Fitch has also upgraded GBR’s Viability Rating (VR) to ‘bb’ from ‘bb-‘ and Shareholder Support Rating (SSR) to ‘bb-‘ from ‘b-‘.
According to Fitch, “the upgrades of the IDRs and VR reflect the benefits of the improved Romanian operating environment to the bank’s risk and business profiles as well a limitation in contagion risk from its linkage to Turkiye’s exposures. The latter, combined with the improved credit profile of GBR’s direct parent Turkiye Garanti Bankasi A.S. (TGB; BB-/Stable/bb-), support the upgrade of GBR’s SRR”.
GBR is a small universal Romanian bank operating a traditional bank business model, with growing focus on business diversification, albeit into more volatile but higher-yielding business. However, the bank’s limited franchise constrains its competitive advantages in the competitive Romanian banking sector. The burden of its modest and declining exposure to Turkiye risk is diminishing due to improved economic prospects and decreased intervention risk in Turkiye.
Fitch expects “the bank’s impaired loans ratio (end-1H24: 1.6%) to moderately weaken over the next two years to about 2.1%, reflecting the normalisation of default rates and the bank’s recent faster growth in unsecured retail lending, structurally weighing on new impaired loans generation as this seasons. GBR’s impaired loans ratio has historically outperformed the sector average, but loan book concentrations increase vulnerability to cyclical losses. GBR’s capitalisation is a rating strength and reflects the bank’s high capital ratios (common equity Tier 1 (CET1) ratio at end-1H24: 19.7%) providing moderate buffers against stress, although it would be vulnerable to more severe stress. We expect the CET1 ratio to moderately decline over the next two years, but the level should stay commensurate with the bank’s risk profile”.
The rating agency also “expects the bank’s gross loans/customer deposits ratio to be broadly stable around 90%. GBR’s funding profile is based on granular and fairly stable customer deposits, although the bank’s funding franchise is weaker than large domestic peers. GBR’s liquidity is reasonable and refinancing risk is low”.