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Bank of Alexandria: Financial Strength Rating Raised and Positive Outlook Assigned

Egypt: Thursday, November 18 - 2010 @ 12:52

The ratings action is based on the Bank’s improving asset quality and strong loan loss coverage, improved capital adequacy and better income generation, despite some tightening of liquidity and a still relatively high cost/income ratio. A ‘Positive’ Outlook is also appended to the FSR to reflect the ongoing positive trend in the Bank’s asset quality and profitability in the current year.

The Support Rating, affirmed at ‘2’, reflects a very high likelihood of financial support from the majority shareholder Intesa Sanpaolo, as well as from Central Bank of Egypt in case it were needed. The Foreign Currency Long-Term and Short-Term Ratings are affirmed at ‘BBB-‘ and ‘A3’, respectively, with a ‘Stable’ Outlook. These ratings are constrained by Egypt’s sovereign ratings.

Now in its fourth year of operations as a privatised bank, BoA operates an extensive branch network in Egypt under a renewed corporate and market profile. The Bank’s “core business” strategy remains focused on retail banking while maintaining a good presence in corporate business. In the past year, the Bank continued to transform the structure of its asset base as it stepped up lending and reduced bank placements. This generated strong growth in gross income and operating profit as well as improved overall returns.

Credit risk within the retail book is mitigated by a substantial amount of payroll-based lending, a strict risk management framework and relatively low borrower concentration. Capital adequacy has strengthened due to a high rate of earnings retention. Loan-based liquidity remains comfortable in global terms but has tightened relative to other banks given the strong rate of growth in loans.

Bank of Alexandria was established in 1957 as a commercial bank fully owned by the Egyptian government. In a landmark privatisation, the Bank was sold in 2006 to its current major shareholder Intesa Sanpaolo (70.25%). The remaining shares are held by the Egyptian government (20%) and the International Finance Corporation (9.75%). BoA operates through a network of 200 branches (including 38 outlets) located nationwide, complemented by internet, mobile phone and call centre platforms. In the past two years, branches have been upgraded and undergone refurbishment to a high standard. This process has run in parallel with an aggressive advertising campaign to promote the Bank’s new brand identity “Alexbank”.

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Thursday, November 18- 2010 @ 12:52 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.

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