Fitch: Georgian Banks' Financial Metrics Remain Solid, Downside Risks Have Increased

Link to Fitch Ratings' Report: Georgian Banks Presentation

Fitch Ratings-London/Moscow-18 June 2013: Fitch Ratings says in a newly-published report that sovereign and macroeconomic issues remain key for its bank ratings in Georgia. A marked deterioration in the operating environment could put downward pressure on these ratings, while upgrades are unlikely in the absence of a sovereign upgrade.

The change of government in 2012 and the economic slowdown have had little impact to date on banks' financial metrics, which for the most part remain solid. Profitability and asset quality are reasonable, supported by wide interest margins and still positive GDP growth, respectively. Capital ratios are high, liquidity positions are comfortable and refinancing risk is limited due to the high level of funding provided by international financial institutions.

The main near-term challenges for Georgian banks are to maintain profitability and asset quality ratios in the face of slowing loan growth and increasing competition. In addition, downside risks for the operating environment are significant and have increased, in Fitch's view, due to somewhat greater macroeconomic and political uncertainty following the change in government. In light of this, and given banks' high levels of foreign-currency lending, the sizeable capital buffers typically maintained by the banks are warranted, in Fitch's view.

The report, published as a presentation, was given at a Fitch conference in Tbilisi in June 2013. It is available by clicking on the link above or at www.fitchratings.com.