Fitch Ratings further downgraded on Wednesday one of Lebanon's largest lenders, Byblos Bank, due to its substantial exposure to the country’s central bank.
Byblos Bank’s long-term issuer default rating (IDR) has been downgraded to “CCC-” from “CCC” and viability rating (VR) to “CCC-” from “CCC.”
Fitch has also placed Byblos on a ratings negative watch (RNW).
A “CCC” rating by Fitch is considered junk status, which represents an extremely high risk of default.
“The downgrade and the RWN reflect heightened liquidity risks Byblos and other Lebanese banks are facing in view of increasing political tensions and social unrest in Lebanon,” Fitch said in a statement on Tuesday.
“These events have caused a closure of domestic banks for operations since 18 October 2019. In our view deposit stability is now at greater risk as depositor confidence has also suffered,” the agency added.
Fitch added that this downgrade also comes at a time of heightened liquidity risks, particularly in foreign currency.
“This makes Byblos’s liquidity position particularly vulnerable to unexpected deposits outflows,” Fitch added.
The ratings agency also downgraded Audi Bank (AUD) to CCC on placed the bank on rating watch negative (RWN).
“The downgrade and the RWN reflect heightened liquidity risks AUD and other Lebanese banks are facing in view of increasing political tensions and social unrest in Lebanon,” the agency said.
Deposit stability is at a greater risk as depositor confidence has also suffered, Fitch added.
Although authorities are expected to support AUD of needed, Fitch noted that the ability of Lebanese authorities to support the bank may be limited, given the country’s low sovereign rating.
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