Moodyʼs Investors Service has announced an upgrade of the long-term local and foreign-currency deposit ratings of Hungaryʼs Takarék Mortgage Bank (TMB) from B1 to Ba3, while also changing its outlook from stable to positive, according to a press release sent to the Budapest Business Journal.
Furthermore, Moodyʼs has upgraded the bankʼs baseline credit assessment (BCA) from b3 to b1, its adjusted BCA from b2 to b1, and its long-term Counterparty Risk Rating (CRR) from Ba3 to Ba2.
The agency also updated the bankʼs long-term Counterparty Risk Assessment (CRA) from Ba2(cr) to Ba1(cr). Its short-term Not Prime deposit ratings and CRRs and short-term Not Prime(cr) CRA have been affirmed.
Moodyʼs argues that the upgrade and the positive outlook is justified by "the rating agencyʼs assessment of the bankʼs anticipated financial profile following the near-term transformation of the bank into a specialized mortgage institution, firmly embedded within the Hungarian credit cooperatives sector, and the sectorʼs evolving and strengthening credit risk profile on the back of the implementation of the new strategic plan adopted by its central bank, Magyar Takarékszövetkezeti Bank Zrt. (TakarékBank)."
The ratings agency says that the plan will lead to more uniform implementation of decision-making and also better managerial and risk control of the sector.
At the same time, the agency notes that an expected transfer of assets from TMB subsidiary Takarék Commercial Bank to another entity in the Takarék group will most likely worsen TMBʼs asset quality metrics at that point in time. In addition, Moodyʼs expects TMBʼs profitability to remain weak, and its reliance on market funding to increase accordingly with its new operational mode.
"Despite these challenges, the two notches upgrade of the BCA to b1 from b3 acknowledges TMBʼs adequate capitalization," the report notes.
The adjusted BCA upgrade incorporates full support assumptions from TakarékBank. Moodyʼs says that the assessment is based on the close integration of TMB into the credit cooperatives sector, and the new plan which will make TMB the sectorʼs specialized mortgage bank.
Moving the deposit rating up a notch to Ba3 incorporates unchanged results from LGF analysis and government support assumptions as well. The agency maintains that there is a "moderate probability" of government support, based on the credit cooperative sectorʼs approximately 11% market share (as of June 2018) in the household deposits market.
Regarding TMBʼs new, positive outlook, Moodyʼs said that it "captures Moodyʼs expectation of an improvement in TakarékBankʼs credit profile following the successful implementation of the sectorʼs restructuring, which could lift TMBʼs adjusted BCA and consequently its long-term deposit ratings."