Credit rating agency Moody's affirmed the A3/P-2 long- and short-term deposit ratings of K&H Bank, the Hungarian unit of KBC, with a stable outlook. It also affirmed K&H's ba1 Baseline Credit Assessment (BCA) and baa3 Adjusted BCA, its A3/P-2 long- and short-term Counterparty Risk Ratings (CRR); and its Baa1(cr)/P-2(cr) long- and short-term Counterparty Risk (CR) Assessments.

The affirmation of K&H's ba1 BCA acknowledges the resiliency in the bank's financial performance despite Hungary’s sovereign issuer rating of Baa2 with a stable outlook. Moody’s expects a moderate deterioration in asset quality in 2024, because of the still elevated borrowing costs, which, however, is not expected to undermine K&H's credit profile.

Moody's expectation that K&H will maintain moderate capitalization, a stable predominantly deposit-based funding structure and large, although declining, liquidity buffers is also reflected in the BCA affirmation.

The lender expects that K&H's very strong profitability will soften in 2024, as increased loan volumes and higher fees and commissions will not be enough to offset the significant decline in interest rates and more normalized credit costs.

After-tax profit of the bank rose 60% to HUF108bn (€280mn) in 2023, even as the impact of government measures, such as the windfall profit tax and an interest rate freeze, added up to HUF56bn.

Hungary’s third-largest lender with total assets over HUF5.6 trillion saw net interest revenue grew 21% to HUF197bn in 2024.

The company’s lending stock rose 10% to HUF2.8 trillion as the corporate loan book expanded by 13% and retail loans edged up 4%.