Edited by Jihad Taki
Fitch Ratings has today affirmed the National Bank of Egypt's (NBE) Long-term Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. NBE's Short-term IDR is affirmed at 'B', the National Long-term rating at 'AA(egy)', and the National Short-term rating at 'F1+(egy)'. The Outlook on the National Long-term rating is Stable. Fitch has simultaneously affirmed the bank's Individual Rating at 'D/E', Support Rating at '3' and Support Rating Floor at 'BB+'.
NBE's Long- and Short-term IDRs and National ratings reflect Fitch's view of the support that would be provided by the Egyptian authorities in case of need, based on the bank's systemic importance, its 100% government ownership, and significant retail deposit franchise. NBE's Individual Rating reflects the strength of the bank's domestic franchise, its stable funding and strong liquidity. It also takes into account NBE's weak performance and still substantial level of non-performing loans, although these are largely legacy NPLs and do not reflect current performance. NBE's capitalisation remains on the low side, although management has stated that the bank recently received a USD400m subordinated government loan that boosted its Tier II capital.
Following the appointment of a new chairman and deputy chairman in 2008, there has been a marked shift in the pace of the bank's restructuring with a number of new appointments made at all levels. There have been improvements in all major divisions, including risk management, and a strengthening of reporting and monitoring systems and controls. The composition of the board was also substantially changed during 2008, during which six of its present eight members were appointed, to broaden the board's business background and to ensure support for NBE's restructuring. The bank is increasingly run on commercial lines with pricing of both assets and liabilities adjusted to market rates which is expected to improve the bank's performance going forward.
NBE continued to report weak profitability in the year to June 2008 and the six months to December 2008. The slight strengthening of net interest and fee income was offset by some losses on the bank's securities portfolio and ongoing loan provisioning charges. In the year to June 2008, NBE booked an exceptionally large provision charge in a bid to boost reserve coverage. The expense was largely funded by the sale of AFS securities, mostly to the bank's wholly-owned subsidiary, Ahly Capital. NBE still has a large proportion of non-performing loans and these increased in the year to June 2008. However, management has stated that virtually all of the increase was due to a reclassification of legacy NPLs that had not previously been recognised. The reclassification occurred as part of a review of NBE's loan book following the improvement in the bank's reporting systems and controls.
NBE is wholly-owned by the Egyptian government. It offers a wide range of retail, wholesale and investment banking services through its extensive domestic branch network. NBE is still Egypt's largest bank by assets by far, accounting for about a quarter of the system's total. Funding is one of NBE's main strengths and reflects the bank's extensive domestic franchise. It is funded by its large deposit base, almost three quarters of which are retail deposits.
Global Arab Network
Fitch Ratings has today affirmed the National Bank of Egypt's (NBE) Long-term Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. NBE's Short-term IDR is affirmed at 'B', the National Long-term rating at 'AA(egy)', and the National Short-term rating at 'F1+(egy)'. The Outlook on the National Long-term rating is Stable. Fitch has simultaneously affirmed the bank's Individual Rating at 'D/E', Support Rating at '3' and Support Rating Floor at 'BB+'.
NBE's Long- and Short-term IDRs and National ratings reflect Fitch's view of the support that would be provided by the Egyptian authorities in case of need, based on the bank's systemic importance, its 100% government ownership, and significant retail deposit franchise. NBE's Individual Rating reflects the strength of the bank's domestic franchise, its stable funding and strong liquidity. It also takes into account NBE's weak performance and still substantial level of non-performing loans, although these are largely legacy NPLs and do not reflect current performance. NBE's capitalisation remains on the low side, although management has stated that the bank recently received a USD400m subordinated government loan that boosted its Tier II capital.
Following the appointment of a new chairman and deputy chairman in 2008, there has been a marked shift in the pace of the bank's restructuring with a number of new appointments made at all levels. There have been improvements in all major divisions, including risk management, and a strengthening of reporting and monitoring systems and controls. The composition of the board was also substantially changed during 2008, during which six of its present eight members were appointed, to broaden the board's business background and to ensure support for NBE's restructuring. The bank is increasingly run on commercial lines with pricing of both assets and liabilities adjusted to market rates which is expected to improve the bank's performance going forward.
NBE continued to report weak profitability in the year to June 2008 and the six months to December 2008. The slight strengthening of net interest and fee income was offset by some losses on the bank's securities portfolio and ongoing loan provisioning charges. In the year to June 2008, NBE booked an exceptionally large provision charge in a bid to boost reserve coverage. The expense was largely funded by the sale of AFS securities, mostly to the bank's wholly-owned subsidiary, Ahly Capital. NBE still has a large proportion of non-performing loans and these increased in the year to June 2008. However, management has stated that virtually all of the increase was due to a reclassification of legacy NPLs that had not previously been recognised. The reclassification occurred as part of a review of NBE's loan book following the improvement in the bank's reporting systems and controls.
NBE is wholly-owned by the Egyptian government. It offers a wide range of retail, wholesale and investment banking services through its extensive domestic branch network. NBE is still Egypt's largest bank by assets by far, accounting for about a quarter of the system's total. Funding is one of NBE's main strengths and reflects the bank's extensive domestic franchise. It is funded by its large deposit base, almost three quarters of which are retail deposits.
Global Arab Network
