Standard & Poor’s Rating Services has raised its long and short-term counterparty credit and certificate of deposit ratings on Czech Republic-based Komercni Banka AS (KB) and Ceska Sporitelna as (CS) to ‘BBB/A-2’ from ‘BBB-/A-3’. The outlook on both banks is positive.
At the same time, Standard & Poor’s revised the outlook on Czech Republic-based Ceskoslovenska Obchodni Banka AS (CSOB) to positive from stable, and affirmed its ‘BBB/A-2’ counterparty credit and certificate of deposit ratings on the bank.
“The rating actions on CS and KB reflect the largely completed restructuring and integration programmes, which have modernised and revitalised the two banks, and have underpinned their improved financial performance,” says Standard & Poor’s credit analyst John Gibling. The ratings also reflect the increasing strategic importance of both banks to their foreign strategic investors and the maintenance of their strong market positions.
“The rating actions on all three banks also reflect the Czech banking industry’s strong potential, the further economic benefits to be derived from the country’s EU accession in 2004, and the ongoing support from the banks’ respective strategic shareholders,” adds Gibling. Between them, these three banks account for about 60% of the Czech banking system’s assets.
Constraining rating factors include the medium-term challenge of growing sustainable revenues and the higher-than-average, but improving, economic and industry risks, which are prevalent in the Czech Republic .
“Future improvements in the three banks’ creditworthiness depend on their ability to sustain improved financial performance, particularly their ability to grow core earnings and maintain strong asset quality; continued positive developments in the economic environment of the Czech Republic; and improvements in industry risk (in particular, weak creditor rights),” says Standard & Poor’s credit analyst Alise Ross. “Conversely, the ratings could be negatively impacted by an economic downturn and resurgence of asset quality problems that would negatively affect the banks’ financial strength that would not be supported by the banks’ foreign strategic shareholders in a timely manner.”