Aktia Bank PLC

The stable outlook indicates that we expect Aktia to preserve a sound financial position, underpinned by strong risk-adjusted capitalization and prudent capital management, over the next two years. We expect the bank will continue building and maintain an additional loss-absorbing capacity (ALAC) buffer--consisting of senior nonpreferred and Tier 2 capital instruments--sufficiently above our adjusted threshold of 4% of S&P Global Ratings' risk-weighted assets. Clarity about Aktia's potential subordination requirement on its minimum requirement for own funds and eligible liabilities (MREL) could further strengthen its ALAC buffer. We could lower the rating if the bank's asset quality and earnings came under greater pressure than we currently expect, or if the bank inorganically grew its risk-weighted assets beyond our current expectations, leading

...We expect stable revenue generation and sound cost control will continue to support Aktia's strong capitalization over the next two years. S&P Global Ratings views Aktia's earnings capacity and capital position as a rating strength and projects the risk-adjusted capital (RAC) ratio on Aktia at 12.0%-13.0% over 2024-2026, from 11.9% as of Dec. 31, 2023. In our forecast we project pretax profits of 117 million-127 million over the next two years, compared with 106 million in 2023, translating into a strong return on average equity of 13%-15% (13.1%). Assuming shareholder dividends of 60%, this allows continuous capital build up of 7%-10% annually. Our projections are based on historically wide albeit gradually tightening net interest margins compensating weaker loan growth of around 1% in 2024, before recovering to 3%-5% in 2025-2026. We expect Aktia will maintain sound cost control and that income from wealth management will remain stable or increase slightly....

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