Moody & # 8217; s upgraded, by one step, its ratings for Hellenic Bank. The outlook is positive, ie there may be a new upgrade.
According to the house, the upgrade of the ratings reflects the significant improvement in the quality of its assets after the sale agreement of a non-performing loan portfolio (NPL) of nominal value EUR 720 million. The bank expects to complete the transaction, which is subject to regulatory approvals, by the end of 2022.
Moody & # 8217; s expects the transaction to be completed, which will reduce Hellenic Bank MES stock to 11.6% of loans in December 2021, from 21.3% in September 2021. Excluding of MES
State-guaranteed, the bank's NPEs/Gross Loans ratio is lower at 4.4%. The NPL index is further reduced to 3.4% (excluding government-guaranteed NPLs) also incorporating a recent acquisition of serviced loans by RCB and other NPL sales, which is close to the Bank of Greece's strategic medium-term target for the index. NPE around 3.0%. The coverage of the remaining NPLs (excluding those guaranteed by the state) is relatively high and amounts to 69% in December 2021.
Prospects and risks
Moody & # 8217; s reports that all Hellenic Bank ratings could be upgraded if Hellenic Bank manages to further improve the quality of its assets and enhance its profitability, while maintaining stable amounts of capital and liquidity.
Ratings could also be upgraded if Moody & # 8217; s concludes that the impact of the coronavirus pandemic and the Russian invasion of Ukraine will not leave permanent damage to the Cypriot economy, which in turn may lead Moody & # 8217; s to decide that
a smaller part of the bank's liabilities are at risk of loss in the event of a consolidation.
Given the positive outlook, it is unlikely that its ratings will deteriorate bank in the next 12-18 months. The positive outlook could return to stable if Moody & # 8217; s expect the bank to face a significant weakening of its capital and overall solvency profile, possibly as a result of a prolonged financial turmoil.
