CAIRO: Moody’s Investors Service has upgraded local-currency (LC) deposit ratings of five Egyptian banks a few days after raising Egypt’s bond rating from Caa1 to B3, the global agency said stated Tuesday.
LC deposit ratings of National Bank of Egypt SAE, Banque Misr SAE, Banque Du Caire SAE and Commercial International Bank (Egypt) SAE were upgraded from Caa1 to B3. Further, Bank of Alexandria’s LC deposit rating was also raised from B3 to B2.
All of the five banks’ standalone ratings were also upgraded by one notch, while their foreign-currency (FC) deposit ratings were upgraded to Caa1 from Caa2, marking the increase in the FC deposit ceiling for Egypt to Caa1.
Moody’s attributed the rating actions, which follow an improvement in Egypt’s sovereign creditworthiness, mainly to “the improved operating environment in Egypt, which will benefit the banks’ business prospects and asset quality… improved quality of the banks’ liquidity buffers, and the government’s improved capacity to support these banks, in case of need,” the statement detailed.
Egypt’s upgrade by Moody’s Investors with a stable outlook was the first positive step from the most reserved rating agency since the January 25 Revolution in 2011, yet it remains “very low,” Amr Hassanein, the Chairman of Middle East Rating and Investors Services (MERIS), told The Cairo Post via telephone Thursday.
“This action has taken Egypt out of the (C) zone, which marks an extreme risk close to a default situation to the (B) zone which bears less risk but remains very low and flagging,” Hassanein said.
However, Moody’s recent action is a fresh start which would be a positive incentive to other agencies like Standard & Poor’s and Fitch Ratings to reconsider Egypt’s rating.
Moody’s said Egypt’s real GDP growth is projected to recover to 4.5 percent year-on-year for the current fiscal year 2015, and then to edge up to around 5 percent six percent over the coming four years, as long as domestic political stability and business environment improvements continue.