Assessment of financial credibility of PKO Bank Polski SA

Creditworthiness assessment of PKO Bank Polski SA in 2015 was awarded by the rating agencies Moody's Investors Service and Standard & Poor's, which give the Bank paid rating according to their own bank assessment procedures. Fitch Ratings gives free rating (unsolicited).

On 19 May 2015, Fitch Ratings (who gives the Bank unsolicited assessment) downgraded its assessment for the Bank’s support from "2" to "5". Downgrading the support for Bank resulted from the assumption that the EU Directive on restructuring and orderly liquidation of banks (BRRD) provides a framework for the process of insolvency of banks, according to which creditors will most likely be required to cover the banks' losses in case of necessity, instead of the Treasury or in the first instance before receiving support from the Treasury.

On 21 May 2015, Moody's Investors Service published a press release on the website, which announced the change of the Bank’s ratings as a result of the review of ratings given to banks in Poland. Overview resulted from adoption of new methodology published by the Agency on 16 March 2015. According to the notes:

  • deposit rating was maintained at A2/P-1,
  • assessment of commitments was reduced from grade A2/(P)P-1 to grade A3/(P)P-2
  • evaluation of counterparty risk was graded A2(cr)/P-1(cr)
  • outlook for the rating was raised from "negative" to "stable".

The increase of perspective and maintaining the Bank's ratings resulted from the Agency's consideration of favourable macroeconomic environment in Poland and appropriate key indicators of the Bank, including improved capital ratios and the quality of the asset portfolio as well as of maintaining good profitability.

Correction of the commitments’ evaluation resulted from Moody's assessment of lower probability of granting possible support from the Treasury in the event of termination of repayment obligations by the Bank. According to Moody's Poland will implement, as a country belonging to the European Union, the EU Directive on restructuring and orderly liquidation of banks (BRRD), which in the opinion of the agency creates the need to change the probability of awarding support to the Bank by the Treasury from very high to moderate.

On 17 June 2015 Standard and Poor's rating agency has published a press release on its website ("Note"), which announced updating of an analysis and changed the ratings of the Bank. According to the Notes Standard and Poor's lowered the long-term credit rating of the Bank and unsecured debt rating from grade "A-" to grade "BBB+". At the same time the agency has maintained the short-term credit rating at "A-2" level. The prospect has been defined as "negative". The Agency maintained its Bank's assessment defined as "SACP" (stand-alone credit profile) at "bbb". Standard and Poor's had seen improving asset quality, lower cost of risk, as well as the strong liquidity position of the Bank. In the Note Agency evaluates capital level and the profitability of the Bank as adequate. Agency reviewed the Bank's support factor from the Treasury and concluded that the Bank no longer meets the definition of a Government related entity ("GRE"). Consequently it subtracted two so-called notches from evaluation of the Bank’s support. Standard and Poor's also expressed the opinion that the Bank may receive support from the Treasury in connection with the systemically important role of the Bank for the Polish economy, adding one notch to the assessment of support. At the same time Standard & Poor's emphasizes that the Treasury remains the largest shareholder, although from 2013 it reduced its share in the stock of the Bank from 51.2% to 31.4%. Negative perspective resulted from the inclusion by Standard and Poor's and predicted by the agency for the beginning of 2016 implementation of the EU Directive on restructuring and orderly liquidation of banks (BRRD). In the opinion of rating agency it creates the possibility of reducing the long-term credit rating by one notch. It is caused by introduction of solutions aggravating creditors of the Bank for its financial problems, with limited possibility of granting the Bank support by the Treasury.

On 17 December 2015, the Bank had filed an application to the Standard and Poor's rating agency to withdraw the ratings granted to the Bank. The Bank’s rating was withdrawn by the agency on 19 January 2016. Bank terminated the contract of cooperation with the rating agency Standard and Poor's and caused withdrawal of ratings due to the limitation of bond issues on international markets, especially in the United States. Termination of the contract was justified by the fact that the current structure of the Bank's balance sheet and related plans for obtaining medium and long-term financing through bond issues primarily on the domestic and European (mainly in EUR) market.

Therefore, having the paid rating from only one rating agency is sufficient to carry out financial plans. An important prerequisite to terminate the contract with the rating agency Standard and Poor's in 2015 was also a need to reduce the cost of the Bank's operations, which is particularly important in an environment of low interest rates and changes in the regulatory environment. On the occasion of withdrawing the ratings, Standard and Poor's rating agency made a final analysis of the current situation of the Bank and environment of its activities and on 19 January 2016 confirmed its short-term rating at "A-2" and lowered long-term rating from 'BBB+' to 'BBB'. At the time of withdrawal of the ratings the outlook was stable. Rating agency Standard and Poor's announced that the reduction of the Bank’s long-term rating was due to the ratings reduction for Poland (sovereign) on 15 January 2016. Agency's analysis found that the Bank has a strong business position, adequate capital strength and liquidity over the next two years, assets quality and a solid funding base, based mainly on retail deposits.

Ratings as of December 31, 2015 (paid rating)

Moody’s Investors Service
Deposits long-term rating A2
Deposits short-term rating P-1
Liabilities long-term rating A3
Liabilities short-term rating (P)P-2
Contractor risk long-term opinion A2(cr)
Contractor risk short-term opinion P-1(cr)
Forecast Stable
Standard and Poor’s (rating withdrawn as at 19 January 2016)
Long-term rating BBB+
Short-term rating A-2
Forecast Negative

As at the end of 2015, KREDOBANK SA had the following rating granted by the rating agency Standard & Poor’s on 26 November 2015:

  • long-term credit rating on the international scale – ’CCC+’,
  • forecast - ’negative’,
  • short-term credit rating on the international scale - ’C’,
  • rating on the Ukrainian scale - ’uaB+’.

As at the end of 2015, PKO Bank Hipoteczny SA had the following rating granted by the rating agency Moody’s Investors Service:

  • long-term credit rating ‘Baa1’ and short-term rating ‘Prime-2’ with stable outlook granted on 7 September 2015,
  • long-term opinion on the risk of counterparty ‘A3(cr)’ and short-term ‘Prime-2(cr)’ granted on 7 September 2015,
  • rating for the covered bonds issued by the PKO Bank Hipoteczny SA at ‘Aa3’ granted on 11 December 2015.