Fitch Affirms NBE's rating at 'B+'; with stable outlook

CAIRO - 3 August 2021: Fitch Ratings affirmed Monday National Bank of Egypt's (NBE) Long-Term (LT) Issuer Default Rating (IDR) at 'B+' with a Stable Outlook.

Fitch has also affirmed National Bank of Egypt (UK) Ltd's (NBEUK) Long-Term IDR at 'B+' with Stable Outlook and Support Rating at '4'. NBEUK is a wholly owned subsidiary of NBE. A full list of rating actions is below.

Fitch stated that pressures on the domestic operating environment have eased since end-3Q20, moderating downside risks to Egyptian banks' credit profiles. “This reflects improving foreign-currency (FC) liquidity, with the banking sector's net foreign assets (NFAs) reaching $3.5 billion at end-April 2021 from a net foreign liability position of $5.3 billion at end-April 2020. This was supported by a strong increase in foreign holdings of Egyptian treasuries, sovereign Eurobond issuance and resilient remittances.”

Its view also factors in healthy growth momentum with real GDP growth expected to accelerate to 6 percent in fiscal year 2022 (3 percent in FY21), in line with pre-pandemic levels. The sector average loan growth was 6% in 1Q21, which we expect to accelerate to low double digits in 2021.

According to the rating agency, deterioration in loan quality following the expiry of the Central Bank of Egypt's (CBE) six-month credit moratoria in September 2020 has largely been contained. The sector average stage 3 (S3) loans ratio remained stable at 3.4 percent at end-3Q20. The stage 2 (S2) loans ratio varied significantly across banks, ranging from 2 percent to more than 30 percent of total loans.

In Fitch’s opinion, the higher portion of S2 loans for some banks is an indication of more conservative loan classifications rather than weaker underlying asset quality. Banks' asset quality is also underpinned by high exposure to the sovereign, including investments in bonds and lending to public-sector entities.