Erste Group Bank AG

The stable outlook on Erste reflects our view that, over the next 18-24 months, it will preserve a solid balance sheet--in particular sound asset quality metrics and strong liquidity buffers--in what would likely be a supportive economic environment. It also reflects our assumption that Erste will maintain solid profitability and capital build-up capacity. We could lower our ratings on Erste if we see a more material or prolonged setback for profitability and asset quality, particularly if the bank becomes loss-making. This would challenge our current view that Erste demonstrates superior resilience in difficult markets. We could also lower the ratings if Erste's ALAC ratio decreases sustainably below the relevant 3% threshold within our forecast horizon. Although unlikely, we could raise

...Erste Group Bank enjoys a well-managed business model with strong franchise in retail, small and midsize enterprises (SMEs), and corporate banking across Austria and six core strategic countries in CEE. The pandemic has caused weaker economic and operating conditions for Erste's main markets. Nevertheless, we think the group is well-positioned and has effectively managed the biggest COVID-19-related challenges. Aside from temporary setbacks during the pandemic, management has advanced its efforts to digitalize the bank, thereby helping to safeguard the customer base against changing consumer preferences. The management team is stable and has, in our view, followed a generally consistent strategy. We project that our main capital indicator, the risk-adjusted capital (RAC) ratio, on Erste will remain close to 10% in the next 12-24 months. This includes our understanding that growth of the bank's retail and corporate lending will mainly be in lower-risk countries such as Austria, the Czech...

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