Ahli United Bank

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25292
Company name	Ahli United Bank BSC
Country	MENA Region
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	October 11, 2006
Projected board date	November 10, 2006
Previous Events	Invested: December 13, 2006 Signed: November 18, 2006 Approved: November 16, 2006

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of:

- a tier 2 eligible convertible subordinated term loan to Ahli United Bank (AUB or the Bank), the third largest commercial bank in Bahrain; and
- an equity investment in Delta International Bank of Egypt (DIB) which has recently been acquired by AUB and a consortium of GCC institutional investors.

The proposed project is designed to support the Bank's tier 2 capital base and expansion of its operations through acquisitions of local commercial banks and financial institutions, primarily focusing on developing Middle Eastern countries.

Anticipated development impact of the project

The project supports south-south investments from the more developed and resource surplus countries in the GCC region to the developing middle eastern economies. More specifically, it will support AUB’s expansion in Egypt and in new markets in developing countries of the Middle East, where it proposes to acquire and restructure local banks and financial institutions and to develop their operations on a sustainable basis in line with modern banking practices.

AUB’s expansion and investments in banks in developing middle eastern countries will help to recapitalized the acquired local banks such as DIB, develop their operations on a sound footing, and help to introduce better operational practices and polices. AUB’s investment in DIB is expected to facilitate and promote the significant trade, investment, remittances and tourism flows between Egypt and the Middle Eastern countries where AUB and its affiliates operate. AUB is also expected to train staff of DIB and other banks to be acquired and develop appropriate skills which are expected to enable the acquired local banks and DIB to increase lending, reduce non-performing assets and achieve greater operational efficiency.

The project is also expected to catalyze an increased flow of funds from markets in the GCC to Egypt and other developing countries in MENA region where AUB plans to expand and would establish institutional linkages between them.

IFC's expected development contribution

The project will have a catalytic effect in helping transform the financial sector in less developed AUB target markets such as Egypt, Iraq, Iran, Yemen, Lebanon and potentially Libya and Jordan where AUB expects to expand, subject to available attractive opportunities. IFC’s investment will help AUB’s ability to increase its investments and commitments in these markets and to establish operations, introducing new products and services. IFC’s investment will lead to transfer of management expertise, technology and corporate governance best practices by a leading GCC based banking institution, AUB, to banks in developing countries in the Middle East (including Egypt where DIB is based) and is expected to facilitate and promote inter-regional trade, investment, remittances and tourism flows.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC analyzed the FI portfolio and the activities proposed to be supported with IFC financing and determined the following Applicable Requirements:

- The IFC FI Exclusion List and
- The applicable National Social and Environmental Laws and regulations

IFC also reviewed the FI’s current social and environmental risk management practices and capacity.

Based on the Applicable Requirements and FI risk management and capacity review, AUB/DIB will be required to:

- Provide IFC with evidence of their current procedures related to environmental & social
considerations as applied to corporate and project finance transactions and commit to formalizing
these over mutually agreed time frame through clear reference to these issues in their credit policy
and through the development of checklists and guidance documents (as considered appropriate) in
their operational procedures that provide formal direction to their credit officers.
- Commit to establish similar social and environmental policies and procedures in banks in which AUB
will take a controlling stake using IFC funding.
- Nominate an officer to serve as the Environmental Coordinator.
- Commit to implementing the system described above, to ensure that its investments/activities are in compliance with the Applicable Requirements.
- Commit to take action to remedy any gaps in implementation on an ongoing basis.
- Submit an annual report to IFC as per a format to be provided by IFC.

IFC PROJECTS