Acquisition frenzy: Inside the Gulf’s rapid expansion in Egypt’s banking sector
HSBC’s announcement last month that it will sell its retail banking business in Egypt to one of the UAE’s largest banks cannot be treated as a routine exit-and-acquisition deal. It reflects a growing trend: Gulf banks acquiring stakes across Egypt’s banking sector, alongside the parallel divestment of foreign banks.
A survey conducted by Al Manassa found that Gulf banks were the buyer in 80% of announced bank acquisitions in Egypt over the past 15 years, making GCC-based banks the most numerous foreign presence in Egypt’s banking sector after national banks.
“We currently have more than 10 Gulf banks among the 36 banks operating in Egypt’s banking sector, including around 7 banks that emerged directly from Gulf financial institutions acquiring entities in Egypt,” says Ezzat Yasser, banking and non-bank financial services analyst at Naeem Brokerage, speaking to Al Manassa.
Gulf presence isn’t just a matter of numbers. Some of these banks have grown considerably heavier in the market within just a few years. The clearest example is Qatar National Bank, which entered Egypt through its 2013 acquisition of National Société Générale Bank, and is now ranked the fifth-largest bank in Egypt by assets, surpassing many of the market’s long-established players.
But why has the Gulf bank become the most likely buyer for available deals in Egypt? And does this carry advantages for the Egyptian economy, or do the risks outweigh the benefits?
Why does the Gulf buy?
Two years ago, Fitch Ratings published a significant report explaining this growing Gulf presence, driven by expanding profit opportunities not only in Egypt but also in Turkey and India.
Experts who spoke to Al Manassa endorse this analysis, noting that the Gulf market, despite the scale of its capital, has limited growth opportunities compared to what’s available in Egypt, given the size of Egypt’s consumer base.
Banking expert Mohamed Abdel Hakim compares the return on equity (ROE) of Egyptian banks — which reached around 39% during the monetary tightening cycle, before falling to 30% last March as interest rates eased — with the UAE's equivalent figure, which was limited to 15%.
ROE measures a company’s efficiency in generating profit from shareholders’ funds, calculated by dividing net income by average shareholder equity. It is one of the clearest indicators of the opportunity gap with the Gulf market.
Experts do not see HSBC’s exit from retail banking in Egypt as a negative signal about how foreign banks view Egypt
Abdel Hakim points to another indicator reinforcing the case for Egyptian banks’ superior returns: net interest margin (NIM), which measures how successfully a bank generates profit from loans and investments relative to the interest it pays on deposits. NIM is estimated at between 6.5% and 10% in Egypt, compared to 2.2% to 3.2% at Gulf banks.
According to an earlier Fitch report, the high yields the government pays on its debt were a key reason behind Egypt’s strong interest margins, since the banking sector is one of the largest investors in public debt.
Alongside these factors, Aya Zoheir, an analyst at Zilla Capital, points to strong commercial and investment ties with Gulf countries that encourage their banks to operate in Egypt. She tells Al Manassa: “Opportunities for Gulf banks aren’t limited to financing corporations and individuals in the Egyptian market. They extend to financing Gulf companies operating in Egypt, financing bilateral trade, letters of credit and guarantee, and financing Gulf projects and investments in Egypt.”
The Egyptian pound’s decline against the dollar also gave acquisition deals a boost, says Naeem Brokerage’s Ezzat Yasser: “Egyptian asset valuations in dollar terms fell after the pound devaluations of 2016, 2022 and 2024, while Egyptian banks trade at relatively low multiples of book value, making the acquisition of existing banking assets more attractive to foreign investors.”
Why does the Gulf replace the West?
Experts do not see HSBC’s exit from retail banking in Egypt as a negative signal about how foreign banks view Egypt, so much as a reflection of the bank’s global restructuring arrangements.
“The recent exit reflects a global strategic shift to restructure the bank’s business, as HSBC tries to limit its operations in emerging markets to corporate finance, international trade, and wealth management services,” says Abdel Hakim.
But looking at the pattern of acquisitions in Egypt over the past decade and a half, most banks that exited Egypt were European or American. So were these earlier Western exits driven by similar reasons?
Abdel Hakim believes the earlier cases don’t differ much from HSBC’s motives: “Major European and American banks have been moving for years toward what could be described as risk management and geographic repositioning, focusing instead on their core markets or on regions that generate higher returns in more stable currencies.”
He adds: “Gulf banks, by contrast, view Egypt as part of their natural economic zone, not a distant emerging market requiring additional risk-management costs — which gives them a greater capacity to absorb market volatility and invest over a longer time horizon.”
But Ezzat Yasser points out that the turmoil Egypt’s market experienced in recent years also played a role in reshaping the map of players in its banking sector: “Foreign investors faced a number of challenges related to the investment environment in past years.”
The dollar exchange rate in Egypt rose sharply in recent years, driven by successive crises of weak foreign currency inflows against strong demand for hard currency to finance the country’s core needs.
Yasser adds that “some of these obstacles have seen notable improvement, particularly regarding the availability of dollar resources and ease of transferring profits, alongside the abolition of the capital gains tax on stock exchange trading and its replacement with a stamp duty — which provided greater clarity in the tax treatment of investments.”
But other challenges still need to be addressed to increase the appeal of Egyptian assets to foreign investors, Yasser adds, chief among them limited market depth and low liquidity levels, along with the concentration of a large share of market capitalization in a limited number of stocks.
Why didn’t the Gulf save privatization deals?
Strong Gulf appetite for Egyptian banks raises a question: why hasn’t the Gulf helped push forward Egypt’s privatization program, which has suffered severe delays and drawn sharp criticism from the IMF?
One of the clearest examples is the sale of Banque du Caire, which the government heavily promoted as part of its asset-sale program. But according to sources who spoke to Al Manassa in 2025, the deal collapsed at the time because of the low price offered by Emirates NBD.
If the state offers stakes in Egyptian banks, Gulf banks are likely to lead the field of competitors
Ezzat Yasser believes the nature of privatization deals, and the government's insistence on achieving fair value commensurate with an asset's size and strategic importance, affected the pace of privatization at state-owned banks.
Acquisitions of private banks, however, involve different conditions. “The seller is a foreign party seeking an exit as part of a global or regional strategic restructuring of its business, which makes the pricing and negotiation dynamics different from the sale of a state-owned asset,” Yasser adds.
Is concentration a risk?
One group of experts doesn’t view Gulf expansion as a risk, seeing it instead as a driver of banking sector reform. Others warn that the intensity of Gulf presence in Egypt could make the banking sector highly exposed to potential volatility in Gulf markets.
Aya Zoheir says that regardless of a bank’s capital nationality, all banks operating in Egypt are subject to the rules and oversight of the Central Bank of Egypt, and therefore acquisitions in the banking sector carry no risk.
Ezzat Yasser notes that when a Gulf bank enters an Egyptian bank’s ownership structure, this is often accompanied by service development and increased capital adequacy, alongside restructuring of operations and technological infrastructure and improvements in asset quality and operational efficiency.
Yasser also points out that state-owned banks still hold a dominant position in the market, with National Bank of Egypt and Banque Misr together holding around 50% of the sector’s assets. “This limits the ability of Gulf banks to individually influence the level of competition, in addition to the regulatory role of the Central Bank of Egypt, which sets controls and limits on acquisitions to preserve competition and financial stability in the sector,” he adds.
But access to a large share of Gulf ownership does carry some risks, says Abdel Hakim — including the possibility of tying part of financial stability to regional economic cycles, as well as increasing future pressure to transfer profits abroad in foreign currency. These risks, he notes, can be managed through oversight by the Central Bank of Egypt.
Does the Gulf keep expanding?
Aya Zoheir expects Gulf interest in the Egyptian market to continue in the coming years, but selectively — tied to available opportunities, valuations, and regulatory approvals, not necessarily in the form of a broad wave of acquisitions.
“Merger and acquisition activity in Egypt’s banking sector is likely to continue, but at a slower pace than in previous years, given the shrinking number of major remaining opportunities, following a number of large deals that reshaped the sector’s ownership over the past decade,” says Ezzat Yasser.
No specific names have yet been floated for banks that might be acquisition candidates, especially given how quickly the landscape is shifting. But if the state does offer stakes in Egyptian banks, Gulf banks are likely to lead the field of competitors, drawing on their financing capacity and prior experience in the Egyptian market, according to Yasser.