Final bids submitted for Egypt bank

Dubai's Mashreq bank and four other banks yesterday started submitting final bids for a 67 per cent stake of Banque du Caire from the Egyptian Government in the largest privatisation in Egypt since the sale of Bank of Alexandria in 2006.

Mohamed Barakat, Chairman of Banque du Caire and sister state-owned bank Banque Misr, said the winner of a public auction would be announced today.

The other banks cleared to bid are London-based Standard Chartered, Saudi Arabia's Samba Financial Group, National Bank of Greece and a consortium of Saudi Arabia's Arab National Bank and its Jordanian affiliate Arab Bank Group.

The government has said it expects the sale to raise at least $1.6 billion (Dh5.8bn), the amount it received for an 80 per cent stake in Bank of Alexandria, sold in October 2006 to Italy's Sanpaolo. That sale was a landmark move in reducing the role of the state in the economy.

Banque du Caire, the third-largest state-owned bank with total assets of 50.1 billion Egyptian pounds (Dh34.3bn) a year ago, is larger than Bank of Alexandria but it has not gone through the same radical restructuring and improvements.

Before selling Bank of Alexandria, the government cleared up its portfolio of non-performing loans, retrained staff and renovated many of the bank's branches.

"Banque du Caire still needs work and that work will cost money," one banking analyst said.

Bank of Alexandria sold at 6.1 times its book value, and another bank, AlWatany Bank of Egypt, was sold to National Bank of Kuwait at five times book value in 2007, the most recent Egyptian bank sale.

"Nobody in the market has an accurate estimation of how much the deal will be but if it was around the price-to-book multiple of five… it would be a positive indication for the whole economy," said Mohamed Kotb of Jazira Asset Management.

On the eve of the sale, Moody's Investors Service changed to negative from stable its outlook for Banque du Caire's Ba2 long-term foreign currency deposit ratings.

The change reflected Moody's reassessment on Monday of the outlook for Egypt's foreign exchange deposit ratings, mainly because consumer price inflation rose sharply in May.

But Moody's did not change the stable outlook for the bank's financial strength rating, which stands at D, or for its local currency deposit rating, which stands at Baa2.