LESS than eight months after it sold the Bank of Alexandria, the government is selling Banque du Caire (BDC), Egypt's third largest public bank in terms of asset value. The government will sell 80 per cent of the state- owned BDC to a strategic investor. It will sell another 15 per cent in an Initial Public Offering (IPO) and allocate the remaining five per cent to the bank's 6,000 employees. No specific date was given for the planned sale but banking sector analysts believe it will take place in the last quarter of 2007. A cabinet statement said the government will offer assets that are not realising any extra income to the bank like the banking licence and the goodwill together with the network of branches. Unlike the Bank of Alexandria sale which was preceded by a lot of media coverage and raised a lot of controversy, being the first of the four public banks to be privatised, this decision took observers as well as layman by surprise. Following last November's sale of the Bank of Alexandria, the government stressed several times that it will keep the National Bank of Egypt and Banque Misr, which was supposed to merge with BDC to form Egypt's largest banking entity. The merger plan was shelved as government committees formed to assess repercussions of the merger decided the merger was not feasible, as it would have burdened the larger bank, Banque Misr, with a heavy non- performing loan portfolio. The plan was modified in January 2007 to allow Banque Misr to acquire BDC's shares while leaving its legal and commercial status and its branches separate. BDC's non-performing loans represented 73 per cent of its loan portfolio as of the end of 2006, resulting in a provision deficit. While the government never hinted it might privatise the bank, media reports speculated last week that it is moving in this direction. BDC has transferred ownership of stakes it used to hold in joint venture banks and companies to Banque Misr as a means of financing its non-performing loans. Files of some BDC defaulters were also transferred to Banque Misr. BDC also made many layoffs with 2,100 employees leaving the bank through early retirement schemes. The decision was announced after a meeting attended by Prime Minister Ahmed Nazif, Investment Minister Mahmoud Mohieldin, Central Bank of Egypt Governor Farouk El-Okda and Banque Misr Chairman Mohamed Barakat. The statement revealed that BDC has two persistent problems: the heavy burden of non-performing loans being exacerbated by a provision deficit and administrative problems related to risk management practices, poor information systems and a redundant and unskilled work force. Egypt's banking sector has been attracting a lot of regional and foreign interest amid a wide ranging long- term sectoral overhaul. Cabinet figures show that the sector is still dominated by local banks, with Egyptian banks holding 71 per cent of market share by assets and Arab and International banks 29 per cent. BDC has an Egyptian market share of six per cent while the National Bank of Egypt and Banque Misr together have 41 per cent. Other specialised state banks hold another 5.5 per cent. The government will use the proceeds of the BDC sale to further restructure the finances of the state-owned Banque Misr and the National Bank of Egypt and to repay the public debts to the two banks.
