Hellenic Bank outlook revised to positive by Fitch Ratings

Investing.com -- On Monday, Fitch Ratings revised the outlook for Hellenic Bank Public Company Limited’s (HB) Long-Term Issuer Default Rating (IDR) to Positive from Stable. The agency affirmed the Long-Term IDR at ’BBB-’ and the Viability Rating (VR) at ’bbb-’.

The Positive Outlook revision is attributed to an upgrade in the ’bbb-’ Cypriot operating environment score, reflecting an assessment of improving prospects for Cypriot banks. Factors contributing to the improved outlook include continued economic growth, falling unemployment, and reduced private sector indebtedness.

Fitch Ratings also anticipates that HB’s business profile will gain from the acquisition of CNP Assurances SA’s Cypriot and Greek activities and the planned merger with Eurobank Cyprus Ltd. These transactions are expected to enhance revenue diversification in insurance and corporate and private banking, as well as increase market shares in Cyprus.

The agency has withdrawn the ’BB+’ rating on the senior non-preferred class of HB’s euro medium-term note programme due to commercial reasons.

HB’s Long-Term IDR is driven by its VR, reflecting its strong competitive position as the second-largest bank in Cyprus, stable deposit-based funding, robust liquidity, and healthy profitability prospects. The bank’s revenue diversification is expected to improve upon the completion of the acquisition of CNP’s Cypriot and Greek activities in 1Q25 and the planned merger with Eurobank Cyprus Ltd.

HB’s non-performing exposure ratio of 2.4% at the end of 2024 is well below historical peaks and should remain below 2.5% in the next two years. The bank’s common equity Tier 1 (CET1) ratio of 28.7% at the end of 2024 was well above regulatory requirements and most European peers.

The bank’s profitability is expected to remain strong in the next two years due to healthy loan growth, a larger and longer-dated securities portfolio, manageable loan impairment charges, and synergies realization, including an acceleration in the development of the bank’s fee-generating and insurance businesses.

HB’s long-term deposit rating is one notch above its Long-Term IDR reflecting full depositor preference in Cyprus and the protection from senior and subordinated debt and equity buffers. HB complies with its final MREL, which will become binding by the end of June 2025.

HB’s SSR has been upgraded to ’bb+’ from ’bb’. The SSR is in line with Eurobank’s Long-Term IDR as, in Fitch’s view, a default of the subsidiary would entail huge reputational risk for Eurobank. This is based on their common regulation and HB’s inclusion in Eurobank’s single-point-of-entry (SPE) resolution group. It also reflects our view that Eurobank’s propensity to provide support to HB has improved after it increased its stake to 93.47%.

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