Emirates NBD has agreed to buy the Egyptian operation of BNP Paribas for US$500 million (Dh1.83 billion).
The UAE's biggest lender by assets will buy the French bank's entire 95.2 per cent stake in BNP Paribas Egypt and "simultaneously offer to acquire the remaining 4.8 per cent from its minority shareholders at the same price", Emirates NBD said yesterday.
The transaction, which will give the Dubai lender total ownership of BNP Paribas Egypt, is pending regulatory approval and is expected to be completed by the end of the first quarter next year.
Emirates NBD's shares rose 0.7 per cent yesterday to close at Dh2.85 each.
The acquisition follows a flurry of buy-ups by Arabian Gulf lenders flush with cash and ready to make million-dollar investments, following last year's revolution that ousted Hosni Mubarak from the presidency.
In May, Egypt's EFG Hermes agreed to hive off its investment banking business in a joint venture in which QInvest, the Doha-based investment bank, would control a 60 per cent stake.
"Opportunities like this don't come up very often.
It takes a revolution and a euro-zone crisis to get prices where they are today. It's a great time to be picking up assets," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.
With Egypt, you have to take a long-term view. Once the country settles down, the prospects will be incredible. You have a population of 18 million [in Cairo], the most populous in the the Arab world, a strategic position and lots of natural resources. Egypt is a country that can, if properly managed, do very well."
Foreign banks are focusing on buying into banks already in operation, said Tariq Qaqish, the deputy head of asset management at Al Mal Capital in Dubai.
"The acquisition of existing banks gives you an immediate access to banking, without worrying about obtaining licences from the regulator, building your book and so on. They have branches, everything is set," Mr Qaqish said.
Egypt's economy is expected to grow 2 per cent this year as political tensions ease, according to estimates by the IMF. The country held its parliamentary elections at the start of the new year and presidential elections in the spring, which saw the Muslim Brotherhood's Mohammed Morsi elected into office.
Egypt's stock market has rallied this year, ranking among the top performers globally. It dropped by 45 per cent last year, amid heavy foreign outflow of capital, after banks and the Egyptian exchange were forced to close for a few days in the peak of the uprising.
"Overall the signs are very positive in Egypt," said Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai. "I'm not particularly worried about the brotherhood, the important thing is stability in Egypt and foreign investment reserves going up - that's the only unknown."
But foreign currency reserves last month stood at US$15.04bn, down from $36bn in December 2010, according to central bank data. Moody's Investors Service rates debt-ridden Egypt a junk grade of B2.
A much-needed $4.8bn loan from the IMF, which was supposed to have come into effect this month, was postponed until next month to allow for time for the government to explain a package of unpopular austerity measures to the Egyptian people.
"Egypt is an excellent investment climate, but there are some obstacles," said Wadah Al Taha, the chief investment officer at Al Zarooni, an investment company in Dubai.