Fitch Ratings has downgraded the London-based National Bank of Egypt International's (NBEI's) individual rating to C/D from C. The bank's long-term and short-term foreign currency ratings have been affirmed at BB+ and B, respectively, and the outlook is Stable. The support rating remains at 4.
The rating action reflects the agency's concerns over NBEI's vulnerability to further macroeconomic problems in the bank's main market, Egypt, and to potential asset quality problems caused by a weaker global economic environment.
NBEI's low profitability, small size and the relative concentration of its exposures give it increased sensitivity to any asset impairment. Though a conservative approach to risks has so far kept the bank largely free of asset quality problems, the currently weaker credit environment increases the level of risk and a narrow operating margin limits the bank's ability to absorb any such losses.
The conservative risk profile is one of the bank's strengths, but is also the main reason for low returns, as low yielding interbank assets make up most of the balance sheet. Egyptian lending forms a relatively small proportion of assets and is mainly to larger corporates and quasi-governmental institutions. Good capitalization and strong balance sheet liquidity also support NBEI's ratings.
Based in London, NBEI provides wholesale banking and trade finance services, with an emphasis on the Egyptian market. It is a wholly owned subsidiary of the National Bank of Egypt, which is in turn 100 percent owned by the Egyptian government. In Fitch's opinion, it is likely, but not certain, that the National Bank of Egypt would support NBEI, if support were required. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
