Fitch downgrades K&H and Erste Hungary, affirms rating of CIB Bank

By bne IntelliNews October 17, 2014

Fitch Ratings has downgraded the long-term issuer default ratings (IDR) of Hungary's K&H Bank and Erste Bank Hungary to BBB- from BBB, the rating agency informed in a statement. The ratings carry stable outlook. At the same time, Fitch affirmed the long-term IDR to Hungary’s CIB Bank at BBB- but revised the outlook from negative to stable.

The agency noted that the downgrade of K&H's and Erste’s ratings has been driven by a reassessment of the linkage between sovereign and bank credit risk in Hungary. The ratings have been capped one notch above the sovereign (BB+). In Fitch’s view the government interventions in the banking sector amplify country risks for banks operating locally.

As regards to CIB, the revision of the outlook mirrors that of Italian parent Intesa.

Fitch also believes that there exists a high probability that all three foreign parents KBC, Intesa and Erste would support their Hungarian units if required, thus ensuring compliance with regulatory capital requirements. The agency noted that CIB Bank and Erste Hungary have strong track record of support. The two lenders received EUR 0.9bn and EUR 1bn in new equity from their owners, respectively in the period between end-2009 and end-September 2014.

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