Capital Intelligence (CI), the international credit rating agency, announced that it has affirmed Commercial International Bank (CIB)’s Long and Short-Term Foreign Currency Ratings (FCR) at ‘BB+’ and ‘B’, respectively.
These ratings are placed at the same level as CI’s sovereign ratings for Egypt. CIB’s overall financial condition remains very strong. Non-performing loans and loss coverage are at a very good level and the Bank’s risk absorption capacity strong enough, if necessary, to comfortably absorb higher risk charges.
In common with other Egyptian banks, liquidity is consistently high and likely to continue benefitting from a good rate of increased customer deposits in the current year. Despite higher risks in the current operating environment, the Bank’s capital buffers remain more than adequate, supported by high internal capital generation. Accordingly, Capital Intelligence (CI) affirms CIB’s Financial Strength Rating (FSR) at ‘A’.
The current, major constraining factors affecting the ratings are indeed the sovereign risks related to a balance of payments and/or currency crisis. Although both are mitigated by the Bank’s good liquidity and Support Rating of ‘3’ (affirmed) – which reflects a high likelihood of support from the Central Bank of Egypt in case of need – these risks would still be heightened in the event of an extreme political setback. As is the case with other banks in Egypt, the Outlook for CIB’s ratings remains ‘Negative’, reflecting the Outlook for Egypt’s sovereign rating. A downgrade of the sovereign ratings would immediately result in a lowering of the Bank’s FSR and FCR.
CIB’s demonstrated track record and effective risk management bode well in the face of a difficult economic environment. The Bank has a commanding position in the Egyptian market as one of the largest and successful private sector banks. Its well-entrenched corporate banking franchise, as well as a strong consumer banking operation, has brought diversification to risk assets and earnings. Whereas the strong franchise remains a key strength in the current business environment, CIB’s strong credit metrics may come under some pressure in the context of heightened credit risk in the corporate and retail sectors. There are a few signs of credit stress, as evidenced by the continued rise in renegotiated loans with customers. Borrower concentration risks also remain moderately high.
CIB is the country’s second largest listed company and the most actively traded blue chip stock on the Egypt Exchange. As the biggest private sector bank in Egypt, CIB holds 8.77% and 7.23% market shares of loans and deposits as at December 2011. The Bank was primarily a corporate bank at inception but as the Egyptian banking market has developed, has gradually transformed its business model by growing its retail business. CIB has played a key role in fostering that development by expanding its branch network and product offerings to households. Apart from a representative office in Dubai, CIB’s balance sheet is overwhelmingly domestic in nature. As at end 2011, the Bank’s total assets were LE85.5bn ($14.18bn) and total capital was LE8.8bn ($1.45bn).
Ameinfo
