CAIRO: Egypt’s Housing and Development Bank (HDB) and state-owned Egyptian Arab Land Bank (EALB) are being restructured with an eye toward a possible merger within the two next years, the head of the two banks said.
Chairman Fathy El-Sebai completed a capital increase at HDB earlier this year that reduced the government’s stake to between 62 and 64 percent and is in the final stages of restructuring EALB, Egypt’s fourth-biggest state bank by assets.
"I have a strong feeling there is the viability for them to merge and add more value to the two institutions," Sebai told Reuters in an interview.
However, the ultimate decision whether to merge them was the government’s and not his, he added.
A combined entity would be Egypt’s sixth or seventh biggest commercial bank in both the state and private sector.
Sebai is among a group of bankers brought in by the government from the private sector in the early part of the decade to reform state banks.
These include Bank of Alexandria, which was sold in late 2006 to Italy’s Intesa Sanpaolo, and Banque du Caire, whose planned privatization in June 2008 was aborted after offers did not meet the government’s minimum price.
At the time of the Banque du Caire offering, many Egyptians criticized the government’s privatization program, saying assets were being sold off too cheaply, and since then the government has not tried to sell any other major state assets.
Free float
HDB’s LE 450 million ($79 million) capital increase boosted the bank’s free float to between 36 and 37 percent from 10 percent, Sebai said.
"This was the idea, to make a kind of a privatization, not for an anchor investor, but for the public, for everybody."
The bank, whose capital is now LE 1.15 billion, will use the new funds to install an advanced IT system and expand its branch network to 100 by the end of 2013 from 57, he added.
Sebai said EALB’s restructuring had been more complicated because much of its lending had been to tourism and residential projects that stalled when an Egyptian real estate bubble ended early in the decade.
"The owners didn’t want to put more money in the tourist projects and the banks also stopped funding," he said.
EALB shareholders agreed in 2005 to delay plans for merging with HDB until EALB’s finances could be straightened out. Sebai plans to finish the bank’s restructuring by June 2012.
"The target is to have the bank ready for the merger, which can be done at any minute by the shareholders," he said.
"But my plan is to finish the restructure process and finish all the problems in the bank to be ready now, either to continue to stand alone or to merge."
Sebai said rising property values meant HDB’s loans, mainly in mortgages and credit to individuals, have been profitable despite a slow judicial process to gain control of homes when borrowers default.
HDB’s assets were LE 17.85 billion at the end of December, while EALB’s assets were about LE 20 billion at end-June.
