The prospects are positive after its agreement to sell a portfolio of nonperforming exposures (NPEs), as reported by Moody’s. Moody's upgraded Hellenic Bank's long-term debt to Ba3 from B1 on Wednesday (20/4), maintaining the positive outlook.

 A full list of affected ratings can be found at the end of this press release:
Company Ltd's (Hellenic Bank) long-term deposit ratings to Ba3 from B1, its senior unsecured, junior senior unsecured and subordinate MTN program ratings to (P)B3 from (P)Caa1, its long-term Counterparty Risk Ratings (CRRs) to Ba2 from Ba3, its long-term Counterparty Risk Assessment (CRA) to Ba2(cr) from Ba3(cr) and its Baseline Credit Assessment (BCA) and Adjusted BCA to b2 from b3. The outlook on the bank's longterm deposit ratings is positive.

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RATINGS RATIONALE
The upgrade of Hellenic Bank's ratings and assessments reflects the significant improvement in the bank's asset quality following its agreement to sell a portfolio of nonperforming exposures (NPEs) with a gross book value of €720 million to an entity managed and advised by Pacific Investment Management Company LLC (PIMCO), a global fixed-income investment manager. The bank expects to complete the transaction, which is subject to regulatory approvals, by the end of 2022.

Moody's expects the transaction will be concluded, which will reduce Hellenic Bank's stock of NPEs to a proforma 11.6% of gross loans as of December 2021, from 21.3% as of September 2021. Excluding the NPEs that are guaranteed by the government, the bank's NPEs/gross loans ratio is lower, at 4.4%,. The NPE ratio drops further to 3.4% (excluding NPEs guaranteed by the government) by also incorporating a recent acquisition of performing loans from another domestic bank and other small NPE disposals, a figure that is close to Hellenic Bank's strategic medium-term target of an NPE ratio of around 3.0%. The coverage of residual NPEs (excluding those guaranteed by the government) is relatively high at 69% as of December 2021, pro-forma for the sale.

>>>Downlοad the full list of affected ratings

The NPE sale transaction is capital accretive adding 15 basis points to Hellenic Bank's Common Equity Tier 1 (CET1) ratio upon completion, based on December 2020 figures. Following the completion of the transaction, risks to capital from legacy NPEs will have significantly receded for Hellenic Bank, with the bank's residual net NPEs (excluding those guaranteed by the government) accounting for 6% of CET1 capital, based on pro-forma September 2021 data. Moody's expects Hellenic Bank's CET1 ratio to be around 18%, following the transaction and also incorporating the impact of the full acquisition of performing loans. The transaction has a total value of €357 million and comprises the securitisation of the NPE portfolio and the sale of Hellenic Bank's debt servicing platform, APS Debt Servicer. Hellenic Bank will retain 66.7% of the Senior Note and 5% of each of the Mezzanine and Junior Notes of the securitisation[1].

Hellenic Bank's ratings continue to also capture its strong, retail deposit-based funding and ample liquid assets. At the same time, the ratings capture elevated residual asset quality risks, in the context of the still fragile post-pandemic economic recovery, with lower economic growth than previously expected, following Russia's invasion of Ukraine and considerable downward risks.

Hellenic Bank's Ba3 deposit ratings remain positioned at two notches above its BCA, driven by the protection that Moody's expects will be afforded to depositors from more loss-absorbing junior securities, based on the rating agency's forward-looking Advanced Loss Given Failure analysis. This analysis incorporates the bank's planned upcoming MREL (minimum requirement for own funds and eligible liabilities) eligible debt issuances over the coming years. We expect the bank to successfully proceed with issuances in the next three years of at least 5% of Risk-Weighted Assets (RWAs), to meet its binding minimum MREL requirement of 24.1% of RWA (excluding the combined buffer requirement)[2] by year-end 2025.