Fitch Ratings has downgraded Garanti Bank SA (GBR)’s Shareholder Support Rating (SSR) from “b +” to “b”. At the same time, the GBR’s long-term issuer default rating (IDR) is confirmed by “BB-” and the stable outlook and feasibility rating (VR) is confirmed by “bb-“.
The downgrade of SSR follows the recent downgrade of Turkiye Garanti Bankasi AS (Garanti BBVA), a wholly owned shareholder of GBR, to “B” in the long-term foreign currency IDR.
GBR’s VR verification hasn’t changed significantly in the bank’s standalone credit profile since the last rating action in February 2022. The confirmation of the GBR’s IDR with a stable outlook reflects our view that the GBR’s risk profile remains sufficiently independent of the Galanti BBVA and allows the GBR. It is rated above the Galanti BBVA.
GBR’s SSR is driven by potential institutional support from Garanti BBVA’s majority and controlling shareholder Banco Bilbao Vizcaya Argentaria (BBVA; BBB + / Stable). This is considered the ultimate support source if needed. The GBR’s SSR shows that Fitch’s view of the low strategic importance of Romanian operations to BBVA limits the potential for institutional support from BBVA.
In addition, you cannot expect BBVA to support GBR in addition to the support extended to Galanti BBVA. Therefore, the Galanti BBVA’s “B” long-term foreign currency IDR incorporates Fitch’s view of the risk of government intervention in the Turkish banking sector, limiting the shareholder support rating available to the GBR to “b”.
The GBR IDR is driven by a standalone credit profile, as reflected in the VR “bb-“. The main rating factors for GBR’s IDR and VR are the rating action commentary released on February 3, 2022 (“Fitch stably revised the outlook of the Romanian Garanti Bank and confirmed the IDR with” BB- “). It is outlined in).
In Fitch’s view, the GBR risk profile is sufficiently independent of the Galanti BBVA risk profile, limiting direct exposure to the parent of the subsidiary (and its domestic market), a fairly independent franchise, and non-parental. It reflects the limited reliance on stock funds, and the fairly strong Romanians. Regulations that allow GBR VR to be rated above Galanti BBVA’s long-term foreign currency IDR. Transmission risk usually limits the potential rise in VR of a subsidiary from the parent company’s long-term IDR to a maximum of 3 notches under that criterion.
Evaluation of sensitivity
Factors that can lead to negative assessment actions / downgrades, individually or collectively:
– GBR’s IDR is primarily sensitive to VR changes. In our view, GBR’s VR and IDR have enough rating margin to absorb the potential weakening of key financial indicators.
– Potential transmission risk means that GBR VR and IDR are likely to be sensitive to multi-notch downgrade of Galanti BBVA’s long-term foreign currency IDR.
– The GBR’s SSR is sensitive to the downgrade of the long-term foreign currency IDR of the Galanti BBVA or the weakening of the assessment of the strategic importance of the GBR to the Galanti BBVA.
Factors that may lead to positive rating actions / upgrades, individually or collectively:
– Continued improvement in bank franchises and maintenance of key financial credit indicators could lead to a turnaround in VR. However, upgrades are limited to 3 notches above the long-term foreign currency IDR of Galanti BBVA.
– If the long-term foreign currency IDR of Galanti BBVA is upgraded, or if GBR’s strategic importance to BBVA increases, GBR’s SSR will be upgraded, neither of which is likely at this time.
The VR for “bb-” is below the implicit score for “bb” for the following adjustment reasons:Business profile
The operating environment score for “bb +” is below the implicit score for the Romanian “bbb” category for the following adjustment reasons: Macroeconomic stability (negative).
The “bb +” capitalization and leverage scores are below the implicit score in the “bbb” category due to risk profile and business model (negative) adjustments.
https://www.romaniajournal.ro/business/financial/fitch-downgrades-romanian-garanti-bank-s-a-s-ssr-to-b-affirms-idr-at-bb-stable/ Fitch downgraded the Romanian Garanti Bank SA’s SSR to “b”. ‘BB-‘ / Stable – Check IDR in Romanian Journal