The government is gradually relinquishing its holdings in joint venture banks. Niveen Wahish rounds up what's for sale Events in the banking sector these days are as hot as the summer heat. The declaration of the winner in the bid to buy Banque Misr's 25.5 per cent share in Misr International Bank (MIBank) was scheduled to be delivered this week but never came through. The contenders until last week included Société Générale Bank, BNP Paribas and Barclays Bank. This week however, Barclays Bank fell out of the race. A statement sent to the Capital Market Authority by MIBank said that "additional details are now required from the bidders to unify the comparison criteria for the two offers." The competition for Banque Misr's share has been going on for weeks now causing fluctuations in the bank's share price. The price has gone from less than LE34.90 in April to a year high of LE52 last week and then down to LE46.90 earlier this week following doubts about the Barclays bid. Contenders at an earlier stage of the bidding process for MIBank included Bahrain's Ahli United Bank, but it opted out a couple of weeks ago when the Capital Market Authority announced that whoever wins the 25.5 per cent share of Banque Misr, could then bid for 100 per cent of the bank, a step which the Bahraini bank said it was not ready to take. Alongside Banque Misr, the other main shareholders in MIBank are Misr Insurance Company which owns 3.25 per cent, Banca Di Roma International with 10 per cent, the British Arab Commercial Bank with 8.5 per cent, Europartners Holding with 7.875 per cent and Sumitomo Mitsui Banking Corporation with 2.625 per cent. The rest of MIBank's shares are available on the Egyptian and London Stock Exchanges. With total capital reaching LE562 million, the bank is one of Egypt's largest private sector banks. The move to sell Banque Misr's stake in MIBank is part of the government's plans to divest itself of its interests in joint venture companies and banks. The showdown for Banque Misr's share is an indication of investors' voracious appetite for the Egyptian banking sector, particularly since the Central Bank of Egypt (CBE) has long since stopped granting new licenses for Greenfield investments in the sector. The only option for potential investors is to acquire or buy into existing banks. Not only that, but it is an opportunity for existing banks to grow. As Wael El-Hatow of HC securities explains "by buying into existing banks, other banks are buying a market share, not just the network of branches." MIBank is the first of many more such opportunities yet to come this year. National Bank of Egypt recently announced that it has chosen Goldman Sachs as financial advisor for the sale of its 20 per cent stake in the Commercial International Bank. The Egyptian American Bank is another opportunity. Last April the bank renewed acceptance of the intention of the Bank of Alexandria and American Express Holding, who together hold around 75 per cent of the Bank's shares, to sell their holdings in the bank. American Express Holdings holds 40.83 per cent while the Bank of Alexandria holds 33.81 per cent. The remainder is owned by the banks' employees as well as other companies and individuals. As the government continues selling its stakes in joint venture banks and proceeds with the sale of the Bank of Alexandria by the end of the year, "the influence of public sector banks on the aggregate system will diminish", offers Marwa El-Sheikh, senior analyst with EFG-Hermes. Currently, public sector banks dominate the Egyptian banking sector, accounting for over 55 per cent of banking assets. That, according to El-Sheikh, will provide a healthier environment where competition within the private sector will lead to a stronger banking sector. She stated that "private sector management is known to be aggressive towards maximising shareholders' value and enlarging businesses." "Minimal participation of the government as a major shareholder is what the free market economy is all about," El-Sheikh explained, adding that this will give the government the opportunity to concentrate on what it should really be doing, namely playing a regulatory and supervisory role so as prevent monopolies or corporate malpractice. She believes Egypt's banking sector is attractive because in areas such as retail and corporate banking there is plenty of room to grow. The government has already divested itself of all its shares in Barclays last year and most of its shares in National Société Générale Bank (NSGB). With the sale of government shares, the banking sector will be headed toward becoming stronger and more consolidated, exactly where the CBE intends for it to go. That same goal was the deciding factor in the CBE's decision not to delay the deadline for banks to conform to the banking law requirement that each bank must retain at least LE500 million in capital. As a result of this decision the number of Egyptian banks will drop from 52 banks down to about 30. Banks unable to increase their capital will be forced to either liquidate or merge with other banks. Within this framework, Commercial International Bank (CIB) announced late last week that it is beginning a preliminary assessment of the National Development Bank. The preliminary assessment may then be followed by a due diligence study prior to the presentation of an acquisition offer. Government stakes in MIBank, CIB and EAB will not be the last to be made available. On its website, the Ministry of Investment is offering 20.17 per cent of the Suez Canal Bank, owned by the National Insurance Company. It is also offering, among others 36.53 per cent of Egyptian Saudi Finance Bank owned by the Bank of Alexandria, as well as 10.55 per cent of Delta International Bank.
