Having worked together on an export receivables transaction for Russia's Gazprom's (see p. 22), Morgan Stanley and Merrill Lynch have their sights on Egypt, according to a source. The banks are said to jointly arranging a transaction for National Bank of Egypt backed by diversified payment rights (DPRs).

Moody's Investors Service and Standard & Poor's rate National Bank Ba2' and BB+', respectively. S&P has the issuer on negative watch.

The bank is fully state-owned and has a 21% share of the country's total banking assets and 23% of deposits. The bank has wide exposure to government entities in both loans and deposits, according to a Moody's report released in June.

On the downside, the agency said the bank is saddled with overstaffing and bureaucracy issues and faces encroaching competition from homegrown and foreign private banks. Working in its favor is National's position as the largest bank in the country. That gives the government a powerful incentive to ensure its solvency, Moody's said.

The bank's funding base is another strength cited by the agency. Retail deposits make up 51.5% of the total figure. Still, large state-controlled companies account for a significant share. The 20 largest depositers provided 30% of overall deposits as of June 30, 2003, according to Moody's.

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