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Fitch rates Banca Comerciala Romana's senior notes at 'BBB+'

Fitch rates Banca Comerciala Romana's senior notes at 'BBB+' Author: BCR, Licence: All Rights Reserved

BUCHAREST (Romania), December 13 (SeeNews) - Fitch Ratings on Friday assigned Romanian lender Banca Comerciala Romana (BCR) senior unsecured notes worth 600 million lei ($140 million/125.5 million euro) a final 'BBB+' long-term rating. 

The rating is in line with the expected rating assigned on 19 November 2019, Fitch said in a press release.

The notes are rated in line with BCR's Long-Term Issuer Default Rating (IDR) because they constitute direct, unsecured and senior obligations of the bank.

Fitch Ratings also said in the statement:

"We expect that, subject to the transposition of EU Directive 2017/2399 (regarding the insolvency hierarchy of senior debt) into Romanian law, the notes will rank as senior non-preferred and subordinated to other senior obligations, but senior to any subordinated debt of the bank, in insolvency or resolution. This would allow the notes to qualify for minimum requirements for own funds and eligible liabilities (MREL), to be set by the National Bank of Romania for BCR. However, at this time the Directive has not yet been transposed into Romanian law. Because of this, we believe that from the time of their issuance and until the Directive is transposed, or the legal framework otherwise clarified, the notes would rank pari passu with other senior obligations in insolvency or resolution.

The IDR of BCR reflects support from its majority-owner Erste Group Bank AG (Erste, A/Stable), and is capped at the level of the Country Ceiling, at two notches above Romania's 'BBB-' sovereign Long-Term IDR. We expect the benefit of support from Erste to apply to the notes in the same manner as it applies to BCR's IDR. Support propensity is underpinned by BCR's and the wider CEE region's high strategic importance for the group, high level of operational and management integration of BCR within Erste and evidence of past capital, funding and liquidity support. Erste's ability to provide support is very high, given the group's strong and diversified credit profile. We do not interpret the group's intention to adopt a multiple point-of-entry resolution strategy as diminishing the ability or propensity to support BCR ahead of resolution, if needed.

BCR's CET1 ratio stood at 19.24% at end-1H19. The capital structure of the bank is supplemented by around RON1 billion of outstanding subordinated debt of which around half is recognised as regulatory Tier 2 capital, bringing the total capital ratio to 20.62% at end-1H19. The liability structure of the bank is dominated by customer deposits (92% of total funding at end-1H19) with retail deposits accounting for 68% of total customer deposits.

RATING SENSITIVITIES

The rating of the notes is primarily sensitive to a change in BCR's IDR. BCR's IDR is mainly sensitive to the sovereign's Long-Term IDR. It is also sensitive to Fitch's assessment of country risks facing Romanian banks, including that of the authorities' intervention in the banking sector, which can affect the ability of BCR to use parental support to service its obligations.

The IDR is also sensitive to a multi-notch downgrade of Erste or a significant decrease in BCR's strategic importance for the group, neither of which is likely, in our view.

The implementation of the insolvency hierarchy of senior debt in Romanian law is not likely to result in a change in these notes' ratings. Once the status of the notes as senior non-preferred is recognised in Romanian legislation we expect the notes to form part of the resolution buffer and Fitch will continue to rate senior non-preferred notes in line with the bank's Long-Term Issuer Default Rating as per our Criteria. Fitch views the likelihood of default on senior non-preferred debt as the same as that of the bank."

(1 euro=4.7786 lei)

 
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