This week, Capital Intelligence Ratings (CI Ratings) revealed that it had raised Hellenic Bank's (HB) Long-Term Foreign Currency Rating (LT FCR) from "BB-" to "BB" and confirmed that its Short-Term Foreign Currency Rating (ST FCR) remains at "B."
CI Ratings also upgraded Hellenic Bank's Bank Standalone Rating (BSR) from "bb-" to "bb" at the same time.
The agency also stated that the bank's Core Financial Strength (CFS) rating of "bb" and Extraordinary Support Level (ESL) of Uncertain have been affirmed, and that the Outlook for the LT FCR and BSR has been altered from Positive to Stable.
According to Capital Intelligence, the steady outlook suggests that the banks' ratings will not change over the course of the following 12 months.
The planned NPL securitization must be finished within the next six months, and the bank's profitability must significantly improve, according to the research, otherwise the outlook could be changed to positive.
Additionally, the agency explained that although the quality of assets, as determined by NPLs, has greatly improved, the consequences of the crisis in Ukraine on data regarding the quality of assets as well as the bank's profitability are anticipated to continue to have an impact on ratings.
Furthermore, Capital Intelligence Ratings emphasized that Hellenic Bank has a steady and well-diversified deposit base of retail banking clients and little reliance on the markets for funding.
The agency also stated that the bank's capital adequacy is assessed to be adequate, its capital ratios are strong, and its capital quality is good. The bank's liquidity and credit strength have not changed.
The agency also highlighted the fact that a portion of the gross NPLs benefit from a state guarantee of 90%, allowing Hellenic Bank to retain smaller reserves for future loan losses even while the ratio of NPLs to equity "remains high" despite a "significant downward trend."
The agency added that Hellenic Bank is able to deploy a sizeable portion of its assets in liquid investment securities due to the size of its customer deposit base and the relatively small amount of loans the bank has on its balance sheet.
Hellenic Bank's greatly improved loan quality, as seen by its NPL ratio dropping to 10% at the end of the first half of 2022, is another credit strength, according to Capital Intelligence.
However, according to Capital Intelligence Ratings, the bank's loan portfolio's substantial exposure to the real estate market "adds further pressure to asset quality" and its loan quality is still a "significant credit challenge."
The agency also stated that the bank's low profitability is another major credit concern, but Hellenic Bank reported improved operating and net profitability in the first half of 2022 as a result of greater net interest income and decreased reserves for loan loss expenditures.
The agency did note that the bank's profitability ratios are still below levels seen before 2020.
The research stated that provided operational expenses are kept in check given the current inflationary environment, the higher interest rate environment "will likely have a positive impact on net interest income, which may boost operating profitability."
The agency concluded by saying that the implementation of a leaner management structure and the change in senior management at Hellenic Bank in 2021 will be crucial to the bank's anticipated improved performance in the upcoming years.
By fLEXI tEAM