Monday 16 March 2026 – 11:19 AM
Fitch confirmed that the banking sector in Egypt enjoys strong financial conditions that enable it to confront the repercussions of the war in Iran, despite the presence of some risks associated with exchange rate fluctuations and the exit of a portion of foreign capital.
The banking sector in Egypt
The agency explained in a report issued today, Monday, that capital ratios in banks may be exposed to some pressure in the event of a significant decline in the value of the Egyptian pound, but the sector enjoys good profitability and appropriate capital levels, in addition to strong liquidity reserves in foreign currencies, which enhances its ability to confront shocks compared to the conditions that followed the outbreak of the Russian-Ukrainian war in 2022.
The report indicated that foreign investors’ holdings of Egyptian treasury bills denominated in pounds are still high, reaching about $45 billion by the end of September 2025, or approximately $21 billion when excluding repurchase operations carried out by banks.
Since the outbreak of war in Iran late last February, investment portfolios in local treasury bills have recorded outflows exceeding $6 billion, which has increased pressure on the Egyptian currency, as the exchange rate reached about 52.4 pounds to the dollar on March 12, a decrease of approximately 9% compared to the end of 2025.
The agency confirmed that Egyptian banks currently have stronger liquidity reserves in foreign currencies compared to 2022, as the sector’s net foreign assets rose to about $14.5 billion by the end of January 2026, which is the highest level since 2012, which enhances the sector’s ability to absorb more portfolio investment exits.
The report also indicated that banks’ reliance on foreign financing remains limited and manageable, at less than 10% of total financing by the end of August 2025, with most of this financing being medium or long-term, which limits refinancing risks in the near term.
In the same context, Fitch indicated that the loan portfolios of Egyptian banks are still witnessing a noticeable degree of “dollarization,” as loans in foreign currencies represent about 33% of the sector’s total loans by the end of August 2025, which makes capital ratios more sensitive to the decline in the value of the pound.
According to the agency’s estimates, a 10% movement in the dollar exchange rate usually leads to a change ranging between 30 and 50 basis points in the core capital ratio of banks.
