The Clap
Moody’s downgraded the future outlook for five major Egyptian banks.
What
Moody’s downgraded the future outlook of the National Bank of Egypt (NBE), Banque Misr, Banque du Caire, Bank of Alexandria, and the EGX-listed Commercial International Bank (CIB).
So What
The downgrade is due to macroeconomic issues such as FX shortage, funding costs, high interest rates, and inflation — Moody’s explained.
Now What
Amr Hussein Elalfy, Chief Equity Strategist at Thndr Securities Brokerage, told Claps, “The downgraded future outlook for these five Egyptian banks suggests that Moody’s could potentially downgrade the banks’ ratings next, depending on a downgrade of the sovereign rating.”
Claps Class – Sovereign Ratings vs. Banks’ Ratings
Sovereign ratings, similar to a country’s credit score, play a crucial role in influencing banks’ ratings, as these banks function within the economic landscape defined by the nation’s financial health. However, while a Moody’s future outlook downgrade predicts a potential shift, it doesn’t immediately translate into an actual downgrade in the ratings.
Moody’s Recommendation
To upgrade the banks’ ratings, improvements in the government’s credit profile would be essential along with sufficient FX liquidity and improved operating environment, according to Moody’s.
Some Context
Due to FX shortage, Moody’s recently altered the economy’s credit outlook from stable to negative in the last week.
