(MENAFNEditorial) 29 March 2013
Banque du Caire's Ratings Lowered following Egypt Sovereign Ratings Action; 'Negative' Outlook Affirmed on all Ratings
Capital Intelligence (CI), the international credit rating agency, today announced that it has downgraded Banque du Caire (BdC)'s Long-Term Foreign Currency Rating (FCR) to 'B' from 'BB-', and affirmed the Short-Term FCR of 'B'. The rating action follows the downgrade of Egypt's Sovereign Long-Term FCR to 'B' from 'BB-', on 'Negative' Outlook. The Outlook for BdC's Ratings remains 'Negative', as is the case with other Egyptian banks, reflecting the Bank's base of operations in Egypt and its exposure to Egyptian sovereign debt. As such, the Bank's Ratings remain highly correlated with Egypt's sovereign creditworthiness. The downgrade of the sovereign or any improvement in Egypt's creditworthiness would have a commensurate effect on BdC's Ratings. The Support level remains at '3', reflecting CI's assessment of a high likelihood of shareholder and official support in case of need.
At the same time, the Bank's Financial Strength Rating (FSR) is lowered to 'BB-' from 'BB+' and remains on 'Negative' Outlook. Although as a group the Egyptian banks have so far adeptly managed their balance sheets in the face of continued elevated credit and political risks, the deteriorating operating conditions in Egypt are placing additional pressure on BdC's credit metrics. The FSR is thus vulnerable to ongoing downward pressure, in common with other banks in Egypt, reflecting a sustained difficult operating environment compounded by markedly weakened post revolution macroeconomic indicators. The risk of a balance of payments and/or currency crisis continues to weigh heavily on all Egyptian banks amid an unsettled political climate.
BdC was established in May 1952 and ranks fifth largest in terms of assets in the Egyptian banking sector. Under the impetus of new management installed several years ago, BdC has adopted a new commercial bank business model with a good balance between retail and corporate activities. Retail is premised on payroll-based loans to government sector employees. Newer products such as credit cards, car loans, and vehicle finance have also been launched. The Bank maintains a strong operating platform of more than 200 branches nationwide. As at end 2011, BdC had total assets of EGP49.3 billion (USD8.2 billion) and total capital of EGP2.4 billion (USD398mn).
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The ratings have been initiated by Capital Intelligence. However, the issuer participated in the rating process. The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents of the issuer for the purpose of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in December 2009. The ratings were last updated in December 2012.
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com.
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