QNB Alahli’s Foreign Currency Ratings Outlook Revised to ‘Stable’ from ‘Negative’

March 17, 2014 2:06 pm

Capital Intelligence (CI), the international credit rating agency, has today announced that it has revised the Outlook for QNB ALAHLI’s 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, the Bank’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 the Bank’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 in due course and the changes, if any, will be announced. 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, QNB ALAHLI’s FSR is vulnerable to some downward pressure, as is the case with all the other Egyptian Banks.

Primary Analyst
Morris Helal
Senior Credit Analyst
Tel: +357 2534 2300