Moody's: Zagrebacka outlook negative

Moody's Investors Service said it changed to stable from negative the outlook on the D+ bank financial strength rating of Zagrebacka banka dd and downgraded its long- and short-term global local-currency deposit ratings to Baa1/Prime-2 from A2/Prime-1.

The downgrade concludes the review of the deposit ratings initiated in May 2009, and the outlook on them is now negative.

According to Moody's, Zagrebacka's ratings are underpinned by its dominant position in the Croatian banking system, good financial metrics - particularly strong capitalization, providing a substantial cushion against possible asset quality pressure - as well as its good income generating capacity and a solid funding base.

However, the ratings remain constrained by the bank's lack of geographic diversification at a time when operating environment risks are becoming more pronounced in light of Croatia's ongoing recession, the agency said.

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