Komercni banka: Rating upgrade by Moody’s

Following a change in the outlook of the A1 rating for Czech government bonds to positive from stable, rating agency Moody’s also upgraded the financial strength ratings of several banks in the country, including Komercni Banka and Ceske Sporitelna, from C- to C. The outlook on Komercni Banka's foreign currency deposit rating of A1 was also changed to positive from stable. Moody's highlighted the ownership of Societe Generale as a supporting factor, as well as the bank's strong earnings, asset quality, and capital. We view the shift towards a more positive outlook for Czech Republic positively, particularly as it provides a useful contrast versus the situation in Hungary at the moment. We reiterate our Buy recommendation on Komercni Banka.