Egypt's Commercial International Bank (CIB) and Arab African International Bank (AAIB) are considering a merger to create Egypt's biggest private bank, sending CIB's shares to an all-time high.
The two banks said on Monday they have agreed to conduct due diligence that could lead to a merger.
Shares in CIB raced to an all-time high of 80.50 Egyptian pounds ($14.4) after the announcement and last traded 4% higher at 80 pounds.
"The new bank will have about 8% share of market assets making it a national banking private champion," said Hatem Alaa, banking sector analyst at HC Brokerage.
The two banks said there was no timetable for the merger negotiations and that they would refrain from giving "any information for the time being".
A merger would have to be approved by the two banks' general assemblies and the central bank.
The move has been the subject of market speculation for more than two months but the two bank had repeatedly declined to comment.
CIB, one of Egypt's top three private lenders, is the country's most profitable bank, Alaa said. It posted a 64% jump in first-half net profit to 635.4 million pounds.
A consortium of international investors led by Ripplewood Holdings owns an 18.7% stake in CIB, which it bought in 2006 for $230 million.
The bank is also listed on the Abu Dhabi Securities Exchange (ADSE) and the Kuwait Stock Exchange (KSE) and has a network of 119 branches.
"The picture on the Arab African is not as clear but we think it is a profitable bank and there will be no financial problems holding back the merger," Alaa added.
The Egyptian banking sector has been going through a shake-up in the past two years, leading to a surge of acquisitions.
After failing to acquire the state-owned Bank of Alexandria in 2006, CIB said it was eyeing potential expansion in Syria, Lebanon, Jordan and the Gulf. It is also set to open an Algerian subsidiary by the end of the year.
Alaa said he did not think a merged CIB/Arab African International Bank would bid to acquire up to 80% of state-owned Banque du Caire in March.
"CIB has a conservative management when it comes to eroding the value created for the shareholders and this limits their bidding ceiling," he added. - ReutersFor all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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