Bank Millennium S.A. receives ratings upgrade from Moody's

Investing.com -- Moody's Ratings has upgraded the long- and short-term deposit ratings of Bank Millennium S.A. (BM) to Baa2/P-2 from Baa3/P-3, maintaining a positive outlook on the long-term deposit ratings. The ratings upgrade reflects the bank's improved solvency profile, primarily due to increased capital buffers and reduced risks to its capitalization.

In addition to the deposit ratings, Moody's has also upgraded the bank's Baseline Credit Assessment (BCA) to ba2 from ba3, its Adjusted BCA to ba1 from ba2, and its long-term Counterparty Risk Ratings (CRR) to Baa1 from Baa2. The bank's short-term CRRs and Counterparty Risk Assessment were affirmed at P-2.

The upgrade was prompted by the bank's increased capital buffers, which exceed regulatory minimum requirements, and the ongoing reduction of the bank's exposure to Swiss-franc mortgages. As of December 2024, BM had reduced its outstanding Swiss-franc mortgages to PLN1.3 billion, about 20% of its Common Equity Tier 1 (CET 1), down from nearly PLN3 billion the previous year.

The bank's improved solvency profile and reduced exposure to Swiss-franc mortgages allowed BM to exit its recovery plan mid-last year. The regulator also eliminated the additional capital requirement previously imposed to address risks from foreign currency loans.

The bank's BCA also reflects stable asset quality metrics with the ratio of nonperforming loans at 4.4% as of year-end 2024, down from 4.5% the year before, and a low cost of risk at 40 basis points in 2024.

BM's long-term deposit ratings were upgraded to Baa2 from Baa3, and the junior senior unsecured debt ratings to Ba1 from Ba2. These upgrades were driven by the bank's improved BCA, the moderate likelihood of parental support from BM's controlling shareholder, Banco Comercial Portugues, S.A., and the application of Moody's Advanced Loss Given Failure (LGF) analysis.

The positive outlook on BM's long-term deposit ratings is based on the expectation of further improvement in the bank's credit profile, supported by strong core earnings and improved net profit over the next 12 to 18 months, along with ongoing efforts to reduce legal risks.

The ratings could be upgraded further if the bank maintains its improved financial performance and manages the risks of its 2025-2028 strategic plan. This plan aims to nearly double the size of its corporate loan book during this period.

However, the bank's ratings could be downgraded if there's a decline in the bank's capitalization, a weaker asset quality, or a deterioration in its funding and liquidity profile. A significant change in the legal environment increasing losses from foreign currency mortgages could also result in a downgrade.

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