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Fitch Upgrades ProCredit Macedonia's Viability Rating; Downgrades ProCredit Bank Serbia
January 23, 2014 / 5:01 PM / 4 years ago

Fitch Upgrades ProCredit Macedonia's Viability Rating; Downgrades ProCredit Bank Serbia

(The following statement was released by the rating agency) LONDON/WARSAW, January 23 (Fitch) Fitch Ratings has affirmed ProCredit Bank Macedonia’s (PCBM) Long-Term foreign currency and local currency Issuer Default Ratings (IDRs) at ‘BB+’ with a Stable Outlook and upgraded its Viability Rating (VR) to ‘b+’ from ‘b’. At the same time, Fitch has downgraded ProCredit Bank Serbia’s (PCBS) Long-term foreign currency IDR to ‘B+’ from ‘BB-’. A full list of rating actions is provided at the end of this rating action commentary. KEY RATING DRIVERS - IDRS and SUPPORT RATINGS of PCBM and PCBS The Long-Term IDRs and Support Ratings of PCBM and PCBS are driven by potential support from their parent, ProCredit Holding AG & Co. KGaA (PCH, BBB-/Stable). In turn, PCH’s ratings are based on Fitch’s view of the support it could expect to receive from its core shareholders when needed, particularly from its international financial institution (IFI) shareholders. The downgrade of PCBS’s Long-term foreign currency and local currency IDRs to ‘B+’ and ‘BB-’, respectively, as well as its Support Rating follows the downgrade of Serbia’s Long-term IDR and Country Ceiling to ‘B+’ (please see ‘Fitch Downgrades Serbia to ‘B+’ Outlook Stable, dated 17 January 2014, available at www.fitchratings.com). This is because the bank’s foreign currency IDR is constrained by the Country Ceiling RATING SENSITIVITIES - IDRS and SUPPORT RATINGS of PCBM and PCBS PCBM's IDRs and Support Ratings are sensitive to multi-notch downgrade in Macedonia's sovereign rating (BB+/Stable) and Country Ceiling (BBB-). A downgrade of Macedonia's Country Ceiling by two notches or more would result in a downgrade of the bank’s Long-term IDRs. A downgrade of Macedonia's Country Ceiling to ‘B+’ or below would also trigger a downgrade of PCBM's Support Rating. Upward movement in the sovereign rating would not trigger an upgrade of PCBM's IDRs in view of PCH’s ratings. A weakening, in Fitch's view, of the support available to PCBM from PCH would also result in a downgrade to the bank’s IDRs and potentially also the Support Rating, although this is not expected by Fitch at present. Potential support for PCBS, and hence its IDRs and Support Rating, are constrained by Serbia’s ‘B+’ Country Ceiling. Consequently, further movements in Serbia’s sovereign rating and Country Ceiling would affect the bank’s IDRs. A weakening, in Fitch's view, of the support available to PCBS from PCH would also result in a downgrade to the bank’s IDRs and potentially also its Support Rating. However, this is not expected by Fitch at present. KEY RATING DRIVERS - PCBM’S VR The upgrade of PCBM’s VR to ‘b+’ from ‘b’ reflects the bank’s improved performance in 9M13, consistent and sound asset quality track record that continues to outperform the sector average. Loans overdue by 90 days (PAR90) have ranged from a reasonable 2% to 3% since end-2010, and have strong reserves coverage. The bank’s liquidity is also comfortable. Furthermore, Fitch forecasts GDP growth of 3.2% for Macedonia in 2014, up from 2.7% in 2013, which should support PCBM’s performance and asset quality further. However, these factors are mitigated by the bank’s only moderate capitalisation (Fitch Core Capital ratio of 11.8% at end-3Q13) in view of a still demanding operating environment, and a high level of foreign currency loans. However, the foreign currency risks are mitigated by Macedonia’s existing currency peg. RATING SENSITIVITIES - PCBM’S VR PCBM’s VR could be downgraded in the event of an unexpected and material worsening of the operating environment and a sharp deterioration in asset quality that puts pressure on profitability and erodes capital. A further upgrade of PCBM’s VR is unlikely in the short- to-medium term, given today’s upgrade. The rating actions are as follows: PCBM Long-term foreign currency IDR: affirmed at 'BB+'; Outlook Stable Short-term foreign currency IDR: affirmed at 'B' Long-term local currency IDR: affirmed at 'BB+'; Outlook Stable Short-term local currency IDR: affirmed at 'B' Viability Rating: upgraded to ‘b+’ from 'b' Support Rating: affirmed at '3' PCBS Long-term foreign currency IDR: downgraded to 'B+' from ‘BB-’; Outlook Stable Short-term foreign currency IDR: affirmed at 'B' Long-term local currency IDR: downgraded to 'BB-' from ‘BB’; Outlook Stable Short-term local currency IDR: affirmed at 'B' Viability Rating unaffected at ‘b’ Support Rating: downgraded to '4' from ‘3’ Contact: Primary Analyst Lindsey Liddell Director +44 20 3530 1008 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Eris Huang Analyst +44 20 3530 1493 Committee Chairperson Artur Szeski Senior Director +48 22 338 6292 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria, dated 15 August 2012, Evaluating Corporate Governance Criteria, dated 12 December 2012 and Country Ceilings Criteria dated 9 August 2013 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Evaluating Corporate Governance here Country Ceilings here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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