He improved OTP Bank’s HUF deposit rates by improving the asset quality and profitability of the financial institution and with the appropriate capital position and good financing profile.
On Thursday, the international rating agency announced in London that OTP’s long-term and short-term deposit portfolio has been raised to a Baa2 / Prime-2 by one degree from Baa3 / Prime-3 to date.
At the same time, Moody’s improved the baseline credit assessment (BCA) of the bank from ba2 by now to one degree BA1.
The long-term and short-term foreign currency rating of OTP Bank has been confirmed by Moody’s at Baa3 / Prime-3 level.
OTP’s foreign currency deposit rating is set at this level by the Moody’s foreign currency-class ceiling maintained in Hungary.
Both deposit ratings are stable. The prospect of the forint rating has so far been positive, but this has been replaced by Moody’s for stability on Thursday.
The company has upgraded Ba1 to Baa3 at the same time as issuing OTP Mortgage Bank rating, justifying the step by upgrading the parent company’s rating.
The upgrading of OTP Mortgage Bank, according to Moody’s, reflects the high degree of integration of the division and the fact that OTP Bank is a full-fledged owner and a full guarantor.
In its reasoning for OTP Bank’s upgrading, the credit rating highlights the improved financial quality and profitability of the financial institution, as the BCA rating increases, the bank maintains adequate capital and a good financing profile.
OTP’s non-performing loan portfolio, which Moody’s has defined as overdue liabilities over 90 days, declined to 12.2 percent of gross receivables by the end of June from 14.7 percent at the end of last year and 17 percent at the end of 2015.
The credit rating emphasizes that this process is visible on all important markets of the OTP Group.
The non-performing loan volume is still high, but the resulting risks are mitigated by the fact that by the end of June OTP’s credit loss reserve covers 97.7 percent of the non-performing debt ratio, according to Moody’s Thursday’s London analysis.
Moody’s improved its outlook for the Hungarian banking system as a whole in June last year. This positive view was reinforced by the credit rating at the end of last month and highlighted in this analysis that it is expected that sector default rates will fall to about 9 percent of the total loan portfolio by the end of 2018 at 14.7 percent at the end of last year.
Moody’s also underlined that the conversion of foreign currency-based retail loans over the past two years had eliminated banking credit risks arising from the possible steep depreciation of the forint in the retail sector.
Thursday’s upgrading of the OTP Group was announced by Moody’s one day before the review of the Baa3-level, stable review of the Hungarian sovereign debt rating. The credit rating is on this Friday, the third potential revision date of the Hungarian sovereign rating on Friday.
Moody’s announces its decision in London after making its final decision on Friday and late in the night, following European and American markets.
In this year’s review agenda of the company, Hungary first appeared on March 3 and second on July 7, but at these times Moody’s did not investigate Hungary’s public debt classification, so it did not announce a rating change.
On 4 November last year, Moody’s reclassified the classification of the Hungarian public debt category into the category of investment recommendation, and argued in particular that the improvement of the structure of Hungarian sovereign debt decreased the external vulnerability of the Hungarian economy.
Source: MTI / Picture: napi.hu /