S&P Lowers Banca Comerciala Romana Rtg To ‘BB+’, Outlook Neg

S&P said the decision follows the downgrade action made on Romania this week. Monday, S&P cut Romania’s long-term foreign currency rating to BB+, below investment grade, from BBB-.

"As the largest bank in the country, BCR’s performance and fundamentals are highly correlated with sovereign creditworthiness through, among other things, its role as the major financier of the local economy and its material holdings of government securities," Standard & Poor’s credit analyst Magar Kouyoumdjian said in a statement.

S&P said the ratings on BCR remain constrained by its relatively high level of adversely classified loans; increasing competition, particularly from foreign banks; pressurized margins and high economic and industry risks in the Romanian banking sector.

The agency said BCR’s outlook remained negative.

On Monday, S&P lowered its long- and short-term foreign currency sovereign credit ratings on Romania to ‘BB+/B’ from ‘BBB-/A-3’, and its local currency long-term rating to ‘BBB-‘ from ‘BBB’.

"The outlook on BCR reflects that on the sovereign, as well as our growing concerns about the impact of the difficult operating environment in Romania, which could place downward pressure on the bank’s stand-alone creditworthiness," Kouyoumdjian said.

"The downgrade reflects the mounting risks to Romania’s real economy due to high and rising private sector leverage and the related dependency on an increasingly uncertain external financing channel," Standard & Poor’s credit analyst Marko Mrsnik said.

BCR reported a net profit after taxes and minority interests of 759.5 million lei (EUR1-RON3.6645) in the first half of the year, up 63.5% against RON 464.6 million in the same period a year earlier.

BCR reported assets worth a total of RON64.81 billion at the end of the first six months, up 2.3% compared with RON63.358 million at the end of December.Austria’s Erste Bank owns a majority stake of 61.88% in BCR shares.

Erste paid EUR3.75 billion in 2006 to buy a majority stake of 61.88% in Banca Comerciala Romana, in the biggest privatization transaction made in Romania. Erste has subsequently increased its share to 69%, after buying the shares owned by BCR employees.