UPDATE 1-Dubai-based Mashreq bank launches Egypt operations

* Mashreq launches scaled down Egyptian retail ops

* Bank plans five new Egypt branches a year from 2010

By Cynthia Johnston

CAIRO, April 1 (Reuters) - Dubai-based Mashreq Bank MASB.DU launched its Egyptian retail operations on Wednesday with 10 branches and a capital outlay of 560 million Egyptian pounds ($99.4 million), but its expansion was moving slower than previously announced.

The bank, which said last year it would open 30 new branches in Egypt in the next three to four years, was adopting a more cautious approach due to the economic downturn and was working hard to manage expenses while continuing to invest.

"Our vision though still remains the same. But how we will actually achieve it has meant that we will possibly be less aggressive and more disciplined in our approach," John Iossifidis, Executive Vice President and Head of International Banking told a news conference in Cairo.

Mashreq said it now has 10 Egyptian branches in Cairo and the coastal city of Alexandria, and would open an additional branch in the most populous Arab country by the end of the year.

"Our goal is to still get to 30 branches. But it would be over a phased period, probably with just opening five branches a year from 2010 onwards," Iossifidis said. He added that Mashreq would also open a branch in Kuwait later this year.

"Our strategy is to expand organically and selectively in the region while continuing to invest in our core franchises and leveraging our longstanding strengths," he said.

Mashreq's Egyptian operations will offer services including auto and personal loans and overdraft facilities, and the bank would have 27 cash machines by end-2009.

Buoyed by an oil- and real estate-powered economic boom, Gulf Arab banks have been expanding their branches at home and buying stakes into lenders abroad.

Mashreq failed, however, to capture a stake in Egypt's third-largest bank last year after the North African country cancelled the auction, saying bids for Banque du Caire were too low.

Mashreq's chief executive Abdul Aziz Al Ghurair said Egypt offered great potential for banking service penetration.

"We believe that Egypt is the ideal platform to grow our business regionally," he said. "The Egyptian banking sector is a key player in the growth of the country's economy, especially in light of the remarkable GDP growth that averaged 7 percent over the last two years."

Earlier this month, Egypt's finance minister said growth was expected to slow to between 4 and 4.5 percent in the current fiscal year, from 7.2 percent a year earlier.

The global financial crisis has affected Egypt's main sources of income, with revenues from the Suez Canal and tourism declining. Foreign direct investment fell to $4 billion between July and December 2008 from $7.7 billion in the same period a year earlier. ($1=5.6343 Egyptian pounds) (Writing by Alastair Sharp and Cynthia Johnston; editing by Mike Nesbit)