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Fitch Ratings revised on Friday from "stable" to "negative" the rating outlook on Romania's banking giants the Romanian Commercial Bank (BCR) and BRD-Groupe Societe Generale SA (BRD), a press release by Fitch informs.
A "negative" rating outlook reflects the probability that for the future, Fitch will modify, in a negative sense, the rating of the two Romanian banks.
On Friday, however, Fitch affirmed at "BBB-plus" the long-term rating of BCR and BRD, as well as the 'BBB-minus' with a negative outlook for UniCredit Bank S.A and 'BB plus' with a stable outlook for Banca Transilvania SA (BT).
"The revision of the Outlooks on BCR and BRD reflects the significant probability that Fitch will in future cap the ratings of Romanian banks at one notch above the Romanian sovereign (BBB-/Stable), rather than two notches at present. This in turn reflects the potentially greater risk of government intervention in the Romanian banking sector, in case of a sovereign default, that would negatively affect the banks' ability to service their obligations," Fitch underscores.
The rating agency specifies that this modification of the viewpoint was determined by the recent proposals or recently adopted initiatives, which, as far as Fitch is concerned, might have a negative impact on the banks, the most important being a special tax on the banks' assets.
Ficth has also confirmed the viability ratings of BCR to 'BB+' and that of UniCredit Bank S.A. at 'BB', because they consider that the banks' financial profiles are sufficiently resilient, at least in the short term, in the event of a drop in profitability due to the above-mentioned tax. In exchange, Fitch warns that the viability ratings could be downgraded if the tax on assets is maintained for an undetermined period and the banks will not be able to counter its impact by adjusting their business strategies.
Regarding the long-term ratings of BCR and BRD, Fitch points out that they are particularly sensitive to a revision of the country risks faced by Romanian banks. If the proposed punitive measures, such as the tax on banks, are implemented as planned and will remain in place beyond a short-term horizon, or if new unconventional measures are introduced that will cause bank losses or will affect the bank's solvency rating, Fitch could limit the long-term rating of banks to one notch above the country's rating, and would degrade the long-term rating of banks accordingly.
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When it comes to the viability ratings of BCR, BT and UniCredit Bank S.A., Fitch points out that it could be downgraded if the tax on banks or other measures would undermine performance so as to lead to a significant weakening of their solvency. The viability ratings could also be downgraded if the expected economic downturn or a significant increase in the risk appetite translate into a deterioration in the banks' asset quality, warns the rating agency.
AGERPRES .
