Fitch Downgrades Bulgarian Banks UBB, Eurobank EFG

“While the parent banks' propensity to support their international banking subsidiaries remains unchanged, their ability to do so has been reduced,” Fitch said in a statement. File photo

Fitch has lowered the long-term and short-term issuer default ratings of United Bulgarian Bank (UBB) and Eurobank EFG Bulgaria to 'BBB-' from 'BBB'; and to F2 from F3, respectively. The outlook is negative.

UBB and Eurobank EFG Bulgaria are the third and fifth largest in the country, respectively, and are Bulgarian subsidiaries of Greek Banks – the National Bank of Greece is parent of UBB, EFG Eurobank – of Eurobank EFG Bulgaria

“While the parent banks' propensity to support their international banking subsidiaries remains unchanged, their ability to do so has been reduced,” Fitch said in a statement.

The move comes shortly after Greece’s four largest lenders, including National Bank of Greece SA and EFG Eurobank Ergasias SA, had their credit ratings lowered at Fitch Ratings, which said the country’s economic crisis will hurt asset quality.

Greece aims to cut its deficit to 8.7% and that is likely to affect the Greek banks’ asset quality, which may lead to higher credit costs and lower underlying profitability, Fitch said.

According to the agency the required fiscal tightening that needs to be made by the Greek government will have a significant effect on the real economy, affecting loan demand and putting additional pressure on asset quality.

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