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Exclusive: Lebanon’s Bank Audi open to sale of Egyptian unit with right offer – CFO

By Tom Perry

BEIRUT (Reuters) – Lebanon’s Bank Audi <AUDI.BY> is considering selling its Egyptian subsidiary after receiving interest from lenders, its chief financial officer told Reuters, indicating a possible strategy rethink as Lebanon grapples with a financial crisis.

Bank Audi is also proceeding with an equity increase which the central bank has instructed all Lebanese banks to implement to help weather the crisis, the country’s worst in decades.

Finance chief Tamer Ghazaleh said Bank Audi will call a shareholder meeting for the second week of February to vote on the equity raising and he was confident of securing shareholder support.

Bank Audi is “doing the equity increase and independently considering discussing with parties selling Bank Audi Egypt at the right price”, he said in an interview late on Monday.

“For us, we would not have considered thinking of it if the situation was different in Lebanon. We have our own ambition and expansion plan in Egypt,” he said, referring to a potential sale of Bank Audi Egypt.

Since Lebanon’s crisis began, the bank has received several calls from investment bankers “trying to support us if we want to sell foreign assets as a way of increasing the capitalization and liquidity of the Lebanese operation”, Ghazaleh said.

“The appetite of investors was higher for Egypt. We did not reach any agreement with any party to do a transaction but we are considering this – if we get the right offer,” he said.

Bank Audi Egypt has grown from a three-branch operation acquired by Bank Audi in 2005 to 50 branches today with total assets of $4.4 billion at the end of September, Ghazaleh said, calling it “a very profitable operation”.

“For us, we would not have considered thinking of it if the situation was different in Lebanon. We have our own ambition and expansion plan in Egypt,” he said.

If Bank Audi decided to sell, it would still require board and regulatory approval, he said.

Lebanon’s biggest bank by total assets has expanded in the region since 2005 and has operations in 10 countries in the Middle East and North Africa, including its fully owned subsidiary Bank Audi Egypt.

Lebanon’s central bank instructed banks in November to raise their Common Equity Tier 1 capital, a key measure of financial strength, by 10% through cash injections by the end of the year and a further 10% by June 30 this year.

Bank Audi had enough shareholder support to secure approval for the equity increase, Ghazaleh said. “We are comfortable with the level of commitment of the large shareholders for this increase. We have enough support to call for the (shareholder meeting) soon,” he said.

Across Lebanon’s banking sector, a 20% equity increase should raise $4 billion, representing 2% of the banking system.

Lebanon’s central bank governor Riad Salameh said in a televised interview last week that most banks had informed the central bank that they had started steps to implement the increase.

Bank Audi had told the central bank it would need some additional weeks beyond the Dec. 31 deadline to complete the first part of the increase due to its complexity and the short time frame, Ghazaleh said, noting its listing on two stock exchanges and over 1,500 shareholders.

Bank Audi aims to raise $311 million in the first part of the increase.

“The first point is to regain the confidence of the market. The shareholders want to show to the market and customers their willingness to support their organization by any necessary means. It is to show commitment,” he said.

“The second point is that any capitalization will always be beneficial to maintaining the solvency of the banking system.”

(Writing by Tom Perry; Editing by Rachel Armstrong and Susan Fenton)