Bidders on bank to be narrowed to five
CAIRO: For those keeping abreast of the news in the ongoing saga of the privatization of the Bank of Alexandria (BOA), there is light at the end of the tunnel. Nine local, regional and international banks have made their interest in the BOA official.
The interested parties are the Egyptian Commercial International Bank, Jordanian Arab Jordan Limited, Emirate’s Al Mashreq Bank, French BNP Paribas, Greek National Bank of Greece, Saudi SAMBA and three British banks: Standard Chartered Bank, HSBC and Barclays.
Over the next 10 days the Central Bank of Egypt (CBE), the regulatory of the banking sector, will shortlist five of these banks so that the necessary due diligence can be completed. According to CBE, the winning bid is scheduled for announcement at the end of next November.
In the history of bank privatization in Egypt, the planned sale of BOA is one of the most significant in banking reform due to the bank’s transformation from a weak, failing bank, to a financial institution with profit churning possibilities. In fact, the positive performance of BOA in recent years has not only been hailed by the local and regional community as a successful makeover to be exemplified by other public banks with dreams of going private, but in the process has also garnered high interest in the sale from both domestic and foreign institutions.
As of 2005, BOA became the fourth largest commercial bank in Egypt when measured by total assets and customer deposits. As of February 2006, under International Financial Reporting Standards, BOA recorded total assets of $6.9 billion, customer loans of $1.4 billion, customer deposits of $5.4 billion and shareholders’ equity of $0.8 billion.
Proceeds from the sale will be used to settle public sector debts worth LE 19.2 billion to the National Bank of Egypt, Banque Misr and Banque du Caire, according to the Ministry of Investment, which is co-coordinating the sale of the bank, and is being advised by Citigroup, an international banking institute.
A dividend of LE 2 billion will be paid to the bank’s existing shareholders in April 2006. Also, five percent of BOA’s share capital will be available to the bank’s employees as part of the privatization process.
Furthermore, any residual shareholding (15-20 percent) in the bank will be sold by way of an initial public offering on the Cairo and Alexandria Stock Exchange (CASE) once the sale has gone through.
Banks wishing to qualify had to fulfill a certain criteria established by CBE, as well as the Ministry of Investment.
According to CBE and the ministry, any prospective bidder must be an established financial institution, possess a commercial banking license and have sufficient resources and expertise to ensure that the bank is financially and commercially strong post-privatization. Parties that bid as a consortium had to include one member who is a “qualifying purchaser, which translated into a third party that intends to acquire shareholding in excess of 51 percent of the shares of the bank.
Currently, the privatization and reformation of the banking sector is at the center of the Egyptian government’s agenda. As part of a five-year reform plan for the industry, which began two years ago, the industry is expected to witness more and more privatization, as fragile private banks are either axed or gifted to the private sector by way of bidding.
The overhaul of the banking industry, which represents around 80-90 percent of Egypt’s total financial sector, is due to the fact that the industry is not performing as efficiently as it should. Profitability has been at about 0.5 percent on assets over the last years; nonperforming loans officially exceeded 20 percent of total loans in 2004 and less than two thirds were provisioned.
