The upgrade is driven by the strengthened credit risk profile of the Government of Slovenia and unchanged assumption of a moderate likelihood of government support in case of need for the bank.
Moody’s has upgraded the long-term local and foreign currency deposit ratings of NLB (and NKBM) to Baa1 from Baa2. The outlook on the long-term deposit ratings remains stable.
Concurrently the agency has upgraded the two banks’ local and foreign currency long-term Counterparty Risk Ratings (CRRs) to A3 from Baa1 and their long-term Counterparty Risk Assessments (CRA) to A3(cr) from Baa1(cr). The banks’ short-term local and foreign currency P-2 deposit ratings and CRRs and their P-2(cr) short-term CRAs have been affirmed.
The rating actions follow the recent upgrade of the Government of Slovenia’s long-term issuer and senior unsecured bond ratings to A3 from Baa1
The upgrade of the banks’ long-term deposit ratings is driven by the strengthened credit risk profile of the government of Slovenia, as indicated by the upgrade of the Slovenian government issuer rating to A3 from Baa1 and Moody’s unchanged assumption of a moderate likelihood of government support in case of need for these banks which results in one notch of uplift in the banks’ deposit ratings. Moody’s support assumption considers the two banks’ importance in the domestic banking sector, each accounting for more than 20% of total sector assets.
The stable outlook reflects the agency’s view that the banks’ credit profiles will remain broadly stable over the next 12 to 18 months.
Factors That Could Lead to an Upgrade or Downgrade of the Ratings
The banks’ deposit ratings could be upgraded following a strengthening of their standalone credit profile. An increase in the amount of subordinated liabilities creating a higher cushion for depositors could also lead to an upgrade of the deposit ratings. On the contrary, a worsening in the banks’ standalone credit profile or a lower uplift to deposit ratings following the application of Moody’s Advanced LGF could lead to a downgrade of the banks’ deposit ratings, CRRs and CRAs.
