Ceska Sporitelna, a.s.

The positive outlook on Ceska reflects our view that a clearer indication of the bank's additional loss-absorbing capacity (ALAC) build-up over the next 12 months could lead to an upgrade if it results in material protection for senior unsecured (preferred) creditors should the bank fail. We expect Ceska to benefit from the current economic recovery in the Czech Republic, facilitating sound earnings and continued solid risk-adjusted capitalization. We would most likely raise the rating by one notch if Ceska's ALAC buffers are sufficiently high to merit an ALAC notch, as would be indicated by a ratio of ALAC to S&P Global Ratings risk-weighted assets (RWAs) of above 5%. This will hinge on the bank's net issuance plans of bail-inable debt,

...Ceska has well managed risks from the challenging operating conditions as a result of the pandemic in line with its two Czech peers. We expect Ceska's nonperforming assets (NPAs) in retail and corporate portfolio to remain resilient. Its historically prudent credit underwriting and restrained risk appetite were supportive factors in the uncertain economic environment. Our ratings on Ceska reflect its stronger stand-alone credit profile (SACP) of 'a' compared with its two domestic peers Ceskoslovenska Obchodni Banka A.S. (CSOB) and Komercni Banka A.S., with SACPs of 'a-'. Ceska's very strong capitalization is the key strength to the rating, as indicated by our forecast risk-adjusted capital (RAC) ratio of about 16.5% by 2023....

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