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Monday, 10 February 2020

Is Ahli United Bank looking to sell its Egypt unit?

M&A WATCH- Is Ahli United Bank looking to sell its Egypt unit? Ahli United Bank could be looking to sell its Egypt arm after its recent acquisition by Kuwait Finance House (KFH), the local press reported, citing unnamed sources. The Kuwaiti bank is required to obtain a separate Islamic banking license from the Central Bank of Egypt (CBE) to operate in the country, the report suggests, adding that the bank is yet to acquire the license and could negotiate an exit from the country. It remains unclear whether KFH has applied for the license.

The news comes amid a rare period of change in the normally staid banking sector. Bank Audi announced last month that it was looking to sell off its Egypt unit, and is currently in negotiations with First Abu Dhabi Bank. State-owned banks Banque du Caire and United Bank are both moving towards privatization, while the National Bank of Greece is presumably still looking for a buyer for its Egypt arm, having seen its sale to Bank Audi fall through last month.

Egypt’s banks are ripe M&A targets, but sales are rare: The country’s banks capitalized on the high interest rate environment that followed the 2016 EGP float by piling into high-yield treasury bonds and bills, resulting in “excessively strong balance sheets” that have made the banks highly attractive acquisition targets. The problem, though, is that only a few are actually up for grabs, Naeem Brokerage head of research Allen Sandeep noted earlier this month.

Potential buyers? A major Saudi bank is looking to acquire a majority stake in an Egyptian bank or receive a new license, while another foreign bank is also inquiring about the Egyptian banking market, Fincorp Managing Director Mohamed Salem said. He noted that the Saudi bank has been waiting for the new Banking Act to pass before making its move. Acquisitions are currently the only way into Egypt’s banking sector, as the CBE has for years denied new banking licenses and has instead pointed potential market entrants to acquisition targets among the country’s 38 licensed banks.

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