CAIRO: Five regional and international banking players have lined up Tuesday for the bidding on Banque Du Caire amid expectations the sale could generate up to $2 billion, officials said.
According to Mohamed Barakat, chairman of the Technical Committee for the execution of the sale of Banque du Caire, the sale of the bank would begin Tuesday through an open auction whereby short-listed banks would submit their final financial bids for a minimum of 51 percent and a maximum of 67 percent stake in the bank.
Banks vying for the stake include the National Bank of Greece, UK-based Standard Chartered Bank, Saudi Arabia’s Samba Financial Group, Dubai’s Mashreq Bank (UAE), and a consortium formed by Jordan’s Arab Bank and the Saudi Watany Arab Bank.
The auction’s results are expected to be announced Wednesday or Thursday.
“We expect the bank to sell at a higher market price per book value, said Hatem Alaa, banking analyst at HC Securities. He added he could not predict a specific figure because the bank’s exact book value was still unspecified.
“The bank will generate a very high price as a result of two main things, he clarified. “One, it’s possibly one of the best chances to enter the banking sector in Egypt. Secondly, it has undergone restructuring processes before the sale – similar to what happened with Bank of Alexandria – whereby its non-performing loans were transferred to Banque Misr.
Banque Misr has recently announced it completed the acquisition and sale of almost 95 percent of Banque du Caire’s investment portfolio in preparation for the sale of the bank.
In a bid to tackle Banque Du Caire’s debt and non-performing loans, the government embarked in 2005 on reform plans before the official sale process, aspiring to clean up the bank’s portfolio and ultimately sell it at a good price. Under the management and supervision of Banque Misr, the government announced it succeeded to cover 40 percent of the bank’s stumbled loans portfolio.
According to EFG-Hermes records, Banque Du Caire holds a six percent market share by assets and deposits, around 200 branches, an ATM network, and a developed IT infrastructure, which all pose the bank an opportunity for new players that seek to enter the Arab world’s most populous nation.
With less than 10 percent of the Egyptian population being banked, experts recently pegged Egypt’s banking sector an evergreen opportunity for banking institutions – both domestic and foreign – to penetrate the market and increase access to finance.
“This offers an opportunity in the market. Egypt has long been a cash economy . and now foreign banks are attracted to Egypt because of this low penetration rate, Nada Shousha, country officer at the International Finance Corporation (IFC), previously told Daily News Egypt. “This is where the potential exists, in a country with a large population and a growing economic rate.
Currently, Banque Du Caire is Egypt’s third largest state-owned bank – after the National Bank of Egypt and Banque Misr – with some two million customers. The initial sale plan, unveiled in July 2007, was to sell 80 percent of Banque Du Caire to a strategic investor. Fifteen percent of shares would be made public, and five percent were to be offered to employees.
The somewhat abrupt decision to privatize the bank sparked controversy from both opposition parties and the public which feared selling the bank to a foreign entity that could afford the staggering LE 12-15 billion estimated sale value. The pending sale process also fueled debate in the press, which accused the government of gratuitously selling Egyptian assets to foreign institutions, putting public welfare at risk.
The government justified the sale by outlining the bank’s non-performing loans that represent around 73 percent of gross loans. According to state reports, the bank was weighed down with deficit that bulks up to LE 12-14 billion, representing six times its entire capital.
The Cabinet claimed at that time its only option was to sell the bank, as merging it with possible candidate Banque Misr would have been too costly (a whopping LE 20 billion).
Since the announcement of the sale process, public opinion has been at odds with the decision, resulting in an attempt by left-wing political figures to collect money from the public to place a bid on the bank.
Amid growing public dismay, the government amended its decision and announced offering a 67 percent stake in the bank, 28 percent in an initial public offering on the Egyptian stock exchange, and the remaining five percent to employees.
The Central Bank of Egypt (CBE) short-listed last March the five potential buyers, which reportedly presented a letter of guarantee valued at $75 million (LE 405 million), as well as a plan for revitalizing the bank, and sources of financing and shareholder structure.
The CBE revealed it anticipated revenues from the purchase of Banque Du Caire to exceed that of the Bank of Alexandria – sold for $1.613 billion – as the former was larger with more branches and a more sophisticated electronic dat