Fitch affirms ratings for BRD, BCR and Garanti Bank

Fitch Ratings has affirmed Bucharest based BRD-Groupe Societe Generale S.A.’s (BRD) and Banca Comerciala Romana S.A.’s (BCR) Long-term Issuer Default Ratings (IDR) at ‘BBB+’ and Garanti Bank S.A.’s (GBR) Long-term IDR at ‘BB+’.

BCR’s IDRs and Support Rating are driven by the potential support it can expect to receive from its 93.6 percent-owner, Erste Group Bank AG (Erste; A/Negative). As a strategically important subsidiary of Erste, Fitch would normally notch BCR’s IDR one notch below that of its parent, implying an IDR for BCR of ‘A-‘/Negative. However, BCR’s rating is constrained by the Romanian Country Ceiling of ‘BBB+’.

Fitch believes that BCR continues to be strategically important to its group despite the weak performance of the Romanian market, in light of Erste’s focus on Central and Eastern European (CEE), the strong integration into the group and the track record of support to date.

The IDRs and Support Rating of BRD are based on our view that there would be a high likelihood of support from its majority (60 percent) shareholder, Societe Generale (SG; A/Negative/a-) in case of need.

Fitch views BRD as a strategically important subsidiary for SG, given the parent’s strategic focus on Romania; BRD’s high integration, with management, board members and risk systems drawn from the parent and SG’s proven commitment to date. In line with Fitch’s criteria, as a strategically important subsidiary of SG, Fitch would normally notch BRD once from the parent’s IDR, implying an IDR of ‘A-‘/Negative for BRD. However, BRD’s rating is currently constrained by the Romanian Country Ceiling of ‘BBB+’; therefore the Stable Outlook on BRD’s IDR reflects that on Romania’s IDR.

BRD’s Stable Outlook reflects the fact that, assuming no change in Fitch’s perception of BRD’s strategic importance to SG, a one-notch downgrade of SG’s Long-term IDR due to the expected revision of SG’s SRF would not trigger any action on BRD’s IDRs. Fitch expects to downgrade SG’s Support Rating to ‘5’ and revise down its SRF to ‘No Floor’ by H115. SG’s Long-term IDR would then likely be downgraded to the level of its VR, which is currently ‘a-‘.

As Fitch has not undertaken a full review of BRD, it has not assigned a Viability Rating.

The IDRs and Support Rating of GBR are underpinned by Fitch’s view that the bank is a strategically important subsidiary of Turkiye Garanti Bankasi (TGB; BBB-/Stable). GBR shares the parent’s brand and IT systems, and sources top management and board members from TGB. Fitch believes the parent has a strong propensity to support GBR, given their strong integration and the high reputational risk to TGB in allowing its subsidiary to default.