CAIRO: In a major leap forward for its long-running banking reform agenda, the government announced that it will offer an 80 percent stake of the country s third largest public sector bank, Banque Du Caire, to a strategic investor. Only 15 percent of the bank’s stakes will be sold through an IPO, while its employees will hold the remaining 5 percent.
The Cabinet explained yesterday that the main reason behind the sale was to complete the bank’s restructuring process. The Cabinet added that the sale of Banque Du Caire denoted the government’s efforts to fight bureaucracy and misconduct in state-owned banks as well as efforts to reform these banks.
“This comes under the government’s policy to privatize most public-owned sectors, commented Walaa Hazem, head of research unit at HC Securities brokerage firm. “The initial plan was to merge Banque Du Caire into Banque Misr. However, a lot of problems began to appear, so the government decided to sell it instead.
Banque Du Caire is currently under-provisioned and is notorious for its non-performing loans that represent around 73 percent of gross loans. It is also overburdened with several structural setbacks, namely an excessive labor force that lacks necessary skills.
“The government has to embark on major reform processes if it wants to sell the bank at a good price, he added.
The bank’s reform process, pointed out Cabinet Spokesperson Magdy Rady, began around two years ago with addressing stumbled loans portfolio as well as administrative problems related to managerial and risk management issues that aimed to optimize the bank’s competency.
Egyptian banks constitute 71 percent of the entire banking sector, mainly manifested in The National Bank of Egypt and Banque Misr, among other specialized banks in agricultural, industrial and real-estate activities. Banque Du Caire alone represents six percent of these state-owned banks. Arab and international banks maintain the remaining 29 percent.
The Cabinet has not yet announced potential bidders but expectations circle around major international banks.
“Most probably, the sale will occur through a bid, similar to that of Bank of Alexandria. The government will first short-list interested bidders and investors that perform well on the banking market. Afterwards, the bidding will begin, added Hazem.
According to the Cabinet, sale’s proceeds will be used to restructure Banque Misr as well as settle state-run companies’ debts to The National Bank of Egypt and Banque Misr, a step that will strengthen financial performance of these two banks. Revenues from the purchase will also be directed to projects targeting limited income citizens, sanitation projects and low-income housing.
Hazem explained that it was much too early to decide whether privatizing Banque Du Caire was a good step or not. “It depends on the price.and price depends on how clean the bank’s book value is.
He added, “With Bank of Alexandria, for example, the sale came at a very good price. In fact, it was sold above all expectations.
Last October, Italy s Sanpaolo Bank bought 80 percent stake in Bank of Alexandria -Egypt’s fourth largest bank – for $1.613 billion.
“The bank was sold six times higher than its value, Hazem said. “It had a clean book value due to good restructuring processes that occurred before its sale.
