FGB weighs up Egyptian expansion as UAE ramps up investment

FGB, the country’s third-largest lender by assets, is considering expanding into Egypt to service UAE companies that are increasing investments into the Arab world’s most populous nation.

“Egypt is on the radar,” the chief executive Andre Sayegh said in an interview at the bank’s headquarters in Abu Dhabi. “You see more UAE companies operating in Egypt. Some of them, for instance, are working on the expansion of the Suez Canal. It’s about following corporate customers. Wherever we are operating overseas now, it’s wholesale banking. Egypt has the basic ingredients for future success.”

While the bank has not undertaken a formal study of how it would create a presence in Egypt, one of the options would be to start with a representative office with the view of later upgrading it to a branch as it is currently doing in India, Mr Sayegh said.

Even though the heads of other UAE banks, including the chief executives of Abu Dhabi Islamic Bank (ADIB) and Mashreq, have said that foreign expansion is one way to hedge against slower loan growth in the emirates this year amid falling oil prices, Mr Sayegh disagreed with the notion. He said the bank’s enthusiasm for expanding abroad is not because business back home is dwindling.

“The UAE is one of the countries that are very well positioned to overcome the drop in oil for many reasons,” said Mr Sayegh. “The economy now is very diversified and oil represents a smaller percentage of the GDP of the country and the economy is investing in areas that will have importance going forward.”

Still, FGB joins a number of Emirati lenders that have taken more interest in doing business in Egypt as the country begins to recover economically from four years of political chaos.

ADIB, Mashreq and Emirates NBD are among banks vying to buy Citigroup’s Egypt consumer banking assets that have been put on the block. Mr Sayegh said he could not bid for the assets because FGB does not have an existing operation in Egypt that it could be added to.

UAE firms have been among the most aggressive first movers in investing in Egypt amid the flourishing ties between the two nations. Arabtec, the country’s largest listed construction firm, in March last year won a US$40 billion low-cost housing contract, its biggest venture overseas. And Majid Al Futtaim, the UAE company behind the Mall of the Emirates and the City Centre mall brands, is developing more malls in the country.

Local banks have been expanding for several years now outside their home markets amid the compressing margins that they receive for giving out loans as interest rates inch lower. Emirates NBD recently bought the Egyptian assets of the French bank BNP Paribas while banks including FGB and National Bank of Abu Dhabi, the biggest UAE bank by assets, have been beefing up their activities in Asia to take advantage of increasing business ties between the UAE and emerging markets within what NBAD’s chief executive Alex Thursby has dubbed the West-East corridor.

“Our overseas operation now represent more than 5 per cent of our revenue in a very short period of time of four to five years,” said Mr Sayegh. “Going forward, it will gain momentum. I can’t give you an exact forecast, but I can tell you that the momentum will grow and it will grow at a larger pace than what it is today.”

Unlike the UAE, both Egypt and India are both benefiting from a spell of lower oil prices as they are net importers of energy and are therefore obvious countries for UAE banks to expand into.

Oil prices have dropped more than 50 per cent since last June, giving governments of countries such as Egypt and India that subsidise energy products more scope to spend that money on more economically productive projects such as roads, bridges and other civil works.

Elsewhere, FGB is keen on securing a licence to operate a representative office in China by the end of this year, Mr Sayegh said. It also has representative offices in London, Seoul and Hong Kong, and branches in Singapore and Qatar.

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