March 24 (SeeNews) - Moody's Investors Service said it has upgraded the long-term local and foreign-currency deposit ratings of Raiffeisenbank Bulgaria to Ba2 from Ba3 and changed the outlook to stable from positive.
"The bank's adjusted Baseline Credit Assessment (BCA) was also upgraded to ba2 from ba3 and its Counterparty Risk Assessment to Baa2(cr)/P-2(cr) from Baa3(cr)/P-3(cr). Concurrently, the bank's Not-Prime short-term local and foreign-currency deposit ratings were affirmed," Moody's said in a rating action statement late on Thursday.
The rating action follows the upgrade of the deposit and debt ratings of the bank's parent, Raiffeisen Bank International (RBI), to Baa1 with stable outlook and BCA to ba2 from ba3.
Moody's also said in the statement:
"RATINGS RATIONALE
The upgrade of RBB's ratings reflect the improved capacity of RBI to support its Bulgarian subsidiary in case of need, indicated by the upgrade of RBI's BCA to ba2 from ba3 on 21 March 2017. Refer to "Moody's Upgrades Raiffeisen Bank International's long-term ratings and withdraws ratings of Raiffeisen ZentralBank Oesterreigh" https://www.moodys.com/research/--PR_363682, for more details regarding the rating action on RBI.
Raiffeisenbank (Bulgaria) EAD continues to be well integrated within the RBI group, which provides the bank with operational and funding support if needed. These considerations, together with Moody's view of RBI's commitment to the Bulgarian market, underpin the rating agency's assumptions of a high probability of parental support for RBB, which results in an one-notch rating uplift for the Ba2 long-term deposit ratings from the bank's ba3 standalone BCA.
THE STABLE OUTLOOK
The stable outlook on RBB's ratings balances its improving financial metrics - specifically asset quality and profitability - against the parent bank's limited capacity to provide support beyond current levels.
Moody's notes it expects further improvement in RBB's financial fundamentals, supported by the improving economic environment in Bulgaria, which could put upward pressure on its ba3 BCA. RBB's ratio of non-performing loans (NPLs) to gross loans declined to 7.1% as of December 2016 from a high 18.7% as of year-end 2013, while coverage of NPLs grew to 85% as of December 2016 from 53% as of December 2013. In addition RBB's shareholder's equity to total assets ratio remained high at 14.5% as of December 2016.
Nevertheless, the rating agency's decision to change to stable from positive the outlook for RBB's Ba2 long-term deposit ratings reflects the stable outlook on RBI's ratings which limits further uplift of RBB's deposit ratings.
-- WHAT COULD MOVE THE RATINGS UP/DOWN
An improvement in the operating environment and the Weak + macro profile for Bulgaria and/or an upgrade of RBI's BCA could lead to an upgrade of RBB's deposit ratings. Further reduction in RBB's problem loans, while maintaining strong capital ratios and improving its core profitability, would put upward pressure on RBB's BCA.
Although not likely, a lower assumption of affiliate support would likely result to a downgrade of the bank's ratings. In addition a weakening of the macroeconomic environment or a worsening in the bank's financial metrics could lead to a downgrade of its ratings."
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