Capital Intelligence (CI), the international credit rating agency, has announced that it has revised the Outlook for Arab International Bank’s (AIB) Foreign Currency Ratings (FCRs) to ‘Stable’ from ‘Negative’. This change follows the agency’s recent revision of the Outlook for Egypt’s Sovereign FCR to ‘Stable’ from ‘Negative’, and the affirmation of the Sovereign’s Long-Term and Short-Term FCRs at ‘B-’ and ‘B’, respectively. Accordingly, AIB’s Long- and Short-Term FCRs are affirmed at the same level of ‘B-’ and ‘B’, respectively (see table below). The Bank’s FCRs remain highly correlated with the Sovereign’s creditworthiness. Any deterioration or improvement in Egypt’s creditworthiness would have a corresponding effect on AIB’s FCRs.
The change in the Outlook for Egypt’s Sovereign FCRs is driven by the receding short-term financing risks and improving international liquidity, in large part due to the continued availability of financial assistance from friendly states and international donors, as well as the mildly improving political climate – although risks remain high. FCRs in the ‘B’ range indicate significant credit risk, as the capacity for timely fulfillment of financial obligations is very vulnerable to adverse changes in internal or external circumstances.
At the same time, the agency announced that while the Bank’s Financial Strength Rating (FSR) is affirmed at its current level, on ‘Negative’ Outlook (see table below), this Rating and its Outlook will be reviewed as and when the Bank publishes its 2013 audited financial statements. The changes, if any, will be announced in due course. As a group, the majority of the Egyptian Banks have so far adeptly managed their balance sheets and profitability in the face of continuing elevated credit and political risks. However, as the domestic operating environment remains challenging and economic risks are still high, AIB’s FSR is vulnerable to some downward pressure, as is the case with all the other Egyptian Banks.
Senior Credit Analyst
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Monday, March 17- 2014 @ 14:14 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.