It seems hard to believe after years of decline, but bad news out of Greece has changed to “less-bad” and then to almost good news. We previously saw that the Greek budget may have a surplus. Now we have news out that one of the credit ratings agencies is upgrading five Greek banks now that the nation’s rating was raised.

Moody’s raised the rating of Greece’s government bonds to Caa3 with a “stable” outlook. Now we have five Greek banks being given credit rating upgrades as well. The one upgrade that ADR investors will want to watch is the rating on the National Bank of Greece S.A. (NYSE: NBG). Moody’s signaled that the upgrade reflects NBG’s more favorable asset-quality, funding profile and earnings than local peers. It also is based upon an expectation of further capital enhancements to address its weaker capital base.

Other identical upgrades were made in Piraeus Bank and Alpha Bank. The ratings went up by one notch to Caa1 with a stable outlook for NBG and the other two. This is up from Caa2 with a negative outlook. Moody’s also raised the baseline credit assessments of each to Caa2 from Caa3, within the bank financial strength rating range of E.

Friday’s credit rating actions are after the recent improvement in the creditworthiness of the Government of Greece. Moody’s raised Greece’s sovereign bond rating on November 29 up to Caa3 with a stable outlook up from C with no outlook. If you will look below you will see that Moody’s even expects NBG to be profitable.

The New York-traded ADRs (or ADSs) for National Bank of Greece were up by 1.7% at $5.92 in late-Friday trading against a modified post-split 52-week trading range of $2.85 to $24.70.

Maybe good things can still happen in the lands of the PIIGS in Europe. Moody’s said on NBG,

Although National Bank of Greece has a weaker capital base (pro-forma core Tier 1 ratio of 9.4% incorporating the recent sale of its real-estate subsidiary ‘National Pangaea’) relative to its similarly rated local peers, Moody’s notes its stronger loan quality, with NPLs at 21.9% of gross loans as of September 2013. Moreover, Moody’s expects National Bank of Greece to further strengthen its capitalization in 2014, through the further sale of non-core assets, as well as the possible sale of a minority stake in its Turkish subsidiary Finansbank AS (Ba2, negative, BFSR E+/BCA b2 negative). The sale could yield an approximate 300 basis point enhancement to its core Tier 1 ratio.

In addition, Moody’s expects that the bank will be profit-making in both 2013 and 2014, mainly as a result of the earnings contribution by Finansbank, while National Bank of Greece exhibits the best net loans-to-deposits ratio among its local peers, at 97%, due to its strong market share in savings deposits in Greece. The bank has also reduced central bank funding to EUR22.2 billion in September 2013, with no emergency liquidity assistance (ELA) from the Bank of Greece, down from EUR33 billion in September 2012.

The other two bank upgrade notes specified,

At the same time, Moody’s has affirmed and changed the outlook to positive from negative on Eurobank Ergasias SA’s Caa2 deposit and senior debt ratings, and affirmed and changed the outlook to stable from negative on Attica Bank SA’s Caa2 deposit rating. The BFSR of these banks was also affirmed at E (stable outlook), equivalent to a BCA of caa3.

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