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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 affirmation of PGBG's 'BB' Long-Term IDRs at one notch above the sovereign rating, and its Support Rating at '3', reflects Fitch's view that PCH's propensity to provide support to the subsidiary is high, but PCBG's ability to receive and utilise this support could be restricted by transfer and convertibility risks, as reflected by Georgia's Country Ceiling of 'BB'.
PCBG's IDRs are driven by the potential support it may receive from its sole shareholder, ProCredit Holding AG & Co.
The affirmations of the banks' 'bb-' (BoG, TBC, PCBG) and 'b+' (LB) VRs consider their reasonable financial metrics, stable funding profiles and adequate capitalisation, which provide resilience in case of potential recurring pressures on asset quality and performance.
PCBG's VR also factors in the bank's well-developed franchise in its SME niche and fairly conservative risk management, resulting from its close integration with the parent bank.
PCBG's NPLs declined to a low 1.2% of gross loans at end-2017 (preliminary data as the end-2017 IFRS report has not yet been published) from 1.5% at end-2016 and were fully reserved.
PCBG's profitability is constrained by a declining net interest margin (5.0% in 2017, down from 6.8% in 2016), as loan growth has been moderate and sector competition remains high.
The regulatory Tier 1 and total capital ratios were 14.4% and 18.3% at end-2017 (compared to end-2017 minimum levels for PCBG of 11.5% and 14.5%, including buffers), allowing PCBG additionally reserving moderate 4% of gross loans.
PCBG's liquidity cushion (cash, unpledged securities eligible for repo and short-term bank placements, net of potential debt repayments within the next 12 months) was reasonable, covering 15% of customer accounts at the same date.
The affirmation of PCBG's 'BB' Long-Term IDRs at one notch above the sovereign rating, and '3' Support Rating, reflect Fitch's view of the moderate probability of support from the bank's 100% shareholder, ProCredit Holding AG & Co.
PCBG's Long-Term IDRs are sensitive to changes in Fitch's assessment of support from PCH and to a change in Georgia's Country Ceiling.
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