Fitch Ratings upgrades 4 Egyptian banks’ IDRs following sovereign rating boost

Updated 11/19/2024 4:18:00 PM

Arab Finance: Fitch Ratings has upgraded the long-term issuer default ratings (IDRs) of four major Egyptian banks to 'B’ from ‘B-,' with a stable outlook, as per a statement.

The banks are the National Bank of Egypt (NBE), Banque Misr, Commercial International Bank (CIB), and Banque du Caire (BDC).

This decision follows the upgrade of Egypt's sovereign credit rating to 'B' with a stable outlook on November 1^st.

Fitch stated that 53% of the banking sector's total assets are tied to the country’s sovereign, equaling 8.3x their equity at the end of 2023.

The credit rating agency also noted significant improvements in foreign currency liquidity for Egyptian banks compared to 2023, reflecting a more stable operating environment. This led to an upgrade in the banks' operating environment score to 'b'/stable from 'b-'/positive.

Economic conditions in Egypt are also improving, with real gross domestic product (GDP) growth expected to rise to 4.2% in 2025 and 5.4% in 2026, compared to just 2.4% in 2023, as per Fitch estimates.

Moreover, Fitch expects inflation to decline to 12.5% by end-June 2025 from 26.5% in October 2024, supported by stronger incomes, foreign investments, and remittances.

Profitability remains a strong point for Egyptian banks, with sharp improvements expected in 2024 due to higher yields on government securities and stronger client activity, the statement reads.

Looking ahead, the banking sector is projected to achieve a slight net positive foreign asset position in 2025 and 2026, driven by net inflows from foreign portfolio investors, a lower current account deficit, and support from international financial institutions.