“The main drivers of the rating
action are:
(1) The improvement of the Hungarian
operating environment, as reflected in Moodyʼs upgrade of the Hungarian
governmentʼs bond rating to BAA3 from BA1;
(2) The strong correlation between
sovereign and sub-sovereign credit risk, reflected in macroeconomic and
financial linkages as well as in institutional factors,” the press statement
from Moody’s says.
The rating upgrade and the change in
outlook follow similar actions on Hungaryʼs government bond rating late Friday.
According to the ratings agency,
Budapest reflects the improvement of the operating environment in Hungary, as
reflected by the sovereign rating upgrade.
“The rating upgrade also reflects
Moodyʼs view that the creditworthiness of Budapest is closely linked to that of
the sovereign, as Hungarian local governments depend on revenues that are
linked to the sovereignʼs macroeconomic and fiscal performance,” Moodyʼs said.
“Almost 70% of Budapestʼs operating
revenues in 2015 were from intergovernmental revenues, in the form of shared
taxes and central government transfers that are set at the national level,” the
press statement added.
Moody’s Investors Service has
upgraded four Hungarian banks in the wake of the upgrade of the country’s debt
rating back to investment grade prompted by the upgrade of the Hungarian
government's debt rating and raising of Hungary's country ceiling for long-term
foreign-currency deposits to BAA3 from BA2.
The following banks are affected by
today's rating actions: Hungarian Development Bank (MFB), OTP Bank Nyrt., OTP
Jelzálogbank Zrt., (mortgage bank) K&H Bank.
After almost five years in the junk
bond category, 2016 saw all of the three leading agencies restore Hungary's
sovereign rating to investment grade, finally turning several year's
expectations into reality. The market had already priced the upgrades in when
they eventually happened. This was one of the top most important stories of the
year 2016 for Hungary.
Compiled by Bendeguz H. Kovács (08.11.2016)
Sources:
http://www.portfolio.hu/en/economy/hungary_2016_top_stories_junk_no_more.32276.html 