OTP Bank’s debt and deposit ratings has been lowered by Moody's Investors Service, among 44 banks, following the modification of the agency bank rating methodology which incorporates joint default analysis (JDA). The refined methodology, released on March 30th, reduces external support level incorporated into bank deposit and debt ratings in order to give greater weight to intrinsic financial strength. Ratings downgrade include:
• OTP Bank: to Aa3 from Aa1 (pre-JDA rating A1),
• OTP Mortgage Bank: to Aa3 from Aa1 (no pre-JDA local currency rating),
• OTP Banka Slovensko (OBS): to A2 from A1 (no pre-JDA local currency rating)
Our view: The major downgrades have been expected and came as a result of the criticism of inconsistency in the Moody's Investors Service ratings. In February Moody's raised OTP Bank A1 local bank deposit rating three steps to Aa1 justifying the ranking by support of government that would be willing to pay back bank debt before sovereign obligations to prevent a banking crisis. We do not expect any trading impact as of today.