Shell invests in Mina West gas development in Egyptian Mediterranean Sea    Egypt's FM highlights 'soft power' in Mali meeting with alumni    Egypt's foreign minister opens business forum in Niger, targets new partnerships    Egypt's FM delivers Al-Sisi message to Niger's leader, seeks deeper security ties    Rafah Crossing 'never been closed for one day' from Egypt: PM    Egypt will keep pushing for Gaza peace, aid: PM    Remittances from Egyptians abroad surge 70% YoY in July–May: CBE    Sudan's ambassador to Egypt holds reconstruction talks on with Arab League    Egypt's current account gap narrows, but overall BoP records deficit    Al-Sisi urges accelerated oil, gas discoveries, lower import bill    Egypt hosts international neurosurgery conference to drive medical innovation    Egypt's EDA discusses Johnson & Johnson's plans to expand investment in local pharmaceutical sector    I won't trade my identity to please market: Douzi    Sisi calls for boosting oil & gas investment to ease import burden    EGX to close Thursday for July 23 Revolution holiday    Egypt, Senegal sign pharma MoU to unify regulatory standards    Egyptian Drug Authority discusses plans for joint pharmaceutical plant in Zambia    Two militants killed in foiled plot to revive 'Hasm' operations: Interior ministry    Egypt, Somalia discuss closer environmental cooperation    Egypt foils terrorist plot, kills two militants linked to Hasm group    Giza Pyramids' interior lighting updated with new LED system    Egypt's EHA, Huawei discuss enhanced digital health    Foreign, housing ministers discuss Egypt's role in African development push    Korea Culture Week in Egypt to blend K-Pop with traditional arts    Egypt reveals heritage e-training portal    Three ancient rock-cut tombs discovered in Aswan    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Egypt's Irrigation Minister urges scientific cooperation to tackle water scarcity    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    Egypt's Democratic Generation Party Evaluates 84 Candidates Ahead of Parliamentary Vote    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Moody's says Egypt banking sector outlook still negative
Published in Ahram Online on 25 - 02 - 2014

The outlook for Egypt's banking system is negative because of political instability and banks' increasing exposure to the indebted government, Moody's Investors Service said in a report that contrasted with many investors' growing optimism.
Yields on Egypt's international bonds have tumbled and its stock market has soared 62 percent since last July, when the ouster of Islamist President Mohamed Morsi brought to power a government promising better economic management.
Billions of dollars in aid to Egypt from Gulf allies since Morsi's ouster have averted a balance of payments crisis and allowed the government to spend on economic stimulus plans.
But credit rating agency Moody's, which rates Egypt's sovereign debt Caa1, deep in junk territory, said on Tuesday that it still had a negative outlook for the mass of Egyptian banks - unchanged since 2011, when the country's political turmoil began.
One reason is Egypt's continuing political tensions, Moody's said. Although it is moving towards elections, the government remains locked in a confrontation with Morsi's Muslim Brotherhood and also faces incidents of militant violence.
"Against the backdrop of the unsettled security situation and political climate, the banks' operating environment will remain difficult," Constantinos Kypreos, senior credit officer at Moody's, said in a statement.
"This is because the outlook for foreign investment, tourism and consumer confidence remains weak, leading to subdued credit growth and low business generation for banks."
The rating agency forecast Egyptian gross domestic product growth of just 2.6 percent in 2014, well below an average of 4.9 percent between 2001 and 2010 - and below the roughly 5 percent which many analysts think is needed to cut high unemployment.
Moody's also cited "banks' high and increasing exposure to Caa1-rated Egyptian government debt", which ties the system's solvency to sovereign default risk.
It predicted that over the next 12 to 18 months, banks' exposure to government securities, which reached 5.7 times shareholders' equity in September 2013, would rise further.
"The government continues to rely on local banks to fill the funding gap in the absence of foreign funding and continues to run high budget deficits," Moody's noted, predicting banks' asset quality metrics would deteriorate further as corporate loans were restructured.
Although Egyptian banks reported an average Tier 1 capital ratio of 11.8 percent last September, Moody's said that level was low given the likelihood of deterioration in assets.
Egypt's national regulator gives a zero risk-weighting to the banks' holdings of Egyptian government securities but applying a weighting of 150 percent, more in line with global standards, would yield a capital ratio below 6 percent, it said.
However, Moody's said it expected Egyptian banks to remain well-funded because of their strong deposit bases, supported by remittances from Egyptians working abroad. This lets them avoid relying on riskier funding from domestic or foreign markets.
Last month Fitch Ratings raised the outlook for its B-minus rating of Egypt to stable from negative, citing financial aid from the Gulf and a somewhat calmer political situation.
But it said public finances remained the main weakness in the country's sovereign credit profile, and that it did not expect the state budget deficit to drop significantly in the next two years.
http://english.ahram.org.eg/News/95220.aspx


Clic here to read the story from its source.