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Dubai lender Emirates NBD, the largest bank in Dubai, agreed to purchase the Egyptian arm of French bank BNP Paribas SA for US$500 million, a purchase that promises to help the French bank boost its capital and expand in the area, Sky News Arabia reported.
The deal shows that despite the political turmoil in Egypt, Gulf investors who have sufficient liquidity are keen on bolstering their investments in Egypt after the 25 January revolution.
“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 chairperson, Sheikh Ahmed Bin Saeed Al Maktoum, said.
BNP, like other French and European banks, has spent the past year cutting assets and staff to better withstand the euro zone’s debt crisis and tougher global Basel III rules on risk-taking, Reuters reported.
For ENBD, majority-owned by the government of Dubai, 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.
In a statement to the Dubai stock market, ENBD said it would buy BNP’s 95.2 percent stake in its Egyptian arm and make an offer to minority shareholders for the remaining 4.8 percent.
The transaction, expected to close by early 2013, values the business at 1.6 times its book value as of September 2012, ENBD said.
BNP has a network of 69 branches in Egypt and operates retail, corporate banking and private banking operations with retail banking making up the majority of its business.
Industry sources told Reuters this week that ENBD had outbid Morocco’s Attijariwafa Bank for the asset.
Following deal agreement by both SocGen and BNP, the focus may now shift to Credit Agricole SA, which also owns 60 percent of Credit Agricole Egypt and operates a retail, corporate and private banking business in the country, a banking source familiar with the matter told Reuters.
“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.