Fitch Downgrades Unicredit's Croatian, Romanian & Russian Subsidiaries; Affirms Polish Subs

Wed Mar 20, 2013 3:23pm EDT

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(The following statement was released by the rating agency) WARSAW/LONDON/MOSCOW, March 20 (Fitch) Fitch Ratings has downgraded the support-driven Issuer Default Ratings (IDR) of Zagrebacka Banka d.d. (ZABA), UniCredit Tiriac Bank S.A. (UCTB) and ZAO UniCredit Bank to 'BBB' from 'BBB+'. The Outlook is Negative. Fitch has also affirmed Bank Pekao SA (Pekao) and Pekao Bank Hipoteczny's (Pekao BH) Long-term Issuer Default Ratings (IDR) at 'A-' with Stable Outlooks. A full list of rating actions is below. The rating actions follow the downgrade of the banks' ultimate parent UniCredit S.p.A. (UC) to 'BBB+' with Negative Outlook (see "Fitch Takes Rating Actions on Italian Banks Following Sovereign Downgrade at www.fitchratings.com) RATING DRIVERS: ZABA, UCTB and ZAO UniCredit Bank ZABA, UCTB and ZAO UniCredit Banks' Long- and Short-term IDRs and Support Ratings are based on potential support available from their ultimate parent, UC. The affirmation of their Support Ratings at '2' reflects Fitch's view that UC will continue to have a strong propensity to support these banks given the strategic importance of the Central and Eastern Europe (CEE) region and Russia for UC. The downgrades of their IDRs reflect Fitch's view of UC's weakened ability to provide support. The Negative Outlook on their Long-term IDRs mirrors that on UC. The banks' Viability Ratings (VR) are not affected by these rating actions. RATING DRIVERS: Pekao Pekao's Long- and Short-term IDRs are based on its intrinsic strength, reflected in its VR of 'a-' (for more details see 'Fitch Affirms Bank Pekao SA and Pekao Bank Hipoteczny' dated 30 January on www.fitchratings.com). The affirmation of Pekao's 'A-' Long-term IDR with a Stable Outlook reflects Fitch's view that there is only moderate contagion risk for Pekao from negative developments at UC, and a further one-notch downgrade of UC would be unlikely to result in a change in Pekao's ratings. The affirmation of Pekao's '2' Support Rating reflects Fitch's view that UC will continue to have a high propensity to provide support to Pekao, given the strategic importance of Polish banking operations to UC. However, at the current rating levels, Pekao's IDRs do not benefit from support available from UC. RATING SENSITIVITIES: ZABA, UCTB and ZAO UniCredit Bank IDRs and Support Ratings Fitch views these subsidiaries as strategically important for UC and notches their Long-term IDRs once down from UC's Long-term IDR. Therefore, any further downgrade of UC's Long-term IDR would be likely to result in a downgrade of these bank's Long-term IDRs and ZAO UniCredit's National Rating. Any further downside risk for ZAO UniCredit's Long-term IDR would likely be limited to one notch,, given its 'bbb-' VR. At present these subsidiaries' IDRs and Support Ratings do not incorporate any potential support coming directly from their direct owner UniCredit Bank Austria AG (UCBA, 'A'/Stable/'bbb+'). This reflects Fitch's view that the Austrian authorities would probably look to UC to provide support to the CEE subsidiaries before allowing any Austrian sovereign support to flow through to these entities. It also considers the risk that any further negative developments at UC could ultimately also result in deterioration of UCBA's stand-alone credit profile, weakening its ability to provide support to the CEE subsidiaries. ZABA, UCTB and ZAO UniCredit Bank's ratings could stabilise at their current levels if the Outlook on UC also reverts to Stable. RATING SENSTIVITIES - Pekao, IDRs, VR Pekao's ratings would be unlikely to be impacted by a possible further one-notch downgrade of UC's Long-term IDR, given the agency's view of only moderate contagion risk for Pekao from negative developments at UC. However, Pekao's ratings could come under negative pressure if there was a multi-notch downgrade of UC, which Fitch does not anticipate at present. An upgrade of Pekao's VR and IDRs is unlikely in the short to medium term, given the weakening operating environment and pressure on UC's credit profile. Pekao's VR is currently not constrained by the sovereign rating, so positive rating action on Poland's sovereign ratings would not result in an upgrade of Pekao's ratings. Pekao could be downgraded if there was further escalation of the eurozone crisis, which could result in increased impairment charges due to a less supportive local operating environment. RATING SENSTIVITIES - Pekao's SUPPORT RATING In Fitch's view, UC's propensity to support Pekao will remain strong. However, Pekao's Support Rating could be downgraded if UC's Long-term IDR was downgraded to 'BBB-' or below. Any downgrade of the Support Rating would likely be limited to one notch given the systemic importance of the bank for the Polish banking sector and the potential for support, if needed, from the Polish authorities. RATING ACTION RATIONALE, DRIVERS AND SENSITIVITIES: Pekao BH The affirmation of Pekao BH's ratings reflects Fitch's view that it is a core subsidiary for Pekao, as a result of which Pekao BH's IDRs are equalised with those of its parent and have the same Stable Outlook. Pekao BH IDRs will likely move in tandem with those of Pekao. The rating actions are: ZABA Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+', Outlook Negative Short-term foreign currency IDR: downgraded to 'F3' from 'F2' Viability Rating: 'bb+', not affected Support Rating: affirmed at '2' UCTB Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+', Outlook Negative Short-term foreign currency IDR: downgraded to 'F3' from 'F2' Viability Rating: 'bb-', not affected Support Rating: affirmed at '2' ZAO UniCredit Bank Long-term foreign and local currency IDRs: downgraded to 'BBB' from 'BBB+'; Outlook Negative Short-term foreign and local currency IDRs: downgraded to 'F3' from 'F2' National Long-term rating: affirmed at 'AAA(rus)'; Outlook revised to Negative Support Rating: affirmed at '2' Viability Rating: 'bbb-', not affected Bank Pekao Long-term foreign currency IDR: affirmed at 'A-', Outlook Stable Short-term foreign currency IDR: affirmed at 'F2' Viability Rating: affirmed at 'a-' Support Rating: affirmed at '2' Pekao BH Long-term foreign currency IDR: affirmed at 'A-', Outlook Stable Short-term foreign currency IDR: affirmed at 'F2' Support Rating: affirmed at '1' National Long-term rating: affirmed at 'AA(pol)', Outlook Stable National Short-term rating: affirmed at 'F1+(pol)' Contact: Primary Analyst (ZABA) Banu Cartmell Director +44 20 3530 1109 Fitch Ratings Limited 30 North Colonnade London E14 5GN Primary Analyst (ZAO UniCredit Bank) Olga Ignatieva Director +7 495 956 6906 Fitch Ratings CIS Limited 26 Valovaya Street, Moscow 115054 Primary Analyst (Bank Pekao SA, UCTB) Artur Szeski Senior Director +48 22 338 6292 Fitch Polska S.A. Krolewska 16, 00-103 Warsaw Primary Analyst (Pekao Bank Hipoteczny) Agata Gryglewicz Analyst +48 22 330 6970 Fitch Polska S.A. Krolewska 16, 00-103 Warsaw Secondary Analyst (ZABA) Agata Gryglewicz Analyst +48 22 330 6970 Secondary Analyst (UCTB) Levent Topcu Director +90 212 284 7819 Secondary Analyst (ZAO UniCredit Bank) Dmitri Abramov Director +7 495 956 2409 Secondary Analyst (Bank Pekao SA) Michal Bryks, ACCA Director +48 22 338 6293 Secondary Analyst (Pekao Bank Hipoteczny) Artur Szeski Senior Director +48 22 338 6292 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15 August 2012, 'Rating FI Subsidiaries and Holding Companies', dated 10 August 2012, Evaluating Corporate Governance, dated 12 December 2012, 'Rating Financial Institutions Above the Sovereign', dated 11 December 2012 are available at www.fitchratings.com. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here Evaluating Corporate Governance here Rating Financial Institutions Above the Sovereign here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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