Fitch Ratings has assigned Austria-based Addiko Bank AG a Long-Term Issuer Default Rating (IDR) of 'BB' and Viability Rating (VR) of 'bb' with a stable outlook.

The ratings reflect Addiko's focus on unsecured lending to retail clients and small businesses in Southeast Europe (SEE), where economies are more volatile. The VR considers the bank's risk profile, improving asset quality, and strong capitalization.

Despite slower economic growth, labor markets in Addiko's largest markets should remain resilient over the next two years. However, high inflation may lead to a moderate increase in impaired loans and loan impairment charges (LICs). Rising interest rates are likely to offset LICs through higher lending margins, Fitch Ratings says in its report.

Addiko's business profile is supported by its small but growing franchise in SEE. As a challenger bank, Addiko's unique selling points include speed and modern digital offerings, affording the bank some pricing power.

The bank's risk profile is influenced by its exposure to unsecured consumer and SME lending in SEE. Risk controls are adequate, while market risk is low.

Asset quality has improved as Addiko reduced its impaired loans ratio. Profitability, though weak, is improving due to successful restructuring and cost management.

The bank's capitalisation is strong, with high and stable capital adequacy targets, providing protection against potential losses.

Addiko mainly relies on locally sourced retail deposits, ensuring solid funding and liquidity. The bank does not rely on external wholesale funding and has a credible intention not to access the wholesale market in the medium term.