"The upgrade primarily reflects Banco Montepio's successful reduction in its non-performing exposure (NPEs, as defined by the European Banking Authority)," Fitch analysts point out.
Fitch upgraded Banco Montepio’s Long-Term Issuer Default Rating (IDR) by one notch, from “B-“ to “B”, with the financial rating agency justifying this decision with the reduction of NPEs and improved operational efficiency.
“The upgrade primarily reflects Banco Montepio’s successful reduction in its non-performing exposure (NPEs, as defined by the European Banking Authority),” Fitch analysts point out in a statement published on Monday, in which they give a positive outlook.
Fitch estimates that Banco Montepio’s problem assets ratio has reduced to around 10.2% at the end of September. However, it remains higher than at higher-rated southern European banks.
Besides the reduction in problem assets, Fitch highlights the “bank’s improved operating efficiency” and also, as an external factor, the “resilience of the Portuguese economy in 2023, even in light of growing economic uncertainties.”
Despite the good news, Fitch notes Banco Montepio’s vulnerabilities, including its capital ratio and the fact that it is a small bank in the Portuguese market with “limited diversification,” which then has an impact on its low profitability.
Following the upgrade of the Long-Term IDR, the Long-Term Deposits (from B to B+), the Viability Rating (from b- to b), the Senior Preferred Debt (from CCC+ to B-) and the Senior Non-Preferred and Subordinated Debt (from CCC to CCC+) were also revised upwards.