04/02/2009 06:50
Credit Rating Firm, Moody’s downgraded last night the ratings of Alpha Bank, Piraeus Bank and Eurobank. Moody’s are concerned about a deterioration in the bank's key financial fundamentals resulting from the accelerated weakening economic and operating conditions in Greece and in a number of South-Eastern European countries (mainly Romania and Bulgaria), where Eurobank has built sizeable operations in recent years and the pressure on the bank's profitability arising from slower business expansion, interest margin pressure and elevated credit costs.
Moody’s downgraded by one point the long-term deposit and debt ratings, the subordinated debt and preferred stock and the financial robustness. The outlook on these ratings is negative for Eurobank. The outlook for Piraeus Bank and Alpha Bank is stable for the financial robustness but negative for all other ratings.
“The Greek economy expanded faster than most Eurozone countries over the past decade (an average growth rate of 4.3%) but is expected to slow down sharply during 2009, with a number of economic sectors, and hence corporations, facing significant stress. The prospect of higher unemployment could also lead to a rise in default rates in retail lending, including consumer credit where Eurobank has built a sizeable credit portfolio in recent years”, the report said.
Moody’s are also concerned about the business loans, especially those that have been injected to sectors that face severe stress such as shipping, constructions and tourism. The loans to the shipping sector are 3.8% of Piraeus Bank’s portfolio and 3% of Alpha Bank.
The credit rating of the three banks is also stigmatized by their strong presence in SE Europe, especially Romania and Bulgaria. Those markets show increased risks due to their increased unemployment and the exchange risks.
“In light of dysfunctional international capital markets and curtailed access to wholesale funding at reasonable costs, Piraeus -- in common with European peers -- is addressing its future debt refinancing needs through securitisation transactions eligible to access European Central Bank funding. At the same time, the bank is participating in the Greek government plan that aims to provide liquidity to the domestic economy by supporting the banking sector, and will have access to government liquidity bonds and could raise government-guaranteed debt. Nevertheless, the recent widening in the spreads for Greek government debt suggests that such government-guaranteed funding could be expensive for those banks that to have resort to it”, the report said.
Moody’s downgraded by one point the long-term deposit and debt ratings, the subordinated debt and preferred stock and the financial robustness. The outlook on these ratings is negative for Eurobank. The outlook for Piraeus Bank and Alpha Bank is stable for the financial robustness but negative for all other ratings.
“The Greek economy expanded faster than most Eurozone countries over the past decade (an average growth rate of 4.3%) but is expected to slow down sharply during 2009, with a number of economic sectors, and hence corporations, facing significant stress. The prospect of higher unemployment could also lead to a rise in default rates in retail lending, including consumer credit where Eurobank has built a sizeable credit portfolio in recent years”, the report said.
Moody’s are also concerned about the business loans, especially those that have been injected to sectors that face severe stress such as shipping, constructions and tourism. The loans to the shipping sector are 3.8% of Piraeus Bank’s portfolio and 3% of Alpha Bank.
The credit rating of the three banks is also stigmatized by their strong presence in SE Europe, especially Romania and Bulgaria. Those markets show increased risks due to their increased unemployment and the exchange risks.
“In light of dysfunctional international capital markets and curtailed access to wholesale funding at reasonable costs, Piraeus -- in common with European peers -- is addressing its future debt refinancing needs through securitisation transactions eligible to access European Central Bank funding. At the same time, the bank is participating in the Greek government plan that aims to provide liquidity to the domestic economy by supporting the banking sector, and will have access to government liquidity bonds and could raise government-guaranteed debt. Nevertheless, the recent widening in the spreads for Greek government debt suggests that such government-guaranteed funding could be expensive for those banks that to have resort to it”, the report said.
Related Articles
