Egypt, S.Arabia step up trade ties through coordination council talks    Egypt reviews progress on $200m World Bank-funded waste management hub    Egypt urges Israel to accept Gaza deal amid intensifying fighting    SCZONE showcases investment opportunities to eight Japanese companies    Egypt, ADIB explore strategic partnership in digital healthcare, investment    SCZONE, Tokyo Metropolitan Government sign MoU on green hydrogen cooperation    Egypt welcomes international efforts for peace in Ukraine    Al-Sisi, Macron reaffirm strategic partnership, coordinate on Gaza crisis    Contact Reports Strong 1H-2025 on Financing, Insurance Gains    Egypt, India's BDR Group in talks to establish biologics, cancer drug facility    AUC graduates first cohort of film industry business certificate    Egyptian pound down vs. US dollar at Monday's close – CBE    Egypt's FM, Palestinian PM visit Rafah crossing to review Gaza aid    Egypt prepares unified stance ahead of COP30 in Brazil    Egypt recovers collection of ancient artefacts from Netherlands    Egypt harvests 315,000 cubic metres of rainwater in Sinai as part of flash flood protection measures    Egypt, Namibia explore closer pharmaceutical cooperation    Fitch Ratings: ASEAN Islamic finance set to surpass $1t by 2026-end    Renowned Egyptian novelist Sonallah Ibrahim dies at 88    Egyptian, Ugandan Presidents open business forum to boost trade    Al-Sisi says any party thinking Egypt will neglect water rights is 'completely mistaken'    Egypt's Sisi warns against unilateral Nile measures, reaffirms Egypt's water security stance    Egypt's Sisi, Uganda's Museveni discuss boosting ties    Egypt, Huawei explore healthcare digital transformation cooperation    Egypt's Sisi, Sudan's Idris discuss strategic ties, stability    Egypt to inaugurate Grand Egyptian Museum on 1 November    Greco-Roman rock-cut tombs unearthed in Egypt's Aswan    Egypt reveals heritage e-training portal    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    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    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 Daily News Egypt on 25 - 02 - 2014

Reuters – 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 an army-backed 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% in 2014, well below an average of 4.9% between 2001 and 2010 – and below the roughly 5% 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% 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%, more in line with global standards, would yield a capital ratio below 6%, 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.


Clic here to read the story from its source.