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Does Kuwait’s sovereign fund want to up its stake in AAIB? The KuwaitInvestment Authority (KIA) has appointed advisors to look into upping its stake in Arab African International Bank (AAIB) to become the lender’s biggest shareholder, Al Borsa reports, citing sources it says are in the know. The lender is part of the government’s list of 32 state-owned companies geared for privatization. The newspaper does not specify who the advisors are.
Who owns AAIB? The Central Bank of Egypt (CBE) and the KIA each own a 49.4% stake in AAIB, with the remaining 1.2% owned by unnamed “others,” according to the lender’s 2021 annual report (pdf).
What makes AAIB attractive to investors? Growing earnings, a “sizable share of the loan market” (about 4.5% in 9M 2022) and robust capital amid volatility in the global banking sector, Amany Shaaban, equity analyst at Prime Securities, told Enterprise yesterday. The bank captured almost 4.5% of total market lending in 9M 2022, Shaaban said. Its capital adequacy ratio rests comfortably at 20% — far above the CBE’s minimum threshold of 12.5%, she notes. AAIB’s bottomline grew 54% y-o-y to USD 58.7 mn in 3Q 2022, according to the company’s quarterly financial statement (pdf). The bank has 96 branches and units, of which 93 are in Egypt, with two offices in the UAE and one in Lebanon.
There's room for improvement: The bank needs to continue to reduce its percentage of non-performing loans, which stood at 8% in 9M 2022, down from 13% in 2020, Shaaban notes. The average in the banking sector was about 3.2% in 9M 2022, leaving plenty of room for AAIB to tackle legacy issues in its portfolio by tackling NPLs.
That’s where strategics come in: The government wants strategic investors to help strengthen state-owned bank’s fundamentals ahead of potential public share sales. Stakes in AAIB, Banque du Caire (BdC) and United Bank “are better placed with a strategic partner to lay down a clear vision and a clear reading on growth and then go to market afterwards,” Sovereign Fund of Egypt CEO Ayman Soliman told Bloomberg last month.
