On the national scale, ratings have been reaffirmed at-(eg)/2(eg)(Single Minus / Two).
Outlook on the assigned ratings is Stable. The fiduciary score has been assessed in the range of ’66-70’,reflecting adequate fiduciary standards wherein rights of various stakeholders are adequately protected.
ABBE operates as a mid-sized player in a highly concentrated and competitive Egyptian banking sector.
Owned in majority by the l Baraka Banking Group ( BG), BBE benefits from the group’s presence in diverse operating regions, the resulting business synergies, and the parent bank’s strong franchise. Egypt’s economy has posted improving indicators in terms of growth and foreign investment.
However, the country’s economic development continues to be hampered by adverse security situation and geopolitical issues. Moreover, the continued depreciation of Egyptian pound in recent periods and foreign exchange shortages, in view of continuously falling exports, pose additional issues for the economy.
Thus far, the banking sector has remained relatively resilient in the face of economic pressures; however financial and operational challenges for the sector are expected to gradually increase in the medium term, with implications on the banking sector’s international ratings.
BBE’s asset growth exceeded the industry aggregate in 2015 and was almost entirely supported by the increase in deposits, reflecting an industry-wide drive to compete for, and attract deposits. Much of this new growth was deployed in increased government debt instruments. Given the high returns offered on these instruments, the bank’s earnings increased during 2015. The bank’s business base features concentration both on the asset and liabilities side. However, regulations by the Central Bank of Egypt (CBE) and the bank’s increasing orientation towards the retail segment may alter the composition of the bank’s portfolio over the long-term. BBE’s sound profitability and liquidity indicators lend support to the assigned ratings. Asset quality indicators, though slightly affected due to difficult regional environment, are considered to be satisfactory. Capitalization level is above the minimum regulatory requirement, however requires external reinforcement to support BBE’s competitive position in the industry, given its growth objectives.
Corporate governance framework at the bank benefits from the new regulations introduced by CBE regarding the implementation of recent Basel Committee Guidance with regards to banks’ capital, corporate governance practices, risk management systems and internal control procedures. The bank maintains significant reliance on government debt instruments for liquidity management in the absence of a well-developed domestic Sukuk market.