Fitch Ratings has affirmed JSC Liberty Bank's rating at 'B+' with a Stable Outlook. Liberty Bank's ratings reflect the bank's reasonable profitability and asset quality metrics amid a strong economic recovery in Georgia, reads the statement.
"Liberty Bank's IDR of 'B+' is driven by the bank's standalone profile, as captured by its 'b+' VR. The ratings reflect the bank's reasonable profitability and asset quality metrics amid a strong economic recovery in Georgia, notwithstanding the ongoing military conflict in Ukraine. The VR also captures the bank's moderate franchise, weaker pricing power than peers', and a high, albeit declining, exposure to unsecured retail lending.
The military conflict in Ukraine and subsequent sanctions on Russia have had a positive impact on the Georgian economy in the form of inflows of capital, remittances and qualified labour. These factors, coupled with stable public consumption and positive net exports, have led us to revise up our GDP growth forecast to 10.9% in 2022, before normalising to 5.3% in 2023. We expect the boost to economic activity to also support banking sector performance.
Liberty Bank is the third-largest bank in Georgia, primarily focused on retail lending. The bank's market shares amounted to 6.6% and 6.2% in household loans and deposits, respectively, at end-1Q22. Liberty Bank acts as an exclusive agent for pensions and welfare distributions, and its retail franchise is supported by the broadest branch network in the country," reads the publication of Fitch Ratings.
In March 2022 Liberty Bank acquired a GEL300 million portfolio of micro/SME loans from sanctioned JSC VTB Bank Georgia. This was transferred along with a corresponding amount of deposits and did not involve any cash contribution. According to Fitch, "the resultant expansion of risk-weighted assets (RWAs) by 10% weakened Liberty Bank's capital adequacy metrics, but the bank received forbearance from the Georgian regulator, such that buffers on its Tier 1 and total capital requirements have been lowered."
As the report says, "the bank's focus on unsecured retail lending has historically helped Liberty Bank to maintain one of the lowest dollarisation levels on the Georgian market. At end-1Q22 a moderate 22% of loans were issued in foreign currencies (FC), compared with the sector average of 51%."
