Ratings agency Fitch has downgraded its rating of (1580 HUF, 5,33%) Bank’s Russian unit to BB from BB+, whilst moving the outlook for the long-term issuer default rating to negative from stable. The rating remains based on high propensity of the subsidiary to receive support from its parent and this remains the base scenario of Fitch. However, an ongoing deterioration of the operating environment in Hungary and sharp downturn in other CEE and CIS countries has weakened its standalone credit profile, increasing uncertainty.
The news may have a negative trading impact today. However, we believe a very pessimistic economic and operating outlook has already been priced in by the market. Investor confidence remains low but recent days have seen a recovery of the forint off its lows and a decline in Hungary’s benchmark credit default swap to 537bp from an all-time high of 638 last week, moderately improving sentiment towards the stock.