Ceska Sporitelna, a.s.

The negative outlook on Ceska reflects our view that increasing economic risks in Czechia over the next 12-24 months could lead to weaker financial performance and asset quality. We envisage that the country could enter a deeper recession considering a potential sharper slowdown of economic growth, further energy constraints because of the war in Ukraine, and higher-than-expected inflation undermining consumers' confidence and debt repayment capacities. Because of Ceska's highly strategic group relevance to its parent, Erste Group Bank AG (A+/Stable/A-1), we consider a negative rating action on the Ceska issuer credit rating as limited to one notch below Erste's current 'a' unsupported group credit profile. In contrast, Ceska's senior nonpreferred debt could move in tandem with a weakening of Ceska's

...Ceska Sporitelna, a.s. (Ceska) has managed risks well over 2023, despite challenging operating conditions in Czechia in light of the shallow recession in the country. S&P Global Ratings expects in its base-case scenario that the bank will maintain solid profitability thanks to high operating revenue and moderate credit losses in 2023. We think nonperforming assets (NPAs) in the retail and corporate portfolios will remain steady in the next 12-24 months, but we note downside risks to our projections if the current economic slowdown becomes more entrenched....

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