Insider
Hellenic Bank was put on an upgrade trajectory by the rating agency Fitch, changing the bank's outlook to positive from negative.
Specifically for Hellenic Bank, Fitch notes that the change in outlook reflects the expectation that asset quality will improve, as the bank is working to conclude a € 0.7 billion MES sale agreement early in 2022 with the well-known project ” Starlight ».
“Once completed, the sale of NPLs will reduce the capital burden on unsecured troubled assets including NPLs and recovered assets,” Fitch said, adding that he expects a strong economic recovery in Cyprus to prevent a significant deterioration of asset quality after the coronavirus pandemic.
For the rating of Elliniki, “B”, the house states that it reflects the weak quality of assets compared to international standards and the high capital burden from troubled assets. He considers that the bank's strengths are the capital ratios, which are comfortably above the supervisory requirements, but notes that “the capitalization is not proportional to the risks”.
Considers that with the completion of Starlight the MES index will fall from 14.5% (excluding loans covered by the asset protection program) around 5% and adds that the capital burden will fall from 50% of the index CET1 (without transitional provisions) at 30%.
It also refers to weak profitability, due to the bank's dependence on net interest income and high cost base, which is limited by high loan impairment charges. Profitability is under pressure due to a non-diversified business model, while costs are structurally high and the small size of the bank makes it difficult to achieve economies of scale, Fitch added.
