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���������ֳ�-London-06 November 2014: ���������ֳ� has affirmed Bucharest based BRD-Groupe Societe Generale S.A.'s (BRD) and Banca Comerciala Romana S.A.'s (BCR) Long-term Issuer Default Ratings (IDR) at 'BBB+' and Garanti Bank S.A.'s (GBR) Long-term IDR at 'BB+'. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS: IDRs AND SUPPORT RATING
BCR
BCR's IDRs and Support Rating are driven by the potential support it can expect to receive from its 93.6%-owner, Erste Group Bank AG (Erste; A/Negative). As a strategically important subsidiary of Erste, ���������ֳ� would normally notch BCR's IDR one notch below that of its parent, implying an IDR for BCR of 'A-'/Negative. However, BCR's rating is constrained by the Romanian Country Ceiling of 'BBB+'.

The Negative Outlook on BCR's Long-term IDR takes into consideration ���������ֳ�'s statement that it is likely to downgrade Erste's IDR to the level of its VR (currently bbb+) by end-1H15, when its Support Rating and Support Rating Floor will likely be downgraded to '5' and revised to 'No Floor' (for more details see '���������ֳ� Affirms Large Austrian Banks at 'A'; Outlook Negative' at www. ). At that point, the anchor rating driving Erste's IDR will be its VR and BCR's IDR will likely be downgraded to 'BBB'. A downgrade of BCR's Long-term IDR to 'BBB' is unlikely to trigger a downgrade of its Short-term IDR of 'F2'.

���������ֳ� believes that BCR continues to be strategically important to its group despite the weak performance of the Romanian market, in light of Erste's focus on Central and Eastern European (CEE), the strong integration into the group and the track record of support to date.

BRD
The IDRs and Support Rating of BRD are based on our view that there would be a high likelihood of support from its majority (60%) shareholder, Societe Generale (SG; A/Negative/a-) in case of need.

���������ֳ� views BRD as a strategically important subsidiary for SG, given the parent's strategic focus on Romania; BRD's high integration, with management, board members and risk systems drawn from the parent and SG's proven commitment to date. In line with ���������ֳ�'s criteria, as a strategically important subsidiary of SG, ���������ֳ� would normally notch BRD once from the parent's IDR, implying an IDR of 'A-'/Negative for BRD. However, BRD's rating is currently constrained by the Romanian Country Ceiling of 'BBB+'; therefore the Stable Outlook on BRD's IDR reflects that on Romania's IDR.

BRD's Stable Outlook reflects the fact that, assuming no change in ���������ֳ�'s perception of BRD's strategic importance to SG, a one-notch downgrade of SG's Long-term IDR due to the expected revision of SG's SRF would not trigger any action on BRD's IDRs. ���������ֳ� expects to downgrade SG's Support Rating to '5' and revise down its SRF to 'No Floor' by H115. SG's Long-term IDR would then likely be downgraded to the level of its VR, which is currently 'a-'.

As ���������ֳ� has not undertaken a full review of BRD, it has not assigned a Viability Rating.

GBR
The IDRs and Support Rating of GBR are underpinned by ���������ֳ�'s view that the bank is a strategically important subsidiary of Turkiye Garanti Bankasi (TGB; BBB-/Stable). GBR shares the parent's brand and IT systems, and sources top management and board members from TGB. ���������ֳ� believes the parent has a strong propensity to support GBR, given their strong integration and the high reputational risk to TGB in allowing its subsidiary to default.

The Stable Outlook on GBR's Long-Term IDR reflects the Outlook on TGB.

KEY RATING DRIVERS: VR
BCR
BCR's VR reflects (i) still weak asset quality; (ii) the improved but still considerable level of uncovered impaired loans relative to ���������ֳ� core capital (FCC); and (iii) weak performance expected in 2014 driven by high loan impairment charges (LICs), which reflected accelerated efforts by the bank to resolve its large pool of legacy problem loans. The VR also reflects the bank's (i) still substantial capital buffer to absorb potential further losses; (iii) adequate pre-impairment profitability; and (iii) comfortable liquidity.

The bank reported a still high impaired loans ratio (IFRS impaired loans/gross loans ratio) of 27.9% at end-3Q14, down from 30.5% at end-2013 driven by sales of problem loans and write-offs. ���������ֳ� understands further portfolio sales will allow the bank to reduce its volume of impaired loans further to year-end.

The coverage of these impaired loans with IFRS reserves has increased substantially to 78% at end-3Q14, further to the additional provisioning charges in 3Q14. However, ���������ֳ� estimates that uncovered impaired loans continued to account for a high 59% of FCC.

The bank reported FCC of 19% at end-1H14. ���������ֳ� estimates FCC at end-Q314 to be about 14%, assuming that risk-weighted assets (RWA) at end-3Q14 were equivalent to 1H14, minus the additional LICs booked in 3Q14 (RON2.7bn), and that the loan book composition remained constant. ���������ֳ� believes that capital provides a sufficient cushion to absorb any further moderate losses linked to the balance sheet clean up.

High LICs are expected to drive full year losses. However, ���������ֳ� notes that pre-impairment operating results remain adequate (pre-impairment operating profit/average equity of 27% at end-1H14), as the bank has managed to increase efficiency (costs/average assets of 2.6% in 1H14) and counter downward pressure on its NIM (455bps in 1H14) by repricing its customer deposit base.

BCR is primarily funded by customer deposits (customer deposits / total funding 68% at end-1H14). Whilst parent funding has continued to decline, it remains considerable at 25% of total funding at end-1H14. The liquidity cushion held by the bank is sizeable, with cash (including mandatory reserves) and unpledged securities eligible for repo with the Central Bank covering about 70% of total customer deposits (bank standalone).

GBR
GBR's 'b' VR reflects its (i) short track record of operating profits following losses in 2011-2012; (ii) weak reserve coverage of IFRS impaired loans; (iii) modest franchise; and (iv) the importance of foreign fiduciary deposits for its funding. The VR also reflects the bank's reduced reliance on parent funding and adequate capitalisation.

The bank reported operating profits in 1H14 and 2013, but this remains a short track record of core profitability (the bank started operations in its current form in 2010). LICs are likely to remain a constraint on mid-term profitability, given the fast growth of the loan book which has yet to season in a challenging operating environment. Asset quality remains weak (IFRS impaired loans of 15.7% at end-1H14), although it improved further due to write offs in 1H14, and compares well with the sector average. Borrower concentrations are high with the largest 25 exposures (on and off balance sheet) accounting for 4.6x FCC at end-1H14. We view the bank's capitalisation as adequate (���������ֳ� core capital 18% at end-1H14), but note weak reserve coverage of IFRS impaired loans (40.5% at end-1H114), modest internal capital generation, and credit risks in the loan book which is yet to season.

The funding profile improved in 1H14, as customer deposits increased to 50% of total funding and the share of parent funding significantly reduced (4% of total end-1H14 funding). However, cross-border fiduciary deposits continue to account for a high 23% of its total end-1H14 funding.

RATING SENSITIVITIES - IDRS, SUPPORT RATING
BCR
BCR's Long-term IDRs are sensitive to both a change in Erste's Long-term IDR or in Romania's Country Ceiling. However, ���������ֳ� currently considers a downward revision of the Romanian Country Ceiling as unlikely. They are also sensitive to any reduction in ���������ֳ�'s view of Erste's commitment to CEE and to the Romanian market in particular.

A downgrade of the Support Rating would require a downgrade of Erste's Long-term IDR to 'BBB-' or below, or a change in ���������ֳ�'s view of the propensity of Erste to provide support to BCR. ���������ֳ� considers both of these unlikely.

BRD
A downgrade of BRD's IDR would require SG's IDR to be downgraded to 'BBB+' or below, or a downward revision of the Romanian Country Ceiling, both of which ���������ֳ� currently considers unlikely. The IDRs and SR are also sensitive to a change in ���������ֳ�'s view of the propensity of SG to provide support to BRD, which we currently consider unlikely.

GBR
GBR's IDRs are sensitive to a change in TGB's IDR. Given the recent downgrade of TGB's IDR and its Stable Outlook, an upgrade is unlikely in the short to medium term. Additionally, GBR's IDR could come under downward pressure should ���������ֳ� adversely change its view on TGB's ability or propensity to support GBR.

RATING SENSITIVITIES - VR
An upgrade of BCR's VR would require further progress in resolving the "legacy" problem loan book, and a stabilisation of operating performance.

An upgrade of GBR's VR would depend on the bank building an extended track record of reasonable performance, and on the loan book seasoning without a marked deterioration in asset quality.

The rating actions are as follows:

Banca Comerciala Romana S.A.
Long-term foreign currency IDR: affirmed at BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Negative
Support Rating: affirmed at '2'
Viability Rating: affirmed at 'b+'

Garanti Bank S.A.
Long-term foreign currency IDR: affirmed at BB+; Outlook Stable
Short-term foreign currency IDR: affirmed at B
Support Rating: affirmed at 3
Viability Rating: affirmed at b

BRD-Groupe Societe Generale S.A.
Long-term foreign currency IDR: affirmed at BBB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Support Rating: affirmed at '2'

Contact:
Primary Analyst
Sandra Hamilton
Director
+44 20 3530 1266
���������ֳ� Limited
30 North Colonnade
London E14 5GN

Secondary Analyst
Radu Gheorghiu
Analyst
+44 20 3530 1253

Committee Chairperson
James Watson
Managing Director
+7 495 956 6657

Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com.

Additional information is available on

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, are available at .

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