Lebanon’s Bank Audi open to sale of Egyptian unit in new strategy

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. (Reuters)
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Updated 14 January 2020

Lebanon’s Bank Audi open to sale of Egyptian unit in new strategy

  • Bank Audi is also proceeding with an equity increase which the central bank has instructed all Lebanese banks
  • Bank Audi Egypt has grown from a three-branch operation acquired by Bank Audi in 2005 to 50 branches today

BEIRUT: Lebanon’s Bank Audi 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.”


Dubai rents may be bottoming out as ‘green shoots’ appear

Updated 20 January 2020

Dubai rents may be bottoming out as ‘green shoots’ appear

  • An estimated 45,000 homes were completed in Dubai in 2019 according to Chesterton estimates

LONDON: Confidence may be returning to Dubai property despite a bloated market for off-plan homes, according to a report from Chestertons, the real estate broker.

Although apartment and villa sales prices were down 2 percent and 3 percent respectively in the fourth quarter of 2019 compared to the previous quarter, rental rates are stabilizing.

But supply issues continue to represent the biggest challenge facing the market, with 45,000 new units completed in 2019 and that expected to double this year.

“The Dubai residential market in Q4 2019 is alluding to a more positive outlook for 2020 thanks to the slowdown of sales price declines and the leveling of rental rates,” said Chris Hobden, of Chestertons MENA. “This does, however, have to be tempered by the volume of new units scheduled for delivery in 2020, which makes the short-term recovery of prices in the emirate unlikely.”

In the rental market, no movement was witnessed in the fourth quarter with the market supported by a draft law which would fix rental rates for three years upon the signing of a contract. 

“To ensure high occupancy in 2020, landlords will have to be realistic in the face of tough market conditions. The incentives previously offered to tenants, such as rent-free periods, multiple cheques and short-term leases, will continue, with an increase in tenant demand for monthly direct debit payments also likely” added Hobden.