CAIRO: Egypt s Housing and Development Bank (HDB) will use a LE 930 million ($170 million) capital increase to finish housing projects and expand retail operations, an adviser on the issue said. The increase will raise the bank s capital to LE 1.6 billion and reduce government ownership to less than 50 percent. It includes the sale of shares worth LE 550 million directly to the public beginning on March 23. The bank wants to direct funds to complete real estate projects, which it expects will earn a net profit of LE 2.3 billion over the next five years, Mahmoud Selim, vice president at HC Securities and Investment, told Reuters on Tuesday. HDB will offer 3 million shares to employees at LE 10 apiece, 17.5 million shares to existing shareholders and 27.5 million shares to the public at LE 20 apiece. Cairo-based HC and CI Capital are lead managing the offering. The bank, established in 1979 to finance real estate development, last year bought 39 percent of Dubai-based Damac Holding s Egypt unit, whose main project is the 1,500 hectare Hyde Park housing development east of Cairo. The Damac project is scheduled for completion in 2017, Selim said, adding that HDB had seven other real estate projects due to be completed by 2015. HDB also owns 25 percent of the shares of Taamir Mortgage Co. directly and other shares indirectly through subsidiaries, giving it a controlling stake. Taamir has 25 percent of the Egyptian mortgage market, Selim said. Retail operations The new funds will also allow HDB to expand its retail operations as it moves to become a full range commercial bank. The capital increase will help the bank increase the number of its branches to 100 within three years from 55 now, at a rate of 15 a year, Selim said. Under central bank rules, a bank needs LE 20 million in capital for each branch it opens. The bank also plans to invest LE 50 million in new information technology, an investment it expects will reduce its cost-to-income ratio to 36 percent by 2014 from 53 percent now through efficiency gains, he added. The capital increase will increase the maximum amount the bank is allowed to lend to a single borrower to LE 480 million from the current LE 188 million. HDB s free float is only 7 percent, which will increase to 35 percent after the capital increase. State institutions, including Misr Insurance and the New Urban Communities Authority, hold 76 percent of HDB, while private funds and high-net-worth institutions hold the rest. The offering to existing shareholders will close on April 27 and that to the public on May 6. The new shareholders will be eligible for dividends for 2010, Selim said.
