NLB's local and foreign currency deposit ratings were upgraded to Baa2/Prime-2, the long-term and short-term counterparty risk ratings to Baa1/Prime-2, the long-term and short-term counterparty risk assessment to Baa1(cr)/Prime-2(cr) and the BCA and adjusted BCA to ba1.

The upgrade reflects Moody's re-assessment of the bank's overall credit profile following the successful initial public offering in November and the reduction in government ownership to 35%.

The agency believes that the progress in privatisation in line with the European Commission's approval of the revised deadline for the bank's restructuring and privatisation lifts material uncertainty about the bank's viability.

The re-assessment also considers ongoing gradual improvements in asset quality and maintenance of strong capital adequacy and liquidity profile.

It also reflects moderate reduction of legacy problem loans, while maintaining a strong problem loans coverage and strong capital cushion which is expected to remain strong, despite some dilution ahead given the bank's resumption of loan growth and NLB's dividend payout targets.

The positive outlook expresses Moody's expectation that the bank will further strengthen its risk profile by continuing reducing its still elevated problem loans as well as improve its core earnings generation capacity while maintaining a strong capital base.

Gradual lending growth should moderate the pressures from competition and the low interest rate environment and expected lower loan loss provisioning reversal that currently support the bottom line.

Moody's action follows that of Fitch, which upgraded NLB's ratings in November.