Standard and Poor (S&P) Global's report assigned the National Bank of Egypt, Banque Misr, and the Commercial International Bank (CIB) a rate of 'B/B' on global long- and short-term issuer credits.  

The recent rating followed the revision of Egypt's outlook to negative from stable; it confirms the country's long and short-term foreign and local currency credit rating at B/B.

"The outlook revision on the sovereign rating reflects our view that Egypt's funding sources may not cover its high external financing requirements. We estimate funding needs of about $17 billion for the fiscal year ending June 30, 2023, and $20 billion for fiscal 2024," S&P said.

The rating agency noted that it "doesn't believe" that NBE, CIB, and Banque Misr "would withstand a sovereign default without defaulting on their financial obligations."

Any future decrease in [Egypt's] sovereign credit rating will negatively impact the banks' stand-alone credit profiles (SACPs) as Egypt's creditworthiness affects the rating of Egyptian banks.

S&P maintained that NBE, Banque Misr, and CIB's ratings could be lowered in the next 12 months if Egypt receives a negative rating or the operating environment becomes less supportive for banks.

It is worth noting that the banks mentioned in the S&P report are key issuers of high-yield certificates of deposits (CDs) in Egypt.

These certificates were issued to contain inflation triggered by the Russian-Ukrainian war.

Since March 2022, the three banks have issued different types of high-yield CDs, with annual yields varying between 18 percent and 25 percent. CDs worth EGP 750 billion ($24.27 billion) matured in March 2023; their proceedings amounted to $885 billion.

NBE, CIB, Banque Misr and several banks in Egypt issued new CDs with annual yields ranging from 19 percent to 22 percent after the Central Bank raised interest rates by 2 percent in April.

Egypt's annual headline inflation rate surged to 33.9 percent in March 2023, up from 12.1 percent in March 2022.