The biggest expansion of Egypt’s Suez Canal since it opened in 1869 will boost syndicated loan deals in North Africa’s biggest economy, according to the nation’s largest publicly traded bank.
Syndicated lending in Egypt rose 61 percent in the first nine months to $2.9 billion, according to data compiled by Bloomberg, after a $1.4 billion deal on Sept. 30 boosted what was the lowest total since 2003. The market will grow 25 percent next year, Commercial International Bank Egypt SAE said in an e-mailed response to questions Oct. 15.
Banks are preparing for a surge in lending as the government spends about $8.4 billion digging a second waterway to ease congestion at the canal and develop the area to offer logistic services, said CIB’s Managing Director Hisham Ezz Al Arab. Lenders have relied on high yielding government debt to bolster earnings as demand for corporate credit dried up in the aftermath of the 2011 ouster of President Hosni Mubarak.
“We see a recovery in syndicated loans in the second half of 2015 or early 2016, far exceeding” pre-political unrest levels, said Ezz Al Arab, who also serves as chairman of the Federation of Egyptian Banks. “There will be quantum leaps. It’s not only going to impact corporate finance requirements, but also the consumer requirements.”
Syndicated loans averaged about $6 billion a year in the five years leading up to the anti-government protests in January 2011, according to data compiled by Bloomberg. That’s about twice the total for each of the last two years.
Economic Growth
Egypt is one of the world’s least banked nations, where one in 10 adults has a formal account, according to World Bank data. Lenders may see a retail boom as the economy improves, Ezz Al Arab said.
Egypt’s economy will grow 3.5 percent in the fiscal year that ends in June, according to the average estimate of 11 economist compiled by Bloomberg. That compares with 2.3 percent last year and would make it the strongest year since 2010.
CIB said it plans to open 20 branches in Egypt next year. It operated 156 outlets at the end of 2013, making it one of the biggest private banking networks in the country.
Shares in CIB, which is the country’s biggest listed company and accounts for 30 percent of the benchmark EGX 30 Index, are up 39 percent this year, giving it a market value of 40.7 billion Egyptian pounds ($5.7 billion).
To contact the reporter on this story: Ahmed A. Namatalla in Cairo at anamatalla@bloomberg.net
To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Dana El Baltaji
