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French Version

Buyers get set for Bank of Alexandria sale

Jockeying is getting under way ahead of the planned privatization this summer of Egypt's Bank of Alexandria (BOA), the country's first large publicly owned lender to go on the block. The sale is part of a government strategy to consolidate and streamline the banking sector, still dominated by state-owned institutions, so as to spur competition and improve profitability.

BOA is the smallest of the country's big four banks, along with sector giant National Bank of Egypt (NBE), Bank Misr and Bank of Cairo.

It has assets of 37.4 billion Egyptian pounds ($6.51 billion, 5.37 billion euros), or five percent of the market, and deposits of 31.8 billion pounds, or seven percent.

Along with the sale of BOA, the government has also decided to merge Bank Misr and Bank of Cairo to make them more competitive with NBE. In fact, the new entity, with assets of 163 billion Egyptian pounds, will be slightly large than NBE, at 131.7 billion.

In January, the government swept away a major obstacle to BOA's sale by repaying seven billion pounds in loans owed to the bank by government companies.

As a first step in the sale, potential buyers, thought to include such heavyweights as Barclays, Paribas and Credit Agricole-Indosuez, will be able to acquire the prospectus in the coming days.

But many are playing their cards close to their chests.

"We will certainly have a look at the prospectus," says Philippe Torre, the director in Egypt of Paribas, a French lender whose local client base is doubling every nine months.

At Barclays, the word is "no comment; it's just pure speculation," he says.

Lebanon's Audi Bank has just bought the medium-sized Cairo Far East Bank. Its strategic director, Freddie Baz, says the Bank of Alexandria "is not our target."

And HSBC's Pierre Francon, also says his bank will not be bidding.

"We would have to start from scratch with it."

Meanwhile, BOA vice president Fatma Lotfi told Al-Ahram Hebdo magazine that Egypt's Commercial International Bank is probably the favorite, with Deutsche Bank an outside chance.

The bank will be sold in three tranches - 75 percent to a strategic investor, 20 percent to be listed on the stock market and the balance to employees.

The battle for Bank of Alexandria and its 184 branches "will be very hot because the issue is one of having a critical mass to cope in a market with such strong potential," says Adrian Phares, director general of Calyon Egypt, a unit of Credit Agricole-Indosuez.

Calyon, which recently bought the private Egyptian American Bank and already has a number of other units, has still not finished its "shopping," Phares says.

Nabil Hashad, chairman of the Arab Center for Financial and Banking Studies and Consulting, told Egypt's Business Today magazine earlier this year that the deal will send a very important signal to the whole sector.

"If its privatization is successful, it will encourage investment in the banking sector. If not, it will negatively reflect on the sector. The best is to sell it to a professional banking institution," he says, agreeing that an IPO is not the best tack to take.

The government has decided to reorganize the public banking sector, which accounts for 57 percent of deposits and to begin clearing out non-performing loans.

This, in turn, is part of a broader strategy to clean up the public sector and privatize 170 non-strategic companies.

In the banking industry alone, the number of lenders has been reduced from 60 to 26. A 2003 banking law set a strict new capital adequacy requirement of 500 million pounds which led to a wave of forced mergers.

In Egypt, banks are operating in a radically different environment than lenders in the West. Out of a population of some 73 million people, only about one-quarter have regular earnings.

And only three million earn more than 1,000 Egyptian pounds (140 euros, $175) a month.

Cairo,04 03 2006
The Daily Star
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