CAIRO: As the government moves forward with the privatization of Banque Du Caire – which is expected to fetch over $1.6 billion – several heavyweight businessmen have shown interest in bidding for Egypt’s third largest state-owned bank.
Egypt’s most prominent businessman Nagiub Sawiris, chairman of Orascom Telecom, recently appeared on state-owned television expressing interest in bidding for Banque Du Caire, asserting he had sufficient financial capabilities and expertise to buy the offered stake in the bank.
In addition, rumor has it that several other Egyptian businessmen including Mohamed Abu El Enein, chairman of Ceramica Cleopatra, Mohamed Shafiq Gabr, chairman of Artoc Group, and Mohamed Farid Khamis, chairman of Oriental Weavers, are interested in competing for the bid.
However, Central Bank of Egypt (CBE) rejected selling a majority stake of any Egyptian bank to individuals – whether Egyptian, Arab, or foreign – to avoid domination over a bank.
By virtue of the law, an individual cannot own more than a ten percent stake in any Egyptian bank without the CBE’s approval. Hence, only financial institutions or banks are allowed to acquire a majority stake in Egyptian banks.
“The question is do these businessmen possess the necessary expertise and technical know-how required to run a bank, said Hatem Alaa, banking analyst at HC Securities brokerage firm. “It is generally much better that a financial institution or bank acquires another bank because they are experienced enough and are present in the field for a long time. Therefore, [they] will run the synergy process more easily.
Last July, the government went forward with its privatization program and announced that it would offer an 80 percent stake of Banque Du Caire to a strategic investor, while selling 15 percent of the bank’s stakes through an IPO. The government’s decision came hot on the heels of the successful sale of Bank of Alexandria – Egypt’s fourth largest bank – for $1.613 billion to Italy’s Sanpaolo Bank last October.
“Will the government’s current banking privatization scheme go into effect without creating an Egyptian-owned private bank? Sawiris told Egypt’s state-owned Al-Ahram newspaper. “It makes no sense why a bank should not be owned by Egyptian investors.
History, however, proves that malfunction and eventually closure prevail when Egyptian businessmen venture into acquiring the majority stake in Egyptian banks.
Around six banks in Egypt were owned by Egyptian businessmen and run under the so-called family business. They ended up suffering heavy financial losses as well as deficits that mounted to some LE 10 billion and went bust, which led the CBE to merge them with other state-owned banks.
“Owning a bank is completely different to owning a company, Alaa explained. You could be a successful businessman but not [necessarily] a successful banker.
One way Egyptian businessmen can own a bank, Alaa suggested, is by forming a consortium with a bank. “That way, they will own enough expertise to enable them to safely run a bank.
In the meantime, the government has short-listed five firms to advise on the sale of Banque Du Caire and would announce a winner sometime this month.
The size of the stake to be sold in the bank is still unsettled, after the government had to backtrack on the initial 80 percent stake amid public suspicion and dismay over the privatization process.
