(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own)
By Una Galani
DUBAI, Sept 3 (Reuters Breakingviews) - Egypt’s banks are
ripe for picking. Qatar National Bank QNBK.QA is in talks to
buy Societe Generale’s (SOGN.PA) 77 percent stake in its local
subsidiary, NSGB, the country’s second-largest private bank by
market value. With a political transition in full swing and a
pledge from the president not to devalue the pound, a number of
banks could soon change hands as European owners retreat in a
bid to shore up capital.
The sellers are mostly forced. BNP Paribas (BNPP.PA) is
selling its retail banking business and Credit Agricole
(CAGR.PA) Egypt is seen as a takeover target. Last year,
Standard Chartered (STAN.L) walked away from talks to acquire
the business of Piraeus Bank (BOPr.AT).
Egypt remains an attractive long-term market even though
credit growth has almost ground to halt after the change or
government, from around 25 percent year-on-year. Only 10 percent
of the population has a bank account. Retail lending is less
than 10 percent of GDP, compared to 50 percent or higher in
Egypt, like Turkey, is a key market for any bank that wants
to be a strong regional player. QNB has excess capital to fund
its ambition to become an “iconic” brand. Yet the bank misjudged
Dexia’s desperation to sell earlier this year when it put in a
low ball bid for Turkey’s Denizbank, only to lose to Russia's
Sberbank (SBER.MM). The bank sold for 1.3 times book value. In
Egypt, there are fewer assets on offer and the regulator isn't
handing out new licenses. So there will be more competition,
with higher valuations.
An offer for the whole of NSGB, as per Egyptian market
rules, would cost QNB around $2.8 billion at current prices, or
around 2.2 times book value. That’s still below the 2.8 times of
its pre-revolution days. The shares have risen 20 percent since
talks were announced. With a 25 percent premium to the
undisturbed price, QNB could make a return on investment of 8.6
percent in the first year, according to Arqaam Capital. That
leaves some room for a slip in the pound if Egypt’s currency
loses some of its value in spite of the president’s promise.
Egypt’s economic stabilization will only take it closer to a
wave of banking M&A.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Societe Generale said on Aug. 30 that it is in talks to
sell its 77.2-percent stake in its Egyptian unit, National
Societe Generale Bank, to Qatar National Bank.
- "The discussions are preliminary and there can be no
certainty as to whether an agreement will be reached", SocGen
- NSGB is one of the largest foreign lenders in Egypt with a
network of 160 branches across the country with total assets
worth 63.8 billion Egyptian pounds ($10.5 billion) as of June
30, 2012, according to QNB.
- QNB, 50-percent owned by the government, is the largest
bank in the Gulf state and has a market capitalisation of $26
- The bank’s 2017 strategy is “to become a Middle East and
African icon” by increasing share and profitability in existing
key markets and achieving scale by pursing sizeable
- BNP Paribas is also said to be seeking preliminary bids
for its Egyptian retail banking business, sources have told
- Shares in NSGB rose 10 percent in Cairo on Sept. 2
following the announcement, valuing the bank’s equity at 15.4
billion Egyptian pounds ($2.5 billion).
- Reuters: SocGen says in talks to sell Egyptian unit
- Reuters: Qatar National Bank picks JP Morgan for Egypt
- For previous columns by the author, Reuters customers can
click on [GALANI/]
(Editing by Pierre Briançon and Sarah Bailey)
Keywords: BREAKINGVIEWS QATAR/SOCGEN/
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