Fitch Ratings upgrades 4 Egyptian banks IDRs
Fitch said these rating actions reflect the strong correlation between the banks' creditworthiness and that of the Egyptian government, given the banks' significant exposure to sovereign debt.
On 1 November, Fitch upgraded Egypt’s sovereign rating to B/Stable from B-/Positive. As a result, the IDRs of the National Bank of Egypt, Banque Misr (SAE), Commercial International Bank (CIB), and Banque Du Caire were all upgraded to B/Stable from B-/Positive.
The upgrade was driven by the banks’ Viability Ratings (VRs), which were also raised to "B" from "B-," reflecting improved operating conditions.
The banks' upgraded ratings were further supported by a stronger potential for government support, as evidenced by the rise in their Government Support Ratings (GSRs) to "B" from "no support."
This change reflects the government’s enhanced capacity to assist these state-owned banks in times of need, although Fitch emphasized that Egyptian authorities are expected to provide extraordinary support only to public-sector banks due to their systemic importance, according to Fitch.
It also explained that this upgrade highlights the positive shifts in Egypt's economic conditions, particularly the improvement in foreign-currency liquidity.
GDP to grow, inflation to fall
Moreover, Fitch forecasted Egypt's real GDP growth to rebound, reaching 4.2 percent in 2025 and 5.4 percent in 2026, supported by stronger confidence, rising remittances, and a recovery in foreign direct investment (FDI).
It also projected Egypt’s inflation to decline significantly from 26.5 percent in October 2024 to 12.5 percent by June 2025.
Ras El-Hekma deal narrows foreign asset deficit
The banking sector’s exposure to sovereign debt remains a key factor, with sovereign exposure accounting for 53 percent of total bank assets at the end of 2023.
However, the sector has seen a significant improvement in its foreign assets position, with the deficit narrowing from $17.6 billion in January 2024 to $130 million in September 2024.
This was driven by strong capital inflows, including those from the Ras El-Hekma deal and nearly $17 billion in non-resident investments returning to Egypt’s treasury bills market.
Fitch also upgraded the four banks' funding and liquidity scores to B/Stable, in line with the improved operating environment, and expects the banking sector to maintain a positive foreign assets position in 2025 and 2026.
It expects further stability in the exchange rate to support the sector's capital ratios, which Fitch says will be strengthened to above 13 percent by the end of 2024.
Furthermore, the rating agency affirmed that profitability remains a key strength for Egyptian banks, with expectations for a sharp improvement in 2024, driven by higher yields on sovereign securities and strong client activity.
It added that while profitability may normalize in 2025 as interest rates decrease, the sector’s financial metrics are expected to remain robust.
Fitch says the upgrade underscores the resilience of Egypt’s banking sector amid ongoing economic challenges and reflects improving macroeconomic conditions that are expected to support continued stability and growth.