Fitch lowers ratings of Subsidiary bank "Home Credit and Finance Bank"; outlook "Negative"

/Fitch Ratings, Moscow, November 10, 14, heading by KASE/ – Fitch Ratings has downgraded Kazakhstan-based SB JSC Home Credit and Finance Bank (HCK) to 'B+' from 'BB-'. The Outlook is Negative. A full list of rating actions is available at the end of this commentary. KEY RATING DRIVERS - IDRS, NATIONAL RATING, SUPPORT RATING AND SENIOR DEBT RATINGS The downgrade of HCK's ratings follows the downgrade of its parent bank, Russia's Home Credit & Finance Bank (HCFB; BB-/Negative, see 'Fitch Downgrades Home Credit, Russian Standard & Orient Express; Affirms 3 Russian Retail Banks' dated 28 October 2014 on www.fitchratings.com). HCK's downgrade reflects the parent's reduced ability to provide support to HCK, in case of need, due to pressure HCFB faces from deteriorating asset quality in its domestic market. The Negative Outlook on HCK's ratings mirrors that on the parent. Fitch continues to view HCFB's propensity to support HCK as high given the strategic importance of the subsidiary; the latter remained profitable in 1H14 while the parent reported significant losses. Furthermore, any such support should only require moderate resources from the parent as HCK accounted for less than 7% of HCFB's assets at end-1H14. Fitch's view also takes into account HCFB's full ownership, common branding and reputational risk for HCFB in case of HCK's default. The one-notch difference between HCFB's and HCK's ratings reflects the cross- border nature of the parent-subsidiary relationship and uncertainty regarding the performance of the unsecured consumer finance market in Kazakhstan and the strategic importance of the subsidiary for HCFB over the longer-term. HCK's senior unsecured debt is rated in line with its Long-term IDRs and National Ratings (for domestic debt issues), reflecting Fitch's view of average recovery prospects, in case of default. RATING SENSITIVITIES - IDRS, NATIONAL RATING, SUPPORT RATING AND SENIOR DEBT RATINGS A downgrade of HCFB's Long-term IDR could result in a downgrade of HCK's Long-term IDRs if in Fitch's view this indicates a further significant weakening in the ability of the parent to provide support. This would also impact the National Rating and senior debt ratings. The rating actions are as follows: HCK Long-term foreign and local currency IDRs: downgraded to 'B+' from 'BB-'; Outlooks Negative Short-term foreign currency IDR: affirmed at 'B' National Long-Term Rating: downgraded to 'BBB (kaz)' from 'BBB+(kaz)'; Outlook Negative Viability Rating: unaffected at 'b' Support Rating: downgraded to '4' from '3' Senior unsecured debt Long-term rating: downgraded to 'B+' from 'BB-', Recovery Rating assigned at 'RR4' Senior unsecured debt Long-term rating: downgraded to 'BBB (kaz)' from 'BBB+(kaz)'. Contacts: Primary Analyst Roman Kornev Director +7 495 956 70 16 Fitch Ratings Moscow Valovaya Str, 26 Moscow Secondary Analyst Konstantin Yakimovich Associate Director +7 495 956 99 78 Committee Chairperson Olga Ignatieva Senior Director +7 495 956 69 06 Contacts for media in Moscow: Kseniya Ivanova, Moscow, tel. + 7 495 956 6810/9901, ksenia.ivanova@fitchratings.com [2014-11-17]