The Banking Executive Magazine - July 2022 Issue

National Bank of Egypt Fitch Ratings has affirmed National Bank of Egypt's (S.A.E.) (NBE) Long- Term (LT) Issuer Default Rating (IDR) at 'B+' with a Stable Outlook, and its Viability Rating (VR) at 'b+'. A full list of ratings is provided below. Fitch has withdrawn NBE's Support Rating and Support Rating Floor as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rat- ing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 NBE's IDRs are driven by the stand- alone strength of the bank as ex- pressed in its 'b+' VR. The VR reflects the strong correlation between NBE's credit profile and that of the sovereign (B+/Stable) given the bank's sizeable holdings of Egyptian government debt (37% of total assets at end-September 2021) and signifi- cant lending to public-sector compa- nies (around 31%). The VR also factors in weak core capital adequacy and volatile prof- itability through the cycle. Rating strengths are the bank's solid fran- chise, strong funding as well as healthy asset-quality metrics. The 'b+' VR is above the 'b' implied VR due to positive influence from its business profile. Dominant Domestic Franchise: NBE is Egypt's largest bank with 35% and 37% of system's assets and deposits respectively, at end-September 2021. The bank has a large footprint with 576 branches at end-September 2021 and 17 million customers. High Credit Concentration: NBE ex- hibits high credit concentration with the bank's largest exposure (to a pub- lic sector entity guaranteed by the government) accounting for 3.6x the bank's common equity Tier 1 (CET1) at end-September 2021. Lending to the government and public-sector entities were more than 60% of gross loans at end-9M21, supporting asset- quality metrics through economic cycles. Healthy Asset-Quality Metrics: NBE's Stage 3 loans ratio (excluding interest the BANKING EXECUTIVE 26 ISSUE 163 JULY 2022 Fitch Affirms National Bank of Egypt at 'B+'; Outlook Stable