Attica Bank’s long-term deposit ratings upgraded to Ba2 by Moody’s

Investing.com -- Moody’s Ratings has upgraded the long-term ratings and assessments of Attica Bank S.A. today. The upgrades include the Baseline Credit Assessment (BCA) and Adjusted BCA to b1 from b2, long-term deposit ratings to Ba2 from B1, long-term Counterparty Risk Ratings (CRR) to Ba1 from Ba2, and long-term Counterparty Risk Assessment (CR Assessment) to Ba1(cr) from Ba2(cr). Short-term CRR and deposit ratings were confirmed at NP, and the short-term CR Assessment was confirmed at NP(cr). The outlook for the bank’s long-term deposit ratings remains positive.

The upgrade of Attica Bank’s BCA to b1 is primarily due to the completion of its nonperforming exposures (NPE) securitization through the state-backed asset protection scheme, Hercules III. This scheme allowed the bank to offload approximately €3.7 billion of bad loans. As a result, the bank retained around €1.2 billion of senior notes guaranteed by the government on its balance sheet and achieved a pro-forma NPE ratio of 2.8% (down from 57% in 2023) with a provisioning coverage of about 48% as of December 2024. This NPE clean-up has significantly improved the bank’s solvency and set the stage for future growth and the rebuilding of its market credibility.

The quality of the bank’s new lending over the past few years, primarily in the form of SME (Small and Medium Enterprises) and corporate exposures that are well diversified across various sectors, was also considered in the BCA upgrade. The bank’s solvency enhancement was also supported by a share capital increase last November, which resulted in a common equity Tier 1 (CET1) of 11.9% as of December 2024, comfortably above its capital requirement of 8.7%.

The BCA upgrade also reflects the expectation that Attica Bank’s core earnings generation will improve further, driven mainly by its loan growth momentum and potential efficiency gains from the merger with Pancreta Bank S.A. The bank was able to almost double its recurring pre-provision income during 2024 compared to the previous year.

The upgrade further considers the bank’s improved funding and liquidity and the expectation of the bank receiving a higher share of customer and public-sector deposits in the market. Following its NPE clean-up, Attica Bank had one of the lowest loans-to-deposits ratios in the system at 54%, and the highest liquidity coverage (LCR) of 301% combined with a net stable funding ratio (NSFR) of 147% as of December 2024.

The BCA positioning at b1 also takes into account execution risks around the technical merger process with Pancreta Bank, and integration challenges that the senior management will face.

The positive outlook on Attica Bank’s long-term deposit ratings reflects the expectation that the bank will continue to improve its underlying financial fundamentals, and will successfully complete the technical merger and integration with Pancreta Bank over the next 12-18 months.

Attica Bank’s ratings could be upgraded following further strengthening of its solvency position. The bank’s deposit ratings could also benefit from the potential issuance of debt instruments that could provide a loss absorption buffer in a resolution scenario under Moody’s Advanced LGF analysis.

Given the positive outlook on the long-term deposit ratings, it is unlikely that the ratings will be downgraded. The ratings could come under pressure if the implementation of the transformation and merger plan is at risk or if there is a significant delay in its execution, impairing the bank’s business plan and performance.

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