OREANDA-NEWS. Fitch Ratings has assigned JSC Halyk Bank Georgia a Long-term foreign currency Issuer Default Rating (IDR) of 'BB-' with a Stable Outlook. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
Halyk Bank Georgia's ratings are driven by potential support the bank may receive, if needed, from its parent, Halyk Bank of Kazakhstan (BB/Stable). Support considerations take into account the full ownership, common branding (implying reputation risks for the parent arising from a subsidiary default), commitment of the parent to the Georgian market, which it has identified as strategically important, close parental integration and the parent's ability to provide support to Halyk Bank Georgia, given the latter's small size relative to the parent (less than 1% of the parent bank's consolidated assets).

The one-notch differential between the parent and subsidiary's IDRs reflects the cross-border nature of the parent-subsidiary relationship, and the so far limited track record and contribution of the Georgian subsidiary to the overall group performance.

Fitch has not assigned Halyk Bank Georgia a Viability Rating due to its narrow standalone franchise, short track record of operations, and the high level of management and operational integration with the parent bank, particularly in terms of liquidity and risk management. The parent has contributed around 50% of Halyk Bank Georgia's total funding at end-2014 and plans to remain the bank's key funding provider in the medium term.

Halyk Bank Georgia operates as a universal bank with five branches in the country. The bank has a track record of servicing a number of Kazakh companies operating in Georgia that were identified as anchor clients by the parent bank.

The bank has a fairly small balance sheet (GEL181m at end-2014), of which one-quarter comprises liquid assets, while the loan book (dominated by Georgian companies from the trade and services sector) made up 67% of total assets. The quality of the loan portfolio is reasonable with low 0.4% non-performing loans (NPLs, 90+ days overdue). The bank's business is expected to grow mostly organically. The bank is significantly exposed to indirect FX risk, which is typical for the market, as more than 80% of the loan book is denominated in US dollars. Halyk Bank Georgia's capitalisation is strong with a regulatory total Capital Adequacy Ratio at a healthy 28.4% as of end-2M15.

RATING SENSITIVITIES
The Stable Outlook on Halyk Bank Georgia's Long-Term IDR mirrors that on its parent. Halyk Bank Georgia's support-driven ratings would likely change in tandem with the parent bank's Long-Term IDR. A sale of the Georgian subsidiary to a financially weaker owner or a change in Fitch's view of the willingness of the parent to support its Georgian subsidiary could trigger a downgrade. However, Fitch does not currently expect any of these scenarios to materialise.

The rating actions are as follows:

Halyk Bank Georgia
Long-term Issuer Default Rating: assigned at 'BB-', Outlook Stable
Short-term Issuer Default Rating: assigned at B
Support Rating: assigned at '3'.