Moody’s sees positive outlook for Hellenic Bank following Eurobank deal

Moody’s upgraded Hellenic Bank’s credit rating to Baa2 from Baa3 on Wednesday, citing the recent acquisition of a 56% stake by Eurobank S.A. The agency also revised the bank's outlook to positive.

The upgrade, which concludes a review that began on June 18, 2024, reflects Hellenic Bank's ongoing improvement in creditworthiness, bolstering its financial strength, according to Moody’s. The rating agency believes the bank’s fundamentals and overall franchise will remain strong following Eurobank’s majority acquisition.

Moody’s noted that the positive outlook for Hellenic Bank aligns with the positive outlook for its parent company, Eurobank. The bank has further strengthened its capital adequacy, reporting a CET1 capital ratio of 26.6% in June 2024, up from 20.8% a year earlier.

"We expect capital levels to continue increasing, supported by improved internal capital generation and moderate loan growth, while capital risks have gradually receded," Moody’s said.

The bank's profitability has also improved amid rising interest rates, with net income relative to tangible assets reaching 2.2% in the first half of 2024, up from 1.6% in the same period in 2023. While profitability is expected to decrease from recent highs due to lower normalized interest rates, Moody’s anticipates steady earnings driven by growth in insurance-related activities.

Cost-cutting initiatives and further measures over the next two years will offset higher staff expenses following a recent agreement between the bank and its workers’ union, the rating agency added.

Moody’s highlighted that Hellenic Bank navigated the period of high inflation and interest rates without impacting its asset quality, with the non-performing loans ratio dropping to 2.4% in June 2024, down from 3.3% a year earlier, excluding government-guaranteed loans.

Regarding the Eurobank acquisition, Moody’s said it offers "long-term benefits" and stressed that Hellenic Bank will continue to operate independently from Eurobank Cyprus Ltd in the short term. However, the acquisition may lead to a more "focused strategic direction" and provide access to Eurobank’s expertise, particularly in corporate and private banking and wealth management.

[Information sourced from CNA]