Fitch: Banks Outlook in CEE 'Stable but Bleak'

The overall outlook for banks in Central and Eastern Europe, including Bulgaria, is stable but bleak given the backdrop of the eurozone crisis, stated rating agency Fitch Thursday.

According to the agency, the crisis is set to result in weaker GDP growth and a worsening of bank asset quality.

"Adverse trends have also continued in Bulgaria, Romania and Croatia, meaning that banks there have less flexibility to absorb shocks," says the Fitch press release, adding that the situation is better in Poland, Slovakia and the Czech Republic.

The agency says it expects slow lending growth, combined with higher funding costs, to put pressure on pre-impairment profitability for most of the markets in the region.

"Weak growth and high impairment charges will put pressure on banks in Slovenia and Hungary in particular," writes Fitch.

In addition, continued weakening of asset quality, without strengthening of banks' capital, is possible to result in downgrades of viability ratings in Slovenia, Hungary, Croatia, Bulgaria and Romania.

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