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Fitch Affirms Halyk Bank Georgia at ‘BB-‘

Fitch Ratings has affirmed Halyk Bank Georgia’s (HBG) Long-Term Issuer Default Rating (IDR) at ‘BB-‘ with a Positive Outlook. Fitch has also assigned the bank a Viability Rating (VR) of ‘b+’. A full list of rating actions is at the end of this rating action commentary.

HBG’s IDRs and Support Rating are driven by potential support it may receive in case of need from its sole shareholder, Halyk Bank of Kazakhstan (HBK, BB/Positive). Fitch believes that HBK will have a high propensity to support its Georgian subsidiary, given full ownership, relatively low cost of potential support for HBK and potential negative implications for HBK in case of subsidiary’s default.

The one-notch difference between the Long-Term IDRs of HBK and HBG reflects the cross-border nature of the parent-subsidiary relationship and the so far limited track record and contribution of the Georgian subsidiary to overall group performance. The Positive Outlook on HBG’s Long-Term IDR mirrors that on the parent.

The bank is well capitalised with Fitch Core Capital (FCC) standing at 20% of risk-weighted assets at end-3Q18 (according to management accounts), supported by a capital injection from the parent bank of GEL14 million in 2018. The regulatory Tier 1 and Total capital ratios were adequate at 17.2% and 21.7% at end-3Q18, respectively, allowing the bank to reserve about 6% of gross loans without breaching the minimum required levels, including buffers.