Fitch Ratings has assigned Banque du Caire S.A.E. (BDC) a Long-Term Issuer Default Rating (IDR) of 'B+' with a Stable Outlook, Viability Rating (VR) of 'b+' and National Long-Term Rating of 'AA(egy)' with a Stable Outlook. A full list of ratings is below.
Fitch believes that pressures on the domestic operating environment have eased since end-3Q20, moderating downside risks to Egyptian banks' credit profiles. This considers improving foreign-currency (FC) liquidity with the banking sector's net foreign assets reaching USD3.5 billion at end April 2021 from a net foreign liability position of USD5.3 billion at end-April 2020. This was supported by a strong increase in foreign holdings of Egyptian treasuries to USD29 billion at end-May 2021 from USD10 billion at end-June 2020, sovereign Eurobond issuances and resilient remittances.
Our view also considers healthy growth momentum, with real GDP growth expected to accelerate to 6% in FY22 (3% in FY21), in line with pre-pandemic levels. The sector average loan growth was 6% in 1Q21 and we expect low double digits growth in 2021.
Trade, textiles and tourism are among the sectors most affected by the pandemic. However, banks' asset quality has proved resilient and deterioration in loan quality following the expiry of the Central Bank of Egypt's (CBE) six-month credit moratoria in September 2020 has largely been contained. The sector average Stage 3 (S3) loans ratio remained stable at 3.4% at end-3Q20. At the same date, the Stage 2 (S2) loans ratio varied significantly across banks, ranging from 2% to more than 30% of total loans. Some banks frontloaded their provisions in 2020 resulting in stronger impaired loans coverage ratios and we see the higher portion of S2 loans for some banks an indication of more conservative loan classification policies rather than weaker underlying asset quality. Banks' asset quality is also underpinned by high exposure to the sovereign, including investments in bonds and lending to public sector entities.
