SOFIA (Bulgaria), September 14 (SeeNews) – Fitch Ratings said on Wednesday it affirmed Bulgaria’s UniCredit Bulbank support rating at ‘2’.
“The rating reflects the high probability of support, should it ever be required, from UCB's ultimate shareholder Unicredit S.p.A (UC, rated 'A'/Stable/'F1'),” Fitch said in a press release.
Following is Fitch's full statement:
“Fitch Ratings has affirmed Bulgaria-based UniCredit Bulbank AD's (UCB) Support Rating at '2'.
The rating reflects the high probability of support, should it ever be required, from UCB's ultimate shareholder Unicredit S.p.A (UC, rated 'A'/Stable/'F1'). UC indirectly owns 92% in UCB through Unicredit Bank Austria AG ('A'/Stable/'F1'), the holding company for most of UC group's Central and Eastern European (CEE) assets.
The potential for UCB to receive and utilise support is constrained by transfer and convertibility risks, as reflected in Bulgaria's Country Ceiling of 'BBB+'. A change in the Country Ceiling could affect UCB's Support Rating. Any deterioration in UC's ability and/or willingness to support UCB could also trigger a downgrade.
UCB is the largest bank in Bulgaria in terms of total assets, total loans and total deposits, and has a solid domestic franchise. Its performance improved in H111, with its net interest margin increasing to 4.4% as it reduced funding costs by ceasing to compete on price for customer deposits. Cost efficiency is sound and loan impairment charges seem to have peaked in 2010. Fitch expects profitability to improve in the rest of 2011 and 2012 as the Bulgarian economy has returned to growth.
UCB's non-performing loans (NPLs; 90-plus days overdue) reached a high 12.1% at end-H111 but is slightly below the banking sector average of 13.5%. Fitch expects NPLs to keep increasing, albeit less quickly, and to peak in H211. Customer deposits, mainly corporate deposits, are UCB's main source of funding, although borrowings from the parent also comprise 25% of non-equity funding. The bank's capital ratios are comfortable, with a Tier 1 and Fitch core capital ratio of 16.56% and 19.64%, respectively, at end-H111.”
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