In light of the current trend in Egypt towards Bank mergers and acquisitions of Banks into larger financial entities. The Middle East Observer interview Dr. Magdy Abd Elfattah, the banking expert, regarding the various aspects related to the economy and banking sector.
In a TV Interview with The Deputy Minister of Finance, he declared that the loan of the International Monetary Fund will cover budget deficit, what is your comment ?
Yes, the Deputy Minister of Finance declared that the loan will be paid off to budget shortage, and I was shocked. In my opinion the government should have directed the funds towards developmental projects.
What do you think of the Central Bank’s decision to float the Egyptian pound ?
The Central Bank’s decision of floating the Egyptian pound was essential, yet it should have been accompanied by a gradual subsidy decrease and a strong market monitoring to minimise the price hikes.
What is your opinion regarding Deposits and Savings interest rates Increase ?
The decision of increasing interest rates was very important in collecting liquidity of USD and Egyptian pounds, but on the other hand, this increase leads to increasing the lending rates and charges on loans , and may lead to an increase in cases of bad debts that will directly affect banks portfolios and seriously affects clients projects and accordingly the economy.
The Central Bank of Egypt revealed that some banks in Egypt will issue shares in the Stock Exchange Market ?
Yes, According to the Central Bank’s declarations Cairo Bank will sell 20% of its shares in the Stock Market (the 20% Shares are the state owned shares), also the Arab African Bank will sell
40% of its shares (20% owned by the state and 20% owned by Kuwait). As for the United Bank of Egypt, it will be sold in total by end of 2016 or early 2017. All these steps reflect measures taken by the state to create financial resources in covering budget deficit.
What is you vision around selling Egyptian Banks and what is the role of the central Bank and Government to safeguard the banking sector?
Selling in concept has basis and conditions to be considered, yet the most important is that selling assets that are not currently being exploited should be at market prices and if there’s a role for the Central Bank in the process then it should be safeguard the sale and providing a realistic assessment of the bank’s performance.
The case of The United Bank UNITED BANK IN EGYPT TO BE SOLD LATE 2016, EARLY 2017
According to the United Bank Chairman’s declaration “The Bank Now Is Ready For Sale”. The bank was established in 2006 merging the Nile Bank, Egyptian United Bank and the Islamic Bank for Development and Investment. The bank’s capital now is EGP 1Bn and the equity amounts 1.7BN. The Central Bank granted the bank EGP 4Bn as a subordinated loan to be repaid to the Central Bank upon concluding the selling process. The Bank has 47 branches and 21 branches for Islamic banking. The Bank’s financing portfolio reaches about EGP.5.8Bn and the Bank is aiming to increase it to EGP.6.2Bn by end of 2016. The deposits in the bank amount to EGP.22Bn and it is intended to be increased to 25Bn by end of 2016. The next step is to target the strategic investors with the strongest offer in terms of creditworthiness, and to make a shortlist to conduct the technical due diligence of the bank with all scenarios transparent and hope for the best deal.
Dr. Magdy Abd Elfattah,
Banking Expert working in credit, Islamic banking and Investment as well as
Legal Consultant specialized in banking settlement, reconciliations and arbitration .
