International rating agency Fitch Ratings has confirmed positive outlook on the rating of the International Bank for Economic Co-operation in the context of the ongoing global crisis caused by the COVID-19 pandemic. On March 11, 2020 Fitch Ratings has revised the Outlook on IBEC, namely: Long-Term Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at “BBB-“. IBEC’s Short-Term IDR has been affirmed at “F3”.
As noted in the agency’s published report, the possible impact of the crisis on IBEC is minimized due to structural changes carried out in recent years, modernization of the management system, risk assessment and control mechanisms. IBEC reform, which started in mid-2018, resulted in focusing on borrowers with higher ratings, as well as geographical and industry diversification which improved the quality of the loan portfolio. The fundamental nature of these changes allows the agency to give a positive outlook on the rating.
The agency notes that severe deterioration in loan performance as a result of the COVID-19 crisis could lead to a revision in the Outlooks to Stable, in case of Non-Performing Loans (NPLs) in banks' portfolios. But according to Fitch, “excellent” capitalization protects IBEC from any drastic revisions of the ratings even in conditions of economic instability and makes its ratings stable in the medium and long term. Even more, according to Fitch, IBEC’s capitalization metrics are well above the ‘excellent’ threshold (with equity to asset ratio of 47% as of end 2019 vs. a threshold at 25%, and a FRA ratio of 57% vs. a threshold at 35% as of end 2019).
An important stabilizing factor for IBEC is its territorial orientation – the Bank operates mainly in Central and Eastern Europe, as well as in the countries of the Commonwealth of Independent States. These regions are least affected by the pandemic, which reduces the risk of deterioration in the quality of the IBEC loan portfolio.
“In the context of the global pandemic caused by COVID-19 and the economy crises erupted in many states, the Fitch’s Positive Outlook confirms once again the Bank's high financial stability, solvency and credit quality”, - said Denis Ivanov, Chairman of the IBEC Board.
Despite the negative impact of the COVID-19 pandemic, IBEC, as a sustainable multilateral development bank, remains committed to the values of mutual assistance and cooperation with financial institutions worldwide, as well as to the development of international economic relations of its member states. At present, IBEC has been assigned the following ratings: Moody’s Investor Service - Baa3 with a stable outlook, Fitch Ratings - BBB- with a positive outlook, ACRA (AO) - A- according to the international scale and AAA (RU) with a stable outlook on the national scale, Acra Europe – BBB with a stable outlook.