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Fitch affirms long-term IDR of Bulgaria's Fibank at 'B', withdraws ratings

Author Mario Tanev
Fitch affirms long-term IDR of Bulgaria's Fibank at 'B', withdraws ratings Author: First Investment Bank Licence: All Rights Reserved

SOFIA (Bulgaria), August 19 (SeeNews) - Fitch Ratings said that it has affirmed the long-term issuer default rating (IDR) of Bulgaria's First Investment Bank (Fibank) [BUL:5F4] at 'B' with stable outlook, and subsequently withdrew the ratings for commercial reasons.

Fibank's IDRs are driven by its standalone financial strength, as expressed by its viability rating, while the stable outlook reflects the ratings agency's opinion that risks related to Fibank's intrinsic creditworthiness are broadly balanced, Fitch said in a statement last week.

Fitch also said in its statement:

"The VR primarily reflects FIBank's weak asset quality and capitalisation. This is illustrated by a high ratio of impaired loans and non-income-generating repossessed assets, high capital encumbrance by unreserved problem assets and significant single-name concentration in the loan book. The VR also reflects FIBank's reduced credit risk appetite, reasonable strategy for 2017-2021, stable recent profitability and comfortable liquidity position, underpinned by stable funding in the form of granular retail savings accounts. However, these factors have lower influence on the VR than the bank's weak asset quality and capitalisation.

On 26 July 2019, the ECB announced the results of its asset quality review (AQR) and stress test of six Bulgarian banks, including FIBank. In our view these results are broadly neutral for our assessment of the bank's overall credit risk profile, although the AQR revealed that FIBank's asset quality is weaker than we previously assessed. FIBank's post-AQR common equity Tier 1 capital ratio shrank to 4.5% from 15.7% at end-2018 due to a material increase in non-performing exposures and loan loss allowances. The AQR's adjustments are roughly in line with our previous assessment that FIBank's asset quality and capitalisation are key rating weaknesses.

FIBank may reflect some selected AQR adjustments in its financial accounts, which would likely materially inflate its stock of Stage 3 loans, but the impact on capitalisation should be moderate. In 1H19, FIBank had already covered half of the EUR260 million capital shortfall identified in the adverse stress scenario. The remainder will be covered through de-risking in the corporate book, profit retention and other measures.

FIBank's Support Rating Floor (SRF) of 'No Floor' and the Support Rating (SR) of '5' express Fitch's opinion that although potential sovereign support for the bank is possible, it cannot be relied upon. This is underpinned by the EU's Bank Recovery and Resolution Directive, transposed into Bulgarian legislation, which requires senior creditors to participate in losses, if necessary, instead of or ahead of a bank receiving sovereign support.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on our ESG Relevance Scores, visit

Not applicable as the ratings have been withdrawn. 

The following ratings have been affirmed and withdrawn:

Long-Term IDR: 'B'; Outlook Stable
Short-Term IDR: 'B'
Support Rating: '5'
Support Rating Floor: 'No Floor'
Viability Rating: 'b'"