Bank of Alexandria – Ratings and Stable Outlook Affirmed

(MENAFN- Capital Intelligence Ltd) 11 June 2026

Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Bank of Alexandria S.A.E. (Alexbank or the Bank) at ‘B’ and ‘B’, respectively. At the same time, CI Ratings has Alexbank’s Bank Standalone Rating (BSR) of ‘b’, Core Financial Strength (CFS) rating of ‘bb+’ and Extraordinary Support Level (ESL) of High. The Outlook for the LT FCR and BSR remains Stable.

The Bank’s BSR of ‘b’ is derived from a CFS rating of ‘bb+’ and an Operating Environment Risk Anchor (OPERA) of ‘b’. The ESL of High is based on Intesa Sanpaolo (ISP) ownership. CI considers that the Italian parent has the capacity and willingness to provide extraordinary support to the Bank if needed. The LT FCR is, however, not notched up for this support, as the Bank does not meet our criteria for being rated above Egypt’s sovereign rating of ‘B’. Accordingly, both the LT FCR and BSR are constrained by the sovereign. The CFS is supported by the credit strengths of very good profitability metrics, sound capitalisation, a maintained asset quality profile, and comfortable liquidity. The latter reflects a large base of retail deposits and the sizeable portfolio of government securities (albeit that the latter also raises concentration risks).

The main rating constraints are linked to a still challenging operating environment, exacerbated by heightened geopolitical risk. Egypt’s OPERA reflects a still challenging economic situation, given high (but now declining) inflation; large socio-economic vulnerabilities; and, most recently, the adverse macroeconomic impacts on Egypt of the US/Israel armed conflict with Iran. Credit challenges, in part, stem from significantly higher geopolitical risks since February 2026, which in turn have led to accentuated governmental external liquidity risks. Although Egyptian banks have seen rising net interest margins (NIMs), their customers were negatively impacted by high inflation rates and consequent very high policy interest rates applied to combat this.

Loan growth and asset quality metrics appear to confirm that management continues to follow a conservative approach to lending. However, publicly available financial statements lack disclosure on possible concentrations in both loans and deposits. Credit loss absorption capacity continues to be satisfactory, underpinned by good capital buffers (and the implied ability to turn to the parent for support in case of need) and more than full loan-loss reserve coverage – albeit reduced by 57% compared to 2024 due to a shift in provisioning strategy moving from a large annual charge to a net release of provisions in 2025. Stage 2 loans remain at a somewhat elevated proportion of gross loans at 11.5%, indicating ongoing stress in the credit portfolio. The significant holdings of government securities are (as with all Egyptian banks) a source of some concern in terms of concentration risk – although at a level equivalent to 214.7% of equity, the ratio is lower than at many of its peers.

The Bank’s funding profile remains a key credit strength due to the predominance of EGP retail funds and a shift toward CASA deposits. Customer deposit gathering capability remains good, supported by the Bank’s relatively large branch network. Alexbank has virtually no reliance on wholesale funding, with its wholesale funding ratio falling to just 0.7%. Moreover, in case of need, CI expects that the Bank would be able to access liquidity support from ISP. Liquidity metrics remain good, reflecting its significant holdings of government securities and balances with the Central Bank of Egypt (CBE). Earlier systemic liquidity risks seen in Egypt (as recently as in 2023-24) related mainly to foreign currency funding, although the Alexbank business model has little reliance on FX in either assets or liabilities. Egyptian government securities denominated in EGP are readily tradeable and repo-able.

CI considers capitalisation to be a rating support factor in terms of capital adequacy metrics, although this is tempered by the high level of securities exposure to the ‘B’ rated sovereign. While the high total CAR owes a great deal to the zero risk-weighted asset weighting of the Egyptian government securities, the balance sheet and Basel III leverage ratios are still good – as is the quality of capital. The rate of internal capital generation is high, while the presence of a large and financially strong foreign parent should mean additional ordinary capital support would also be forthcoming if required.

Earnings and profitability remain another area of credit strength; profitability metrics reached new highs in 2025, supported by high interest rates and a net release of credit provisions. Earnings quality is also seen as being good, dominated by net interest income (NII). Strong operating profitability allows Alexbank to set aside larger provisions, should these be needed in the future. Efficiency improved further, with the cost-to-income ratio dropping to 22.5%, one of the strongest among Egyptian peers. Given the solid retail deposit base, the outlook for the NIM for 2026 remains positive, despite a likely downward trend in CBE policy rates, once geopolitical tensions ease. As operating income is very largely based on NII, a still-strong NIM and a low cost of credit would translate into another strong ROAA performance this year.

Rating Outlook

The Stable Outlook reflects our expectation that the ratings are likely to remain unchanged over the next 12 months.

Rating Dynamics: Upside Scenario

The most likely upside scenario would be for the revision of the Outlook on the LT FCR and BSR to Positive. This would, however, require a similar upward revision to the outlook for the sovereign rating. While not our current base case scenario, this is nonetheless seen as being a medium-term possibility, especially if the US-Israel conflict with Iran can be resolved.

Rating Dynamics: Downside Scenario

The most likely downside scenario would be a lowering of the Outlook on the LT FCR and BSR to Negative. Given Alexbank’s generally satisfactory risk profile, the most likely reason for such a move would be a similar move in the outlook for the sovereign rating. Unless the conflict intensifies, however, this is still seen as being unlikely given the continuing external support that Egypt is receiving from the IMF, the EU and from GCC countries – the latter in the form of foreign direct investment.

Contact

Primary Analyst: Rory Keelan, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Morris Helal, Senior Credit Analyst
Committee Chairperson: Morris Helal, Senior Credit Analyst


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