Moody’s Investors Service on Thursday downgraded Lebanon’s three largest banks by assets further into junk territory, reflecting the weakening creditworthiness of the Lebanese government as political unrest cripples the country.
The move follows the ratings agency on Tuesday lowering Lebanon’s issuer ratings to Caa2, citing the increased likelihood of a debt rescheduling it would classify as a default.
Moody’s said it was downgrading the local-currency deposit ratings of Bank Audi, Blom Bank and Byblos Bank to Caa2 from Caa1. It downgraded their foreign-currency deposit ratings to Caa3 from Caa1, citing constrained sovereign support for such deposits.
All the banks’ ratings remained under review for further downgrade.
“The Lebanese government’s weakening creditworthiness is adversely affecting the three banks’ own creditworthiness given their large exposure to the Lebanese sovereign, which is their main source of risk,” Moody’s said.
It also reflected strained systemic funding and liquidity conditions in light of the increased political uncertainty and deterioration in the operating environment for banks, it added.
Several weeks of protests have led to the resignation of Prime Minister Saad al-Hariri, stalling the chances of reforms to the 2020 budget and further draining Lebanon’s already depleted foreign exchange reserves.
Fitch Ratings last week downgraded Bank Audi and Byblos Bank to CCC-, the fourth-lowest possible rating.