Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or minimum every six months in the case of sovereign, sub-sovereign and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key ratings assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for MFB Hungarian Development Bank Private Limited Company (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB+/Stable; short-term local- and foreign-currency issuer ratings: S-2/Stable) on 9 June 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

MFB Hungarian Development Bank’s (MFB’s) BBB+ rating reflects the guarantee framework for its liabilities provided by Hungary (BBB+/Stable), which is the key factor for equalising MFB’s ratings with the ratings of the sovereign. The explicit, direct and irrevocable guarantees cover the bonds issued, credit and loans taken, deposits from the interbank market, and replacement costs of currency or interest rate swaps entered into by MFB for fundraising purposes.

The bank’s high strategic importance as a key government-related entity (GRE) implementing economic and social policies for the Hungarian state was recently highlighted during the pandemic with MFB’s central role to disseminate state support to Hungarian companies. To support MFB’s lending, Hungary has strengthened MFB’s capital position on several occasions. A sharply growing business volume led to rising capital requirements, which were covered by capital contributions from the Hungarian state. Risks to MFB’s balance sheet in the context of deteriorating asset quality are limited because separate state guarantees cover the loans and guarantees issued under the pandemic support package. The modest but stable profitability alongside limited loan portfolio diversification reflects the development bank’s public policy mandate.

The Stable Outlook reflects Scope’s assessment that the risks to the ratings over the next 12 to 18 months are balanced.

The ratings could be upgraded in the event of an upgrade of Hungary. The ratings could be downgraded in the event of: i) a downgrade of Hungary; and/or ii) changes in the legal framework or guarantee structure that notably weaken government support for MFB.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Government Related Entities Rating Methodology, 6 May 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies..
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Jakob Suwalski, Director

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