The Banking Executive Magazine - July 2022 Issue

Banque du Caire Fitch Ratings has affirmed Banque du Caire S.A.E. (BDC)'s Long-Term Is- suer Default Rating (IDR) at 'B+' with a Stable Rating Outlook, Viability Rating (VR) at 'b+' and National Long-Term Rating at 'AA(egy)'/Stable. A full list of ratings is below. Fitch has withdrawn BDC's Support Rating and Support Rating Floor as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rat- ing Criteria on 12 November 2021. In line with the updated criteria, we have assigned a Government Sup- port Rating (GSR) of 'b'. KEY RATING DRIVERS BDC's IDRs are driven by its stand- alone creditworthiness, as expressed by its VR. The bank's VR reflects the correlation between its credit profile and that of the sovereign given its sizeable holdings of government debt (33% of total assets at end- March 2022) and lending to public- sector companies (4% of total assets), together equivalent to 7.4x the bank's common equity Tier 1 (CET1) capital. The VR also reflects BDC's strong re- tail franchise, sound asset quality, good profitability, stable funding and sound liquidity. It also reflects below average core capital ratios. Strong Retail Franchise: BDC is the fifth-largest bank in Egypt by total assets with a 3% market share in loans and deposits at end- 2021. The bank has the third-largest customer base with more than three million customers, supported by wide branch network. With focus on retail, BDC had bigger 7% market share in retail lending at end-2021. High Concentration and Market Risks: Loan book concentration by names is high (the 20 largest funded and un- funded exposures represented 2.1x of CET1 capital). In the rising interest rates environment, the bank is ex- posed to market risk through a large negative interest re-pricing gap in the 1-3 years maturity bucket (EGP15.4 billion at end-1Q22), resulting in pressure on cost of funding and net interest margins (NIMs). Sound Asset-Quality: The bank's problem loans ratios were stable in 1Q22 with Stage 3 the BANKING EXECUTIVE 24 ISSUE 163 JULY 2022 Fitch Affirms BANQUE DU CAIRE AT 'B+'; OUTLOOK STABLE