United Bulgarian Bank Beats Greek Parent RatingFinance | June 17, 2011, Friday // 16:08| views
International credit rating agency Standard & Poor's said it has lowered its long-term counterparty credit rating on United Bulgarian Bank A.D. (UBB) to 'B-' from 'B'.
United Bulgarian Bank is a unit of the National Bank of Greece SA, Greece's biggest lender, and the move comes a day after the downgrade in the long-term rating on the Greek parent.
Even after the downgrade however the subsidiary continues to be higher-rated than its parent.
Standard & Poor's analysts believe that as a result of the downgrade NBG will be less able to maintain its ongoing funding support to UBB.
In addition, ongoing deterioration of NBG's creditworthiness could raise the risk of contagion effects for UBB, says a statement of the agency.
"Nevertheless, we maintain that UBB demonstrates superior business and operating characteristics relative to NBG, and consider that it would be severable and independently sustainable if NBG were to experience serious difficulties," the agency adds.
If funding support from NBG were withdrawn, UBB would be able to repay its obligations to its parent without damaging its own financial profile, the agency's analysts believe.
They point out that NBG still maintains ongoing funding support to UBB in the form of existing subordinated debt, term deposits, and overnight funding.
At present, there are no indications from NBG that its support for UBB has diminished.
In the analysts' view, UBB can repay its parent via its internal cashflow generation, access to additional interbank funding and debt, as well as liquid assets.
However, owing to NBG's ownership of UBB, the agency is concerned about potential contagion risk, which could destabilize UBB's deposit base and constrain access to wholesale funding.
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