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Moody’s: Hellenic Bank ratings on review for upgrade

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Moody’s Ratings has placed all Hellenic Bank ratings and assessments on review for upgrade, with the exception of the Prime-2 short-term Counterparty Risk Ratings (CRRs) and Prime-2(cr) short-term Counterparty Risk (CR) Assessment which have been affirmed.

“This announcement reflects our strong financial performance and strategic development,” the bank said in a brief statement.

Last month, Hellenic Bank announced first quarter profits of €93.3 mln, up 34% year on year, but 25% below the €124.8 mln in the last quarter of 2023, mainly due to higher income from interest rates.

Moody’s said the ratings and assessments that have been placed on review for upgrade are its Baseline Credit Assessment (BCA) and Adjusted BCA of ba2, its long-term and short-term deposit ratings of Baa3/Prime-3, its long-term CRRs of Baa2, its long-term CR Assessment of Baa2(cr), its subordinated Medium-Term Note (MTN) programme ratings of (P)Ba3 and subordinated debt rating of Ba3, its senior unsecured and junior senior unsecured MTN programme ratings of (P)Ba2, and its senior unsecured debt rating of Ba2.

Previously, the outlook on the long-term deposit and senior unsecured ratings was positive.

Moody’s said that the rating action follows both the continued improvements in the bank’s financial profile which is placing upward pressure on the bank’s standalone financial strength, and the acquisition of a 55.5% stake in the bank by Eurobank S.A. (BCA ba1, LT bank deposits Baa2 stable) and therefore the potential capacity to support Hellenic Bank, in case of need.

The review for upgrade of the BCA will consider the degree to which strengthened profitability and capital metrics, and continued reductions in its legacy asset quality risks have strengthened the bank’s solvency profile.

The review will also focus on the strategy and business plans that Eurobank S.A. will want to implement following the increase in its ownership stake, and how these will shape Hellenic Bank’s management, financial profile and liability structure as well as the willingness of Eurobank S.A. to support Hellenic Bank, in case of need.

Moody’s said it will also be assessing any potential changes to the bank’s liability structure and plans for intragroup debt or liability amounts for Minimum Required Eligible Liabilities (MREL) requirements and the likely impact these will have on the loss-given failure of each instrument across the liability structure.

The rating agency said that at the conclusion of the review, Hellenic Bank’s ratings may be upgraded if Moody’s believes that the bank will sustain most of its recent profitability and asset quality improvements, while maintaining solid capital and liquidity metrics, or Moody’s assesses a high likelihood of parental support from its majority shareholder Eurobank S.A.

Furthermore, debt and deposit ratings may be upgraded in the event that the bank issues a greater volume of junior instruments that will increase the protection afforded to deposits and the various debt classes.

“Given the review for upgrade it is unlikely that the ratings will be downgraded,” the Moody’s announcement said.

The ratings may be confirmed at their current level if Moody’s considers that the bank will not sustain recent improvements in its financial profile or if Moody’s believes that Eurobank S.A. has a low ability or willingness to support Hellenic Bank.

Last month, Moody’s Investors Service said Hellenic Bank’s takeover of CNP Assurances’ regional operations, allowing it to dominate the local insurance market, was a credit positive.

The €182 mln deal will help the bank group leap to the forefront of the sector and secure a 30% share of the life insurance market and a 23% share of the general insurance sector.

That places Hellenic Bank’s insurance business ahead of Bank of Cyprus that, based on its 2023 annual report, enjoyed a 27% market share with its EuroLife subsidiary and 14% of the general insurance market with Genikes Asfaleies.