Banque du Caire has announced it will offer a portion of its shares for sale on the stock market. The offering will take place before the end of the year and is expected to garner between $300 and $400 million.
The bank, owned by Banque Misr, the second-largest state-owned bank in Egypt, will offer 20 or 30 per cent of its shares for private placement and public offering, but it has yet to decide on the percentage of each.
It is currently negotiating with EFG Hermes and HSBC, the investment banks in charge of the offering, regarding the promotion among potential buyers.
“The majority of shares will go in favour of private placement,” said Tarek Fayed, chairman of the board of Banque du Caire. He said the timing of the offering depended on the conditions of local and global markets, and the bank may offer stakes on foreign stock exchanges in addition to the Egyptian bourse “because the percentage of the stakes offered is huge.”
He added that the private placements would primarily target Gulf banks in addition to international banks and individual investors. Promotions will be conducted in the Gulf, Europe and the US.
The sale might include increasing the bank’s capital in addition to the initial public offering (IPO), Fayed said, but a final decision has not been made. “Offering Banque du Caire stocks for sale will definitely energise the market,” said Hani Tawfik, an investment expert.
The government is intending to sell a minority share of the bank’s shares because it wants to maintain its current administration and remain in control of 50 per cent of the banking sector through its ownership of the National Bank of Egypt, Banque Misr, and the majority of Banque du Caire, Tawfik added.
He explained that the government did not want to repeat the experience of the Bank of Alexandria, the majority of which was bought by the Italian bank Sanpaolo IMI.
The offering of Banque du Caire shares would see the banking sector develop its performance on the stock exchange, increase trading on the bourse floor, and introduce new investors to the economic scene, Tawfik said.
The government had announced on more than one occasion its intention to offer shares in the United Bank and the Arab African Bank. IPOs for Banque du Caire were also previously announced in the past.
The timing of the current sale, slated before the end of the year, is a wise choice, believes Radwa Al-Sweify, head of research at Pharos Holding, an investment bank. Investors lay out their investment plans for the new fiscal year in the fourth quarter, she explained.
Only shares in the Commercial International Bank, the Al-Baraka Bank and the Egyptian Gulf Bank are currently available on the stock market. The scarcity could lead to increasing demand on the part of traders, Al-Sweify said.
“It will be easy to collect the $300 million targeted from the IPO,” she added.
Banque du Caire has 2.5 million clients and a market share of five per cent. In 2018, it made LE2.5 in net profits, up from LE807 million in the previous year with a growth rate exceeding 200 per cent.
The bank’s non-performing loans diminished to 3.3 per cent in 2018, down from five per cent a year earlier. Deposits had achieved a growth rate of 7.5 per cent to reach LE131.3 billion, Fayed said.
Last year, it achieved a 26 per cent growth in corporate clients.
However, decreases in trading on the stock exchange, together with weak liquidity or a retreat in trader confidence, might threaten the success of the Banque du Caire IPO, Tawfik said.
Average trading on the bourse since the end of last week reached LE400 million, in comparison to between LE2 billion and LE3 billion a month earlier.
Banque du Caire updated its corporate slogan last week to “Unlimited Opportunities” to target different strata of clients. Fayed said the move had been taken after conducting studies to develop the bank’s marketing strategy.
New IPOs increase liquidity and increase investor appetites, particularly because the banking sector is one of the most defensive and is less affected by market slow-downs, said Alia Mamdouh, an economist at Beltone Financial, an investment bank.
Mamdouh is not worried that the performance of foreign markets might decrease the appeal of the Banque du Caire IPO. She explained that foreign-market conditions typically do not count in issuing dollar-denominated eurobonds. Share sales are more likely to be affected by the performance of the company or asset being offered.
The Banque du Caire IPO would attract foreign investors and likely introduce new investors to the Egyptian market, she said.
The bank has achieved a growth rate of 82 per cent, or more than LE36.2 billion, in corporate credit directed at large and medium-sized enterprises, up from LE20 billion in 2017.
Moreover, its corporate credit client base grew by 26 per cent last year. It also expanded on financing small and medium-sized projects by up to 106 per cent in 2018, to reach more than LE3 billion, up from LE1.3 billion in 2017, and increased its base of clients in small and medium-sized project funding by 37 per cent in 2018.
The bank targets to increase its allocation from the corporate credit portfolio to the SMEs sector to reach the 20 per cent set by the Central Bank of Egypt by the end of the year.
It also intends to double its share of remittances within the coming five years. It has the opportunity to expand operations in the Gulf region minus the UAE, Fayed said.
*A version of this article appears in print in the 25 April, 2019 edition of Al-Ahram Weekly under the headline: Partial Sale of Banque Du Caire