S&P affirms Takarékbank ratings, suggests bank could do better

S&P said it took the ratings actions after noting positive developments in a review of economic and industry risks for the Hungarian banking sector. Among the developments cited were the conversion of FX retail lending stock into forints, the establishment of an asset management company to deal with bad commercial real estate loans and a reduction in banksʼ reliance on external financing.

S&P said Takarékbank “compares poorly, in terms of profitability and earnings generation” with its peers in countries with similar economic and industry risk and rated “BB+” or lower.

It also noted that Takarékbank had only recently enacted a radical transformation and that “it remains to be seen” if its business model and enterprise risk management will prove efficient.

A positive rating action could be taken on the bank if the domestic economy improves and demand for credit picks up, but this would also require a stronger commercial strategy, with higher earnings margins, and better efficiency, with improved earnings buffers and capital sustainability, S&P said.

A negative rating action could be taken if Takarékbankʼs profitability and earnings buffer remain below peers, or if the bankʼs links with the integrated savings cooperatives weaken significantly, it added.