2024-03-13 07:37:41
Moody’s confirmed the ratings of five Egyptian banks this Tuesday, March 12. This action comes less than a week following the rating agency confirmed Egypt’s sovereign rating at Caa1 and changed its outlook from negative to positive on March 7, showing “confidence in the macroeconomic management of the Egypt in difficult times.”
The revision concerns the Caa1 ratings of long-term deposits of National Bank of Egypt SAE (NBE), Banque Misr SAE (BM), Banque du Caire SAE (BdC) and Commercial International Bank (Egypt) SAE (CIB), as well as the B3 ratings of long-term deposits from Bank of Alexandria SAE (BoA). The banks’ outlook, however, is moving from negative to positive.
A rating that demonstrates the resilience of the banks’ financial profiles to date, including their deposit-based funding profiles, strong local currency liquidity, stable profitability, among others.
According to Moody’s, the capital injection by the United Arab Emirates provided the backdrop for the marked change in economic policy. On March 6, the Central Bank of Egypt (ECB) floated the official exchange rate which converged to the parallel rate at around 51 Egyptian pounds per dollar from 30.9 Egyptian pounds per dollar and raised the rate manager by 600 basis points to bring it to 27.25%. The same day, the IMF confirmed staff’s agreement with Egyptian authorities, paving the way for an increase in the IMF’s initial program of $3 billion to around $8 billion.
These developments will also have a positive impact on the banking sector, given the high sovereign exposure of banks, mainly in the form of public debt securities, which links their credit profile to that of the state.
Added to this in particular is the increase in the ECB’s key rates, which brings monetary policy closer to neutrality following a long period of negative real interest rates. Moody’s also says that tightening fiscal policy should, over time, reduce inflation and support debt sustainability, while fostering an environment conducive to private sector activity.
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