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Fitch Revises VTB Georgia & ProCredit Bank Georgia's Outlook to Positive, Affirms Liberty Bank

March 04, 2011 | Fitch Ratings

Fitch Ratings-London/Moscow-04 March 2011: Fitch Ratings has revised the Outlooks on JSC VTB Bank Georgia's (VTBG) and ProCredit Bank (Georgia)'s (PCBG) 'BB-' Long-term Issuer Default Ratings (IDR) to Positive from Stable. At the same time, the agency has affirmed JSC Liberty Bank's (LB) Long-term IDR at 'B' with a Stable Outlook. A full list of ratings actions is at the end of this release.

The rating actions follow the revision of the Outlook on Georgia's Long-term foreign and local currency IDR of 'B+' to Positive from Stable (see "Fitch Revises Georgia's Outlook to Positive, Affirms 'B+'", published 03 March 2011 at www.fitchratings.com).
The change in Outlooks on VTBG's and PCBG's Long-term IDR reflects the increased likelihood of an upgrade of Georgia's Country Ceiling of 'BB-', following the change in the sovereign Outlook. Georgia's Country Ceiling captures transfer and convertibility risks and limits the extent to which support from the foreign shareholders of these banks can be factored into their Long-term foreign currency IDR. PCBG's Long-term local-currency IDR also takes account of Georgia's country risks.

VTBG is 92.6%-owned by Russian state-controlled bank JSC VTB Bank ('BBB'/Stable) and PCBG is 100%-owned by Germany's ProCredit Holding AG ('BBB-'/Stable). The Long- and Short-term IDR and Support Ratings of both banks reflects the likely high propensity of their shareholders to provide support, in case of need.

Fitch notes that VTBG remains potentially exposed to political risks in light of the strained nature of Georgian-Russian relations. However, in Fitch's view, the actions of the Georgian authorities, which have continued to regulate VTBG in line with other local banks, and of JSC VTB Bank, which recapitalised its Georgian subsidiary during the crisis, suggest that VTBG is likely to be able to continue receiving and utilising support from JSC VTB Bank.

The affirmation of LB's IDR with a Stable Outlook reflects Fitch's expectation that the bank's ratings are unlikely to change even if Georgia's Long-term IDRs are upgraded to 'BB-'. LB's Long-term IDR continues to be underpinned by support the bank may receive in case of need from the Georgian authorities, given the bank's important social function in distributing pensions and social benefits, and the support received by the bank during 2008-2009. However, the bank's private ownership and still moderate market shares mean that this support potential would probably not be sufficient to drive an upgrade of the bank, even if the Georgian sovereign is upgraded to 'BB-'.

The ratings of other Georgian banks are unaffected by the rating action on Georgia as their Long-term IDRs are not driven by sovereign support or constrained by the Country Ceiling. The Long-term IDRs of Bank of Georgia ('B+'/Stable) and Basisbank ('B-'/Stable), are driven by their standalone strength, while that of TBC Bank ('B+'/Stable) reflects potential support from its international financial institution shareholders.

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. The Individual Ratings of the banks covered in this commentary have not been reviewed as part of the rating actions.

The rating actions are as follows:

VTBG
Long-term foreign currency IDR: affirmed at 'BB-'; Outlook revised to Positive from Stable
Short-term foreign currency IDR: affirmed at 'B'
Support Rating: affirmed at '3'
Individual Rating: remains at 'D/E'

PCBG
Long-term foreign currency IDR: affirmed at 'BB-'; Outlook revised to Positive from Stable
Long-term local currency IDR: affirmed at 'BB-'; Outlook revised to Positive from Stable
Short-term foreign currency IDR: affirmed at 'B'
Short-term local currency IDR: affirmed at 'B'
Support Rating: affirmed at '3'
Individual Rating: remains at 'D'

LB
Long-term foreign currency IDR: affirmed at 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Support rating: affirmed at '4'
Support rating floor: affirmed at 'B'
Individual Rating: remains at 'D/E'

Company: VTB Bank Georgia

Full company nameAO "VTB Bank Georgia"
Country of riskGeorgia
Country of registrationGeorgia
IndustryBanks

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