BUCHAREST (Romania), June 6 (SeeNews) - Moody's Investors Service said on Wednesday it has downgraded the debt and deposit ratings of the three largest Austrian banking groups, reflecting continued asset quality problems and vulnerability to external pressures.
"The ratings for Raiffeisen Bank International (RBI, A2 stable, D+/ba1 stable1) and UniCredit Bank Austria (UBA, A3 negative, D+/ba1 stable) were downgraded by one notch, while those for Erste Group Bank AG (Erste, A3 negative, D+/baa3 negative) were downgraded by two notches reflecting the combination of the recent significant asset quality deterioration and the sizable concentration to Hungary and Romania," Moody's said in a statement.
The downgrades "reflect [the three banks'] vulnerability to the adverse operating conditions in some of their core markets in Central and Eastern Europe (CEE) and the Commonwealth of Independent States and the increased risk of further shocks from the ongoing euro area debt crisis," the rating agency said.
In the case of Erste, Moodys said that the bank's less diversified CEE franchise makes it more vulnerable to negative developments in single countries such as the adverse and uncertain operating conditions in Romania and Hungary, where Erste has sizeable operation.
"We currently consider that Erste’s operations in Hungary and Romania pose the highest risk to the group’s earnings. Its operations in other countries might not be sufficient to compensate for shocks to earnings and capital that exceed our assumptions under stressed scenarios," Moody’s said.
Moody’s also said that among mitigating factors that have limited the extent and scope of the ratings downgrade were the banks’ solid franchises which generate solid pre-provision earnings and the relatively stable domestic environment.
The rating agency also recognises positively that the three largest Austrian banks have limited direct exposures to countries in Europe's southern periphery.