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Kazakh banks face high risks in 2016 as economy stagnates - S&P

Business Materials 11 April 2016 21:01 (UTC +04:00)
Kazakhstan’s economy will likely stagnate or contract modestly in 2016, due to low oil prices, weaker exports, and shrinking consumption.
Kazakh banks face high risks in 2016 as economy stagnates - S&P

Baku, Azerbaijan, Apr.11

By Elena Kosolapova - Trend:

Kazakhstan's economy will likely stagnate or contract modestly in 2016, due to low oil prices, weaker exports, and shrinking consumption, read a report issued by the Standard & Poor's ratings service.

This backdrop, together with a volatile currency, complicates operating conditions for the country's banking sector, said Standard & Poor's Ratings Services in a new report published today titled "Kazakh Banks Face High Risks In 2016 From Thinning Capital Cushions As The Economy Stagnates."

"We expect depressed economic conditions and low earnings will restrict banks' internal capital generation and increase the need for new capital injections from shareholders," says Standard & Poor's credit analyst Annette Ess. "However, we see shareholders' willingness and ability to provide new capital as limited."

It will likely result in declines in the sector's capitalization, according to S&P.

"We expect to see continued systemwide pressure on the funding and liquidity of Kazakh banks in 2016, with an increasing percentage of nonperforming loans," said the report.

S&P also views Kazakh banks' pronounced asset and liability mismatches in foreign currencies and tight tenge liquidity as additional risk factors to the banking system's stability.

"We anticipate that negative rating actions will outnumber positive ones, given that seven of the 19 commercial banks we rate in Kazakhstan have a negative outlook," said the S&P.

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