Outlook on foreign-currency deposit rating remains stable
London, 06 June 2018 -- Moody's Investors Service, ("Moody's") has affirmed
Romania's Raiffeisen Bank SA's (Raiffeisen-RO) Baa2/Prime-2
long-term and short-term local-currency and Baa3/Prime-3
long-term and short-term foreign-currency deposit
ratings. Concurrently, Moody's has affirmed the bank's
ba2 baseline credit assessment (BCA) and ba1 adjusted BCA. The
bank's long-term and short-term Baa2(cr)/Prime-2(cr)
Counterparty Risk Assessment (CRA) were also affirmed. The outlook
on the bank's long-term local-currency deposit rating
is changed to positive from stable, whilst the outlook on the long-term
foreign-currency deposit rating remains stable.
The rating action was prompted by two factors, specifically Moody's
assessment of 1) Raiffeisen-RO's improving credit fundamentals
and the resulting scope for a higher BCA; and 2) the unchanged ratings
uplift from affiliate support following the rating action on its parent
Raiffeisen Bank International AG's (RBI, A3/A3 stable,
baa3). For further information about the rating action on RBI,
see press-release dated June 4th, 2018 https://www.moodys.com/research/Moodys-affirms-Raiffeisen-Bank-International-AGs-A3-debt-and-deposit--PR_384396
The full list of the affected ratings and rating inputs can be found at
the end of this press release.
RATINGS RATIONALE
- RATIONALE FOR AFFIRMING THE STANDALONE CREDIT ASSESSMENT
By affirming Raiffeisen-RO's ba2 BCA, Moody's has taken into
account the bank's full-year 2017 evidencing its improving performance
in line with our expectation. The affirmation of the BCA reflects
the rating agency's view that the recovering operating environment
in Romania should support the continued improvement of Raiffeisen-RO's
asset risk, a key driver for a potentially higher BCA over the next
12-18 months.
As of year-end 2017, Raiffeisen-RO reported a non-performing
loan (NPL) ratio of acceptable 6.4% which holds further
room for improvement; it has been steadily declining from its peak
of 10.4% as of year-end 2013. Against its
asset risk, Raiffeisen-RO has an adequate capitalization
level, with a tangible common equity (TCE) over risk weighted assets
ratio of 15.8% and a leverage ratio (TCE/Total Assets) of
9.3% as of year-end 2017, which remained largely
stable in recent years as the bank resumed its growth strategy since 2015.
Raiffeisen-RO's good profitability is further supporting
the bank's loss absorption capacity. Net Income over Total
Assets stood at 1.38% as of year-end 2017 and has
been steady over the last three years.
Raiffeisen-RO has low market funding reliance and comfortable liquidity
with a loan to deposit ratio of 77% and liquid banking assets making
up 37% of tangible banking assets as of year-end 2017.
Moody's believes that the bank's funding profile is principally
sensitive is currency exchange rate fluctuations as a third of its deposits
are in foreign currency. However, foreign currency refinancing
risk is reduced with a foreign-currency loan-to-deposit
ratio of 65% as of year-end 2017, down from 78%
in 2016. The foreign-currency liquid assets cover 39%
of total foreign-currency liabilities, providing a high level
of flexibility to the bank. As a result, Moody's believes
that Raiffeisen-RO will be able to continue its current loan growth
without increasing its market funds reliance and sustain its capital levels
due to its earnings power and moderate dividend payout levels.
- RATIONALE FOR AFFIRMING THE ADJUSTED BASELINE CREDIT ASSESMENT
Moody's affirmation of Raffeisen-RO's adjusted BCA
follows the affirmation of its BCA and continues to benefit from one notch
rating uplift from Moody's high parental support from RBI.
At the current BCA level of ba2 of Raiffeisen-RO, the recent
upgrade of its parent's RBI BCA to baa3 from ba1 does not result
in an increase in the parental uplift higher than currently incorporated
in the bank's rating.
- RATIONALE FOR AFFIRMING THE DEPOSIT RATINGS
Moody's affirmed Raiffeisen-RO's Baa2 long-term
local currency deposit rating following the affirmation of bank's
ba1 adjusted BCA and the result of Moody's Advanced Loss Given Failure
(LGF) analysis which results in two notches of rating uplifts.
The long-term foreign currency deposit rating is affirmed at Baa3
as it is constrained by the foreign currency deposit ceiling applicable
in Romania based on the Baa3 sovereign rating.
- RATIONALE FOR THE POSITIVE OUTLOOK ON THE LOCAL-CURRENCY
AND STABLE OUTLOOK ON FOREIGN-CURRENCY DEPOSIT RATINGS
The positive outlook on Raiffeisen-RO's long-term
local-currency deposit rating reflects Moody's expectation
of further improvement in the bank's credit profile over the next 12-18
months. We project continued reduction in problem loans and growth
of the loan book on the back of a more favourable operating environment
and stronger credit demand in Romania. Moody's believes that
the bank will rely on its strong levels of liquid assets to fund new credit
growth and to maintain adequate capital levels due to its good earnings
power.
The bank's long-term foreign-currency deposit rating carry
a stable outlook is in line with that of the sovereign's rating
as it is constrained by it.
-- WHAT CAN CHANGE THE RATING UP/DOWN
An upgrade of Raiffeisen-RO's local-currency deposit ratings
could be prompted by (1) an upgrade of its BCA; and/or (2) an increase
in uplift resulting from our LGF analysis implying higher protection for
senior creditors and a lower loss-given-failure in a resolution.
The bank's foreign-currency deposit rating is constrained by the
country ceiling for Romania and will be upgraded if the ceiling is raised.
An upgrade of RBI-RO's BCA could develop from a sustained strong
performance of the bank and mainly an improvement in Moody's overall
solvency assessment of RBI-RO, and primarily its asset risk,
while maintaining a stable Tier 1 capital ratio and a comfortable liquidity
profile.
Raiffeisen-RO's ratings could experience downward pressure as a
result of substantial weakening in its profitability, erosion of
its capital base and/or deterioration in asset quality that will result
in a multi-notch lowering of its BCA. Downward pressure
on the deposits could also emerge in case of a reduction of the volume
of deposits or subordinated instruments in the liability structure of
the bank, which could imply a possible higher loss-given-failure
in a resolution. The bank's foreign-currency deposit rating
will not be affected by a one-notch downgrade of the local-currency
deposit rating as it is already constrained at one notch lower owing to
the applicable country ceiling constraint.
LIST OF AFFECTED RATINGS
Issuer: Raiffeisen Bank SA
Affirmations:
....LT Bank Deposits (Local Currency),
Affirmed Baa2, Outlook changed to Positive from Stable
....ST Bank Deposits (Local Currency),
Affirmed P-2
....LT Bank Deposits (Foreign Currency),
Affirmed Baa3, Outlook Remains Stable
....ST Bank Deposits (Foreign Currency),
Affirmed P-3
....Adjusted Baseline Credit Assessment,
Affirmed ba1
....Baseline Credit Assessment, Affirmed
ba2
....LT Counterparty Risk Assessment,
Affirmed Baa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-2(cr)
Outlook Action:
....Outlook, Changed to Stable (m) from
Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
April 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Arif Bekiroglu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
