Four Egyptian banks receive positive outlook on improved foreign currency liquidity

Fitch Ratings has revised its outlook on four Egyptian banks to positive from stable, affirming their long-term issuer default ratings at B-, the U.S.-based credit rating agency announced.

State-owned and private banks included in positive outlook revision

The list includes three state-owned banks – the National Bank of Egypt (NBE), Banque Misr (BM), and Banque du Caire (BDC) – along with Commercial International Bank (CIB), Egypt’s largest private bank.

Capitalization and leverage scores improved for select banks

The agency further revised the outlooks on CIB’s and BDC’s capitalization and leverage scores to positive from stable. It also revised the outlooks on NBE’s and BM’s capitalization and leverage scores to stable from negative.

Reduced pressure on sovereign debt supports banks’ capital ratios

These revisions reflect reduced pressures on these banks’ capital ratios in the upcoming FY2024/2025 on the back of reduced pressure on the sovereign after recent foreign exchange inflows into Egypt.

Stable exchange rate, stronger profitability expectations

The revisions on the four banks also conform to expectations of a broadly stable exchange rate and expected stronger profitability, which will build up the banks’ capital.

Read more: Egypt’s exports to Arab nations up 8.7 percent in 2023, reaching $13.6 billion

Correlation between banks’ and sovereign’s credit profiles

Fitch also attributed its revision of the four banks to their viability ratings, which reflect the strong correlation between the banks’ credit profiles and that of the sovereign, given their significant direct exposure to the government through sizeable holdings of the Egyptian government debt and lending to public sector companies.

Positive factors impacting the Egyptian economy

Fitch also highlighted several factors which had a positive impact on the Egyptian economy, including the $35 billion Ras El-Hekma development deal, the expansion of the country’s loan programme of the International Monetary Fund (IMF), the recent large investment from the UAE, and support packages from the IMF.

Foreign exchange flexibility and liquidity boost macro stability

The agency further noted the recent foreign exchange (FX) rate flexibility and the significant improvement in foreign currency liquidity, stressing that these factors will boost Egypt’s macro stability in the upcoming FY2024/2025.