S&P: PASHA Holding may deconsolidate subsidiaries in two countries

"We will revise our base-case forecast as soon as we get more details on planned capital injections or changes in PASHA Bank's group structure," S&P Global Ratings said.

Report informs, citing the agency that PASHA Holding may consider deconsolidating PASHA Bank Georgia and PASHA Bank Turkey to reduce the sensitivity of the bank's capital position from negative foreign currency movements, Report informs, citing S&P Global Ratings.

"In our base case, we assume the bank will continue distributing 60% of its net income as dividends," S&P said.

S&P expects that the bank's capital position at the consolidated level (including subsidiaries in Turkey and Georgia), as reflected in its risk-adjusted capital (RAC) ratio, will remain under pressure over the next two years.

"This is due to the combined effect of high business growth of 15%-20%, high dividend payments, a lack of Tier 1 capital support from the shareholder, and lower profitability on the back of high provisioning needs. We estimate that the bank's consolidated RAC ratio was close to 5.5% at year-end 2019, down from 6.6%, and we forecast it will deteriorate to 4.7%-4.9% in the next 12-18 months."

The rating agency analysts view PASHA Holding's capital policy concerning the bank as aggressive.

"PASHA Holding did not provide capital support or lower dividend aspirations in 2019, and we do not incorporate into our forecast new Tier 1 capital injections over the next two years except subordinated debt with low capacity to absorb losses. The latter supports regulatory metrics but is excluded from our RAC ratio. However, the shareholder may consider capital support for the new strategic period commencing 2021."