Fitch Ratings has affirmed
The Outlooks remain Negative. Fitch has also affirmed the bank's Viability Rating (VR) at 'ccc'.
Key Rating Drivers
ATB's IDRs and National Ratings are driven by potential support from the bank's 64.2% shareholder,
The 'ccc' VR is heavily influenced by our assessment of the domestic operating environment. ATB operates exclusively in
Shareholder Support: Fitch believes that ATB is strategically important to AB. Integration links are strong, with AB defining the subsidiary's strategy and overseeing its credit, market and liquidity risks. AB also provides risk-management expertise. While ATB has not required extraordinary support from AB, the parent provides ordinary support in the form of capital increases and liquidity lines.
Very Challenging Operating Environment:
Well-Established Tier 2 Bank: ATB is
Heightened Risk Profile: As a purely domestic bank, ATB 's risk profile is inevitably high, given the very difficult domestic operating environment. Nonetheless, the bank has a reasonable history of managing concentration risk across sectors, customer type and large exposures, which are not high by developing market standards.
Weak Asset Quality: ATB lends mainly to large local corporates but also to SMEs, retail/very small companies and public sector entities. The bank's unconsolidated impaired loans/gross loans ratio increased to 12.1% (end-2020: 11.3%), broadly in line with the sector average.
Net Loss in 2021: ATB posted a net loss of
Small Capital Buffers: We view ATB's capital buffers as weak relative to the bank's risk profile. The Tier 1 capital ratio was 7.9% at end-2021 (unchanged from end-2020), against a minimum regulatory requirement of 7%. ATB's regulatory capital ratio was 12.3% at end-2021. We expect capitalisation to be supported by a potential rights issue in 2022 and by growth in lower-risk segments.
Adequate Funding, Improving Liquidity: ATB is primarily funded by stable customer deposits, which accounted for 85% of total non-equity funding at end-2021. Deposits are well balanced between retail and corporates, and concentrations are acceptable by emerging market standards, with the 20 largest deposits representing 18% of the total at end-2021. Tunisian dinar liquidity conditions eased during 2021 and ATB has reduced its reliance on CBT's finance, which is now around 1% of total non-equity funding (end-2019: 10%).
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
ATB's Long-Term IDRs are sensitive to a downgrade of
ATB's IDRs would also be downgraded if AB's strategic interest in the bank weakens or if the parent's IDRs are downgraded by at least four notches.
ATB's VR is sensitive to further deterioration in the bank's asset quality and sustained deterioration in profitability affecting capital ratios. This could come from sustained deterioration in the domestic operating environment.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade of ATB's Shareholder Support Rating and IDRs would require an upgrade of
An upgrade of the VR would require sustained improvement in the operating environment allowing for a strengthening of asset quality, earnings and capitalisation, which is unlikely at present.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
ATB's ratings are driven by AB's IDRs.
ESG Considerations
ATB's ESG Relevance Score of '3' for e social impacts reflects ATB's exposure to social disapproval of interest rate practices in the banking sector, versus '2' that is typically assigned to banks. Nevertheless, environmental, social or governance assessments are not rating drivers for ATB.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com
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