Moody's Assigns Ba3/NP/D Ratings to Bulgarian Blue Chip Corporate Commercial Bank

The agency has also assigned a Not Prime short-term foreign and local currency deposit ratings and a D- bank financial strength rating (BFSR) to the bank, it said in a statement, adding that all ratings carry a stable outlook.

“The ratings reflect CorpBank' small presence in Bulgaria as the country's tenth-largest locally owned bank with a market share of around 3% in
banking assets. More positively, they also take account of the bank's comfortable capital levels, good liquidity and strong asset quality metrics,” Moody’s said.

The bank, which has focused on corporate lending and its interest rate margins are lower than those of other banks in the system, has weaker profitability levels that its peers and higher cost of funding than its foreign-owned competitors, it added.

"Another major constraint to CorpBank's ratings is the high concentration
levels on both sides of its balance sheet, which not only raise the
sensitivity of the institution's funding structure to deposit withdrawals
but also heighten the risks associated with the performance of individual
borrowers," Moody's said, adding that a number of corporate governance issues also constrain the bank's risk positioning and thus its ratings.

"In addition, a system-wide factor that constrains the upward movement of  all Bulgarian banks' ratings is Moody's growing concerns with regard to  future credit quality as a result of the recent strong credit growth in the developing Bulgarian economy,” said Elena Panayiotou, lead analyst for CorpBank at Moody's.

Moody's assesses that the probability of CorpBank enjoying systemic support from the Bulgarian authorities in case of need is low, noting that the introduction of the currency board in Bulgaria in 1997 has reduced the probability of systemic support across the board.

“Therefore, the bank's Ba3/Not Prime deposit ratings do not enjoy any uplift to reflect support expectations,” Moody’s said.