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Fitch improves outlook for IIB long-term BBB+ rating to ‘positive’

Fitch Ratings has improved the outlook for International Investment Bankʼs long-term BBB+ rating from “stable” to “positive.” This is the second positive rating action on the bank from leading international rating agencies in 2019, and the sixth since the beginning of 2018, the IIB told the Budapest Business Journal.

Fitch calls the ongoing comprehensive improvement of the instituteʼs business profile the main factor contributing to the decision.

The agency’s report emphasizes that as a result of the bankʼs successful relocation to Budapest from Moscow in the first half of 2019, IIB became the first multilateral development bank to be headquartered in the CEE region, while the approval by member states of a EUR 200 million paid-in capital increase will support the bank’s ambitious loan growth targets.

Fitch underlines that comprehensive support provided to the bank by its shareholder states will continue to be important evidence of the growth of importance of the bank for its member statesʼ economies. The agency also gave a positive assessment of the fact that EU shareholders now account for more than 50% of the bank’s paid-in capital and voting rights, which it said in practice means a majority for all key decisions.

In Fitch Ratings’ view, IIB has been successful in its relaunch strategy implementation, including the growing quality of the loan portfolio with 53% destinated to the support of European projects, and the enhancing of its risk management system that has allowed it to reduce its non-performing loan (NPL) ratio from 4% a year before to 1.8% now.

Fitch Ratings also draws attention to the bank’s high level of liquidity, steadily improving assets, and ongoing diversification of funding.

“It is very symbolic that Fitch announced another positive rating action on the bank on the eve of historic meetings of the IIB board of governors and board of directors, which will be held on September 16-17, 2019, in Budapest,” said Nikolay Kosov, chair of the IIB management board. “Today, we can confidently say that this is a vivid testimony of success of our strategy supported by member states. The bank is constantly proving its effectiveness, continues to grow at a rapid pace, and already today, by some key performance indicators, is ahead of the targets for 2022.”

Member states of the IIB are the Republic of Bulgaria, the Republic of Cuba, the Czech Republic, Hungary, Mongolia, Romania, the Russian Federation, the Slovak Republic, and the Socialist Republic of Vietnam, according to the bankʼs website.

Established in 1970 by Comecon, the former Soviet-led economic organization until 1991, the bank is an international intergovernmental organization that enjoys tax-free and regulation-free status, as well as the support of its member statesʼ governmental bodies, the website adds.

In March this year, the IIB management board released a statement denying what it said were “unfounded” media accusations of close ties to the Russian security apparatus and the Russian state itself. The IIB denied the accusation that it acts as a Russian tool to avoid economic sanctions, arguing that it is an international development financial institution, and stressing that EU countries are in control of more than half of its voting shares.