The Gulf is banking on Egypt's future

Despite an uncertain political climate and a sluggish economic recovery, the long-term prospects of Egyptian banks are attracting attention from their Gulf counterparts.

Two recently announced acquisitions have brought the sector back into the headlines on a positive note, helping offset a recent ratings downgrade, Global Arab Network reports according to OBG. While the transactions also represent the exit of two European banks looking to shift focus back to their core markets and reduce risk, the investments by major Gulf players indicate their confidence in the sector’s future.

International press reported on December 13 that Qatar National Bank (QNB) had agreed to buy a majority stake in National Société Générale Bank (NSGB), the Egyptian unit of Société Générale (SocGen), France’s second-largest bank by market value. QNB will acquire SocGen’s 77.2% share of NSGB for $1.97bn, although the value of stakes in some of its local subsidiaries may bring SocGen’s earnings from the sale as much as $2bn.

The purchase allows QNB to use some of its excess capital and the acquisition is in line with the bank’s strategy of expanding in the Middle East and Africa. The transaction values NSGB at $2.56bn overall, which is twice its book value as of the end of September 2012.

NSGB is the second-largest privately owned lender in Egypt, with assets of LE63.3bn ($9.6bn), a loan book totalling LE36.1bn ($5.5bn) and around 160 branches. QNB, meanwhile, is the biggest bank based in a Gulf Cooperation Council member state and is 50% owned by the Qatar Investment Authority, the country’s sovereign wealth fund.