Moodyʼs upgrades banks, but not sovereign rating

Ratings

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Moodyʼs Investors Service has made some upgrades, but not the sovereign rating upgrade most awaited by the Hungarian government. At a review in November 2016, Moodyʼs raised Hungaryʼs rating by one notch from Ba1 to Baa3, putting the country back in investment grade. The outlook on the rating is stable.

Moodyʼs Investors Service did not update Hungaryʼs sovereign rating on Friday, having previously declined to make upgrades at scheduled reviews on July 7 and March 3 of this year.

Explaining the rationale for the ratings action in November, Moodyʼs said Hungaryʼs debt burden will continue to gradually decline and structural improvements will support positive growth rates, while the countryʼs external vulnerability has been significantly reduced.

Moodyʼs upgraded K&H Bankʼs long and short-term local and foreign currency deposit ratings from Ba1/Not Prime to Baa3/Prime-3. In addition, it upgraded the bankʼs baseline credit assessment (BCA) from b1 to ba3, and its adjusted BCA from ba2 to ba1. K&Hʼs long-term and short-term Baa2/Prime-2 Counterparty Risk Assessments (CRA) were affirmed.

The outlook on the bankʼs local currency deposit rating was changed from stable to positive, while on the foreign currency deposit rating it remains stable. K&Hʼs non-performing loan (NPL) ratio fell to 8.6% at the end of June, from 9.8% at the end of 2016. The lenderʼs first-half net income was flat at HUF 18.9 billion.

Moodyʼs also upgraded the long-term and short-term local currency deposit ratings of OTP Bank from Baa3/Prime-3 to Baa2/Prime-2, and changed the outlook on the local currency deposit rating from positive to stable.

Moodyʼs affirmed OTPʼs Baa3 long-term and short-term foreign currency deposit ratings with a stable outlook. The rating is constrained by the respective country ceiling for Hungary, it noted.

Moodyʼs also upgraded the bankʼs baseline credit assessment (BCA) and its adjusted BCA from ba2 to ba1, and its junior subordinated debt rating from B1 to Ba3.

Moodyʼs upgraded the issuer rating of OTPʼs mortgage lender, OTP Mortgage Bank, from Ba1 to Baa3. OTPʼs non-performing loan ratio fell to 12.2% of gross loans at the end of June, from 14.7% at the end of 2016, it added.

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