thousand job. amounted to LE 2.2 billion compared to LE 1.50 Investment Affairs, the Senior Management In addition to the state’s trend to explore for billion in 2017. Net profit after taxes amounted officials and all the employees for their effort The total budget deficit for the fiscal year of gas in new areas in the Red Sea and Western to LE 1.625 billion compared to LE 1.075 billion and actively participation in the results

12 Annual Report 2018 Annual Report 2018 13 achieved and enhancing efficiency through providing all new things, overcome the difficulties and crises and working as one team.

I also have the honor to pay tribute to Mr. Eng. Minister of Housing, Utilities and Urban Development and Mr. Governor of the Central Bank of Egypt for their generous and continuous support.

We pray for Allah to grant stability, security and prosperity for this nation and its esteemed citizens. We also want to express our thanks and appreciation for the political leadership for its great and unflagging efforts for achieving the prosperity of this country and its valued citizens.

Chairman

Fathy El Sebai Mansour

14 Annual Report 2018 Annual Report 2018 15 Senior Management

16 Annual Report 2018 Annual Report 2018 17 Board of Directors

Mohamed Fathy El-Sebai Mansour Eng. Randa Ali El-Menshawy Chairman Representative of New Urban Communities Organization

Hassan Ismael Ghanem Dr. Assem Abdel Hamid El Gazzar Deputy Chairman and Managing Director Representative of New Urban Communities Organization

Eng. Khaled Mahmoud Abbas Eng. Kamal El Sayed Fahmy Representative of New Urban Communities Organization Representative of New Urban Communities Organization

18 Annual Report 2018 Annual Report 2018 19 May Abdel Hamid Ahmed El-Sayed Nayera Nazieh Ahmed Amin Representative of Houses Financing Fund Expert Board Member

Hossam Eldin Hefnawy Mostafa Eng. Ahmed Ateya Abou El Wafa Representative of Misr Insurance Company Represent of Endowments Authority

Dr.Gamal Sorour Salem Representative of Misr Life Insurance Company

20 Annual Report 2018 Annual Report 2018 21 Heads of Divisions, Regionals and Zones

Medhat El-Sayed Mohamed Radwan Second Zone Regional Manager Mona El-Sayed Waley El-Din Foad Credit Risk and Follow up Mostafa Abdel Rahman Gabr Third Zone Regional Manager Mohamed Ibrahim El-Desouky Internal Audit Moataz Mohamed Mamdouh Hosny Head of South Cairo Branches Mohamed Fikry Amin Mohamed Information Technology Tarek Abdel Alim Mohamed Negm Head of East Cairo Branches Manal Saad Zaghloul Mohamed Eissa IT Governance and Security Ashraf Mohamed El-Saeid Head of North Cairo Branches Hassan Abdel Hamid Hassan Technical Follow up in Chairman’s Office Mohamed El-Sayed Mahareek Head of West Cairo & 6 of October Branches Mahamed Zakaria Ahmed Zein Financial Supervisory Gihan Mohamed El-Ansary Head of Alexandria & Lower Egypt Branches Hesham Mohamed Kamel Abou El- Fettoh Central Legal Affairs Alaa Adel Aly Mahmoud Elsebeiey Head of Northern Upper Egypt Branches Ahmed Ibrahim Mohamed El- Desouky Zones and Branches Legal Affairs Essam Sultan Ayoub Sayed Sonbol Head of Canal & Sinai Branches Ashraf Ibrahim Azab Abou Zied Investment & Contract Legal Affairs Mohamed Khaled Omar Mohamed Demerdash Planning and Finance Doaa Tawfik Gamil Yassin Human Resources Gamal Mahmoud Ahmed Soliman Financial Affairs Adel Ismael Mohamed Aly Administration Ahmed Mohamed Foad El-Khouly Treasury Eng. Mostafa Mohamed Ahmed Badawy Engineering Affairs Ehab Fathy Kassem Ahmed Central Operations Eng. Seddik Mohamed Moussa Seddik Technical Affairs Ayman Mahmoud Samir Tobar Corporate and Syndication Loans Eng. Mohamed Khaled Abdel Raouf El-Feky Real Estate Walid Mohamed Hamdy Hamed Mattar Retail Sherif Mounir Mohamed Ali El-Maghraby SME’s Hesham Milad Amir Gendy Mortgage Finance Ahmed Sayed Hussien Ismael El-Tayyar Risk

22 Annual Report 2018 Annual Report 2018 23 Bank’s Committees

24 Annual Report 2018 Annual Report 2018 25 Bank’s Committees

Audit Committee Salaries & Remunerations Committee

Committee Chairperson Nayera Nazeeh Ahmed Amin Members May Abdel Hamid Ahmed El-Sayed Committee Chairperson Nayera Nazeeh Ahmed Amin Hossam El-Din Hefnawy Mostafa Members Eng.Randa Ali El-Menshawy Eng.Khaled Mahmoud Abbas Dr.Assem Abdel Hamid El- Gazzar Eng.Ahmed Ateya Abou El-Wafa Risk Management Committee

Committee Chairperson Nayera Nazeeh Ahmed Amin Members May Abdel Hamid Ahmed Hossam El-Din Hefnawy Mostafa Dr.Gamal Sorour Salem Executive Committee Eng.Ahmed Ateya Abou El-Wafa Committee Chairperson Hassan Ismael Ghanem Members Eng.Mohamed Saeid El-Alfy Wagdy Youssef Rabat Ayman Mahmoud Samir Tobar Governance & Nominations Committee Waleed Mohamed Hamdy Mattar Gamal Mahmoud Soliman Sherif Mounir El-Maghraby Committee Chairperson Eng.Kamal El Sayed Fahmy Essam Soltan Sonbol Members May Abdel Hamid Ahmed Hossam El-Din Hefnawy Mostafa Dr.Gamal Sorour Salem

26 Annual Report 2018 Annual Report 2018 27 Board Statement

28 Annual Report 2018 Annual Report 2018 29 affiliated companies as well as the increase in the - Work on the completion and updating of the Board Statement number of bank’s branches reaching 84 branches. Bank’s working manuals in accordance with the latest developments is being carried out and for the financial year ending December 31, 2018 The net profit before taxes reached EGP 2.2 billion approved as a modern practical reference for all at the end of 2018 compared to EGP 1.5 billion at sectors. the end of 2017 with an increase rate of 46.7% Esteemed Shareholders, I have pleasure to submit The financial performance of our bank during 2018 As for our bank, despite the challenges and Net profit after taxes reached EGP 1.625 billion (Technological InFrastructure) for the human to you, on behalf of my colleagues and members compared to EGP 1.075 billion at the end of capital sector is also being updated through of the Board of Directors, the annual report of the difficulties faced by the Egyptian economy, our bank was able to achieve achievements on the 2017with an increase of 51.1%. modern programs that help to carry out job Housing and Development Bank which reviews the analyzes of positions, it importance and evaluation results of the Bank’s achievements during the year level of activity and spread while maintaining acceptable limits of risk. Overall, the Bank has maintained its performance, to select the promising elements from the Bank’s 2018 as the Bank was able to continue achieving which is confirmed by the Bank’s key financial employees to become leaders of the branches and a strong performance that confirms the strength The total assets reached EGP 47.8 billion pounds performance indicators as the return on equity sectors of our bank. and safety of its financial position, its ability to increased to record 50% at the end of 2018 deal with the variables and maintain its role and at the end of 2018 compared to EGP 51.9 billion pounds at the end of 2017. compared to 43.25% in 2017. The Return on Assets The total number of employees at the end of 2018 position in the banking sector under the intense (ROA) at the end of 2018 reached 3.4% compared to was 2548 employees. competition. The total loan portfolio in 2018 reached EGP 15.7 2.07% in 2017. billion compared to EGP 13.4 billion in 2017 with an In the Field of Information Systems In 2018, a large number of difficult issues facing the Developing the Bank’s Image After the bank has implemented the banking banking sector has been ended faced, where the increase of 17% over the previous year under the slowdown of the economic growth. In light of the Bank’s future vision and missions system T24, regular updates are made regularly procedures of the Central Bank of Egypt to control outlined for our Bank’s Strategy for the years 2019 so that their outputs are in accordance with the the exchange market, which strengthened the Total deposits at the end of 2018 reached EGP 34.1 - 2023, our Vision and Mission were formulated to standards of the Central Bank of Egypt. stability of the dollar rate and contributed to the achieve the objectives of the phase, whereas the elimination of the parallel market completely; as billion pounds compared to EGP 40.9 billion in 2017. vision represented in being among the top ten Through this system, our bank is expanding in the well the Central Bank succeeded to eliminate the commercial banks in the banking market while field of digital banking services, either via mobile waiting lists at banks through foreign exchange maintaining the current high operating efficiency. phone or internet. As the technologies of CR2, Irish management for importers. The net Interest income from the return reached EGP 3.1 billion at the end of 2018 compared to Company, has been chosen to enable our bank to Mission is determined in seeking excellence in complete the digital transformation process and The decisions taken by the Central Bank of Egypt EGP 2.6 billion in the previous year 2017 with an increase of 23.2%. provision of the banking, housing and real estate develop its banking services for its customers in in supporting economic development and the flow services to customers through the continuous order to enhance its competitiveness. of foreign investments contributed to the rise in Net income from fees and commissions reached development of our human capital and to provide foreign exchange reserves to the highest level at a distinguished level of services to meet the The Bank will rely on the systems and technologies the end of 2018. EGP 304.1 million at the end of 2018 compared to EGP 278.1 million in 2017 with an increase of 9.3%. needs of the bank’s customers and shareholders’ of Bank World, which is provided by CR2 The bank’s distributions from its corporate profits aspirations. International Company, which provides the latest The banking sector and the business community banking services via the mobile and the Internet, started the year 2018 by making two successive reached EGP 80.1 million in 2018 compared to EGP 71 million in 2017. Development of Human Capital enabling our bank to provide its customers with the decisions by the Central Bank to cut interest - During the year, the Bank’s organizational best digital banking services, which help to raise rates by 2% by 100 points at the monetary policy The decline in credit losses reached EGP 219.5 structure, central sectors and branches were the efficiency of banks and increase profitability. committee meeting held on 15th February and the completed and described all functions in same at the end of March meeting... Despite the million at the end of 2018 compared to EGP 890.6 million in 2017. accordance with the directives of the Bank’s Our bank has been able to activate its good expectations of investment banks and analysts senior management, the directives of the Board technological system and its successive updates that the Central Bank proceeded with such steps, Net trading income at the end of 2018 reached EGP of Directors of our Bank and Mr. Chairman of the in the implementation of the land seizure and the by another cut to encourage investment, however, Board of Directors and under the supervision of Mr. units for the public tender of the projects of the fiscal control measures by the government and the 62.2 million compared to EGP 272.1 million in 2017 as a result of the set back of the amounts invested Vice Chairman and Managing Director resulting in New Urban Communities Authority through the emerging market crisis prompted the Central Bank an integrated system Internet with the highest efficiency, accuracy and to maintain rates of return until the end of the year in Zero Coupon bonds from EGP 312.2 million to EGP 12.5 million. - Cooperation and processing of the required data control rules praised by all the customers of the unchanged. has been performed in order to participate in the bank. Expenses increased by 32% over the previous current project of the Bank to prepare a new salary The economic reform measures carried out by structure that achieves justice as much as possible This system also helped to implement the data Egypt have contributed to the raising of the year as a result of the depreciation calculation of programs and licenses for the banking system and for the various positions and under the supervision financial coverage project and extract all data sovereign rating as the financial adjustments in of a contracted specialized consultant. (Clients / accounts / cards / wallet). Egypt have made steady progress. the increase in the volume of bank’s activity and

30 Annual Report 2018 Annual Report 2018 31 The branches are currently equipped with network - The Bank has followed up its investment in its during the year 2018 two certificates were added small and medium-sized projects entrusted with lines, ATM machines and modern PCs that support subsidiaries and associates that reached (17) to our various savings certificates package, which the implementation of the Bank’s strategy in windows to meet the requirements of the modern subsidiaries and (15) companies available for sale. is a five-year certificate of Deposit with a fixed the field of loans and credit facilities granted to banking system. The total value of the investment portfolio for the quarterly return and seven-year certificate with customers of this segment. purpose of holding at the end of 2018 reached fixed semi-annual return. The total loan portfolio and the total facilities The emergency center was also set up at the about EGP 1.7 billion. granted to SME customers reached EGP 2.130 billion headquarters of the First Settlement branch of the - During 2018 there was a clear fluctuation in the as of 31/12/2018 compared to EGP 1.654 billion with bank for head office management located in the El The portfolio includes major real estate companies balances of the customer deposit portfolio and a an increase of 477 million pounds and a growth rate koroum building and the vital works that cannot such as City Edge Real Estate Development setback in deposit balances at the end of the third of 29%. be stopped for any reason (ACH-Swift-Routers- Company, Hyde Park Real Estate Development quarter of 2018 as a result of sudden withdrawals ABC-RTGS). Company and Al Tameer for Real Estate Investment from major customers and some large entities. Our In the Field of Companies and Institutions Company with large asset base will generate high bank dealt with this crisis very generously and a In the light of the Bank’s strategy to be among the Projects for the supply and installation of returns in the future. short term marketing plan was prepared to attract top 10 banks, during the period 2019-2023, the Bank information security systems are currently being new deposits whether current customers or new is required to work towards achieving this strategy implemented in the Main Information Center at The portfolio of investments has achieved a total individuals and enterprises. through a plan of action launched by our bank since 6th of October City and Data Exchange Center at net profit of EGP 668 million in 2018 and distributed This plan succeeded to reach the balance of 2016. The most important elements were building, deposits portfolio (excluding deposits of transient operating and creating qualified cadres capable of Borg Al Arab (Web Gateway Security / Palo A lot / returns for the bank of EGP 80.1 million. customers) at the end of 2018 to EGP 30.4 billion performing their functions efficiently end effective FTD). pounds compared to EGP 30.1 billion at the end of in a way that supports the strong and influential In the Field of Banking Product Development for 2017 with a growth rate of 1.1%. contribution to the growth of the portfolio and Expanding and Spreading Policy Retail Banking Sector maximize the profitability of the bank to become During the year 2018, the Bank was keen to - In line with the Bank’s keenness to convoy the - Also the year 2018 witnessed a clear setback in its one of the top 10 banks in Egypt providing banking strengthen the role of the bank in the field of technological development in the technological personal loan portfolio as a result of decisions issued services and credit facilities for companies and encouraging financial education operations, banking services business and to develop and aimed at reducing the bank financing directed for institutions, as well as joint loans during the next especially with the customer segments that have facilitate communication between customers consumption purposes and intense competition five years through the following: not been dealt with before, that has not been and our bank by creating and providing a between banks in attracting customers; our bank * Emphasize the building and management of targeted by the banks during the past years and the comprehensive range of modern and safe dealt with the reduction by preparing a long-term diversified, balanced and quality credit portfolios. consolidation of the concept of financial inclusion. electronic solutions, as the Bank launched in 2018 marketing plan ends in 2021 and was approved by payment service through mobile phone (Flosy the end of 2018 through the provision of competitive * Penetrating the syndicated loan market on solid Due to the desire of our bank to reach such Phone application) to assist the bank’s customer in prices, new facilities and new systems of personal ground. segments of customers and to increase customers’ paying due installments, daily payments, paying loans system. * Improve profitability by maximizing revenue, database, The Bank has opened new branches all bills at anytime and anywhere, saving time and controlling cost and managing risk. in 2018 in areas allowing the achievement of its effort on customers. In the Field of Small and Medium-sized Projects Small and medium-sized projects currently have the target, five branches has been opened during • Strengthening relationships with companies in 2018(Marsa Matrouh, New Borg Al Arab, Helwan, Our bank also aims to increase the number of users attention of economic and social policy planners in various countries of the developed and developing portfolios through applying the spirit and concept El Taqa, El Obour University), bringing the total of the electronic payment services (Flosy Phone world alike, in view of the vital role of these projects of Relationship Management number of branches of our bank to 85 branches. Application) to reach 200 thousand customers in achieving sustainable development goals. before the end of 2019, while working on * Emphasize the availability of qualified human attracting large segments of the society in support In 2019, our bank aims to increase its branch There is a global trend to support small and medium cadres and ensure the proper management of network over the Republic to reach 100 branches of the principle of financial inclusion and achieving customer accounts. the State’s tendencies in reducing monetary projects because of the increasing importance of through processing and the completion of the transactions and enhancing the handling of these projects, which is the center piece of creating number of 15 branches during 2019. new job opportunities, reducing unemployment * Expanding the sector’s customer base and electronic payment methods. and increasing GDP. increasing the portfolio. Subsidiaries and Affiliates The Bank is launching a new package of digital * Providing high quality banking services to the In 2018, our bank adopted a new policy in the field In light of the importance of the banking sector’s banking products during the next period such clients of the sector (internally and externally). of benefiting from its investment in subsidiaries role in supporting the national economy, the as «Mobile Banking» and «Internet Banking» for development and vitalization of various companies and associates. The activity of such companies is individuals to be followed by many expansion The following is a presentation of the evolution of complementary to the activities of our bank and and facilities, especially small and medium-sized the loan portfolio and corporate credit facilities steps in this field.Within the framework of our companies and facilities, the Central Bank of Egypt helps to expand the spread base. bank’s diversification of its savings products, and syndicated loans during 2018 compared to year launched in January 2016 the initiative to finance 2017.

32 Annual Report 2018 Annual Report 2018 33 The total direct facilities for companies during and its accessories of communication devices and The total domestic ATM usage on our machines In the Treasury Sector Deposits returns with the Central Bank of Egypt the year 2018 reached EGP 4.65 billion pounds others to a data center at Sixth of October. reached 6.7 billion on 31/12/2018 compared to 5.3 for 2018 reached EGP 1.5 billion compared to EGP compared to 3.49 billion pounds for the year 2017 The total return on activity in the central banking billion on 31/12/2017, with an increase of 26%. 1.2 billion for 2017, with an increase of 26.2%. with a growth rate of 33%. sector reached EGP 67.4 million on 31/12/2018 compared to EGP 53 million on 31/12/2017, with Payment service by mobile phone and the service This resulted from the Central Bank issuing weekly The total indirect facilities (letters of guarantee) for an increase of 27%.In the area of correspondent for Flosy phone customers was launched as of fixed-rate deposits and issuing long-term deposits 2018 reached EGP 805.95 million pounds compared accounts, settlement of financial transactions, 5/6/2018 where the number of subscribers to the with variable yield for different terms. to EGP 566.91 million pounds for the year 2017, central collection and electronic clearing, after service until 31/12/2018 reached number of 17.5 with an increase of 42%. the implementation of the T24 system, the sector thousand customers and training courses were Deposits returns at banks for 2018 reached EGP adds the incoming remittances in the accounts of held in all regions and branches of our bank to 131.6 million compared to EGP 142.6 million for Thus, the total facilities companies for the year customers directly to the branch of our bank with define the service Flossy phone. 2017, with a setback of 7.7%. 2018 reached 5. 5 billion pounds compared to 4.1 the efficiency and speed required. billion pounds for the year 2017, with an increase The switch for the Housing and Construction Bank The volume of investment in treasury bonds at of 34%. The sector conducts remittances of small value was activated and the bank’s machines were the end of 31/12/2018 reached EGP 15.5 billion payments through the automatic clearing room compared to EGP 16.1 billion on 31/12/2017, with a Activity of the Banking Operations Sector of the ACH system for the Direct Credit service connected. setback of 3.7%. During the year 2018, the banking central and according to the protocol signed between operations sector developed the technological the Ministry of Supply (Supply Authority - Supply Preparations for the migration of debit cards were The return on treasury bonds for 2018 reached infrastructure for the operations of the banking Chain Support System) and the banks of Egypt for completed as a first step in the transfer of all cards EGP 2.1 billion pounds compared to EGP 1.6 billion operations sector, where a number of 93 machines technological progress, including our bank as the on the bank’s switch. pounds for 2017, with an increase of 35.9%. for the branches of our bank and central clearing Bank of Settlement of the system. assigned to the unit of the continental verification The equipment was completed to launch the cards The volume of investment in treasury bonds code to secure electronic cheques data. The amounts imported under the strength of the of the national transfer network “Meza”. on 31/12/2018 reached EGP 4.1 billion pounds system as of 1/1/2018 until 31/12/2018 reached total compared to EGP 2.4 billion pounds at 31/12/2017, The employees were also trained to use the number of movements 14.4 thousand movement of The Reconciliation program to match the with an increase of 70.1%. new equipment and a publication was issued to approximately 13 billion Egyptian pounds. movements of the switch with the client accounts confirm that no cheques were issued holding the in the branches with the movements of the The return on treasury bonds for 2018 reached EGP fingerprint of the cryptographic investigation The total revenue achieved as a cheques collection machines for speed response to obstacles. 484.8 million compared to EGP 360.1 million for except through new machines to ensure that commission reached EGP 4.5 million pounds as 2017, with an increase of 34.6%. there is no forgery or falsifying cheques before of 31/12/2018 compared to EGP 4.4 million until * In the field of trade services activity, the total disbursement. 31/12/2017. commissions and expenses collected from The volume of investment in Zero Coupon treasury bonds on 31/12/2018 reached EGP 12.5 million In addition, a website has been set up to hold the * In the field of ATM cards documentary credits, foreign transfers and compared to EGP 312.3 million on 31/12/2017 due national projects of the New Urban Communities Total income from credit cards on 31/12/2018 collections reached EGP 10.7 million on 31/12/2018 to the Ministry of Finance’s non-issuance of new Authority to activate the electronic collection reached EGP 33 million compared to EGP 25.9 compared to EGP 9.9 million on 31/12/2017, with an investments in Zero Coupon treasury bonds. system for booking reservations in the SWIFT and million on 31/12/2017, with an increase of EGP 7.1 increase of 8%. ACH systems. million, an increase of 27.4%. The return on Treasuries and the Zero Coupon The efficiency of the human element in this field is (2018) treasury bonds (with return) of 2018 reached A department was established for the servicing The amount of use of our bank cards / local purchases also increased through the redistribution of tasks EGP 4.5 million compared to EGP 143.9 million for the clients of foreign trade operations in order to reached 128.3 million on 31/12/2018 compared to 92 among employees, with the opportunity to create 2017 due to a setback in the amount invested in overcome the problems facing customers through million on 31/12/2017, with an increase of 39.5%. new cadres and increase the number of SWIFT treasury bills Zero Coupon. direct communication with them and removing messages issued / received during the period with obstacles. The volume of use of our bank cards / international a total of 30710 INPUT, a total of 46245 OUTPUT and In the field of housing activity For projects owned purchases reached 10.4 million on 31/12/2018 the expansion of the network of correspondents by the bank: The tools used in the Swift system are developed compared to 8.1 million on 31/12/2017, with an from banks and financial institutions for effective -Total sales of 2018 units of these projects reached and converted from Turbo Swift to the advanced increase of 28%. external presence in most of the world’s continents 223 units with a total sales value of EGP 486 million, Swift Alliance system which has a backup unit through the exchange of RMA to document achieving sales revenue of EGP 311.3 million compared and another alternative to cover the needs of all Total domestic ATM applications on other bank branches of our bank and has also been linked to machines reached 5.1 billion on 31/12/2018 banking transactions with them, which reached to 348 units during 2017 with a total sales value of both the T24 systems and the Screening System. compared to 4.3 billion on 31/12/2017, with an 201, mostly in the continent of Europe, which is the EGP 329 million, achieving sales revenue of EGP 194.8 the main servers was also transferred to the system increase of 18.6%. first trading partner of Egypt. million and a growth rate of sales revenues of 59.8%.

34 Annual Report 2018 Annual Report 2018 35 The total number of available-for-sale units on checking the availability of policies and procedures In the Field of Risk Management: - Develop key risk indicators of the bank, which 31/12/2018 is 897 units with a book cost of EGP 509 required to deal with all regulatory requirements. The bank’s risk management is based on a are relied upon as an indicator or indication of million. The total “other housing income” during comprehensive strategy for reduction, mitigation potential risks, and considered an early warning the year 2018 reached EGP 133 million compared to In 2018, the Bank continued its commitment and facing risks, after identifying the acceptable system for the possibility of a particular risk. 167 million pounds during 2017. to implementing best practices in the field of risks by the bank to manage its business to ensure - Development of stress testing methodology and compliance and monitoring of money laundering the level and quality of the various risks that the mechanism. National Housing Project: and terrorist financing by promoting and Bank wishes to borne and accept, which do not The total number of bank financing units available developing corporate governance principles affect the achievement of the strategic objectives, The Internal Capital Adequacy Assessment for sale from our bank for the year 2018 was 41645 based on the principles of fairness, transparency, in addition to mitigating the negative effects (ICAAP) process is ongoing and its results have units compared to 41636 units for the year 2017. accountability and liability, in order to enhance the of internal and external events on the Bank’s demonstrated the bank’s capital base to intake confidence of depositors, profitability, capital level, market share and any and cover all the risks that the bank may face. The total amount financed from the support until other intangible factors such as reputation of the bank. 2018 reached EGP 406.7 million, and the loans shareholders and other entities related to the In the Field of Social Responsibility financed by the premises reached EGP 181.40 Bank to ensure the achievement of the strategic As a continuation of the role of the Housing and In view of the importance of maintaining effective million; also the bank financing for the units of objectives of the Bank and to manage its operations Development bank in carrying out its role in the these projects until 2018 reached EGP 1.031 billion. risk management, the bank continued during 2018 field of community contribution, 2018 witnessed in a safe manner in accordance with the laws and using a consistent approach to the development instructions issued by the local and international a surge in social responsibility, as The bank’s first of various risk management policies, systems and strategy in the area of social responsibility outlined Real Estate Finance: regulators. The Board has adopted a governance The Real Estate finance activity is part of the Bank’s programs that include Risk Pro to manage credit priorities for contributions that the bank considers policy on information technology applications real estate and housing services system, which and market risks and the One Sumx program for to be most in line with the bank’s trends. aims primarily to provide adequate housing for all that ensures the key framework for integrity of Operational Risk Management, to keep abreast segments of society. practices and confidentiality of information and of developments and comply with governance The first report on the bank’s achievements in the has adopted many policies related to governance guidelines and to mitigate risk exposures and field of social responsibility has been prepared Recognizing the importance of its role in this type and compliance. work within acceptable risk levels. for the year 2017; as well the year 2018 also of activity, an independent unit specialized for real witnessed the allocation of 2% of its profits in the estate finance has been established to provide The compliance and corporate governance sector In this context, the Risk Sector has undertaken the field of social responsibility that had a significant all the technical and legal services related to this periodically reviews procedures, policies and following actions: impact on the possibility of participating in many activity. controls to ensure compliance, matching and - Continue the periodic review of the credit initiatives and establishing partnerships with conformity with the existing laws ... as well as worthiness of all companies’ credit customers community service institutions or with non- individually, in order to identify any negative The Unit’s efforts during 2018 resulted in the adopting developed concepts to increase the profit organizations. The bank has prioritized its indicators or setback that requires precautionary following: effectiveness of the compliance and governance contributions through the implementation of a measures. The quantity and quality of the credit The completion of the granting of real estate system, including the GRC, which refers to the strategy for social responsibility in 2018 focusing finance to customers from the limited, medium portfolio are analyzed according to specific on health, education, heritage conservation and integration of the activities of governance and indicators of performance; Endurance tests are and distinguished income, as well as the study of a risks and commitment to enable the institution to entrepreneurship in the field of entrepreneurship. number of cases of real estate financing under the carried out to measure the bank’s capital base to develop its performance under the umbrella of an initiative of the Central Bank of Egypt and several cover potential losses to the bank in the event of In the Field of Health effective control, which leads to the achievement protocols have been prepared with investment and any of the assumed scenarios. The largest contribution was in the field of health real estate development companies and executive of shareholders’ objectives and provide protection as it received the largest percentage of donations agencies in several provinces. to customers. As part of the bank’s keenness to develop control (about EGP18 million), with an increase of EGP 7.5 systems on a continuous basis, several operational million from the previous year, which is as follows: The number of cases related to the initiative of the This has also enabled the activation of technological risk measurement methodologies are applied to A mobile pediatrics clinic prepared in cooperation Central Bank of Egypt in the field of real estate applications that contributed to meeting the identify and assess the risks that may be exposed with Badran Foundation for the purpose of financing was about 54309 cases with a total requirements of correspondents as well as the to identify the risks that the bank may subject to in reaching patients in remote areas to provide funding of EGP 4.911 billion. achievement of automated connections with order to take appropriate control measures which will medical services. This is the second mobile internal regulatory entities. facilitate the decision-making process in reduction of clinic that the bank finances, which has already In the Field of Governance and Commitment: such risks, the most important of which are: contributed to the processing of a mobile dental - Continuation of the prudent approach to reduce The Bank’s management is keen to avoid any This has also enabled the activation of technological car and the contribution with Ahl Misr Hospital for operational risks by updating the risk matrices for risks associated with non-compliance with the applications that contributed to meeting the the establishment of the hospital for burns, which instructions issued by the local and international the different duty stations of the bank as part of is considered the first hospital in Egypt specialized requirements of correspondents as well as the the continued application of the RCSA methodology regulators, especially by the Central Bank of Egypt, achievement of automated connections with in the treatment of burns for the second year as The Bank deals with such risks by continuously to identify key risk indicators at the level of various in row and funding the renovation of the heart internal regulatory entities. banking activities.

36 Annual Report 2018 Annual Report 2018 37 department at Abu Al-Reish Children’s Hospital of training workshops for four handicrafts that are In the Field of People with Special Needs: us to continue the path of sustainable growth The Bank has supported the visually impaired the Faculty of Medicine at Al-Qasr Al-Aini for the endangered as copper, arabesque, and shellfish. in various fields of business and consolidate the Football Team for the second year. second year in row, which is expected to open in prestige of the bank. April 2019. The crafts are taught to 60 students by the workers It is the first Egyptian team to prepare for this of such crafts for a period of two years so that they Finally, I have pleasure to take this opportunity game, which hopes to qualify for the World Cup for The Bank also contributed EGP 10 million for the can master the skills of crafts, contribute with to express my deep thanks and appreciation the blind. The Bank has contributed to support the national campaign to eliminate waiting lists in Misr EL Kheir Charity Foundation in the Heritage to Dr. Eng. Minister of Housing, Utilities and Bar El Aman Association for the second year. cooperation with the Ministry of Health. Documentation Initiative and contribute to the New Urban Communities and Mr. Governor of printing of a documentary book “Life begins from the Central bank of Egypt for their support and It is the first association for young adults with In the Field of Education vacuity.” close cooperation with our bank and thanks to mental disabilities who are not accepted in schools Participate in the preparation of the engineering the members of the Board of Directors and the to reach the age of eight, The Bank contributed department of the Nile University for the third The researchers spent 6 years documenting executive administrations and the employees of in supporting Nedaa Association for hearing year in row, contribute in the construction of customs, traditions and the history of Southern the bank for their sincere efforts to improve the impaired and cochlear implants whether in the an experimental school in Fayoum in the area of Red Sea, Shalatin - Sheikh Shazly and Gulf of performance of the bank and provide the best rehabilitation of teachers in cooperation with an of Damo (Primary / Preparatory), contribute Qalaan. services to its customers. with two local associations, namely, Engaz and American University specialized in the hearing Educate me to raise the efficiency of teachers, In the Field of Entrepreneurship impaired or in the preparation of classes with tools that help in the process of teaching and also principals and all school staff, also working on the In compliance with the State’s policy of achieving I would also like to thank the bank’s auditors and contributed to support sports by supporting the development of the children’s’ skills in preparatory financial inclusion and encouraging micro, members of the Central Auditing Organization for Sohag Sports Club with the training clothes. schools, define the concept of entrepreneurship; small and medium enterprises through the their continued support to the bank. A competition will be held between ten schools in Central Bank’s lending initiatives, the decision to The Bank also supported the Marathon in Aswan cooperation with the institution of Engaz under participate in the initiative of the Central Bank I would also like to emphasize the board’s keenness whose revenue has been paid for Magdi Yaqoub the name of the Housing & Development Bank and the Nile University for Entrepreneurship to on the interests of shareholders, depositors and Hospital and the Orman Marathon in Luxor whose to teach and train students in the preparatory establish a nursery to sponsor an initiative in clients with the bank, hoping to continue to revenue has been paid for Orman Hospital for the stage on the skills of the twenty-first century, the field of development of building materials serve their needs and meet their aspirations and treatment of cancer in Upper Egypt. such as leadership, finding alternative solutions and constructions, participation with the Small to ensure that the bank continues to undertake and innovation, financing scholarships for the its societal responsibility in supporting various and Micro Enterprises Development Authority The Bank also supported Speedball for people second year in row in various fields in several to support the training of four courses of the targeted qualitative activities and initiatives. universities for 10 students with special needs and with special needs. The bank aspires to continue Businesswomen’s Program get ahead and four its commitment in the field of social responsibility the blind including the expenses of education, May God help us all to serve our pioneering courses of Start Your Program. and adopt promising young initiatives to achieve accommodation and all other expenses and a The aim of these courses is to prepare the organization and our dear homeland. scholarship at the University of the Nile for the sustainable economic, social and environmental borrowers both accountably and legally prior to growth, and work to achieve the concepts of number of one student engineering specialization starting projects to ensure their success. for 5 years and two scholarships for four years at sustainability and financial inclusion both inside Cairo University Faculty of Politics and Economics, the bank and outside. provide financial support for the top students of In the Field of Orphanages and Social Work general secondary of all its departments, as well M\S Shareholders For the fifth year in a row, the Bank has contributed as commercial, technical and hotel education, in Our bank is entering into its new operational year to “Wataneya” association, an association that addition to in-kind assistance such as electronic 2019 amidst regional and international economic works to raise the efficiency, education and training computers given to each student to facilitate the and political developments. However, we look of service providers in the orphanage according Chairman completion of their studies with tools of modern to the standards established by the Association forward to the prospects of the future with a times. and approved by the Ministry of Social Solidarity, look of hope and optimism that enable our dear participation with the Heliopolis Association country to overcome these challenges and risks, In the Field of Conservation of Heritage raise the rates of growth of our national economy This is the first time that the bank contributes for the second year in a row, an association that Fathy El Sebai Mansour and strengthen investment in it, increase the in this field because it felt that it is necessary sponsors an orphanage on the highest level of to contribute to the conservation of heritage, service and commitment in providing 100 bride and effectiveness of the banking sector, which especially as it is threatened with extinction. groom with electrical appliances for the second reflects positively on the Bank’s performance and year in a row in the governorates of Alexandria and business performance, and enhance its active The decision to contribute was as the following: Beheira, who meet the terms and conditions at a role in meeting the financing needs of the various Contribute with Mezala organization to establish wedding party held in Alexandria and Beheira. productive economic sectors, which will enable

38 Annual Report 2018 Annual Report 2018 39 Seperate Financial Reports

40 Annual Report 2018 Annual Report 2018 41 Report on Other Legal and Regulatory Requirements Independent Auditors’ Report Nothing has come to our attention that causes us to believe that material violations were occurred regarding the provisions of the Central Bank of Egypt, Banking and Monetary System Law No. 88 of 2003 for the year To The Shareholders of Housing and Development Bank - Egypt (S.A.E) ended 31 December 2018.

The bank maintains proper accounting records that comply with the laws and the bank’s Articles of Report on the Separate Financial Statements Association and the financial statements agree with the bank’s records. We have audited the accompanying separate financial statements of Housing and Development Bank - Egypt (S.A.E), represented in the separate balance sheet as at 31 December 2018, and the related separate The financial information included in the Board of directors’ report, prepared in accordance with the statements of income, changes in shareholders’ equity and cash flows for the year then ended, and a provisions of Law No.159 of 1981 and its executive regulations are in agreement with the bank’s accounting summary of significant accounting policies and other explanatory notes. records within the limit that such information is recorded therein.

Management’s Responsibility for the Financial requirements and plan and perform the audit to Auditors Statements obtain reasonable assurance that the financial These separate financial statements are the statements are free from material misstatements. Tarek Salah Sherif El – Kelany Emad Ali Hassan Abu Ghazala responsibility of Bank’s management. Management An audit involves performing procedures to is responsible for the preparation and fair obtain audit evidence about the amounts and presentation of these financial statements in disclosures in the separate financial statements. accordance with the instructions of preparation The procedures selected depend on the auditors’ BT Wahid AbdelGhaffar &CO E&Y Allied for Accounting & Auditing Accountability State Authority and presentation of financial statements for judgment, including the assessment of the risks of Egyptian banks issued by Central Bank of Egypt on Public Accountants & Consultants Public Accountants & Consultants Member in Egyptian Society of material misstatement of the financial statements, Accountants & Audiotors 16 December 2008 as well as with relevant Egyptian whether due to fraud or error. In making those Laws and regulations. Management responsibility risk assessments, the auditor considers internal includes designing, implementing and maintaining control relevant to the entity’s preparation and fair internal control relevant to the preparation and fair presentation of the separate financial statements in presentation of financial statements that are free order to design audit procedures that are appropriate from material misstatements, whether due to fraud in the circumstances, but not for the purpose of or error. Management’s responsibility also includes expressing an opinion on the effectiveness of the selecting and applying appropriate accounting bank’s internal control. An audit also includes policies; and making accounting estimates that are evaluating the appropriateness of accounting reasonable in the circumstances. policies used and the reasonableness of accounting estimates made by management, and evaluating Auditors’ Responsibility the overall presentation of the separate financial Our responsibility is to express an opinion on these statements. separate financial statements based on our audit. We conducted our audit in accordance with Egyptian We believe that the audit evidence we have obtained Standards on Auditing and applicable Egyptian laws. is sufficient and appropriate to provide a basis for our Those standards require that we comply with ethical audit opinion on the separate financial statements.

Opinion In our opinion the separate financial statements referred to above, give a true and fair view, in all material respects, of the separate financial position of Housing and Development Bank - Egypt (S.A.E) as of 31 December 2018 and of its separate financial performance and its separate cash flows for the year then ended in accordance with the instructions of the preparation and presentation of financial statements for Egyptian banks issued by the Central Bank of Egypt on 16 December 2008 as well as with relevant Egyptian laws and regulations.

42 Annual Report 2018 Annual Report 2018 43 Separate Balance Sheet for the year ended December 31, 2018

Note No. 31 December 2018 31 December 2017 Note No. 31 December 2018 31 December 2017 EGP EGP EGP EGP ASSETS Equity Cash and balances with Central Bank of Egypt (16) 2,486,135,211 4,936,058,053 Issued and Paid-up-Capital (35) 1,265,000,000 1,265,000,000 Due from banks (17) 8,749,502,983 13,624,317,648 Reserves (36) 1,799,662,556 1,197,484,463 Treasury bills (18) 14,166,957,399 14,902,695,798 Retained earnings (included net profit of the year) (36) 1,810,251,220 1,100,040,901 Financial investment held for trading (19) 378,109,424 860,079,523 Total Shareholders’equity 4,874,913,776 3,562,525,364 Loans and advances to customers (20) 13,609,254,404 11,439,176,026 Total Liabilities And Shareholders’equity 47,791,078,192 51,939,002,301

Financial investments Available for sale (21) 40,316,488 41,968,342 - The accompanying notes, from (1) to (43) form an integral part of the separate financial statements and to Held to maturity (21) 4,079,789,993 2,384,147,308 be read therewith. Financial investments in Subsidiaries and Associates (22) 1,663,314,124 1,456,609,374 Housing projects (23) 837,209,048 925,757,865 Real estate investments (24) 79,324,028 113,028,452 (25) 120,831,827 85,187,601 Intangible assets Gamal Soliman Hassan Ismael Ghanem Fathy El Sebai Mansour Other assets (26) 884,067,196 660,215,507 Fixed assets (27) 696,266,067 509,760,804 TOTAL ASSETS 47,791,078,192 51,939,002,301

Liabilities And Equity Chief Financial Officer Deputy Chairman & Managing Director Chairman Liabilities Due to banks (28) 456,920,252 210,582,346 Customers’ deposits (29) 34,122,070,120 40,884,974,330 (30) 5,218,431,377 4,156,766,947 Other loans Auditors Dividends payable 612,994 206,397 Other Liabilities (31) 2,335,628,972 2,675,082,319 Tarek Salah Sherif El – Kelany Emad Ali Hassan Abu Ghazala Provisions (32) 605,072,029 311,391,129 Current Income tax obligations 123,341,368 94,423,447 Deferred tax (33) 17,653,453 9,256,675 Retirement benefit obligations (34) 36,433,851 33,793,347 BT Wahid AbdelGhaffar &CO E&Y Allied for Accounting & Auditing Accountability State Authority Total Liabilities 42,916,164,416 48,376,476,937 Public Accountants & Consultants Public Accountants & Consultants Member in Egyptian Society of Accountants & Audiotors

44 Annual Report 2018 Annual Report 2018 45 Separate Income Statement

for the year ended December 31, 2018

Note No. 31 December 2018 31 December 2017 EGP EGP Interest from loans and similar income (6) 6,108,251,644 4,686,841,446 Interest on deposits and similar expense (6) (2,960,641,953) (2,132,731,711) Net interest income 3,147,609,691 2,554,109,735

Fees and commissions revenue (7) 332,967,616 305,015,253 Fees and commissions expense (7) (28,880,648) (26,919,965) Net fees and commission income 304,086,968 278,095,288

Dividends income (8) 82,501,918 75,950,658 Net trading income (9) 62,159,653 272,072,705 Housing Projects Profits’ (10) 444,792,715 361,969,249 Impairment losses from financial investments (21) (1,641,104) (529,997) Loans impairment losses (13) (219,529,105) (890,573,102) General & administrative expenses (11) (1,419,176,369) (1,075,309,295) Other provision (284,103,492) (131,249,864) Other operating income (expenses) (12) 78,383,617 44,997,287 Net profit before income tax - 2,195,084,492 1,489,532,664 Income tax expense (14) (570,249,132) (414,000,009) Net profit for the year - 1,624,835,360 1,075,532,655

Earnings per share (15) 12.89 6.55

46 Annual Report 2018 Annual Report 2018 47 Separate Cash Flows Statement for the year ended December 31, 2018

Cash flows from investing activities Payments for purchase of fixed assets (299,404,581) (259,247,845) Proceeds from sale of fixed assets 2,511,886 1,890,359 Note No. 31 December 2018 31 December 2017 Payments for purchase of financial investments EGP EGP other than held for trading (2,120,503,299) (354,234,525) Cash Flows From Operating Activities Proceeds from sale of financial investments Profit before tax 2,195,084,492 1,489,532,664 other than held for trading 435,020,000 396,625,654 Adjustments: Payments for acquisition of associates companies (206,704,750) (180,727,713) Depreciation and amortization )24(,)25(,)27( 208,450,821 121,244,054 Payments for purchase of intangible assets (121,926,807) (66,664,890) Credit impairment losses (13) 219,529,105 890,573,102 Dividends income 81,986,100 74,716,041 Impairment losses from other assets and housing projects (12) (5,148,949) 6,874,288 Net cash flows used in investing activities (2,229,021,451) (387,642,919) Other provisions-charged during the year (12) 284,103,492 131,249,864 Cash flows from Financing activities Revaluation difference of financial investments held for trading (9) (43,205,915) (245,925,634) Long-term loans 1,061,664,430 1,349,229,596 Impairment losses from debt instruments held for trading (21) 1,641,104 - Dividends paid (122,093,403) (353,099,029) Impairment losses from investments in associate (21) - 529,997 Net cash flows from financing activities 939,571,027 996,130,566 Amortization of discount - Investment held to maturity (21) (10,148,636) (6,164,210) Increase (decrease) in cash and cash equivalents during the year (6,298,312,237) 10,609,561,093 Dividends (8) (82,501,918) (75,950,658) Cash and cash equivalent at the beginning of the year 14,448,022,835 3,838,461,742 Utilization of other provision (32) (31,567,976) (2,433,734) Cash and cash equivalents at the end of the year 8,149,710,598 14,448,022,835 Provisions no longer required (12) - (15,731) Cash and cash equivalents are represented in: Gain from sale of fixed assets (12) (2,511,838) (1,307,563) Cash and balances with Central Bank of Egypt 2,486,135,211 4,936,058,053 Due from banks 8,749,502,984 13,624,317,649 Operating income before changes in operating assets andliabilities 2,733,723,782 2,308,206,439 Treasury bills 14,166,957,399 14,902,695,798 Net decrease (increase) in assets Obligatory reserve balance with CBE (1,643,612,237) (3,971,440,942) Due from banks 1,027,548,480 (2,399,612,780) Bank Deposits with maturity more than three-month (1,442,315,360) (142,035,136) Treasury bills 734,615,188 (6,206,270,603) Treasury bills with maturity more than three-month (14,166,957,399) (14,901,572,587) Financial investments for held trading 525,176,014 1,782,995,976 Cash and cash equivalents at the end of the year (38) 8,149,710,598 14,448,022,835 Loans and advances to customers and banks (2,367,073,478) (2,998,801,599) Housing Projects and real estate investments 112,984,270 68,403,534 Other assets 278,249,814 327,224,312

Net (decrease) increase in liabilities Due to banks 246,337,905 (460,393,433) Customers’ deposits (6,762,904,210) 20,090,948,293 Other liabilities (1,004,585,145) (2,095,214,836) Income tax paid (532,934,433) (416,411,857) Net cash flows from (used in) operating activities (5,008,861,813) 10,001,073,446

48 Annual Report 2018 Annual Report 2018 49 Separate Changes In Shareholders’ Equity Statement

for the year ended December 31, 2018

Reserve of General Paid-in-capital Legal reserves General reserve Special reserve Other reserve Bank Risk IFRS 9 Reserve Retaivned earnings Total

Balances as of January 1 , 2018 1,265,000,000 401,329,094 467,000,000 14,447,953 14,115,643 107,474 - 677,992,545 2,839,992,709 Dividends paid for the year 2018 ------(353,000,000) (353,000,000) Transferred to reserves - 35,000,000 265,000,000 - 430,562 53,737 - (300,484,299) - Net profit for the year ended 2018 ------1,075,532,655 1,075,532,655 Balances at 31 December 2018 1,265,000,000 436,329,094 732,000,000 14,447,953 14,546,205 161,211 - 1,100,040,901 3,562,525,364

Balance as of January 1 , 2018 1,265,000,000 436,329,094 732,000,000 14,447,953 14,546,205 161,211 - 1,100,040,901 3,562,525,364 Dividends paid for the year 2018 ------(312,250,000) (312,250,000) Transferred to reserves - 53,776,633 400,000,000 - 1,307,563 53,737 147,237,108 (602,375,041) - Adjustments - - - - - (196,948) - - (196,948) Net profit for the year ended 2018 ------1,624,835,360 1,624,835,360 Balances as at 31 December 2018 1,265,000,000 490,105,727 1,132,000,000 14,447,953 15,853,768 18,000 147,237,108 1,810,251,220 4,874,913,776

50 Annual Report 2018 Annual Report 2018 51 Profit Dividends Statement

for the year ended December 31, 2018

31 December 2018 31 December 2017 EGP EGP

Net profit for the year (As per income statement) 1,624,835,360 1,075,532,655 Deduct:

Gain on sale of fixed assets transferred to capital reserve as per law regulations (2,511,838) (1,307,563)

General Banking Risk Reserve (4,500) (53,737) IFRS 9 Reserve - (147,237,108) Net 1,622,319,022 926,934,247 Retained Earnings at the beginning of the year 185,415,860 24,508,246 Net Income attributed to distribution 1,807,734,882 951,442,493 Distributed as following: Legal Reserve 81,241,768 53,776,633 General Reserve 900,000,000 400,000,000 Shareholders’ Dividends 632,500,000 189 750 000 Employees shares of Profit 162,231,902 112,500,000 Board of directors rewards 15,000,000 10,000,000 Retained Earnings 16,761,212 185 415 860 Total 1,807,734,882 951,442,493

52 Annual Report 2018 Annual Report 2018 53 Notes to the Separate Financial Statements For the Financial year ended December 31, 2018

54 Annual Report 2018 Annual Report 2018 55 Accounting for subsidiaries and associates in the changes in amortized cost and differences related Notes To The Separate Financial Statements separate financial statements are recorded by cost to changes in the exchange rate are recognized method, according to this method, investments as other operating income(expense),and changes for the year ended December 31, 2018 are recorded at cost of acquisition including any in fair value of available-for-sale investments are good- will after deducting any impairment losses in recognized in equity(fair value reserve/available value, and the dividends in the income statement for sale investments). 1. Background preparation and presentation of the banks’ financial are recorded in the adoption of the distribution of Housing and Development bank provides Banking statements and measurements and recognition these profits and evidence of the bank’s right to Evaluation differences resulting from non- Services for Corporates rather than Investments, basis as issued by Central Bank of Egypt’s board of collect it. monetary items include profit and loss resulting retail Banking Services in the Arab republic of Egypt directors on December 16, 2008. from changes in fair value such as equity through 84 branches, and hires 2548 employees at C. Translation of Foreign Currencies instruments held at fair value through profit the date of the financial position. B. Subsidiaries & Associates C.1. Functional and presentation currency and loss, While evaluation differences resulting Housing and Development bank is an Egyptian B.1.Subsidiaries The financial statements are presented in Egyptian from equity instruments classified as financial Joint Stock company established as Investments Subsidiaries companies are the entities over which pound, which is the bank’s functional and investments available for sale are recognized as and Business Bank on June 30, 1979 by virtue, owns directly or indirectly the power to govern presentation currency. fair value reserve available for sale investments ministerial Decree No.147 for a year 1979 and it the financial and operating policies generally under the equity caption. handles its activity through the head office in accompanying a shareholding of more than one- C.2. Functions and balances in foreign currencies Giza governorate and the bank is registered in the half of the voting right. The bank maintains its accounts in Egyptian pound D. Financial Assets Egyptian Stock Market for Securities. and transactions are recorded in foreign currencies the existence and effect of potential voting rights during the financial year on the basis of prevailing The Bank classifies its financial assets into the 2. Summary of Significant Accounting Policies that are currently exercisable or convertible are exchange rates at the date of the transaction, following categories: financial assets at fair value The principal accounting policies applied in the considered when assessing whether the bank has monetary assets and liabilities denominated in through profit or loss, loans and receivables, held-to- preparation of these financial statements are set the ability to control the entity. foreign currencies are retranslated at the end maturity investments, and available for-sale financial out below. These policies have been consistently of the financial year on the basis of prevailing assets. Management determines the classification of applied to all the years presented, unless otherwise B.2.Associates exchange rates at that date. Foreign exchange its investments at initial recognition. stated. Associates are the entities over which the bank gains and losses resulting from the settlement and owns directly or indirectly significant influence but translation of such transactions and balances are D.1. Financial assets at fair value through profit or loss A. Basis of Preparation not control generally accompanying a shareholding recognized in the income statement and reported The financial statements are prepared in accordance of between 20% and 50% of the voting rights. under the following items: This category has two sub-categories: financial assets with Central bank of Egypt instructions approved the purchase method of accounting is used to held for trading, and those designated at fair value by its board of directors on December16, 2008 in account for the acquisition of subsidiaries by the • Net income from held for trading/or net income through profit or loss at inception. addition to the historical cost basis, modified by the bank. from classified financial instruments at the date revaluation of assets and liabilities held for trading, of inception valued by fair value through profit A financial asset is classified as held for trading if it is financial assets and liabilities originally valued with and loss of the assets/liabilities held for trading or acquired or incurred and carrying its cost principally fair value through profits and losses, and available The cost of an acquisition is measured as the fair those classified at the date of inception with its fair for the purpose of selling or repurchasing in the near for sale investments, and all financial derivatives value of the assets given and/or, equity instruments value through profits and losses according to type. term or if it is part of a portfolio of identified financial contracts.These separate financial statement were assets acquired and liabilities incurred and/or • Shareholders’ equities of financial derivatives as instruments that are managed together and for which prepared in accordance with relevant local laws, assumed at the date of exchange, plus costs directly a coverage for cash flow/net investment or as a there is evidence of a recent actual pattern of short- investment in associates are presented in bank’s attributabale to the acquisition. identifiable assets coverage for net investment. term profit-taking. Also the derivative is classified as separate financial statement and valued according acquired and liabilities and contingent liabilities • Other operating income (expenses) for the other held for trading unless it has been recognized as it’s a to cost less impairment loss method. assumed in a business combination are measured items. recovarage tool. The financial statements have been prepared until initially at their fair valuse at the acquisition date, • Changes in fair value of financial instruments Financial assets are designated at fair value through December 31, 2009 applying the Central Bank of irrespective of the extent of any minority interest. denominated in foreign currency classified as profit or loss in the following cases: Egypt regulations prevailing until that date which the excess of the cost of acquisition over the fair available for sale investments (debt instruments) • When doing so significantly reduces measurement differ in some aspects from Central Bank of Egypt value of the bank’s share of the identifiable net is analyzed between valuation differences from inconsistencies that would arise if the related instructions approved by its board of directors on assets acquired is recorded as goodwill in the changes in amortized cost of the instrument, derivatives were treated as held for trading and December 16, 2008.While preparing the financial consolidated financial statement, and if the cost differences resulted from changes in the prevailing underlying financial instruments were carried at statements for the year ended December 31, 2010 of acquisition is less than the fair value of the net exchange rates, and differences resulted from amortized cost for loans and facilities to customers the management changed some accounting assets of the acquired subsidiaries, the difference changes in the fair value of the instrument. Those or banks and debt securities in issue. policies, and measurement basis to be in conformity is recognized directly in the consolidated income changes are recognized in the income statement • When managing certain investments, such as with Central Bank of Egypt requirements for the statement. as income on loans and similar items regarding equity investments, at a fair value basis in accordance

56 Annual Report 2018 Annual Report 2018 57 with a documented risk management or investment than those allowed in specific circumstances. As At this time the cumulative profits and losses previously transferred to the Statement of profit and losses. strategy and reporting to key management personnel specified by the Central Bank of Egypt. recognized in equity is recognized in the income statement. In case of subsequent impairment any gain or loss on that basis, these investments are classified at fair Interest calculated based on the amortized cost method previously recognized in equity will be transferred to the value through profits and losses. D.4. Available for Sale Financial Investments and foreign exchange gains or losses on monetary Statement of profit and losses. Available for sale financial investments are those financial assets classified as available for sale are If the Bank adjusts its estimates of payments or receipts, • Financial instruments, such as debt securities non-derivative financial assets intended to be held recognized in the income statement. Dividends on the carrying amount of the financial asset (or group of held-to-maturity, containing one or more for an indefinite year of time, which may be sold available for sale financial assets in equity instruments financial assets) will be adjusted to reflect the adjusted embedded derivatives which significantly modify in response to needs for liquidity or changes in are recognized in the income statement when the bank’s estimates of cash flows and recalculates the present the cash flows, are designated at fair value through interest rates, exchange rates or equity prices. right to receive payments is established. value of estimated future cash flows at the effective profit and loss. yield of the financial instrument and the difference is • The profit and loss resulted from the change The following applies to financial assets: The fair value of quoted investments in an active market recognized as income or expense in the profit and loss. in the fair value of the financial derivatives that is based on current bid price. If there is no active market are managed in relation to assets and liabilities Regular-way purchases and sales of financial assets for financial assets, or quoted prices are available, the In all cases, if the bank reclassifies a financial asset classified with fair value through profit and loss in classified at fair value through profit and loss, held fair value is determined by the bank using valuation and the bank increased its estimate of the proceeds the income statement under item (net income of to maturity financial investments and available techniques including discounted cash flows analysis, of future cash flows, this increase will be recognised financial instruments recorded with fair value) for sale investments are recognized using the recent neutral transactions, option-pricing models, or as adjustment to the effective interest rate effective • Any financial derivatives of (a valued financial settlement date which is the date that an assets other valuation methods commonly used by the market from the date of change in the estimate and not as instruments at fair value) are not reclassified is delivered to or by the entity. All financial assets, dealers. adjustment to the book value of the asset at the date of through profit and loss during the retention year other than those classified as at fair value through the change in estimate. or force. It also has not re-classified any financial profit or loss, are initially recognized at fair value If the bank is unable to assess the fair value of equity instrument, quoting from a range of financial plus transaction costs. instruments classified as available for sale, the value E. Offsetting between Financial Instruments instruments at fair value through profit and loss if thereof is measured at cost less of any impairment this tool has been customized by the bank at initial Financial assets classified as at fair value through losses. Financial assets and liabilities are offset when the bank recognition as assessed at fair value through profit profit or loss are initially recognized at fair value. has a legally enforceable right to offset the recognized and loss. The bank reclassifies the financial asset previously amounts and it tends to settle this amount on a net basis, Transaction costs associated with those assets are classified as available for sale to which the definition of or realize the asset and settle the liability simultaneously. D.2. Loans and Advances expensed and reported in the income statement in loans- debts (debentures or loans) applies by means of Repos and reverse repos agreements related to treasury Loans and advances are non-derivative financial ‘net trading income’. transferring it from the category of available for sale to bills are netted on the balance sheet and disclosed under assets with fixed or determinable payments that the category of loans and debts or the financial assets “treasury bills and other governmental notes” caption of are not quoted in an active market, other than The bank derecognizes a financial asset only when held to maturity, once the bank has the intention and the balance sheet. those that: the contractual rights to the cash flows from the ability to hold such financial assets in • The bank intends to sell immediately or in the financial asset expire or when it transfers the F. Financial Derivatives Instruments and short term, which are classified as held for trading, financial asset and substantially all the risks and the near future or up to the maturity date, such hedging accounting or those that the bank upon initial recognition rewards of ownership of the asset to another entity. reclassification is made at fair value as of that date. Any designates at fair value through profit or loss. gains or losses related to such assets which have been • Derivatives are initially recognized at fair value on the • The bank upon initial recognition designates at Financial liabilities are excluded when they are previously recognized within equity shall be treated as date on which a derivative contract is entered into and are available for sale. extinguished, that is when the obligation is follows: subsequently re-measured at their fair value. • The bank may not recover substantially all of its discharged, cancelled or expires. 1. In case of reclassified financial asset which has a initial investment, for other than deterioration in Available for sale financial investments and fixed maturity, gains or losses are amortized over the Fair values are obtained from quoted market prices in credit worthiness of the issuer. financial assets classified at fair value through remaining life of the investment until the maturity date active markets, including recent market transactions, profit and loss are subsequently measured at fair using the effective yield method and any difference and valuation techniques, including discounted cash flow D.3. Held-To-Maturity Financial Investments value. between the value on the basis of amortized cost and models and options pricing models, as appropriate. All Held-to-maturity financial investments are Held to maturity financial investments are subsequently maturity value is amortised over the remaining life of derivatives are carried as assets when fair value is positive non-derivative financial assets with fixed or measured at amortized cost. Gain and losses arising from the financial asset using the effective yield method, and and as liabilities when fair value is negative. determinable payments and fixed maturity dates changes in the fair value of financial assets classified at in the case of the subsequent impairment in the value of that the bank has positive intent and ability to fair value through profit and loss are recognized in the the financial asset any previously gain or loss previously • Embedded derivatives in other financial instruments hold to maturity. Reclassification will be made to income statement during the year in which they arise. recognized directly in equity in the profits and losses. such as conversion option in a convertible bond are Available-for sale category in case the bank has, Profits and Losses arising from changes in the fair value treated as separate derivatives when their economic during the current financial year sold or reclassified of available for sale financial investments are directly 2. In the case of financial asset which has no fixed characteristics and risks are not closely related to those of more than an insignificant amount of held to recognized in equity until the asset is disposed of or maturity, profit or loss will remain in equity until the the host contract provided that the host contract is not maturity investments before maturity other impaired. sale of the asset or its disposal of at that time it will be classified as at fair value

58 Annual Report 2018 Annual Report 2018 59 through profit and loss and these embedded Inefficiency in all of the contracts and the related valued by the fair value of profits and losses), this and ‘interest expense’ in the income statement derivatives are recognized at fair value and changes covered items mentioned in the previous paragraph is through the profits and losses resulted from the using the effective interest method. in these fair values are recognized in the income are added to the net trading income. changed in the fair value of derivatives managed in statement under net trading income item. If the hedging is no longer following the hedging relation to the classified assets and liabilities at fair The effective interest method is a method of accounting procedures, the modification added to value through profits and losses. calculating the amortized cost of a financial asset • The embedded derivatives are not separated if the book value of the covered items recorded by the or a financial liability and of allocating the interest the bank decides to classify the entire compound amortized cost method, this is through charging it G. Recognizing first day’s deferred profits and losses: income or interest expense over the relevant year. contract by the fair value through profits and against the profits and losses along the year till its Considering the tools that evaluate the fair value, losses. maturity. Amendments in covered equity instrument’s book the transaction price is considered to be the best The effective interest rate is the rate that exactly • Recognizing the profits and losses resulted from value remain within the owners’ equity till it has instrument to evaluate the fair value on the discounts estimated future cash payments or the fair value depends on whether the derivative is been excluded. transaction date(fair value of delivered or received receipts through the expected life of the financial a covering instrument provision and according to return) unless the fair value of the instrument on instrument or, when appropriate, a shorter year to the nature of the covered item, the bank classifies F.2. Cash flows hedging that date is indicated depending in the transaction’s the net carrying amount of the financial asset or some of the derivatives as one of the following: The effective part in the changes in the fair value of the price in published market or using evaluation financial liability. qualified derivative provision to cover the cash flows modules. • Risk Hedging of the fair value of recognized assets is recognized as owners’ equity, while the profit and When calculating the effective interest rate, the Bank and liabilities or confirmed commitments (fair losses related to the ineffective part are recognized When the bank has a long term transaction, its estimates cash flows considering all contractual value hedging). fair value is specified using evaluation modules terms of the financial instrument (for example, immediately as (net trading income) in the income that their inputs may not all be from the published prepayment options) but does not consider future • Risk hedging of future highly expected cash flows statement. market rates or prices, those financial instruments credit losses. The calculation includes all fees and related to recognized asset or liability or related to are recognized according to transaction price which points paid or an expected transaction (cash flows hedging). The amounts accumulated in the owners’ equity are is the best indication of the fair value. received between parties to the contract that transferred to the income statement in the same year • Hedging accounting is used for provision are an integral part of the effective interest rate, that the covered item has an effect on profits and derivative for that purpose if the needed conditions Although the value calculated from evaluation transaction costs and all other premiums or are available. losses, profits and losses related to the effective part of modules may be different, and the difference discounts. Interest income on loans is recognized on the currency transfers and options are added to the net between the transaction price and the amount accrual basis except for the interest income on non- • At the beginning of the transaction the bank trading item. resulted from the module is not immediately performing loans, which ceases to be recognized as documents the relations between the covered When the hedging instrument is being due or sold, recognized as first day’s profits and losses and it is revenue when the recovery of interest or principle is items and hedging instruments, also the objectives or when the hedging is no longer following the listed as other assets in the case of loss, and as other in doubt and are rather recorded off balance sheet of risk management and the strategy of having hedging accounting procedures, the profits and losses liabilities in the case of profit. as follows: different hedging transactions. At the beginning accumulated in the owners’ equity in that time remain of hedging and consciously, the bank documents The timing of recognizing the deferred profit and • When it is collected and this is after redeeming all the estimation of whether the derivative used in within the owners’ equity item and it is recognized in loss is specified separately for each case through dues of consumer loans and personnel mortgages hedging transactions are effective in facing the the income statement when the expected transaction its amortization on the transaction or when it is also small loans for economic activities. changes in the fair value or cash flows of the covered is finally recognized. possible to identify the instrument’s fair value using items. But if the expected transaction is no longer expected published market’s inputs or by • For corporate loans, interest income is recognized to occur then the profits and losses accumulated in F.1. Fair value hedging approving it when adjusting the transactions, on a cash-basis after the bank collects 25 % of the owners’ equity are immediately transferred to the The changes in the fair value of qualified derivatives the instruments is measured by the fair value, the rescheduled instalments and when these provisions for hedging of the fair value are income statement. the subsequent changes in the fair value are instalments continue to be paid for at least one recognized in the income statement, this with any immediately recognized in the income statement. year. If a loan continues to be performing thereafter, change in the fair value related to the risk of the F.3. Unqualified derivative of hedging accounting interest accrued on the principal then outstanding covered asset or liability. Changes in the fair value of the unqualified H. Interest Income and Expense starts to be recognized in revenues. Interest that The effective changes in the fair value of return derivatives of hedging accounting are being Interest income and expense for all interest-bearing is marginalized prior to the date when the loan recognized in the (net trading income) item. In the transfers contracts and the related covered items financial instruments, except for those classified as becomes performing is not recognized in profit or income statement, the profits and losses resulted are added to the net return and effective changes held for trading or designated at fair value through loss except when the total balance of loan, prior to in the fair value of the future currency contracts are from the changes in the fair value is recognized as profit or loss, are recognized within ‘interest income’ that date, is paid in full. added to net trading income. (net income of classified financial instruments

60 Annual Report 2018 Annual Report 2018 61 I. Fees and Commissions Administrative consultations and other service fees recognition of the asset (a ‘loss event’) and that loss In this respect the following should be consider: Fees charged for servicing a loan or facility that are usually recognized as revenue on a straight-line event has an impact on the estimated future cash • If the bank determines that no objective evidence is measured at amortized cost, are recognized as basis over the year in which the service is rendered. flows of the financial asset or group of financial of impairment exists for an individually assessed revenue as the service is provided. Fees from financial planning management and assets that can be reliably estimated. financial asset, whether significant or not, it includes custodian services provided to clients over long year the asset in a group of financial assets with similar Fees and commissions on non-performing or are usually recognized as revenue on a straight- The criteria that the Bank uses to determine that credit risk characteristics and collectively assesses there is objective evidence of an impairment loss them for impairment based on the historical loss impaired loans or receivables cease to be recognized line basis over the year in which these services are include: rates. as income and are rather recorded off balance sheet. rendered. • Significant financial difficulty of the issuer or obligor. • Assets that are individually assessed for These are recognized as revenue - on the cash J. Dividends impairment and for which an impairment loss is basis – only when interest income on those loans Dividends are recognized in the income statement • A breach of contract, such as a default or or continues to be recognized are not included in a is recognized in profit or loss, at which time, fees when the bank’s right to receive payment is delinquency in interest or principal payments. collective assessment of impairment. and commissions that are an integral part of the established. effective interest rate of a financial asset are treated • It becoming probable that the borrower will enter • If no impairment losses result from the previous as adjustment to the effective interest rate of that K. Purchase & Resale Agreements, and Resale & bankruptcy or financial re-organization. assessment of impairment in this case the asset financial asset. Purchase Agreements included in a collective assessment of impairment. • Deterioration of the competitive position of the Commitment fees received by the bank to originate Financial instruments sold under repurchase borrower. Provision amount of impairment loss is measured a loan are deferred if it is probable that the bank agreements, are not derecognized from the books. by the difference between the asset’s book value • The lender, for economic or legal reasons relating and the present value of the expected future cash will enter into a specific lending arrangement and to the borrower’s financial difficulty, granting to the flows excluding the future credit losses that have are regarded as a compensation for an ongoing These are shown in the assets side as an addition to borrower a concession that the lender would not been incurred yet, deducted from the use of involvement with the acquisition of the financial the “treasury bills and other governmental notes” not otherwise consider. actual return rate of the financial asset. instrument and recognized as an adjustment to the line item in the balance sheet. effective interest rate. • Impairment in the value of collaterals .or The book value of the asset is decreased by the On the other hand, the bank’s obligation arising • Deterioration in the creditworthiness of the provision of impairment loss. The impairment loss is If the commitment expires without the bank from financial instruments acquired under resale borrower. recognized as credit losses in the income statement. making the loan, the fees are recognized as revenue agreements, is shown as a deduction from the on expiry. “treasury bills and other governmental notes” line An objective evidence for impairment loss of the If the loan or investment held to maturity has a item in the balance sheet. financial asset includes observable data indicating variable interest rate, the discount rate used to Fees related to debt instruments which are measured that there is a measurable decrease in the estimated measure any impairment losses is the original at fair value are recognized under revenue at initial Differences between the selling and repurchase future cash flows from a group of financial assets effective contractual interest rate. Where practicable, recognition. price or between the purchase and resale price since the initial recognition of those assets, although the bank measures the impairment losses based the decrease cannot yet be identified with the is recognized as interest expense or income on the fair value of the instrument using declared individual financial assets in the group, such as the market prices. In the case of collateralized financial The fees for promotion of joint loans are recognized throughout the year of agreements using the increase of default cases with respect to a banking assets, the addition of the present within revenues upon completing the promotion effective interest rate method. product. value of the expected future cash flows that may process without retaining any part of the loan by the originate from the execution of and sale of the bank, or if the bank maintains a part thereof with the L. Impairment of Financial Assets The estimated year between the date in which the collateral after deducting the related expenses must actual interest rate available to other participants. loss occurred and the date on which the impairment be observed. L.1. Financial Assets Measured at Amortized Cost loss has been identified for each specific portfolio is For the purposes of a collective evaluation of Fees and commissions that are earned on negotiating The Bank assesses at each balance sheet date 12 months. impairment, financial assets are grouped on the or participating in the negotiation of a transaction whether there is objective evidence that a financial basis of similar credit risk characteristics (i.e., on the asset or group of financial assets is impaired. in favor of another entity, such as arrangements The Bank first assesses whether objective evidence basis of the Group’s grading process that considers for the allotment of shares or another financial of impairment exists individually for financial assets asset type, industry, geographical location, collateral A financial asset or a group of financial assets is that are individually significant, and individually type, past-due status and other relevant factors). instrument or acquisition or sale of an enterprise on impaired and impairment losses are incurred only if behalf of a client, are recognized as revenue when or collectively for financial assets that are not Those characteristics are relevant to the estimation there is objective evidence of impairment as a result individually significant. of future cash flows for groups of such assets by the transaction has been completed. of one or more events that occurred after the initial

62 Annual Report 2018 Annual Report 2018 63 being. Indicative of the debtors’ ability to pay all A significant or prolonged decline in the case of the privileges in location and area for each unit with N.2. Other intangible assets amounts due according to the contractual terms of equity investments classified as available for sale, a no effect on the project’s total cost. the assets being evaluated. significant or prolonged decline in the fair value of Represented in the intangible assets other than goodwill an investment in an equity instrument below its cost Real-estate investment and computer programs for example (trademarks, For the purposes of evaluation of impairment for is an objective evidence that the assets is impaired. Real-estate investment is requested in land & Buildings license, and rental contracts benefits). a group of a financial assets according to historical owned by the bank for gain rental revenues or capital default ratios future cash flows in a group of During years start from First of January 2009, The appreciation. Therefore it doesn’t include real-estate Intangible assets are recorded by acquisition cost and financial assets that are collectively evaluated decrease consider significant cause it become 10% assets used in the bank’s operations or which was is amortized by straight line method or the economic for impairment are estimated on the basis of the from cost of book value and the decrease consider received in settlement of the bank’s liability. benefits expected, along its estimated useful life. contractual cash flows of the assets in the Bank and to be extended if it continue for year more than 9 historical loss experience for assets with credit risk months, and if the mentioned evidences become Investment is accounted by the same method applied Considering assets with no definite useful life, they are characteristics similar to those in the bank. available then the accumulated loss to be post from for fixed assets in which investments are recorded at not amortized but its impairment loss is yearly examined the equity and disclosed at the income statement, historical cost and depreciated using straight line method and recorded (if found) in the income statement. Historical loss experience is adjusted on the basis impairment losses recognized in the income using appropriate depreciation rate and recognizing of current observable data to reflect the effects of statement on equity instruments are not reversed impairment loss if needed. O. Fixed Assets current conditions that did not affect the year on through the income statement. which the historical loss experience is based and N. Intangible Assets Land and buildings comprise mainly branches and to remove the effects of conditions in the historical If, in a subsequent year, thefair value of a debt offices. All fixed assets are carried at historical cost net of year that do not currently exist. Estimates of changes instrument classified as available for sale increases N.1. Computer programs accumulated depreciation and accumulated impairment in future cash flows for groups of financial assets and the increase can be objectively related to an losses. should reflect and be directionally consistent with event occurring after the impairment loss was Expenses related to improvement & maintenance of changes in related observable data from year to recognized in profit or loss, the impairment loss is computer programs are recognized as expenses in Cost includes expenditures that are directly attributable year (for example, changes in unemployment rates, reversed through the income statement. income statement when incurred. Recognized as an to the acquisition of the items. property prices, payment status, or other factors intangible asset expenses related directly with definite indicative of changes in the probability of losses in M. Evaluation of Housing Projects Subsequent costs are included in the asset’s carrying programs and under the bank control & expected to the Bank and their magnitude). The cost of works under implementation includes amount or recognized separately, as appropriate, only generate economic benefits which exceed its cost for The bank reviews the method and assumptions the cost of allocated lands for housing projects, the when it is probable that future economic benefits used to estimate future cash flows. cost of the constructions therein, the borrowing more than one year. associated with the item will flow to the Bank and the expenses that are capitalized during the borrowing cost of the item can be measured reliably. L.2. Available for Sale year until related work is finished and all related Direct expenses includes labour cost in the program Financial Investments Fair Value of financial expenses as works under implementation are improvement team in addition to appropriate average All other repairs and maintenance expenses are investments available for sale either listed or considered one of the qualified assets to be charged recognized in profit or loss within” other operating unlisted and are not actively traded is measured with with the borrowing costs which should be no more of related general expenses and it is recognized as an expenses” during the financial year in which they are one of the technical acceptable ways/methods, and capitalized for the projects that its core activities improvement cost in the expenses that leads to an incurred. in case the bank is unable to assess the fair value for needed to make it ready for its identified purposes increased expansion or performance of the computer such investments in a reliable way / method , so the or for selling it to other. program more than its original standards, it is added to Depreciation is charged so as to write off the cost of fair value of the available-for-sale investments is the program cost. assets, other than land which is not depreciated, over measured by cost method to equity investments and - Finished housing units are evaluated at the cost or their estimated useful lives, using the straight-line by amortized cost method to debt instruments after fair value whichever less than fair value is evaluated impacting changes in foreign currency exchange in the light of detailed studies. In case the fair value Computer programs’ cost which are recognized as an asset method to the extent of their estimated residual values rates included all related costs and deducting its is less than the cost value, the difference is charged are depreciated over its life time of not more than 4 years. based on the following annual rates: impairment loss in value and recognizing this loss to reduce “profits of housing projects” item in the on income statement. income statement. In case of an increase in the fair value, such increment shall be credited to the At each balance sheet date, the bank assesses income statement within the limits previously whether there is objective evidence that any charged to the income statement. financial assets or a group of financial assets Asset Annual Depreciation Rate classified as available for sale or held to maturity has - The cost and selling price of housing units in some Buildings & constructions 5% been impaired. distinguished projects are calculated according to Machinery and equipment 25% Furniture 10% Transportation vehicles 25%

64 Annual Report 2018 Annual Report 2018 65 • Re-establishing expenses related to the rented branches expenses in the income statement according to straight Initial recognition in the financial statements is recorded in the difference between both the present value of are amortized through the estimated production life or line method within the contract year. by the fair value at the date of granting the collateral liabilities in the balance sheet date and the present the year of the rent contract whichever less. which may reflect the collateral fees. Later on, the bank’s value of its assets including settlements resulted from • Facilities and instalments are depreciated over 3 year’s R. Cash and Cash Equivalents liability is measured by the virtue of the collateral on actuarial profit/loss and also the cost of previous service. year. the basis of the initial recognition amount less the Those liabilities are determined annually by independent • The assets’ residual values and useful lives are reviewed, For the purposes of the cash flow statement, cash and amortization to recognize the collateral fees in the actuarial expert using the “estimated added unit and adjusted if appropriate, at each balance sheet date. cash equivalents comprise balances with less than three income statement by the straight line method over the approach” and are determined through estimated months’ maturity from the date of acquisition; they collateral lifetime, or the best estimation of the needed future out cash flow applying interest rates on bonds Assets that are subject to amortization are reviewed include cash and balances due from central bank of payments to adjust any financial liability resulted from with maturities similar to that of the liabilities in “other for impairment whenever events or changes in Egypt-other than those within the mandatory reserve, the financial collaterals on the balance sheet date which liabilities” item. circumstances indicate that the carrying amount may current accounts with banks and treasury bills and other is higher. These estimations are specified according to the Actuarial profit/loss resulted from settlements together not be recoverable. An asset’s carrying amount is written government notes. experience in similar transactions and historical losses with amendments in the medical system are charged to down immediately to its recoverable amount if the and also by the management’s judgment. Any increase the income statement if it’s not more than 10% of the asset’s carrying amount is greater than its estimated S. Provisions in the liabilities resulted from financial collaterals, is value of the asset or 10% of the defined benefits liabilities, recoverable amount. The recoverable amount is the Provisions for restructuring costs and legal claims recognized in the income statement as other operating whichever is higher and in case profits (losses) is more higher of the asset’s fair value less costs to sell and value are recognized when the Bank has a present legal or revenues (expenses). than the percentage, the increment is added (deducted) in use. constructive obligation as a result of past events, it is to the income statement over what’s left from the more likely than not that an outflow of resources will U. Empolyees Benefits working years. The recoverable amount of an asset is the higher of the be required to settle the obligation and the amount has The cost of the previously mentioned service is charged asset’s net realizable value or value in use. been reliably estimated. U.1. Pension Liabilities directly to the income statement as (general & administrative expense) unless changes that have been Gains and losses on disposals are determined by Where there are a number of similar obligations, the The bank is committed to pay the contributions to the made on the policies state that worker should stay for comparing proceeds with relevant carrying amount. likelihood that an outflow will be required in settlement Social Insurance Public Authority, with no other liabilities a specified year, in this case the cost of the service is These are included in profit or loss in other operating is determined by considering the class of obligations as after paying these contributions. Those contributions are amortized using straight-line method. income (expenses) in the income statement. a whole. recorded yearly in the income statement in its maturity year and are listed as labor benefits. P. Non-Financial Asset Impairment A provision is recognized even if the likelihood of an The bank has insurance fund for the employees of the U.3. Share based payments Assets without definite useful life are not depreciated outflow with respect to any one item included in the bank, which was founded in 1987 Working according to & it is being tested annually for impairment. Assets same class of obligations may be small provisions which law no. 54 for year 1975 and its executive regulations, in The bank operates an equity-settled, share-based are tested for impairment of events or circumstances negated the purpose of wholly or partly repaid within the the purpose of granting compensation and insurance compensation plan. The fair value of the employees indicated that the book value may not be recoverable. item other operating income (expense). An appropriate benefits for the members, this pension fund and its services received in exchange for the grant of the options interest rate is used to measure the present value of amendments are implemented on all of the employees is recognized as an expense. The total amount to be Then the impairment is recognized & decreasing the liabilities’ payments that are determined to be settled of the bank’s head office and its branches. The bank is expensed over the vesting year is determined by reference assets value by the amount of the asset’s book value after one year from balance sheet date. This interest rate committed to pay the annual and monthly subscription to the fair value of the options granted, excluding exceeding the recoverable value. is not affected by the taxes’ rates which reflect the cash to the fund according to the funds regulation and its the impact of any non-market vesting conditions (for time value and if it’s due in less than a year estimated amendments. example, profitability targets). The recoverable values represent the net asset’s sale value of the liability is calculated and if it has an important value or the assets usable value whichever is higher. effect, it’s recognized by the present value. No other liabilities on the bank after the payment of Non-market vesting conditions are included in In order to estimate the impairment, asset is joined to the subscription. Those subscriptions are recognized assumptions about the number of options that are smallest possible generating-cash unit. T. Financial collateral contracts as administrative expenses when they come due. The expected to become exercisable. At each balance sheet Financial collateral contract is the contract issued by prepaid subscriptions are recognized as assets to the limit date, the entity revises its estimated number of options Non-financial assets with impairment are being audited the bank to collateral loans or debit current accounts that the deposit leads to reduce the future payments or that are expected to become exercisable. It recognizes to check if there is any impairment to be credited to the presented to its customers from other parties and it to a refund. the impact of the revision of original estimates, if any, in income statement at the date of preparing the financial is required from the bank to pay certain payments to the income statement, and a corresponding adjustment statement. compensate the beneficiaries of carried loss because U.2. Retirement Liabilities to equity over the remaining vesting year. debit payment in the due date according to the debt Q. Rental instrument’s conditions. These financial collaterals are The bank has applied a specified medical system for its The proceeds received net of any directly attributable Payments are recorded in operating rent account after presented to banks, financial institutions and other employees and the retired ones. According to the above transaction costs are credited to share capital (nominal deducting any discounts received from the lesser in the parties on behalf of the bank’s customers. mentioned system, the bank’s liabilities are represented value) and share premium when the options are exercised.

66 Annual Report 2018 Annual Report 2018 67 V. Income Taxes X. Capital control them through reliable methods and up–to–date A.1. Measuring the Credit Risk Income tax expense on the year’s profit or loss includes systems. The bank regularly reviews the risk management Loans and facilities to banks and clients the sum of the tax currently payable and deferred tax and X.1. Cost of capital policies and systems and amendments thereto, so that In measuring credit risk of loan and advances to customers is recognized in the income statement, except when they they reflect the changes in markets, products and services and to banks at a counterparty level, the Bank’s rating relate to items that are recognized directly in equity, in The issuance expenses that are related directly with and the best up-to–date applications. system is based on three key pillars: which case the tax is also recognized in equity. issuing new shares or shares of acquiring entity or • The ‘probability of default’ by the client or counterparty issuance options, are presented as a deduction from Risks are managed in accordance with preapproved on its contractual obligations. Income tax is recognized based on net taxable profit owners’’ equity and the net revenues after tax. policies by the board of directors. using the tax rates applicable at the date of the budget in • Current exposures to the counterparty and its likely addition to tax adjustments for previous years. X.2. Dividends The risk management department identifies, evaluates future development, from which the bank derive the and covers financial risks, in close collaboration with the (exposure at default). Deferred taxes is recognized on temporary differences Dividends are recognized when the general assembly bank’s various operating units. between the carrying amounts of assets and liabilities in of shareholders approves them. Dividends include the These credit risk measurements, which reflect expected the financial statements and the corresponding tax bases employees’ profit share and the board of directors’ The board of directors provides written rules which cover loss.The operational measurements can be contrasted used in the computation of taxable profit. remuneration as prescribed by the bank’s articles of certain risk areas, such as credit risk, foreign exchange with impairment allowances required under EAS and in association and the corporate law. risk, interest rate risk and the use of derivative and non- accordance with the Central Bank of Egypt’s instructions Deferred tax assets and liabilities are measured at the tax derivative financial instruments. approved by the board of directors on December 16, 2008, rates that are expected to apply in the year in which the Y. Trust Activities which are based on losses that have been incurred at the liability is settled or the asset realized, based on tax rates Moreover, the risk department is responsible for the year balance sheet data (the ‘incurred loss model’) rather than (and tax laws) that have been enacted or substantively Trust activities are the assets’ opposition and managing expected losses. review of risk management and the control environment enacted by the end of the reporting year. for individuals and funds. Its values and profits are not independently. recognized in the bank’s financial statements because The bank assesses the probability of default of individual Deferred tax assets are generally recognized for all they are not owned by the bank. counterparties using internal rating tools tailored to the A.Credit Risk deductible temporary differences to the extent that it various categories of counterparty. The bank is exposed to the credit risk which is the risk is probable that taxable profits will be available against Z. Comparative Figures resulting from failure of the client to meet its contractual which those deductible temporary differences can be They have been developed internally and combine utilized. Comparative figures are reclassified, where necessary, to obligations towards the Bank. statistical analysis with credit officer judgment to reach conform with changes in the current year’s presentation. the relevant credit rating basis. The carrying amount of deferred tax assets is reviewed at the end of each reporting year and reduced to the extent 3.Management of Financial Risks The credit risk is considered to be the most significant risk Clients of the Bank are segmented into four rating classes. that it is no longer probable that sufficient taxable profits The bank, as a result of conducting its activities, is exposed for the bank, therefore requiring careful management. The bank’s rating scale, which is shown below, reflects will be available to allow all or part of the asset to be to various financial risks. the range of default probabilities defined for each rating recovered. The credit risk manifests itself in the lending activities and class. Since financial activities are based on the concept of debt instruments in bank’s assets as well as off balance However, when it is expected that the tax benefit will accepting risks and analysing and managing individual sheet financial instruments, such as letters of credit and This means that, in principle, exposures migrate between increase, the carrying amount of deferred tax assets shall risks or group of risks altogether, the bank aims at letters of collateral. classes as the assessment of their probability of default increase to the extent of previous reduction. achieving a well-balanced risks and relevant rewards, as changes. The rating tools are kept under review and appropriate and to reduce the probable adverse effects The credit risk management and control are centralized in upgraded as necessary. W. Borrowing on the bank’s financial performance. a credit risk management team in Bank Risk management The Bank regularly validates the performance of the department and reported to the Board of Directors and rating and their predictive power with regard to default Loans obtained by the bank are initially recognized at fair The most important types of risks are credit risk, market head of each business unit regularly. events. value net of transaction costs incurred in connection with risk, liquidity risk and other operating risks. obtaining the loan. The market risk comprises foreign currency risk, interest Bank’s internal ratings scale Borrowings are subsequently measured at amortized rate risk and other pricing risks. cost, with the difference between net proceeds and the Bank’s Rating Description of the grade value to be paid over the borrowing year, recognized in The risk management policies have been laid down to profit or loss using the effective interest rate method. determine and analyse the risks, set limits to the risks and 1 Good debts 2 Normal watch-list 3 Special watch-list 4 Non-performing loans

68 Annual Report 2018 Annual Report 2018 69 And the loans expose to default depend on the Exposure to credit risk is also managed through volume of instruments outstanding. This credit risk portions of authorizations to extend credit in the form banks expectation for the outstanding amounts regular analysis of the ability of borrowers and exposure is managed as part of the overall lending of loans, collaterals or letters of credit. With respect to when default occur. potential borrowers to meet interest and capital limits with customers, together with potential credit risk on commitments to extend credit, the Bank Loss given default or loss severity represents the repayment obligations and by changing these exposures from market movements. is potentially exposed to loss in an amount equal to the Bank expectation of the extent of loss on a claim lending limits where appropriate. total unused commitments. However, the likely amount should default occur. Collateral or other security is not usually obtained of loss is less than the total unused commitments, as It is expressed as percentage loss per unit of exposure Some other specific control and mitigation for credit risk exposures on these instruments, most commitments to extend credit are contingent and typically varies by type of counterparty, type measures are outlined below: except where the bank requires margin deposits upon customers maintaining specific credit standards. and seniority of claim and availability of collateral from counterparties. The Bank monitors the term to maturity of credit or other credit mitigation. Collaterals commitments because longer-term commitments The bank employs a range of policies and practices Settlement risk arises in any situation where a generally have a greater degree of credit risk than Debt Instruments, Treasury Bills and Others to mitigate credit risk. The most traditional of payment in cash, securities or equities is made in shorter-term commitments. For debt securities and other bills, external rating or these is the taking of security for funds advances, the expectation of a corresponding receipt in cash, their equivalents are used by bank Risk Department which is common practice. The bank implements securities or equities. A.3. Impairment and Provisions for managing of the credit risk exposures, and if guidelines on the acceptability of specific classes Policies The internal rating systems previously described this rating is not available, then other ways similar of collateral or credit risk mitigation. The principal Daily settlement limits are established for focus more on credit-quality mapping from the to those used with the credit customers are uses. collateral types for loans and advances are: each counterparty to cover the aggregate of all inception of the lending and investment activities. In • Mortgages over residential properties. settlement risk arising from the Bank market contrast, impairment provisions are recognized for The investments in those securities and bills are • Mortgage business assets such as premises, transactions on any single day. financial reporting purposes only for losses that have viewed as a way to gain a better credit quality inventory and accounts receivable. been incurred at the balance sheet date based on mapping and maintain a readily available source • Mortgage financial instruments such as debt Commitments Related to Credit objective evidence of impairment due to the different to meet the funding requirement at the same time. securities and equities. The primary purpose of these instruments is to ensure methodologies applied, the amount of incurred credit • Longer-term finance and lending to corporate that funds are available to a customer as required. losses provided for in the financial statements are A.2. Risk limit control and mitigation policies entities are generally secured revolving individual usually lower than the amount determined from the The bank manages, limits and controls credit facilities are generally unsecured. Collaterals and standby letter of credit carry the same expected loss model that is used for internal operational concentrations of credit risk wherever they In addition, in order to minimize the credit loss credit risk as loans. management and Central Bank of Egypt’s regulation are identified − in particular, to individual the bank will seek additional collateral from the purposes. counterparties and banks, and to industries and counterparty as soon as impairment indicators Documentary and commercial letters of credit which countries. are noticed for the relevant individual loans and are written undertakings by the Bank on behalf of a The impairment provision shown in the balance sheet advances. customer authorizing a third party to draw drafts on the at the year-end is derived from each of the four internal The Bank structures the levels of credit risk it • Collateral held as security for financial assets Bank up to a stipulated amount under specific terms rating grades. However, the majority of the impairment undertakes by placing limits on the amount of risk other than loans and advances is determined by and conditions are collateralized by the underlying provision comes from the bottom two grads. accepted in relation to one borrower, or groups the nature of the instrument. Debt securities, shipments of goods to which they relate and therefore The table below shows the percentage of the bank’s in of borrowers, and to geographical and industry treasury and other governmental securities are carry less risk than a direct loan. balance sheet items relating to loans and advances and segments. Such risks are monitored on a revolving generally unsecured, with the exception of asset- the associated impairment provision for each of the basis and subject to an annual or more frequent backed securities and similar instruments, which Commitments to extend credit represent unused bank’s internal rating categories: review, when considered necessary. are secured by portfolios of financial instruments.

Limits on the level of credit risk by individual, Derivatives counterparties, product, and industry sector and by country are approved quarterly by the Board of The bank maintains strict control limits on net open 31 December 2018 31 December 2017 Directors. derivative positions (i.e., the difference between Loans and Impairment Loans and Impairment Bank’s Rating purchase and sale contracts), by both amount facilities % losses provision % facilities % losses provision % The exposure to any one borrower including banks and term. At any one time, the amount subject and brokers is further restricted by sub-limits to credit risk is limited to the current fair value of 1.Good debts 94.36 58.68 92.32 53.36 covering on- and off-balance sheet exposures, and instruments that are favourable to the bank (i.e., 2.Normal watch-list 0.1 2.67 0.82 0.76 daily delivery risk limits in relation to trading items assets where their fair value is positive), which in 3.Special watch-list 0.07 0.05 0.01 0.01 such as forward foreign exchange contracts. Actual relation to derivatives is only a small fraction of the 4.Non-performing loans 5.56 38.60 6.85 45.87 exposures against limits are monitored daily. contract, or negotiable values used to express the 100 100 100 100

70 Annual Report 2018 Annual Report 2018 71 The internal rating tools assists management to determine whether objective evidence of impairment according to A.5. Maximum limits for Credit Risk before Collateral. the basis of preparing and previewing the financial statements of banks, assurance and measurements basis held by the board of director of central bank of Egypt at December 16,2008 ,and based on the following criteria set out by the Bank: EGP • Cash flow difficulties experienced by the borrower. Items Exposed to Credit Risks 31 December 2018 31 December 2017 • Breach of loan covenants or conditions. Treasury Bills 14,166,957,399 14,902,695,798 •Initiation of bankruptcy proceedings. • Deterioration of the borrower’s competitive position. Trading Financial Assets • Bank granted concessions may not be approved under normal circumstances, for economic, legal reasons, or Debt Instruments 12,474,647 312,282,014 financial difficulties facing the borrower. Loans and Advances to Customer • Deterioration in the value of collateral. Retail Loans • Deterioration in the credit situation. Overdrafts 343,854,016 344,306,906 The bank’s policy requires the review of all financial assets that are above materiality thresholds at least annually or Credit cards 19,079,976 17,745,422 more regularly when individual circumstances require. Impairment allowances on individually assessed accounts are Personal Loans 1,838,753,818 2,014,178,201 determined by an evaluation of the incurred loss at balance-sheet date on a case-by-case basis, and are applied to all Real Estate Loans 6,386,914,018 5,169,742,973 individually significant accounts. The assessment normally encompasses collateral held (including re-confirmation Corporate Loans: of its enforceability) and the anticipated receipts for that individual account. Impairment loss provision is formed based on homogenous assets using the historical experience of loan loses, Overdrafts 4,189,116,617 2,674,795,688 available personal judgement of bank management and statistical methods. Direct Loans 2,011,819,891 1,796,114,582 Syndicated Loans 276,975,793 629,242,839 A.4. Bank Risks Measurement General Model Specialized Loans: In addition to the four categories of measuring credit worthiness the management makes small groups more detailed Direct Loans 621,019,249 766,620,223 according to the Central Bank of Egypt’s rules. Assets facing credit risk are classified to detailed conditions relying Financial Investments: greatly on customer’s information, activities, financial position and his regular payments to his debts. Debt Instruments 4,062,789,993 2,367,147,308 The bank calculates the provisions needed for assets impairment in addition to credit regulations according to Other assets 884,067,196 660,215,507 special percentages determined by Central Bank of Egypt. In the case of increase of impairment loss provision 34,813,822,613 31,655,087,461 needed according to Central Bank of Egypt for purpose of making the financial statements according to the Financial Total Reporting Standards and in accordance with the instructions of the Central Bank of Egypt approved by the Board of Directors as on December 16, 2008, the general banking risk reserve is included in owners’ equity deducted from the retained earning with this increase, this reserve is modified with year basis with the increase and decrease, which Items Exposed to Credit Risks (off Balance Sheet) equals the increase in provisions and this reserve is not distributed. And this are categories of institutional worthiness according to internal ratings compared with Central Bank of Egypt’s ratings and rates of provisions needed for assets EGP impairment related to credit risk: 31 December 2018 31 December 2017

Letter of guarantee 1,217,736,151 922,366,023 Letter of credit 382,564,720 290,435,040 Classification of the Classification Required Internal Internal classification Total 1,600,300,871 1,212,801,063 Central Bank of Egypt Significance provision rate classification Significance 1 Low risks Zero 1 Performing loans 2 Average Risk 1% 1 Performing loans 3 Satisfactory risks 1% 1 Performing loans 4 Reasonable Risk s 2% 1 Performing loans 5 Acceptable Risk 2% 1 Performing loans 6 Marginally Acceptable risk 3% 2 Regular watching 7 Watch list 5% 3 Watch list 8 Substandard 20% 4 Non-performing loans 9 Doubtful 50% 4 Non-performing loans 10 Bad Debt 100% 4 Non-performing loans

72 Annual Report 2018 Annual Report 2018 73 The management controls the minimal exposure for credit risk of both loans portfolio and debt instruments according 31 December 2018 to the following: • 94.37% of the loans and facilities’ portfolio is classified in the first two internal evaluation categories Regular Special (93.14% at the end of 2017). Evaluation Good Watching watch list Total EGP • 64.05% of the loans and facilities’ portfolio is free of due payments or impairment indications Retail (72.56% at the end of 2017). • Real estate loans are fully covered with real estate guarantees. Overdrafts 160,083,431 - - 160,083,431 • Loans and facilities that evaluated with individual basis reached EGP 259 591 415 compared Credit cards 17,546,228 - - 17,546,228 to EGP 439 650 117 at the end of 2017. Personal loans 1,231,097,119 - - 1,231,097,119 Real estate loans 4,792,830,435 - - 4,792,830,435 A.6. Loans and Facilities Total Retail 6,201,557,213 - - 6,201,557,213 Corporate Following is the position of loans and facilities balances to the clients in terms of credit solvency: Overdrafts 3,211,699,388 119,922 10,364,762 3,222,184,072 Direct loans 4,582,301 - - 4,582,301 Syndication loans 233,333,333 - - 233,333,333 EGP 31 December 2018 31 December 2017 Total Corporate 3,449,615,022 119,922 10,364,762 3,460,099,706 Specialized Loans Loans & advances Loans & advances Direct Loans 386,411,189 - - 386,411,189 to customers to customers Total Loans and Advances to Clients 10,037,583,424 119,922 10,364,762 10,048,068,108

Neither past dues nor subject to impairment 10,048,068,108 9,732,298,281 Past due but not subject to impairment 4,764,721,979 2,748,367,491 Guaranteed loans are excluded from impairment with regard to the irregular category taking into consideration Individually subject to impairment 874,743,291 932,081,062 possibility of collecting the collateral value. Total 15,687,533,378 13,412,746,834

Less: Impairment loss provision (2,027,028,221) (1,922,302,914) Interest in suspense (51,250,753) (51,267,894) Net 13,609,254,404 11,439,176,026 31 December 2017

Regular Special Loans and facilities impairment reached EGP 219,529,105 compared to EGP 890,573,102 in the comparative year. Item Evaluation Good No. (20) Includes additional information about provision for impairment losses on Loans and facilities to banks and Watching watch list Total EGP customers. Retail Overdrafts 192,176,040 - - 192,176,040 Loans and advances without unpaid balances and are not impaired: Credit cards 16,278,446 - - 16,278,446 The credit quality of the portfolio of loans and advances without unpaid balances and are not impaired is evaluated Personal loans 1,480,497,555 - - 1,480,497,555 by referring to the internal evaluation used by the bank. Real estate loans 3,947,842,118 - - 3,947,842,118 Total Retail 5,636,794,159 - - 5,636,794,159 Corporate Overdrafts 1,669,199,999 - - 1,669,199,999 Direct loans 1,580,313,991 - - 1,580,313,991 Syndication loans 467,360,037 109,341,996 - 576,702,033 Total Corporate 3,716,874,027 109,341,996 - 3,826,216,023 Specialized Loans Direct Loans 269,288,099 - - 269,288,099 Total Loans and Advances to Clients 9,622,956,285 109,341,996 - 9,732,298,281

74 Annual Report 2018 Annual Report 2018 75 Loans and advances past due but not subject to impairment 31 December 2018

Loans and advances with dues up to 90 days but are not considered impaired, unless other information is available to indicate the contrary. Clients’ loans and advances with neither past due nor impaired.

Credit Real Estate Overdrafts Personal Loans Total EGP Retail cards Loans The fair values of the collateral related thereto are represented as follows: Past due 30 days 719,517 - 391,027,246 558,173,998 949,920,761 Past dues more than 30 days up to 60 days 3,429,180 - 1,017,372 228,948,662 233,395,214 Past dues more than 60 days up to 90 days 1,332,340 - 222,594 217,379,140 218,934,074 31 December 2018 Total 5,481,037 - 392,267,212 1,004,501,800 1,402,250,049

Overdrafts Personal Loans Real Estate Loans Total EGP Retail Past dues up to 30 days 241,456 441,081,620 727,588,488 1,168,911,564 Past dues more than 30 days up to 60 days 61,000 234,583 306,090,905 306,386,488 Past dues more than 60 days up to 90 days 80,957 114,693 340,379,986 340,575,636 Total 383,413 441,430,896 1,374,059,379 1,815,873,688 Overdrafts Direct Loans Total EGP Corporate Past dues up to 30 days 9,401 14,492,257 14,501,658 Past due more than 30 days up to 60 days 232,488,794 7,582,089 240,070,883 Past dues more than 60 days up to 90 days 591,019,965 3,192,813 594,212,778 Total 823,518,160 25,267,159 848,785,319

Overdrafts Direct Loans Total EGP Corporate Past dues up to 30 days 196 158,353,619 158,353,815 Past due more than 30 days up to 60 days 632,543,756 9,546,908 642,090,664 Past dues more than 60 days up to 90 days 166,122,929 1,747,672,823 1,913,795,752 Total 798,666,881 1,915,573,350 2,714,240,231

Direct Loans EGP Specialized Loans Past dues up to 30 days 75,638,961 Past due more than 30 days up to 60 days 64,221,439 Past dues more than 60 days up to 90 days 357,471,723 Direct Loans Specialized Loans Total 497,332,123 Past dues up to 30 days 70,144,384 Past due more than 30 days up to 60 days 58,869,653 Past dues more than 60 days up to 90 days 105,594,023 Total 234,608,060 Loans and advances subject to impairment Loans and advances subject to customers Loans and advances assessed on an individual basis before cash flows from collaterals are amounted EGP 874,743,291 compared to EGP 932,081,062 at the end of the comparative year. At the time of initial recording loans and advances, fair value of collateral is assessed based on the valuation techniques Following is an analysis of the total value of the loans and advances individually subject to impairment including the usually used with similar assets. In subsequent years, the fair value is updated at the market prices or similar assets fair value of the collaterals that the bank received in return for such loans: prices.

76 Annual Report 2018 Annual Report 2018 77 A.7. Acquisition of collaterals: 31 December 2018 31 December 2017 EGP Assets owned through possession are classified among other assets in the balance sheet. Loans and Loans and Those assets are sold whenever practical according to The Central Bank of Egypt regulations to dispose those assets Collaterals Collaterals Evaluation advances advances in a specified year. Retail Overdrafts 183,387,172 154,453,582 142,929,724 239,461,372 Credit cards 1,533,748 102,040 1,571,659 307,612 A.8. The concentration of financial assets exposed to credit risks: Personal loans 166,225,803 - 141,413,388 747,960 Geographical segments Real Estate Loans 220,024,204 12,715,704 221,014,474 1,949,277 The following table represents the analysis of the most important bank’s credit risks measured at the book value, Total Retail 571,170,927 167,271,326 506,929,245 242,466,221 allocated according to the geographical segment at December 31 , 2018 While preparing this table, risks were Corporate allocated to the geographical segments according to the areas related to the bank’s customers. Overdrafts 168,265,664 9,320,953 182,077,530 33,970,941 Direct loans 91,664,240 50,211,021 147,344,158 44,077,438 Syndication loans 43,642,460 7,750,000 95,730,129 7,750,000 Total Corporate 303,572,364 67,281,974 425,151,817 85,798,379 Total Loans and advances individually subject to impairment 874,743,291 234,553,300 932,081,062 328,264,600 Arab Republic of Egypt

Cairo Alexandria, Upper EGP Delta and Sinai Egypt Total Restructuring Loans and advances: Treasury Bills 14,166,957,399 - - 14,166,957,399 Trading Financial Assets: Restructuring activities include extended payment arrangements; execute obligatory management programs, Debt Instruments 12,474,647 - - 12,474,647 modification and deferral of payments. Restructuring policies and practices are based on indicators or criteria Loans and Advance to Customers which, in the judgment of local management, indicate that payment will most likely continue. These policies are Retail Loans: kept under continuous review. Restructuring is most commonly applied to long term loans; in particular customer finance loans Renegotiated loans that would otherwise be past due or impaired totalled at the of the financial Overdrafts loans 96,088,024 126,042,875 121,723,117 343,854,016 year, especially customers’ funded loans. Loans that were being Credit cards loans 7,720,560 4,413,597 6,945,819 19,079,976 renegotiated amounted EGP 395,001,867. Personal loans 586,891,726 685,335,107 566,526,985 1,838,753,818 Real Estate loans 2,432,789,361 2,330,031,772 1,624,092,885 6,386,914,018 Corporate Loans: Overdrafts 2,503,185,543 1,109,273,590 576,657,484 4,189,116,617 Direct loans 1,441,709,268 456,791,532 113,319,091 2,011,819,891 31 December 2018 31 December 2017 Syndication loans 276,975,793 - 276,975,793 EGP EGP Loans & advances to customers Specialized Loans: Corporate: Other loans 621,019,249 - 621,019,249 Overdrafts 221,017,315 223,771,218 Financial Investments Direct loans 14,203,546 703,546 Debt Instruments 4,072,789,993 - 4,062,789,993 Syndication loans 159,781,006 159,781,006 Other Assets 1,535,,418,811 20,845,235 8,392,267 884,067,196 Retail: Total as of 31/12/2018 27,976,873,164 4,732,733,708 3,017,657,648 34,813,822,613 Personal loans - - Total as of 31/12/2018 27,931,545,393 2,479,618,160 2,120,801,969 31,655,087,461 Real estate loans - - Total 395,001,867 384,255,770

78 Annual Report 2018 Annual Report 2018 79 The following table represents the analysis of the most important bank’s credit risk in book value, allocated according to the customers’ activity

Financial Agricultural Industrial Services Real Estate Governmental Other Individuals Total EGP Institutions Institutions Commercial Activity Sector Activities

Treasury bills ------14,166,957,399 - - 14,166,957,399 Trading financial Assets Debt Instruments - - - - - 12,474,647 - - 12,474,647 Loans &Facilities Retail Loans Overdrafts ------343,854,016 343,854,016 Credit Cards ------19,079,976 19,079,976 Personal loans ------1,838,753,818 1,838,753,818 Real Estate ------6,386,914,018 6,386,914,018 Corporate Overdraft - 594,339,760 736,660,728 4,018,523 2,074,271,888 705,311,927 - 74,513,791 - 4,189,116,617 Direct - 483,461 54 465,606 432,146,346 1,133,581,840 297,279,181 - 93,863,457 - 2,011,819,891 Syndicated - - - - 276,975,793 - - - - 276,975,793 Specialized Loans Direct ------621,019,249 - - 621,019,249 Financial Investments Debt Instruments ------4,062,789,993 - - 4,062,789,993 Other Assets 39,847,059 - - - 41,471,187 253,262,721 490,840,975 5,995,139 52,650,115 884,067,196 Total as of December 31, 2018 39,847,059 594,823,221 791,126,334 436,164,869 3,526,300,708 1,255,853,829 19,354,082,263 174,372,387 8,641,251,943 34,813,822,613 Total as of December 31, 2018 61,796,699 374,572,871 699,921,334 432,164,869 2,901,691,964 565,333,772 18,739,943,584 298,688,751 7,580,973,617 31,655,087,461

80 Annual Report 2018 Annual Report 2018 81 B. Market Risk The bank is assessing the historical movements in the market prices based on volatilities and correlations data Other US Dollar Euro Sterling Pound The bank takes on exposure to market risks, which is the for the past two years while collecting the historical December 31,2018 Currencies data for the past five years and the bank applies these risk that the fair value or future cash flows of a financial Financial Assets: historical changes in rates, prices and indicators directly instrument will fluctuate because of changes in market Cash and balances with Central Bank 8,488,501 361,500 41,759 469,735 prices. to the current positions, and this way is known as a 2,967,511 974,743 203,386 4,422,974 simulated historical method and the actual outputs are Due from banks Treasury bills 38,596,372 12,400,000 -- -- Market risks arise from open positions in interest rate, monitored on regular basis to measure the appropriate currency and equity products, all of which are exposed assumptions and factors used to measure VAR. Loans & facilities to customers 14,637,530 90,255 647 3,279 to general and specific market movements and changes Other Financial assets 2,769,148 536 87 4,090 in the level of volatility of market rates or prices The use of this approach does not prevent losses outside Total financial assets 67,459,062 13,827,034 245,879 4,900,078 of these limits in the event of more significant market B.1. Market Risk Measurement Techniques: movements. Financial liabilities: Due to banks 15,271,408 8,936,764 -- 2,722 Stress Testing Stress tests provide an indication of the Value at risk Customer’s deposits 39,777,046 3,830,075 212,811 4,346,394 potential size of losses that could arise under extreme Other Financial liabilities 9,354,389 208,786 873 6,937 The bank applies a “value at risk” methodology (VAR) to market conditions. 64,402,843 12,975,625 213,684 4,356,053 its trading portfolios, to estimate the market risk of its Total financial liabilities positions held and it’s been monitoring daily. Therefore, bank designs stress tests according to its Net financial position as of December 31,2018 3,056,219 851,409 32,195 544,025 activities by using typical analysis to specific scenarios. VAR is a statistically based estimate of the potential loss December 31,2018 on the current portfolio resulting from adverse market B.2. Foreign exchange risk Total financial assets 49,597,701 9,032,022 159,129 1,930,054 movements. Total financial liabilities 46,324,520 8,212,329 163,146 1,683,504 The Bank takes on exposure to the effects of fluctuations Net financial position as of December 31,2018 3,273,181 819,693 (4,017) 246,550 It expresses the ‘maximum’ amount the bank might in the prevailing foreign currency exchange rates on its lose, but using certain level of confidence (98%). There financial position and cash flows. is therefore a specified statistical probability (2%) that actual loss could be greater than the VAR estimate. The Board sets limits on the level of exposure by currency B.3.Interest rate Risk and in aggregate for both overnight and intra-day The VAR model assumes a certain ‘holding year’ until positions, which are monitored daily. positions can be closed (10 days) before closing the Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of The table below summarizes the bank’s exposure to opining quarters, and it is assumed that the movement changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will of the market during the retention year will follow the foreign currency exchange rate risk and bank’s financial same movement pattern that occurred during the instruments at carrying amounts, categorized by fluctuate because of changes in market interest rates. The bank takes on exposure to the effects of fluctuations in the currency. previous ten days. prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may profit decrease in the event that unexpected movements arise. The board sets limits on the level of mismatch of interest rate reprising that may be undertaken, which is monitored daily by Risk Dept. The following table summarizes the risk that the bank faces the change in the return value including the book value of financial instruments allocated based on the re-pricing dates or due dates price whichever is sooner:

82 Annual Report 2018 Annual Report 2018 83 Re-pricing gap Total financial liabilities financialOther liabilities loansOther Customer’s deposits toDue banks Financial liabilities Total financial assets assets Other Held to maturity Available for sale Financial investments: & facilities toLoans customers Trading financial assets Treasury Bills fromDue banks andCash From Due Bank Central Financial Assets: 31, 2018 December C.Liquidity Risk the loan’s obligations include cash, balances with Liquidity risk is the risk that the Bank is unable to meet Central bank, dues from banks, treasury bills, other its payment obligations associated with its financial governmental securities and loans and advances to liabilities when they fall due and to replace funds when customers and banks, customers’ loans that are due they are withdrawn. The consequence may be the within a year are extended partially for the ordinary failure to meet obligations to repay depositors and fulfil activity of the bank. commitments to lend. In addition, some of debt instruments, treasury bills and Liquidity Risk Management governmental securities are mortgaged to guarantee The bank’s liquidity management process, as carried out the liabilities, the bank has the ability to cover the net within the bank and monitored by Risk Management unexpected cash flows through the sale of financial Department, includes: securities and finding other funding resources. • Day-to-day funding, managed by monitoring future 16,022,238 4,079,790 4,550,568 5,006,683 3,502,487 1,184,348 11,015,555 6,915,315 340,298 455,937 1 month cash flows to ensure that requirements can be met. This Due from banks Up to Up 178 ------

- includes replenishment of funds as they mature or is The fair value of floating rate placements and overnight borrowed by customers. The bank maintains an active deposits is their carrying amount. The estimated fair presence in global money markets to enable this to value of fixed interest bearing deposits is based on happen. discounted cash flows using prevailing money-market 1 month to More than 1,800,000 interest rates for debts with similar credit risk and 1,599,464 1,485,307 3,454,632 3 months 3 1,853,741

1,855,168 • Maintaining a portfolio of highly marketable assets 169,325 1,427 remaining maturity.

------that can easily be liquidated as protection against any

- unforeseen interruption to cash flow. • Monitoring balance sheet liquidity ratios against Loans and overdrafts to banks internal and requirements of central bank of Egypt. Loans and banking facilities represented in loans not 3 months to months 3 More than

5,208,033 from deposits at banks. The expected fair value of the 2,052,990 9,682,847 4,474,814 1,922,932 7,629,857 Managing the concentration and profile of debt 130,058 1 year 1 maturities. loans and facilities represents the discounted value ------

- • Monitoring and reporting take the form of cash flow of future cash flows expected to be collected. Cash measurement and projections for the next day, week flows are discounted using the current market rate to and month respectively, as these are key years for determine fair value. liquidity management. 9,859,046 More than 5,086,768 17,245,655 5,334,700 17,851,720 8,303,737 2,579,847 3,855,150 606,065 1 year to Loans and Facilities to customers 5 years 5 37,811 40,316 ------Loans and advances are net of provisions for impairment. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and The estimated fair value of loans and advances the expected collection date of the financial assets. Risk represents the discounted amount of estimated future Management Department also monitors unmatched cash flows expected to be received. Expected cash flows medium-term assets, the level and type of un-drawn are discounted at current market rates to determine fair

(Values thousands in Egyptian pounds) lending commitments, the usage of overdraft facilities value. (20,850,941) 17,491,092 30,598,051 13,105,976 7,226,787 2,486,135 9,747,110 Without 34,188 return and the impact of contingent liabilities such as standby 983 ------letters of credit and guarantees. Financial Investments Investment securities include only interest-bearing Funding approach assets held to maturity; assets classified as available for sale are measured at fair value. Fair value for held- Sources of liquidity are regularly reviewed by a separate to-maturity assets is based on market prices or broker/ 34,122,070 15,687,533 4,079,790 56,758,547 56,758,547 15,530,527 9,806,634 16,961,126 8,749,503 2,486,135 5,218,431 456,920 378,109 dealer price quotations. Where this information is not 40,316 team in the Risk Management (Assets & liabilities), to Total

- maintain a wide diversification by currency, provider, available, fair value is estimated using quoted market product and term. prices for securities with similar credit, maturity and The available assets to cover all the liabilities and yield characteristics.

84 Annual Report 2018 Annual Report 2018 85 Due to other banks and customers

31 December 2018 31 December 2018 The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings Capital adequacy ratio according to Basel II EGP EGP not quoted in an active market is based on discounted cash flows using interest rates for new debts with similar Capital remaining maturity. ( Tier 1 capital) basic capital Paid-up capital 1,265,000,000 1,265,000,000 D.Capital Management Reserves 1,796,180,933 1,191,751,760 Retained earnings 227,808,785 50,916,960 The bank’s objectives when managing capital, which consists of another items in addition of owner’s equity stated in balance sheet are: Total deduction from basic capital (350,826,192) (214,400,161) • To comply with the legal requirements in Egypt and the countries where the bank’s branches exist. Total basic capital 2,938,163,526 2,293,268,559 • To safeguard the Bank’s ability to continue as ongoing concern so that it can continue to provide returns for Net income 1,399,368,783 1,087,217,000 Shareholders and stakeholders and other parties that deal with the bank. Total paid up capital and additional paid up capital and retained earnings 4,337,532,309 3,380,485,559 • To maintain a strong capital base to support the development of its business. Capital adequacy and the use of regulatory capital are monitored daily by the Bank’s management, employing techniques based on the guidelines (Tier 2 capital) syndicated capital, developed by the Basel Committee as implemented by the Central bank Of Egypt, for supervisory purposes. 45% of Special Reserve 4,205,000 4,205,000 The required information is filed with the Authority on a quarterly basis. Central Bank of Egypt requires the following: 45% of the increase in fair value to book value for financial investment. 376,446,323 - • Holding the minimum level of the issued and paid up capital of EGP 500 million. Impairment provisions for loans facilities and regular contingent 209,441,578 184,046,384 • Maintaining a ratio of total regulatory capital to the risk weighted asset or above the agreed minimum of 10%. Total Syndicated Capital 590,092,901 188,251,384 The bank’s branches are working under the regulations of the banking sector in Egypt. Total capital 4,927,625,210 3,568,736,943 The nominator of capital adequacy standard consists of two tiers: Risk-weighted assets and contingent liabilities: Tier One: Total Credit Risk 16,755,326,263 14,723,710,748 Total Market Risk 1,252,236,394 1,702,750,030 Tier one, consisting of paid-in capital (after deducting the book value of treasury shares), and retained earnings and Total Operational Risk 5,447,362,000 4,296,572,500 reserves resulting from the distribution of profits with the exception of banking risk reserve and deducting there Total 23,454,924,657 20,723,033,278 from previously recognized goodwill and any transferred loss. Capital Adequacy ratio (%) 21.01 17.22

Tier Two: Based on the bank’s consolidated financial statement according to the Central Bank of Egypt regulations Qualifying subordinated loan capital, which consists of the equivalent of the risk allocation according to the principles on December 18, 2012. of credit issued by the Central Bank of Egypt for not more than 1.25% of total assets and liabilities weighted with risk, loans / deposits support in excess of the schedule of five years (with consumption of 20% of their value in each year 4.Critical Accounting Estimates and Judgments of the last five years of the schedule) and 45% of the increase between the fair value and book value for each of the financial investments available for sale and held to maturity in subsidiaries. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and based on historical experience and other When calculating the total dominator of capital adequacy, it shall not exceed the capital cushions (Qualifying factors, including expectations of future events that are believed to be reasonable under the circumstances and subordinated loan capital) for share capital and loans not to increase (deposits) support for half of the share capital. available info. Assets are risk weighted ranging from zero to 100% classified by the relation of the debtor to all each asset to reflect the credit risk associated with it, taking the cash collateral account. These are used for the treatment of off balance sheet items after adjustments to reflect the nature of contingency and the potential loss of those amounts.

The bank had complied with all the local capital requirements during the past two years. The following table summarizes basic and syndicated capital components and the capital adequacy ratio.

86 Annual Report 2018 Annual Report 2018 87 A.Impairment losses on loans and facilities investments to maturity. If the Bank fails to keep these Based on personal basis The Bank reviews its loan investments to maturity other than for the specific Revenues and Expenses according to segment activity portfolios to assess impairment at least on a quarterly circumstances – for example, selling an insignificant basis in determining whether an impairment loss amount close to maturity it will be required to reclassify should be recorded in the income statement, the Bank the entire category as available for sale. The investments makes judgments as to whether there is any observable would therefore be measured at fair value not amortized data indicating that there is a measurable decrease in cost and the classification of any such investments will for the year ended December 31, 2018 the estimated future cash flows from a portfolio of loans be suspended. before the decrease can be identified with an individual loan in that portfolio .This evidence may include E.Income taxes Corporate Investment Individuals Other activities Total EGP observable data indicating that there has been an The bank is subject to income tax in a number of Segment activity revenues 2,120,048,940 1,668,089,035 1,982,503,035 1,810,544,096 7,581,185,133 adverse change in the payment (Egyptian Pounds) status tax circles for its branches which requires the use of of borrowers in a Bank, or national or local economic significant estimates to determine the total income tax Segment activity expenses 1,456,523,264 768,458,090 1,556,142,332 776,982,940 3,023,078,507 conditions that correlate with defaults on assets in the provision. There’s a number of operations and accounts Segment operation results 663,525,676 899,630,972 426,360,703 1,033,561,156 3,023,078,507 Bank. Management uses estimates based on historical that are difficult to determine its final tax expense Unclassified expenses - - - - ( 424,332,302) loss experience for assets with credit risk characteristics accurately. The bank created provisions for the expected Net income for the year before taxes - - - - 2,598,746,205 and objective evidence of impairment similar to those results of the tax inspection that is being conducted Taxes - - - - ( 632,745,758) and to account for probable additional tax. When there in the portfolio when scheduling its future cash flows. Net income for the year - - - - 1,62000,447 The methodology and assumptions used for estimating is a difference between the final results of the tax both the amount and timing of future cash flows are and the pre-recorded amounts, these differences will reviewed regularly to reduce any differences between be adjusted against the income tax and the deferred loss estimates and actual loss experience. income tax provision.

5.Segment Analysis B-Impairment of available for-sale equity for the year ended December 31, 2017 investments A. Segment Analysis of activities The bank determines that available-for-sale equity Segment activity includes operational procedures and investments are impaired when there has been a the assets that are used in providing banking services EGP significant or prolonged decline in the fair value below and managing the risk related to it and the return Corporate Investment Individuals Other activities Total its cost. This determination of what is significant or relevant to that activity that may differ from any other Segment activity revenues 1,381,826,628 1,178,500,278 1,603,816,597 1,595,333,699 5,759,477,202 activities and the segment analysis of operations prolonged requires judgment. In making this judgment, Segment activity expenses 788,754,970 744,948,429 1,244,673,046 489,263,924 3,267,640,369 the bank evaluates among other factors, the normal according to banking operations includes the following: Segment operation results 593,071,658 433,551,849 359,143,551 1,106,069,775 2,491,836,833 volatility in share price. In addition, impairment may be Unclassified expenses - - - - (1,002,304,169) appropriate when there is evidence of deterioration in Corporate, medium & small sized enterprise the financial performance of the investee operational This includes current accounts (debit/credit), deposits, Net income for the year before taxes - - - - 1,489,532,664 and financing cash flows, industry and sector loans & facilities and financial derivatives. Taxes - - - - (414,000,009) performance, and changes in technology. Net income for the year - - - - 1,075,532,655 Investments C.Fair value of derivatives Includes merging of companies, financing companies The fair values of financial instruments that are not restructuring & financial tools. quoted in active markets are determined by using valuation techniques. Where valuation techniques (for Retail example, models) are used to determine fair values, Includes current, saving & deposit accounts, credit cards, they are validated and year reviewed. and personal & real estate loans.

D.Financial Investments Held to Maturity Other activities The non-derivative financial assets with fixed or Includes other banking activities. determinable payments and fixed maturity are being Transactions between business segments are on normal classified held to maturity. This classification requires commercial terms and conditions and it includes significant judgment. In making this judgment, the operational assets and liabilities as presented in the Bank evaluates its intention and ability to hold such banks’s balance sheet

88 Annual Report 2018 Annual Report 2018 89 B. Analysis of Geographical Segments The year ended December 31, 2017

Alexandria, Delta Cairo Upper Egypt Total EGP The year ended December 31, 2018 Revenues &expenses in accordance with geographical segment and Sinai Geographical segment revenues 4,315,756,255 1,140,976,517 302,744,430 5,759,477,202 Alexandria, Delta Cairo Upper Egypt Total EGP Geographical segment expenses 3,562,521,196 528,820,107 178,603,235 4,269,944,538 Revenues &expenses in accordance with geographical segment and Sinai Sector’s profit results 753,235,059 612,156,410 124,141,195 1,489,532,664 Geographical segment revenues 5,185,810,667 1 413,413,013 506,618,586 7,105,842,266 Net income for the year before tax - - - 1,489,532,664 Geographical segment expenses 3,990,707,048 667 ,647,554 252,403,172 4,910,757,774 Tax - - - (414,000,009) Sector’s profit results 1,195,103,619 745,765,459 254,215,414 2,195,084,492 Net income for the year - - - 1,075,532,655 Net income for the year before taxes 2 195 084,492 Taxes ( 570 249 132) Assets and liabilities in accordance with geographical segment Net income for the year 1 624 835 360 Assets of geographic segment 38,896,087,030 9,647,649,379 2,800,317,487 51,344,053,896

Unspecified Assets 594,948,405 Assets and liabilities in accordance with geographical segment Total assets 38,896,087,030 9,647,649,379 2,800,317,487 51,939,002,301 Assets of geographic segment 37,666,817,541 6,854,673,888 2,452,488,869 46,973,980,298 Liabilities of geographic segment 36,115,620,942 9,484,679,248 2,776,176,747 48,376,476,937 Unspecified Assets - 817,097,894 Other items of the Geographical Segment Total assets 37,666 ,817,541 6,854,673,888 2,452,488,869 47,791,078,192 Depreciations (98,427,804) (10,714,721) (2,588,542) (111,731,067) Liabilities of geographic segment 33,458,982,465 7,008,908,493 2,448,273,458 42,916,164,416 Impairment (890,573,102) - - (890,573,102) Other items of the Geographical segment Depreciations (181,501,777) (14,024,798) (3,655,276) ( 199,181,851) Impairment ------( 219,529,105)

C.Banking and Housing Activities

The bank’s main activity is banking activity and other activities related to banking, which represented in the receiving deposits from customers and other sources of funds from the banking system and the Central Bank of Egypt. These funds are used in lending activities to other companies, retail banking products of various types and short and long term investments activities through financial markets and other financial investments and provide banking services of all kinds as the bank of the leading banks in banking with full and permanent commitment to the Banking Law No. 88 of 2003 and the instructions of the Central Bank of Egypt about the rules related to the banking system, including the commercial banks operating in the Arab Republic of Egypt, In order to maximize the return on shareholders ‘equity and to complement the Bank’s view of the integration of the banking services, the Bank may in some cases consider investing part of the shareholders’ equity and long-term savings instruments in some of the equity instruments in some companies engaged in real estate development activity or entering into some housing projects to serve and integrate banking activities in order to maximize the return on assets and shareholders’ equity with emphasis on the Bank’s strategy of continuing as a banking institution representing housing activities not only an essential part of the bank but also helps to develop and enhance the bank’s presence among the leading banks in providing banking services, the most important of which is to be the main arm of one of its clients, which aims at housing development within the framework of the Country’s plan in economic and social development as well as the rest of the bank’s corporate clients. The Bank aims to maintain excellent banking relationships with them as part of its banking business.

90 Annual Report 2018 Annual Report 2018 91 The distribution of revenues, expenses and profits on both banking and real estate activity as at December 6-Net interest income 31 December 2018 31 December 2017 31, 2018 is as follows: EGP EGP Interest received from loans and similar items: Loans and advances to customers 1,878,163,825 1,441,507,247 (Values in Egyptian thousands pounds) Treasury bills 2,133,134,376 1,569,850,623 31 December 2018 Housing Banking Total Deposits and current accounts 1,612,176,887 1,315,340,835 Held to maturity and available for sale investments 484,776,556 360,142,741 Loans & advances to customers - 6,108,252 6,108,252 Total 6,108,251,644 4,686,841,446 Interest on deposits and similar expenses - (2,960,642) (2,960,642)

Net income from return - 3,147,610 3,147,610 Interest on Deposits and similar Expenses: Net Fees and commissions income 116,132 216,836 332,968 Deposits and current accounts: Fees and commissions expenses: - (28,881) (28,881) Banks 40,956,560 101,226,539 Net Fees and commissions income 116,132 187,955 304,087 Customers 2,688,956,798 1,820,665,596 Dividends income - 82,502 82,502 Total 2,729,913,358 1,921,892,135 Net trading income - 62,160 62,160

Housing projects profits 444,793 - 444,793 Other financial institutions loans 230,728,595 210,839,576 Losses from financial investments - (1,641) (1,641) Total 2,960,641,953 2,132,731,711 Impairment losses on loans - (219,529) (219,529) Net interest income 3,147,609,691 2,554,109,735 Administrative Expenses (221,973) (1,197,206) (1,419,179) Other Provision no longer required - (284,103) (284,103) Other operating revenues 56,553 (21,832) 78,384 7-Net fees & commissions income 31 December 2018 31 December 2017 Net profit before taxes 395,505 1,799,579 2,195,084 EGP EGP Fees & commissions income : Income tax expenses (88,989) (481,260) (570,249) Fees & commissions related to credit 28,058,603 28,132,678 Net profit for the year 306,516 1,318,319 1,624,835 Financing fees 156,286,198 124,949,790 Other fees 148,622,815 151,932,785 Total 332,967,616 305,015,253 Fees and commission expenses: Housing Banking Total 31 December 2017 Other paid fees (28,880,648) (26,919,965) Loans & advances to customers - 4,686,842 4,686,842 Net income from fees and commissions 304,086,968 278,095,288 Interest on deposits and similar expenses - (2,132,732) (2,132,732) Net income from return - 2,554,110 2,554,110 Net Fees and commissions income 74,438 203,657 305,015 8-Dividends Income 31 December 2018 31 December 2017 Fees and commissions expenses: - (26,920) (26,920) EGP EGP Net Fees and commissions income 74,438 203,577 278,095 Held for trading 2,356,179 4,892,398 Dividends income - 75,951 75,951 Available for sale 5,767,111 4,234,295 Net trading income - 272,073 272,073 Subsidiaries and associates 74,378,628 66,823,965 Housing projects profits 361,969 - 361,969 Total 82,501,918 75,950,658 Losses from financial investments - (530) (530) Impairment losses on loans - (890,573) (890,573) Administrative Expenses (203,009) (872,300) (1,075,309) Other Provision no longer required - (131,250) (131,250) Other operating revenues 42,204 2,793 44,997 Net profit before taxes 275,602 1,213,931 1,489,533 Income tax expenses (62,010) (351,990) (414,000) Net profit for the year 213,592 861,941 1,075,533

92 Annual Report 2018 Annual Report 2018 93 9-Net trading income 13-Credit impairment losses 31 December 2018 31 December 2017 31 December 2018 31 December 2017 EGP EGP EGP EGP Forex profit 15,833,719 23,540,304 Loan and customer advances (219,529,105) (890,573,102) Debt instruments held for trading 4,464,656 143,856,235 (219,529,105) (890,573,102) Debt instruments Equity 41,861,278 104,676,166 62,159,653 272,072,705

14-Income tax expenses 31 December 2018 31 December 2017 10-Revenue from housing projects EGP EGP 31 December 2018 31 December 2017 EGP EGP Current taxes (561,852,354) (407,095,954) Deferred taxes (8,396,778) (6,904,055) Sales of housing properties 486,156,839 329,286,441 (570,249,132) (414,000,009) Cost of sold properties (174,846,474) (134,463,912) Revenue from properties 311,310,365 194,822,529 Other housing revenues 133,482,350 167,146,720 444,792,715 361,969,249 Settlements to calculate actual income 31 December 2018 31 December 2017 tax expenses EGP EGP Accounting profit before tax 2,195,084,492 1,489,532,664 Tax at 22,5% 22,5% 22,5% 31 December 2018 31 December 2017 11-Administrative expenses Total tax 493,894,011 335,144,849 EGP EGP Add (deduct): Staff cost Non-deductible expenses 32,307,602 19,138,202 Wages and salaries 591,030,393 516,638,532 Tax exemptions (33,709,946) (19,974,107) Social insurances 30,631,698 24,690,483 The impact of provisions 71,625,446 74,091,440 Retirement benefit cost 11,656,711 9,945,205 The impact of depreciations (8,396,778) (6,904,055) Operation utilities 452,259,158 337,839,537 Withholding tax 4,890,698 4,614,538 Current expenses 264,912,725 170,501,046 Tax on Treasury bills in foreign currency 1,241,321 985,087 Portion of social and athletic activities 1,282,550 1,133,400 Income tax expenses 561,852,354 407,095,954 Donations 67,403,134 14,561,092 The price of the actual tax 25.6% 27,3% 1,419,176,369 1,075,309,295

12-Other operating revenues (Expenses) 31 December 2018 31 December 2017 EGP EGP Revaluation losses of assets and liabilities balances in foreign currencies with monetary nature other than held for trading or classified at inception at fair value through profit and loss (4,279,119) (4,243,050) Gains on sale of property and equipment 2,511,838 1,307,563 Reversal of provisions - 15,731 Impairment of other assets and projects 5,148,949 (6,874,288) Rents 56,553,447 53,055,132 Others 18,448,502 1,736,199 Total 78,383,617 44,997,287

94 Annual Report 2018 Annual Report 2018 95 15-Earnings per share 18-Treasury bills 31 December 2018 31 December 2017 EGP EGP Earnings per share are calculated by dividing the net profit for the year attributable to the equity shareholders by the weighted average number of shares outstanding during the Year, Treasury bills, maturity 91 days - 1,150,000 Treasury bills, maturity 182 days - 2,220,000,000 Treasury bills, maturity 273 days 3,965,575,000 5,402,000,000 31 December 2018 31 December 2017 Treasury bills, maturity 364 days 11,564,952,200 8,487,403,000 EGP EGP 15,530,527,200 16,110,553,000 Net profit for the year available for distribution 1,807,734,881 951,442,493 Unearned interest (1,363,569,801) (1,207,857,202) Board of directors Remuneration (15,000,000) (10,000,000) Total 14,166,957,399 14,902,695,798 Employees portion in the profit (162,231,902) (112,500,000) Available amount for the shareholders from the net profit of the year 1,630,502,979 828,942,493 -As of 31 December 2018, the pledged treasury bills in favour of the Central Bank amounted to LE 5,335 Weighted average number of shares 126,500,000 126,500,000 billion against loans granted by the Central Bank under the Initiative of Mortgage Finance. Basic earnings per share 12.89 6.55

19-Trading financial assets 31 December 2018 31 December 2017

Debt instrument EGP EGP 16-Cash and balances with central bank 31 December 2018 31 December 2017 Bonds 12,474,647 312,282,014 EGP EGP Total debt instrument 12,474,647 312,282,014 Cash 842,522,974 964,617,111 Equity instrument listed in stock market Due from central Bank within the required reserve percentage 1,643,612,237 3,971,440,942 Local companies’ shares 62,162,100 83,859,689 2,486,135,211 4,936,058,053 Total equity instrument 62,162,100 83,859,689 Non-interest bearing balances 2,486,135,211 4,936,058,053 Equity instrument not listed in stock market Mutual funds investment certificates - 15,919,162 Total equity instrument not listed in stock market - 15,919,162 Financial investment portfolio managed by others 303,472,677 448,018,658 Total trading financial assets 378,109,424 860,079,523 17-Due from banks 31 December 2018 31 December 2017 EGP EGP Current accounts 34,187,623 43,282,513 Deposits 8,715,315,360 13,581,035,135 8,749,502,983 13,624,317,648 Central Bank(excluding obligatory reserve) 7,049,851,060 11,845,579,136 Local Banks 1,659,968,024 1,748,993,322 Foreign Banks 39,683,899 29,745,190 8,749,502,983 13,624,317,648 Non-interest bearing balances 34,187,623 82,282,513 Interest bearing balances (Fixed rate) 8,715,315,360 13,542,035,135 8,749,502,983 13,624,317,648 Current balances 8,749,502,983 13,624,317,648

96 Annual Report 2018 Annual Report 2018 97 20-Loans & facilities to customers 21- Financial investments 31 December 2018 31 December 2017 31 December 2018 31 December 2017 EGP EGP EGP EGP Financial Investments available for sale Retail Equity instrument at cost (unlisted) 40,316,488 41,968,342 Overdrafts 343,854,016 344,306,906 Total Financial Investments available for sale 40,316,488 41,968,342 Credit cards 19,079,976 17,745,422 Financial Investments Held to maturity Personal loans 1,838,753,818 2,014,178,201 Debt instruments at amortized cost: Real Estate loans 6,386,914,018 5,169,742,973 Debt instrument (listed) 4,062,789,993 2,367,147,308 Total 8,588,601,228 7,545,973,502 Mutual fund’s instrument established according to the 17,000,000 17,000,000 Institutions including small loans for economic activities issued rates 4,079,789,993 2,384,147,308 Overdrafts 4,189,116,617 2,674,795,688 Total Financial Investments Held to maturity 4,120,106,481 2,426,115,650 Direct loans 2,011,819,891 1,796,114,582 Total Financial Investments 4,062,789,993 2,367,147,308 Syndicated loans 276,975,793 629,242,839 Current Balances 57,316,488 58,968,342 *Other loans 621,019,249 766,620,223 Non-current Balances 4,120,106,481 2,426,115,650 Total 7,098,931,550 5,866,773,332 Debt Instruments – interest bearing (fixed) 4,062,789,993 2,367,147,308 Total Loans& facilities to customers 15,687,533,378 13,412,746,834 Less: Impairment of loan loss provision (2,027,028,221) (1,922,302,914) Interest in suspense (51,250,753) (51,267,894) Financial Financial 13,609,254,404 11,439,176,026 Investments Investments Held to available for sale maturity Total Current Balances 4,229,920,481 3,983,263,142 31 December 2018 Non-current Balances 11,457,612,897 9,429,483,692 Balance at the beginning of January 1, 2018 41,928,342 2,384,147,308 2,426,115,650 15,687,533,378 13,412,746,834 Additions 9,250 2,120,494,048 2,120,503,298 Amortization of premium issuance - 10,148,637 10,148,637 * Supported loans are paid regularly within the governmental plan for sociable development, Disposals (20,000) (435,000,000) (435,020,000) Impairment loss (1,641,104) - (1,641,104) Balance as of December 31, 2018 40,316,488 4,079,789,993 4,120,106,481

Balance as of January 1, 2017 41,928,342 2,420,414,227 2,462,342,569 Additions 40,000 354,194,525 354,234,525 Amortization of premium issuance - 6,164,210 6,164,210 Impairment of loan loss provision Disposals - (396,625,654) (396,625,654) Movement analysis of impairment of loan and facilities loss provision to customers Balance as of December 31, 2017 41,968,342 2,384,147,308 2,426,115,650

31 December 2018 31 December 2017 EGP EGP

Balance at the beginning of the year 1,922,302,914 1,100,664,449 Impairment loss 219,529,105 890,573,102 Amounts written off during the year ( 101,891,756) (55,358,016) 31 December 2018 31 December 2017 Refunded amounts during the year 8,515,345 7,131,364 Losses from financial investments EGP EGP Foreign currency revaluation difference 1,106,619 (3,316,682) Impairment losses Equity instrument – AFS (1,641,104) - Transferred from contingent liabilities provision (22,534,006) (17,391,303) Impairment losses Equity instrument – associates - (529,997) Balance at the end of the year 2,027,028,221 1,922,302,914 Total (1,641,104) (529,997)

98 Annual Report 2018 Annual Report 2018 99 * The bank sharing value in obelisk company for portfolio management and mutual funds is EGP 750 000 and the 22-Investments in associated companies 31 December 2018 31 December 2017 impairment has been formed for the company with amount of EGP 749 999, the sharing value after the impair- ment is EGP 1, Sharing Sharing Sharing value Sharing value percentage percentage **The bank sharing value in HD company for securities is EGP 1 800 000 and the impairment has been formed for EGP % EGP % Subsidiaries: the company with amount of EGP 1 799 999, The sharing value after the impairment is 1 EGP, Holding company for development and investment 460,000,000 92% 460,000,000 92% Housing and development company for real estate investment 180,000,000 60% 180,000,000 60% ***The bank sharing value is Misr Sinai company for tourism is 29 983 200 EGP and the impairment has been associated companies: formed for company with amount of EGP 29 983 199, The sharing value after the impairment is 1 EGP El-Tameer company for housing and utlities 5,250,000 35% 5,250,000 35% El-Tameer Company for Real Estate Finance 175,161,370 24,8% 175,161,370 24,8% El-Tameer company for assets management 942,000 15,7% 942,000 15,7% 23-Housing projects 31 December 2018 31 December 2017 El-Tameer company for cleaning services 1,521,000 39% 1,521,000 39% EGP EGP El-Tameer company for real estate mutual funds 4,800,000 24% 4,800,000 24% Lands allocated for housing projects 186,498,759 218,079,976 El-Tameer company for financing and real estate promotion 2,178,158 39% 2,178,158 39% Under Construction projects 161,166,115 254,114,715 Development for Technological Services (DTS) Company 4,000,000 40% 4,000,000 40% Finished projects 508,871,393 472,890,393 El-Tameer company for real estate development and investment 74,000,000 37% 74,000,000 37% Housing projects provision (19,327,219) (19,327,219) Hyde Park for Real Estate Development Company 198,622,250 36,9% 198,622,250 36,9% Total 837,209,048 925,757,865 Obelisk for mutual funds investment* 1 30% 1 30% HD company for securities** 1 20% 1 20% Zayed city edge company 491,473,000 38% 341,768,250 38% Projects under constructions includes LE 8.4 Million, represents borrowing costs, the bank has charged to the work Misr Sinai for tourism*** 1 30% 1 30% under constructions at a rate of return and discount announced by CBE. El-Tameer company for security and transportation 6,000,000 40% 6,000,000 40% The total empty distance units of the units and available for sale reached 149334 meters, administrative and H.D for leasing 59,366,343 60% 2,366,343 60% commercial buildings 13649 meters and the lands 151976 meter, Total 1,663,314,124 1,456,609,374

24-Real estate investments 31 December 2018 31 December 2017 EGP EGP

Total Investments 142,600,465 140,232,618 Accumulate Depreciation (29,572,013) (20,447,155) Net book value at the beginning of the year 113,028,452 119,785,463 Additions 9,033,572 3,853,940 Disposal (38,678,318) (1,486,093) Disposal of accumulated depreciation 5,209,293 388,129 Depreciation of the year (9,268,971) (9,512,987) Net book value at the end of the year 79,324,028 113,028,452

Real estate investments rented for the bank’s companies and others with yearly renewal contracts and with depreciation calculated for the rented units at 5% annually, Real estate investments have been revaluated with the fair value by an amount of MEGP 283.9 As of 31 December 2018 by an evaluator with a recognized professional certificate and has an experience of real estate.

100 Annual Report 2018 Annual Report 2018 101 25-Intangible Assets 31 December 2018 31 December 2017 EGP EGP Computers programs EGP Beginning cost of the year Total 174,990,356 108,325,466 872,403 3,126,961 2,855,198 9,262,256 76,584,611 8,679,460 633,732,151 883,717,741 112,899,271 484,873,413 373,956,937 306,051,786 327,680,365 259,247,846 1,181,139,480 300,548,700 509,760,804 509,760,804 509,760,804 696,266,067 Additions during the year 121,926,806 66,664,890 696,266,067 Ending cost of the year 296,917,162 174,990,356 Accumulated depreciation at the beginning of the year

(89,802,755) (54,656,298) ------EGP

Depreciation during the year 362,408 362,408 944,638 2,712,574 2,712,574 2,712,574

(86,282,580) (35,146,457) 8,991,513 6,275,196 2,350,166 12,554,135 4,507,260 8,046,875 15,266,709 14,904,301 Facilities & Facilities 15,266,709 Accumulated depreciation at the end of the year (176,085,335) (89,802,755) installments Net book value at the end of the year 120,831,827 85,187,601 ------EGP 901,861 969,372 6,013,123 Furniture 48,117,501 4,768,750 21,297,277 14,485,143 30,687,113 18,035,763 65,183,892 79,669,035 42,988,799 34,496,779 34,496,779 34,496,779 36,700,236 26,820,224 42,968,799 -- EGP 55,434 55,440 511,101,711 7,468,184

26-Other Assets 7,445,938 44,151,326 75,792,859 Equipment

31 December 2018 31 December 2017 66,824,160 139,104,491 205,928,651 251,547,304 259,554,407 105,419,005 207,277,679 175,809,879 259,554,407 303,879,472 128,069,593 128,069,593 128,069,593 Machinery & EGP EGP

Accrued revenues 491,371,541 449,564,774 --

Prepaid expenses 3,516,921 731,087 EGP vehicle 331,661 824,700 1,622,344 1,622,386 12,159,657 16,140,422 4,052,664 4,097,500 28,419,552 16,140,422 44,559,974 6,640,490 18,683,454 18,683,454 18,683,454 11,069,500 31,840,060 23,401,406 19,680,403 Advanced payments for purchasing fixed assets 68,270,066 97,374,433 42,084,860 Transportation Advanced payments for contractors 28,193,088 31,292,261 Insurance and consignment 1,742,622 1,850,720 Debit accounts under settlement 48,021,946 69,017,446 -- -- EGP 872,403

Assets reverted to banks in settlement of debts 1,177,420 1,449,135 51,316,972 Buildings 19,104,611 1,531,826 54,167,548 22,102,633 353,941,257 112,399,793 507,243,277 131,504,404 153,302,020 118,442,046 223,683,025 353,941,257 454,524,864 336,082,818 323,020,460 323,020,460 323,020,460

Others 191,634,040 8,852,960 &Constructions Total 884,067,196 660,215,507

------EGP Lands 6,336 2,771,608 2,771,608 2,777,944 2,777,944 2,777,944 2,777,944 23,298,774 23,298,774 23,298,774 20,520,830 27- Fixed Assets 27- Fixed 1, 2018 January Balance at Cost Depreciation Accumulated 1, 2018 January book at value Net Additions Disposals depreciation Disposals accumulated from expense Depreciation December book 31, 2018 at value Net 1, 2018 January Balance at Cost Depreciation Accumulated 1, 2018 January book at value Net DecemberBalance 31, 2018 at 1, 2018 January book at value Net Additions Disposals depreciation Disposals accumulated from expense Depreciation properties investments to charged Depreciation December book 31 , 2018 at value Net DecemberBalance 31 , 2018 at Cost Depreciation Accumulated December book 31, 2018 at value Net

102 Annual Report 2018 Annual Report 2018 103 30-Other loans 28-Due to banks 31 December 2018 31 December 2017 Interest rate 31 December 2018 31 December 2017 EGP EGP Long term loans % EGP EGP Current accounts 982,699 407,575 Loans Granted from the CBE: Deposits 455,937,553 210,174,771 Activity loans %17.25 4,568,112 12,859,384 456,920,252 210,582,346 New Urban Communities organization %17.25 38,622,647 51,278,282 local banks 451,289,470 207,348,155 Construction & Housing Organization %17.25 516,071,323 597,678,429 Foreign banks 5,630,782 3,234,191 Houses Mutual Fund %17.25 14,699,165 21,203,293 456,920,252 210,582,346 Low income %2.50 3,324,142,672 2,471,426,108 Non-interest bearing balances 982,699 407,575 Middle income %4.50 252,448,994 177,932,228 Interest bearing balances (fixed rate) 455,937,553 210,174,771 Below low income %0.50 860,114,248 645,348,133 456,920,252 210,582,346 Above Middle income %7 79,969,849 21,935,980 Current balances 456,920,252 210,582,346 Total loans granted from the CBE 5,090,637,010 3,999,661,837 Loans granted from the Social Fund for development %14.75 ،%7 58,815,000 79,075,000

The Egyptian Company for real estate refinance loan %11 ،%10.25 68,979,367 78,030,110 Total 5,218,431,377 4,156,766,947 Current balances 131,663,000 202,785,000 29-Customers’ deposits 31 December 2018 31 December 2017 Non-current balances 5,086,768,377 3,953,981,947 EGP EGP 5,218,431,377 4,156,766,947 Demand deposit 15,053,072,298 15,994,144,358 Time & call deposits 6,461,702,284 4,022,769,454 The bank fulfilled its commitments regarding those loans in terms of the principal amount & interest amount or Saving certificates 3,628,298,781 3,218,927,350 any other conditions during 2018 and 2017 Saving deposits 5,030,227,545 4,660,068,479 Other deposits 3,948,769,212 12,989,064,689 34,122,070,120 40,884,974,330 31 December 2018 31 December 2017 Institutions deposits 17,786,704,571 16,468,826,887 31-Other liabilities EGP EGP Individual deposits 16,335,365,549 24,416,147,443 34,122,070,120 40,884,974,330 Accrued interest 342,069,645 286,276,790 Non-interest bearing balances 17,491,091,848 18,988,449,175 Unearned revenue 1,324,790 1,399,167 Interest bearing balances (variable rate) 5,030,227,545 4,660,068,479 Accrued expense 112,382,275 67,744,370 Interest bearing balances (fixed rate) 11,600,750,727 17,236,456,676 Creditors 41,319,098 31,681,381 34,122,070,120 40,884,974,330 Advanced reservation of lands and units 1,830,637 112,003,447 Current balances 30,493,771,339 37,666,046,980 Down payments under instalments 218,121,760 403,935,278 Non-current balances 3,628,298,781 3,218,927,350 Checks under payment & credit accounts under settlement 553,925,012 679,127,250 34,122,070,120 40,884,974,330 Other credit balance 1,064,655,755 1,092,914,636 Total 2,335,628,972 2,675,082,319

104 Annual Report 2018 Annual Report 2018 105 32-Provisions The deferred tax assets related to items previously mentioned were not recognized, and this is due to that there 31 December 2018 31 December 2017 is not a reasonable assurance to benefit from it, or the existence of an appropriate level to ensure the existence of EGP EGP sufficient future tax returns through which it is possible to benefit from these assets,

Balance at the beginning of the year 311,391,129 165,199,427 Charged to income statement 284,103,492 131,249,864 Transferred during the year 22,534,006 17,391,303 34-Retirement benefit obligations Used during the year (12,956,598) (2,449,465) 31 December 2018 31 December 2017 Balance at the end of the year 605,072,029 311,391,129 Retirement benefit obligation as recorded in balance sheet : EGP EGP Medical benefit after retirement 36,433,851 33,793,347 -There is a provision for EGP 59,741,681 on December 31, 2018 against EGP 37,207,675 in the comparative financial Transactions of liabilities during the year represented as follows : year to face contingent liabilities. Balance at the beginning of the year 33,793,347 31,691,371 Provided amounts during the year 9,326,020 7,309,500 Current service cost (6,685,516) (5,207,524) 33-Deferred Income Tax Balance at the end of the year 36,433,851 33,793,347

Deferred income taxes have been totally calculated on the difference of the deferred taxes under the liabilities method using a tax rate of 22,5% in the current financial year,Deferred income taxes resulted from previous years Current year Comparison Year tax loss is not recognized unless there is expected profit taxes can be used to decrease the previous years’ tax loss, Main actuarial assumption used represented in the following: % % Discount rate 12 % 10 % Expected interest rate on assets 9,6 % 8,5 % Future salary increase rate 10 % 10 % 31 December 2018 31 December 2017 Future pension increase rate 20 % 20 % Deferred tax (liabilities) EGP EGP Death rates (49-A52) (49-A52)

Fixed assets and Intangible Assets (17,653,453) (9,256,675) Total deferred tax liability (17,653,453) (9,256,675) The assumptions related to the death rate are based on the announced recommendations, statistics, and experience in Egypt,

35-Capital

31 December 2018 31 December 2017 Authorized capital Deferred tax (liabilities) transactions EGP EGP The authorized capital is EGP 3 000 million, the issued and paid up capital is EGP 1 265 million totaling 126,5 million Begning balances of the year (9,256,675) (2,352,620) share each share par value is EGP 10. Charged to income statement (8,396,778) (6,904,055) End balance of the year (17,653,453) (9,256,675) 1-The Bank’s extraordinary general assembly approved on 5/11/2007 to increase the authorized capital from EGP 1 000 million to EGP 3 000 million, and the issued and paid up capital from EGP 550 million to EGP 1 150 million with an increase amounted to EGP 600 million.

The newsletter subscription had been announced on 16/01/2008 for the first fees with an increase amounted to 31 December 2018 31 December 2017 EGP 120 million at the face value for the initial shareholders, and it was completely accomplished and marked on Unrecognized deferred tax assets the bank’s commercial ledger. EGP EGP

Loans impairment provision excluding the 80% during the year 405,405,644 384,460,583 The second phase had been announced from 23/3/2010 till 29/04/2010 and open subscription for the initial Other items 38,518,068 13,991,907 shareholders, and till 13/05/2010 for the new shareholders for 45 million shares at par value EGP 20 in addition to 25 piasters (issuance fee) and 3 million shares have been distributed to the employees at par value EGP 10 in addition to 25 piasters (issuance fee) and it was completely accomplished and marked on the bank’s register of commerce on 29/9/2010 so the issued capital now is EGP 1 150 million

106 Annual Report 2018 Annual Report 2018 107 2-The Bank’s extraordinary general assembly approved on 10/04/2014 to increase the issued and paid up capital from Movements in Reserves are presented as follows EGP 1 150 million to EGP 1 265 million by contribute EGP 115 million from the Legal reserve of year 2012 by one share A- General Banking risks reserve for every ten shares and marked on the bank’s register of commerce on 14/12/2014 so the issued and paid up capital 31 December 2018 31 December 2017 now is EGP 1 265 million, EGP EGP 3- The Bank’s extraordinary general assembly approved on 20/12/2018 to increase the issued and paid up capital from Beginning balance of the year 161,211 107,474 EGP 1 265 million to EGP 1 518 million by contribute EGP 253 million from the General reserve of the period ended 30 Transferred from retained earning 53,737 53,737 September 2018 by one share for every five shares and the procedures have been taken to be marked on the bank’s Disposal resulting from sale of assets reverted to the bank in settlement of debts (196,948) - register of commerce. Ending balance of the year 18,000 161,211

As follows contributors who have over than 5% from the issuance capital: 31 December 2018 31 December 2017 Number of shares Percentage of EGP in thousands B- Legal reserve EGP EGP Contributors EGP contribution EGP Beginning balance of the year New urban communities authority 37,713,240 29,81% 377,132 436,329,094 401,329,094 Transferred from retained earnings RIMCO CO. for investment 12,319,998 9,74% 123,200 53,776,633 35,000,000 Ending balance of the year Misr Life insurance company 11,283,840 8,92% 112,838 490,105,727 436,329,094 Misr insurance company 10,492,492 8,29% 104,925 Houses Mutual Fund 9,370,450 7,41% 93,705 Rolaco EGB for investments 7,990,112 6.32% 79901 Egyptian Endowments Authority 6,362,950 5.03% 63630

C- General reserve 31 December 2018 31 December 2017 EGP EGP 31 December 2018 31 December 2017 36-Reserves Beginning balance of the year 732,000,000 467,000,000 EGP EGP Transferred from retained earnings 400,000,000 265,000,000 Banking risks reserve 18,000 161,211 Ending balance of the year 1,132,000,000 732,000,000 Legal reserve 490,105,727 436,329,094 General reserve 1,132,000,000 732,000,000 Special reserve 14,447,953 14,447,953 Other reserves 15,853,768 14,546,205 IFRS 9 Reserve 147,237,108 - Total reserves at the end of the year 1,799,662,556 1,197,484,463

31 December 2018 31 December 2017 D- Special reserve EGP EGP Beginning balance of the year 14,447,953 14,447,953 Ending balance of the year 14,447,953 14,447,953

108 Annual Report 2018 Annual Report 2018 109 E- Other reserves 31 December 2018 31 December 2017 38-Cash and cash equivalents 31 December 2018 31 December 2017 EGP EGP EGP EGP Beginning balance of the year 14,546,205 14,115,643 Due from central bank 842,522,974 964,617,111 Transferred from retained earnings 1,307,563 430,562 Due from banks 7,307,187,624 13,482,282,513 Ending balance of the year 15,853,768 14,546,205 Treasury bills - 1,123,211 8,149,710,598 14,448,022,835

F- IFRS 9 Reserve 31 December 2018 31 December 2017 EGP EGP Beginning balance of the year - - Transferred from retained earnings 147,237,108 - 39-Contingent Liabilities And Commitments Ending balance of the year 147,237,108 - A- Legal claims There are a number of existing cases filed against the bank without providing provisions as it’s not expected to make any losses from it. G-Retained Earnings 31 December 2018 31 December 2017 EGP EGP B- Capital commitments Beginning balance of the year 1,100,040,901 677,992,545 The bank contracts of Capital commitments reached 203,193,479 EGP on December 31, 2018 compared to EGP 249,313,551 on comparative year resembled in purchasing equipment and fitting out branches and the top Net profit during the year 1,624,835,360 1,075,532,655 management are confidence in generating net profits and in the existence of available liquidity to cover those Profit distribution of last financial year ( 189,750,000) (253,000,000) obligations. Employee’s share in profit ( 112,500,000) (90,000,000) Board of Director’s rewards ( 10,000,000) (10,000,000) C- Loans, collateral & advances commitments Transferred to general banking risk reserve ( 53,737) (53,737) Represented in EGP 5,117,460,470 on December 31, 2018 compared to EGP 5,298,821,002 in the comparative financial Transferred to legal reserve ( 53,776,633) (35,000,000) year. Transferred to general reserve ( 400,000,000) (265,000,000) Transferred to other reserves (1,307,563) (430,562) Transferred to IFRS 9 (147,237,108) - D- Contingent liabilities 31 December 2018 31 December 2017 Balance at the end of the year 1,810,251,220 1,100,040,901 EGP EGP Letters of Guarantee 1,217,736,151 922,366,023 Letters of Credit 382,564,720 290,435,040 37-Dividends Distributions Less: Is not recorded until it is approved by the shareholders general assembly, Collaterals (247,758,663) (218,755,560) Contingent liabilities 1,352,542,208 994,045,503

40-Transactions With Related Parties

The bank has dealt with related parties through the banks normal activity which include loans, deposits and transactions in foreign currencies: The transactions and balances of related parties at the end of the fiscal year are represented in the following

110 Annual Report 2018 Annual Report 2018 111 31 December 2018 31 December 2017 42-Tax status EGP EGP

Loans 217,352,000 316,137,000 Salary tax From beginning of the activity -2007: The Bank’s salary tax has been examined, paid and settled, Deposits 517,926,000 716,506,000

2008-2012: The Bank’s salary tax has been examined, Claims not received yet - As per CBE instructions on 23 August 2011 and 1 March 2012 Salaries and wages for the Year ended 31 2013-2018: The Bank’s salary tax under examination for this years, the bank pays it monthly and prepare the tax December 2018 includes an amount of EGP 3,532,250 which represents average total top 20 salaries of bank ,Sub- settlements on time under law no, (91) Year 2005, sidiaries and associates paid during the Year. (4,203, 600 As of 31 December 2017) Stamp duty tax The bank’s stamp duty tax has been inspected, paid and settled for the banks’ branches till the end of imposing the low no,(111) for the year 1980 (stamp tax), From August 1, 2006 the law no, (143) for the year 2006 that amended by law no, (115) for the year 2008 has been applied, 41-Mutual funds El-Themar Mutual Fund The tax inspections was carried out for the period from 1 August 2006 till 31 March 2013, and the tax differences resulted from the tax inspections have been paid.

The board of directors has agreed on September 10, 2007 to establish accumulated fund with regular dividends The tax inspection for the period from 1 April 2013 till 31 December 2015 has been carried out in accordance with the distribution called El-Themar Mutual Fund for EGP (100) million, managed by Prime Company for Financial executive instructions issued by tax authority No. 61 for the year 2015, tax assessment did not yet received, the bank pays the stamp duty regularly on a quarter basis Investments, The tax inspection for the years form 1 January 2018 till 31 December 2018 did not yet carried out, the bank pays the The Central Bank of Egypt has agreed on Jan 30, 2008 to establish the fund under the license no, 449 approved by the stamp duty regularly on a quarter basis. Egyptian financial supervisory authority on March 18, 2008 Income Tax The newsletter subscription for the fund has been announced on April 14, 2008, the subscription begun at May 4, 1980 – 2004: Tax inspection has been completed and settled. 2008 and ended on June 5, 2008 the subscription reached EGP 141,2 million The bank’s portion is 5% represented in 2005 - 2007: Tax inspection has been completed and settled. (50000) ICs amounted to EGP (5) million with face value EGP 100/share. 2008 - 2012: Tax inspection has been completed and settled, appeal committees for these claims.

The redemption value of the certificate on December 31, 2018 was EGP 216.90 2013 –2014: Tax inspection has been completed and settled and the internal committee still in process, appeal committees for these claims.

2015- 2017: The bank’s has applied its tax return under tax income law no, (91) Year 2005 and its amendment at the legal Mawared Fund time and the tax had paid and under examination.

The board of directors has agreed on April 27, 2009 to establish daily accumulated mutual Fund (Mawared) managed by Prime Company for Financial Investments. The Central Bank of Egypt has agreed on July 9, 2009 to establish the 43- Comparative Figures fund under the license no, 544 approved by the Egyptian financial supervisory authority on November 16 2009. The subscription begun at December 21, 2009 with bank’s portion of EGP 12 million that represents a share of 5% Before restatements Restatements After restatements presented in 1.2 million certificates with a nominal value of EGP 10 each. Statement of Profit and loss EGP EGP EGP Other provision (100,000,000) (31,249,864) (131,249,864) Other operating income 13,747,423 31,249,864 44,997,287 The redemption value of the certificate on December 31, 2018 was EGP 23.63

- Other operating income has been increased with amount of EGP 31,249,864 against increase in the other provision with the same amount – Note (12).

112 Annual Report 2018 Annual Report 2018 113 Head Office & Branches

115 114 Annual Report 2018 Annual Report 2018 Head Office and Branches of Housing and Development Bank

Head Office Address 26, Elkoroum St., Mohandeseen, Giza Telephone +20 02 37492013 - 37492014 - 37492015 P.O. Box 234 Mohamed Farid, Cairo Postal Code 11518 Mohamed Farid, Cairo SWIFT HDBKEGCA Email [email protected]

Telephone Fax Email Central Operations Group 33349052 33328177 [email protected] [email protected] Treasury 33349055 33328174 [email protected] 33349056 33328179 [email protected] Marketing 33349035 33386453 [email protected] 33349036 Risk Management 33349040 37607324 Internal Audit and Control 37499652 33377534 Planning and Evaluation 37612750 37609919 [email protected] Chairman Affairs 37499707 37499388 [email protected] Legal Affairs 33363828 33366949 [email protected] 37604906 33362018 Information Technology 37470026 35704594 [email protected] Engineering Affairs 37492013 27549075 [email protected] Administration Affairs 37492013 38502435 [email protected] Human capital 37492014 38345292 Technical Engineering Affairs 37492015 27549080 [email protected] Investment and Housing 33364235 37480713 [email protected] Financial Affairs 33357170 37612738 [email protected] Real Estate 37483587 37624321

116 Annual Report 2018 Annual Report 2018 117 First Regional Area Central and South Cairo Region Zamalek Branch Opera Branch

Address 10, El-Kamel Mohamed St., Zamalek, Cairo Address Kasr Al-Nile st., Obera Square Telephone +2 02 27356197- 27359504- 27361826- 27373663 Telephone +2 02 23957855-23957856-23957850-23957860 Fax +2 02 27361458- 27359501 Fax +2 02 23957853

Mohandiseen Branch Talaat Harb Branch

Address 26 Korroum Street, Mohandeseen, (26 Papa Sharo st., Mohandseen, Giza) Address 9 Talaat Harb st. Cairo Telephone +2 02 37617859- 37617828- 33370127 Telephone +2 02 23937953- 23937961- 23937946 Fax +2 02 37617829 Fax +2 02 23937951

El-Manesterly Branch Dokki Branch

Address Tower No. 7, El-Manesterly Towers, El-Bahr El-Azam St., Giza Address 6 Refaa Street, El-Mesaha, Dokki Telephone +2 02 37745247- 35684050- 35718933- 35708888 Telephone +2 02 37623207 – 3364235 - 37490903 Fax +2 02 35718931- 35705341 Fax +2 02 37623208

El-Manial Branch Helwan Branch

Address 1 Manial Museum Road- El-Roda Island-Cairo Address 39 mostafa fahmy street, helwan Telephone +2 02 23684670- 23684671- 23684829 Telephone +2 02 28165242 - 28165243 Fax +2 02 23686269 Fax +2 02 28165241

Shubra Branch

Address 2 Al- horya st., Menyat Al-Serg, El-Sahel, Cairo Telephone +2 02 22027629-2203596-22027605-22033647 Fax +2 02 22027614-22027617

118 Annual Report 2018 Annual Report 2018 119 East Cairo Region

Nasr City Branch 15th of May Branch

Address 2, Abbas El-Akkad St, Nasr City , Cairo Address 15th of May City Authority, Suite No. 6, Administrative Building, Businessmen District, 15th of May City Telephone +2 02 22706040- 22706042- 22706041 Telephone +2 02 25500431 - 25500774 – 25512493 - 25516975 Fax +2 02 26712438 Fax +2 02 25504973

Heliopolis - Sheraton Maadi Branch

Address Building No. 7,8 Misr Al-Taamir building- Second Zone- Sheraton Heliopolis Area Address 3,4 d/5 Allaselky street -Maadi Telephone +2 02 22670446- 22661767- 22688235 Telephone +2 02 25174062 - 25174063 - 25174065 - 25174068 Fax +2 02 22687706- 22660687 Fax +2 02 25174067

El-Katameya Branch Mokattam Branch

Address El-Nile Company 1,2 Buildings, in Front of El-Katameya Police Station -Katameya, Cairo Address Land no.6019, Block no.2, Street no.9 - Mokattam Telephone +2 02 27580912 - 27581463 - 27580910 Telephone +2 02 26670010 - 26670020 - 26670050 Fax +2 02 27581464 Fax +2 02 26670040

El-Tagmoa’ El-Khames Branch Zaker Hussein Branch

Address Building No. 114, Behind Building Authority City El-Tagmoa’ El-Khames, Cairo Address 41, Zakir Husain street, Cairo Telephone +2 02 25414733 - 25414732 - 25414870 - 25414731 Telephone +2 02 22735416-22735417-22735422 Fax +2 02 25414734 Fax +2 02 22735415

El-Tagmoa’ El-Awal Branch Taqa Branch

Address Land no. 28, First District, New Cairo, Cairo Address 11, taqa street behind al-ahly sports club, nasr city Telephone +2 02 28112510 - 28112507- 28112503 Telephone +2 02 24710257 – 24721505 – 24721780 - 24708299 Fax +2 02 28112505 Fax +2 02 24710148

120 Annual Report 2018 Annual Report 2018 121 North Cairo Region

Roxy Branch El-Shorouk Branch

Address 6B, El-Hegaz St., Takseem B, Roxy, Ghernata Square, Heliopolis, Cairo Address Administrative Zone, Second District Centre, Next to the Medical Centre, El-Shorouk City Telephone +2 02 24504348 - 24504346 - 24504350 Telephone +2 02 26303868 - 26303864 Fax +2 02 24504347 - 22569540 Fax +2 02 26303862 P.O. Box 223 Heliopolis

Heliopolis (Geser El-Suez) Branch Badr City Branch

Address 128/130 Gesr Al-Suez Street (Bonian building)- Heliopolis Address Apartment 3, Building No. 18, Third Neighborhood Next To Building Authority of Badr City Telephone +2 02 22405043 - 22569143 - 22569236 Telephone +2 02 28643108 - 28643109 - 28645515 Fax +2 02 22569157 Fax +2 02 28640950

10th of Ramadan City Branch Badr – El-Nady Branch

Address Building Authority city, behind Sednawy, first Neighborhood, the first District center , Address Central of First District – Banks zone – Badr City Tenth of Ramadan city Telephone +2 02 28687445 - 28687448 - 28687447 Telephone +2 015 364 358 Fax +2 02 28687446 Fax +2 015 364 376

El-Obour (AL-Souk) Branch Zeitoun Branch

Address Banks’ Compound, El-Obour Market, El-Obour City, Misr Ismailia Road Kilo 25 Address 13 el-tameer Towers – matarya – zeitoun - cairo Telephone +2 02 44770058 – 44770717 – 44770772 Telephone +2 02 22850036 -22850037 Fax +2 02 44770024 Fax +2 02 22850035

El-Obour, Golf City Branch Obour University Branch

Address Obour City beside Carrefour mall – Golf City Project Address Obour university for science & technology Telephone +2 02 49210759 - 49210780 Telephone +2 02 46110420 – 46110421 – 46110422 - 46110423 Fax +2 02 46105399 Fax +2 02 46110428

122 Annual Report 2018 Annual Report 2018 123 Abasiya Branch Marakia Branch

Address 81, abasiya street next to El-waily Police Station Address The first area, the Commercial Market, Marakia tourist village, Kilo 52 Alex-Matrouh road , Telephone +2 02 26837785 – 26837788 - 26837789 North Coast Fax +2 02 26837805 Telephone +2 03 3741645 – 3741628 - 2742320 Fax +2 03 3741569 Second Regional Area

Alexandria Region Borg El Arab Branch

Sultan Hussein Branch – Alexandria Address Building No.34, Block No. 12, Neighborhood No. 9, Borg El-Arab El-Gadeeda City Telephone +2 03 4597171 - 4593350 - 4592730 Address 9, El-Fawatem and Bani El-Abbas St. off Sultan Hussein St., El-Azaritta, Alexandria Fax +2 03 4592723 Telephone +2 03 4849053 - 4849056 - 4877161 Fax +2 03 4848986

Damanhour Branch Fleming Branch – Alexandria Address Abdel Salam Elshazily Building next to Mabara hospital, Damanhour Address 513A, Gamal Abd El-Nasser Road, Fleming, Alexandria Telephone +2 045 3374862 - 3374863 - 3358833 Telephone +2 03 5823494 - 5823495 - 5826850 Fax +2 045 3374865 Fax +2 03 5826858

Gelim Branch – Alexandria Kafr El-Sheikh Branch

Address Horia Road – Mazloum Square , in front of Central Glim, Alexandria Address El-Forkan Building, in front of nasr compound El-Awkaf Buildings, El-Geish St., Kafr El-Sheikh Telephone +2 03 5838994 - 5838995 - 5838550 Telephone +2 047 3241351 - 3231898 - 3231858 Fax +2 03 5838920 Fax +2 047 3237563

Marina El-Alamin Branch Smouha Branch

Address Building12, North of First Commercial Centre, East of Circular Lake, K 94 Marina El-Alamin center, Address 14 May bridge , smouha, Alexandria North Coast. Telephone +2 03 3857023 - 3857022 Telephone +2 046 4062295 - 4061851 Fax +2 03 3857022 Fax +2 046 4061850

124 Annual Report 2018 Annual Report 2018 125 Dekhela ( Ajmi ) Branch Mansoura Branch

Address Marafek Street, Dekhela, Alexandria Address 36 Al-Geish St., 1 Kenanet Al-Shawaf tower, Mansoura, Dakahlya Telephone +2 03 2201477 Telephone +2 055 2326162 - 2301143 - 2301163 Fax +2 03 2201473 Fax +2 055 2303161

Mersa Matruh Branch Zagazig Branch

Address 101 el-galaa Street, beside police club Address Building 1 Moderiat El-Amn Street, Horya Building, Zagazig Telephone +2 046 4930893 – 4930897 - 4942101 Telephone +2 055 2374832 - 2374834 - 2376885 Fax +2 046 4930893 Fax +2 055 2374833

Banks Centre Branch - Borg El Arab Kids Library Branch (Zagazig)

Address Banks Centre Branch - Borg El Arab Address Kids Library, Saad Zaghloul St., Zagazig Telephone +2 03 4600303 - 4600304 Telephone +2 055 2318028 – 2318072 - 2318071 Fax +2 03 4600302 Fax +2 055 23185025

East Delta Region Damietta Branch El-Salheya El-Gadida Branch Address Ground Floor, El-Awkaf Building, Saad Zaghloul St., Damietta Address Building No. 6 Neighborhood No. 12 In Front of Commercial Market, El-Salheya El-Gadida Telephone +2 057 2224055 - 2247401- 2224033 Telephone +2 055 3202614 - 3202613 Fax +2 057 2231967 Fax +2 055 3200270

Damietta El-Gadida Branch Tanta Branch

Address Central Region Area 90, Damietta El-Gadida City Address 107 Elgiesh st., Tanta, Gharbia Telephone +2 057 2402041 - 2402042 - 2413863 Telephone +2 036 3272581 - 3272618 - 3272617 Fax +2 057 2402043 Fax +2 036 3272582

126 Annual Report 2018 Annual Report 2018 127 Damietta (Mosharafa) Branch Sharm El-Sheikh Branch (El-Hadaba)

Address Damietta (Mosharafa) Address Banks’ zone, Om El-Seid – Sharm El-Sheikh Telephone +2 057 2245503 – 2245504 – 2245505 - 2245506 Telephone +2 069 3665439 - 3665437 - 3665421 Fax +2 057 2245502 Fax +2 069 3665438

Gamasa Branch Sharm El-Sheikh Branch (Nea’ma Bay)

Address 107 Elgiesh st., Tanta, Gharbia Address Mall No. 8 Nea’ma Bay sharm el sheikh Telephone +2 050 3272617 - 3272618 Telephone +2 069 3601205 - 3601207 Fax +2 050 3272582 Fax +2 069 3601206

Greater Mahalla Branch Sharm El-Sheikh Branch (Nabq) Address Shokry el-qwatly street,in front of baladet el-mahalla club , Gharbya. Telephone +2 040 2380287 Address Commercial Mall Arab sat – south Nabq – touristic no. (11) Fax +2 040 2380282 Telephone +2 069 9205469 - 9205479 Fax +2 069 3710266

Canal and Sinai Region Dahab Branch Ismailia Branch Address Tourism service Area, Commercial Building number 7 in Tourism Commercial center, Dahab Address El-Talatiny Tower, El-Gomhoria St., First of El-Blajat Road, Ismailia Telephone +2 069 9205479 - 9205469 Telephone +2 064 3918407 - 3917521 - 3921810 Fax +2 069 3710266 Fax +2 064 3917457

Port Said (Chamber of Commerce Branch) Al-Tor Branch

Address Chamber of Commerce Building, Mohamed Ali St., Port Said Address Microwave Area, Tor Sinai City, South Sinai Telephone +2 066 3345400 – 3357900 – 3240432 Telephone +2 069 3777907 - 3777901 - 3777905 Fax +2 066 3357600 Fax +2 069 3777904

128 Annual Report 2018 Annual Report 2018 129 El-Arish Branch El-Shiekh Zayed Branch Address 23rd of July St., Near to Care Service company and Bank of Alexandria El-Arish, North Sinai Address Building No. 50, Third Neighborhood, El-Shiekh Zayed 6B Telephone +2 068 3352997 – 3352996 Telephone +2 02 38507778 - 38507776 - 38502894 Fax +2 068 3352998 Fax +2 02 38521463

Port Said (Gawhara) Branch 6th District Branch- 6th of October City

Address 11 Saad Zghloul and El-Gish St., in front of Omar afandy, Taxes Tower, Port Said Address 5th Neighborhood, Commercial Market, 6th District, 6th of October City Telephone +2 066 3654128 - 3654152 - 3654137 Telephone +2 02 38346333 - 38320604 - 38306026 Fax +2 066 3654132 Fax +2 02 38339127

Suez Branch El-Sadat Branch Address 2 Tanzeem Al-Metwally st., Suez Section, Suez Telephone +2 062 3350624 – 3350618 - 3350620 Address No. 47, Belal Ebn Rabah St., El-Sadat City, Monofya Fax +2 062 3350619 Telephone +2 048 2600779 – 2600867 Fax +2 048 2600778

Al-Ein Al-Sokhna Branch Address Portoreh Al-Sokhna village, Block 4458 , Kesm Attaka, Suez Banha Branch Telephone +2 062 3596503 - 3596502 Fax +2 062 3596501 Address El-Safa & El-Marwa Tower, Corner of El-Amal wa El-Reyada St., Banha El-Gadida Telephone +2 013 3224298- 3245471- 3231597-3231601 Fax +2 013 3224297 Third Regional Area

West Cairo & 6th of October Region El-Motamayez District Branch 6th of October Branch Address Building No. 22,23 Second Neighborhood, El-Motamayez district, 6th of October City Address Central Axe, Next to Police Station, 6th of October City Telephone +2 02 38831219 - 39122149 Telephone +2 02 38345293 - 38245199 - 38245304 Fax +2 02 38831192 Fax +2 02 38346307

130 Annual Report 2018 Annual Report 2018 131 12th District Collection Branch Assiut Branch

Address 5 Sites in Building No. 33,34, 5th Neighborhood, 12th district, 6th of October City Address 2, El-Gomhoreya St., El-Wagh El-Kebly Company Towers, watania construction , Assiut Telephone +2 02 38325466 - 38300481 Telephone +2 088 299004 – 2299003 – 2299002 Fax +2 02 38325466 Fax +2 088 299005

Shebin Al-Koum Branch El-Fayoum Branch

Address Building number 5, Al-Shohadaa st., Bandar Shebin Al-Koum, Monofya Address 18 Taksim El_Horya., -Bandar El-Fayoum, Fayoum Telephone +2 048 2315870 - 2315876 - 2315874 - 2315628 Telephone +2 084 6308871- 6308872- 6313702 Fax +2 048 2315867 Fax +2 084 6308874

Opera City Branch El-Menia Branch Trade Center, bank project, 1 st. dist., Shikh Zayed city Address Address Sultan Building1, Taha Hussein St., El-Menia +2 02 38504035 Telephone Telephone +2 086 2368856- 2339944 +2 02 38504038 Fax Fax +2 086 2368857

Montaza Branch Menia El Gadida Branch Address Trade Center, bank project, South neighborhoods Address Building 33, No. 4.1 units, second neighboring, a project of the city, the new city of Menia, Telephone +2 02 36227226 east of the Nile Fax +2 02 36887225 Telephone +2 086 2295011 Fax +2 086 2295401

North Upper Egypt Region El-Haram Branch Beni Souef Branch Address Gardinia El-Haram Building, Spatis Station, El-Haram St. Address The 1st District, City center Block 1033, Shark Al-Nile, Beni Souef El-Gadida City Telephone +2 02 33899812 - 3389913 - 33899814 Telephone +2 082 2240162 - 2240163 - 2240863 Fax +2 02 33899815 Fax +2 082 2242666

132 Annual Report 2018 Annual Report 2018 133 South Upper Egypt Hurgada Branch

Sohag Branch Address Sindbad Tourism Village – Tourism Villages Zone – Hurgada Telephone +2 065 3404253 - 3404254 - 9201877 Address Assiut road , Sohag Fax +2 065 3441483 Telephone +2 093 2116122 - 2116126 - 2116154 Fax +2 093 2116157

Hurgada El-kawthar Branch

Qena Branch Address Moataz Bellah Str. - Kawthar District - Hurghada Telephone +2 065 343247 - 3403242 Address Modereyet El-Amn Square, Borg El-Modereya, Qena Fax +2 065 3403248 Telephone +2 096 5321603 - 5344116 Fax +2 096 5321605

Akhmim - Sohag Branch Luxor Branch Address Akhmim - Kawthar District - Sohag +2 093 2280443 - 2280390 Address El-Mahata St. Luxor Telephone +2 093 2280389 Telephone +2 095 2361442 – 2389083-2384224 Fax Fax +2 095 2384236

Aswan Branch

Address Building No. 9, El-Akkad District, behind Hall Indoors El-Sadat Road, Aswan Telephone +2 097 2424976 - 2424963 Fax +2 097 2424972

Aswan Branch (Cornish El-Nil)

Address 9 Cornish El-Nil, Aswan Telephone +2 097 2446085 Fax +2 097 2446085

134 Annual Report 2018 Annual Report 2018 135 Housing & Development Bank Group

137 136 Annual Report 2018 Annual Report 2018 Auditors’ Report

To The Shareholders of Housing and Development Bank- Egypt (S.A.E) Report on Other Legal and Regulatory Requirements Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Housing and Development Bank - Egypt Nothing has come to our attention that causes us to believe that material violations were occurred regarding the (S.A.E), represented in the consolidated balance sheet as at 31 December 2018, and the related consolidated statements provisions of the Central Bank of Egypt, Banking and Monetary System Law No. 88 of 2003 for the year ended 31 December 2018. of income, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. The Bank maintains proper accounting records that comply with the laws and the Bank’s Articles of Association and the financial statements agree with the Bank’s records. Management’s Responsibility for the Financial Statements These consolidated financial statements are the responsibility of Bank’s management. Management is responsible for The financial information included in the Board of directors’ report, prepared in accordance with the provisions of Law the preparation and fair presentation of these financial statements in accordance with the instructions of preparation No.159 of 1981 and its executive regulations are in agreement with the Bank’s accounting records within the limit that and presentation of financial statements for Egyptian banks issued by Central Bank of Egypt on 16 December 2008 as such information is recorded therein. well as with relevant Egyptian Laws and regulations. Management responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error. Management’s responsibility also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Auditors’ Responsibility Tarek Salah Sherif El – Kelany Emad Ali Hassan Abu Ghazala Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Egyptian Standards on Auditing and applicable Egyptian laws.

Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatements. BT Wahid AbdelGhaffar &CO E&Y Allied for Accounting & Auditing Accountability State Authority Public Accountants & Consultants Public Accountants & Consultants Member in Egyptian Society of An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Accountants & Audiotors consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, and evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

Opinion In our opinion the consolidated financial statements referred to above, give a true and fair view, in all material respects, of the consolidated financial position of Housing and Development Bank - Egypt (S.A.E), as of 31 December 2018 and of its consolidated financial performance and its consolidated cash flows for the Year then ended in accordance with the instructions of the preparation and presentation of financial statements for Egyptian banks issued by Central Bank of Egypt on 16 December 2008 as well as with relevant Egyptian laws and regulations.

138 Annual Report 2018 Annual Report 2018 139 31 December 2018 31 December 2017 Consolidated Balance Sheet Note No. EGP EGP Equity for the year ended December 31, 2018 Issued and paid-up-capital (35) 1,265,000,000 1,265,000,000 Reserves (36) 1,799,662,556 1,197,484,463 Retained earnings (included net profit of the year) 2,962,812,001 1,942,608,685 Total Shareholders’equity - 6,027,474,557 4,405,093,148 Non-controlling interest - 91,201,949 78,609,602 Note No. 31 December 2018 31 December 2017 Total Liabilities, Shareholders’equity And Non Controlling Interest - 50,748,217,258 53,823,356,184 EGP EGP ASSETS Cash and balances with central bank of Egypt (16) 2,486,318,942 4,936,351,223 Due from banks (17) 8,773,207,697 13,727,788,466 Treasury bills (18) 14,389,810,189 15,256,567,861 Gamal Soliman Hassan Ismail Ghanem Fathy El-Sebai Mansour Financial investment held for trading (19) 389,020,427 875,728,492 Loans and advances to customers (20) 13,609,254,404 11,439,176,026 Financial investments - Available for sale (21) 53,327,380 54,979,234 - Held to maturity (21) 4,089,789,993 2,394,147,308 Chief Financial Officer Deputy Chairman & Managing Director Chairman Investments in associated companies (22) 1,822,514,581 1,381,914,939 Housing projects (23) 2,649,276,814 1,853,076,342 Auditors Real estate investments (24) 84,307,028 118,271,452 Intangible assets (25) 121,230,171 85,745,545 Tarek Salah Sherif El – Kelany Emad Ali Hassan Abu Ghazala Other assets (26) 1,564,656,313 1,173,221,505 Deferred Tax assets (33) - 3,611,765 Fixed assets (27) 715,503,319 522,776,026 Total Assets 50,748,217,258 53,823,356,184 BT Wahid AbdelGhaffar &CO E&Y Allied for Accounting & Auditing Accountability State Authority Public Accountants & Consultants Public Accountants & Consultants Member in Egyptian Society of Liabilities And Equity Accountants & Audiotors Liabilities Due to banks (28) 456,920,252 210,582,346 Customers’ deposits (29) 33,853,979,049 40,614,962,690 Other loans (30) 5,218,431,377 4,156,766,947 Dividends payable 612,994 206,397 Other Liabilities (31) 4,200,212,273 3,794,260,769 Provisions (32) 674,513,479 373,675,654 Current Income tax obligations 185,537,771 155,405,284 Deferred tax liabilities (33) 2,899,706 - Retirement benefit obligations (34) 36,433,851 33,793,347 Total Liabilities -- 44,629,540,752 49,339,653,434

140 Annual Report 2018 Annual Report 2018 141 Consolidated Income Statement

for the year ended December 31, 2018

Note No. 31 December 2018 31 December 2017 EGP EGP Interest from loans and similar income (6) 6,148,427,514 4,733,934,255 Cost of deposits and similar expense (6) (2,932,138,120) (2,109,367,882) Net interest income 3,216,289,394 2,624,566,373 Fees and commissions revenue (7) 332,813,785 304,867,261 Fees and commissions expense (7) (28,880,648) (26,919,965) Net fees and commission income 303,933,137 277,947,296 Dividend income (8) 11,291,374 10,869,860 Net trading income (9) 66,277,420 274,951,041 Housing projects profits’ (10) 692,678,687 569,749,120 Touristic assets revenues 3,280,306 5,949,138 Security and cleaning revenues 6,200,367 5,025,234 Financial and real estate marketing revenues 2,009,732 1,103,705 Development and technological services revenues 200,000 452,830 Money transfer revenues 10,654,528 - Touristic assets expenses (25,907,074) (22,656,852) Security and cleaning expenses (27,815,410) (21,259,235) Financial and real estate marketing expenses (3,245,822) (3,364,312) Development and technological services expenses (17,246,131) (12,415,463) Money transfer expenses (26,932,633) - Bank’s share from associates companies’ profits 221,396,949 97,168,393 Losses from financial investments (21) (1,641,104) - Loans impairment losses (13) (219,529,105) (890,573,102) Other provision (284,488,643) (159,228,913) Administrative expenses (11) (1,414,614,238) (1,064,636,598) Other operating revenues (expenses) (12) 85,954,471 85,159,011 Net profit before income tax 2,598,746,205 1,778,807,526 Income tax expense (14) (632,745,758) (466,789,216) Net profit for the year attributable to: 1,966,000,447 1,312,018,310 Non- controlling interests 16,628,590 16,035,485 Controlling interests 1,949,371,857 1,295,982,825 1,966,000,447 1,312,018,310 Earnings per share (15) 15.41 10.24

142 Annual Report 2018 Annual Report 2018 143 Consolidated Statement Of Cash Flows for the year ended December 31, 2018

Note No. 31 December 2018 31 December 2017 Cash flows from investing activities EGP EGP Payments for purchase of fixed assets (312,398,269) (269,900,964) Cash Flows From Operating activities Proceeds from sale of fixed assets 2,121,040 2,325,294 Profit before tax 2,598,746,205 1,778,807,526 Payments for purchase of financial investments Adjustments: other than held for trading (2,120,503,298) (354,234,525) Depreciation and amortization )24(,)25(,)26( 214,332,168 123,716,872 Proceeds from sale of financial investments Credit impairment losses (13) 219,529,105 890,573,102 other than held for trading 435,020,000 396,625,654 Other provisions-charged during the year (12) 284,488,643 159,128,913 Payments for acquisition of associates companies (207,454,750) (163,810,683) Revaluation difference of financial investments held for trading (9) (46,051,644) (248,837,169) Payments for purchase of intangible assets (121,926,806) (67,303,290) Impairment Loss investment Available for sale (21) 1,641,104 - Net cash flows used in investing activities (2,325,142,083) (456,298,514) Amortization of premium - Investment held to maturity (21) (10,148,637) (6,164,210) Cash flows from Financing activities Bank’s share from associate companies’ profit (21) (221,396,949) (97,168,393) Long-term loans 1,061,664,430 1,349,229,595 Utilization of other provision (32) (37,907,765) (11,328,122) Dividends paid (326,386,903) (366,764,246) Provisions no longer required (12) (5,822,679) (23,879,903) Net cash flows from financing activities 735,277,527 982,465,349 Gain from sale of fixed assets (12) (3,132,619) (1,685,352) Net Increase (decrease) in cash and cash Operating income before changes in operating assets and Liabilities - 2,994,276,932 2,563,163,264 equivalents during the year (6,286,945,332) 10,619,791,324 Cash and cash equivalent at the beginning of the year 14,460,544,374 3,840,753,050 Net decrease (increase) in assets Cash and cash equivalents at the end of year 8,173,599,042 14,460,544,374 Due from banks 1,118,790,928 (2,379,927,242) Cash and cash equivalents are represented in: Treasury bills 865,634,462 (6,254,027,580) Cash and balances with Central Bank of Egypt 2,486,318,942 4,936,351,223 Financial investments for held trading 532,759,709 1,781,756,564 Due from banks 8,773,207,697 13,727,788,466 Loans and advances to customers (2,367,073,477) (2,998,801,600) Treasury bills 14,389,810,189 15,256,567,861 Housing Projects and real estate investments (771,765,019) 117,629,473 Obligatory reserve balance with CBE (1,643,612,237) (3,971,440,942) Other assets 267,178,507 375,629,370 Bank Deposits with maturity more than three-month (1,442,315,360) (233,277,583) Net increase (decrease) in Liabilities Treasury bills with maturity more than three-month (14,389,810,189) (15,255,444,651) Due to banks 246,337,906 (460,393,433) Cash and cash equivalents at the end of the year (38) 8,173,599,042 14,460,544,374 Customers’ deposits (6,760,983,641) 18,016,863,010 Other liabilities (226,135,283) (210,231,513) Income tax paid (596,101,800) (458,035,824) - The accompanying notes, from (1) to (43) form an integral part of the consolidated financial statements and to be Net cash flows from (used in) operating activities - (4,697,080,776) 10,093,624,489 read therewith.

144 Annual Report 2018 Annual Report 2018 145 Consolidated Changes in Shareholders’ Equity Statement for the year ended December 31, 2018

General banking Paid-in-capital Legal reserves General reserve Special reserve Other reserve IFRS 9 reserve Retaivned earnings Total risks reserve EGP EGP EGP EGP EGP EGP EGP EGP

Balances as of January 1 , 2017 1,265,000,000 401,329,094 467,000,000 14,447,953 14,115,643 107,474 - 1,313,775,376 3,475,775,540 Dividends paid during 2016 ------(366,665,217) (287,521,486) Transferred to reserves - 35,000,000 265,000,000 - 430,562 53,737 - (300484299) - Net profit for the year 2017 ------1,295,982,825 1,295,982,825 Balance as of 31 December 2017 1,265,000,000 436,329,094 732,000,000 14,447,953 14,546,205 161,211 - 1,942,608,685 4,405,093,148

Balance as of January 1 , 2018 1,265,000,000 436,329,094 732,000,000 14,447,953 14,546,205 161,211 - 1,942,608,685 4,405,093,148 Dividends paid during 2017 ------(326,793,500) (326,793,500) Transferred to reserves - 53,776,633 400,000,000 - 1,307,563 53,737 147,237,108 (602,375,041) - Disposal resulting from assets reverted to the bank in settlement of debts - - - - - (196,948) - - (196,948) Net profit for the Year 2018 ------1,949,371,857 1,949,371,857 Balance as of 31 December 2018 1,265,000,000 490,105,727 1,132,000,000 14,447,953 15,853,768 18,000 147,237,108 2,962,812,001 6,027,474,557

- The accompanying notes, from (1) to (43) form an integral part of the consolidated financial statements and to be read therewith.

146 Annual Report 2018 Annual Report 2018 147 Notes To The Consolidated Financial Statements for the year ended December 31, 2018

149 148 Annual Report 2018 Annual Report 2018 Consolidation procedures Notes to the Consolidated Financial Statements When preparing the consolidated financial statement, the entity consolidates the financial statements of the holding company together with that the financial statements of the subsidiaries companies by adding similar items of assets, for the year ended December 31, 2018 liabilities, shareholder’s equity, revenues and expenses so that the consolidated financial statements represent all the financial information related to the group as one entity. Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financial statements are set out below. These The following steps are taken when preparing the consolidated financial statement: policies have been consistently applied to all the years presented, unless otherwise stated. - Excluding the book value of investments of the holding company after adjusting it according to shareholders equity method in each subsidiary company with the share of the holding company in the shareholders equity in every A. Basis of preparing consolidated financial statements subsidiary company. The financial statements are prepared in accordance with Central bank of Egypt instructions approved by its board of directors on December16, 2008 in addition to the historical cost basis, modified by the revaluation of assets and - Non-controlling rights in the net profit/loss of the affiliated companies are determined during the current reporting liabilities held for trading, financial assets and liabilities originally valued with fair value through profits and losses, year . and available for sale investments, and all financial derivatives contracts. These consolidated financial statement were prepared in accordance with relevant local laws, investment in associates - Non-controlling rights in the net consolidated assets of the subsidiaries companies are determined and represented are presented in bank’s consolidated financial statement and valued according to cost less impairment loss method. in the financial statement separately from shareholders’ equity of the main company. The financial statements have been prepared until December 31, 2009 applying the Central Bank of Egypt regulations prevailing until that date which differ in some aspects from Central Bank of Egypt instructions approved by its board - Eliminating all balances, transactions, revenues and expenses exchanged in the companies of the group. of directors on December 16, 2008.While preparing the financial statements for the year ended December 31, 2010 the management changed some accounting policies, and measurement basis to be in conformity with Central Bank of - Eliminating all balances resulting from transactions between the companies of the group and the group transaction Egypt requirements for the preparation and presentation of the banks’ financial statements and measurements and including the revenues, expenses and dividends. recognition basis as issued by Central Bank of Egypt’s board of directors on December 16, 2008 The profits or losses resulting from group transactions and it’s included within the value of the assets are eliminated B- Basis of consolidating the consolidated financial statements as well. Subsidiaries Companies Subsidiaries companies are the entities over which the bank owns directly or indirectly the power to govern the - The consolidated financial statements are prepared using unified accounting policies for similar transaction and for financial and operating policies generally accompanying a shareholding of more than one-half of the voting right. the events that occurred in the same circumstances. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the bank has the ability to control the entity (when the banks direct or indirect share increase over - When the non-controlling rights from losses of a subsidiary company exceeds their shareholders equity in that 50% form the capital of the subsidiary company) or the existence of an authority of the bank to nominate or terminate company, this loss in addition to any other losses related to most of the board of directors or the existence of an authority over most of the votes in the corporate minutes in non-controlling rights are charged to majority rights except for those which are mandatory for the non-controlling the entity.The financial statement are consolidated for the subsidiaries companies in the banks consolidated financial bear and the ability to make additional investments to cover these losses , statement and that’s from the date of gaining control till the date in which the bank stops to exercise the right of if the subsidiaries company reported profits in future then these profits will be added to the majority rights to the control. extent with which the losses were covered that was previously charged to the majority right on behalf of the non- controlling. The following is a statement of the subsidiaries companies that have been consolidated in the bank’s consolidated financial statements on December 31, 2018 C. Associates The financial investments in associate company are valued according to the shareholder equity method in which Direct/Indirect share investments in the associate company is recognized when acquired at cost , then the investment balance is increased % or decreased by the bank’s share of the invested company profits or losses after the date of acquisition , then the Holding for Investment and Real Estate Company 92 % investment balance is decreased by the value of the collected coupon from the company in which the bank invested in. Housing and Development for Real Estate Investment Company 94.96% N. Goodwill El-Tameer for Financial and Real Estate Marketing Company 94.20% Goodwill (Positive/Negative) is represented in the amounts that resulted from acquiring subsidiaries companies and El- Tameer for Security and Cleaning Servies Company 85.92% its calculated based on the difference between cost of acquisition and the fair value of the net asset acquired on the El- Tameer for Assets Management Company 62.62% date of acquisition. El- Tameer for Real Estate Investment Funds 93.83% Development for Technological Services (DTS) Company 86.92% Positive goodwill is recognized by the cost deducting from it the losses that result from impairment in its value while El- Tameer for Real Estate Investment and Development Company 92.77% negative goodwill is charged directly in the income statement. Hemaya for Securities and Money transfer 94.82%

150 Annual Report 2018 Annual Report 2018 151 Maximum limits for Credit Risk before Collateral. The concentration of financial assets exposed to credit risks: Geographical segments 31 December 2018 31 December 2018 The following table represents the analysis of the most important bank’s credit risks measured at the book value, EGP EGP allocated according to the geographical segment at December 31 , 2018 While preparing this table, risks were allocated to the geographical segments according to the areas related to the bank’s customers. Items Exposed to Credit Risks Treasury Bills 14,389,810,189 15,256,567,861 Trading Financial Assets Debt Instruments 12,474,647 312,282,014 Loans and Advances to Customer Retail Loans 344,306,906 Overdrafts 343,854,016 Arab Republic of Egypt Credit cards 19,079,976 17,745,422 Personal Loans 1,838,753,818 2,014,178,201 5,169,742,973 Alexandria, Delta Real Estate Loans 6,386,914,018 Cairo Upper Egypt Total EGP and Sinai Corporate Loans: Overdrafts 4,189,116,617 2,674,795,688 Treasury Bills 14,389,810,189 - - 14,389,810,189 Direct Loans 2,011,819,891 1,796,114,582 Trading Financial Assets: Syndicated Loans 276,975,793 629,242,839 Debt Instruments 12,474,647 - - 12,474,647 Specialized Loans: Loans and Advance to Customers Direct Loans 621,019,249 766,620,223 Retail Loans: Financial Investments: Overdrafts loans 96,088,024 126,042,875 121,723,117 343,854,016 Debt Instruments 4,072,789,993 2,377,147,308 Credit cards loans 7,720,560 4,413,597 6,945,819 19,079,976 Other assets 1,564,656,313 1,173,221,505 Personal loans 586,891,726 685,335,107 566,526,985 1,838,753,818 Total 35,727,264,520 32,531,965,522 Real Estate loans 2,432,789,361 2,330,031,772 1,624,092,885 6,386,914,018 Corporate Loans: Overdrafts 2,503,185,543 1,109,273,590 576,657,484 4,189,116,617 Direct loans 1,441,709,268 456,791,532 113,319,091 2,011,819,891 Syndication loans 276,975,793 - 276,975,793 Specialized Loans: Other loans 621,019,249 - 621,019,249 Financial Investments Debt Instruments 4,072,789,993 - 4,072,789,993 Other Assets 1,535,418,811 20,845,235 8,392,267 1,564,656,313 Total as of 31/12/2018 27,976,873,164 4,732,733,708 3,017,657,648 35,727,264,520 Total as of 31/12/2017 27,931,545,393 2,479,618,160 2,120,801,969 32,531,965,522

152 Annual Report 2018 Annual Report 2018 153 The following table represents the analysis of the most important bank’s credit risk in book value, allocated according to the customers’ activity:

Financial Industrial Governmental Agricultural Commercial Services Real Estate Other Activities Individuals Institutions Total EGP Institutions activity Sector

Treasury bills ------14,389,810,189 - - 14,389,810,189 Trading financial Assets Debt Instruments - - - - - 12,474,647 - - 12,474,647 Loans &Facilities Retail Loans Overdrafts ------343,854,016 343,854,016 Credit Cards ------19,079,976 19,079,976 Personal loans ------1,838,753,818 1,838,753,818 Real Estate ------6,386,914,018 6,386,914,018 Corporate Overdrafts - 594,339,760 736,660,728 4,018,523 2,074,271,888 705,311,927 - 74,513,791 - 4,189,116,617 Direct - 483,461 54 465,606 432,146,346 1,133,581,840 297,279,181 - 93,863,457 - 2,011,819,891 Syndicated loans - - - - 276,975,793 - - - - 276,975,793 Specialized Direct loans ------621,019,249 - - 621,019,249 Financial Investments Debt Instruments ------4,072,789,993 - - 4,072,789,993 Other Assets 39,847,059 - - - 41,471,187 933,851,838 490,840,975 5,995,139 52,650,115 1,564,656,313 Total as of December 31, 2018 39,847,059 594,823,221 791,126,334 436,164,869 3,526,300,708 1,936,442,946 19,586,935,053 174,372,387 8,641,251,943 35,727,264,520 Total as of December 31, 2017 61,796,699 374,572,871 699,921,334 432,164,869 2,901,691,964 1,078,339,770 19,103,815,647 298,688,751 7,580,973,617 32,531,965,522

A. Market Risk The bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices The bank separates exposures to market risk into trading and non-trading portfolios. Market risks are measures, monitored and controlled by two teams separately, and regular reports are submitted to the board of directors and heads of each business units. Trading portfolios include positions arising from market-to-market transactions where the bank acts as principal with the customers or with the market. Non-trading portfolios include portfolios that primarily arise from the interest rate management of the entity’s retail and commercial banking assets and liabilities, and these non-trading portfolios consist foreign exchange and equity risks arising from financial investments designated as available for sale and held-to-maturity.

154 Annual Report 2018 Annual Report 2018 155 Interest rate Risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may profit decrease in the event that unexpected movements arise. The board sets limits on the level of mismatch of interest rate reprising that may be undertaken, which is monitored daily by Risk Dept. The following table summarizes the risk that the bank faces the change in the return value including the book value of financial instruments allocated based on the re-pricing dates or due dates price whichever is sooner:

(Values in Egyptian thousands pounds)

More than 1 month More than 3 months More than 1 year to Without Up to 1 month to 3 months to 1 year 5 years return Total

December 31, 2018 Financial Assets: Cash and Due From Central Bank ------2,486,135 2,486,319 Due from banks 6,915,315 1,800,000 -- -- 57,891 8,773,206 Treasury Bills 3,502,487 1,485,307 5,483,683 5,334,700 -- 15,806,177 Trading financial assets 340,298 -- -- 48,722 -- 389,020 Loans & facilities to customers 1,184,348 169,325 4,474,814 9,859,046 -- 15,687,533

Financial investments: Available for sale ------53,327 -- 53,327 Held to maturity 4,079,790 -- -- 10,000 -- 4,089,790 Other assets ------4,556,098 2,359,443 6,915,541 Total financial assets 16,022,238 3,454,632 9,958,497 19,861,893 4,903,653 54,200,913

Financial liabilities Due to banks 455,937 ------983 456,920 Customer’s deposits 4,550,568 1,853,741 1,922,932 8,122,737 17,404,001 33,853,979 Other loans 178 1,427 130,058 5,086,768 -- 5,218,431 Other financial liabilities - - - 4,843,818 9,827,765 14,671,583 Total financial liabilities 5,006,683 1,855,168 2,052,990 18,053,323 27,232,749 54,200,913 Re-pricing gap 11,015,555 1,599,464 7,905,507 1,808,570 (22,329,096) -

156 Annual Report 2018 Annual Report 2018 157 A. Revenues and Expenses According to Segment Activity B. Analysis of Geographical Segments

Corporate Investment Individuals Other activities Total EGP 31 December 2018 The year ended on December 31 , 2018 Alexandria, Delta Revenues &expenses in accordance Greater Cairo & Sinai Upper Egypt Total EGP Segment activity revenues 2,120,048,940 1,668,089,062 1,982,503,035 1,810,544,096 7,581,185,133 with geographical segment Segment activity expenses 1,456,523,264 768,458,090 1,556,142,332 776,982,940 4,558,106,626 Geographical segment revenues 5,661,153,534 1,413,413,013 506,618,586 7,581,185,133 Segment operation results 663,525,676 899,630,972 426,360,703 1,033,561,156 3,023,078,507 Geographical segment expenses 4,062,388,202 667,647,554 252,403,172 4,982,438,928 Unclassified expenses - - - - ( 424,332,302) Sector’s profit results 1,598,765,332 745,765,459 254,215,414 2,598,746,205 Net income for the year before taxes - - - - 2,598,746,205 Net income for the year before taxes - - - 2,598,746,205 Taxes - - - - ( 632,745,758) Taxes - - - (632,745,758) Net income for the year - - - - 1,966,000,447 Net income for the year after taxes - - - 1,966,000,447 Assets and liabilities in accordance with geographical segment Assets of geographic segment 40,604,321,011 6,854,673,888 2,452,488,869 49,911,482,768 Non classified assets 836,733,490 Corporate Investment Individuals Other activities Total EGP Total Assets 40,604,321,011 6,854,673,888 2,452,488,869 50,748,217,258 The year ended on December 31 , 2017 Liabilities of geographic segment 35,172,358,801 7,008,908,493 2,448,273,458 44,629,540,752 Segment activity revenues 1,381,826,628 1,449,024,011 1,603,816,597 1,595,333,699 6,030,000,935 Other items of the Geographical segment Segment activity expenses 788,754,916 723,984,536 1,244,673,046 489,263,924 3,246,676,422 Depreciations (187,123,123) (14,024,798) (3,655,276) (204,803,197) Segment operation results 593,071,712 725,039,475 359,143,551 1,106,069,775 2,783,324,513 Impairment (219,529,105) (219,529,105) Unclassified expenses - - - - (1,004,516,987) Net income for the year before taxes - - - - 1,778,807,526 Taxes - - - - (466,789,216) Net income for the year after taxes - - - - 1,312,018,310

31 December 2017

Alexandria, Delta Revenues &expenses in accordance Greater Cairo & Sinai Upper Egypt Total EGP with geographical segment Geographical segment revenues 4,586,279,988 1,140,976,517 302,744,430 6,030,000,935 Geographical segment expenses 3,543,770,067 528,820,107 178,603,235 4,251,193,409 Sector’s profit results 1,042,509,921 612,156,410 124,141,195 1,778,807,526 Net income for the year before taxes - - - 1,778,807,526 Taxes - - - (466,789,216) Net income for the year after taxes - - - 1,312,018,310 Assets and liabilities in accordance with geographical segment Assets of geographic segment 40,766,867,747 9,647,649,379 2,800,317,487 53,214,834,613 Non classified assets 608,521,571 Total Assets 40,766,867,747 9,647,649,379 2,800,317,487 53,823,356,184 Liabilities of geographic segment 37,078,797,439 9,484,679,248 2,776,176,747 49,339,653,434 Other items of the Geographical segment Depreciations (100,640,622) (10,714,721) (2,588,542) (113,943,885) Impairment (890,573,102) - - (890,573,102)

158 Annual Report 2018 Annual Report 2018 159 Net Trading Income 31 December 2018 31 December 2017 Net Interest Income 31 December 2018 31 December 2017 EGP EGP EGP EGP Forex profit (losses) 15,881,402 23,465,450 Interest received from loans and similar items: Debt instruments held for trading 4,464,656 143,856,235 Loans and advances to customers 1,878,163,825 1,441,507,247 Debt instruments Equity held for trading 45,931,362 107,629,356 Treasury bills 2,161,527,849 1,600,220,665 Net trading income 66,277,420 274,951,041 Deposits and current accounts 1,622,409,284 1,330,513,602 Held to maturity investments 486,326,556 361,692,741 Total 6,148,427,514 4,733,934,255

Revenue From Housing Projects 31 December 2018 31 December 2017 EGP EGP Sales of housing properties 995,788,279 785,130,736 Cost of sold properties (446,875,020) (384,001,822) Net Fees & Commissions Income 31 December 2018 31 December 2017 Revenue from properties 548,913,259 401,128,914 EGP EGP Other housing revenues 143,765,428 168,620,206 Fees & commissions income : Total 692,678,687 569,749,120 Fees & commissions related to credit 28,058,603 28,132,678 Financing fees 156,286,198 124,949,790 Other fees 148,468,984 151,784,793 Total 332,813,785 304,867,261 Fees and commission expenses: Administrative Expenses 31 December 2018 31 December 2017 Other paid fees (28,880,648) (26,919,965) EGP EGP Net income from fees and commissions 303,933,137 277,947,296 Staff cost Wages and salaries 615,653,239 534,069,523 Social insurances 30,672,636 24,723,952 Retirement benefit cost 11,656,711 9,945,205 Dividends Income 31 December 2018 31 December 2017 Operation utilities 373,560,150 278,378,636 EGP EGP Current expenses 270,133,609 172,832,940 Held for trading 2,356,179 4,892,398 Portion of social and athletic activities 1,282,550 1,133,400 Available for sale 8,935,195 5,977,462 Donations 67,403,134 14,561,092 Total 11,291,374 10,869,860 Others 44,252,209 28,991,850 Total administrative expenses 1,414,614,238 1,064,636,598

160 Annual Report 2018 Annual Report 2018 161 Other Operating Revenues (Expenses) 31 December 2018 31 December 2017 Due From Banks 31 December 2017 EGP EGP Revaluation losses of assets and liabilities balances in foreign 31 December 2018 Current accounts currencies with monetary nature other than held for trading or EGP EGP 57,892,337 55,510,883 Deposits classified at inception at fair value through profit and loss (4,279,191) (4,243,050) 8,715,315,360 13,672,277,583 Gains on sale of property and equipment 3,132,619 1,685,352 8,773,207,697 13,727,788,466 Central Bank(excluding obligatory reserve) Reversal of provisions 5,822,679 23,879,903 7,049,851,060 11,845,579,136 Local Banks Others 81,278,364 63,836,806 1,683,672,738 1,852,464,140 Foreign Banks Total 85,954,471 85,159,011 39,683,899 29,745,190 8,773,207,697 13,727,788,466 Non-interest bearing balances 96,892,337 94,510,883 Interest bearing balances (Fixed rate) 8,676,315,360 13,633,277,583 Current balances 8,773,207,697 13,727,788,466 Income Tax Expenses 31 December 2018 31 December 2017 EGP EGP

Current taxes (626,234,287) (472,919,322) Deferred income taxes (6,511,471) 6,130,106 Total (632,745,758) (466,789,216) 31 December 2018 31 December 2017 Treasury Bills EGP EGP

Treasury bills, maturity 91 days - 1,150,000 Treasury bills, maturity 182 days 48,775,000 2,321,450,000 Earnings Per Share Treasury bills, maturity 273 days 3,965,575,000 5,408,450,000 Earnings per share are calculated by dividing the net profit for the year attributable to the equity shareholders by the weighted Treasury bills, maturity 364 days 11,749,877,200 8,755,578,000 average number of shares outstanding during the year. 15,764,227,200 16,486,628,000 Unearned interest (1,374,417,011) (1,230,060,139) Total 14,389,810,189 15,256,567,861

31 December 2018 31 December 2017 EGP EGP - As of 31 December 2018, the pledged treasury bills in favour of the Central Bank amounted to LE 5,335 billion against loans granted by the Central Bank under the Initiative of Mortgage Finance. Net profit for the year available for controlling interest 1,949,371,857 1,295,982,825 Weighted average number of shares 126,500,000 126,500,000 Basic earnings per share 15.41 10.24

Cash and Balances With Central Bank 31 December 2018 31 December 2017 EGP EGP

Cash 842,706,705 964,910,281 Due from central Bank within the required reserve percentage 1,643,612,237 3,971,440,942 Non-interest bearing balances 2,486,318,942 4,936,351,223

162 Annual Report 2018 Annual Report 2018 163 Financial Investments Financial Investments Total EGP available for sale Held to maturity

Trading Financial Assets 31 December 2018 31 December 2017 EGP EGP EGP EGP Balance at the beginning of January 1, 2018 54,979,234 2,394,147,308 2,449,126,542 Debt instrument Additions 9.,250 2,120,494,048 2,120,503,298 Bonds 12,474,647 312,282,014 Amortization of premium issuance - 10,148,637 10,148,637 Total debt instrument 12,474,647 312,282,014 Disposals (20,000) (435,000,000) (435,020,000) Equity instrument listed in stock market Balance as of December 31, 2018 (1,641,104) - (1,641,104) Local companies’ shares 62,162,100 83,859,689 Balance as of January 1, 2017 53,327,380 4,089,789,993 4,143,117,373 Total equity instrument 62,162,100 83,859,689 54,939,234 2,430,414,227 2,485,353,461 Equity instrument not listed in stock market Additions 40,000 354,194,525 354,234,525 Mutual funds investment certificates 10,911,003 31,568,131 Amortization of premium issuance - 6,164,210 6,164,210 Total equity instrument not listed in stock market 10,911,003 31,568,131 Disposals - (396,625,654) (396,625,654) Financial investment portfolio managed by others 303,472,677 448,018,658 Balance as of December 31, 2017 54,979,234 2,394,147,308 2,449,126,542 Total trading financial assets 389,020,427 875,728,492

31 December 2018 31 December 2017 Losses From Financial Investments EGP EGP

Impairment losses Equity instrument – Held for Trading (1,641,104) - Total (1,641,104) - 31 December 2018 31 December 2017 Financial Investments EGP EGP Financial Investments available for sale Equity instrument at cost (unlisted) 53,327,380 54,979,234 Total Financial Investments available for sale Financial Investments Held to maturity 53,327,380 54,979,234 Debt instruments at amortized cost: Debt instrument (listed) 4,062,789,993 2,367,147,308 Debt instrument (unlisted) 10,000,000 10,000,000 Mutual fund’s instrument established according to the issued rates 17,000,000 17,000,000 Total Financial Investments Held to maturity 4,089,789,993 2,394,147,308 Total Financial Investments 4,143,117,373 2,449,126,542 Current Balances 4,062,789,993 2,367,147,308 Non-current Balances 80,327,380 81,979,234 4,143,117,737 2,449,126,542 Debt Instruments – interest bearing (fixed rate) 4,072,789,993 2,377,147,308

164 Annual Report 2018 Annual Report 2018 165 Investments In Associated Companies 31 December 2018

Company’s total Company’s total liabilities Company’s total Company’s total profit assets without owners’ equity revenues (loss) Shares percentage Shares Value EGP EGP EGP EGP % EGP

El-Tameer housing and utilities company * 231,176,978 178,302,686 142,826,132 4,342,418 35 % 18,068,502 El-Tameer Real Estate Finance company * 1,873,774,332 1,045,484,544 236,193,110 44,938,146 24.8% 205,734,162 Hyde Park for Real Estate Development Company 9,111,649,525 7,080,142,161 1,744,859,295 242,140,758 53.66% 884,798,758 City edge company 3,294,894,525 1,714,895,209 780,218,108 198,655,660 39.52% 614,313,846 HD for leasing ** - - - - 78% 99,599,313 Total 14,511,495,360 10,018,824,600 2,904,096,645 490,076,982 1,822,514,581

The bank shares’ in profits of associated companies in 31 December 2018 amounted to EGP 221,396,949 31 December 2017

Company’s total Company’s total liabilities Company’s total Company’s total profit assets without owners’ equity revenues (loss) Shares percentage Shares Value EGP EGP EGP EGP % EGP

El-Tameer housing and utilities company * 155,703,047 104,934,727 114,420,195 1,832,694 35 % 17,768,912 El-Tameer Real Estate Finance company * 1,336,019,085 860,154,578 141,206,974 23,482,413 24.8% 200,162,901 Hyde Park for Real Estate Development Company 9,173,241,035 7,470,380,985 673,473,389 105,601,357 53.66% 755,768,598 City edge company 1,692,098,254 460,459,348 84,582,314 54,029,475 31.55% 388,615,215 El-Tameer for security and money transit company ** - - - - 94.82% 15,000,000 HD for leasing ** - - - - 78% 4,599,313 Total 12,357,061,421 8,895,929,638 1,013,682,872 184,945,939 1,381,914,939

166 Annual Report 2018 Annual Report 2018 167 31 December 2018 31 December 2017 Intangible Assets Housing Projects 31 December 2018 31 December 2017 EGP EGP Computers programs EGP EGP Lands allocated for housing projects 567,536,792 667,461,547 Beginning cost 175,628,756 108,325,466 Under Construction projects 1,592,195,848 732,051,621 Additions during the year 121,926,806 67,303,290 Finished projects 508,871,393 472,890,393 Ending cost 297,555,562 175,628,756 Housing projects provision (19,327,219) (19,327,219) Accumulated depreciation at the beginning of the year (89,883,211) (54,656,298) Total 2,649,276,814 1,853,076,342 Depreciation during the year (86,442,180) (35,226,913) Accumulated depreciation at the end of the year (176,325,391) (89,883,211) The total area of empty units’ available for sale household units 312.9 meters, administrative and commercial buildings 33.1 meters Net book value at the end of the year 121,230,171 85,745,545 and the lands 2.425 million meters.

Real Estate Investments 31 December 2018 31 December 2017 EGP EGP Other Assets 31 December 2018 31 December 2017 Total Investments 148,363,465 145,995,618 EGP EGP Accumulated Depreciation (30,092,013) (20,707,155) Accrued revenues 492,721,618 450,820,706 Net book value at the beginning of the year 118,271,452 125,288,463 Prepaid expenses 5,690,080 3,999,244 Additions 9,033,572 3,853,940 Advanced payments for purchasing fixed assets 68,270,066 97,384,433 Disposals (38,678,318) (1,486,093) Notes receivable and customers 381,673,171 333,483,958 Accumulated depreciation of Disposals 5,209,293 388,129 Insurance and consignment 4,547,220 3,643,419 Depreciation of the year (9,582,971) (9,772,987) Assets reverted to banks in settlement of debts 51,316,972 1,531,826 Net book value at the end of the year 84,307,028 118,271,452 Others 560,437,186 282,357,919 Total 1,564,656,313 1,173,221,505 Real estate investments rented for the bank’s companies and others with yearly renewal contracts and with depreciation calculated for the rented units at 5% annually. Real estate investments have been revaluated with the fair value by an amount of MEGP 373.6 As of 31 December 2018 by an evaluator with a recognized professional certificate and has an experience of real estate.

168 Annual Report 2018 Annual Report 2018 169 Fixed Assets Buildings Transportation Machinery & Automated Facilities & Lands Furniture Total &Constructions vehicle Equipment systems installments EGP EGP EGP EGP EGP EGP EGP EGP Balance at January 1, 2017 Cost 2,771,608 338,109,455 34,682,023 208,679,706 50,438,356 2,322,174 18,034,008 655,037,330 Accumulated Depreciation - 113,157,630 21,387,380 141,520,007 28,373,181 1,555,405 16,811,751 322,805,354 Net book value at January 1, 2017 2,771,608 224,951,825 13,294,643 67,159,699 22,065,175 766,769 1,222,257 332,231,976 31 December 2018 Net book value at January 1, 2017 2,771,608 224,951,825 13,294,643 67,159,699 22,065,175 766,769 1,222,257 332,231,976 Additions 6,336 118,442,046 13,070,063 109,832,192 20,725,585 1,218,883 6,605,859 269,900,964 Disposals - - 971,603 7,499,327 1,067,207 46,518 - 9,584,655 Accumulated depreciation of disposals - - 470,802 7,466,420 964,930 42,561 - 8,944,713 Depreciation expense - 19,202,211 4,596,771 44,836,941 5,032,198 393,730 4,655,121 78,716,972 Net book value at December 31, 2017 2,777,944 324,191,660 21,267,134 132,122,043 37,656,285 1,587,965 3,172,995 522,776,026

Balance at January 1, 2018 Cost 2,777,944 456,551,501 46,780,483 311,012,571 70,096,734 3,494,539 24,639,867 915,353,639 Accumulated Depreciation - 132,359,841 25,513,349 178,890,528 32,440,449 1,906,574 21,466,872 392,577,613 Net book value at January 1, 2018 2,777,944 324,191,660 21,267,134 132,122,043 37,656,285 1,587,965 3,172,995 522,776,026

31 December 2018 Balance at December 31, 2018 Net book value at January 1, 2018 2,777,944 324,191,660 21,267,134 132,122,043 37,656,285 1,587,965 3,172,995 522,776,026 Additions 20,520,830 54,167,548 10,714,128 209,128,895 14,979,658 1,328,617 1,558,593 312,398,269 Disposals - 1,449,135 2,052,789 59,289 17,806 - - 3,579,019 Accumulated depreciation of disposals - 1,177,420 1,890,184 59,283 14,576 - - 3,141,463 Depreciation expense - 22,200,233 8,401,822 77,342,339 6,442,556 856,763 3,117,304 118,361,017 Depreciation charged of investments property - 872,403 - - - - - 872,403 Net book value at December 31 , 2018 23,298,774 355,014,857 23,416,835 263,908,593 46,190,157 2,059,819 1,614,284 715,503,319

Balance at December 31 , 2018 Cost 23,298,774 509,269,914 55,441,822 520,082,177 85,058,586 4,823,156 26,198,460 1,224,172,889 Accumulated Depreciation - 154,255,057 32,024,987 256,173,584 38,868,429 2,763,337 24,584,176 508,669,570 Net book value at December 31, 2018 23,298,774 355,014,857 23,416,835 263,908,593 46,190,157 2,059,819 1,614,284 715,503,319

170 Annual Report 2018 Annual Report 2018 171 Customers’ Deposits 31 December 2018 31 December 2017 EGP EGP Other Liabilities 31 December 2018 31 December 2017 Demand deposit 14,965,981,227 15,902,785,469 EGP EGP Time & call deposits 6,280,702,284 3,844,116,703 Saving certificates 3,628,298,781 3,218,927,350 Accrued interest 340,516,636 286,141,428 Saving deposits 5,030,227,545 4,660,068,479 Unearned revenue 1,326,190 1,400,567 Other deposits 3,948,769,212 12,989,064,689 Accrued expense 115,523,782 70,161,162 33,853,979,049 40,614,962,690 Creditors 43,483,245 33,790,990 Institutions deposits 17,518,613,500 16,198,815,247 Advanced payments for lands and units 750,243,645 948,298,414 Individual deposits 16,335,365,549 24,416,147,443 Down payments for installments 218,121,760 403,935,278 33,853,979,049 40,614,962,690 Checks under payment & credit accounts under settlement 553,925,012 679,127,250 Non-interest bearing balances 17,404,000,777 28,891,850,158 Creditors to buy lands 867,062,671 77,016,432 Interest bearing balances (variable rate) 4,849,227,545 4,660,068,479 Other credit balance 1,310,009,332 1,294,389,248 Interest bearing balances (fixed rate) 11,600,750,727 7,063,044,053 Total 4,200,212,273 3,794,260,769 33,853,979,049 40,614,962,690 Current balances 30,225,680,268 37,396,035,340 Non-current balances 3,628,298,781 3,218,927,350 33,853,979,049 40,614,962,690

Provisions 31 December 2018 31 December 2017 EGP EGP

Other Loans Interest rate 31 December 2018 31 December 2017 Balance at the beginning of the year 373,675,654 213,649,701 % EGP EGP Charged to income statement 297,667,819 172,964,415 Transferred during the year 22,466,393 (1,610,340) Long term loans Used during the year (19,296,387) (11,328,122) Loans Granted from the CBE: Balance at the end of the year 674,513,479 373,675,654 Loans of Bank Activity 17.25% 4,568,112 12,859,384 New Urban Communities organization 17.25% 38,622,647 51,278,282 Construction & Housing Organization 17.25% 516,071,323 597,678,429 - There is a provision for EGP 59,741,681on December 31, 2018 against EGP 37,207,675 in the comparative financial year toface contingent liabilities. Houses Mutual Fund 17.25% 14,699,165 21,203,293 Low income 2,5 % 3,324,142,672 2,471,426,108 Middle income 4,5 % 252,448,994 177,932,228 Below low income 0.50 % 860,114,248 645,348,133 Above middle income 7,00% 79,969,849 21,935,980 Total loans granted from the CBE 5,090,637,010 3,999,661,837 Deferred Income Tax Loans granted from the Social Fund for development 14.75 % , 7 % 58,815,000 79,075,000 Deferred Tax Assets (Liabilities) The Egyptian Company for real estate refinance loan 10.25% , 11% 68,979,367 78,030,110 Total 5,218,431,377 4,156,766,947 31 December 2018 31 December 2017 Current balances 68,979,367 78,030,110 EGP EGP Non-current balances 5,149,452,010 4,078,736,837 5,218,431,377 4,156,766,947 Fixed assets and Intangible Assets (2,899,706) 3,611,765 Total deferred tax asset (liability) (2,899,706) 3,611,765 The bank fulfilled its commitments regarding those loans in terms of the principal amount & interest amount or any other conditions during 2018 and 2017.

172 Annual Report 2018 Annual Report 2018 173 Deferred Tax Assets (Liabilities) Transactions:

31 December 2018 31 December 2017 EGP EGP Fixed assets and Intangible Assets (2,899,706) 3,611,765 Total deferred tax asset (liability) (2,899,706) 3,611,765

Deferred tax assets (liabilities) transactions:

31 December 2018 31 December 2017 EGP EGP Beginning balances of the year 3,611,765 (2,518,341) Charged to income statement (6,511,471) 6,130,106 Ending balance of the year (2,899,706) 3,611,765

Cash And Cash Equivalents 31 December 2018 31 December 2017 EGP EGP Due from central bank 842,706,705 964,910,281 Due from banks 7,330,892,327 13,494,510,883 Treasury bills - 1,123,210 8,173,599,042 14,460,544,374

Transactions With Related Parties

- As per CBE instructions on 23 August 2011 and 1 March 2012 Salaries and wages for the Year ended 31 December 2018 includes an amount of EGP 3,532,250 which represents average total top 20 salaries of bank, Subsidiaries and associates companies, paid during the Year. ( 4,203,600 As of 31 December 2017)

Comparative figures Before restatements Restatements After restatements EGP EGP EGP Statement of Profit or loss Other provision (100,000,000) (59,228,913) (159,228,913) Other operating income 25,930,098 59,228,913 85,159,011

- Other operating income has been increased with amount of EGP 59,228,913 against increase in the other provision with the same amount – Note (12).

• The items that have not been mentioned above should be read with that mentioned in Housing and Development Bank’s complementary notes.

174 Annual Report 2018 Annual Report 2018 175