S&P issued the following statement late on Thursday:
"Standard & Poor's Ratings Services said today that its ratings and outlooks on Bulgarian financial institutions remain unchanged following the revision of the outlook to stable from negative on the ratings on the Republic of Bulgaria (BBB/Stable/A-3) on Dec. 1, 2009. The banks are as follows:
*UniCredit Bulbank A.D. (BBB/Negative/A-3) *Bulgarian American Credit Bank (BB-/Negative/B) *Municipal Bank A.D. (B+/Stable/B) *United Bulgarian Bank A.D. (BBB-/Negative/A-3)
The sovereign outlook revision reflected our view of the Bulgarian government's commitment to fiscal discipline, and our expectation that the government will implement structural reforms, namely in the social security system.
Of the rated Bulgarian banks, only UniCredit Bulbank A.D. (BBB/Negative/A-3) has ratings that are at the same level as those on the sovereign. The outlook on UniCredit Bulbank remains negative, as with the other banks on negative outlook, given our ongoing concern about the impact of the domestic recession on loan portfolio quality and overall stand-alone creditworthiness.
As we expect the recession in Bulgaria to persist into 2010, we believe that Bulgarian banks' financial profiles should remain under pressure, with asset quality the current major risk to their creditworthiness. Rapid loan growth over the past decade, high sector exposure to the construction and real estate segments, single-name lending concentrations, and increased consumer indebtedness, among other factors, are likely to drive asset quality deterioration, as loans season in a worsened economic environment. Risks to banks' creditworthiness are, however, partly offset by rated Bulgarian banks' high foreign ownership by Western European strategic investors, integration with their parent institutions, and generally adequate capital cushions."
