Fitch Ratings has downgraded Malta-based Fimbank (FIM) long-term issuer default rating (IDR) to 'BB-' from 'BB', with a stable outlook, and viability rating (VR) to 'bb-' from 'bb'.

At the same time, Fitch affirmed the bank's short-term IDR at 'B'.

Fitch said in a statement the long-term IDR and VR were downgraded to reflect FIM's high risk appetite, which resulted in a significant deterioration in asset quality, as well as unstable and weak earnings.

Most of FIM's credit deterioration was driven by the consolidation in 1H14 of weak quality factoring assets in India and Russia. Fitch expected asset quality pressures to persist, with remaining factoring assets potentially posing add-on risks.

Fitch said FIM's revenue generation was low relative to its cost structure, resulting in limited flexibility to absorb further impairment charges as sizeable as those reported in 2014.

The stable outlook on the long-term IDR reflected Fitch's belief that FIM's capital would continue to be supported by its ultimate owner in the foreseeable future, potentially easing further pressures from asset quality and profitability.

Fitch also assumed that FIM would gradually be more operationally integrated into its parent, which could result in management and strategic changes.