Back to the complete issue
Wednesday, 5 April 2017

Some banks at risk of not meeting minimum regulatory capital requirements -Fitch

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.”

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.