The ratings agency also affirmed the Ba3 long-term issuer ratings of MBH Mortgage Bank Co. Plc., the group’s mortgage subsidiary, likewise with a stable outlook.

Moody’s said the affirmation reflects MBH Bank’s “overall stable financial profile,” even as it noted a recent weakening in asset quality and reserve coverage, particularly within the bank’s concentrated corporate loan portfolio.

The bank’s baseline credit assessment (BCA) was affirmed at ba3, with Moody’s pointing to the still-developing track record of MBH’s post-merger strategy following a series of acquisitions that created Hungary’s second-largest bank.

The agency said it expects further pressure on asset quality, especially among corporate borrowers, due to challenges in the domestic operating environment. Hungary’s sovereign rating stands at Baa2 with a negative outlook.

At the same time, MBH’s capital position was described as moderate and potentially subject to pressure as the bank pursues both organic and inorganic growth, alongside higher dividend payouts linked to an increase in free-float ownership.

Profitability is also expected to moderate, driven by a gradual easing of interest rates, normalization in risk costs and the continued impact of government-imposed taxes and sector-specific measures on banks operating in Hungary.

MBH Credit Profile Supported by Solid Liquidity Buffers, Strong Funding Structure

Despite these headwinds, Moody’s said MBH’s credit profile continues to be supported by solid liquidity buffers and a funding structure largely based on customer deposits, underpinned by a strong deposit franchise.

The affirmation of the Baa3 long-term deposit rating reflects both the bank’s standalone credit strength and external support considerations. Moody’s said its analysis incorporates a moderate likelihood of support from the Hungarian government if needed, resulting in a one-notch uplift for deposit ratings.

The agency added that its loss-given-failure analysis provides an additional two-notch uplift for deposit ratings, while senior unsecured debt ratings do not benefit from similar uplift.

MBH’s senior unsecured medium-term note program ratings were affirmed at (P)Ba2, and its senior unsecured debt ratings at Ba2. Subordinated debt ratings were also affirmed at B1.

For MBH Mortgage Bank, Moody’s said the rating action reflects its high level of integration with its parent. The subsidiary’s creditworthiness remains closely linked to MBH Bank due to strong operational and financial ties, as well as its strategic importance to the group.

However, the mortgage bank’s ratings remain one notch below those of the parent, reflecting ownership structures that could create legal constraints on immediate financial support if required.

Moody’s said the stable outlook on MBH Bank reflects its expectation that the lender’s credit profile and liability structure will remain broadly unchanged over the next 12 to 18 months.

Similarly, the outlook on MBH Mortgage Bank aligns with that of its parent.

Looking ahead, Moody’s said upward rating pressure could emerge if MBH demonstrates sustained improvements in asset quality, capital strength and profitability, or establishes a proven track record of delivering on its post-merger strategy.

Conversely, downward pressure could arise from a deterioration in solvency or liquidity metrics, significant credit losses or further large-scale acquisitions that weaken the bank’s financial position.

The agency also noted that changes in the bank’s funding structure or reduced expectations of government support could negatively affect ratings.