Moody's cuts eight Hungarian banks

Moody's Investors Service said it took rating actions on Hungarian banks, downgrading eight of them, including OTP Bank, OTP Mortgage Bank, CIB Bank, K&H Bank, MKB Bank, Erste Bank Hungary, Budapest Bank and MFB Hungarian Development Bank.

Also, the ratings of FHB Mortgage Bank were confirmed, but the outlook was changed to negative from stable, the agency noted.

The downgrades, in many cases of several notches, reflect Moody's view that the rapid deterioration of the Hungarian operating environment, which has resulted in the rating agency downgrading the Hungarian government bond rating by two notches to Baa1 (negative outlook) since November 2008, is putting significant pressure on the banks' standalone creditworthiness, as measured by their bank financial strength ratings.

Affected ratings include the downgrade of OTP Bank's BFSR to D+ (mapping to baseline credit assessment - BCA - of Baa3) from C+ (A2), the agency said, adding that the downgrade was driven by Moody's expectation that potential losses on the bank's portfolio, especially given its significant exposure to less developed markets in the CEE region such as Ukraine and Russia, but also due to rapid weakening of its domestic operating environment, will exert significant pressure on its profitability and capitalization.

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