Fitch Ratings has upgraded its outlook on four local banks — the National Bank of Egypt, Banque Misr, Banque du Caire, and CIB — taking their long-term debt outlook to positive from stable, while affirming their ratings at B-, according to a statement.

The why: Fitch pointed to greater FX liquidity from the Ras El Hekma agreement and IMF package. “Banks’ performance will remain strong in the medium term supported by high interest rates, stronger business growth and greater macroeconomic stability,” the statement said.

This mirrors Fitch’s decision earlier this month to upgrade Egypt’s sovereign outlook to positive from stable. The credit rating agency cited a reduction in near-term external financing risks on the back of an influx of foreign capital from the Ras El Hekma agreement, fresh funds from international financial institutions, non-resident holdings of domestic debt doubling since January to USD 35.3 bn in March, the float of the EGP, and interest rate hikes.

The four banks are exposed to Egypt’s sovereign debt through their holdings of government debt and their lending activities to public sector firms, which explains the correlation between the sovereign credit rating and that of the banks, the statement writes.

Remember: Fitch lowered the bank’s credit ratings to B- from B in November after downgrading the country’s credit rating.

Moody’s did it first: Moody’s in March upgraded five Egyptian banks’ credit rating outlook to positive from negative shortly after upgrading Egypt’s outlook to positive.

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