Moody’s reviews Hellenic Bank for potential upgrade

International credit rating agency Moody’s this week announced that it has initiated a review for a possible upgrade of all ratings and assessments of Hellenic Bank.

According to the announcement, this move comes as a result of the bank’s improved financial profile and Eurobank S.A.’s acquisition of a majority stake.

The agency explained that it has placed several of Hellenic Bank’s ratings on review, including its Baseline Credit Assessment (BCA) and Adjusted BCA of ba2, and its long-term and short-term deposit ratings of Baa3/Prime-3.

Other ratings under review include the long-term Counterparty Risk Ratings (CRRs) of Baa2, the long-term CR Assessment of Baa2(cr), and the subordinated Medium-Term Note (MTN) programme ratings of (P)Ba3, among others.

However, the Prime-2 short-term Counterparty Risk Ratings (CRRs) and Prime-2(cr) short-term Counterparty Risk (CR) Assessment have been affirmed.

“The review for upgrade will consider the degree to which strengthened profitability and capital metrics, and continued reductions in its legacy asset quality risks, have enhanced the bank’s solvency profile,” said Moody’s in a statement.

What is more, the review will also evaluate Eurobank S.A.’s strategic plans following its 55.5 per cent acquisition of Hellenic Bank and its potential to support Hellenic Bank in times of need.

Moody’s will also examine any changes to Hellenic Bank’s liability structure, including plans for intragroup debt or liability amounts to meet Minimum Required Eligible Liabilities (MREL) requirements.

This analysis will focus on the impact these changes could have on the loss-given failure of each instrument across the liability structure.

Furthermore, Moody’s highlighted two main factors that could lead to an upgrade, including the sustained improvement in Hellenic Bank’s profitability and asset quality, and a high likelihood of parental support from Eurobank S.A.

Additionally, an increase in the volume of junior instruments issued by the bank, enhancing the protection for deposits and various debt classes, could also prompt an upgrade.

Conversely, Moody’s indicated that a downgrade is unlikely during the review period. However, the agency continued, should the bank fail to sustain its recent financial improvements or if Eurobank S.A. demonstrates a low capacity or willingness to support Hellenic Bank, the ratings may be confirmed at their current level.