Fitch Upgrades Hellenic Bank’s Shareholder Support Rating to 'bb' Following Eurobank Stake Increase

Fitch Ratings has upgraded the Shareholder Support Rating (SSR) of Hellenic Bank Public Company Limited (Hellenic Bank) from “bb-” to “bb”, the agency announced on Monday. This decision follows the recent upgrade of Eurobank S.A.’s Long-Term Issuer Default Rating (IDR) from “BB” to “BB+”.

Eurobank, which now holds a 55.9 per cent stake in Hellenic Bank, is viewed by Fitch as the most likely source of financial support for the Cypriot bank. Despite the SSR upgrade, Fitch clarified that Hellenic Bank’s long-term IDR remains at “BBB-”, driven by its Viability Rating of “bbb-”. No other ratings were affected by this recent change.

The upgrade of Hellenic Bank’s SSR to “bb” now places it one notch below Eurobank’s Long-Term IDR. According to Fitch, the decision reflects the expectation that Eurobank’s ability and willingness to provide support will remain somewhat limited until the bank further increases its stake in Hellenic Bank to over 75 per cent or achieves greater integration and synergies, particularly due to the influence of significant minority shareholders.

Fitch also noted that while Hellenic Bank’s size relative to Eurobank is such that any required support would be manageable, it would still represent a material commitment for the parent company.

Over the past two years, Eurobank has progressively increased its stake in Hellenic Bank, securing a majority shareholding in June 2024. Full consolidation of Hellenic Bank into Eurobank’s operations began on July 1, 2024, boosting the group’s total assets by around 22 per cent, bringing them to just under €100 billion.

“Eurobank’s involvement in Hellenic Bank’s management has been limited so far,” Fitch stated in its report. “However, Eurobank plans to shortly replace part of Hellenic Bank’s board of directors and appoint its new chief executive officer, thus taking a more active role,” the agency added.

Fitch further commented that it expects Eurobank to achieve “some integration and synergies,” although the extent of these outcomes will largely depend on Eurobank’s success in further increasing its stake in Hellenic Bank or merging it with Eurobank’s existing Cypriot subsidiary.

Fitch also identified several factors that could result in a downgrade of Hellenic Bank’s SSR. These include a potential downgrade of Eurobank’s Long-Term IDR or the failure of Eurobank to further increase its stake in Hellenic Bank. Additionally, if minority shareholders significantly obstruct the integration process between Eurobank and Hellenic Bank, thereby preventing meaningful synergies, the SSR could come under downward pressure.

On the other hand, an upgrade of Hellenic Bank’s SSR would likely require improvements in Eurobank’s Long-Term IDR or a stronger display of commitment to supporting Hellenic Bank. This could include Eurobank increasing its stake beyond 75 per cent, achieving deeper integration, or establishing a track record of synergies between the two banks.

Finally, Fitch noted that Environmental, Social, and Governance (ESG) factors did not play a direct role in the SSR upgrade. The agency assigned Hellenic Bank an ESG relevance score of “3”, indicating that while ESG factors are considered, they are credit-neutral and have a minimal impact on the overall rating of the bank.

By fLEXI tEAM