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Rating Action Commentary

ֳ Affirms Egypt's National Societe Generale Bank SAE at Support '3'

Tue 01 Dec, 2009 - 4:55 AM ET

ֳ-London-30 November 2009: ֳ has today affirmed Egypt-based National Societe Generale Bank SAE's (NSGB) Support rating at '3'.

As ֳ has not conducted a full review of NSGB, only a Support Rating has been assigned. The rating reflects the moderate probability of support from its major shareholder, Societe Generale (SG; rated 'A+'/Stable outlook). The Support Rating is based on ֳ's belief that SG would have a strong propensity and ability to support NSGB in case of need but the rating is constrained by the potential transfer risks of Egypt (Long term foreign currency IDR of 'BB+'/Stable outlook).

NSGB's activities have been largely corporate, though, like many banks in Egypt, it is now expanding its retail operations. Operating profit was virtually flat yoy at end-9M09 although 9M08 profit benefited from a relatively substantial release of provisions which distorts the comparison. Interest income, the main revenue driver, increased by 18% yoy in 9M09 with a higher yield on treasury bills and wider loan margins more than compensating for the impact of low USD rates on the bank's USD placements. Fee income held up relatively well, but net profit was down 4.5% mainly on a higher tax bill as the tax-exemption on government debt was removed.

Asset quality continued to improve with the non-performing loan (NPL) ratio reaching 6.8% from 7% at end-2008 and 11.3% at end-2007. Most NPLs consist of legacy loans from NSGB's merger with another local bank (Misr International Bank) in 2006, and are being gradually recovered or written off. Coverage was satisfactory at 108% at end-9M09.

NSGB is one of Egypt's largest private sector banks with market shares of roughly 6% each of loans and deposits. It provides commercial, retail and investment banking services and has one of the most extensive branch networks among private sector banks. SG has been its majority owner since 1996 and currently holds a 77.2% stake.

Contacts: Laila Sadek, +44 20 7682 7373, Kamal Raja, London, Tel: +44 20 7417 6253.

Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.

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