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, despite macroeconomic uncertainties from the current war in Ukraine and other external risk factors. It also reflects our assumption that Erste will maintain solid profitability and capital build-up capacity. We could lower our rating 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 rating if Erste's ALAC ratio decreases sustainably below the relevant 3% threshold within our

...Erste Group Bank AG (Erste) has 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 bank is not directly affected by the war in Ukraine because it does not have subsidiaries in Ukraine, Belarus, or Russia. That said, we expect Erste to see some knock-on effects on credit losses because of the Russia-Ukraine conflict amid potential stress for borrowers in certain sectors like energy, metals, and chemicals, for which it already has precautionary provisioned loan losses. Elevated inflation is also a strain for borrowers' debt repayment capacities, particularly in the bank's retail segment. At the same time, higher interest rates across Erste's core operating regions will act as strong...

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