Fitch Ratings has affirmed three Romanian banks’ ratings: Banca Transilvania S.A. (BT; Long-term Issuer Default Rating (IDR) affirmed at ‘BB-‘), UniCredit Tiriac Bank S.A . (UCTB; Long-term IDR affirmed at ‘BBB+’) and ProCredit Bank Romania (PCBR; Long-term IDR affirmed at ‘BB+’). A full list of rating actions is at the end of this comment.
The affirmation of BT’s ratings reflects its good franchise, well-diversified and stable funding structure, no reliance on short-term wholesale funding and comfortable liquidity. It also reflects the deterioration in its asset quality, average profitability and improving, albeit still high cost base. BT’s IDRs are driven by its standalone strength and also underpinned by the potential support from the sovereign, if needed, as reflected by the Support Floor of ‘BB-‘. Given BT’s nationwide presence and its market share in Romania, Fitch believes there is a moderate likelihood that the Romanian authorities would provide support if necessary. Although BT’s asset quality has deteriorated, its non-performing loan (NPL) ratio (7.8% at end-Q111) was better than the sector average of 12.7%. BT has a fairly well-diversified loan portfolio and a relatively low share of foreign-currency loans compared with the Romanian banking sector.
The affirmation of UCTB’s IDR and Support Rating reflect Fitch’s maintained view that the support it can expect to receive from its ultimate parent Unicredit S.p.A. (‘A’/Stable), through its fully owned subsidiary UniCredit Bank Austria AG (‘A’/Stable) remains high, should it be needed. Its Long-term IDR is constrained by Romania’s Country Ceiling of ‘BBB+’. The Viability Rating reflects rising loan impairment charges, concentrated lending in the construction and real estate sectors, which exposes the bank to sector volatility and its reliance on its parent for funding. It also takes into account its good core profitability, sustained efficiency and comfortable liquidity. Fitch considers that achieving good asset quality is UCTB’s main challenge. Its NPL ratio was 11.5% at end-Q111, slightly lower than the sector average.
The affirmation of PCBR’s IDRs and Support Rating reflects Fitch’s opinion that ProCredit Holding AG (PCH, ‘BBB-‘/Stable), the bank’s main shareholder, remains committed to PCBR and there is a moderate probability of support forthcoming from PCH given its financial strength. The affirmation of the Viability Rating acknowledges the bank’s efforts in managing credit risks and limiting the asset quality deterioration, still adequate capitalisation and good liquidity that to some extent compensate for low core profitability resulting from structural cost inefficiency and small franchise.
PCBR’s better-than-market asset quality is due to the bank’s focus on financing production rather than consumption, lending more in local currency relative to the sector, having close contact with customers and diversified lending. At end-Q111, loans in arrears of more than 90 days totalled 2.79% of gross loans, still comfortably covered by reserves (146%). A recent cash capital injection resulted in regulatory total capital ratio of 14.7% at end-June 2011, which in Fitch’s opinion is adequate taking into account the provisioning level.
The rating actions are as follows:
Banca Transilvania S.A.:
Long-term foreign currency IDR: affirmed at ‘BB-‘; Outlook Stable
Short-term foreign currency IDR: affirmed at ‘B’
Support Rating: affirmed at ‘3’
Viability Rating: affirmed at ‘bb-‘
Individual Rating: affirmed at ‘D’
Support Rating Floor: affirmed at ‘BB-‘
UniCredit Tiriac Bank S.A.:
Long-term foreign currency IDR: affirmed at ‘BBB+’; Outlook Stable
Short-term foreign currency IDR: affirmed at ‘F2’
Support Rating: affirmed at ‘2’
Viability Rating: affirmed at ‘bb-‘
Individual Rating: affirmed at ‘D’
ProCredit Bank (Romania):
Long-term foreign currency IDR: affirmed at ‘BB+’; Outlook Stable
Short-term foreign currency IDR: affirmed at ‘B’
Long-term local currency IDR: affirmed at ‘BB+’; Outlook Stable
Short-term local currency IDR: affirmed at ‘B’
Support Rating: affirmed at ‘3’
Viability Rating: affirmed at ‘b’
Individual Rating: affirmed at ‘D/E’.
Source: bne
