Moody's Investors Service has downgraded the local-currency deposit ratings of the following five Egyptian banks: National Bank of Egypt to B1 from Ba3, Banque Misr to B1 from Ba3, Banque du Caire to B1 from Ba3, Commercial International Bank to Ba3 from Ba2 and Bank of Alexandria to Ba2 from Ba1.
The foreign-currency [FC] deposit ratings of all these banks were also downgraded to B2 from B1, capped by Egypt's FC bank deposit ceiling.
The main factors driving Moody’s rating actions are:
(1) The banks' high exposures to (B1 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.
NEGATIVE OUTLOOK MAINTAINED
Moody's maintains the negative outlook assigned to Egyptian banks' ratings to reflect the considerable downside risks facing the operating environment.
Moody's notes that the current period of political uncertainty in Egypt -- and in the wider Middle East and North Africa (MENA) region -- has negatively affected Foreign Direct Investments[FDI] flows into the country and has disrupted economic activity.
The outlook remains highly uncertain for the tourism sector and the inflow of remittances from Egyptian workers abroad, both of which are key sources of foreign exchange for the country.