Moody's on Aug. 1 downgraded First Investment Bank AD's long-term bank deposit ratings to B3 from B2 and revised the outlook on the rating to negative from stable.
The agency also lowered the Bulgarian bank's baseline and adjusted baseline credit assessments to "caa1" from "b3", its long-term counterparty risk ratings to B1 from Ba3 and its long-term counterparty risk assessments to Ba3(cr) from Ba2(cr).
The downgrades take into account the results of the ECB's comprehensive assessment of six Bulgarian banks, which found a capital shortfall of €262.9 million at Fibank. Based on the assessment, which included an asset quality review, Moody's said the quality of the bank's credit portfolio could present a more material risk to its solvency than previously projected.
The ratings action also reflects the extent of the capital shortfalls identified for Fibank, in addition to measures already taken and expected to be taken by the bank to address the capital shortfalls. The bank has said it already secured €130 million from several sources, on top of a pre-provisioning profit of €65 million for the first half, to bolster its capital, and that it will plug the remaining €133 million shortfall with financial resources coming from its operating profit and by implementing other measures, including derisking its credit portfolio.
The outlook change to negative, meanwhile, reflects Moody's view that any additional IFRS 9 stage 3 and stage 2 loans may require further provisions and could negatively impact Fibank's financial performance in the next 12 to 18 months, including dampening its net income and the pace of its credit portfolio derisking.
Concurrently, the bank's Not Prime short-term bank deposit and counterparty risk ratings and Not Prime(cr) short-term counterparty risk assessment were affirmed.