DBRS Ratings (Morningstar DBRS) has upgraded the credit ratings of two major Greek banks, Eurobank S.A. and the National Bank of Greece, raising them from BBB (low) to BBB.

The Canadian ratings agency has also assigned a positive outlook to Eurobank S.A., while maintaining a stable outlook for the National Bank of Greece.

In its statement regarding Eurobank, Morningstar DBRS said the upgrade reflects the group’s improved ability to sustain enhanced profitability and a strong asset quality profile, while maintaining adequate capital buffers. This is despite its acquisition of Hellenic Bank (HB) in Cyprus.

What is more, the agency expects Eurobank’s profitability to remain at sound levels in the near future.

It noted that any negative effects from lower interest rates and higher operating expenses are likely to be offset by an increase in loan volumes, greater revenue diversification, cost optimisation, and synergies arising from the integration of Hellenic Bank.

With regard to the National Bank of Greece, the agency said the rating upgrade and stable outlook reflect the bank’s consistently improving profitability and the continued strengthening of its asset quality.

The agency also highlighted that the bank maintains ample capital buffers well above its supervisory requirements.

Looking ahead, Morningstar DBRS expects the profitability of the National Bank of Greece to decline, primarily due to lower interest rates and higher operating expenses.

However, it added that the volume of new loans, coupled with increased fee income and additional cost-control measures, is expected to help mitigate these negative effects.