BEIRUT: Fitch Ratings has downgraded both Audi and Byblos banks' Long-Term Issuer Default Rating (IDR) and Viability Rating (VR) to 'CCC' from 'B-'.
The downgrade follows Fitch's recent downgrade of the Lebanese sovereign to 'CCC' on August 23. Given Audi's significant credit exposure risk in Lebanon, estimated at 68 percent, its ratings are constrained at the current level by the sovereign rating.
Coupled with substantial exposure to Banque Du Liban, Audi also lacks domestic lending opportunities amid weak economic growth, Fitch noted.
"Fitch views the bank's capitalisation as weak in light of its substantial exposures to the Lebanese sovereign and BDL," the report said.
In regards to Byblos, Lebanon "represented about 85% of the bank's credit risk exposures as of 1H19."
It's not all bleak, however, with Fitch underscoring "Audi's resilient asset quality and deposit base despite some pricing pressures to retain deposits", mainly US dollars. It also took note of the bank's considerable market share, about 10% of domestic banking sector assets, as well as its international diversification and competent management.
Fitch also highlighted "Byblos's strong domestic franchise (as Lebanon's third-largest bank with a market share of 8.5% of domestic banking sector assets) and competent management."
Last month, Fitch downgraded Lebanon's sovereign from B- to CCC, highlighting the need for favorable conditions in order for Lebanon to make good on its debt obligations.
In an op-ed published last month, Annahar columnist Dan Azzi predicted a downgrade of Lebanon's banks, noting that it will translate into additional capital requirements and more stringent procedures for international transactions.
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