CAIRO, May 23 (Reuters) - Egyptian investment bank EFG Hermes Holding is targeting minority stakes in start-ups after its acquisition of a majority stake in state-owned Arab Investment Bank (AIB), its chief executive said on Sunday.

The acquisition of the 51% stake, approved by the cabinet on Wednesday, will be finalised in the third quarter, CEO Karim Awad told Reuters.

It is Egypt's first privatisation since 2006, when it sold a majority stake in Bank of Alexandria.

EFG Hermes, Egypt's biggest investment bank, will use internal resources to buy new AIB shares worth 2.55 billion Egyptian pounds ($163 million), Awad said.

The Sovereign Fund of Egypt will also buy new shares worth 1.25 billion pounds, increasing AIB's capital to 5 billion pounds, while the current owner, state-owned National Bank of Egypt, will retain a 24% stake.

"Our share in the bank will be financed through the liquidity available to the company on its own ... We have lots of liquidity," Awad told Reuters, adding that EFG Hermes began working to fulfil all government conditions and approvals as soon as the cabinet approved the deal.

The central bank will have to approve the deal as well.

"We are not entering the banking sector to compete with the big banks operating in Egypt," Awad said. "Rather, we are seeking to find a portion of the market to focus on to provide services to help it grow."

"We can sell the bank's services to EFG Hermes clients," he added.

Awad said the new owners would retain all of AIB's current employees, but would study a possible change in the bank's name. ($1 = 15.6600 Egyptian pounds) (Writing by Aidan Lewis and Patrick Werr; Editing by David Goodman and Emelia Sithole-Matarise)