Hopes to transform banking sector
During a meeting of the State Council of Participations at the end of 2006, the Algerian government decided to put a 51% controlling stake in Credit Populaire d'Algrie (CPA) on the auction block, a move that had been anticipated for some time. The actual privatization was expected to be launched with an international tender in early November, with the deal concluded by February 2007.
The government is actively seeking a large foreign bank to take over CPA and bring its expertise and experience to upgrade standards in line with international best practice. The aim is to make CPA not only one of the premier banks in Algeria, but also in the region at large. Rothschild France has been involved with CPA since 2005, advising the government on how to find the appropriate buyer.
Bidder expected to be big
The successful bidder is widely expected to be one of the global banking industry's major players. French banks such as BNP Paribas, Socit Gnrale and Crdit Agricole (through its subsidiary Calyon), who are already present on the Algerian market, are considered strong contenders. Many other foreign banks, not yet involved in the market, have also expressed interest, such as US banking giant Citigroup, UK firm HSBC and leading Spanish bank Banco Santander.
Over 40 banks have expressed their interest in the deal, but as one banker said, expressing their interest is not comparable to tabling an offer. Analysts believe the 51% stake in CPA could fetch as much as $1.5 billion. However, the purpose of the sale is not to raise money for the government as such, but rather to strengthen CPA as a national bank and regional player, with the help of an experienced strategic banking partner.
To reach this outcome, the government is not just going to ask for a large check but is looking for a firm that would actually be motivated to takeover and transform CPA. Analysts believe that the project's interested buyer proposal, to be reviewed by the government, will determine the results of the bidding process. Indeed, bidders must have a strategy that will demonstrate how they will develop CPA and transform it into a top regional banking establishment. Importantly, the buyer will also be required to maintain the bank's present staff. The bidders' international reputations will also play a key role in the decision-making process.
CPA is the first of three state-owned banks slated for privatization in the coming year. The Banque de Dveloppement Local (BDL) and the Banque Nationale d'Algrie (BNA) are also scheduled to be part of the transformation. The government, however, is waiting to see how the CPA deal goes through before proceeding with the sale of the other two banks.
Founded in 1966, CPA represents 12% of the country's banking market assets. It has around 4,000 staff and over 120 branches. As one banking CEO said, "The transfer of these assets into the private sector will undeniably have an impact on the banking sector. It will immediately double the market share of privately-owned banks. It is indisputably a major event, but also something we have been waiting for."
Buy would put suitor in strong position
Currently, over 90% of the banking sector is held by the seven state-owned banks, while over 25 privately-owned banks and nine finance companies manage the remainder. Though the number of privately-owned financial establishments has increased in recent years, spurring greater competition, it has not developed the sector sufficiently in the government's eyes.
The acquisition of CPA would guarantee a foreign suitor a strong foothold in the rapidly-growing Algerian market, and this explains in part the massive interest generated by the deal. Buying CPA would also allow a foreign major to avoid the time-consuming process of structuring a network, building a customer base and establishing a reputation.
The entry of a leading global bank into the Algerian market should serve as a catalyst for progress in the sector, something that is sorely needed. Indeed, Algeria has suffered significantly from a lack of financial and banking services, which have been below international standards for years, hampering economic progress. A successful privatization of CPA should also bring forward the two other banking privatizations in 2007, as well as giving the Algerian banking sector a much-needed boost.
Moreover, the Algerian banking market is one of the last untapped growth opportunities in the Middle East and North African region. The potential is palpable, as the country boasts a population of over 33 million, many of whom are under-bancarized according to the local sector jargon, and strong macro-economic indicators, including economic growth of over 5% and inflation below 3% in recent years and an estimated $65 billion in foreign currency reserves.
© Executive 2006
