Moody's Investors Service has upgraded to B3 from Caa1 the local-currency (LC) deposit ratings of National Bank of Egypt SAE, Banque Misr SAE, Banque Du Caire SAE and Commercial International Bank (Egypt) SAE as well as the LC deposit ratings of Bank of Alexandria SAE to B2 from B3. The standalone ratings of all five banks were also upgraded by one notch.
Moody’s rating actions capture (1) the improved operating environment in Egypt, which will benefit the banks' business prospects and asset quality; (2) the improved quality of the banks' liquidity buffers; and (3) the government's improved capacity to support these banks, in case of need. These actions follow the improvement in Egypt's sovereign creditworthiness, as reflected by Moody's decision to upgrade Egypt's bond ratings to B3 from Caa1.
Concurrently, the banks' foreign currency (FC) deposit ratings were upgraded to Caa1 from Caa2 to reflect the increase in the FC deposit ceiling for Egypt to Caa1.
The upgrades reflect Moody's expectation that Egypt's improving macroeconomic performance and easing external vulnerabilities will support increased lending opportunities. The rating agency expects mid-double-digit loan growth for the system over 2015 while GDP growth is forecasted to accelerate to 4.5 percent for the fiscal year ending (FYE) June 2015 from 2.2 percent in FYE 2014. The higher economic activity will likely also improve local borrowers' repayment capacity, which will benefit the banks' asset quality.
At the same time, the reduced credit risk associated with the government of Egypt has improved the quality of the banks' government-related assets, including their liquidity reserves. The rating agency highlights that the Egyptian banks' large exposures to government securities imply a high convergence between their credit risk profile and the sovereign's credit quality.
Moody’s upgrades Egyptian banks’ ratings
