Moody's downgrades Romania's BRD SocGen on worsening assets, weakening environment

Ratings agency Moody's downgraded French lender BRD – Groupe Societe Generale by a notch, to Baa3, after the mother bank's long term debt and deposit ratings were also downgraded. The weakening business environment and worse bank assets quality triggered the decision, according to the ratings agency.

Moody's also mentions BRD has some exposure to the Romania's state-owned electricity generator Hidroelectrica, which recently filed for insolvency, which could bring additional pressure on the bank's balance sheet.

Other SocGen subsidiaries were also affected by the ratings cut, in the Czech Republic and Russia. The downgrade reflect a combination of factors, such as the reduction in the financial capacity of SocGen as a support provider, concerns that group level pressures may impact financial strength at the subsidiary level and the impact of weakening domestic operating environments. In Romania, the rapid increase in the bank's non-performing loans was counterbalanced by Moody's view of SocGen's continuing commitment to the Romanian market, but also impacted by the deterioration of the operating environment in Romania, according to the ratings agency. “Romania's economic performance has deteriorated, as its high dependence on external markets, particularly in terms of exports and private sector capital inflows, renders it vulnerable to the weakening growth prospects of the euro area,” Moody's writes in its ratings statement. BRD is the second-largest bank in Romania, with market shares of around 15 percent in deposits and loans. SocGen holds a 60 percent stake in the bank and provides some funding to its subsidiary, mostly to finance its sizeable foreign-currency portfolio, according to Moody's. editor@romania-insider.com (photo source: Romania-Insider.com)