CIB downgraded on Foreign Currency Rating

Capital Intelligence (CI), the international credit rating agency, has lowered Commercial International Bank (CIB)'s Long-Term Foreign Currency Rating (FCR) to 'B-' and affirmed the Short-Term FCR at 'B' following the recent downgrade of Egypt's Sovereign Long-Term FCR to 'B-' from 'B', on 'Negative' Outlook.

The ratings, which are set at the same level as CI's sovereign ratings for Egypt, denote significant credit risk, as CIB's capacity for timely fulfillment of financial obligations is very vulnerable to adverse changes in the operating environment and economy.

The Bank's Financial Strength Rating (FSR) is affirmed at 'BBB-', supported by still sound loan asset quality (despite further growth in non-performing loans (NPLs) in Q1 2013), strong profitability at both operating and net levels, high liquidity and good capital adequacy.

Although the Bank has maintained sound credit metrics, these are outweighed by heightened sovereign risk factors related to a balance of payments and/or currency crisis and ongoing political instability.

Accordingly, the Outlook for CIB's FSR remains 'Negative', as is the case with other Egyptian banks. The Bank's ratings remain highly correlated with Egypt's sovereign creditworthiness. A downgrade of Egypt's Sovereign Ratings would be followed by a lowering of CIB's FCR and FSR. The Support Level of '3' (affirmed) denotes a high likelihood of support from Central Bank of Egypt, in case of need.

Notwithstanding the recently announced financial support for Egypt from Gulf Cooperation Council (GCC) countries, following the toppling of the Islamist government by the military, the political landscape is likely to worsen in the near term and push up the cost of risk for banks as the economy comes under ever increasing pressure.