Frankfurt am Main, October 04, 2021 -- Moody's Investors Service (Moody's) has today upgraded Tatra
banka, a.s.'s (Tatra) long-term and short-term
deposit ratings to A2/Prime-1 from A3/Prime-2, the
long-term issuer and senior unsecured debt ratings to A3 from Baa1,
and the Baseline Credit Assessment (BCA) and Adjusted BCA to baa2 from
baa3. At the same time, the rating agency affirmed the bank's
A2/Prime-1 Counterparty Risk Ratings (CRR) and its A2(cr)/Prime-1(cr)
Counterparty Risk (CR) Assessments. The outlook on the long-term
deposit ratings, issuer and senior unsecured ratings is stable.
The rating action reflects Tatra's improved credit profile namely
in terms of asset quality and capital, despite the economic challenges
caused by the pandemic. The rating action was also prompted by
the sustained recovery of the bank's profitability metrics.
A full list of affected ratings is provided at the end of the press release.
RATINGS RATIONALE
-- UPGRADE OF STANDALONE BCA AND LONG-TERM RATINGS,
STABLE OUTLOOK
The upgrade of Tatra's long-term deposit ratings, issuer
and senior unsecured debt ratings reflects: (1) the upgrade of the
bank's standalone BCA and Adjusted BCA to baa2, in line with
its financial profile, from baa3, (2) our unchanged assumption
of high parental support from Austria's Raiffeisen Bank International
AG (A2 stable, baa2), which does not result in a rating uplift
because the bank's BCA is at par with that of its parent, (3) the
result from Moody's Advanced Loss-Given-Failure (LGF)
analysis, leading to two notches of rating uplift for the bank's
deposit ratings and one notch of uplift to the issuer rating, and
(4) the additional one notch of rating uplift for the deposit and issuer
ratings from our unchanged assumptions of a moderate likelihood of public
support from the Government of Slovakia (A2, stable), if needed.
The upgrade of Tatra's BCA mirrors the bank's success in improving
its financial profile despite the economic challenges associated with
the coronavirus crisis. Tatra managed to maintain non-performing
loans (NPLs) at low levels, at 2.0% of gross loans
as of June 2021, vis-à-vis a 2.6%
sector average, with almost full reserve coverage at 94%
of NPLs. As a result, the cost of risk declined to a marginal
6 basis points of gross loans, and Moody's expects it to remain
moderate over the next 12 to 18 months.
In upgrading the bank's BCA, the rating agency has also taken
into account the recovery of Tatra's profitability close to pre-pandemic
levels. Moody's-adjusted net income went up to 0.85%
of tangible assets in the first six months of 2021, the strongest
result among peers, from 0.68% in 2020. Tatra
is one of the most efficient banks in Slovakia, owed to steady cost
discipline, partially supported by the absence of the bank levy
in 2021, in tandem with better earnings and reduced reliance on
interest income.
Moody's expects Tatra's capital buffers to somewhat ease following
the bank's intention to pay dividends out of the previously retained
2019 distributable profit, but to remain at solid levels,
balancing the elevated asset risk inherent in the bank's sizeable
exposure to the cyclical commercial real estate and construction sectors.
The bank reported a total capital ratio of 21.4% as of June
2021, well above the 15.96% regulatory minimum.
The BCA further reflects Tatra's good funding profile mitigating
its rather lean pool of liquid assets when compared to the median of other
baa2 rated banks, although it is one of the strongest among Slovak
peers. Because of the persistent ultra-low interest rate
environment, euro area banks typically hold less sizeable stocks
of liquid assets than regional peers outside the area.
The outlook on Tatra's long-term deposit ratings, issuer
and senior unsecured debt ratings is stable, reflecting Moody's
expectation that the bank will be able to maintain its improved credit
profile over the next 12-18 months.
--AFFIRMATION OF THE COUNTERPARTY RISK ASSESSMENT AND COUNTERPARTY
RISK RATING
As part of today's rating action, Moody's has also affirmed
Tatra's CRRs at A2/Prime-1 and its CR Assessments at A2(cr)/Prime-1(cr).
Both the long-term CRR and CR Assessment, prior to government
support, are positioned three notches above the baa2 Adjusted BCA,
and thus at par with Slovakia's A2 sovereign rating, following
the one notch upgrade of the bank's Adjusted BCA. As a result,
the long-term CRR and CR Assessment do not benefit anymore from
a systemic support uplift.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the ratings could develop from significant improvements
in Tatra's BCA, especially in its solvency profile as a result
of a further reduction of problem loans or markedly stronger profitability.
The impact on the bank's deposit ratings, issuer and senior
unsecured debt ratings from a milder enhancement of its standalone financial
profile, however, would be offset by the absence of the current
one notch of uplift from government support. Any additional volumes
of subordinated instruments implying higher protection for senior creditors
and a lower loss-given-failure in a resolution could lead
to an additional uplift for the deposit ratings, issuer and senior
unsecured debt ratings.
Tatra's ratings could experience downward pressure because of a
substantial weakening of its standalone financial strength following -
but not limited to - a sharp deterioration of its solvency profile
with a strong increase in asset risk and material decline of capital buffers.
Downward pressure on the deposit ratings, issuer and senior unsecured
debt ratings 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.
LIST OF AFFECTED RATINGS
Issuer: Tatra banka, a.s.
..Upgrades:
....Long-term Bank Deposits,
upgraded to A2 from A3, outlook remains Stable
....Short-term Bank Deposits,
upgraded to P-1 from P-2
....Long-term Issuer Ratings,
upgraded to A3 from Baa1, outlook remains Stable
....Baseline Credit Assessment, upgraded
to baa2 from baa3
....Adjusted Baseline Credit Assessment,
upgraded to baa2 from baa3
....Senior Unsecured Regular Bond/Debenture,
upgraded to A3 from Baa1, outlook remains Stable
..Affirmations:
....Long-term Counterparty Risk Rating,
affirmed A2
....Short-term Counterparty Risk Rating,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed A2(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
..Outlook Action:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
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for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
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Please see www.moodys.com for any updates on changes to
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for additional regulatory disclosures for each credit rating.
Katja Reise
Asst Vice President - Analyst
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Maria Jose Mori
VP - Senior Credit Officer
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
