Fitch Ratings lowers credit rating of 3 state banks and 1 private bank to B-

Cairo – November 14, 2023: International ratings agency, Fitch, downgraded the credit ratings of four Egyptian banks late Monday, pointing towards concerns of external financing, macroeconomic stability, and government debt.

Fitch lowered its long-term issuer default rating for state-owned National Bank of Egypt, Banque Misr, and Banque Du Caire, as well as Commercial International Bank (CIB), to B- with a stable outlook from B with a negative outlook.

On its rating for Egypt’s operating environment score for the banking sector, the agency lowered it to B- with a stable outlook. Fitch explained that the decisions are in line with the new country rating given earlier this month, considering its “tight external liquidity, high core inflation” and weakening business conditions in the non-oil sector.

Fitch’s report states that “Economic conditions for Egyptian banks should remain weak given high inflation, rising input costs, geopolitical uncertainties and lingering pressures on the currency. The banking sector recorded a high net foreign liability position of $16.4 billion at end-3Q23, reflecting tight [foreign currency] liquidity”.

The Egyptian government continues to strengthen its efforts to bolster the country’s foreign reserves by introducing restrictions on international transactions and improving the business climate to attract foreign investors.

Egypt’s international reserves saw a slight upward trend in October, climbing to $35.1 billion as it works to bring in fresh FX and diversify its external financing sources, including its goal of attracting $25 billion in foreign direct investments (FDIs) within the next five years.

As part of its diversification efforts, the finance ministry issued new Samurai and Panda bonds, with each issuance valued at around $500 million.

Its privatization program looks to bring in $5 billion by the end of the current fiscal year, while the country is gearing up to collect around LE 70 billion (approx. $2.264 billion) from its IPO program alone.

Fitch sees real GDP growth slowing to 3.5 percent in the financial year ending June 2024 and 4.5 percent in FY2024/2025 compared with 3.8 percent in FY2021/2022, with inflation averaging 33 percent in FY24 and views a further currency adjustment as highly likely.