Fitch Maintains Bulgaria FIBank’s Rating at BB- with Negative Outlook

Fitch Ratings has affirmed Bulgaria’s First Investment Bank (FIBank) Long-term Issuer Default Rating (IDR) at 'BB-' with a Negative Outlook and its Viability Rating (VR) at 'b-'.

The rating action reflects Fitch's view that “as a domestically-owned systemically important bank in Bulgaria, extraordinary support from the Republic of Bulgaria (BBB-/Stable) may be available, if needed”.

This was evident in June when the Bulgarian state, with the approval of the European Commission, provided extraordinary liquidity support to FIBank, following a deposit run and negative rumours about the bank.

First Investment Bank, Bulgaria’s third-largest lender and the country’s second-largest retail deposit-taker at the end of the first half of this year.

Against this backdrop, the rating agency views “the propensity of the Bulgarian authorities to provide extraordinary support to FIBank as moderately strong”  because of “the bank's systemic importance, particularly in terms of its funding profile”.

“However, in Fitch's view, weaknesses in the bank's corporate governance could result in somewhat greater uncertainty about the authorities' readiness to support the bank in all circumstances, including the provision of capital support in case of need,”

“The Negative Outlook on the Long-term IDRs reflects Fitch's view that there is a clear intention to reduce implicit state support for banks in the EU,” the global rating agency said in a statement.

FIBank's Viability Rating reflects ”weaknesses in corporate governance, potentially high related-party and relationship lending, weak asset quality and tight capitalisation,” Fitch said, adding the deposit run in June “suggests that customer funding may not be stable in all circumstances”.

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