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IIRA reaffirms Al Baraka Bank Egypt ratings

Bahrain Business
Wed, 21 Sep 2016

Manama: Islamic International Rating Agency (IIRA) has reaffirmed the international scale ratings of Al Baraka Bank Egypt at ‘B-/B’. 

On the national scale, ratings have been reaffirmed at ‘A-/A2’. Outlook on the assigned ratings is stable. The fiduciary score has been assessed in the range of ’66-70’, reflecting adequate fiduciary standards wherein rights of various stakeholders are adequately protected, the bank said.

The bank operates as a mid-sized player in a highly concentrated and competitive Egyptian banking sector. 

Owned in majority by the Al Baraka Banking Group, Al Baraka Bank Egypt benefits from the group’s presence in diverse operating regions, the resulting business synergies, and the parent bank’s strong franchise.

Though Egypt’s banking sector has remained relatively resilient in the face of economic pressures, financial and operational challenges for the sector are expected to gradually increase in the medium term, with implications on the banking sector’s international ratings.

The bank’s asset growth exceeded the industry aggregate in 2015 and was almost entirely supported by the increase in deposits, reflecting an industry-wide drive to compete for, and attract deposits. Much of this new growth was deployed in increased government debt instruments. 

Given the high returns offered on these instruments, the bank’s earnings increased during 2015. Its business base features concentration both on the asset and liabilities side. 

However, regulations by the Central Bank of Egypt (CBE) and the bank’s increasing orientation towards the retail segment may alter the composition of the bank’s portfolio over the long-term. 

Its sound profitability and liquidity indicators lend support to the assigned ratings. Asset quality indicators, though slightly affected due to difficult regional environment, are considered to be satisfactory, it said. 

Capitalisation level is above the minimum regulatory requirement, but requires external reinforcement to support the bank’s competitive position in the industry, given its growth objectives.

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