CAIRO: Prime Minister Ahmed Nazif announced Monday that he expects that privatization of Banque Du Caire to raise more than $1.6 billion.
The Central Bank of Egypt (CBE) anticipated the revenues from the purchase of Banque Du Caire would exceed that of the Bank of Alexandria, which sold for $1.6 billion, as the former was larger with more branches and a more sophisticated electronic database.
CBE’s Governor Farouk El-Okdah said at a press conference held Monday that the government would earn between LE 12-15 billion of its sale of the bank.
According to EFG-Hermes, Banque Du Caire holds a six percent market share by assets and deposits, 200 branches, an ATM network, as well as a developed IT infrastructure.
The Cabinet recently unveiled plans to put 80 percent of Egypt’s third largest public-owned bank up for auction in six to nine months and float another 15 percent on the stock exchange no more than a year later.
“Privatization of state-owned banks will create more efficient banks, produce more money, and be better for the staff because that way they will be more focused, Angus Blair, head of research at Beltone Financial, told The Daily Star Egypt. “Privatization creates more dynamism of the country’s banking sector; and [that way,] Banque Du Caire will become another contender in terms of generating more efficient competition within the sector.
The public auction will be open to all bidders with no restrictions, as the government is seeking a strategic investor with ample banking experience, manpower, and technological capability to resume the bank’s restructure process. However, the CBE said it was still too early to receive expressions of interest from potential bidders.
“The sale will [probably] draw a significant interest from the region and beyond, Blair predicted.
Banque Du Caire is currently weighed down with deficit that bulks up to LE 12-14 billion, representing six times its entire capital. In a bid to tackle the bank’s debt and non-performing loans, the government embarked – over two years ago – on reform plans that succeeded to cover 40 percent of the bank’s stumbled loans portfolio, under the management and supervision of Banque Misr.
Initially, Banque Du Caire was slated to merge its operations with Banque Misr, but that would have added more pressure on Banque Misr’s balance sheet and cash flow. The government decided to privatize it instead.
El-Okdah added that merging Banque Du Caire into Banque Misr would have cost LE 20 billion to cover the its provision deficit and pay off credit owed by the public sector, an amount the government could “ill-afford.
The Cabinet indicated it would persist with its restructuring measures before the sale of the bank aspiring to clean up the bank’s portfolio and ultimately sell it at a good price.
The government, Blair pointed out, did not necessarily have to continue with its restructuring plans. “If someone is willing to come in and do it, fine. But then, the government will have to sell it at a discounted price, he said. “If the government wants to go on with its restructuring plans, that means it will spend more money before [selling] the bank. So, it’s a trade-off; and at the end, benefits will be the same.
