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30 January 2020

Bank Audi's sale of Egyptian unit is credit positive, says Moody’s

The sale of Bank Audi’s Egyptian business is expected to be beneficial for the bank if it can achieve a favourable valuation

Bank Audi Egypt’s assets totalled $4.4 billion and its equity totalled $427 million in September 2019/Bloomberg

by Kudakwashe Muzoriwa

Moody’s said that Bank Audi's sale of its Egyptian unit and the capital increase will shore up its financial position.

Recently, Lebanon’s Bank Audi (Caa2) announced that it is entered exclusive negotiations with UAE-based First Abu Dhabi Bank (Aa3 stable) to sell its Egyptian business.

Bank Audi also began accepting shareholders’ dollar-denominated cash contributions to capital to increase its common equity Tier 1 capital by 10 per cent to effect the first part of a capital increase mandated by the Banque du Liban (BdL).

Moody’s stated that both the Egyptian unit sale and the increase in capital would be credit positive for Bank Audi.

The transactions will shore up the bank’s common equity Tier 1 and foreign-currency liquidity as Lebanon faces severe fiscal, economic and financial stress amid civil protests that started in October 2019 as well as waning depositor and investor confidence. The higher solvency and liquidity buffers would also send a positive signal to the bank's depositors and counterparties.

Tamer Ghazaleh, Bank Audi’s Chief Financial Officer, said that the bank is considering selling its Egyptian unit after receiving interest from other banks earlier this month, indicating a possible strategy rethink as Lebanon grapples with a financial crisis.

Private-sector deposits in Lebanon declined in aggregate by $12 billion in the 11 months to November 2019, straining the sector’s liquidity and prompting the country's banks and the BdL to impose unofficial and official restrictions on foreign-currency deposits.

According to Moody’s, “Although Bank Audi is selling a prized asset and sacrificing diversification, future growth and earnings, its Egyptian unit could fetch a significant price multiple over book value of equity given Egypt's positive macroeconomic environment and the unit's performance.

Bank Audi Egypt’s assets totalled $4.4 billion and its equity totalled $427 million in September 2019.

Bank Audi is also working to raise up to $311 million in capital from its shareholders in response to BdL’s call for banks to increase their capital from existing shareholders by 10 per cent by end 2019 and a further 10 per cent by June 2020.

RELATED STORIES: Bank Audi Moody’s Banque du Liban First Abu Dhabi Bank





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