The FINANCIAL — Fitch Ratings-Moscow/London-28 February 2019: Fitch Ratings has upgraded ProCredit Bank Georgia’s (PCBG) Long-Term Issuer Default Ratings (IDRs) to ‘BB+’ from ‘BB’. The Outlook is Stable. The Viability Rating (VR) is unaffected. A full list of rating actions is at the end of this rating action commentary.
The upgrade follows the upgrade of Georgia’s sovereign rating to ‘BB’ from ‘BB-.
Agency said the upgrade of PCBG’s Long-Term IDRs reflects reduced Georgian country risks, as captured by the sovereign upgrade, and therefore a greater likelihood that the bank will be able to receive and utilise support from its sole shareholder, ProCredit Holding AG & Co. KGaA (PCH, BBB/Stable) in case of need.
“Fitch caps PCBG’s ratings at one notch above the sovereign rating to reflect the country risks that domestic banks are exposed to. In our view, Georgia’s still relatively weak external finances and vulnerability to external shocks mean that there would be a material risk of government intervention in the banking sector in case of extreme macroeconomic and sovereign stress scenarios. Such intervention could limit PCBG’s ability to service its obligations or the parent’s propensity to continue providing support, or both”.
“We believe that the risk of such intervention is somewhat lower than the risk of a sovereign default and therefore rate PCBG one notch above Georgia. However, we do not consider the risk of such intervention to be sufficiently remote to rate PCBG two notches above the sovereign, as the Country Ceiling of ‘BBB-‘ would permit”.
PCBG’s Long-Term IDRs reflect the potential support the bank may receive from PCH. Fitch believes PCH would have a high propensity to provide support to its Georgian subsidiary given the importance of Georgia to the group, full ownership, common branding, strong integration between the parent and the subsidiary and a record of capital and liquidity support.
IDRS AND SUPPORT RATING
PCBG’s support-driven IDRs are sensitive to Fitch’s assessment of support from PCH and Georgia’s country risks.
The rating actions are as follows:
Long-Term Foreign and Local Currency IDRs: upgraded to ‘BB+’ from ‘BB’, Outlook Stable
Short-Term Foreign and Local Currency IDRs: affirmed at ‘B’
Viability Rating: ‘bb-‘, unaffected
Support Rating: affirmed at ‘3’