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Investing.com -- Moody’s Ratings has upgraded the long- and short-term deposit ratings of Piraeus Bank S.A. to Baa2/P-2 from Baa3/P-3, and the bank’s Baseline Credit Assessment (BCA) to ba1 from ba2. The bank’s long-term senior unsecured rating has also been upgraded to Baa2 from Baa3.
The upgrade reflects improvements in Piraeus Bank’s financial fundamentals, including stronger asset quality, robust earnings, and continued comfortable funding and liquidity. The bank’s non-performing loans (NPE) ratio declined to 2.6% in December 2024 from 3.5% in December 2023, and its NPE provisioning coverage increased to approximately 65%.
The bank has also demonstrated strong core operating profitability, with a return on equity of 17.5% and a net interest margin (NIM) of 2.6%. The bank’s cost-to-core income ratio was just 30% in December 2024, reflecting its tight management of operating expenses.
Piraeus Bank’s capital metrics have been strengthened through organic capital generation, with a pro-forma common equity Tier 1 (CET1) ratio of 14.7% in December 2024 compared to 13.3% the year before. The bank’s plan to reduce the level of its deferred tax credits (DTCs) to below 25% of its CET1 by 2028 by accelerating their amortization is reflected in the rating upgrade.
The bank’s long-term deposit and senior unsecured debt ratings are positioned two notches above its BCA, indicating very low losses in a resolution scenario. The rating upgrade also reflects the volume of bail-in-able instruments issued to meet its minimum requirement for own funds and eligible liabilities (MREL), providing a good loss absorbing cushion to senior creditors and depositors.
Moody’s has changed the outlook for the long-term deposit and senior unsecured debt ratings of Piraeus Bank to stable from positive. This change balances the expectation that the bank will continue to improve its credit profile in the next 12-18 months, against some modest pressure on its capital metrics from its recently announced acquisition of Ethniki Insurance in Greece.
The deposit and senior unsecured debt ratings could be upgraded if there is any further improvement in the bank’s tangible capital metrics and asset quality, while it maintains solid profitability and favorable cost base. Downward pressure on the bank’s ratings could result from a sharp increase in its new NPEs formation, or if it does not meet its capital projections going forward.
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