North Africa: Uncertainty Takes Toll

There have been more changes at the top of the North African top 25 table than in any other regional table in our survey. Groupe Banques Populaire of Morocco leapfrogs over Libyan Foreign Bank and Attijariwafa Bank to take top spot, with a capital base of $2.9bn, up from $2bn last year.

Attijariwafa Bank, which is still partly owned by the Moroccan royal family, has experienced a fall in value over the same period, while Libyan Foreign Bank may have suffered in the rankings from a lack of more up-to-date information about its value. There are no audited accounts for 2011.

As mentioned in the overview, Egyptian banks have recovered some ground in our table, taking 11 positions in our Top 25, up from nine last year. The political settlement between the army and the new government has calmed tensions in the country to some extent but a more lasting settlement will be required before investors regain confidence in the country’s banks or indeed the banks begin to benefit from a more open political and economic system, and one which is gaining the attention of the gulf states especially Qatar. National Bank of Egypt is the top-ranked company from the country in our table, ranked fouth with capital of $1.9bn, up from $1.7bn in last year’s survey. The Egyptian banking sector has been boosted by Standard & Poor’s decision to lift its ‘Negative Watch’ status that had been imposed on Egyptian debt when Cairo applied for a $4.8bn loan from the IMF. Banks do not attract better credit ratings than the sovereign debt of their government and so the fate of all Egyptian banks is closely tied to the stability of the country. As in West Africa, the overall value of North African banks has changed relatively little since our last survey. Banque Internationale Arabe de Tunisie is ranked 25th with a value of $346m, which is $14m less than the $358m value that Credit Immobilier et Hotelier of Morocco needed to take the same spot in our 2011 survey.

Continued uncertainty over the region’s political and economic future has depressed stock values in all markets. Some foreign investors, particularly from Europe, are now seeking to withdraw from Egypt in particular, mainly because of their desire to protect their core operations in their domestic markets.

Gulf banks move in

However, a number of Gulf banks are keen to replace them. In mid-September, Qatar National Bank (QNB) received approval from the Central Bank of Egypt to take a 77.2% stake in National Société Général Banque of Egypt, although QNB must complete due diligence on the deal if it is to submit a bid offer by the 22 November deadline.

In addition, QInvest of Qatar plans to set up an alliance with EFG Hermes of Egypt to operate in the country. Finally, BNP Paribas of Egypt has announced that it will invite to offers for its Egyptian retail banking arm. One likely bidder is the National Bank of Abu Dhabi (NBAD). The bank’s chief executive Michael Tomalin said: “We would look at opportunistically using our capital to acquire, subject to the tests set out before.” Those requirements include the acquisition of a controlling stake in any bank in question.

A combination of stagnation in the Eurozone and insecurity in North Africa has turned Moroccan banks into another source of cross-border investment in the African continent as a whole.

Attijariwafa already operates in a dozen other African countries and plans to increase this number to 20 by 2015. Rival Banque Centrale Populaire (BCP) is to invest in the seven West African Economic and Monetary Union (UEMOA) member states, including its subsidiary in Côte d’Ivoire, Banque Atlantique Côte d’Ivoire (BACI).

Rachid Agoumi, the head of BCP’s international operations, said: “We are going to invest around MD1bn ($116m). BACI needs liquidity. We are going to inject this amount for the development of the group.”

An analyst at the Africa Growth Initiative at the Brookings Institute, Anne Kamau, said: “Pan-African banking leads to greater economic activity by facilitating credit and investment. African economies are growing so strongly today compared to Europe and North America thanks to enhanced financial services.”

The potential gains to be made in other African markets are simply greater than in any other part of the world, with the possible exception of South and East Asia. However, another analyst, who preferred not to be named, said that “North Africa is in a very different position to sub-Saharan Africa. North African banks are generally more developed but could go up or down. Most, further south, are less developed but are good bets for strong growth”.