Moody's Investors Service in a major move has downgraded the local-currency (LC) deposit ratings of five Egyptian banks following the downgrade to B1 of the Egyptian government bond ratings.
These include National Bank of Egypt (NBE) which has been downgraded to B1 from Ba3; Banque Misr (From B1 from Ba3); Banque du Cairo; Commercial International Bank (Egypt) (From Ba3 from Ba2) and Bank of Alexandria (From 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, said Moody's in a statement. Today's rating actions follow Moody's decision to downgrade Egypt's government bond ratings toB1 from Ba3, and the downgrade of the country ceiling on FC bank deposits to B2 from B1.
All of the banks' deposit ratings carry a negative outlook, said the ratings agency. The main factors driving today's actions are the following:
*The banks' high exposures to (B1 rated) Egyptian government securities and related instruments, which raises the banking system's susceptibility to event risk.
*The weakening operating/macroeconomic environment, which will likely exert additional pressure on banks' asset quality metrics and earnings generating capabilities.
*Egypt's reduced capacity to provide systemic support in case of need, implying that none of the rated banks benefit from systemic support uplift. Moody's pointed out that these Egyptian banks maintained very high exposures to government securities.