New York, July 31 (FinanceEnquiry.com) – Analysts at Moody’s Investors Service has downgraded Raiffesien (Bulgaria)’s long and short term local and foreign currency deposit ratings from Baa3 to Ba1. The outlook on the rating stays stable.
In a research note published yesterday, the analysts mention that the rating action indicates Bulgaria’s challenging operating environment, Raiffeisenbank’s asset quality deterioration and Moody’s expectation of further deterioration due to bank’s exposures to the construction and real estate and high concentrations and subsequent pressure on the bank’s profitability, stemming from relatively high provisioning requirements and subdued loan growth.
Moody’s posted that the downgrade of the standalone BFSR indicates both the recent deterioration in financial performance, owning to the challenging operating environment and Moody’s expectation that the weak economic prospects would constrain the bank’s ability to stabilize and improve its asset quality and profitability metrics.
However, the stable outlook on Raiffeisenbank’s ratings indicates the bank’s solid franchise, strong capital levels and adequate liquidity. Firstly, the rating agency recognizes that Raiffeisenbank benefits from a good domestic franchise as the fourth-largest institution in Bulgari due to strong brand recognition and a good presence in the corporate sector and then the bank maintains sound capitalisation buffers, with a Tier 1 ratio of 16 percent, according to bank’s 2011 financial statements, which provides a cushion to absorb losses and lastly Raiffeisenbank benefits from a growing deposit base in Bulgaria which underpins its adequate liquidity levels, the analysts say.
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