Baku, Azerbaijan, Jan. 24
By Elena Kosolapova - Trend:
International Rating Agency Fitch Ratings has upgraded Halyk Bank of Kazakhstan's Long-Term Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and removed the ratings from Rating Watch Evolving (RWE), the agency said on Jan. 24. The Outlook is Stable. The agency has also affirmed Kazkommertsbank's (KKB) Long-term IDRs at 'B' with Stable Outlook and maintained BTA Bank's 'CCC' Long-term IDRs on Rating Watch Positive (RWP). A full list of rating actions is at the end of this rating action commentary.
The rating actions follow the recent statements of Halyk, KKB and Kazakhstan's National Welfare Fund Samruk Kazyna (SK), outlining that Halyk and SK have terminated negotiations on Halyk's potential acquisition of BTA; and SK currently plans to sell a controlling stake in BTA to KKB and a private investor, with the intention that KKB and BTA will ultimately merge.
The upgrade of Halyk's Long-Term IDRs to 'BB' reflects that the termination of the BTA deal has eliminated downside risks for Halyk's credit profile. In April 2013, Fitch stated that the bank's standalone profile warranted 'BB' Long-term IDRs, but that Halyk would only be upgraded if the potential acquisition of BTA did not go through. In Fitch's view, Halyk's standalone credit profile has remained largely unchanged over the past three quarters.
Halyk's Long-term IDRs are based on its Viability Rating (VR) of 'bb', which reflects the bank's strong nationwide franchise, solid profitability and capitalisation, comfortable liquidity position and limited refinancing risks. However, the ratings also factor in still high levels of non-performing and restructured loans, the relatively high-risk operating environment and potential additional loan impairment reserves, which in Fitch's view, may be required on some of the riskier loan exposures.
Halyk could be upgraded if the bank makes tangible progress with workouts of problem loans and further strengthens its capitalisation through continued robust internal capital generation. The ratings could be downgraded if asset quality or capitalisation deteriorated sharply.
Fitch has maintained BTA's 'CCC' Long-term IDRs and senior debt rating on RWP to reflect the potential benefits of the planned acquisition by, and merger with, KKB. The ratings reflect the bank's weak asset quality, capitalisation and performance. Fitch has been informed that no further restructuring of BTA or balance sheet clean-up is planned prior to the acquisition by KKB.
Fitch expects to upgrade BTA's Long-term IDRs and senior debt rating by one notch, to 'B-', following the acquisition by KKB of a controlling stake in the bank. This would reflect the moderately improved prospects of support for BTA from its new owner. The ratings would likely remain on RWP following the upgrade, reflecting their potential to be upgraded further to 'B' as a result of the planned merger.
The ratings could be affirmed if the planned acquisition by KKB falls through.
Fitch has affirmed KKB's Long-term IDRs at 'B' with a Stable Outlook, as it believes the planned acquisition of BTA should at worst be only moderately negative for KKB's credit profile. KKB's ratings continue to reflect the bank's weak asset quality and the potential need for further provisioning of its problem exposures. However, the ratings also consider the bank's significant loss absorption capacity, positive pre-impairment profit (net of accrued interest income), moderate refinancing risk and the currently comfortable liquidity.
KKB's VR, IDRs, and debt ratings could be downgraded if the bank's solvency deteriorates significantly as a result of greater than expected losses on either its own or BTA's problem assets. Successful workouts of problem loans, resulting in a strengthening of the capital position, could result in upward pressure on the ratings.
The rating actions were as follows:
Halyk Bank of Kazakhstan
Long-term foreign and local currency IDRs: upgraded to 'BB' from 'BB-', removed from RWE; Outlook Stable
Short-term foreign and local currency IDRs: affirmed at 'B'
Viability Rating: upgraded to 'bb' from 'bb-', removed from RWE
Support Rating: affirmed at '4'
Support Rating Floor: affirmed at 'B'
Senior unsecured debt rating: upgraded to 'BB' from 'BB-'; removed from RWE
Kazkommertsbank:
Long-term foreign and local currency IDRs: affirmed at 'B'; Outlook Stable
Short-term foreign and local currency IDRs: affirmed at 'B'
Viability Rating: affirmed at 'b'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'B-'
Senior unsecured debt: Long-term rating affirmed at 'B', Short-term rating affirmed at 'B'
Subordinated debt rating: affirmed at 'B-'
Kazkommerts International BV:
Senior unsecured debt rating: affirmed at 'B'
KAZKOMMERTS FINANCE BV:
Perpetual debt rating: affirmed at 'CCC'
BTA:
Long-term foreign and local currency IDRs: 'CCC', maintained on RWP
Short-term foreign and local currency IDRs: 'C', maintained on RWP
Viability Rating: 'ccc', placed on RWP
Support Rating: affirmed at '5', removed from RWP
Support Rating Floor: affirmed at 'No Floor'
Senior unsecured debt: 'CCC', maintained on RWP