S&P affirms negative outlooks for 4 Egyptian banks

Standard & Poor’s Ratings Services has affirmed its long- and short-term counterparty credit ratings on National Bank of Egypt (NBE), Banque Misr (BM), and Commercial International Bank (Egypt) S.A.E. (CIB) at ‘B/B’. The outlooks are negative.

S&P also affirmed the unsolicited public information (‘pi’) rating on National Societe Generale Bank S.A.E. (NSGB) at ‘Bpi’.  CIB’s stand-alone credit profile (SACP) was affirmed at ‘bb-‘ and lowered those on NBE and BM to ‘b+’ from ‘bb-‘ and to ‘b’ from ‘b+’, respectively, to reflect their “very weak” capital positions.

S&P lowered economic risk score for Egypt to ‘9’ from ‘8’ and maintained the industry risk score at ‘7’ as well as lowering the anchor for banks operating in Egypt to ‘b+’ from ‘bb-‘.

S&P said that political uncertainties during the transition phase and security issues are hindering Egypt’s economic growth and harming asset quality and profitability.

“We view the Egyptian banking industry as fragmented, with 39 licensed banks. Three state-owned banks account for about 40% of system assets, creating market distortions..  Stable customer deposits are amply sufficient to fund relatively small loan books. Excess funds are invested in domestic sovereign debt. Under the ongoing reform program, banks are tackling legacy problems and the quality of regulation is improving. Political risk might endanger progress,” S&P report said.