CI revises outlook on Fransabankâ€™s from negative to stable
Capital Intelligence Ratings (CI), has revised the outlook on the long-term foreign currency rating (FCR) of Fransabank to stable from negative. At the same time, the long- and short-term FCRs have both been affirmed at ‘B’ and remain constrained by the Sovereign Ratings.
According to a statement by CI, the rating action follows the revision of the outlook on Lebanon’s sovereign long-term FCR of ‘B’ to stable from negative on 7 April 2017. The rating action reflects: a) the stabilisation of domestic political risk factors following the election of a president and the subsequent formation of a new government following two years of political standoff; b) easing tensions with Saudi Arabia and other key members of the GCC, which is likely to boost key sectors of the Lebanese economy, namely tourism and real estate; c) improvements in the policymaking environment, with parliament recently passing the annual draft budget law for the first time in a decade; d) the stable buffer of foreign exchange reserves, which provide adequate coverage of the country's external debt.
The bank’s FCRs are highly correlated with the sovereign’s creditworthiness. Any improvement or deterioration in Lebanon’s creditworthiness would have a corresponding effect on the Bank’s FCRs. The Bank’s Support Rating is affirmed at ‘3’, which implies a high likelihood of support given Banque du Liban’s record of assisting banks.
At the same time, the agency announced that the financial strength rating (FSR) of Fransabank is affirmed at ‘BB+’, with the outlook also revised to stable from negative, to reflect the improved outlook on the sovereign risk profile. The FSR of Fransabank and all other Lebanese banks is currently under annual review.