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Fitch takes rating action on three Hungarian banks on sovereign downgrade

Fitch Ratings has downgraded CIB Bank Zrt's long-term Issuer Default Rating (IDR) to “A minus” from “A” and OTP Bank Plc's Support Rating to “3” from “2”. The outlook of Kereskedelmi es Hitelbank Zrt's (K&H) has been revised to negative from stable and the long-term IDR of Russia-based OJSC OTP Bank's was affirmed at “BB” with negative outlook, Fitch Ratings said.

The rating actions follow the recent downgrade of Hungary's long-term foreign currency
IDR to “BBB minus” from “BBB”.

The downgrade of CIB's long-term IDR reflects the downgrade of Hungary's country ceiling to “A minus” from “A”. The long-term IDR of CIB is currently constrained by the country ceiling for Hungary. Both CIB and K&H share the negative outlook of the sovereign's long-term foreign currency IDR of “BBB minus”. The IDRs of CIB and K&H reflect the extremely high probability that support would be provided to by their parents, should this be necessary.

The downgrade of OTP Bank's support rating reflects the downgrade of Hungary's long-term IDR to “BBB minus” and thus lower ability of the state to provide support to the bank, if required. However, Fitch believes that the propensity to support remains unchanged due to OTP Bank's importance to the Hungarian banking system and its dominant share of retail deposits. OTP Bank, Hungary's largest universal bank by total assets at end-Q3 2010, has a strong focus on retail business. At the same time, it had almost 25% and 30% of the domestic system assets and deposits respectively.

The long- and short-term IDRs and support rating of OJSC OTP Bank are driven by potential support from OTP Bank, which holds a 95.8% stake in OJSC OTP Bank. Fitch believes that the parent has high propensity to support OJSC OTP Bank in case of need, but its ability to do so must be considered in the context of its own creditworthiness. (MTI – Econews)