Egypt’s banks brace for change
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Egypt’s banks brace for change

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As Gulf banks grapple with squeezed margins, low interest rates and over-banking, Egypt offers the opposite: high interest rates, low lending penetration and a largely unbanked population. It is no surprise that domestic and regional buyers are now circling.

In September, EFG Hermes and the Sovereign Fund of Egypt received approval from the central bank of Egypt to begin due diligence to acquire 76% of the capital of Arab Investment Bank (AIB), a small state-run bank, from National Investment Bank.

EFG Hermes has been looking for an acquisition that would allow it to transform itself from pure play investment banking business into a universal bank – and here was that opportunity.

“It is one of the oldest strategies of EFG to have this universal banking model,” says Mostafa Gad, co-head of investment banking at EFG Hermes. “We thought this is just the right fit to complete the puzzle.”

The deal is the latest evidence of a wave of banking consolidation in the country. A combination of Gulf banks with deep pockets and changes to Egypt’s banking regulations is spurring hopes for a flurry of M&A activity.

“The Egyptian banking sector continues to be one of the most attractive markets within the region, given the significant under-penetration and the significant potential when it comes to financial inclusion and potential growth of the business,” says Monsef Morsy, co-head of research and sector head of financials at CI Capital.


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