The Algerian banking industry remains dominated by public sector players, though both the public and private sectors have seen profits rise in recent years. Public sector banks have become profitable after a long period of restructuring, while private sector players have benefitted from a series of recent trade reforms and limited competition.

PUBLIC BANKS: The public banks control around 85% of assets, with the two largest institutions accounting for more than half of that. However, they are characterised by limited branch networks given their size and market share and low levels of product sophistication and technological advancement.

Following a long period of restructuring that ended in 2008, many public banks have returned to financial health, and the largest institutions all recorded profits in 2011. “2011 was a good year for banks,” said Abderrazak Trabelsi, executive director of the Professional Association of Banks and Financial Institutions (l’ Association Professionnelle des Banques et É tablissements Financiers, ABEF). “The industry’s position has been improving since 2008, when the restructuring of the country’s public banks, which had suffered from bad debts to public enterprises, was completed. The consequences have been felt throughout the sector and, we hope, are irreversible.”

The largest public bank by assets is the Banque Extérieure d’Algérie (BEA), which is the state-controlled financial institution for large-scale infrastructure projects. It is also heavily involved in the oil and gas business, having repatriated $67bn worth of hydrocarbons receipts in 2011. Still, it is pursuing a diversification strategy with the intention of acting as a universal bank and offers a full range of services including savings products, small and medium-sized enterprise (SME) financing, and mortgages. The bank’s capital stands at AD76bn (€730m) and it operates a network of 92 branches. BEA recorded a profit of AD30.26bn (€290m) in 2011, on assets of AD2.64trn (€25bn), up 11.3% from 2010. Based on total sector banking assets cited by the Bank of Algeria (BoA) of AD8.96trn (€86bn), this suggests it has a market share of around 29%. The BEA has the additional status of being the third-largest bank in North Africa and the eighth-largest in Africa, according to Jeune Afrique.

AGRICULTURE: The next largest bank by assets is the Banque National d’Algérie (BNA), based on a 2011 figure of AD1.6trn (€15bn), which suggests a market share by assets of around 18%. Profits at the bank rose 6.8% in 2011 to AD34.4bn (€330m). The bank was founded with the principle aim of financing agribusiness, though it operates across a range of sectors.

The Banque d’Agriculture et de Développement Rural (BADR) has been focused principally on agriculture since 2005; around 80% of its loans go to the farming, rural development and agro-industry sectors. The bank’s assets stood at AD921bn (€8.84bn) for 2011, up from AD811bn (€7.79bn) the previous year, suggesting a market share of approximately 10%. It recorded profits of AD10bn (€96m) for the year, more or less unchanged from 2010 but marking a turnaround for the bank, which until recently had been loss-making.

BADR operates around 295 branches and has plans to open another 40 according to recent local press reports.

UNIVERSAL BANK: Crédit Populaire Algérie (CPA), which has a capital of AD48bn (€461m), is a universal bank that was originally founded to focus on trade, distribution, tourism, media and health care. It recorded assets of AD900bn (€8.64bn) in 2011, with profits of AD13.25bn (€127m), up 27.4% from the previous year.

The deposits of the Caisse Nationale d’Epargne et de Prévoyance (CNEP-Banque) largely consist of household savings, thanks in part to an agreement with Algérie Poste, the post office, which itself offers basic retail deposit services across its network of 3500 branches. The CNEP is the market leader, in terms of financing housing, and controlled a 55% share of the nation’s mortgage/real estate finance market in 2010, with AD24bn (€230m) in total mortgage/real estate lending that same year. In 2011 the bank lent a total of AD174bn (€1.7bn) — a four-fold increase from 2010. The bank additionally provides SME financing and has plans to enter into other sectors.

The final public bank is the Banque de Dé veloppement Locale (BDL), which primarily provides services to retail clients, SMEs and self-employed professionals. In 2009 BDL’s assets stood at AD350bn (€3.36bn).

PRIVATE BANKS: Algeria’s privately owned banks are much smaller by assets than the main public banks.

Natixis became the first French bank to enter into business in Algeria after the sector was re-opened to private activity in 1999. It became a universal bank in 2005 and has been expanding its retail activity. “Entering the retail market in Algeria is difficult,” said André Dieu, the head of the operations department at Natixis. “The product offering is very weak, with few investment opportunities,” he said, adding that the ban since 2009 on consumer finance had hit the segment.

Nevertheless, private banks have large market shares in some areas and they recorded combined profits of AD24bn (€230m) in 2010, up 54% from AD15.6bn (€150m) in 2009. Société Générale Algerie, which has a network of 84 branches, saw a 27% rise in earnings, to AD4.4bn (€42m), while Natixis reported net revenues of €49m in 2011, up 5.3% from 2010.

One potential restriction on the development of the segment is that public enterprises are often reluctant to deal with private banks; this is reinforced in the banking sector by fears of dealing with private entities following the collapse of Khalifa Bank in 2003. Private banks are also excluded from some business lines, including financing infrastructure projects.

ISLAMIC BANKING: Al Baraka was the first Islamic private bank when it opened its doors in 1991 – although Algerian banking regulations do not recognise Islamic banks as a separate category. Al Baraka, a subsidiary of the Bahraini Al Baraka Banking Group, had 25 branches at the end of 2011, which it aims to double by 2016. The bank’s assets stood at $1.76bn at the end of 2011, up 9% from the previous year, while net income rose 18% to $51.8m. The only other Islamic bank is Al Salam Algeria, which is backed by several foreign companies. “Islamic products interest banks a lot as there is a big market,” said Abderrazak Trabelsi, director of the Professional Association of Banks and Financial Institutions.

PROFITABLE MARKET: One reason for the high profitability at private Algerian banks is that the country remains relatively virgin territory. “Algeria is the only country where a new bank can be profitable within a year. At the moment no sectors are saturated and there is plenty of room for everyone,” said Nafa Abrous, deputy director-general of Lebanese-owned Fransabank El Djazaïr. Government investment initiatives and public works, supported by high oil prices, have also helped boost sector activity.

“The relaunch of public investment programmes has seen a lot of large contractors sub-contracting to smaller companies, which in turn has given rise to a lot of demand for financing from banks,” Trabelsi said. Following the imposition, in 2009, of a requirement that importers use letters of credit, combined with a large increase in imports, the trade finance business of the nation’s banks was boosted significantly. “The situation for banks in Algeria is very comfortable,” said Trabelsi.

Part of the reason for the lack of competition is that the market remains relatively closed to new entrants and few new licences have been issued in recent years. “Lots of banks are applying for licences but are not getting them,” said Youcef Mounir Meghaloui, the senior relationship manager for global banking and markets at HSBC Corporate in Algeria. “It’s not clear why but the authorities may want to see what happens with the existing foreign banks operating in the country before allowing more in.”

Entering the industry has also become more complicated since 2009 when the government capped the foreign ownership stake in Algerian firms at 49%. “It is harder to apply the 51:49 requirements in the banking sector than in the real sector,” Trabelsi said. “Previously, all the foreign banks were coming in with 100% ownership, so I think the coming years are unlikely to be rich in new entries, though there is still plenty of room.”