The outlook on the D financial strength rating (FSR) assigned to Bulgaria's DSK Bank has been revised from stable to positive, Moody's Investors Service said on Wednesday, December 7. The outlook for the bank's Ba1/NP foreign currency deposit ratings remains unchanged at positive, in line with the ceiling for such deposits in Bulgaria, said the rating agency. According to Moody's, this rating action is consistent with the bank's strong franchise dynamics as the largest bank in Bulgaria, with dominant market shares in retail lending and deposit-taking in the country. Moody's notes the consistent upward trend in DSK's recurring earning power in recent years, supported by healthy interest rate margins and growing fee and commission income. The bank's efficiency levels have improved on the back of growing revenues and controlled cost growth, although Moody's believes that additional efforts will be necessary in term of branch network rationalization and modernization and customer service improvement. In the medium term, Moody's expects DSK bank's profitability levels to continue to improve on the back of higher retail lending volumes and through higher fee income from the bank's leasing, insurance and asset management operations, supporting the ratings. A successor entity of State Savings Bank, DSK Bank has been a fully-owned subsidiary of the Hungarian OTP Bank (rated at A1/P-1/B-) since the end of 2003 when it was privatized Moody's said DSK Bank PLC had total assets of 2.028 bln euro by June 2005. The rating agency also announced it has changed the outlook on Piraeus Eurobank's E+ financial strength rating (FSR) to positive from stable. The outlook for the bank's Ba1/NP foreign currency deposit ratings remains unchanged, at positive, in line with the ceiling for such deposits in Bulgaria. According to Moody's this rating action reflects the franchise strengthening potential that the bank's new shareholder, the Greek Piraeus Bank (rated at Baa1/P-2/C-) will bring to the smaller institution in Bulgaria. Piraeus Eurobank's E+ FSR partly reflects its modest current franchise in an environment dominated by much larger, foreign-owned banks. Though the bank has been quite profitable for a number of years, there had been concerns about the stability and sustainability of its market positions and revenue streams. In changing the outlook to positive, Moody's notes that the involvement of the bank's new shareholder is expected to contribute to the bank's franchise strengthening and profitability. The integration process, which will involve the merger of Eurobank with Piraeus Bank's own operations in Bulgaria in 2006, is already well under way, and will transform the merged entity bank into a fully-fledged subsidiary of Piraeus Bank. Moody's said Piraeus Eurobank AD had total assets of 248.7 mln euro at end-September 2005.