Arab Finance: Fitch Ratings has confirmed issuer default ratings (IDRs) of National Bank of Egypt (NBE), Banque Misr, Banque du Caire (BDC) (BQDC), and Commercial International Bank Egypt (CIB) (COMI) at ‘B+’, revising outlooks on their long-term IDRs to Negative from Stable, according to the rating action commentary issued on November 21^st.

The rating agency also affirmed the four banks’ national long-term ratings at ‘AA(egy)' with Stable outlooks.

The long-term IDRs of the four banks are affected by their ‘b+’ Viability Ratings (VRs), which signifies the solid correlation between the credit profiles of the banks and their sovereign exposure.

The leading credit rating provider calculated the total exposure of the whole banking sector in Egypt to the sovereign and broader public sector at about 70% of total assets at the end of July 2022.

The banking sector’s net foreign liability position hit record highs with $14 billion at the end of September 2022, compared to a net foreign assets (NFA) position of $1.7 billion end-July 2021, Fitch noted.

Foreign liability position has been backed by portfolio outflows of over $20 billion year-to-date (YTD), along with a hike in the bank’s foreign liabilities.

Non-performing loans ratio of the banking sector recorded 3.2% at the end of the first half (H1) of 2022, Fitch added, expecting that the sector would see some pressures in H2 2022 and 2023.

Moreover, Fitch forecast core capital ratios of banks to experience pressures from currency depreciation and fair value losses on government securities due to higher yields.

On November 8^th, Fitch Ratings confirmed Egypt’s Long-Term Foreign-Currency IDR at ‘B+’, revising its outlook to Negative from Stable.

The negative outlook on Egypt reflects a downturn in the country’s external liquidity position and a slip in prospects for bond market access.