Moody's Investors Service has downgraded the standalone credit assessment of five Egyptian banks: National Bank of Egypt to Caa2 from B3, Banque Misr to Caa2 from B3, Banque du Caire to Caa2 from B3, Commercial International Bank (CIB) to B3 from B2 and Bank of Alexandria to B3 from B2.
The foreign-currency [FC] deposit ratings of all these banks were also downgraded to Caa1 from B3, capped by Egypt's FC bank deposit ceiling.
The main factors driving Moody’s rating actions are:
(1) The banks' high exposures to (B3 rated) Egyptian government securities and related instruments, which raises the banking system's susceptibility to event risk.
(2) The weakening operating/macroeconomic environment, which will likely exert additional pressure on banks' asset quality metrics and earnings generating capabilities.
(3) Egypt's reduced capacity to provide systemic support in case of need, implying that none of the rated banks benefit from systemic support uplift.
Moody's expects further downgrading if the banks loss absorption capacity weakens. Improvements in the macroeconomic environment could upgrade Egypt's bank ratings according to Moody's report.
Fitch, another credit-rating agency, cut Egypt's sovereign rating last month from "B+" to "B" on political turmoil and an alarming budget deficit.