September 12 (SeeNews) - Fitch Ratings said on Wednesday it placed on Rating Watch Negative (RWN) the Long-Term Issuer Default Ratings (IDRs) of the subsidiaries of ProCredit Bank in Southeastern Europe (SEE).
The RWN follows the similar action on the parent and reflects the downside risk to Fitch's assessment of support for ProCredit from its international financial institution shareholders, Fitch said in a statement.
The affected units are Albania's ProCredit Bank Sh.a. (PCBA), Kosovo's ProCredit Bank SH.A. (PCBK), Serbia's ProCredit Bank ad Beograd (PCBS), Bulgaria's ProCredit Bank (Bulgaria) EAD (PCB Bulgaria), Romania's ProCredit Bank S.A. (PCB Romania) and Macedonia's ProCredit Bank AD Skopje (PCBM), Fitch said.
Furthermore, ProCredit Romania's and ProCredit Bulgaria's Short-Term IDRs have also been placed on RWN. The Viability Ratings (VRs) are unaffected by the rating action, the ratings agency said.
Fitch also said in the statement:
" - The IDRs and Support Ratings of the four South Eastern European (SEE) banks - PCBA, PCBK, PCBM and PCBS, as well as PCBG, PCB Bulgaria and PCB Romania subsidiaries - reflect the likelihood of potential support from their sole shareholder, PCH.
Our view of support is mainly based on the strategic importance of the Central and Eastern European and the SEE regions to PCH, the strong integration of these entities and synergies with the group and the proven track record of providing liquidity and funding. Fitch's assessment of support also takes into consideration the full ownership of the subsidiaries, common branding and the potential negative implications of a subsidiary default for the group.
However, the extent to which potential support can be factored into the SEE and Georgian subsidiaries' ratings is constrained by the agency's assessment of risks relating to their respective jurisdictions. Absent of country risk constraints, the subsidiaries' Long-Term IDRs would typically be notched down once from the parent's IDR.
PCBDE's Support Rating and the equalisation of its IDRs with those of PCH reflect Fitch's view of a high likelihood of parental support. This view is based primarily on the bank's treasury role within the group and a strong legal commitment in the form of a profit and loss transfer agreement, which obliges PCH to replenish PCBDE's equity should the latter suffer a loss.
PCBDE'S DEPOSIT RATINGS
- PCBDE's Deposit Ratings are aligned with the bank's IDRs. We have not given any Deposit Rating uplift because in Fitch's view, the bank's qualifying debt buffers would not afford any obvious additional benefit over and above the support benefit already factored into the bank's IDRs, even if they reach a sufficient size in future.
RATING SENSITIVITIES
- SUBSIDIARY BANKS - IDRS AND SUPPORT RATINGS AND PCBDE'S DEPOSIT RATING
- We expect to resolve the RWN before end-2018 following the resolution of RWN on the parent. If PCH's IDRs are downgraded, the IDRs and Support Ratings of PCBA, PCBK, PCBM, PCBS and PCBG could be downgraded or affirmed depending on the extent of the parent's downgrade. The IDRs and Support Ratings of PCB Bulgaria and PCB Romania are sensitive to any potential downgrade of PCH's IDRs.
If PCH's IDRs are affirmed, the subsidiaries' IDRs and Support Ratings would also be affirmed.
PCBDE's ratings are likely to move in tandem with those of PCH."
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