Fitch upgrades Piraeus Bank rating to ’BB+’ with positive outlook

Investing.com -- Fitch Ratings has upgraded the Long-Term Issuer Default Ratings (IDRs) of Piraeus Financial Holdings S.A. (HoldCo) and Piraeus Bank S.A. (Piraeus) to ’BB+’ from ’BB’ on April 1, 2025. The outlook for both firms is positive, reflecting the continued improvement in Piraeus’s standalone credit profile.

This upgrade is attributed to a reduction in non-performing exposures (NPE) and credit losses, along with significantly improved profitability and capital buffers. Fitch also noted a positive reassessment of Greece’s operating environment, predicting that the Greek economy will keep outperforming the eurozone average. This performance is expected to be driven by steady investment acceleration, moderate consumption growth, and a further decrease in unemployment.

The positive outlook is also influenced by Fitch’s expectation that Piraeus’s standalone credit profile will continue to strengthen. The bank is expected to maintain good profitability levels despite lower interest rates and further reduce its stock of problem assets. The bank’s capitalization levels are also expected to rebuild gradually following the initial negative impact from the acquisition of Ethniki Insurance, which will significantly boost the bank’s business profile.

Piraeus’s ratings reflect improved profitability due to higher rates and successful restructuring, adequate capital buffers, and a strong market position in Greece. The bank’s asset quality metrics have improved, bringing them closer to peers, and its stable, deposit-based funding is a rating strength.

Fitch also notes that the Greek economy’s resilient growth, expected to be 2.3% in 2025 and 2026, should support banks’ business model sustainability, asset quality performance, profitability resilience, and internal capital generation.

Piraeus’s strong domestic franchise, which is weighted towards traditional commercial banking activities in Greece, underpins its business profile. The bank’s long-term business model sustainability has improved in line with its successful de-risking, restructuring, and increased digitalization.

The bank’s NPE ratio has been significantly reduced to European average levels, supported by securitisations, modest new inflows, write-offs, and adequate recoveries and cures. The problem assets ratio is a high 7% as it includes the net foreclosed assets, which are still substantial. This ratio is expected to decline due to reduced affordability pressures, loan growth, and additional sales of foreclosed assets.

Piraeus’s common equity Tier 1 (CET1) represents adequate buffers over the regulatory requirements. The bank plans to maintain a CET1 ratio of above 13%, which is lower than domestic peers’ guidance, following the impact of the acquisition of Ethniki Insurance.

The bank’s stable and granular deposit base benefits from large domestic market shares in retail banking. Market access has improved significantly over the past few years. The bank’s good liquidity position and comfortable maturity profile are also noted.

The ratings of HoldCo and Piraeus are equalised as Fitch believes their risk of default is substantially the same. Factors that could lead to a downgrade include a material deterioration in the bank’s financial metrics or a significant deterioration in the operating environment. Conversely, maintaining a CET1 ratio of above 13% on a sustained basis and reducing the problem assets ratio towards 4% would be positive for the ratings.

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