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Fitch affirms Croatia's ZABA at BBB-, outlook stable

Author Annie Tsoneva
Fitch affirms Croatia's ZABA at BBB-, outlook stable A ZABA office in Zagreb. Author: Djordje Daskalovic. License: All rights reserved.

ZAGREB (Croatia), December 6 (SeeNews) - International ratings agency Fitch said it has affirmed the long-term foreign-currency issuer default rating of Croatia's top lender, Zagrebacka Banka [ZSE:ZABA], at BBB-, with a stable outlook.

“Fitch has withdrawn ZABA's support rating as it is no longer relevant to the agency's coverage following the publication of its updated bank rating criteria on 12 November 2021,” Fitch said in a statement last week. In line with the updated criteria, Fitch has assigned ZABA a shareholder support rating of 'bbb-'.

Fitch said ZABA's current long-term foreign-currency issuer default rating and shareholder support rating reflect Fitch's view of a high probability of support from its parent, Italian banking group UniCredit.

Moreover, the rating agency believes the impact of the pandemic on Croatian banks' credit profiles has been broadly contained and it expects any materialisation of residual risks to be manageable for banks. The asset quality pressures are mitigated by the country's sound economic growth prospects, and a solid 2021 tourism season compared with pandemic-hit 2020.

Fitch forecasts Croatia's real GDP to increase by 8.9% this year and 4.4% in 2022. Last year, Croatia's economy contracted by 8.4%.

ZABA's loan book quality deteriorated only marginally over 2020 and improved to close to the pre-pandemic level at the end of the first half of this year, Fitch said, adding that specific coverage of non-performing loans by loan loss allowances remained strong. Therefore, it scored the bank' asset quality at 'bb', above the implied score of 'b & below'.

Fitch also said they expect further recoveries in the second half of this year and a pickup in lending growth in 2022, both of which should offset potential asset quality pressures stemming from the delayed impact of the pandemic in 2020 and in the first half of 2021. Downside risk could come from renewed pandemic-related challenges and the potential adverse effects of higher energy costs and supply chain disruption on the corporate sector, but overall the impaired loans ratio should gradually improve.

ZABA's shares last traded on the Zagreb bourse on Friday, when they closed at 62 kuna ($9.3/8.2 euro), up 0.32%.

(1 euro=7.527 Croatian kuna)

Zagrebacka Banka d.d. is among the biggest banks in SEE, for more reference take a look at Top 100 banks