Fitch Ratings has assigned a long-term Issuer Default Ratings (IDRs) of "B" with a negative outlook and a ‘b’ viability rating to Albanian lender Banka Kombetare Tregtare (BKT), the ratings agency said in a statement.
BKT, majority owned by Turkish Calik Holdings, was the second-largest Albanian bank by total assets and customer deposits and loans as of end-2013.
BKT's IDRs are driven by its standalone risk profile, as reflected by the bank's viability rating. Fitch considers that support from BKT's parent and from the Albanian state is possible but could not be relied upon.
The viability rating reflects BKT's exposure to weak operating environments in Albania and Kosovo, high levels of moderately reserved non-performing loans, risks related to rapid recent loan growth including outside its home markets and potential contagion risks from the bank's ultimate owner through related party transactions, Fitch said.
BKT's main credit risk lies with the bank's loan book which is exposed to Albania, Kosovo (15% of the loan book at end-2013) and international companies (12% of the loan book, most of which related to Turkey). Moreover, the operating environment on the Albanian and Kosovo’s markets remains weak and the enforceability of collateral can be difficult.
On the asset side, risks also arise from BKT's portfolio securities, where exposures are largely non-investment grade. Holdings of Albanian T-bills and notes account for a significant 26.5% share of total assets.
The negative outlook on the bank's long-term IDRs reflects Fitch's view that the balance of risks remains on the downside given Albanian country risks, as a result of weak domestic growth and deteriorating government finances. A further deterioration in the operating environment and the sovereign credit profile could result in a downgrade of BKT. Rating cuts could also be prompted by marked deterioration in asset quality or higher risks stemming from related party transactions.
BKT's solid domestic market position, healthy liquidity and limited refinancing risks are positive for the bank's ratings, Fitch noted. A stabilisation of the operating environment in Albania could result in the outlook on BKT's long-term IDRs being revised to stable.
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