Fitch is worried about Egyptian banks’ capitalization: Some Egyptian banks will struggle to meet minimum regulatory capital requirements following the EGP float given their high exposure to foreign currency loans, Fitch Ratings says. It also believes that the EGP devaluation will result in a “modest deterioration” in asset quality, with debt restructuring of loans for smaller corporates already taking place. Fitch expects that, in the event of capital shortfalls at public-sector banks, the Egyptian authorities “would look to provide support,” possibly through subordinated debt. “However, the government’s ability to support banks is severely constrained by its weak credit profile and financial flexibility… We expect private-sector banks would cut dividends to bolster capital if needed.” Overall, Fitch believes “the floating of the pound will increase the flow of foreign direct investments and help to ease the FC shortage in the Egyptian banking system. However, the sector’s FC loans/deposits ratio is weak, in our opinion, given the operating environment, with a worsening trend in recent years.”