Research Update: Austria-Based Erste Group Bank Ratings Affirmed On Solid Buffers, Outlook To Stable On Deepening COVID-19 Risks

Despite governments' measures to contain the COVID-19 pandemic, European economies, including Austria and others to which Erste Group is exposed, face an unprecedented challenge. While Erste Group's earnings and, to a lesser extent, capitalization could be weaker than we previous expected, we expect it to demonstrate superior resilience thanks to its solid business model, strong profitability, and financial buffers. We are therefore revising to stable from positive our outlook on Erste Group Bank AG (Erste) and its core subsidiary Ceska Sporitelna A.S. At the same time, we are affirming our long- and short-term issuer credit ratings at 'A/A-1'. The stable outlook reflects our expectation that Erste will manage the downside risks that it faces in the coming 12-24 months. This

...- Despite governments' measures to contain the COVID-19 pandemic, European economies, including Austria and others to which Erste Group is exposed, face an unprecedented challenge. - While Erste Group's earnings and, to a lesser extent, capitalization could be weaker than we previous expected, we expect it to demonstrate superior resilience thanks to its solid business model, strong profitability, and financial buffers. - We are therefore revising to stable from positive our outlook on Erste Group Bank AG (Erste) and its core subsidiary Ceska Sporitelna A.S. At the same time, we are affirming our long- and short-term issuer credit ratings at 'A/A-1'. - The stable outlook reflects our expectation that Erste will manage the downside risks that it faces in the coming 12-24 months. This includes our opinion that economic risk for the Austrian banking system could increase in the medium term as a result of the COVID-19-related economy slowdown, and weakening operating conditions in Erste's core...

Research Update