TEXT-Fitch revises Credit Agricole Egypt outlook to stable from negative

Mon Dec 10, 2012 12:33pm EST

Dec 10 - Fitch Ratings has affirmed Credit Agricole Egypt's (CAE)
National Long-term Rating at 'AA+(egy)' and revised the Outlook to Stable from
Negative. A full list of rating actions is at the end of this commentary.

RATING DRIVERS AND SENSITIVITIES - NATIONAL RATINGS AND SUPPORT RATING
Credit Agricole Egypt's (CAE) ratings reflect the probability of support that
would be available from its majority shareholder, Credit Agricole 
('A+'/Negative), which has a 60% stake in the bank. CAE benefits from close
cooperation with its parent - both from a business and a risk management
perspective. A number of senior CAE managers are seconded from Credit Agricole.
CAE remains part of Credit Agricole's presence and strategy in the Middle East
and North Africa region and there is no indication that the group's commitment
to CAE will lessen. In addition Fitch considers there would be reputational
damage to Credit Agricole if it should fail to support CAE in case of need.

There is limited upside potential in CAE's ratings, considering their current
high level. The ratings are sensitive to any significant weakening of Credit
Agricole's willingness to provide support. The revision in the Outlook to Stable
reflects Fitch's view that, even if the economic instability continued, Credit
Agricole's support for CAE would likely remain unchanged. In addition, CAE's
ratings relative to other banks in Egypt would remain unchanged.

Profitability remained robust in 9M12, with net profit strengthening by 55% year
on year, driven mainly by net interest income. There was an increase in lending
during the period, in addition to wider margins. Impairment charges were flat
yoy, and absorbed a moderate 13% of pre-impairment operating profit. Impaired
loans decreased to EGP195m, 1.5% of the loan book, from EGP230m at end-2011.
Reserve coverage is very comfortable at over 200% of impaired loans.

CAE has a solid funding franchise with customer deposits accounting for
virtually all of non-equity funding. Almost 60% of these are retail. There is
some depositor concentration, especially with regard to foreign currency
deposits. Liquidity remains sound, with almost 40% of the balance sheet
consisting of bank placements and Egyptian government securities. The bank
remains adequately capitalised, especially in view of the support available from
its parent if required. The bank's Fitch Core Capital ratio was 14.3% at
end-9M12 and its Tier 1 ratio was 12.2%.

The rating actions are as follows:

National Long-term Rating affirmed at 'AA+(egy)'; Outlook revised to Stable from
Negative
National Short-term Rating affirmed at 'F1+(egy)'
Support Rating affirmed at '4'

Additional information is available on www.fitchratings.com.

The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 15
August 2012, is available at www.fitchratings.com.

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
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