site.btaFitch Affirms Three Bulgarian Banks

Fitch Affirms Three Bulgarian Banks

Sofia/London, June 23 (BTA) - Fitch Ratings said Tuesday that it
 had affirmed the Long-term Issuer Default Ratings (IDRs) of
Allianz Bank Bulgaria AD (ABB), Societe Generale Express Bank AD
 (SGE) and Sogelease Bulgaria (Sogelease) at 'BBB+' and
ProCredit Bank (Bulgaria) EAD's (PCB) Long-term IDR at 'BBB-'.
The Outlooks are Stable. Fitch has also affirmed the banks'
Viability Ratings (VRs).

The three banks' IDRs and Support Ratings are driven by
potential support available from their respective majority
shareholders.

ABB's ultimate majority shareholder is Allianz SE (AA/Stable)
through a 66 per cent stake in Allianz Bulgaria Holding, a
direct 99.9 per cent owner of ABB. PCB is 100 per cent owned by
ProCredit Holding AG & Co. KGaA (PCH; BBB/Stable). SGE is a 99.7
 per cent subsidiary of Societe Generale (SG, A/Stable), while
Sogelease is SGE's 100 per cent subsidiary.

ABB's and PCB's' VRs reflect primarily the banks' small size and
 limited market franchise, which makes them more vulnerable to
potential adverse changes in the operating environment and
limits their internal capital generation ability, Fitch says.
The VRs of all three banks are underpinned by their moderate
risk appetite, better than sector asset quality, adequate
capitalization as well as strong funding and liquidity profiles.
 The ratings also reflect the difficult and relatively unstable
domestic operating environment for banks.

ABB and PCB represented a small 2.3 per cent and 1.8 per cent,
respectively, of the banking's sector total customer loans and
2.6 per cent and 1.1 per cent of total retail deposits at
end-2014. The market franchise of medium-sized SGE was
materially stronger, as its shares in the sector's loans and
retail deposits increased to, respectively, 6.0 per cent and 5.8
 per cent at end-2014.

The banks' asset quality has persistently been better than the
sector average, which can be attributed to their relatively
lower risk appetite, evidenced by limited exposure to the most
problematic economy sectors such as construction and real estate
 sector, focus on larger corporates (ABB, SGE) and/or more
selective underwriting (PCB). At the same time, ABB's and SGE's
corporate focus has resulted in significant single-name loan
book concentrations.

Fitch considers that shrinking margins and subdued credit demand
 pose the main risks to maintaining profitability in 2015. The
margin pressure is likely to increase given the limited
opportunities for further reduction in funding costs and the
accumulated large pools of highly liquid but low-yielding
assets. Banks are increasingly focused on cost optimization
measures and searching for additional revenue sources.

Fitch believes that liquidity risks have increased for all
Bulgarian banks since the deposit runs on the two largest
Bulgarian-owned banks. The events at Corporate Commercial Bank
and First Investment Bank in June 2014 highlighted the corporate
 governance problems at domestically-owned companies and low
level of public trust in the banking system.

ABB's, PCB's and SGE's deposit base remained resilient
throughout 2014. Increased inflows of deposits from private
individuals at these banks support Fitch's view that they are
less exposed to a loss of customer confidence and benefit from a
 flight-to-quality effect.

The banks' sound funding and liquidity profiles are mostly
reflected in the large and overall stable customer deposit base
and high liquidity buffers, the Fitch analysis goes.