London, May 03, 2022 -- Moody's Investors Service ("Moody's") has today affirmed the Ba2 long-term deposit and senior unsecured debt ratings and the ba3 Baseline Credit Assessments (BCAs) of JSC Bank of Georgia (Bank of Georgia) and JSC TBC Bank (TBC Bank), as well as the Ba3 long term deposit ratings and b1 BCA of Liberty Bank JSC (Liberty Bank). The rating agency has also affirmed the Counterparty Risk Ratings (CRRs) of Ba2/NP and Counterparty Risk Assessments of Ba2(cr)/NP(cr) of the above mentioned banks. The outlooks on these banks' long-term deposit ratings were changed to negative from stable.
A list of the banks' ratings affected by today's action is at the end of this press release.
The rating action follows Moody's decision to affirm Georgian government's long-term issuer rating of Ba2 and change its outlook to negative from stable on 28 April 2022. For further information on the sovereign rating action, please refer to Moody's press release: https://www.moodys.com/research/--PR_465177.
RATINGS RATIONALE
BANK-SPECIFIC CONSIDERATIONS
TBC Bank
The rating affirmation and change of outlook to negative from stable reflects the negative outlook on the Georgian government's issuer rating which would result in a lower ability to support TBC Bank in the event of a downgrade of the Georgian government's issuer rating. TBC Bank's Ba2 long-term deposit and senior unsecured ratings benefit from one notch of support uplift due to our assessment of high probability of government support reflecting its systemic importance as the largest bank in Georgia.
The affirmation of the bank's ba3 BCA reflects its (1) adequate capitalisation, above regulatory requirements and (2) resilient profitability, underpinned by its dominant position in Georgia. These strengths are balanced against its (1) elevated credit risks due to its extensive lending in foreign currency; (2) high deposit dollarisation and some moderate reliance on non-resident deposits and incasing market funding although mitigated by adequate liquidity.
Bank of Georgia
The rating affirmation and change of outlook to negative from stable reflects the negative outlook on the Georgian government's issuer rating which would result in a lower ability to support Bank of Georgia in the event of a downgrade of the Georgian government's issuer rating. Bank of Georgia's Ba2 long-term deposit and senior unsecured ratings benefit from one notch of support uplift due to the bank's systemic importance as the second largest bank in Georgia.
The affirmation of the bank's ba3 BCA reflects (1) the bank's adequate capitalisation at levels above the rising regulatory requirements and (2) its resilient profitability which recovered strongly during 2021 despite weaking during 2020. These strengths are balanced against the bank's extensive lending in foreign currency which could weigh negatively on the bank's capital as most capital is denominated in local currency.
Liberty Bank
The rating affirmation and change of outlook to negative from stable reflects the negative outlook on the Georgian government's issuer rating which would result in a lower ability to support Liberty Bank in the event of a downgrade of the Georgian government's issuer rating. Liberty Bank's Ba3 long-term deposit ratings benefit from one notch of support uplift due to the bank's importance on distributing state pensions and welfare payments in the country.
The affirmation of the bank's b1 BCA reflects (1) the bank's solid liquidity and stable deposit base and (2) its continued efforts to diversify its business profile towards that of a universal bank from being a consumer-focused lender. These strengths are balanced against the bank's somewhat increased operational risk which continues to weigh negatively on the bank's risk profile and the lower capital buffers compared to peers.
RATINGS OUTLOOK CHANGED TO NEGATIVE
The outlooks on these banks' long-term deposit ratings were changed to negative from stable, in line with the negative outlook on the Georgian Government's long-term issuer rating of Ba2, which is the support provider for the banks' deposit and senior unsecured ratings.
The decision to change the outlook on Georgia's Ba2 ratings to negative reflects the heightened geopolitical event risks from Russia's ongoing military invasion of Ukraine. While not Moody's base case, the unpredictability of Russia's strategic intentions in the region has increased the risk of Georgia being involved in military conflict notwithstanding the Georgian government's endeavors to minimize the potential for such military conflict.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A downgrade of the credit rating of Georgia would exert downward pressure on the banks' ratings, in view of the sovereign's weaking capacity to support banks. The affected banks' deposit ratings could also be downgraded if their solvency and liquidity were to deteriorate materially beyond our current expectations amid further weakening of the operating conditions.
Upgrades of these banks' ratings are unlikely in the next 12 to 18 months given the unfavorable operating conditions in the country and the negative outlook. However, the ratings could be stabilized if the operating environment improves, while the banks maintain their resilient financial performance.
LIST OF AFFECTED RATINGS
..Issuer: JSC Bank of Georgia
Affirmations:
....Adjusted Baseline Credit Assessment, Affirmed ba3
....Baseline Credit Assessment, Affirmed ba3
....Short-term Counterparty Risk Assessment, Affirmed NP(cr)
....Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)
....Short-term Counterparty Risk Ratings, Affirmed NP
....Long-term Counterparty Risk Ratings, Affirmed Ba2
....Short-term Bank Deposit Ratings, Affirmed NP
....Long-term Bank Deposit Ratings, Affirmed Ba2, Outlook Changed To Negative From Stable
....Senior Unsecured Regular Bond/Debenture, Affirmed Ba2, Outlook Changed To Negative From Stable
Outlook Action:
....Outlook, Changed To Negative From Stable
..Issuer: JSC TBC Bank
Affirmations:
....Adjusted Baseline Credit Assessment, Affirmed ba3
....Baseline Credit Assessment, Affirmed ba3
....Short-term Counterparty Risk Assessment, Affirmed NP(cr)
....Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)
....Short-term Counterparty Risk Ratings, Affirmed NP
....Long-term Counterparty Risk Ratings, Affirmed Ba2
....Short-term Bank Deposit Ratings, Affirmed NP
....Long-term Bank Deposit Ratings, Affirmed Ba2, Outlook Changed To Negative From Stable
....Senior Unsecured Regular Bond/Debenture, Affirmed Ba2, Outlook Changed To Negative From Stable
Outlook Action:
....Outlook, Changed To Negative From Stable
..Issuer: Liberty Bank JSC
Affirmations:
....Adjusted Baseline Credit Assessment, Affirmed b1
....Baseline Credit Assessment, Affirmed b1
....Short-term Counterparty Risk Assessment, Affirmed NP(cr)
....Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)
....Short-term Counterparty Risk Ratings, Affirmed NP
....Long-term Counterparty Risk Ratings, Affirmed Ba2
....Short-term Bank Deposit Ratings, Affirmed NP
....Long-term Bank Deposit Ratings, Affirmed Ba3, Outlook Changed To Negative From Stable
Outlook Action:
....Outlook, Changed To Negative From Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Effie Tsotsani
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Henry MacNevin
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
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JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
