December 17, 2014 / 9:27 AM / 3 years ago

Fitch: Stable Outlook for CEE Banks in 2015

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2015 Outlook: CEE Banks here WARSAW/LONDON, December 17 (Fitch) Fitch Ratings says the overall rating outlook for banks in central and eastern Europe (CEE) is stable for 2015. However, the proportion of Negative Outlooks for banks increased in 2014 due to expected downward revisions of Support Rating Floors (SRFs) in the EU. This affected CEE banks either directly (resulting in the Negative Outlook for the Slovenian banking sector) or indirectly via rating actions on parent banks. All IDRs driven by Viability Ratings (VRs) are on Stable Outlook, including some where a subsidiary is rated above, or in line with, its parent Systemic risks stemming from structural imbalances are gradually receding, but operating environments remain difficult. The combination of low interest rates, stabilising but weak economic growth and more onerous consumer protection/regulatory legislation is weighing on revenues and pushing up costs. However, these pressures should be easily absorbed in better performing sectors (Czech Republic, Poland and Slovakia) or partly compensated by reduced impairment charges (Romania, Bulgaria, Hungary and Slovenia). Most CEE banks' Long-Term Issuer Default Ratings (IDRs) continue to reflect potential support from parent institutions, which remain strategically committed to the region, with Outlooks aligned accordingly. However, bank ratings are capped two notches above the sovereign in Bulgaria and Romania, and at one notch above in Hungary; in these markets, banks' Stable Outlooks reflect those on sovereign ratings. With the exception of pure development banks, IDRs driven by SRFs are on Negative Outlook. NPL generation has slowed across the region, but resolution of legacy issues is difficult. Various forms of portfolio clean up in weaker CEE markets (bad bank and recapitalisation in Slovenia, measures on FX mortgages in Hungary, incentives to sell/write off bad debt in Romania) occurred in 2014, and Fitch expects these efforts to continue in 2015. In the longer term, they should result in sounder bank credit profiles; in the near-term they have led to greater volatility in financial metrics and significant costs imposed on bank shareholders. Apart from Hungary, where there may be a need for further capital injections, capitalisation is adequate/strong and supports stable sector outlooks. Positive changes to funding structures continue with falling shares of parental funding, more balanced loan growth, a focus on customer deposits and efforts to reduce maturity mismatches. For more details on our expectations for CEE banks, see "2015 Outlook: CEE Banks", available at www.fitchratings.com or by clicking the link above. Contact: Artur Szeski Senior Director +48 22 338 6292 Fitch Polska SA Krolewska 16, Warsaw 00-103 Michal Bryks, ACCA Director +48 22 338 6293 Sandra Hamilton Director +44 20 3530 1266 Olga Ignatieva Senior Director +7 495 956 6906 Lindsey Liddell Director +44 20 3530 1008 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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