Standard & Poor (Photo: Reuters)
International credit rating agency Standard & Poor's upgraded its ratings on three Egyptian banks on Monday.
S&P raised its long-term counterparty credit ratings for the National Bank of Egypt, Banque Misr, and Commercial International Bank S.A.E. from CCC+ to B-.
This rating change came days after the agency raised Egypt's national sovereign credit rating from CCC+/C to B-/B with a "stable" rating outlook, with the backing of aid from the Gulf.
"This improvement of Egypt's creditworthiness alleviates some of the pressure we see on the four Egyptian banks we rate, as they hold a high amount of government debt compared with their equity base and earnings capacity," said S&P on Monday.
The United Arab Emirates, Saudi Arabia, and Kuwait have pledged $12 billion cumulatively in aid and grants to Egypt after the ouster of Islamist president Mohamed Morsi in July, and the UAE recently allocated an additional $1.9 billion in development project funding to Egypt.
"We expect support from bilateral lenders to continue over the medium term as the Egyptian authorities try to address the country's political and economic challenges," the agency explained in upgrading Egypt's sovereign credit rating.
S&P also affirmed on Tuesday that the short-term counterparty credit ratings of the three banks was at a C, adding that "the outlooks on the three banks are stable."
Before S&P's actions this month, Egypt's credit ratings had been dropping rapidly since the revolution in January 2011, which toppled the three-decade-old regime of Hosni Mubarak and precipitated years of economic turmoil as vital sources of income such as tourism and FDI dried up.
In December 2012, S&P downgraded state-owned National Bank of Egypt and Banque Misr, as well as privately-owned Commercial International Bank, by one rating, citing their exposure to government debt.