International credit rating agency, Capital Intelligence (CI), affirmed Tuesday Egypt-based QNB Al Ahli’s long-term foreign currency rating (FCR) at ‘B-’ and short-term FCR at ‘B’, with a ‘stable’ outlook.
These ratings, which are constrained by the ratings assigned to the sovereign denote significant credit risk, as the bank’s capacity for timely fulfilment of financial obligations is very vulnerable to adverse changes in internal or external circumstances, CI said.
Notwithstanding the high sovereign credit risk, including Egypt’s weak balance of payments position and vulnerable exchange rate, QNB Al Ahli’s financial strength rating (FSR) is affirmed at ‘BBB-’.
The FSR is supported by sound loan asset quality, comfortable liquidity and an expanding customer deposit base, good capital adequacy, and robust profitability at both operating and net levels.
Although the operating environment remains challenging and credit risk high, QNB Al Ahli has maintained sound risk metrics thanks to adept balance sheet management, CI said, adding the FSR remains constrained by high concentration to Egyptian government securities and elevated sovereign risk, comparatively large borrower concentrations, and sustained rapid loan expansion over the past few years.
The outlook for the bank’s FSR is maintained at ‘stable’ and the support rating of ‘2’ (also affirmed) denotes a very high likelihood of support in case of need from the parent, QNB, as well as from the Central Bank of Egypt (CBE).
The bank’s sound liquidity was stable with key loan-based liquidity ratios moderately higher than local counterparts mainly due to the larger share of loans in total assets and, conversely, the moderately lower proportion of government securities.
As is the case with peer banks, the bulk of QNB Al Ahli’s liquidity is invested mostly in Egyptian treasury bills and bonds, the rating agency said.
While the liquidity of government bonds has reduced over the years due to heightened political and economic risk factors, treasury bills remain liquid instruments in the marketplace and may be repoed at the CBE.
Source: Gulf Times