EFG-Hermes said on Tuesday it would buy a 65 per cent stake in privately owned Lebanon's Credit Libanais as the leading Egyptian investment bank sets out to diversify its business.

EFG-Hermes agreed to pay $542 million from its own cash resources for the stake and said it had a call option to buy an additional 25 per cent over the next two years at the same price.

EFG-Hermes shares rose 2.7 per cent on the news and were up 2.33 per cent at 28.10 Egyptian pounds ($5.07) by 1118 GMT.

Egypt's benchmark index was up 1.5 per cent. EFG-Hermes, which has operations across the Middle East, said it wanted to expand into commercial areas such as retail and online banking.

'The transaction is expected to be earnings accretive from the first full year of the acquisition (i.e. 2011) before any synergy assumptions,' EFG-Hermes said.

The Egyptian bank ended talks to increase its share in Lebanon's Bank Audi late last year after the parties were unable to reach agreement and in January EFG-Hermes sold its stake for $913.4 million.

'They would like to diversify their business and they have a very high cash position that they needed to utilise. The question I have is why Lebanon again?' Radwa el-Swaify at Beltone Financial said.

She said EFG-Hermes' cash position was 4.6 billion Egyptian pounds at the end of June, or 3.9 billion Egyptian pounds after deducting debts.

'The idea (for EFG-Hermes) was not to exit the Lebanese market but to exit the Bank Audi investment and look for another investment in the banking sector,' said Nassib Ghobril, head of Economic Research and Analysis at Byblos Bank.

'It means that the level of confidence in the Lebanese banking sector remains high and it's an attractive destination for foreign investments.'

Credit Libanais, which has 62 branches in Lebanon, is privately-owned with the bulk of its ownership split between Capital Investment Holding, Bahrain and Capital Investment Holding, Lebanon, its website said. – Reuters