Social media platforms and talk shows in Egypt have been abuzz over the last couple of weeks at the news of the planned sale of Banque du Caire (BdC), Egypt’s third-largest state-owned bank.
Some media reports have noted that a deal to sell 45 per cent of the bank to an Emirati investor for $1 billion is in the making, stirring controversy as the figure is seen by many as below the profitable bank’s fair value.
One of the main drivers of the controversy is the fact that BdC was offered for sale in 2007 when a deal was about to be finalised. Things froze as the price offered was considered to be too low. It put the value of 45 per cent of the bank back then at the same $1 billion offered 18 years later.
Maha Abdel-Nasser, an MP, requested in a statement addressed to the House of Representatives spokesperson as well as the minister of finance a clarification of the details of the deal.
“We don’t know how the sale price was determined, the entity that conducted the valuation, or the criteria upon which the valuation is based,” she said. She questioned why the bank was not listed on the Egyptian Stock Exchange, giving local investors the right to own shares, rather than selling them directly to a foreign investor.
BdC is the fifth-largest bank in Egypt by total assets, with a 2.4 per cent market share in loans and deposits and an eight per cent market share in retail lending at the end of the first half of 2024. It has the third-largest customer base, with more than three million customers.
Prime Minister Mustafa Madbouli tried to calm concerns in his weekly press conference on Wednesday by saying that the state had chosen an advisor on the sale and that the last valuation had become outdated.
He noted that it is undecided if the sale will be to a strategic investor or through the bourse.
In a commentary published in the newspaper Al-Masry Al-Youm, economic expert Medhat Nafie lamented the fact that whenever the bank is said to be offered for sale, objections rise on claims of a low valuation preventing the government from divesting from the bank and delaying restructuring the banking sector.
The latter needs to be regulated and governed in compliance with Egypt’s agreement with the International Monetary Fund (IMF) to achieve increased efficiency in the banking system.
“The hype surrounding the sale of any asset intimidates investors, who view societal resistance as a risk that increases their suspicion and hesitation, requiring them to obtain additional guarantees or a price reduction to address potential issues and disputes arising from this commotion,” Nafie said.
He called on non-experts to stop filling social media platforms with rumours and incitement against a particular deal, weakening the Egyptian negotiator’s position.
“Most of those who have reservations about the idea of selling a public bank do so because the public banks play a role in supporting the economy by lending to the government through investing in treasuries and issuing high-yielding certificates of deposit to absorb liquidity and tame inflation,” an economic expert speaking on condition of anonymity told Al-Ahram Weekly.
But according to the source, BdC’s role in both activities is limited. He explained that a look at the bank’s financials shows that it only invests 18 per cent of its assets in treasury bills, equivalent to less than 10 per cent of what the other two public banks invest.
“It also falls behind the two other banks when it comes to offering high-yielding deposit certificates,” he said.
The idea of selling a publicly owned bank is not accepted by many experts and even laymen. “Why are we selling a public, profit-making bank with excellent performance indicators and sound fundamentals,” asked Gamal Wagdy, a banking expert.
BdC saw its net income rise 86 per cent year-on-year in 2024 to about LE12.4 billion with growth in profits in all segments, retail banking, treasury, corporate services, and small-business banking. It has assets of LE483 billion and a customer base of 300 million.
Wagdy noted that all the key performance indicators of the bank are good, negating the need to resort to a foreign investor to provide it with expertise.
He recalled that previous privatisation cases in the 1990s and early 2000s had brought in major names in the global financial industry that had revamped local banks but “this is not needed in this case.”
He added that the bank has undergone a restructuring process recently and that it has excellent management, as proven by the improvement in its performance during the last decade.
Last November, international ratings agency Fitch Ratings upgraded its rating for the bank, together with another three local banks. It cited BdC’s “standalone creditworthiness, as well as potential support from the Egyptian authorities.”
Eighteen per cent of the bank’s total assets at the end of the first half of 2024 were investments in treasuries.
“The rating also reflects BdC’s strong retail franchise, good profitability, moderate loan quality and stable funding. It also captures the bank’s high concentrations and moderate capitalisation,” it noted.
Experts have also questioned the way the bank is to be sold. If the government needs sale receipts and the bank has to be sold, why not offer it in the stock market rather than a direct sale to strategic investors, Wagdy asked.
He said that selling the bank to a foreign investor would secure the dollars the government needs to meet its financial gap, but in the long run it would deprive the state of any profits realised by the bank as these would be transferred abroad.
Mostafa Shafie, head of research at Arabeya Online, agreed that selling a stake in the bank through the local bourse would be a good choice as it would attract many investors. “The sector is a good investment opportunity, given the currently limited number of bank accounts relative to the population,” he said.
Central Bank of Egypt (CBE) figures show that not more than 30 per cent of Egypt’s adult population have bank accounts. Moreover, around 50 per cent of the country’s small and medium-sized enterprises (SMEs) do not have access to credit, which means the sector has wide room for growth.
However, Shafie said that what the state needs from privatisation deals is dollars, and thus selling a stake in the bank to a foreign strategic investor is its best option. “We also have to consider the fact that the potential success of a share offering is low due to the geopolitical risks that are weighing on the market,” he said.
Comparing the price of the potential deal with the price of the one that was supposed to take place in 2008, when the National Bank of Greece wanted to acquire Banque du Caire, there is no significant change in the price, nor is there an exaggerated reduction or decrease in the bank’s value, as is currently being rumoured, he said.
He pointed out that even if there is a reduction in value, it will not be a drastic reduction and could be due to economic conditions and the need for dollars.
* A version of this article appears in print in the 27 March, 2025 edition of Al-Ahram Weekly
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