Finance

Finance

Fitch Ratings places four Georgian banks on negative watch

09 April 2009 09:22 (UTC +04:00)

Baku. Vugar Israfilov â€“ APA-Economics. Fitch Ratings has today placed the Long-term Issuer Default Ratings (IDRs) of four Georgian banks - ProCredit Bank (Georgia) (PCG, Long-term foreign currency IDR ’B+’), JSC VTB Bank (Georgia) (VTBG, ’B+’), Bank of Georgia (BOG, ’B’) and TBC Bank (TBC, ’B’) on Rating Watch Negative (RWN). The rating actions follow yesterday’s placement of Georgia’s sovereign Long-term foreign and local currency IDRs of ’B+’ on RWN (see announcement on
Href="Link">www.fitchratings.com). A full list of rating actions on the banks is provided at the end of this announcement.

The RWN on PCG’s and VTBG’s ratings reflects the potential for Georgian transfer and convertibility risks to increase, and therefore the Georgian Country Ceiling of ’B+’ to be revised lower, together with a downgrade of the sovereign ratings. Higher transfer and convertibility risks and a lower Country Ceiling would indicate a weaker probability of these banks being able to utilise financial support from their majority shareholders in order to meet obligations to creditors. The IDRs of PCG and VTBG are driven by the potential for support from their majority owners: Germany’s ProCredit Holding AG (Long-term IDR ’BBB-’ (BBB minus)/Stable, Individual ’D’; 93.6% stake in PCG), and Russian state-controlled JSC VTB Bank VTBR.MM (Long-term IDR ’BBB’/Negative, Individual ’C/D’, 84.7% stake in VTBG).

The RWN on the ratings of BOG and TBC reflect the risk that a sovereign downgrade would trigger a downgrade of these banks because of a weakening of the Georgian authorities’ ability to provide support to them in case of need. Fitch also notes that material or prolonged political instability, which would increase risks to capital inflows and economic stability, would not only be likely to lead to a sovereign downgrade, but would also be negative for the banking sector. Additionally, Fitch is concerned about deteriorating asset quality and the high level of foreign currency lending at both BOG and TBC. However, Fitch also notes the banks’ currently reasonable capital and liquidity positions. As a result, the agency does not preclude the possibility of affirming the Long-term IDRs of BOG and TBC even if the sovereign is downgraded to ’B’.

Fitch will resolve the RWN on the four banks referenced in this commentary after the resolution of the RWN on the sovereign and a review of the financial positions of BOG and TBC at that time.

Rating actions as follows:

ProCredit Bank (Georgia)

Long-term foreign currency IDR of ’B+’ put on RWN

Long-term local currency IDR of ’BB-’ (BB minus) put on RWN

Short-term foreign and local currency IDRs affirmed at ’B’

Support Rating affirmed at ’4’

Individual Rating affirmed at ’D’

JSC VTB Bank (Georgia)

Long-term foreign currency IDR of ’B+’ put on RWN

Short-term foreign currency IDR affirmed at ’B’

Support Rating affirmed at ’4’

Individual Rating affirmed at ’D/E’

Bank of Georgia

Long-term foreign and local currency IDRs of ’B’ put on RWN

Senior unsecured debt rating of ’B’ put on RWN; Recovery Rating at ’RR4’

Support Rating Floor of ’B’ put on RWN

Support Rating of ’4’ put on RWN

Short-term foreign and local currency IDRs affirmed at ’B’

Individual Rating affirmed at "D"

TBC Bank

Long-term foreign currency IDR of ’B’ put on RWN

Support Rating Floor of ’B’ put on RWN

Support Rating of ’4’ put on RWN

Short-term foreign currency IDR affirmed at ’B’