The London-based Fitch Ratings agency has downgraded National Bank of Egypt's (NBE) individual rating to 'D/E' from 'C/D'. NBE's short-term and long-term foreign currency ratings of 'F3/BBB-' (BBB minus) and support of '2' have been affirmed. The rating outlook is negative in line with the agency's sovereign outlook for Egypt.
At the same time the support rating for NBE's London subsidiary National Bank of Egypt International (NBEI) has been changed from '3' to '4'. NBEI's short- and long-term foreign currency ratings of 'F3/BBB-' (minus) with a negative outlook and an individual rating of 'C' have been affirmed.
NBE's rating change is due to the continued weakness of its capital adequacy ratios and its deteriorating asset quality in a difficult operating environment that is expected to continue in the foreseeable future. In order for the bank to meet minimum local regulatory capital adequacy requirements of 10 percent by year-end 2002, new capital will be needed.
Tough operating conditions have already resulted in a rise in the level of non-performing loans and in increased pressure on profit margins - trends that are making it difficult for the bank to generate sufficient capital internally to lift capital adequacy ratios. In terms of asset quality we believe non-performing loans may be understated and that higher loan loss reserves will be required.
NBE's ratings are, however, supported by its strong local franchise, dominant domestic position as the largest public sector commercial bank in Egypt and the bank's ability to count on government support if necessary.
Nile Rating, a locally incorporated agency that forms part of the FitchRatings group, has affirmed the national ratings assigned to NBE at 'F1+/AA+(egy)'. The change in NBEI's support rating reflects Fitch's view that while support is likely this is now less certain given its parent's own weak capital position. — (menareport.com)
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