Moody’s Investors Service has assigned Baa3/Prime-3 long-term and short-term foreign currency deposit ratings and a D+ bank financial strength rating (BFSR) to Raiffeisenbank (Bulgaria) EAD. The BFSR translates into a Baseline Credit Assessment of Ba1.
At the same time, Moody’s has assigned Global Local Currency (GLC) deposit ratings of Baa1/Prime-2 to the Sofia-based bank with reported total assets of BGN 3.91 bln (USD 2.65 bln) and ranking fourth in terms of assets with a share of around 9.3% of banking system assets.
Raiffeisenbank (Bulgaria) EAD’s Baa3/Prime-3 foreign currency deposit ratings are capped by Bulgaria’s Foreign Currency Deposit Ceiling and carry a positive outlook in line with the outlook for the ceiling. The bank’s D+ BFSR and Baa1/Prime-2 GLC deposit ratings carry a stable outlook.
The bank’s rating derives from its good domestic franchise (particularly in corporate banking and gradually growing retail presence), as well as its solid financial fundamentals supported by strong profitability, high asset quality, a solid funding profile and adequate capitalisation.
At the same time, the rating captures the increasingly competitive environment in which the bank is operating, as the Bulgarian banking sector is dominated by banks which are owned by international financial institutions with a strong regional presence. Also constraining the bank’s rating are: i) its large borrower concentration (we note that although large exposures are well within regulatory limits, concentrations are impacted by material off-balance sheet committed credit lines and the bank’s significant portfolio of government securities – not without credit risk given the rating of Bulgarian government debt); and ii) concerns over the Bulgarian banks’ future asset quality in light of recent years’ fast credit expansion.
The assigned rating also takes into consideration that 2006 reported market shares and financial metrics are distorted due to the practice of Bulgarian banks (particularly foreign owned ones) booking loans abroad so as to cope with central bank credit growth restrictions.
