Fitch Ratings has affirmed Credit Agricole Egypt's (CAE) (CIEB) National Long-term Rating at 'AA+(egy)' and revised the Outlook to Stable from Negative. A full list of rating actions is at the end of this commentary. RATING DRIVERS AND SENSITIVITIES - NATIONAL RATINGS AND SUPPORT RATING Credit Agricole Egypt's (CAE) ratings reflect the probability of support that would be available from its majority shareholder, Credit Agricole ('A+'/Negative), which has a 60% stake in the bank. CAE benefits from close cooperation with its parent - both from a business and a risk management perspective. A number of senior CAE managers are seconded from Credit Agricole. CAE remains part of Credit Agricole's presence and strategy in the Middle East and North Africa region and there is no indication that the group's commitment to CAE will lessen. In addition Fitch considers there would be reputational damage to Credit Agricole if it should fail to support CAE in case of need. There is limited upside potential in CAE's ratings, considering their current high level. The ratings are sensitive to any significant weakening of Credit Agricole's willingness to provide support. The revision in the Outlook to Stable reflects Fitch's view that, even if the economic instability continued, Credit Agricole's support for CAE would likely remain unchanged. In addition, CAE's ratings relative to other banks in Egypt would remain unchanged. Profitability remained robust in 9M12, with net profit strengthening by 55% year on year, driven mainly by net interest income. There was an increase in lending during the period, in addition to wider margins. Impairment charges were flat yoy, and absorbed a moderate 13% of pre-impairment operating profit. Impaired loans decreased to EGP195m, 1.5% of the loan book, from EGP230m at end-2011. Reserve coverage is very comfortable at over 200% of impaired loans. CAE has a solid funding franchise with customer deposits accounting for virtually all of non-equity funding. Almost 60% of these are retail. There is some depositor concentration, especially with regard to foreign currency deposits. Liquidity remains sound, with almost 40% of the balance sheet consisting of bank placements and Egyptian government securities. The bank remains adequately capitalised, especially in view of the support available from its parent if required. The bank's Fitch Core Capital ratio was 14.3% at end-9M12 and its Tier 1 ratio was 12.2%. The rating actions are as follows: National Long-term Rating affirmed at 'AA+(egy)'; Outlook revised to Stable from Negative National Short-term Rating affirmed at 'F1+(egy)' Support Rating affirmed at '4' Reuters
