Update: 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 challenges stemming from spillover effects from the war in Ukraine to European economies and the global economic slowdown. It also reflects our assumption that Erste will maintain solid profitability and capital-building 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

...Erste Group Bank (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 group benefits from higher interest income across its core operating regions because of substantially higher interest rates in the euro area and CEE countries. While this has contributed to Erste's operating income in 2022 and the initial months of 2023, we expect pressure from higher funding costs on net interest margins, particularly from a repricing of Erste's large deposit base. The group has not yet seen a relevant asset quality deterioration, despite a generally weaker economic environment in Europe and elevated uncertainties from the war in Ukraine. On the contrary, it reported a 21 million...

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