Moodyʼs Investors Service has upgraded the long-term and short-term local currency deposit ratings of Hungaryʼs K&H Bank from Baa3/Prime-3 to Baa2/Prime-2. The rating agency also affirmed the bankʼs Baa3/Prime-3 long-term and short-term foreign currency deposit ratings.
Concurrently, Moodyʼs has affirmed the bankʼs long-term and short-term Baa2(cr)/Prime-2(cr) Counterparty Risk Assessment (CRA).
The outlook on the bankʼs long-term local currency deposit rating remains positive, while the outlook on its long-term foreign currency deposit rating remains stable, the rating agency said.
The upgrade of K&Hʼs local currency deposit ratings reflects the bankʼs standalone ba3 Baseline Credit Assessment (BCA) and Moodyʼs continued assumption of a high level of support from the bankʼs parent, Belgiumʼs KBC Bank NV.
The analysis takes into account the severity of loss faced by different liability classes in resolution, and which leads to two notches from previously one notch of rating uplift for K&Hʼs local currency deposit ratings, together with the assumption of low support from the government of Hungary (Baa3, stable), resulting in no further uplift.
The additional one-notch increase in uplift for K&Hʼs local currency deposit rating from Moodyʼs Advanced LGF analysis is supported by the growth of K&Hʼs deposit base, the agency added.
"The positive outlook on the Baa2 long-term local currency deposit rating reflects our expectation that a gradual strengthening of the bankʼs standalone risk profile could result in an upgrade of its BCA and therefore its local currency deposit rating," said the rating agency. "However, the Baa3 foreign currency deposit rating is constrained by the respective country ceiling of Baa3 for Hungary and will not be affected by a potential upgrade of the bankʼs BCA and local currency deposit rating," it added. As a result, the foreign currency deposit rating outlook remains stable.