site.btaFitch Affirms Long-Term Issuer Default Ratings of UniCredit Bulbank, United Bulgarian Bank

Fitch Ratings announced May 28 that it has affirmed Bulgaria-based UniCredit Bulbank AD's (Bulbank) Long-Term Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook, Shareholder Support Rating (SSR) at 'bbb' and Viability Rating (VR) at 'bb+'.

Also, this rating agency affirmed United Bulgarian Bank's (UBB) Long-Term Issuer Default Rating (IDR) at 'A-'. The Outlook is Positive. The bank's Shareholder Support Rating (SSR) was affirmed at 'a-' and Short-Term IDR at 'F1', and upgraded the Viability Rating (VR) to 'bb+' from 'bb'.

The upgrade of UBB's VR primarily reflects structural improvements in the bank's profitability, supported by the merger with KBC Bank Bulgaria (KBCBG), and asset quality. The upgrade also reflects Fitch' view of reduced business and integration risks arising from the merger with KBCBG.

UBB has consolidated its position as the largest Bulgarian bank by assets, following the merger with KBCBG in 2023, and has strong market shares of around 20% of loans and deposits. The bank leverages its parent's business model through offering complete services to its client base through banking, insurance and asset management, Fitch says.

As for Bulbank, the agency says that its issue default rating is driven by its shareholder support rating, which reflects Fitch's view of a high probability of support from its parent, UniCredit S.p.A. The Stable Outlook on Bulbank's Long-Term IDR mirrors that on the parent. 

Bulbank is one of the largest banks in the concentrated Bulgarian banking sector (end-2023: 19% of sector assets), and its business profile is underpinned by its dominant position among large corporates and its strong foothold in the remaining non-retail and retail segments, the report says. Fitch has found Bulbank's diversified business model remaining resilient to various shocks through economic cycles.

Fitch sees stable business prospects. "Bulgaria's economic environment continues to improve, and converge with regional peers, offering Bulgarian banks moderate opportunities to do consistently profitable business. Banks' business prospects are underpinned by banking union membership, significant and structural improvements in asset quality over the last five years and materially reduced sector fragmentation," the report says.