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Moody’s upgrades BCR’s deposit rating to Baa3

Moody’s has upgraded the long-term local and foreign-currency deposit ratings of BCR, to Baa3/Prime-3 from Ba1/Not Prime, a press release informs.

At the same time, the ratings agency has upgraded the Romania’s top lender baseline credit assessment (BCA) to b1 from b2, its adjusted BCA to ba2 from ba3 and its long-term and short-term Counterparty Risk Assessment (CRA) to Baa2(cr)/Prime-2(cr) from Baa3(cr)/Prime-3(cr).

“The upgrade of BCR’s BCA to b1 from b2 reflects ongoing improvements in the bank’s asset quality, profitability, capital adequacy and funding structure. The bank’s non-performing loans (NPL) ratio has declined to 11.8 percent in December 2016 from 20.2 percent as of December 2015 owing to the sale and write-off of problem loans, restructuring procedures and increased recoveries as economic conditions improve,” Moody’s statement reads.

The bank’s NPL coverage ratio has improved in the past few years and stood at a comfortable level of 85.3 percent as of December 2016. According to the bank’s H1 2017 results update, NPLs ratio was 11 percent, whilst NPL coverage was 92.1 percent as of June 2017.

The outlook on BCR’s local-currency deposit rating remains positive, whilst on the foreign-currency deposit rating it is changed to stable from positive.

“The positive outlook on BCR’s long-term local-currency deposit rating reflects Moody’s expectation of further improvements in the bank’s credit profile over the next 12-18 months owing to continued reduction in problem loans and maintaining adequate capitalisation. The bank’s long-term foreign-currency deposit rating is at the level of the foreign-currency deposit ceiling for Romania and will be constrained at that level if the local-currency deposit rating is upgraded,” Moody’s analysts show.

Moody’s continues to assume a moderate probability of government support for BCR’s deposits in the event of its failure, owing to its position as Romania’s largest commercial bank.

An upgrade of BCR’s local-currency deposit ratings could be prompted by either an upgrade of its BCA, or higher affiliate support uplift owing to higher parental support assumptions, or an increase in uplift resulting from Moody’s LGF analysis.

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