...

Fitch: Volume of deposits in Kazakh banking sector rise by 5%

Economy Materials 5 December 2016 21:33 (UTC +04:00)
The total volume of deposits in Kazakhstan’s banking sector has grown by 5 percent in the third quarter of 2016
Fitch: Volume of deposits in Kazakh banking sector rise by 5%

Baku, Azerbaijan, Dec.5

By Leman Zeynalova – Trend:

The total volume of deposits in Kazakhstan’s banking sector has grown by 5 percent in the third quarter of 2016, Fitch Ratings said in its report published Dec.5.

Fitch Ratings has published its Kazakh Banks Datawatch report for the third quarter of 2016, consisting of key data from banks' regulatory financial statements and disclosures sourced primarily from the National Bank of Kazakhstan (NBK) and the Kazakhstan Stock Exchange.

“The NBK has been absorbing substantial liquidity inflows to the sector through issuance of notes on terms attractive for banks. Total deposits grew by 5 percent in 3Q16 and the volume of outstanding NBK notes reached 2.6 trillion tenges, 10 percent of sector assets, at end-3Q16,” said the report.

However, Fitch analysts say that the liquidity surplus has not been eliminated entirely, leaving some space for loan growth: gross loans grew by 2 percent in 3Q16.

“Non-performing loans fell to 9.8 percent at end-3Q16 from 10.2 percent at end-2Q16 due to new loan originations and write-offs,” said the report. “Regulatory forbearance with respect to restructured/distressed and foreign-currency loans also remains in place, as NBK postponed the planned review of sector asset quality until late 2017.”

Performance remained stable despite the inflows of more expensive tenge deposits, according to Fitch.

“Annualized return on average equity of 17.2 percent in 3Q16, little changed from 17.5 percent in 2Q16. The net interest margin contracted to 4.8 percent from 5.3 percent, while earnings on NBK notes have prevented a more significant margin contraction,” said the analysts.

Regulatory capitalization metrics slightly improved due to earnings retention and limited loan growth, according to the report.

The sector Tier I capital ratio improved to 13.7 percent and the total ratio to 16.2 percent at end-3Q16, say Fitch analysts, adding that however, the planned increase in regulatory capital ratios and buffers from 2017 may be challenging for Kazkommertsbank (KKB), Bank RBK and Qazaq banki.

“Liquidity cushions continued to build up, with a few exceptions, helped by deposit growth and the expiration of NBK swap contracts. Sector liquid assets were equal to 35 percent of liabilities at end-3Q16, up from 33 percent at end-2Q16, and KKB improved its liquidity position to 20 percent of liabilities from 13 percent due to a reversal of deposit flows in 3Q16,” said the report.

Fitch says it understands that a potential merger between Halyk Bank and KKB has not been discussed at management level.

However, Fitch views continued consolidation of the Kazakh banking sector as possible. Fitch also believes that state support to privately owned banks in Kazakhstan that would avert losses for senior creditors in case of bank failures remains unreliable despite recent statements by senior country officials.

Tags:
Latest

Latest