Moodyʼs conducted a review for upgrade after changing its Macro Profile for Hungary to "Moderate-" from "Weak+".
"The change of the Macro Profile illustrates Moodyʼs assessment of the improvement in Hungarian banksʼ operating environment, in particular in the gradual recovery in credit demand," Moodyʼs said.

Hungarian banksʼ lending stock has contracted by more than 20% over the past five years, but now is likely to grow by about 5% annually over the next 12 to 18 months, supporting revenue generation, it added.

"The improving operating environment benefits Hungarian banksʼ standalone [baseline credit assessments] by helping to reduce the high level of problem loans, restoring their profitability after several years of losses, and strengthening capitalisation," it said.

K&H Bankʼs long-term local-currency deposit rating was upgraded to Ba1 from Ba3, its long-term foreign-currency deposit rating was upgraded to Ba2 from Ba3, the baseline credit assessment (BCA) was upgraded to b1 from b2 and the adjusted BCA was upgraded to ba2 from ba3.

The outlook on the long-term local-currency deposit rating is stable while the outlook on the long-term foreign-currency deposit rating is positive. The bankʼs long-term Counterparty Risk Assessment (CRA) was affirmed at Baa3(cr).

Erste Bank Hungaryʼs long-term local and foreign-currency deposit ratings were upgraded to Ba2 from B2, the long-term CRA was upgraded to Ba1(cr) from Ba2(cr), the BCA was upgraded to b3 from caa1 and the adjusted BCA was upgraded to b1 from b2. The outlook on the long-term deposit ratings is positive.

Budapest Bankʼs long-term local and foreign-currency deposit ratings were upgraded to Ba2 from B2, the long-term CRA was upgraded to Ba1(cr) from Ba3(cr), and the BCA and adjusted BCA were upgraded to b1 from b2. The outlook on the long-term deposit ratings is stable.

MKB Bankʼs long-term local and foreign-currency deposit ratings were upgraded to B3 from Caa2 with a stable outlook. The bankʼs long-term CRA was affirmed at B2(cr).

"A further improvement in the operating environment for Hungarian banks leading to a considerable reduction in problem loans and stronger capital ratios, could have positive rating implications," Moodyʼs said.

"A deterioration in the countryʼs Macro Profile and/or in individual banksʼ standalone financial metrics may have negative rating implications," the ratings agency added.

Source: BBJ

Republished with permission