Fitch Raises Individual Ratings Of Erste, Raiffeisen Bank International, UniCredit Bank Austria

05.24.2011 By Florentina Dragu

Fitch Ratings Tuesday affirmed Erste Group Bank AG's (EBS.RO), Raiffeisen Bank International AG's, UniCredit Bank Austria AG's and Volksbanken Verbund's long-term issuer default ratings (IDR) at 'A' with stable outlooks.

At the same time, Fitch has upgraded Erste's Individual Rating to 'B/C' from 'C' and RBI's and Bank Austria's Individual Ratings to 'C' from 'C/D'. VB-Verbund's Individual Rating has been affirmed at 'C/D'.

"The upgrade of Erste's, RBI's and Bank Austria's Individual Ratings reflects the banks' continued resilient financial performance in a still challenging operating environment, notably in Central and Eastern Europe, Turkey (in the case of Bank Austria) and the Commonwealth of Independent States, their largely successful efforts to contain further asset quality deterioration and the three banks' adequate funding profiles," Fitch said in a statement.

However, their Individual Ratings also consider Fitch's expectation that impaired loans in some CEE markets have yet to peak and - in the case of Erste and notably RBI - the banks' only modest capitalization if the forthcoming repayment of government participation capital and preparations for Basel III are taken into account, the agency said.

The affirmation of VB-Verbund's Individual Rating at 'C/D' reflects Fitch's view that VB-Verbund's earnings generation capacity and capitalization has disproportionately suffered in the past three years and that the bank will have to make structural changes in the short- to medium-term to ensure that capitalization remains adequate.

Fitch expects the banks' positive performance trajectory to continue in 2011 as operating revenue should remain resilient, operating expenses remain well-controlled and loan impairment charges continue to stabilize or fall.

However, the agency also notes that the economic recovery in certain CEE markets, including Hungary, Croatia and Romania, is still fragile and represents considerable downside risk for the banks' performance in 2011.

Erste is majority stockholder in Romania's largest banking group Banca Comerciala Romana, or BCR.

UniCredit Bank Austria operates UniCredit Tiriac Bank on the local market, while Raiffeisen owns a subsidiary with the same name.

Volksbank runs Volksbank International in Romania.