TEXT-Fitch affirms Banca Comerciala Romana, BRD, Garanti Bank

Wed Nov 14, 2012 11:40am EST

Nov 14 - Fitch Ratings has affirmed Banca Comerciala Romana S.A. (BCR) and
BRD-Groupe Societe Generale S.A.'s (BRD) Long-term Issuer Default
Ratings (IDR) at 'BBB+'. The agency also affirmed Garanti Bank S.A.'s (Garanti
Romania)'s Long-term IDR at 'BB+'. The Outlook on all three Long-term IDRs is
Stable. A full list of rating actions is at the end of this comment.

RATING ACTION RATIONALE, DRIVERS AND SENSITIVITIES: IDR's, SUPPORT RATINGS

BCR's, BRD's and Garanti Romania's IDRs reflect the support they can expect to
receive from their respective majority shareholders: Erste Group Bank AG
('A'/Stable/'a-'), Societe Generale (SG; 'A+'/Negative/'a-') and Turkiye Garanti
Bankasi A.S. (TGB; 'BBB-'/Stable/'bbb-'), respectively. Fitch considers that the
subsidiaries are strategically important investments for their respective
parents in the Central and Eastern European (CEE) region, despite the weak
performance of the Romanian market during the past three years.

BCR's and BRD's IDRs are constrained by Romania's Country Ceiling, and the
Stable Outlooks on the banks' IDRs reflect that on the sovereign. Any change in
the Country Ceiling would likely result in a change in the banks' IDRs. Any
marked reduction in the parent banks' commitment to the CEE region and to the
Romanian market in particular (not Fitch's base case expectation at present)
could also trigger a negative rating action.

Garanti Romania's IDRs are driven by the support that it can expect to receive
from its ultimate shareholder TGB and are sensitive to any change in the IDRs of
TGB. Fitch expects to review the ratings of TGB during the next few weeks
following the recent upgrade of the Turkish sovereign. Garanti Romania's IDRs
could be downgraded in case of a marked reduction in the strategic importance of
the bank for the parent, but this is not currently anticipated by Fitch.

RATING ACTION RATIONALE, DRIVERS AND SENSITIVITIES: VIABILITY RATINGS

BCR is the largest bank in Romania in terms of asset market share. The Viability
Rating reflects its strong franchise, solid efficiency and comfortable
liquidity. At the same time, it reflects a continued weakening of asset quality,
negative operating profitability due to high loan impairment charges, and
reliance on its parent for funding. BCR's operating profitability suffered from
rapidly rising loan impairment charges in 9M12 and 2011. Credit impairments are
the biggest drag on profitability, and should peak in 2012, although large
downside risks exist. Meanwhile, margins have suffered somewhat from competition
and historically low interest rates. Efficiency is solid and benefits from
economies of scale and sound cost controls.

The impaired loan ratio, as per IFRS accounts, increased to a high 25.8% at
end-Q312, although loans overdue by 90 days in unconsolidated accounts (17.5% at
end-H112) are moderately lower. Further increases in impaired loans are possible
due to risks of an economic downturn and a further decline in real estate
prices. The high share of foreign-currency loans could also amplify credit risk
in case of sharp currency depreciation. The coverage ratio of impaired loans,
not allowing for collateral, has improved in 9M12 but still remains low, with
unreserved impaired loans equal to 92% of equity at end-H112. BCR is largely
funded by customer deposits, which provide a comfortable funding and liquidity
position in RON. However, the bank is dependent on its parent for
euro-denominated funds (around 35% of non-equity liabilities). The regulatory
capital ratio at 13.2% at end-Q312 was only moderate, in particular given
weaknesses in asset quality and reserve coverage. Erste's commitment to support
funding and capital provides some comfort. An expected capital increase of
RON501m in December 2012 may contribute to a 100bp increase in the capital ratio
in Fitch's view.

Downside risk for BCR's Viability Rating could arise from continued weakness in
asset quality leading to further pressure on profitability and capitalisation.
An upgrade is not likely in the medium term.

BRD is Romania's second-largest bank, with around 13% of total assets at
end-H112. Fitch has not undertaken a full review of BRD, and has therefore not
assigned a VR to the bank. However, the agency notes that most of BRD's key
credit metrics have significantly deteriorated in 2011 and 9M12, reflecting the
challenging market environment.

Garanti Romania has around 2% share of total assets and its Viability Rating
reflects its small size, its limited franchise and short track record as a
fully-fledged bank. It also reflects its better asset quality compared with the
Romanian banking system in general. . Its reliance on funding from the parent
remained high at 31% of non-equity liabilities at end-H112, in line with its
foreign-owned peers. Capitalisation and growth of the bank is supported by the
parent via cash capital injections, retained earnings and subordinated debt.
Fitch Core Capital equalled 14.6% at end-H112.

The Viability Rating may be upgraded should Garanti achieve sustainable
profitability and improve the diversification of funding and loan book, while
maintaining adequate capitalisation and solid asset quality. Downside to the
Viability Rating could stem from a marked deterioration in asset quality and
profitability leading to erosion in capitalision which is considered unlikely by
Fitch.

The rating actions are as follows:

Banca Comerciala Romana S.A.:
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Stable
Support Rating: affirmed at '2'
Viability Rating: affirmed at 'bb-'

BRD-Groupe Societe Generale S.A.:
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Support Rating: affirmed at '2'

Garanti Bank S.A.:
Long-term foreign currency IDR: affirmed at 'BB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Support Rating: affirmed at '3'
Viability Rating: affirmed at 'b'

Additional information is available on www.fitchratings.com.

BRD-Groupe Societe Generale S.A.'s ratings above were unsolicited and have been
provided by Fitch as a service to investors.

The other ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria' dated
August 2012, is available at www.fitchratings.com.

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria