Fitch Affirms Ratings of ProCredit’s Units in Albania and Macedonia

Fitch issued the following statement:

"Fitch Ratings has today affirmed the ratings of the ProCredit Banks in Albania and Macedonia, as follows:

ProCredit Bank Albania (PCBA): Long-term Foreign Currency Issuer Default Rating (IDR) 'B+'; Outlook Stable; Short-term Foreign and Local Currency IDR 'B'; Long-term Local Currency IDR 'BB-'; Outlook Stable; Individual rating 'D/E; Support rating '4'.

ProCredit Bank Macedonia (PCM): Long- term Foreign and Local Currency IDR 'BB+'; Outlook Stable; Short-term Foreign and Local Currency IDR 'B'; Individual rating 'D/E'; Support rating '3'.

The IDRs and Support Ratings for both banks reflect Fitch's view of the potential support available from the banks' owners, in particular ProCredit Holding AG (PCH; 'BBB-'/Outlook Stable). PCH is the largest shareholder in both banks (PCBA: 80% and PCM: 87.5%).

However, the potential support for PCBA and, hence, the ratings of PCBA are constrained by the 'B+' Country Ceiling of Albania. Any movement in the Country Ceiling for Albania would have implications for PCBA's IDRs and Support ratings. PCM's ratings are not constrained by the Country Ceiling for Macedonia ('BBB') and the Stable Outlook reflects that of its majority shareholder, PCH. PCH's IDRs and Support Ratings in turn reflect Fitch's view of the high potential support available from its owners, and in particular from a group of international financial institutions (IFIs) which are key voting shareholders.

The Individual ratings reflect the credit and operational risks associated with the operating environment, the banks' business model and small size in absolute terms. They also reflect pressure on profitability due to increased loan impairment charges, lower margins and tight capital ratios. Asset quality is moderate (PCBA reports loans in arrears more than 30 days of 2.4% at end-H109; PCM: 2.1%) which is under pressure from the difficult operating environment. Asset quality has to date been stronger than at other domestic banks. The Individual ratings also consider the banks' diversified domestic deposit base, satisfactory liquidity and the centralised control and risk management by PCH. Fitch expects financial performance and asset quality to remain under pressure given the tough operating environment and in particular moderate growth outlook for PCM.

Frankfurt-based PCH was set up as an equity investment company in 1998 to invest in the global network of ProCredit banks (PCH Group). These banks were established by private and public investors to provide financing for micro and SME customers. As of end-H109, the group had total assets of EUR4.7bn and consisted of 22 subsidiaries, primarily banks, in central and eastern Europe (11), Latin America (seven) and Africa (four)."