Societe Generale SA, France’s second-largest bank by market value, agreed to sell a majority stake in its Egyptian unit to Qatar National Bank SAQ for $1.97 billion as it shores up capital amid the European debt crisis.
The sale of the 77.2 percent stake in National Societe Generale Bank SAE will probably close in the first half of next year and give Paris-based SocGen, as the bank is known, a net gain of about 350 million euros ($458 million), it said in an e-mailed statement yesterday. QNB will also acquire stakes not already owned by NSGB in some of its local subsidiaries.
“This should unlock value for QNB, as the market does not value QNB’s surplus capital base whatsoever, while it also supports our very positive view on Egypt,” Jaap Meijer, a director at Arqaam Capital Ltd. in Dubai, said today by e-mail.
Qatar National Bank said in April it had a five-year plan to make itself an “icon” in the Middle East and Africa by expansion and “diversifying income sources.” The lender is expanding overseas amid limited growth opportunities at home.
Including the value of the stakes in some of its local subsidiaries, Société Générale will receive as much as $2 billion, helping boost the Paris-based lender’s core Tier 1 capital by about 30 basis points at the end of 2013. The sale values NSGB at $2.56 billion, or twice its book value at the end of September. Commercial International Bank Egypt SAE, Egypt’s biggest publicly traded lender, trades at 1.97 times book value, according to data compiled by Bloomberg.
NSGB shares plunged 10 percent to close at 35.42 Egyptian pounds in Cairo today, valuing the lender at 15.7 billion pounds ($2.6 billion). The shares have gained 92 percent this year, helped by news of QNB’s interest. The purchase price translates to 35.54 pounds a share, according to Arqaam Capital.
QNB rose 0.9 percent, the most in more than two months, to close at 131.4 riyals in Doha today, while Société Générale was down 0.1 percent at 29.485 euros at 1:06 p.m. in Paris.
SocGen has been eliminating jobs and selling assets as rising capital requirements and Europe’s sovereign-debt crisis squeeze profit. The bank booked a 130 million-euro loss after agreeing to sell its Greek unit this year for 1 million euros, and took a loss of 92 million euros on the sale of Los Angeles-based asset-management unit TCW Group Inc.
The bank has a goal of reaching a core Tier 1 capital ratio under Basel III standards of 9 percent to 9.5 percent by the end of 2013 by retaining earnings and reducing assets.
Doha-based QNB, the biggest lender in the six-nation Gulf Cooperation Council by assets, missed out to OAO Sberbank in its bid to buy Dexia SA’s Turkish unit Denizbank AS, a deal priced at 1.33 times book value. QNB’s third-quarter profit rose 11 percent to 2.11 billion riyals ($580 million) on higher lending.
The buyout is QNB’s biggest in its 48-year history and helps expand its network to almost 25 countries in the Middle East and North Africa region. In August, it more than doubled its stake in Dubai-based Commercial Bank International PSC to 39.9 percent in a deal worth about $75 million.
The NSGB acquisition is part of QNB’s strategy “to diversify revenue sources,” QNB Group Chief Executive Officer Ali Shareef Al-Emadi, said in a statement. “The Egyptian financial sector represents a significant growth opportunity with its combination of growth potential, increased future penetration of banking services, young and dynamic population.”
NSGB is Egypt’s second-biggest privately owned lender and has a network of about 160 branches, assets of 63.3 billion pounds and loans of 36.1 billion pounds at the end of September.
QNB intends to fund the purchase through its own cash and will remain strongly capitalized after the acquisition with a core tier 1 capital ratio of around 15 percent, the lender said in the statement. The transaction is expected to immediately add to earnings in 2013. NSGB will represent 8 percent of the group’s loans and 10 percent of deposits.
QNB wants a presence in Turkey and Morocco by 2017 and will consider acquisitions in these markets over the next three years, Mohamad Moabi, assistant general manager for group strategy said in a conference call today. It has also submitted an application to open a branch in Saudi Arabia, he said.
The lender will aim to buy a majority stake in a top-10 bank in Turkey, Ramzi Mari, group chief financial officer said on the call. The bank is satisfied with NSGB’s management in Egypt and will not make any changes there, he said.
Egypt’s appeal to overseas investors has improved since the nation swore in a new president in June. Economic growth in the most populous Arab nation, home to about 82 million people, dropped to a 19-year low of 1.8 percent in 2011 after a popular uprising toppled Egyptian President Hosni Mubarak. Growth will accelerate to 2 percent this year, according to the median estimate of 10 economists compiled by Bloomberg.
BNP Paribas Exit
HSBC Holdings Plc, Europe’s biggest bank, is among lenders that is seeking to expand its consumer lending and wealth management business in the country to take advantage of a young population, the country’s high savings rate and low borrowings relative to other nations in the region, it said in October. BNP Paribas SA, France’s biggest bank, is also seeking to cut assets in Egypt and aims to raise $400 million by selling its retail banking division there, Le Monde reported Aug. 15.
QNB will make a mandatory tender for all of NSGB’s shares after obtaining regulatory approvals, according to the statement. QNB Capital and JPMorgan Chase & Co. were QNB’s financial advisors, while Clifford Chance LLP and Zaki Hashem & Partners acted as its legal counsel.