Moody's affirms Romanian Banca Transilvania's rating and improves its outlook to positive
<p>International rating agency Moody's has affirmed the ratings assigned for the first time in 2023 to Romanian financial group Banca Transilvania (BVB: TLV) and improved the outlook on the long-term deposit (Baa2) and issuer ratings (Baa3) to positive from stable.</p>

<p>Low dependence of market funding and high profitability balances against risks posed by foreign currency lending and lending to high-risk market segments (SMEs mainly), while the improved outlook reflects the recently issued meaningful volumes of senior non-preferred instruments.</p>

<p>The rating agency explains that the affirmation of the bank's Baseline Credit Assessment (ba1) reflects its robust capitalization, with tangible common equity to risk-weighted assets of 16.1% as of June 2024, and strong profitability supported by the bank's leading market position in Romania along with good cost efficiency.&nbsp;</p>

<p>The bank further displays a very low market funding reliance (mostly driven by regulatory requirements), a granular deposit-based funding structure, and ample liquidity, with its loan-to-deposit ratio in a range of around 50% to 60% over the past few years.</p>

<p>These strengths are balanced against elevated asset risks related to the bank's material share of foreign-currency lending at around one-third of the loan book, as well as its credit exposure to higher-risk segments, like small businesses and consumer lending. There are also tail risks from a high share of foreign currency – mainly euro – liabilities at 41% of the total as of the end of 2023 and some concentration in the bank's liquid assets towards Romanian government securities.</p>

<p>The affirmation also reflects the credit impact from various acquisitions over the past year, balancing financial and strategic benefits and related integration risks.</p>

<p>The positive outlook on the bank's long-term deposit and issuer ratings reflects the strengthened loss protection amid recently issued meaningful volumes of senior non-preferred instruments, &nbsp;now indicating potentially lower loss-given-failure for senior creditors and, if maintained as a proportion of assets, or if supported by future issuance of subordinated debt instruments, could drive additional LGF uplift for depositors and senior unsecured debt obligations.</p>

<p><em>iulian@romania-insider.com</em></p>

<p><em>(Photo source: Banca Transilvania)</em></p>