Moody's downgrades Egypt's Bank of Alexandria

Ahram Online, Wednesday 31 Jul 2013

Credit rating cut follows downgrade of parent bank Intesa Sanpaolo which weakens likelihood of support for Egyptian bank in the midst of political unrest

Bank of Alexandria
Bank of Alexandria (Photo: Al-Ahram)

Moody's Investors Service downgraded Egypt's Bank of Alexandria's local-currency deposit rating for one notch, to B3 from B2, with a negative outlook on Tuesday.

The rating agency's action follows the lowering of the standalone baseline credit assessment of Intesa Sanpaolo (Intesa), Bank of Alexandria's parent bank with a 70.25 percent stake, to Baa3 from Baa2, which in Moody's view reduces Intesa's capacity and potentially its willingness to support the Egyptian bank.

Moody's cited the "stressed operating environment'" in Egypt, which it has rated Caa1, with a negative outlook, as a reason to expect the weakening of Bank of Alexandria's asset quality and profitability, and subsequently Intesa's incentive to support it in the future.

In March, Moody's downgraded Egypt's sovereign currency credit rating to Caa1 from B3, citing unsettled political conditions, citing the inability of then-president Mohamed Morsi's government to secure financing from the International Monetary Fund.

It simultaneously also downgraded the local-currency deposit rating of five Egyptian banks: National Bank of Egypt to Caa1 from B3, Banque du Caire to Caa1 from B3, Banque Misr to Caa1 from B3, Commercial International Bank (CIB) to Caa1 from B3 and Bank of Alexandria to B2 from B3.

On 3 July, president Morsi was deposed by the country's Armed Forces following massive demonstrations calling for his resignation.

In response to the events, Fitch Ratings cut Egypt's long-term foreign and local currency issuer default ratings on 5 July to B-minus from B, with negative outlooks.

On 11 July, Fitch also downgraded the long-term foreign currency Issuer Default Ratings (IDR) of the National Bank of Egypt (NBE) and Commercial International Bank (CIB) from 'B' to 'B-'.

By contrast, rating agency Standard & Poor's kept its credit rating for troubled Egypt unchanged, citing aid pledged in the billions by Gulf states to support the post-coup government in Cairo.

S&P said the LE12 billion promised by Saudi Arabia, Kuwait, and the United Arab Emirates had "partially mitigated"' the risks from the renewed unrest by staving off a balance of payments crisis.

Egypt's sovereign debt rating is rated at junk level by all three rating agencies, which have downgraded Egypt a total of over 16 times since the country's January 2011 uprising which ended the three decade-long rule of Hosni Mubarak.

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