Abu Dhabi investments fuel banking recovery in Egypt

The first half of 2014 saw $3.8 billion worth of projects awarded in Egypt according to Meed.

Egypt has struggled to revive its economy since 2011 following the uprising against Hosni Mubarak that year. Above, the Cairo skyline. avid Degner / The National

Investments by Abu Dhabi companies in Egypt are feeding a revival in the country’s corporate banking industry.

After years of sluggish growth in the sector, the outlook now is for aggressive growth, says the Middle East’s biggest investment bank.

“This is going to have an impact, not on the investment banking side, but the commercial banking a lot more,” said Karim Awad, the chief executive at EFG Hermes Holding.

“There is more room for project financing and deployment of excess liquidity because Egypt’s banks have a low loan- to-deposit ratio. But also there’s going to be room for some activity for the investment bankers in terms of bond arrangements and other financing tools.”

This month, the Cairo-based contractor Orascom Construction Industries and Abu Dhabi’s International Petroleum Investment Company signed a memorandum of understanding (MoU) with the Egyptian government for a coal-fired power plant that is earmarked at US$2.5 billion to $3bn.

Al Nowais Investments, another Abu Dhabi company, signed a deal in September to build a coal-fired plant in Egypt. The company will provide 70 per cent of the capital, its chairman, Hussain Al Nowais, said at the time.

These deals should bring major financing opportunities for Egypt’s commercial banks.

“I don’t think the actual figures have hit the sector because they are still in MoU phase ... but I think as they move from MoU stage to finalising stage you will find the Egyptian banking sector participating more,” Mr Awad said.

HSBC said it was aggressively looking to channel financing into these projects. HSBC is predicting growth of 10 to 15 per cent for project finance across the banking sector in Egypt.

“One of our key focuses is to capture, as a financial institution, this opportunity,” said Ahmed Abdelaal, regional head of corporate banking and structured finance at HSBC Middle East. “So if you ask me is this going to have an impact on our appetite to deploy more capital and investment into these sectors? Certainly as much as these projects will require. Not only in terms of supporting industrial projects on the ground, but also supporting investors from around the region, in terms of pushing more capital into Egypt,” Mr Abdelaal said.

The IMF is projecting that Egypt’s economy will have grown 3.8 per cent in the fiscal year ending on June 30, 2015. Growth has been about 2 per cent per year since the Arab Spring turmoil that removed Hosni Mubarak from power almost four years ago.

The leap in GDP figures comes after a change in thinking by the UAE, Mr Awad said, to move from bilateral grants and deposits to direct foreign investment. The UAE has made a raft of investments in Egypt since the country’s Muslim Brotherhood government was unseated in July 2013.

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