Fitch Says Affirms Romania's Bancpost at 'BBB', Negative Outlook; Cuts Individual Rating to 'D/E'

Bancpost's IDRs and Support Rating reflect the potential support it can expect to receive from its majority shareholder, Greece-based EFG Eurobank Ergasias, in case of need, Fitch said in a statement.

The downgrade of Bancpost's Individual Rating reflects the impact of rapidly increasing impairment charges on the bank's capitalisation, and its still low operating profitability, which is already under pressure from low margins due to significantly increased cost of funding, Fitch said.

Capitalisation has been strengthened through two cash capital injections in 2009. However, Fitch believes that capitalization is still just adequate and new capital injections might be required in case of a prolonged deterioration in the operating environment.

The downgrade of the Individual Rating indicates the likely need for further shareholder support if capitalisation deteriorates rapidly. These factors are balanced by Bancpost's comfortable liquidity and low market risk.

Bancpost has changed its funding policy to collect more customer deposits and the share of related-party funds has declined. However, Fitch considers that Bancpost's deposit base is now concentrated in large interest rate sensitive deposits. Bancpost's liquidity is, however, good due to the large proportion of liquid assets on the balance sheet driven by high reserve requirements.

Bancpost's rapid loan growth ended in 2008 due to the worsening operating environment. Its net interest margin continues to narrow, reflecting a rapid increase in funding costs, which Fitch expects to continue exerting pressure on profitability in the near-term, Fitch said.

The bank has implemented stringent cost measures; however, operating profitability is likely to remain low in the near-term due to growing loan impairment charges and margin compression.

Bancpost has realigned and tightened its lending policies due to the financial crisis. Its primary focus has shifted to asset quality, collection and restructuring. Asset quality has been substantially affected by the economic crisis, resulting in significantly increased NPLs [non-performing loans], and Fitch considers asset quality to be the main risk at Bancpost, the agency said.

Bancpost ranked the eighth-largest bank in Romania at end-2008 in terms of assets. It focuses on both retail and corporate banking, but consumer lending, mortgages and micro lending account for 71% of its total portfolio on a stand-alone basis. Eurobank's shareholding was 84.73% at end-March, which has since increased following purchases of shares from other shareholders in June 2009.