May 6 (SeeNews) - Moody's Investors Service said it has affirmed the state-owned Croatian Bank for Reconstruction & Development's (HBOR) foreign currency long-term issuer ratings at Ba2 and changed the outlook to positive from stable.
It has also affirmed HBOR's Backed Senior Unsecured MTN rating at (P)Ba2, upgrading the outlook to positive from stable, Moody's said in a statement on Friday.
The rating action follows the affirmation of Croatia's sovereign rating at Ba2 and the change of its outlook to positive from stable. The affirmative action on the government rating, which took place on April 26, is backed by Croatia's improving fiscal metrics thanks to a prudent policy stance and improved growth prospects, the rating agency noted.
Moody's also said in the statement:
"Today's affirmation of HBOR's ratings and change of outlook to positive follows the similar rating action on the Croatian government's ratings, and is based on the full, explicit and unconditional guarantee provided by the Government of Croatia for HBOR's liabilities. HBOR's ratings are therefore aligned with those of the Government of Croatia reflecting the full risk transfer of the guarantor.
The rating agency notes that HBOR is fully government-owned, has a development mandate and its operations are closely monitored by the Croatian government and parliament. Its ratings also recognise its robust capital buffers that partly mitigate the elevated asset risks stemming from its policy role and modest profitability. Furthermore, although HBOR has a high reliance on market funding, this is mainly term funding from multilateral development agencies, which largely mitigates refinancing risks.
WHAT COULD MOVE THE RATINGS UP/DOWN
HBOR's issuer rating would move in tandem with the rating of the government of Croatia given its policy mandate, its full government ownership and state guarantee."