Fitch upgrades credit rating of four local banks: Credit rating agency Fitch Ratings has upgraded the credit ratings of four major Egyptian banks. The agency upgraded the ratings of the National Bank of Egypt, Banque Misr, CIB, and Banque du Caire to B from B- with a stable outlook, reflecting “the strong correlation of the banks’ creditworthiness with that of the Egyptian sovereign,” it said in a statement. Fitch also upgraded the local banks’ operating environment and funding and liquidity scores to B with a stable outlook.

Driving the upgrade: Fitch cited improved FX liquidity and a significant jump in net foreign assets — net foreign asset deficit in commercial banks has been improving since the Ras El Hekma agreement and the reforms that followed were announced to sit at USD 132 mn at the end of September from around USD 17.6 bn at the end of January.

The banks’ net foreign asset positions are expected to improve further: “We expect the banking sector to report a slight net positive foreign assets position in 2025 and 2026, supported by positive net inflows from foreign portfolio investors, a lower current account deficit and international financial institutions financings on the back of a more flexible foreign exchange rate regime,” the credit rating agency said.

The move comes just after Fitch upgraded Egypt’s sovereign credit rating: Fitch upgraded Egypt’s sovereign credit rating from B- to B with a stable outlook at the start of the month for the first time since 2019 on the back of FX inflows from the USD 35 bn Ras El Hekma agreement, our expanded USD 8 bn IMF program, and the EU’s EUR 7.4 bn aid package, alongside greater confidence in the durability of our structural reforms.

Looking ahead: The agency expects a “sharp improvement in profitability in 2024, supported by higher yields on sovereign securities, revaluation gains and stronger client activity before it starts normalizing towards historical averages in 2025 as a result of reducing rates.”

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