Zagrebacka Banka's (ZABA) rating is based on potential support available from its ultimate parent, UniCredit (UC) of Italy. Fitch is of the view that UC will continue to have a strong propensity to support ZABA given the strategic importance of the Central and Eastern Europe (CEE) region. The negative outlook on its long-term rating mirrors that on UC.

"Any further downgrade of UC's Long-term IDR (Issuer Default Rating) would be likely to result in a downgrade of ZABA's Long-term IDR. Conversely, ZABA's IDRs could stabilise at their current levels if UC's Outlook was revised to Stable.

"ZABA's IDRs could also be downgraded if (i) UC markedly changes its CEE strategy, resulting in a lower expectation of parent support for its subsidiaries in the region in general, and ZABA in particular; or (ii) Croatia's sovereign ratings are downgraded by two notches, to 'BB' from 'BBB-', resulting in a lowering of the Country Ceiling to 'BBB-' from 'BBB+'. However, neither of these scenarios is regarded by Fitch as likely in the near term," the agency said.

"PBZ, ESB and Splitska's Support Ratings of '2' reflect Fitch's opinion that there is a high probability that the parent banks will support their subsidiaries should the need arise. PBZ is 77% owned by Intesa Sanpaolo ('BBB+'/Negative/bbb+), ESB is 100% owned by Erste Group Bank AG ('A'/Stable/'a-') and Splitska is 100% owned by Societe Generale ('A+'/Negative/'a-'). In light of the parent banks' strategic focus on the broader CEE, Fitch believes, PBZ, ESB and Splitska are strategic subsidiaries for their parents. ESB and Splitska's Support Ratings are constrained by Croatia's Country Ceiling.

"The banks' Support Ratings could be downgraded in case of a multi-notch downgrade of the parent banks' Long-term IDRs, indicating a reduced ability to support the subsidiaries, which Fitch currently does not anticipate. A multi-notch downgrade of Croatia's Long-Term IDRs, and hence its Country Ceiling, could also cause the Support Ratings to be downgraded," Fitch concluded.