Photographer: Shawn Baldwin/Bloomberg
Russian Billionaire's Bank Bets on Egypt as Mideast Risk RisesBy
RenCap’s Cairo office has pipeline of investment banking deals
Bank is ‘de-emphasizing’ Turkish market amid unclear politics
Renaissance Capital, the investment bank owned by Russian billionaire Mikhail Prokhorov, is taking a long-term bet on Egypt even as tensions in the region are on the rise.
“A lot of the global investment banks are de-risking their portfolios, they’re scaling back in Africa and none of them are entering Egypt,” James Friel, the global head of investment banking at RenCap, said in a Moscow interview. “Egypt is a very interesting market for us.”
The bank got its Egypt license earlier this year and is entering the market as Saudi Arabia’s anti-corruption purge and a deepening feud with Iran fuel geopolitical risk. At the same time, one year after Egypt devalued its pound, economic growth is accelerating and stocks are near record highs.
"Our strategy is unchanged,” said Friel, commenting on the tensions in the region. "We have taken a long-term view on the Egyptian market and remain firmly convinced that this is a positive move for the firm.”
Earlier this month, the International Monetary Fund reached a staff-level agreement with Egypt to unlock a $2 billion loan installment, and said economic reforms in the Arab world’s most populous nation are starting to pay off. Gulf tensions should be handled cautiously to avoid adding to regional turmoil, Egyptian President Abdel-Fattah El-Sisi said last week.
RenCap’s Cairo office has a pipeline of deals and will focus on investment banking, financing and research. Friel predicts the improved relations with the IMF will “breathe a lot of new life” into Egypt’s capital markets.
Here’s RenCap’s take on other EMEA markets:
“We’re not presently established in Saudi from an investment-banking perspective. We’re following Saudi Arabia from the research point of view and have witnessed progressive signs, which is encouraging.”
“We don’t currently have a license in Saudi Arabia. We’re not yet at a juncture at which we are considering the opening of an office in that country.”
“We’re de-emphasizing the market. Turkey doesn’t fit into our geographic focus area from an investment banking perspective. It’s a very over-banked market given the deal flow, and the macro and political situation there is unclear. It’s a very challenging market. We still trade some Turkish stocks but it’s not our focus area.”
“We maintain an open mind about all sensible opportunities in the EMEA and frontier space. This requires a degree of clarity on the regulatory regime, including with respect to sanctions. Iran doesn’t currently meet these requirements.”
“We’re probably more interested and better suited for wider North Africa, which we cover on the research side. We have teams spending a lot of time more recently in Morocco, Tunisia, Algeria. Those are markets we’re keen on. Libya isn’t ready for investment banking services yet. And I don’t rule out that we might reinforce the team to cover francophone Africa more broadly, including North Africa. If I were to look into a crystal ball, in three years we’re probably more likely to have done deals in Morocco than Kuwait.”
“We’re active with live deals in Kenya, Ethiopia, Uganda, Rwanda, Tanzania and Zambia. It’s mostly M&A and equity deals. Corporate debt issuance has been less prominent there.”
“Of course, we’re seeing the effect on Kenyan deals and markets from the worsening political crisis. It’s a typical situation: whenever there’s an electoral period in any market, things tend to slow down.”
“What happened with Kenya, because of the canceled elections and what happened with the opposition party withdrawing, that period has been more protracted than usual. We’re very committed to our Kenya operations.’