mBank's long-term deposit ratings and outlook upgraded by Moody's Ratings

Investing.com -- Moody's Ratings has upgraded the long-term deposit ratings of mBank S.A. from Baa1 to A3, and shifted the outlook from positive to stable. The Baseline Credit Assessment (BCA) of the bank was also upgraded from ba1 to baa3. In addition, mBank's long- and short-term Counterparty Risk Ratings (CRR) were upgraded to A2/P-1 from A3/P-2, and long- and short-term Counterparty Risk (CR) Assessments were upgraded to A2(cr)/P-1(cr) from A3(cr)/P-2(cr). The bank's short-term deposit ratings have been affirmed at P-2.

The upgrades also extend to mBank Hipoteczny S.A., mBank's fully owned mortgage bank subsidiary, with its long-term issuer ratings upgraded to Baa1 from Baa2, and its outlook shifted to stable from positive. The long- and short-term CRR of mBank BH were upgraded to A2/P-1 from A3/P-2, and the long- and short-term CR Assessments were upgraded to A2(cr)/P-1(cr) from A3(cr)/P-2(cr). The bank's short-term issuer ratings have been affirmed at P-2.

The upgrade of mBank's BCA reflects a significant improvement in the bank's solvency position, supported by strong earnings and reduced legal costs. The bank has made substantial reductions in its exposure to Swiss-franc mortgages, setting aside over PLN16.5 billion in provisions since 2018. This has reduced mBank's outstanding Swiss-franc mortgages to PLN666 million as of December 2024, less than 5% of the bank's Tier 1 capital.

The upgrade of mBank's long-term deposit ratings to A3 from Baa1 is due to the upgrade of the bank's BCA, the unchanged assumption of a moderate likelihood of parental support from Commerzbank AG (OTC:CRZBY), mBank's majority shareholder, and two notches of uplift for the bank's long-term deposit ratings following the application of Moody's Advanced Loss Given Failure (LGF) analysis.

The stable outlook on mBank's long-term deposit ratings reflects the expected stability of the bank's creditworthiness over the next 12-18 months, supported by sound profitability and limited changes to its liability structure. The stable outlook on mBank BH's long-term issuer ratings reflects the stable outlook on mBank's long-term deposit ratings and the expectation that mBank's commitment to its subsidiary will not change.

An upgrade of mBank's ratings could occur following an upgrade of its BCA and Adjusted BCA, or due to higher volumes of more junior instruments resulting in a lower loss for depositors in the case of resolution. A downgrade could result from a decline in the bank's capitalization, a significantly weaker asset quality, a deterioration in its funding and liquidity profile, or a radical change in the legal environment increasing losses from foreign currency mortgages.

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