Erste Group Bank AG

The stable outlook reflects our view that, over the next 18-24 months, Erste will preserve a solid balance sheet--namely sound asset quality metrics and strong liquidity buffers--despite challenges stemming from spillover effects on European economies from the war in Ukraine, and the only-moderate economic recovery in the bank's key operating regions. It also reflects our assumption that Erste will maintain its solid profitability and capital-building capacity. We could lower our rating on Erste if we see a more material or prolonged setback to profitability and asset quality, particularly if the bank becomes loss-making, however this is a remote scenario. This would challenge our current view that Erste demonstrates superior resilience in difficult markets. We could also lower the rating if

...Erste Group Bank has a well-managed business model with a strong franchise in retail, small and midsize enterprises (SMEs), and corporate banking across Austria and six core strategic countries in CEE. The group benefits from higher interest income across its operating regions because of substantially higher interest rates in the euro area and CEE countries. While this contributed to Erste's operating income in 2022 and throughout 2023, we expect more pressure through higher funding costs on its net interest margins. Remuneration for depositors has recently picked up and we believe this will persist and bring down net interest margins....

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