Fitch Ratings has revised Romania-based Garanti Bank S.A.'s (GBR) Outlook to Stable from Negative, and affirmed the Long and Short-Term Issuer Default Ratings (IDRs) at 'BBB-'/'F3' and Support Rating at '2'. GBR's Viability Rating of 'b+' is not affected by this rating action.

Fitch has revised its assumptions regarding the source of support for GBR's ratings following the rating action taken on its direct parent, Turkiye Garanti Bankasi S.A.(Garanti; BBB-/Stable) (see 'Fitch Downgrades 18 Turkish Banks on Sovereign Downgrade' dated 2 February 2017 at www.fitchratings.com).

Today's rating action reflects Fitch's view that GBR's ultimate parent Banco Bilbao Vizcaya Argentaria (BBVA; A-/Stable) would support GBR if needed (therefore providing a rating 'floor' to GBR's rating), but would not support GBR over and above the support it would likely provide for Garanti (which therefore caps GBR's rating). GBR is fully-owned by Garanti, and Garanti's ratings in turn, are driven by support from its minority but controlling shareholder, BBVA.

KEY RATING DRIVERS
IDRS, SUPPORT RATING

GBR's IDRs and Support Rating are driven by our expectations that there is a high probability that extraordinary support would be forthcoming from BBVA given the ownership link, reputational considerations and GBR's small size in relation to BBVA. However, GBR's strategic importance to the overall BBVA franchise, and Romania's role in the wider BBVA group is rather limited. As a result, we notch GBR's Long-Term IDR three times below BBVA's.

We also believe that the propensity of BBVA to support is unlikely to be greater for GBR than it is for Garanti, so GBR's IDRs are effectively capped by Garanti's IDRs.

We view GBR as a strategically important subsidiary of Garanti and, absent the three-notch 'floor' to its Long-Term IDR from BBVA, would otherwise have notched it down once from Garanti's Long-Term IDR. This reflects our view that BBVA is unlikely to oppose support flowing through Garanti to GBR if needed in a scenario where Garanti itself is relying on BBVA to service its debt. But the probability of support from BBVA being used to support GBR is marginally lower than the probability of support being used by Garanti to service its own debt.

GBR shares Garanti's branding and IT systems, and the risk management framework for both Garanti and GBR are currently being aligned with BBVA's. In addition, key management and supervisory board members are drawn from Garanti. Garanti has provided timely support to GBR in the past.

RATING SENSITIVITIES
IDRS, SUPPORT RATING

GBR's IDRs are sensitive to changes in BBVA's ratings or to Fitch's view of BBVA's commitment to Romania. A one-notch downgrade of BBVA's Long-Term IDR would trigger a downgrade of GBR's IDRs and Support Rating, even if it has no impact on the Long-Term IDR of Garanti. This is because absent the current 3 notch 'floor' to its Long-Term IDR from BBVA, we would otherwise have notched GBR's Long-Term IDR down once from Garanti's IDR.

An upgrade of BBVA's Long-Term IDR would have no impact on GBR's ratings as they would be capped by Garanti's Long-Term IDR, which in turn is capped by Turkey's Country Ceiling (BBB-).

A downgrade of Garanti's IDRs would trigger a downgrade of GBR's IDRs and Support Rating. A one-notch upgrade of Garanti's Long-Term IDR would likely have no impact on GBR's IDRs.