OREANDA-NEWS. Fitch Ratings has upgraded Tekstil Bankasi A.S.'s (Tekstilbank) Long-term foreign currency Issuer Default Rating (IDR) to 'BBB' from 'B+' and removed the rating from Rating Watch Positive (RWP). The Outlook is Stable. A full list of rating actions is available at the end of this commentary.

The rating action follows the change of ownership completed on 22 May 2015, whereby Industrial and Commercial Bank of China (ICBC; A/Stable) acquired a 75.5% stake in the bank.

Tekstilbank's IDRs, National Rating and Support Rating have been upgraded because Fitch believes ICBC would provide support to its new subsidiary, if required. The Support Rating Floor (SRF) has been affirmed and withdrawn, as SRFs are only assigned to banks whose primary source of external support is considered to be the sovereign; this is no longer the case for Tekstilbank.

KEY RATING DRIVERS - IDRS, NATIONAL RATINGS AND SUPPORT RATING
The bank's IDRs, National and Support Ratings are now driven by potential support from ICBC. ICBC's own Long-term IDR of 'A'/Stable is driven by Fitch's expectation of a very high probability of Chinese sovereign support for the bank, should it be required.

ICBC is 73%- owned by the Chinese authorities and has a 13% market share in the Chinese banking sector. Fitch believes the Chinese authorities are highly supportive of their banking sector and would allow support to flow through to foreign subsidiaries should this be required.

Tekstilbank's Long-term foreign currency IDRs are constrained by Turkey's 'BBB' Country Ceiling. The Long-term local currency IDR is notched down twice from ICBC's Long-term local currency IDR, reflecting Fitch's view that Tekstilbank is currently of limited strategic importance for ICBC, rather than a core subsidiary. The Stable Outlook reflects the Outlook on ICBC's Long-term IDR.

Tekstilbank's Short-term IDR has been upgraded to 'F2', the higher of the two possible Short-term IDRs corresponding to its Long-term IDR of 'BBB', reflecting available liquidity support from ICBC.

ICBC recently acquired a majority stake in a small bank in the UK and has a large global presence covering 43 countries and six continents. The Tekstilbank acquisition is a relatively small investment in a potential growth market. China is Turkey's third-largest trading partner with bilateral trade between the two countries having reached USD28bn at end-2014. The expansion into the region is in line with China's "One Belt, One Road" strategy.

Under the capital markets law of Turkey, the transaction will trigger a mandatory offer for the remaining 24.5% stake currently quoted on the Istanbul Stock Exchange, which could raise ICBC's ownership to 100%.

RATING SENSITIVITIES - IDRS, NATIONAL RATINGS AND SUPPORT RATING
Tekstilbank's Long-term IDRs could be downgraded if (i) ICBCs Long-term IDRs are downgraded (only a two-notch downgrade of ICBC would result in a downgrade of Tekstilbank's Long-term foreign currency IDR) (ii) Turkey's sovereign ratings and Country Ceiling are downgraded; or (iii) Fitch believes that the parent bank's propensity to support its subsidiary has weakened. None of these scenarios is currently expected by Fitch.

Tekstilbank's Long-term foreign currency IDR could be upgraded if Turkey's Country Ceiling is upgraded. An upgrade of the Long-term local currency IDR would be contingent on both a Turkish sovereign upgrade and an upgrade of ICBC.

The rating actions are as follows:

Tekstil Bankasi A.S.
Long-term foreign currency IDR: upgraded to 'BBB' from 'B+'; off RWP; Stable Outlook
Short-term foreign currency IDR: upgraded to 'F2' from 'B'; off RWP
Long-term local currency IDR: upgraded to 'BBB+' from 'B+'; off RWP; Stable Outlook
Short-term local currency IDR: upgraded to 'F2' from 'B'; off RWP
Viability Rating: unaffected at 'b+'
Support Rating: upgraded to '2' from '5'; off RWP
Support Rating Floor: affirmed at 'No Floor' and withdrawn
National Long-term Rating: upgraded to 'AAA(tur)' from 'A(tur)'; off RWP; Stable Outlook