Astana, Kazakhstan, Nov.11
Fitch Ratings has downgraded Kazakhstan-based subsidiary of Home Credit and Finance Bank (HCK) JSC to "B+" from "BB-". The outlook is negative.
The downgrade of HCK's ratings follows the downgrade of its parent bank, Russia's Home Credit and Finance Bank (HCFB, BB-/Negative).
HCK's downgrade reflects the parent's reduced ability to provide support to HCK, in case of need, due to pressure HCFB faces from deteriorating asset quality in its domestic market. The negative outlook on HCK's ratings mirrors that on the parent.
Fitch continues to view HCFB's propensity to support HCK as high given the strategic importance of the subsidiary; the latter remained profitable in the first half of 2014, while the parent reported significant losses. Furthermore, any such support should only require moderate resources from the parent as HCK accounted for less than 7 percent of HCFB's assets at end of the first half of 2014.
Fitch's view also takes into account HCFB's full ownership, common branding and reputational risk for HCFB in case of HCK's default.
The one-notch difference between HCFB's and HCK's ratings reflects the cross-border nature of the parent-subsidiary relationship and uncertainty regarding the performance of the unsecured consumer finance market in Kazakhstan and the strategic importance of the subsidiary for HCFB over the longer-term.
HCK's senior unsecured debt is rated in line with its long-term IDRs and national ratings (for domestic debt issues), reflecting Fitch's view of average recovery prospects, in case of default.
Rating sensitivities are IDR, national rating, support rating and senior debt ratings.
A downgrade of HCFB's long-term IDR could result in a downgrade of HCK's long-term IDRs if in Fitch's view this indicates a further significant weakening in the ability of the parent to provide support. This would also impact the national rating and senior debt ratings.
Long-term foreign and local currency IDRs are downgraded to "B+" from "BB-," outlooks negative.
Short-term foreign currency IDR is affirmed at "B". National long-term rating is downgraded to "BBB (kaz)" from "BBB+(kaz)," outlook negative. Viability rating is unaffected at "b". Support rating is downgraded to "4" from "3".
Senior unsecured debt long-term rating is downgraded to "B+" from "BB-," recovery rating is assigned at "RR4". Senior unsecured debt long-term rating is downgraded to "BBB (kaz)" from "BBB+(kaz)".