Capital Intelligence affirms National Bank of Egypt at ‘B-/B’
Capital Intelligence Ratings (CI Ratings) announced Thursday that it has affirmed National Bank of Egypt’s (NBE) long-term foreign currency rating (FCR) at ‘B-’ and the short-term FCR at ‘B’, with a stable outlook.
CI said in a statement that these ratings, which are constrained by CI’s sovereign ratings for Egypt (‘B-‘/’B’/’Stable’), denote significant credit because the Bank’s capacity for timely fulfilment of financial obligations “is very vulnerable to adverse changes in internal or external circumstances.”
CI said that the bank’s Financial Strength Rating (FSR) is affirmed at ‘BB-’, supported by its full Government ownership, dominant size and market shares, improved loan asset quality in H1of FY 2016, good liquidity and greatly improved profitability metrics in H1of FY 2016. Factors constraining the FSR are high sovereign and political risk factors, low capital ratios, and considerable asset concentrations together with ongoing high credit risk.
“Egypt’s still high, albeit diminishing, economic and political risks continue to weigh on the operating environment and all Egyptian banks as a group,” CI said, noting that a weak balance of payments position and vulnerable exchange rate exacerbate difficult credit conditions.
The operating environment is therefore expected to remain challenging and credit risks significant, notwithstanding the financial support for Egypt from Gulf Cooperation Council (GCC) countries and, more recently, the financial support from the International Monetary Fund (IMF), CI said.
It also highlighted NBE’s high rate of non-performing loans and low capital adequacy ratio, which is just above regulatory requirements. Despite this, its significant Government deposits and improved net interest margins—linked to an expansion in Government securities and net loans—means that NBE’s operating and net profit continue to grow.
NBE was Egypt’s first private joint-stock commercial bank, but also acted as the country’s Central Bank before banks were nationalized in 1960. As at end December 2015, the Bank’s total assets amounted to 59 billion Egyptian pounds ($76.6 billion) and total capital was 33.5 billion pounds ($4.29 billion).
