March 22 (SeeNews) - Global rating agency Fitch said it has downgraded the support-driven Issuer Default Ratings (IDR) of Croatia's Zagrebacka Banka (ZABA) and Romania's UniCredit Tiriac Bank (UCTB) to 'BBB' from 'BBB+', with negative outlook.
The change follows the downgrade of the banks' parent UniCredit (UC) to 'BBB+' with negative outlook, Fitch said in a statement on Wednesday.
The agency reviewed the ratings of Russia's ZAO UniCredit Bank, downgrading it to BBB from BBB+, and affirmed the Long-term Issuer Default Ratings (IDR) of Polish subsidiaries Bank Pekao and Pekao Bank Hipoteczny's at 'A-' with stable outlooks.
The agency also said in the statement:
"ZABA, UCTB and ZAO UniCredit Banks' Long- and Short-term IDRs and Support Ratings are based on potential support available from their ultimate parent, UC. The affirmation of their Support Ratings at '2' reflects Fitch's view that UC will continue to have a strong propensity to support these banks given the strategic importance of the Central and Eastern Europe (CEE) region and Russia for UC.
The downgrades of their IDRs reflect Fitch's view of UC's weakened ability to provide support. The Negative Outlook on their Long-term IDRs mirrors that on UC.
The banks' Viability Ratings (VR) are not affected by these rating actions.
RATING DRIVERS: Pekao
Pekao's Long- and Short-term IDRs are based on its intrinsic strength, reflected in its VR of 'a-' (for more details see 'Fitch Affirms Bank Pekao SA and Pekao Bank Hipoteczny' dated 30 January on www.fitchratings.com). The affirmation of Pekao's 'A-' Long-term IDR with a Stable Outlook reflects Fitch's view that there is only moderate contagion risk for Pekao from negative developments at UC, and a further one-notch downgrade of UC would be unlikely to result in a change in Pekao's ratings.
The affirmation of Pekao's '2' Support Rating reflects Fitch's view that UC will continue to have a high propensity to provide support to Pekao, given the strategic importance of Polish banking operations to UC. However, at the current rating levels, Pekao's IDRs do not benefit from support available from UC.
RATING SENSITIVITIES: ZABA, UCTB and ZAO UniCredit Bank IDRs and Support Ratings
Fitch views these subsidiaries as strategically important for UC and notches their Long-term IDRs once down from UC's Long-term IDR. Therefore, any further downgrade of UC's Long-term IDR would be likely to result in a downgrade of these bank's Long-term IDRs and ZAO UniCredit's National Rating. Any further downside risk for ZAO UniCredit's Long-term IDR would likely be limited to one notch,, given its 'bbb-' VR.
At present these subsidiaries' IDRs and Support Ratings do not incorporate any potential support coming directly from their direct owner UniCredit Bank Austria AG (UCBA, 'A'/Stable/'bbb+'). This reflects Fitch's view that the Austrian authorities would probably look to UC to provide support to the CEE subsidiaries before allowing any Austrian sovereign support to flow through to these entities. It also considers the risk that any further negative developments at UC could ultimately also result in deterioration of UCBA's stand-alone credit profile, weakening its ability to provide support to the CEE subsidiaries.
ZABA, UCTB and ZAO UniCredit Bank's ratings could stabilise at their current levels if the Outlook on UC also reverts to Stable.
RATING SENSTIVITIES - Pekao, IDRs, VR
Pekao's ratings would be unlikely to be impacted by a possible further one-notch downgrade of UC's Long-term IDR, given the agency's view of only moderate contagion risk for Pekao from negative developments at UC. However, Pekao's ratings could come under negative pressure if there was a multi-notch downgrade of UC, which Fitch does not anticipate at present.
An upgrade of Pekao's VR and IDRs is unlikely in the short to medium term, given the weakening operating environment and pressure on UC's credit profile. Pekao's VR is currently not constrained by the sovereign rating, so positive rating action on Poland's sovereign ratings would not result in an upgrade of Pekao's ratings.
Pekao could be downgraded if there was further escalation of the eurozone crisis, which could result in increased impairment charges due to a less supportive local operating environment.
RATING SENSTIVITIES - Pekao's SUPPORT RATING
In Fitch's view, UC's propensity to support Pekao will remain strong. However, Pekao's Support Rating could be downgraded if UC's Long-term IDR was downgraded to 'BBB-' or below. Any downgrade of the Support Rating would likely be limited to one notch given the systemic importance of the bank for the Polish banking sector and the potential for support, if needed, from the Polish authorities.
RATING ACTION RATIONALE, DRIVERS AND SENSITIVITIES: Pekao BH
The affirmation of Pekao BH's ratings reflects Fitch's view that it is a core subsidiary for Pekao, as a result of which Pekao BH's IDRs are equalised with those of its parent and have the same Stable Outlook. Pekao BH IDRs will likely move in tandem with those of Pekao.
The rating actions are:
ZABA
Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+', Outlook Negative
Short-term foreign currency IDR: downgraded to 'F3' from 'F2'
Viability Rating: 'bb+', not affected
Support Rating: affirmed at '2'
UCTB
Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+', Outlook Negative
Short-term foreign currency IDR: downgraded to 'F3' from 'F2'
Viability Rating: 'bb-', not affected
Support Rating: affirmed at '2'
ZAO UniCredit Bank
Long-term foreign and local currency IDRs: downgraded to 'BBB' from 'BBB+'; Outlook Negative
Short-term foreign and local currency IDRs: downgraded to 'F3' from 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook revised to Negative
Support Rating: affirmed at '2'
Viability Rating: 'bbb-', not affected
Bank Pekao
Long-term foreign currency IDR: affirmed at 'A-', Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Viability Rating: affirmed at 'a-'
Support Rating: affirmed at '2'
Pekao BH
Long-term foreign currency IDR: affirmed at 'A-', Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Support Rating: affirmed at '1'
National Long-term rating: affirmed at 'AA(pol)', Outlook Stable
National Short-term rating: affirmed at 'F1+(pol)'"