Moody's upgrades Hungary back to investment grade
Moodyʼs Public Sector Europe (MPSE) has upgraded the issuer rating of the City of Budapest, Hungary’s capital, from BA1 to BAA3, while changing its outlook from positive to stable, Moody’s said in a press statement.
“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)