Laying the groundwork for IPOs

Safeya Mounir , Tuesday 10 May 2022

The recent deal between Banque Misr and Banque du Caire is a step towards putting the latter up for sale in an IPO, experts tell Safeya Mounir

Laying the groundwork for IPOs
Banque du Caire may soon be put on the block


Banque Misr raised its stake in Banque du Caire in a deal worth LE6.97 billion, with the share valued at LE6.2.

The deal signed this week between the two state-owned banks “is a move to restructure the ownership of Banque du Caire under Banque Misr, not a purchasing operation,” said Hani Abul-Fotouh, a banking expert.

The Banque Misr president had announced his bank was restructuring its companies, in which case it was customary to acquire more shares from some affiliate companies or to exit others, Abul-Fotouh added.

“The shares Banque Misr acquired belonged to its affiliate the Misr Capital Company. The move may be a preparation to put Banque du Caire stakes up for sale in an initial public offering [IPO],” said Hani Geneina, a lecturer at the American University in Cairo.

Banque du Caire has been posting successful results over the past few years. Its profits rose by 20 per cent to record LE5.8 billion in the past fiscal year, while net profits grew by 15 per cent from LE3.2 billion to LE3.6 billion.

The bank’s revenues reached LE10.5 billion, up from LE10.1 billion, at the end of the 2020-21 fiscal year, growing by four per cent. Meanwhile, revenues from fees and commissions increased by 24 per cent, rising to LE2 billion, up from LE1.6 billion.

The government has no intention of keeping any public or private sector company away from privatisation, even those owned by the Armed Forces, he added. The fact that ADQ Holding, one of Abu Dhabi’s sovereign funds, acquired a stake in Egypt’s Commercial International Bank (CIB) last month shows that Egypt is not against putting such companies up for sale.

Moreover, Banque du Caire shares have been slated for privatisation for the past 15 years, and there are no problems in putting them up for an IPO within a year or two, Geneina pointed out.

Mohamed Hassan, managing director and CEO of Blom Egypt Investments, believes the acquisition prepares Banque du Caire for an IPO after it becomes directly owned by Banque Misr. The step will not take place immediately, he added, especially after the minister of the public business sector stated the IPOs will be put off until September.

The postponement, Hassan noted, is the result of current global affairs, with emerging markets witnessing investments in their debt instruments decreasing. He added that with the US Federal Reserve raising its benchmark interest rate, global inflation, and the Russia-Ukraine war, it would be best to put off Egypt’s IPOs for now.

Hassan expects Egypt’s IPOs will whet the appetite of Gulf investors, especially given the low price of Egyptian shares. This has been evident in the acquisitions announced over the past few weeks.

Mona Mustafa, director of trading at Arabia Online, said that the Banque Misr acquisition was meant to concentrate the ownership of Banque du Caire in its hands, instead of dividing the shares between it and its affiliate the Misr Capital Company.

Mustafa added that it is difficult to tell when Banque du Caire may be put up for an IPO, but that the turnout to buy its shares in a public offering will depend primarily on the turnout at the Egyptian Stock Exchange.

It is unlikely that Banque du Caire ownership will be transferred directly to a strategic investor to avoid claims of squandering public money and doubts about its fair valuation.

*A version of this article appears in print in the 12 May, 2022 edition of Al-Ahram Weekly.

Short link: