United Bank of Egypt announces listing on EGX after 2 years of stalled offerings

The United Bank, a financial institution fully owned by the Central Bank of Egypt (CBE), announced its plan to list 30 percent of its total shares on the Egyptian Stock Exchange (EGX), according to an official statement issued by the bank on Sunday, which Mada Masr reviewed.

Following failed trials to offer the bank up for privatization over the past two years, at a time of unprecedented foreign currency shortage, the state is re-attempting the sale of shares in the CBE-owned bank a few weeks ahead of the International Monetary Fund’s fourth review of its US$8 billion loan program with Egypt. The implementation of the state ownership policy — a document issued by the government in 2022 to outline state assets planned for privatization across sectors to secure necessary foreign currency revenues — is a major proscription of the fund’s loan.

The bank is one of around 32 state-owned assets in several sectors that the government has been trying to exit for the past two years to make room for more private sector participation in the national economy, a major requirement made by the International Monetary Fund (IMF) for the disbursement of loan installments to Egypt.

The bank will initiate a private offering for some Egyptian and foreign investors and institutions, according to the statement, while another public offering will be made for individual Egyptian investors. Stock pricing will be set at the same rate for both listings.

The bank is currently obtaining the necessary approvals prior to the offering, said the statement, including those of the Financial Regulatory Authority and the Egyptian Stock Exchange, with procedures set to wrap by the end of 2024.

The listing could be launched as soon as the first quarter of 2025, according to the CBE, which had announced its intention to offer a stake in the bank in the stock market last month.

CI Capital Holding for Financial Investments will manage the bank’s offering, while Helmy, Hamza & Partners, the Cairo office of international law firm Baker McKenzie, will act as the offering’s legal advisor, according to the bank’s Sunday statement.

A source in the investment banking sector described the move to Mada Masr as a “necessary signal” of the state scaling back its involvement in the economy in the lead up to the IMF’s fourth loan review, scheduled for November.

“The IMF is not concerned about the returns from the sale but rather what it signifies about the state's intent to withdraw from the economy,” the source added.

In August, during its third review of the Extended Fund Facility program it first signed with Egypt in 2022, the IMF noted that the government needed to exert more effort in implementing its state ownership policy, which the lending authority described at the time as one of the most critical and structural reform measures within the program, with priority to the aviation, banking, insurance, and telecommunications sectors.

When the government announced its intention to offer the bank up for privatization in 2023, talk circulated in the press regarding Saudi Arabia and the United Arab Emirates’ interest. No agreement was reached at the time, however, given a rumored dispute with Saudi investors on whether the sales of shares should be in dollars or Egyptian pounds.

But a financial analyst at a brokerage firm speaking to Mada Masr on condition of anonymity noted that the exchange rate’s fluctuation due to the foreign currency shortage and the consequent growth of the parallel market made it difficult to launch the offering, given that the dual exchange rate would have naturally deterred foreign investors specifically from buying assets.

“We should not forget that the gap between both rates was likely the reason the bank could not be sold to a strategic investor last year after the announcement that its due diligence review was permitted,” said the analyst.

As for the size of the offering, banking expert Sahar al-Damati said that it likely reflects the bank’s desire to retain management control by preserving a majority stake. “[The stake up for privatization] should not exceed 49 percent to preserve the current management’s nature and competence in such a sensitive sector,” Damati told Mada Masr.

The offering could go well, according to a financial analyst at a brokerage firm, who told Mada Masr on condition of anonymity that, “In principle, the entire banking sector is attractive for investment in the Egyptian stock market due to its stable returns that do not fluctuate significantly.”

The United Bank and its non-banking financial arm operate a broad network of 68 branches and 225 ATMs, with its profits rising from LE1.1 billion in December 2021 to LE1.7 billion by the end of December 2023. The bank’s capital stands at around LE5.5 billion, comprising 1.1 billion shares with a nominal value of around LE5 per share, according to Central Bank data.

The financial analyst noted that the rapid influx of profit, however, is not expected to continue at the same pace. Profits in the banking sector surged after central bank profits were hiked in March, the analyst said.

But now, “Everyone is anticipating the beginning of the easing phase of the monetary cycle,” he said. “It is clear that we will not witness increased interest rates in the foreseeable future and that the interest rate’s decline is only a matter of time,” the source explained.

“Bank returns will of course continue to grow after the interest rate decline, however, not at the exceptional level we witnessed at the peak of interest rate hikes,” the analyst concluded, adding that “in all cases, the interest rate’s decline will lead to an increased demand in/for borrowing from banks, either for individual or investment loans.”

On Sunday, United Bank director Ashraf al-Qadi said that the bank is looking forward to the upcoming period and the EGX listing, which he said will expand the bank’s operations and benefit it “with promising opportunities in the Egyptian market and the banking sector, including digital transformation and financial inclusion.”