BAKU, Azerbaijan, Nov. 30
By Tamilla Mammadova – Trend:
Fitch has affirmed the support-driven IDRs of Halyk Bank Georgia (HBG) at 'BB' and revised the Outlook to Stable from Negative, Trend reports via the Fitch.
According to Fitch, impaired loans increased to 13.7 percent at end-3Q20 from 10.2 percent at end-2019.
“The share of Stage 2 loans rose to 6.5 percent from 3.4 percent in the same period. Coverage of Stage 2 and Stage 3 loans by specific Lower Limb Assessment Score (LLAs) was the lowest among Fitch-rated banks in Georgia (0.7 percent and 8.3 percent, respectively) as the bank relies on collateral. Coverage of impaired loans by total LLAs was a low 30 percent. In regulatory accounts – further reads the statement - nonperforming loans were fully covered by LLAs (in line with sector average) due to stricter provisioning requirements compared with IFRS,” the report said.
Fitch Ratings also takes into account that in 9M2020, HBG's operating profit to regulatory Risk-weighted asset (RWA) ratio fell to marginally below zero from 2.4 percent in 2019, given increased Listed Investment Companies (LICs) (3.5 percent of average loans).
“Pre-impairment profit was good at 3.5 percent of average loans in 9M2020 (annualized) supported by lower funding costs and improved efficiency compared with 2019 but insufficient to cover increased impairments. The bank's FCC was a high 19 percent of regulatory RWA at end-3Q2020; down from 22 percent at end-2019 due to devaluation-driven inflation of RWA and weak capital generation. Capitalization – Fitch Ratings said - is undermined by an elevated amount of unreserved impaired loans (41 percent of FCC at end-3Q2020),“ the report said.
HBG is primarily funded by its parent bank (68 percent of liabilities), while customer deposits represent only 30 percent of liabilities and are mainly attracted from corporates.
“HBG's standalone liquidity position was moderate with liquid assets sufficient to cover 44 percent of customer accounts at end-3Q2020. Positively, HBG's liquidity position benefits from support provided by the parent bank,” said the statement from Fitch.
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