OREANDA-NEWS. Fitch Ratings says in a new report that Georgian banks' sizeable capital buffers are sufficient to absorb moderate deterioration in asset quality following the depreciation of the lari and slower economic growth. This view is reflected in the overall Stable Outlooks on the Georgian banks' ratings.

The banks reviewed in the peer report are Bank of Georgia (BB-/Stable/bb-), TBC Bank (BB-/Stable/bb-), Liberty Bank (B/Stable/b), ProCredit Bank (BB/Stable/bb-), Cartu Bank (B+/Stable/b+), Basisbank (B/Stable/b) and Halyk Bank Georgia (BB-/Stable).

Despite 30% depreciation of the local currency in 2015 and high dollarisation of the banks' balance sheets, the sector non-performing loans (NPLs, over 90 days overdue) remained moderate at 2.9% of total loans at end-3Q15. Reserve coverage of problem exposures is adequate. However, given the low share of naturally hedged borrowers in the country, Fitch expects some further pressure on the banks' asset quality. Maintaining NPLs at moderate levels will be key to the banks' future profitability metrics, in Fitch's view, though performance will likely remain volatile through the cycle.

The banks' ratings may come under pressure from a marked deterioration in the operating environment, especially one that leads to a negative action on the sovereign rating. A material weakening of financial metrics and/or banks' loss absorption capacity would also be negative for the banks' Viability Ratings (VRs).

If the macroeconomic environment in Georgia strengthens and political stability continues then this could be positive for the banks' ratings, but upgrades would in most cases be dependent on an upgrade to the sovereign rating.