top of page
  • Writer's pictureNadim Samna

What are the distribution strategies applied by banks in Egypt? You may be surprised…

Updated: Aug 12, 2019

Most commercial banks in Egypt have ongoing projects to open new banking branches. Beyond just opening new branches, banks apply specific strategies for their distribution. Each bank follows the most efficient distribution strategy to reach its target customers. So, variances in the distribution strategy means targeting different customers’ segments. A big part of the global strategy of any bank can therefore be identified by analyzing its distribution strategy.

"Egypt is characterized by an uneven distribution of wealth, which highly impacts banking distribution strategies"

Banks targeting Premium / VIP individuals or favoring corporate over retail banking will tend to concentrate their branches in these cities where wealth is also concentrated, such as greater Cairo and Alexandria. A geographical concentration ratio (GCR) is easily measured by calculating the average number of banking branches per city.

We compared the number of branches of 29 banks operating in Egypt to their geographical concentration ratio to identify each bank’s distribution strategy.

We found out that 4 distinct groups clusters banks operate in Egypt.

Pioneers have an aggressive expansion strategy to cover the Egyptian market. They try to find cities with low banking density. They face higher logistics expenses for cash transportation and distant branches management, but they are in advance in terms of the required experience curve to succeed in the Egyptian market. As Islamic banks target clients in rural cities as well as major cities, they tend to be present in more cities than average bank. This group is the most likely to succeed in developing the retail banking division. A prominent pioneer bank is Abu Dhabi Islamic Bank. In the past few years, ADIB has been aggressively opening branches and exploring new cities to accelerate the expansion of its clients’ portfolio. It was successful to catch up with other banks in terms of number of branches and customers.

Selective banks mainly target corporates and wealthy individuals. Their strategic objective is clearly to seek profitability. They don’t want to make long term investments or endure heavy operational costs. We find in this group most European banks which may not be willing to expand in smaller Egyptian cities before implementing adapted processes. Still, they are eager to expand their network in cities where they are already present. HSBC is a strong example of this group; its network of 67 branches covers only 14 cities, out of which only 5 are located outside greater Cairo and Alexandria (Hurghada, Sharm El Sheikh, Mansoura, Port Said, Assiut). To grasp the full potential of the Egyptian banking market, HSBC should explore new cities. It’s the only strategy that will allow HSBC to continue regenerating its sources of revenues and to increase its clients base. When the retail banking market will reach a tipping point, HSBC will be outpaced by other banks in acquiring new clients. Its market share will therefore shrink rapidly.

Cautious banks are focused on niche clients -corporates or wealthy individuals- and are not yet interested in expanding their footprint in Egypt. We expect that the number of cautious banks will decrease as this strategy is not sustainable on the long term. These banks will have to choose between investing in their network or finding a suitable exit strategy. Egyptian Gulf bank wants to reach 50 branches very soon, while National bank of Greece already announced it is seeking to sell its subsidiary in Egypt.

Daredevils, despite their very limited current network, are willing to take higher engagement in terms of distribution as they plan to expand their geographical presence. They are looking for untapped areas, targeting mainly individual clients. During their expansion, they will become either pioneers or selective banks. Not expanding their network of branches means that they will continue to endure high operational costs without the benefits of economies of scale. With only 18 branches, National bank of Abu Dhabi covers 11 cities, meaning almost one branch per city. This shows a clear commitment from this bank towards maximizing its outreach. The cost of running such a dispersed operation without the benefit of economies of scale is a key question to be answered when evaluating a similar strategy.

6 Banks with networks larger than 100 branches were disregarded in the previous chart as it would be biased to compare almost 600 branches of Banque Misr to the 10 branches of Mashreq bank. Nevertheless, we observe that the 3 public banks (National bank of Egypt, Banque Misr and Banque du Caire) have a balanced geographical presence with an average of 3 branches per city. CIB and QNB have a more Selective strategy as their network is more concentrated with more than 4.5 branches per city. AlexBank is clearly in the Pioneers group with only 2 branches per city in average. It is probably a challenge for its short-term profitability.

It appears that banks should not stay in the Cautious or Daredevils groups for long. As they open new branches, they will become either selective or pioneers. This doesn't mean that those who are comfortably installed in the 2 upper groups Pioneers and Selective are there forever. As the average number of branches per bank increases, inactive banks will obviously slip behind the market and return to a less comfortable situation. To bear in mind, the analysis of Stratexis already showed that the number of banking branches in Egypt is really low for a population that need to banked. This means that the average number of branches per bank will definitely soar in the coming years.

The final question would be, is there a sweet spot where all banks should converge to? The answer is definitely no, following the herd was never a winning strategy. All banks are different and each one should look for its own sweet spot. The objective is to create its own blue ocean where competition is absent.


These results are fully aligned with our previous analysis and recommendations concerning the banks’ development strategy in Egypt. In our next study, we will present another aspect of distribution strategy: revenues versus profitability



Nadim Samna

Managing Partner

346 views0 comments
bottom of page