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Fitch Downgrades Zagrebacka Banka d.d. to 'BBB-'; Outlook Stable
August 12, 2014 / 4:01 PM / 3 years ago

Fitch Downgrades Zagrebacka Banka d.d. to 'BBB-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, August 12 (Fitch) Fitch Ratings has downgraded Zagrebacka Banka d.d.'s (ZABA) Long-term Issuer Default Rating (IDR) to 'BBB-' from 'BBB'. The Outlook is Stable. Fitch has also placed the bank's Viability Rating (VR) of 'bb+' on Rating Watch Negative (RWN). A full list of rating actions is at the end of this comment. KEY RATING DRIVERS - IDRS AND SUPPORT RATING ZABA's Long- and Short-term IDRs and Support Ratings are based on the potential support available from its ultimate parent, UniCredit S.p.A. (UC; BBB+/Negative/bbb+). Fitch believes that UC continues to have a strong propensity to support ZABA given the importance of the Central and Eastern Europe (CEE) region to its strategy and would normally rate ZABA one notch below UCI's IDR. However, ZABA's Long-term IDR is capped by the Country Ceiling of Croatia, which was lowered to 'BBB-' from 'BBB' on 08 August 2014. (for more details see 'Fitch Downgrades Croatia to 'BB'; Outlook Stable' at The Stable Outlook mirrors that on the sovereign. Fitch does not incorporate into ZABA's rating any potential support coming directly from ZABA's direct owner's, UniCredit Bank Austria AG (UCBA, A/Negative/bbb+). This is because UCBA's Long-term IDR currently benefits from Fitch's view of potential support from Austrian sovereign due to its systemic importance. Fitch believes that the Austrian authorities would probably look to UC to provide support to its CEE subsidiaries before allowing any Austrian sovereign support to flow through to these entities. Fitch also considers its expectation of weakening sovereign support (for more details see 'Fitch Revises Outlooks on 18 EU Commercial Banks to Negative on Weakening Support' at as well as the risk that any potential negative developments at UC could ultimately also result in deterioration of UCBA's standalone credit profile, weakening its ability to provide support to the CEE subsidiaries. RATING SENSITIVITIES - IDRS AND SUPPORT RATING ZABA's IDRs could be downgraded if (i) UC markedly changes its CEE strategy, resulting in a lower expectation of parent support for its subsidiaries in the region in general, and ZABA in particular; or (ii) Croatia's Country Ceiling was further lowered to 'BB+' from 'BBB-'. Fitch does not consider this second scenario to be likely given the Stable Outlook on the Croatian sovereign rating. The upgrade of ZABA's Long-term IDR would require an upgrade of the Croatian sovereign. Given the recent downgrade of the sovereign, Fitch considers this to be unlikely in the short to medium term. KEY RATING DRIVERS AND SENSITIVITIES - VR Following the recent sovereign downgrade, ZABA's VR is one notch above Croatia's sovereign rating. According to Fitch's criteria the sovereign rating often acts as an effective cap on the maximum level of VR in a jurisdiction. Fitch has therefore placed ZABA's VR of 'bb+' on RWN and intends to reassess the impact of the sovereign action on ZABA's VR and resolve the RWN in the coming weeks. The rating actions are as follows: Long-term foreign currency IDR: downgraded to 'BBB-', Outlook Stable Short-term foreign currency IDR: affirmed at 'F3' Support Rating: affirmed at '2 Viability Rating: 'bb+'; placed on RWN Contact: Primary Analyst Banu Cartmell Director +44 20 3530 11 09 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Agata Gryglewicz Analyst +48 22 330 69 70 Committee Chair Claudia Nelson Senior Director +44 20 3530 1191 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at Applicable criteria, 'Global Financial Institutions Rating Criteria' dated January 2014, and 'Rating FI Subsidiaries and Holding Companies' dated August 2012 are available at Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here Additional Disclosure Solicitation Status 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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