(The following statement was released by the rating agency)
Nov 15 - Contagion risks for Turkey’s Finansbank from its parent, National Bank of Greece (NBG), are minimal, Fitch Ratings says. It is unlikely Fitch would downgrade Finansbank as a result of any further deterioration in NBG’s financial position.
Finansbank has no significant direct financial exposure to NBG, or to Greece more generally. Nor is the bank dependent on funding from its parent. NBG has only subscribed to a small amount of subordinated debt issues and has not sought to withdraw capital or liquidity from its subsidiary. Our recent conversations with Finansbank’s management confirm that there are no plans for this independence to change.
The regulatory environment in Turkey helps limit contagion risk. In our view, the Turkish regulator, the Banking Regulation and Supervision Agency, would be very unlikely to authorise significant transfers of capital or liquidity from Finansbank to NBG and would seek to ensure that Finansbank is ring-fenced from any of its parent’s problems.
We also believe that NBG has a strong interest in protecting the value of its Turkish subsidiary. NBG’s problems have not affected Finansbank’s domestic franchise and market access. Deposits have been stable and the bank continues to raise debt funding, most recently a five-year senior USD350m, 5.15% issue in October 2012.
Fitch has maintained Finansbank’s rating at ‘BBB-’ since it was upgraded to this level in December 2009, notwithstanding multiple negative actions on NBG (now rated ‘CCC’). Finansbank’s ‘bbb-’ Viability Rating is supported by our positive view of prospects for the Turkish economy, the bank’s significant franchise and generally sound credit metrics.
Finansbank’s ratings could come under downward pressure if further rapid expansion results in markedly higher credit risks or significantly weaker capital and funding ratios (the loans/deposit ratio of 122% at end-June 2012 was at the higher end for the sector). We are cautious about the bank’s quite aggressive growth plans and focus on the higher-risk consumer loan segment. The latter resulted in an impaired loan ratio of 6% at the half-year, which is significantly above the sector average.
NBG owns a 95% stake in Finansbank, but has indicated intentions to reduce its stake if the opportunity arises.