BAKU, Azerbaijan, Jun. 9
By Nargiz Sadikhova - Trend:
Fitch Ratings has assigned Kazakhstan - Ziraat International Bank JSC (KZI) long-term foreign- and local-currency Issuer Default Ratings (IDRs) of 'B+' with negative outlooks, Trend reports with reference to the Fitch report.
“KZI's IDRs of 'B+' and Support Rating of '4' reflect Fitch's view of a limited probability of support, if needed, from the bank's parent, Turkiye Cumhuriyeti Ziraat Bankasi A.S. (ZB). The Negative Outlook on KZI mirrors that on the parent bank,” the report said.
In Fitch's view, ZB will have a high propensity to support KZI, given majority ownership and common branding; the high level of integration between the parent and the subsidiary; high reputational risks for the parent in case of the subsidiary's default, given ZB's broader international presence; and the low cost of potential support considering the subsidiary's small size relative to the parent (less than 0.2 percent of the group's consolidated assets at end-2019).
However, ZB's ability to provide support to KZI is constrained, as reflected in its 'B+' rating, the report said.
“The equalization of the ratings of KZI and ZB reflect the very high degree of integration between the parent and the subsidiary, such that the subsidiary operates similarly to a branch. KZI is heavily reliant on its parent for new business origination and management, as the parent's representatives are heavily involved in all major decision-making processes at the subsidiary level,” the report said.
For these reasons, Fitch has not assigned a Viability Rating (VR) to KZI. The equalization of parent and subsidiary ratings also reflects their low level. KZI's National Rating reflects the bank's creditworthiness relative to other credits in Kazakhstan.
“KZI's intrinsic credit profile suffers from potentially vulnerable loan quality, but benefits from reasonable performance, a stable funding profile and high capital ratios,” the report said.
In Fitch's view, KZI's loss absorption capacity is strong.
“KZI's pre-impairment profit is underpinned by wide interest margins, KZI's capital buffer is solid. We estimate that KZI's capital buffer allows the bank to fully cover the stage 3 and stage 2 loans with LLA and still maintain a robust double-digit FCC ratio,” the report said.
KZI is mainly deposit-funded and Fitch views its deposit base as stable.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
KZI's ratings would likely be downgraded if ZB was downgraded. KZI's IDRs could also be downgraded if there was a considerable weakening in the propensity of the parent to support its subsidiary.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on the parent could result in similar rating action on the subsidiary.
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