The review for downgrade of DSK Bank is driven by the review for downgrade of its Hungarian parent bank OTP Bank NyRt and will focus on the extent to which the financial challenges faced by OTP Bank NyRt may impact the group's ability to provide support to its subsidiaries in case of need, Moody's said in a statement.
"DSK Bank's Baa3/Prime-3 deposit ratings currently incorporate two notches of rating uplift from the bank's ba2 standalone credit assessment. This external support uplift incorporates (1) one notch of uplift due to the high probability of parental support; and (2) one notch of uplift from the high probability of systemic support from Bulgarian authorities," the statement said.
Moody's said its assessment of a high probability of parental support is based on DSK's significant operational integration with its parent and the strong strategic fit of DSK with OTP Bank NyRt, as Bulgaria is one of the three strategic foreign markets for the group. During the review, Moody's said it will assess the parent's capacity to provide support to its Bulgarian subsidiary.
At this stage, Moody's said the upwards pressure on the ratings is limited, as indicated by the review of DSK's deposit ratings and the negative outlook on its D standalone BFSR.
"Downwards pressure on DSK's deposit ratings could develop following a weakening of parental capacity to provide support, as indicated by a downgrade of the parent's ratings. Additional pressure would result from a deterioration of DSK's standalone credit strength, and specifically from a material deterioration in the bank's asset-quality metrics that would adversely affect its earnings and capitalization buffers," the statement said.
- Long-term local and foreign-currency deposit ratings of Baa3, placed on review for downgrade, from negative outlook
- Short-term local and foreign-currency deposit ratings of Prime-3, placed on review for downgrade
- Standalone bank financial strength rating (BFSR) of D (equivalent to a standalone credit assessment of ba2), remains unchanged with a negative outlook.
