Lebanon’s banks sell their | Phalanges

Muhammad Wahba wrote in the Al-Akhbar newspaper:

Blom Bank is trying to finalize the sale of Blom Egypt next month. Concerned sources declined to provide detailed information on the deal, but indicated that the offers received by the bank to sell “Bloom Misr” are still in the “Due Diligence” stage. However, it has become a stage in which the buyer makes an offer that paves the way for a deal for sale next November.
Followers refer to two offers to buy “Blum Misr”; The first is owned by the Arab Banking Corporation – Egypt, whose 99.8% belongs to the Arab Banking Corporation in Bahrain, and the second is owned by the Central Bank of Libya with 59.37%, by the Kuwait Investment Authority with 29.69% and other shareholders, each of whom owns less than 5%. Regarding the second offer, it is from Emirates NBD, which is owned by the Dubai government at 55.76%, and from “Capital Est LLC” with a rate of 5.33%, noting that the number of shareholders is 2050, and the participation of foreigners in the shares is 11.12%.
Competition between the two parties to win this deal still exists, but those familiar with the Egyptian market believe that the best offer the deal could win is the one presented by the Arab Banking Corporation, noting that such weights may not be accurate.
In any case, the value of the deal is still unclear, especially since it is under undue pressure on “Blom Bank” in Lebanon to improve its liquidity and capital in foreign currencies. It is estimated that the value of the transaction will not be less than 250 million dollars (1.9 times the book value of the capital), but it will not exceed this ceiling much. As of June 2020, Blum Misr’s declared assets amounted to approximately $ 2.84 billion (calculated on the basis that each dollar equals 15.71 Egyptian pounds), its deposits amounted to approximately $ 2.47 billion, and it has customer loans of value of $ 814 million, and its capital is $ 127 million. While his earnings amounted to 32.8 million dollars. This means, for “BLOM BANK” in Lebanon, that it will make great profits during the investment period that extends from the beginning of 2006 to the present. At that time, he invested around 97.8 million dollars to buy this bank, which was called “Misr Romania Bank”, which was owned by the Egyptian government and “Romania Comerciala Bank”.
The earnings resulting from the difference between the investment value and the transaction value will be entered as capital gains of BLOM BANK, and these funds will be used as liquidity to enhance the bank’s external assets. However, this liquidity will not be sufficient to cover the requirements of Circular 154 issued by the Banque du Liban, which requires banks to form an external free reserve of 3% of total deposits in dollars, indicating that sources in “Blom Bank “indicate that their external liquidity” is not negative, as is the case of many banks. ”Likewise, calculating the amount in capital will not be enough to implement the BDL circular that stipulates an increase in capital in a term that expires in February.
The same applies to the results of the sale of external units at Bank Audi. In the case of the Egypt branch, negotiations with First Abu Dhabi Bank witnessed a breakthrough, but were halted due to crises stemming from the spread of the Corona epidemic, noting that observers believe that the suspension of negotiations It is due to the lack of agreement on the indicative price of the agreement, and that negotiations were not resumed until after it was reduced. In a large percentage. However, Bank Audi continues negotiations to sell its units in Jordan and Iraq, and it is expected to be completed soon.
Bank Audi entered the Egyptian market at the same time that Blom Bank entered it. In 2006, it acquired the Far East Bank of Cairo, owned by 5 Korean banks (49%) and two Egyptian government institutions: Al Sharq Insurance (20%) and Banque du Caire (19%) at a price of 94.4 million euros. Dollars. It then expanded its business there until, in 2018, it acquired the unit of the “National Bank of Greece” in Egypt, with a value of 110 million euros, and its capital there reached 445 million dollars.
The problem with Lebanese banks selling their foreign units is that they will lose significant revenue. “Blom Bank” stated in its published semi-annual budget that “Bloom Egypt” earnings represent 59.3% of the combined earnings of all local and foreign units, noting that its total earnings decreased from $ 238 million to $ 38 million. , 8 million dollars in the first half of the current year. . As for the contribution to the profits of “Bank Audi Egypt” to the Lebanese group, it amounts to 15.9%, according to a recent statement from the general director of the operating unit in Egypt, Mohamed Badair. In general, external income is important in light of the shallow depth of internal income, which consists mainly of interest derived from investments in treasury bonds in Lebanese pounds and certificates of deposit with the Banque du Liban, with the latter being they pay equally between the lira and the local non-convertible dollar. Consequently, local revenues may not be very important in light of the collapse of the lira exchange rate against the dollar, compared to the huge commitments of banks to dollar customers and the pressures they are exposed to to make transfers abroad (students, commercial operations, etc.). As for if banks follow the path of implementing the government’s recovery plan, all their capital will melt away and therefore they will only have to sell their assets abroad to boost their capital and liquidity with fresh money that can sustain them. alive.