Moody’s downgrades ratings of five Egyptian banks

Creative Commons/Abdelrhman

Moody’s Investors Agency has downgraded five Egyptian banks by one notch, including the largest private bank, after downgrading the country’s credit rating on high inflation and rising borrowing costs.

The long-term bank deposit ratings of the National Bank of Egypt, Banque Misr and Banque Du Caire, and privately-owned Commercial International Bank were lowered to “CAA1” from “B3”.

The ratings agency also downgraded Bank of Alexandria, Italy’s Intesa Sanpaolo subsidiary, to “B3” from “B2”. However, it maintained stable outlook for all banks.

• Moody’s downgrades Egypt on rising borrowing costs
• Egypt’s bonds fight back after Moody’s downgrade
• Egypt’s economic outlook darkens as IMF postpones review

The downgrade follows the weakening operating environment and the high interlinkages between the sovereign’s waning creditworthiness.

Moody’s last week changed Egypt’s outlook to stable despite the downgrade due to the government’s track record of fiscal reform implementation capacity and the launch of the asset sale strategy.

In September, global index provider FTSE Russell said it would add Egypt and Pakistan to the watch lists for potential demotion in its equity index suites.

The two countries will be on watch lists for demotion from “secondary emerging markets”, with Egypt moving to become an “unclassified market” and Pakistan getting “frontier market” status.

Egypt has already imposed import restrictions to curb forex outflow, while at least two national banks have suspended using Egyptian pound debit cards outside the country.

The country is gearing up for elections in December after devaluing its currency by more than half in the year to March.