Moody’s upgrades long-term deposit ratings of four Greek banks

Moody’s Investors Service (Moody’s) on Monday upgraded the long-term deposit ratings of National Bank of Greece, Eurobank and Alpha Bank to B2 from Caa1, and Piraeus Bank’s long-term deposit rating to B3 from Caa2.

The outlook on the deposit ratings for all four banks is positive.

The rating agency has also upgraded the long-term Counterparty Risk Assessments (CRA) of National Bank of Greece, Eurobank and Alpha Bank to Ba3(cr) from B1(cr) and for Piraeus Bank to B1(cr) from B2(cr). The long-term Counterparty Risk Ratings (CRR) of the same three banks were also upgraded to Ba3 from B2 and for Piraeus Bank to B1 from B3. The short-term ratings for all banks were affirmed at Not-Prime (NP) and their short-term CRA at NP(cr).

Concurrently, Moody’s has upgraded the Baseline Credit Assessment (BCA) of National Bank of Greece, Alpha Bank and Eurobank to b3 from caa1, and the BCA of Piraeus Bank’s to caa1 from caa2.

“Monday’s rating action on the four largest Greek banks was primarily driven by their improving asset quality and solvency and good prospects for further enhancing their recurring profitability, factors that are exerting upward pressure on their BCAs, the credit rating agency said in a report,” Moody’s said in its report. 

In addition, the upgrade to the banks’ deposit ratings also reflects their recent and upcoming MREL (minimum requirement for own funds and eligible liabilities) eligible debt issuances until the end of 2025, which will change the banks’ liability structure and enhance the buffers available to protect depositors.

“The positive outlooks reflect Moody’s expectation that the four banks will continue to improve their credit profiles, and be in a good position to manage any new problem loan formation as a consequence of the coronavirus pandemic. The ratings could be upgraded in the coming quarters if the banks maintain their sound capital and liquidity, while fully implementing their transformation plans by further reducing their problem loans and leveraging the economic and credit growth potential of the Greek economy, which will benefit significantly from the EU’s recovery and resilience facility (RRF),” it added.

Greek banks’ BCAs are still constrained by the quality of their capital, with sizeable deferred tax credits (DTCs) in the capital structure, and also by the challenge to further reduce their problem loans and cost of risk, as well as improve their core profitability by containing expenses and booking new business, Moody’s said.