Moody’s affirms 5 Egyptian banks’ ratings, downgrades outlooks to negative

Cairo – January 24, 2024: Moody’s has decided to maintain the Caa1 long-term deposit ratings of the five Egyptian banks it monitors while lowering its outlook for the banks to negative from stable.

The decision comes one week after the investor service’s downgrade of Egypt’s sovereign outlook to negative, citing increased risks caused by challenging macroeconomic and exchange rate rebalancing.

The five banks operating in Egypt that are monitored by the agency are the National Bank of Egypt (NBE), Banque Misr (BM), Banque du Caire (BdC), Commercial International Bank (CIB), and Bank of Alexandria (BoA).

Moody’s attributed the decision to lower the outlooks to Egypt’s continued foreign currency shortages, difficult operating conditions, and high asset risks.

“The increasingly challenging operating conditions, as well as the foreign currency shortages, and high-interest rates and inflation, dampen consumer confidence, compromise borrowers' repayment capacity, and increase funding costs for the banks,” it explained.

 Moody’s maintained the Caa1 long-term deposit ratings of NBE, Banque Misr, Banque du Caire, and CIB, while keeping the B3 long-term deposit ratings of the Bank of Alexandria.

The report noted the banks’ resilient financial profiles, highlighting their deposit-based funding profiles, strong local currency liquidity, and stable profitability.  

However, it explained that banks could be exposed to solvency and liquidity tail risks caused by Egypt’s difficult macroeconomic environment that may be further complicated by possible deteriorations in government debt affordability.

According to Moody’s report, the 5 banks’ Baseline Credit Assessments (BCAs) of caa1 match Egypt’s assessment, noting that any possible weakening of the country’s credit profile could lead to another decline in the banks’ credit profiles.

The banks’ direct exposure to government securities was revealed as around 6.7x of regulatory capital for NBE, 3.5x for BM, 3.2x for BdC, 2.3x for BoA, and 2.2x for CIB.

Over the weekend, Finance Minister Mohamed Maait responded to Moody’s downgrade of the country’s sovereign outlook, stating that it “did not take into account the government's ongoing efforts.”