Banque Misr, CI Capital could integrate their financial services operations

Good morning, friends, and welcome to a reasonably quiet Monday morning as we putter toward the last holiday long weekend of summer.

SMART POLICY- Officials are conducting sweeps through the nation’s ports in a search for dangerous and abandoned materials, Finance Minister Mohamed Maait told MPs yesterday. Maait said all ports should be fully cleared by December of any unclaimed goods that could present a danger to public safety. A separate sweep is looking for dangerous goods at the nation’s airports, the Civil Aviation Ministry said. The drive comes after the 4 August blast that devastated Beirut after abandoned ammonium nitrate caught fire and exploded.

The results of last week’s Senate elections are due this Wednesday, with any runoffs set for 8-9 September. Voters will elect 200 members of the newly reconstituted upper house of parliament, with the other 100 set to be appointed by the presidency.

Cairo Metro ticket prices go up by at least EGP 2 today. Commuters whose journeys only cover lines 1 and 2 will be charged EGP 5 for the first nine stops (up from EGP 3), EGP 7 for up to 16 stops (up from EGP 5), and EGP 10 for anything more than 16 stops (up from EGP 7). Those passing through Line 3 will be charged a notch higher. Youm7 has the full price list. The price hike comes a day after President Abdel Fattah El Sisi inaugurated the fourth phase of the EGP 32 bn Cairo Metro Line 3; the section covers six stops in New Cairo. Arab Contractors and Orascom Construction were the main contractors on this phase.

At least one conference organizer thinks we’re unlikely to see a second-wave lockdown this fall: The Cityscape real estate exhibition will take place on 4-7 November at the Egyptian International Exhibition Center in New Cairo after being postponed back in March due to covid-19.

We’re still waiting on official confirmation that this Thursday will be off for banks, the stock exchange, and the private sector in observance of the New Islamic Year. Prime Minister Moustafa Madbouly confirmed over the weekend it will be a paid holiday for the public sector.

3 SIGNS OF THE TIMES to keep you occupied during your next endless conference call:

1- People aren’t reading or watching movies — they’re gaming, writes Ruchir Sharma, Morgan Stanley Investment Management’s head of emerging markets and chief global strategist, in a piece for the New York Times that is equally about how we’re spending our leisure time — and where the next battleground is for Big Tech. Need to get up to speed? Go over to John Gruber’s Daring Fireball and start skimming down the page.

2- Working parents are hitting their breaking point, the WSJ writes, and businesses need to step up to the plate and give them a helping hand if they want to retain talent. Yes, even with school starting next month.

3- Is Kamala Harris Gen X? Does reality really bite? After the hand-wringing in some quarters over whether the US presidency would “skip” Gen X (the small, influential-in-business generation sandwiched between the boomers and the millennials), Kamala Harris joining the Biden ticket has sparked a flurry of op-eds about how her nomination represents “Gen X’s moment” and “the Fall of House Boomer.”

ALSO: Can we all agree that the word “glamping” must die? And that the FT should be banned from ever again using the word “glampervan”?

How do you use that in a headline? “Inside Kim and Kanye's glamping getaway” or “Kim & Kanye: Family glamping photos — not your average vacay.”

COVID-19 IN EGYPT-

The Health Ministry reported 139 new covid-19 infections yesterday, up from 116 the day before, as well as 19 new deaths, bringing the country’s total death toll to 5,160. Egypt has now disclosed a total of 96,475 confirmed cases of covid-19, after the ministry reported. We now have a total of 59,743 confirmed cases that have fully recovered.

Inspired by nature to combine utmost comfort with a world of unparalleled privacy, Mesca’s signature design-led luxury hotel is an elegant amphitheater of sea, sky and sand, redefining waterfront hospitality on the Red Sea.

Saudi to test Russian covid-19 vaccine: Russia has reached an agreement in principle with an unnamed Saudi company to conduct phase 3 clinical trials of its newly announced Sputnik V covid-19 vaccine, CEO of the Russian Direct Investment Fund (RDIF) Kirill Dmitriev told Arab News. RDIF is Russia’s sovereign wealth fund, which is positioning itself as having played a key role in developing the vaccine. Dmitriev said that Russia has already shared data from the first two testing phases. Russia is also looking to start clinical trials in the UAE sometime this month, and in the Philippines and Brazil at a later date.

Italy is closing nightclubs as cases among youth spike and will make it mandatory to wear face masks at night in some areas, Reuters writes, saying this is the “first reimposition of restrictions as cases of coronavirus pick up across the country, especially among younger people.”

GLOBAL HEADLINES-

Joe Biden will be declared the Democrats’ presidential candidate this week as the party’s national convention gets underway today. No major political figures, including Biden and running mate Kamala Harris, will be in Milwaukee for the event as the Dems prepare for their ever “digital convention.” The official convention website is here if you want to poke around or check out the schedule of when the major speeches take place. We’re looking forward to Crooked Media’s Pod Save America episode on Thursday night, live from the convention, as part of the pre-show that will ultimately include Biden’s acceptance speech and a string of speeches by party luminaries.

For political junkies: The full convention schedule is here.

The latest NBC News / WSJ poll has Biden well ahead of Trump nationally as more than 60% of voters say his administration has bungled its response to covid-19. “According to the survey, Biden leads Trump nationally by 9 points among registered voters, 50 percent to 41 percent,” CNBC reports.

Oil majors will have to come to terms with “stranded assets” worth bns of USD that may now never be pumped out of the ground, Bloomberg suggests. The pandemic has accelerated a trend toward renewable energy that will see fossil fuels become cheaper and the cost of their emissions rise, meaning that production in many fields will no longer be commercially viable. Rystad Energy expects around 10% of the world’s recoverable oil to become obsolete (that’s about 125 bn barrels worth, for those of you keeping track at home) — forcing companies across the world to abandon assets.

Israel and the UAE are hitting the ground running now that each admits the other exists, signing the first strategic business agreement yesterday just days after their normalization pact. The UAE’s APEX National Investment and Israel’s Tera Group set up a JV to work on covid-19 research and potential treatment development, and the two countries are expected to sign several more accords on investment, tourism, aviation, security, and telecoms within the week. The two countries’ foreign ministers also spoke on the phone yesterday in a first since the UAE lifted its block on calls to our eastern neighbor. Bloomberg and Reuters have the story.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: School operator GEMS and EFG Hermes' e-finance platform ValU are working together to facilitate school tuition payments, making this the latest in a series of partnerships between education providers and e-payments companies that began to emerge since the outbreak of covid-19. These partnerships are helping to provide parents with financial perks, including more installment options, at a time when some are struggling to keep up with tuition fee payments.

M&A WATCH- Banque Misr, CI Capital could integrate their financial services operations: Banque Misr and CI Capital could potentially merge or otherwise integrate the two entities’ brokerage, financial services, asset management, and non-banking financial services arms, Al Mal reports, citing unnamed sources. The move to streamline operations comes after Banque Misr purchased on Thursday an additional 9% stake in CI, making it the largest shareholder in the EGX-listed investment bank and a stake north of 24%.

Was BM’s new stake purchase the exit of Rashid Mohamed Rashid from CI? Former Trade Minister Rashid Mohamed Rashid’s Global Holding reportedly exited CI Capital and offloaded its 9% stake in CI Capital to Banque Misr, Hapi Journal reports, citing unnamed sources familiar with the agreement. The sale was reportedly closed for a total of EGP 377.1 mn at EGP 3.95 per share.

Advisors: CI Capital Securities Brokerage executed the transaction and Zulficar & Partners were legal advisors.

This is the second time in as many months that state and private-sector players have partnered up to look for opportunity in financial services. EFG Hermes and the Sovereign Fund of Egypt said in late June they were aiming to take a 76% stake in the Arab Investment Bank as EFG Hermes aims to turn itself into a universal bank. The proposed acquisition would see EFG Hermes take a controlling 51% stake in AIB.

INVESTMENT WATCH- Private equity outfit B Investments will establish an EGP 1 bn healthcare platform, with an initial commitment of EGP 200 mn to the venture, a company statement (pdf) said. The new venture will acquire majority stakes in leading local healthcare players and has already kicked off due diligence on its first potential acquisition, the statement said, without disclosing the name of the company. B Investments is an EGX-listed, Egypt-based private equity firm with investments in the energy, real estate and non-banking financial services sectors.

M&A WATCH- FAB’s acquisition of Bank Audi’s Egypt operations may not be dead. Negotiations that could see First Bank of Abu Dhabi (FAB) acquire Bank Audi’s Egypt arm are expected to resume soon as the covid-19 pandemic has subsided, Masrawy reports, citing banking sources with ties to the transaction. Talks stalled in May due to the uncertain outlook earlier during the covid-19 pandemic.

Audi isn’t the only Lebanese bank that may be exiting Egypt stage left: Blom Bank also said last week it’s looking to sell its Egypt assets amid the financial crisis gripping Lebanon. With the LBP in freefall, soaring inflation and a paralyzed financial system, banks are racing to boost their capital after the Lebanese central bank raised capital requirements in a bid to shore up the banking sector.

M&A WATCH- Union National Bank in Egypt to rebadge as Abu Dhabi Commercial Bank next month: The Union National Bank in Egypt (UNB-Egypt) has received the Central Bank of Egypt’s approval to rebrand under the trademark of the Abu Dhabi Commercial Bank (ADCB). The news comes after its parent company UNB in the Emirates finalized its merger (pdf) with ADCB and Sharia-compliant lender Al Hilal Bank in April to create one of the largest retail banks in the UAE. Egypt Managing Director Ihab El Sewerky told Hapi Journal that the new branding would start rolling out at Egyptian branches in September.

Odin, Kasb Capital to establish EGX equity fund; Odin says it is looking at three more specialized funds: Odin Investments and Saudi investment group Kasb Capital are creating a fund to invest in Egyptian equities, Odin said in a regulatory filing (pdf). The fund will be open for public subscription for individuals and institutional investors, Karim Hashem, senior financial analyst at Odin, told Enterprise. Odin is also looking to establish three new investment funds specialized in non-banking financial services and microfinance, venture capital, and educational technology services.

Maersk said to hike letters of guarantee requirement in “crippling” move for freight companies: Maersk is set to increase the value of the letters of guarantee it demands of transportation companies by as much as twelve-fold in a move that threatens to cripple the sector, Al Mal reports. The global shipping firm currently requires a EGP 250k guarantee for any container it transfers to local contractors, but will now hike this to EGP 1 mn for containers of dry goods (with a bank check of EGP 2 mn), and EGP 3 mn for refrigerated containers (with a bank check of EGP 6 mn) from the beginning of September.

The move could put many freight companies out of business, said El Sayed El Mekkawi, head of the Land Transport Division at the Alexandria Chamber of Commerce, who described the decision as “crippling.” The Danish company accounts for around 30% of shipping activity in Egypt’s ports, making it a vital partner for many of the country’s transportation firms.

We reached out to Maersk for comment and haven’t heard back, but will keep our eye on the story in the coming weeks.

LEGISLATION WATCH- The House was busy yesterday as its three-week break came to an end — and as MPs race towards summer recess: The House of Representatives granted final and committee-level nods to a host of bills yesterday in the first of three eventful days before the House adjourns its sessions for its summer recess. Among the laws that made it through parliament:

The new Customs Act, which the House general assembly approved in principle, would expedite clearance through a white list of importers, broaden the powers of clearance agents, and include breaks for local manufacturers, among other stipulations. The bill — which has been in the making for more than two years — now needs a final nod from parliament before being shipped off to the presidency to be signed into law.

Redrawing the country’s electoral districts: The House Legislative Committee gave its final approval to a bill that divides Egypt’s electoral districts into 143 single-member constituencies and four in which MPs are elected through electoral lists. If passed in a final plenary session vote, the law would also specify the number of MPs representing each district. It would replace a 2012 legislation and is expected to come into effect by this year’s November elections for the House.

Protecting the identity of harassment victims: Changes to the criminal code designed to protect the personal data of victims of [redacted] harassment and assault also received a preliminary nod from the House yesterday. The final vote was postponed due to a lack of quorum. The changes were proposed by cabinet following the arrest of ex-AUC student Ahmed Bassam Zaki, who in July confessed to serial abuse and blackmail charges. Reuters took note of yesterday’s vote.

Clinical research law: A law to regulate clinical research and protect human subjects received an early nod at a general assembly meeting. A final vote on the law was also postponed due to a lack of quorum. Parliament had initially signed off on the law in May 2018, but President Abdel Fattah El Sisi refused to ratify the bill at the time, objecting to a number of clauses including those setting harsh penalties for the transfer of human research samples outside of Egypt without obtaining approval from authorities. The president said this could be problematic for future scientific exchange. House Speaker Ali Abdel Aal previously ordered the establishment of a sub-committee to review the law and address El Sisi’s concerns.

Regulating judicial procedures in civil disputes: The general assembly also rubber stamped changes to the law regulating judicial procedures in civil disputes. The amendments allow the prosecutor general to authorize representatives to cash out funds worth up to EGP 10k belonging to incapacitated or absent people or minors they represent, according to Al Masry Al Youm. This figure can be increased to no more than EGP 20k. The bill now needs to be ratified and signed into law by El Sisi.

Funding from Europe gets rubber stamp: Separate House committees approved development funding for Europe, including EUR 150 mn for an energy development financing program from French development agency AFD and EUR 200k from the Spanish Agency for International Development Cooperation for a women’s empowerment initiative in Upper Egypt.

EARNINGS WATCH- Rameda Pharma reported 54% bottom line growth in 2Q2020, with net profits rising to EGP 19.9 mn from EGP 12.9 mn in 2Q2020, according to a company earnings release (pdf). Revenues rose 5.6% during the three-month period to EGP 205 mn despite private sales falling 4% y-o-y due to the covid-19 pandemic. Net profits more than doubled y-o-y in 1H2020, increasing to EGP 43.8 mn from EGP 21 mn from the same period last year. The company’s top line shrugged off a 50% fall in export volumes to grow 13.8% to EGP 437.5 mn in the first half. “Our strong performance demonstrates the breadth and resilience of our portfolio, as well as the vital role of the generic medicines we supply,” said CEO Amr Morsy. “We expect our new launches and acquisitions, combined with the recent easing of social distancing measures, to further drive Rameda’s growth momentum for the remainder of 2020,” CFO Mahmoud Fayek said.

Fawry profits surge in 1H2020: Fawry’s net profit increased 165% y-o-y in 1H2020, reaching EGP 70.5 mn from EGP 26.5 mn last year, according to a company earnings release (pdf). Revenues rose 47.1% to EGP 549.3 mn, up from EGP 373.3 mn a year earlier. The company said that it is seeing “favorable market conditions where digital transformation and electronic payments are becoming priorities for the Government, the Central Bank” as well as businesses and consumers. CEO Ashraf Sabry said the company is now looking at the prospects of a capital increase to finance future growth of “mobile services, omni channel acceptance and integrated supply chain digital solutions” and “early indications” are that 3Q2020 will be strong for the company.

CI Capital’s net profits fell almost 14% to EGP 178.8 mn during 1H2020 due to challenging market conditions caused by the covid-19 pandemic, the company said in an earnings release (pdf) yesterday. Revenues fell 10% to EGP 1.0 bn during the six-month period. The company said that despite an “unprecedented year,” it has seen “progress [on] strategic growth initiatives” at its financing platform. “We are confident that market recovery is inevitable, and hence we remain committed to our expansion plans across most of our business lines, as we position ourselves to capitalize on the expected market recovery,” it said.

Beltone Financial reported a EGP 12 mn loss in 2Q2020, narrowing from the EGP 34 mn loss reported in the same period last year, according to a company earnings release (pdf).

Orascom Development Egypt (ODE) reported a 63% y-o-y decline in net profits to EGP 76.5 mn in 2Q2020 from EGP 205.2 mn in 2Q2019, according to the company’s earnings release (pdf). Revenues fell 23% to EGP 1.02 bn during the quarter, down from EGP 1.33 bn during the same period last year. ODE’s top and bottom lines were negatively affected by curfew and travel restrictions starting late February that significantly impacted the group’s hotel operations. As restrictions on tourism ease, ODE is seeing “steady, incremental improvement in [our] hotel reservations pace for July and August” and remains “optimistic for the recovery of the real estate and the tourism sector in the months to come” as people cash in on pent up demand for travel.

Oriental Weavers posted a net profit of EGP 68.4 mn in the second quarter of the year, a 71% dip from EGP 241.5 in 2Q2019, according to an EGX filing (pdf). Sales fell 31% y-o-y to EGP 1.8 bn during the quarter, down from EGP 2.6 bn in the same period last year.

B Investments reported net profits of EGP 85.3 mn in 2Q2020, up 22% from EGP 69.9 mn in the same period last year, according to a company earnings release (pdf).

Raya losses widen in 2Q2020: Raya Holding reported a EGP 26.7 mn loss in 2Q2020, down from a EGP 24.7 mn loss reported in the same period last year, according to a company earnings release (pdf). This came despite slight topline growth during the quarter, with the company reporting EGP 2.4 bn in revenue, up from EGP 2 bn last year.

Abu Dhabi Islamic Bank’s (ADIB) net profits fell 20% during 2Q2020 to EGP 300 mn from EGP 379 mn in the same period last year, according to the company’s earnings release (pdf).

GSK Egypt triples profits in 1H2020: GlaxoSmithKline’s local subsidiary reported profits of EGP 115.96 mn in 1H2020, up 302% y-o-y from EGP 28.8 mn in the first half of 2019, according to a filing to the EGX.

Correction (17/08/2020): A previous version of this article incorrectly stated that B Investments reported net profits of EGP 85.3 mn in 1H2020.

MOVES- EFG Hermes has appointed high profile corporate lawyer Mohamed Gabr (Linkedin) as general counsel and to provide strategic advice on the firm’s legal affairs, the firm said in a statement (pdf). Gabr made his name as a partner at Matouk Bassiouny and was an attorney at Zaki Hashem & Partners. He joins EFG from Nour & Partners in Association with Al Tamimi & Company, where he was partner and head of the company’s Corporate Commercial team. A graduate of Cairo University (LLB) and the American University in Cairo (BA, MA), Gabr was ranked in the International Financial Law Review 1000 for a five-year period spanning from 2012-2017.

Fawry’s board has accepted Mohamed Okasha’s (Linkedin) resignation from the board, according to a filing (pdf). Okasha stepped down as the company’s managing director in March.

Egypt, Sudan push for binding GERD agreement as fresh talks get underway: Egypt, Ethiopia, and Sudan resumed yesterday African Union-sponsored talks to resolve the Grand Ethiopian Renaissance Dam (GERD) deadlock. A meeting between the three countries’ irrigation ministers, an AU representative, and AU chair South Africa’s foreign minister took place yesterday, Ethiopian Irrigation Minister Seleshi Bekele said on Twitter. The three countries’ irrigation ministers, an AU representative, and AU Chair South Africa’s foreign minister will sit down again for more talks on Tuesday in hopes of reaching an expedited agreement over the filling and operation of GERD. The resumption takes place a week following agreement to suspend talks after Khartoum threatened to boycott the negotiations due to Ethiopia’s refusal to commit to a timetable for filling the dam’s reservoir. Egyptian Prime Minister Moustafa Madbouly and Sudanese Prime Minister Abdalla Hamdok had renewed their two countries’ calls for a binding agreement on the dam over the weekend.

Egypt’s ceramics, sanitary ware exports drop in 1H2020: Egypt exported USD 53 mn-worth of ceramics during 1H2020, down 34% y-o-y from USD 80 mn during the same period last year, according to Al Shorouk. Sanitary ware (bathroom appliances such as sinks, bathtubs, and toilets) exports also decreased 12% y-o-y to record USD 59 mn in the first half of the year, compared to USD 67 mn in 1H2019.