Standard & Poor’s on Tuesday said it placed the ‘BBB-/A-3’ ratings of OTP Bank and OTP Mortgage Bank on CreditWatch with negative implications after placing Hungary’s ‘BBB-/A-3’ sovereign ratings on CreditWatch negative on Friday.

“We expect to resolve the CreditWatch action on Hungary and the two banks this month pending further information from the Hungarian government regarding how it will address the ongoing economic challenges,” S&P said. “In our view, a more unpredictable policy environment, stemming from a weakening of oversight institutions and some budgetary revenue decisions, will impede economic growth and government finances,” it added.

OTP’s ratings are supported by its strong domestic retail franchise and leading position in home mortgage loans, SP said. The bank’s earnings and business diversification in consumer, SME financing and in other parts of the CEE region are also positive, it added.

OTP’s ratings also benefit from strong pre-provisioning earnings, S&P said.

Negative rating factors include OTP’s deteriorating asset quality and earnings pressure, it added.