A BNP Paribas bank branch is seen at a shopping mall in Cairo. For ENBD the deal to buy BNP’s Egyptian arm offers an opportunity to expand its Dubai-centric business, having been hit in recent quarters by its exposure to debt-laden, state-linked entities in Dubai that have been forced to restructure billions of dollars of obligations.


Reuters/Dubai

BNP Paribas, France’s largest bank, agreed to sell its Egyptian arm to Dubai lender Emirates NBD for $500mn as French lenders divest operations in the North African country to shore up their capital bases.
BNP, like other French and European banks, has spent the past year cutting assets and staff to better withstand the eurozone’s debt crisis and tougher global Basel III rules on risk-taking.
For ENBD, majority-owned by the government, the deal offers an opportunity to expand its Dubai-centric business, having been hit in recent quarters by its exposure to debt-laden, state-linked entities in Dubai that have been forced to restructure billions of dollars of obligations.
“This deal represents an excellent opportunity for Emirates NBD to enter the promising Egyptian market and achieve our strategic aspiration of expanding regionally,” the bank’s chairman, Sheikh Ahmed bin Saeed al-Maktoum, said.
The agreement is a fresh sign that despite continued political turmoil in Egypt, cash-rich Gulf investors remain keen to raise their presence in the country after last year’s revolution, even as European banks repair damaged balance sheets by selling some overseas units.
Following deal agreement by both SocGen and BNP, the focus may now shift to Credit Agricole, which also owns 60% of Credit Agricole Egypt and operates a retail, corporate and private banking business in the country, a banking source familiar with the matter said.
“There have been some informal discussions related to that asset. We would expect it come on the block soon,” the source said, speaking on condition of anonymity as the matter is not public.
ENBD, majority-owned by the Dubai government, will buy BNP’s 95.2% stake in its Egyptian arm and make an offer to minority shareholders for the remaining 4.8%, it said in a bourse statement on Thursday.
The transaction, which is expected to close by the end of the first quarter of 2013, values the business at 1.6 times its book value as of September 2012, ENBD said.
The valuation is below the two times book value paid by QNB when it agreed to buy Societe Generale’s Egyptian arm for $2bn last week.
“We see this as a positive development for ENBD as the deal represents the bank’s first step into growth markets, with near-term growth prospects in UAE subdued,” EFG-Hermes said in a research note. “However, the size of the acquired bank...indicates that it is pursuing international expansion cautiously.”
BNP, France’s biggest listed bank, put its business in Egypt on the block in June, seeking to strengthen its capital base and exit non-core operations. Industry sources told Reuters this week that ENBD had outbid Morocco’s Attijariwafabank for the asset.
BNP has a network of 69 branches in Egypt and operates retail, corporate banking and private banking operations with retail banking accounting for the majority chunk of its business.
Sources earlier said the sale may include only the retail arm, but the statement indicated the French bank was selling its entire business in the country.
The Egypt unit had around 200,000 retail and 3,000 corporate clients as of September 2012. EFG Hermes said in the note that the unit had a lending market share of 1.4% and deposit market share of 1.5%, as of September 2012.
The Cairo-headquartered business had revenues of 731mn Egyptian pounds ($118.50mn) and net earnings of 222mn Egyptian pounds ($35.99mn) in 2011, ENBD said.
ENBD is aiming for international revenues of around 15%-20% of its total in five years, up from 5% at present, with acquisitions likely to play a key role in achieving the target, CEO Rick Pudner said in an interview in November.