Rating agency Moody’s has downgraded the deposit ratings of BRD and BCR, the two largest banks in Romania, following the lowering of their baseline credit assessments.
The agency cut the long-term deposit of BCR by two notches to Ba3, after the bank’s baseline credit assessment (BCA) was lowered to b3 from b1. BCR’s standalone financial strength rating (BFSR) was affirmed at E+. Moody’s said the BFSR and the deposit ratings carry a negative outlook.
Moody’s said the lowering of the BCA was triggered by a further deterioration of the bank’s already weak asset quality and the medium-term challenges of returning to sustainable profitability. The agency said that BCR remains exposed to the risk of additional provisioning needs from the existing portfolio of non-performing loans (NPL).
The lender may need additional capital if the assets deteriorate at a similar rate to that of 2012.
Meanwhile, the agency downgraded the long term deposit ratings of BRD-Groupe Societe Generale by two notches to Ba2 and the short term deposit to Not Prime, following the lowering of the BCA to b2 from ba3. The BFSR was lower to E+ from D- and the long-term deposit ratings carry a negative outlook.
Moody’s said the lowering of the BCA was driven by a further deterioration of the bank’s further deterioration of the already weak asset quality and the expectation that the banks will face “significant challenges” in returning to sustainable profitability this year. The agency added that BRD is adequately capitalized to cover further NPL formation.
“Weak economic growth continues to affect banking sector performance with weak credit demand, lower revenues and asset-quality pressures,” said the agency in a statement.
Moody’s said that both banks can rely on parent support. BCR is controlled by Austria’s Erste Bank and BRD by France’s Groupe Societe Generale.