Financial Times: Egypt, Latest Darling of Overseas Lenders

CAIRO, Oct. 11 (SEE) – Experts in Financial institutions have agreed on an optimistic vision toward the Egyptian economy.

A recent report by Financial times quoted experts and analysts that by the time the government work to modernize economies in the Middle East, countries have fallen in and out of bankers’ favor as they have grappled with political difficulties and big movements in the price of oil.

The latest focus of bankers’ attention is Egypt, as the Arab world’s most populous country recovers from years of economic instability and begins its own major reform drive.

Less than two years ago, HSBC was helping the country’s central bank secure emergency funding ahead of a bailout from the IMF, but now the lender’s regional boss is confident about the outlook for Egypt. “We’ve been there through thick and thin”, says Georges Elhedery, HSBC’s Middle East and north Africa chief executive. “We’ve always had a long-term positive view of Egypt, and as the economy rebounds we are optimistic about the next few years.” Mr Elhedery is not alone in his optimism.

The early reforms demanded by the IMF as part of the bailout — including cutting subsidies and removing controls on the Egyptian pound— pushed inflation above 30 per cent. But with the economy stabilising and the government promising more market-friendly changes, the country is increasingly drawing the attention of international banks.

Karim Tannir, JPMorgan’s head of investment banking for Middle East and north Africa, says he sees “a lot of potential in Egypt”, adding: “The country is embarking on several reform initiatives, including privatisation which we expect to be an important theme in the coming years.” The government plans to offload stakes in 23 different state companies over the next two years, with the first two set to take place in October.

Mohamed Ebeid, co-chief executive of investment banking at EFG Hermes, the regional investment bank, says: “It’s a good sign because this push from different international banks and entities increases the potential of foreign investor participation in the market.”

Julien Faye, head of financial services for Middle East and north Africa at Bain, the consultancy, says there is “a definite window of opportunity” in Egypt, pointing to planned infrastructure projects and natural gas discoveries that have already attracted overseas investment.

However, many international groups stand to miss out on one key area of banking growth in the country. While the short-term prizes on offer for corporate and investment banks are not expected to be as large as in Saudi Arabia, Egypt’s large population also creates opportunities in retail banking, according to Mr Faye. “There’s a strong push from the central bank and government to really modernize the sector. A huge part of the population is unbanked and reliant on cash, so there’s a big push to give new shape to the sector.” Most European and US banks have abandoned their Egyptian retail operations. Citi sold its Egyptian consumer bank in 2015, while France’s Société Générale and BNP Paribas both exited the country in 2012.

Regional group Qatar National Bank, in contrast, is already reaping the first benefits of the changes. In its most recent set of quarterly results in July, QNB Al Ahli, which was bought from SocGen, said it was “properly positioned to benefit from the turnaround of the Egyptian economy and the accelerating financial inclusion”. As one of the remaining European retail banks in the country — alongside Intesa Sanpaolo and Crédit Agricole — HSBC is hoping to benefit from both trends. Local banks have been slow to lend to the private sector in recent years, but Mr Elhedery points to a central bank-led initiative to strengthen small and medium-sized enterprises as a particularly encouraging area. Despite the challenges brought by its earlier reforms, Mr Elhedery says the long-term impact would be worth it for the local economy. “They had to take a resilient stance, but it was the right thing to do.”

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