TEXT - Fitch cuts two Egyptian banks ratings to 'B'

Mon Feb 4, 2013 11:29am EST

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(The following statement was released by the rating agency)
    Feb 4 - Fitch Ratings has downgraded the Long-term foreign currency Issuer
Default Ratings (IDR) of National Bank of Egypt (NBE), its wholly-owned
subsidiary, National Bank of Egypt (UK) Ltd (NBEUK), and Commercial
International Bank (CIB), to 'B' from 'B+'. The Outlooks are Negative. A full 
list of rating actions is at the end of this release.

 

RATING DRIVERS AND SENSITIVITIES - IDRs, SUPPORT RATINGS AND SUPPORT RATING 
FLOORS 

The downgrades of NBE, NBEUK and CIB's IDRs and Negative Outlook reflect the 
rating action taken on the Arab Republic of Egypt's ratings (see 'Fitch 
Downgrades Egypt to 'B'; Outlook Negative' dated 30 January 2013 at 
www.fitchratings.com).

The Support Ratings of '4' reflect a limited probability of support from the 
Egyptian authorities. 

NBE's Support Rating Floor has been revised to 'B'. CIB's Support Rating Floor 
has been affirmed at 'B' as Fitch considers that given the uncertainty in the 
market, the Egyptian authorities would have an increased propensity to support 
banks - especially systemically important ones such as NBE and CIB - and that 
therefore at this rating level it is no longer appropriate to differentiate the 
Support Rating Floors of these banks.

The ratings are sensitive to the ratings of the Egyptian sovereign and any 
changes would reflect a change in the sovereign ratings.

RATING DRIVERS AND SENSITIVITIES - NATIONAL RATINGS

CIB's and Credit Agricole Egypt's (CAE) National Ratings have been affirmed, as 
Fitch considers that their relative creditworthiness has not changed despite the
sovereign downgrade. NBE's National Long-term Rating has been downgraded to 
'AA-(egy)', reflecting the sovereign support-driven nature of the bank's 
National Ratings, and the close ties between NBE's creditworthiness and that of 
the Egyptian sovereign. The Outlooks on the National Ratings are Stable, 
reflecting the likelihood that the relative ranking of the three banks will 
remain stable even if the operating environment continues to deteriorate.

The ratings are sensitive to any change in Fitch's view of the relative ranking 
of the banks, which could arise as a result of their being affected to differing
degrees by the continuing uncertainties in the market.

RATING DRIVERS AND SENSITIVITIES - VIABILITY RATING (VR)

Fitch has downgraded NBE's VR to reflect the close ties between NBE's 
creditworthiness and that of the Egyptian sovereign, including through the 
bank's substantial holding of government debt. The agency affirmed CIB's VR as 
Fitch considers that, despite the worsening conditions in the domestic market, 
CIB's intrinsic creditworthiness has not materially deteriorated. Nevertheless, 
its VR is effectively capped by its high exposure to the domestic economic 
environment and significant holdings of Egyptian sovereign debt.

The banks' VRs are sensitive to any further deterioration of the operating 
environment and its impact on performance, asset quality, and capitalisation. 

The rating actions are as follows:

NBE

Long-term IDR downgraded to 'B' from 'B+'; Outlook Negative 

Short-term IDR affirmed at 'B'

National Long-term Rating downgraded to 'AA-(egy)'; Outlook Stable

National Short-term Rating affirmed at 'F1+(egy)'

Viability Rating downgraded to 'b' from 'b+'

Support Rating affirmed at '4' 

Support Rating Floor revised to 'B' from 'B+'

Senior unsecured debt downgraded to 'B' from 'B+'

NBE's Long-term and Short-term IDRs are in line with Egypt's Long-term foreign 
currency IDRs and are driven by the limited probability of support from the 
Egyptian authorities, if needed. Its National Ratings are also driven by the 
limited probability of support from the Egyptian authorities. NBE is wholly 
owned by the Egyptian state. It is Egypt's largest bank by assets, with a 
dominant domestic franchise, especially in customer deposits, where it accounts 
for over a quarter of total system deposits. 

NBEUK 

Long-term IDR downgraded to 'B' from 'B+'; Outlook Negative 

Short-term IDR affirmed at 'B'

Support Rating affirmed at '4' 

NBEUK's IDRs are in line with its parent's IDRs and, in turn, Egypt's Long-term 
foreign currency IDRs. They reflect Fitch's view that there is a limited 
probability of support from the Egyptian state via NBE. Given that virtually all
of NBE UK's funding and its main business are dependent on its connection to the
Egyptian sovereign, through NBE, and NBE UK's strategy increasingly capitalises 
on NBE's franchise, Fitch has not assigned a VR to NBE UK.

CIB 
Long-term IDR downgraded to 'B' from 'B+'; Outlook Negative 
Short-term IDR affirmed at 'B'
National Long-term Rating affirmed at 'AA(egy)'; Outlook Stable 
National Short-term Rating affirmed at 'F1+(egy)'
Viability Rating affirmed at 'b+' 
Support Rating affirmed at '4' 
Support Rating Floor affirmed at 'B' 

CIB's VRs reflect the strength of the bank's local franchise and experienced 
management, its consistently strong profitability, sound asset quality, 
liquidity and capitalisation. Its Long-term IDR is constrained by Egypt's 
Country Ceiling of 'B' and, as a result, the Negative Outlook on its Long-term 
IDR mirrors that on Egypt. CIB is the leading private sector bank in Egypt.

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

CAE's ratings reflect the limited probability of support that would be available
from its majority shareholder, the Credit Agricole group ('A+'/Negative). Fitch 
believes the Credit Agricole group would be willing to support its Egyptian 
subsidiary, but this support is to some extent constrained by the Egyptian 
sovereign ratings.

 (Caryn Trokie, New York Ratings Unit)
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