S&P cuts ratings of Hungarian banks following sovereign downgrade

The international credit rating agency Standard and Poor’s has lowered the credit rating of several Hungarian banks following it lowered Hungary’s sovereign rating to BB+/B from ‘BBB-/A-3 on December 20, the ratings agency announced on Friday.

The credit rating agency lowered the long- and short-term counterparty credit ratings on Hungary’s OTP Bank and its core subsidiary OTP Mortgage Bank to BB+/B from BBB-/A-3. Standard and Poor’s said it had removed both OTP and OTP Mortgage Bank from CreditWatch negative, adding that the outlook on both banks is negative.

S&P also said it is lowering the unsolicited public information (pi) ratings on K&H Bank to BBpi from BBB-pi.

Standard and Poor’s said it had affirmed the BB/B long- and short-term counterparty credit ratings on Magyar Takarekszovetkezeti Bank (Takarekbank), through revised the outlook to negative from stable.

S&P noted that Friday’s ratings decisions did not affect those of the other Hungarian banks the agency rates, the Central-European International Bank and MKB Bank.

Standard and Poor’s noted that the agency’s Friday moves reflect the exposure of OTP, K&H Bank, and Takarekbank to the sovereign rating through the Hungarian bonds in their securities portfolios, the deteriorating operating environment, and the consequences of unfriendly measures the government has imposed on the Hungarian banking system since 2010.

S&P reduced Hungary’s long- and short-term sovereign ratings to BB+/B from ‘BBB-/A-3 on December 20 to reflect its view that the predictability of the country’s policy framework has lessened, weighing on the economy’s prospects in the next couple of years.