Moody's on May 24 upgraded Belfius Banque SA's long-term bank deposit and senior unsecured debt ratings to A1 from A2 and changed the outlook on the ratings to stable from positive.
The agency also raised the Belgium-based bank's long-term counterparty risk ratings to Aa3 from A1, its long-term counterparty risk assessment to Aa3(cr) from A1(cr), and its baseline and adjusted baseline credit assessments to "baa1" from "baa2".
The upgrades reflect the improvement in Belfius Banque's asset quality and capitalization. Its legacy assets, which still added €6 billion to the bank's risk-weighted assets as of 2018-end, have allowed for provision reversals in recent years and no longer represent any significant tail risk, Moody's said, while noting that Belfius Banque's problem loans represent only 2.1% of gross loans at the end of 2018.
The upgrades also reflect a moderate probability of support from the Belgian government. The stable outlook, meanwhile, is driven by the bank's solid fundamentals and Moody's view that the low interest rate environment will continue to pressure the bank's revenues and profitability. It also reflects Moody's expectation that the company's liability structure and probability of government support will remain largely unchanged.
Belfius Banque's Prime-1 short-term bank deposit and counterparty risk ratings and its Prime-1(cr) short-term counterparty risk assessment were affirmed. In addition, the agency upgraded the backed senior unsecured debt rating of Belfius Banque's Luxembourg-based unit Belfius Financing Co. SA to A1 from A2 and changed the outlook to stable from positive.