Standard & Poor’s Ratings Services has raised its long-term counterparty credit and certificate of deposit ratings on Slovak Republic-based banks Tatra Banka (Tatra) to ‘BBB-‘ from ‘BB+’ and on Vseobecna Uverova Banka a.s. (VUB) to ‘BB+’ from ‘BB’. The outlook is stable.

At the same time, Standard & Poor’s raised its short-term counterparty credit and certificate of deposit ratings on Tatra to ‘A-3’ from ‘B’. The ‘B’ short-term counterparty credit and certificate of deposit ratings on VUB were affirmed.

“The rating actions reflect the favourable impact of the strengthening Slovak economy on the banking sector, the maintenance of the two banks’ strong market positions, their solid financial results, and the continuing benefits deriving from business diversification, and for VUB, its ongoing restructuring,” says Standard & Poor’s credit analyst John Gibling.

“The ratings also take into account the continued support and commitment from the bank’s strategic shareholders and further economic benefits to be derived from the Slovak Republic’s EU accession in 2004,” adds Gibling. VUB and Tatra, together with Slovenska Sporitelna as (‘BBpi’), dominate the Slovak banking sector, accounting for about 60% of total assets.

Constraining rating factors include higher than average economic and industry risks that affect the Slovak banking system, tougher competition, and in particular for VUB, the effects on revenues from subdued loan growth for good quality borrowers and the challenge of growing core sustainable revenues in the medium term.

“Further improvements in the ratings on the two banks depend on the banks’ ability to obtain the potential benefits from an improving economy, while maintaining conservative risk procedures and solid financial profiles. On the other hand, negative rating actions could occur if an economic downturn drained the banks’ financial strength and financial support was not provided by the banks’ foreign strategic shareholders in a timely manner,” says Standard & Poor’s credit analyst Denis Deripasko.