Fitch Ratings has affirmed
Fitch also affirmed the Government Support Rating (GSR) at 'ns'.
Key Rating Drivers
IDRs AND VR
Operating Environment with High Influence: BG's VR underpins its IDR. However, the ratings are capped by Fitch's assessment of the operating environment (OE) score of 'ccc+'.
Good Business Model: BG is the second largest bank in
Higher Profitability Levels: BG's profitability has improved due to controlled operating expenses and lower impairment charges due to the excess of loan loss allowances. In addition to a steady NIM due to a higher growth in profitable segments, the bank focused its growth strategy on consumer loans in order to mitigate rising funding costs caused by high competition in the system. As of 3Q23, operating Profit to Risk Weighted Assets (RWA) ratio improved to 2.6% from 2.3%. Fitch expects BG's profitability to remain stable, driven by controlled impairment charges due to lower growth. However, it does not rule out additional pressures driven by higher funding costs, due to less liquidity and high competition at a systemic level.
Stable Capitalization Ratios:
Ample Funding and Liquidity Levels: BG's liquidity position is conservative but is decreasing due to OE risks. Loans-to-deposits ratio remained sound at 94.1% as of 3Q23 but increased from 89.0% at YE22. Historically, customer deposits have covered most of the bank's funding needs (87.9% as of 3Q23). The bank maintains good access to capital debt markets and wholesale funding. It benefits from high quality available funds that represented 34.5% of short-term deposits as of 3Q23, which is considered adequate by Fitch. In order to complement its liquidity levels, the bank maintains credit lines with local and foreign financial institutions.
GOVERNMENT SUPPORT RATING
The GSR of 'ns' reflects that despite BG's important market share and local franchise, Fitch believes that there is no reasonable assumption of support being forthcoming from the sovereign due to
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
IDRs and VR:
The IDRs are sensitive to changes in the sovereign rating or to further deterioration within the local operating environment;
The IDRs and VR could be downgraded if there is significant deterioration in the banks' intrinsic credit profile, although downside potential due to intrinsic financial deterioration is somewhat limited, given the low VR level imposed by the sovereign constraint.
GSR:
The GSR has no downgrade potential, as it is at the lowest possible level.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
IDRs and VR:
BG's upside potential is limited. In the long term, a rating upgrade would require improved prospects for the operating environment and a meaningful and sustained improvement in the bank's core profitability, along with improvement in the bank's credit quality and capitalization.
GSR:
VR ADJUSTMENTS
The VR of 'ccc+' has been assigned below the 'b' implied VR due to the following adjustment reason: Operating Environment (negative).
Fitch has assigned an Operating Environment score of 'ccc+' that is below the 'b' category implied score due to the following adjustment reason: Sovereign Rating (negative).
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.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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