Moody's on May 28 upgraded Hungary-based MKB Bank Zrt.'s long-term foreign- and local-currency bank deposit ratings to B1 from B2, and changed the outlook to positive from stable.
The agency also upgraded the bank's baseline and adjusted baseline credit assessments to "b3" from "caa1," long-term counterparty risk ratings to Ba3 from B1, and long-term counterparty risk assessment to Ba3(cr) from B1(cr).
The rating agency affirmed the bank's Not-Prime short-term deposit ratings and short-term counterparty risk ratings, and Not-Prime(cr) short-term counterparty risk assessment.
The upgrades reflect improvement in MKB's asset quality and profitability due to rising capital buffers and ongoing reduction in problem loans, with the ratio of problem loans to gross loans declining to 8.8% in December 2018 from 30.1% in December 2015. Moreover, the agency noted that the bank's solvency is improving, as a result of these measures, ahead of its intended IPO towards year-end 2019.
The positive outlook reflects Moody's expectation that MKB will continue to improve its asset quality as a result of resumed loan growth and by benefiting from Hungary's positive macroeconomic environment. The outlook also incorporates the agency's expectation that the bank will complete its restructuring plan and intended public listing by the end of 2019.