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Fitch updates outlooks for two Georgian banks

Business Materials 13 August 2021 18:21 (UTC +04:00)
Fitch updates outlooks for two Georgian banks

BAKU, Azerbaijan, August 13

Tamilla Mammadova – Trend:

Fitch Ratings has revised the Outlooks on ProCredit Bank Georgia's (PCBG) and JSC Halyk Bank Georgia's (HBG) Long-Term Issuer Default Ratings (IDRs) to Stable from Negative and affirmed the IDRs at 'BB+', Trend reports via the Fitch.

The revision of the Outlooks to Stable follows the revision of the Outlook on Georgia's sovereign rating to Stable from Negative. The banks' viability ratings are unaffected by this rating action.

The affirmation of PCBG's and HBG's IDRs at 'BB+' and Support Ratings at '3' reflects Fitch's view that the banks will likely be supported by their respective parents, ProCredit Holding AG & Co. KGaA (PCH, BBB/Stable) and JSC Halyk Bank (HBK, BBB-/Stable), in case of need.

Fitch believes that PCH and HBK have a high propensity to support their Georgian subsidiaries, given full ownership, common branding, strong integration, a record of capital and liquidity support, and reputational risks in case of the subsidiaries default.

The subsidiaries' small size relative to their parents (especially in the case of HBG) supports our view that the cost of potential support would be manageable for the parent groups.

Fitch caps PCBG's ratings at one notch above the 'BB' Georgian sovereign rating to reflect the country risks that domestic banks are exposed to. In our view, in the case of extreme macroeconomic and sovereign stress, there is a material risk of government intervention in the banking sector.

Intervention could limit the ability of PCBG to service its obligations or the parent's propensity to continue providing support, or both.

"The one-notch difference between the IDRs of HBG and HBK reflects the cross-border nature of the parent-subsidiary relationship and the limited role of the Georgian subsidiary in the group and its modest contribution to the group's performance," the report said.

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