Two Hungarian Banks Upgraded, One Affirmed As Economic And Industry Risks Diminish

In our view, economic and industry risks for banks in Hungary are decreasing. Credit growth has resumed in absolute terms, property markets are recovering, and the banks have left the worst behind in terms of credit losses. We also now view the overall quality of the regulation and supervision and the regulatory track record as being in line with best practices. In our view, diminishing economic and industry risks in Hungary will be supportive for banks' earnings and the cleaning up of nonperforming loans--but we do not see an immediate rating impact from these developments, in and of themselves, on the three rated banks in the country. At the same time, OTP Bank PLC's funding profile has improved and we

...+ In our view, economic and industry risks for banks in Hungary are decreasing. Credit growth has resumed in absolute terms, property markets are recovering, and the banks have left the worst behind in terms of credit losses. We also now view the overall quality of the regulation and supervision and the regulatory track record as being in line with best practices. + In our view, diminishing economic and industry risks in Hungary will be supportive for banks' earnings and the cleaning up of nonperforming loans--but we do not see an immediate rating impact from these developments, in and of themselves, on the three rated banks in the country. + At the same time, OTP Bank PLC's funding profile has improved and we now see it as better than the average of the Hungarian banking system. + We are consequently raising our long- and short-term ratings on OTP Bank PLC and its core subsidiary OTP Mortgage Bank to '###-/A-3' from '##+/B'. The outlook on both banks is stable. + We are affirming our long-...

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