Fitch Rates TBC Leasing at ‘BB-‘; Outlook Stable

Fitch Ratings has assigned JSC TBC Leasing (TBCL) a Long-Term Issuer Default Rating (IDR) of ‘BB-‘ with a Stable Outlook. A full list of rating actions is detailed below.

Key Rating Drivers

TBCL’s IDRs are driven by support from TBC Bank (BB-/Stable). Fitch’s view of a high probability of support is based on full ownership by, close integration with and the record of capital and funding support from TBC Bank.

TBCL operates solely in Georgia, its domestic market, and is the market leader in Georgian leasing.

The company mainly provides financial leasing to the corporate clientele of TBC Bank as well as to SMEs, microbusinesses and individuals. TBCL’s clients are often higher-risk borrowers than those of TBC Bank, but this is partly mitigated by access to liquid collateral and from the adequate pricing of risk.

TBCL aligns its strategy and risk policies to those of the parent, although TBCL’s management is independent in making operational decisions.

TBC Bank has provided both capital and funding support over the years. To support TBCL’s further growth, the parent injected new equity of GEL 6 million in December 2019 and, at the same time, approved an additional injection in the amount of GEL 2.5 million, to be disbursed in 2020 based on TBCL’s needs. TBC Bank provides TBCL subordinated and senior loans, as well as letters of support to enable third-party borrowing. It also facilitates TBCL’s bond placements.

TBCL’s standalone creditworthiness is constrained by a monoline business model, weaker asset quality and high-risk appetite, particularly in respect to credit and FX risks. Positively, TBCL’s profitability is high and above TBC Bank’s target, highlighting TBCL’s positive contribution to the parent’s performance.

The Stable Outlook mirrors that on the parent.

Rating sensitivities

TBCL’s ratings are sensitive to changes in (i) TBC Bank’s ratings and (ii) Fitch’s view of TBC Bank’s ability and willingness to provide support in case of need.

A material weakening of TBC Bank’s propensity or ability to support TBCL might result in the subsidiary’s rating being notched down from the parent’s. This could be driven by weak performance at TBCL, a greater risk of regulatory restrictions on support or a diminishing of TBCL’s strategic importance.