Fitch: slow Kazakh bank recovery supported by economic

Fitch: slow Kazakh bank recovery supported by economic

Azerbaijan, Baku, May 31 / Trend E. Kosolapova/

Kazakh banks are benefitting from the country's robust economic growth, which has provided opportunities for gradual resolution of asset quality problems, accumulation of moderate capital cushions and reserves, generation of new lending business and rebalancing of funding towards domestic sources, Fitch Ratings says in a newly-published report.

That said, the stock of legacy problem loans on banks' balance sheets remains large and in some cases may still be under-reserved, while improvements in earnings have been varied across the sector.

"Credit leverage has been notably reduced from pre-crisis levels, with net loans equal to a moderate 30 percent of GDP at end-2012 (56 percent relative to non-raw materials GDP). The largest banks have mostly shown limited growth or deleveraged during 2011-2013 to date due to legacy asset quality problems, limited new large-ticket business and in some cases lack of clear strategy from shareholders," Fitch said.

At the same time, several mid-sized players reported significantly higher growth rates (above 25 percent per annum), reflecting their lower level of legacy problems, lower base and/or retail focus.

The main growth drivers are largely limited to sectors benefitting from either direct support from the state (through subsidies to SMEs and agricultural borrowers) or connections to large corporates, both state-owned and private. Retail lending has also accelerated and is likely to remain robust in the near-term, considering still moderate household leverage.

Reported non-performing loans (NPLs; loans more than 90 days overdue) as a proportion of the total loans have been slightly down (to 30 percent at end-2012) owing to a small number of work-outs in large banks and pockets of resumed credit growth. However, notable downside risks still remain, particularly from the significant amount of restructured loans (estimated at 16= percent of the sector portfolio). Recovery in the real estate sector (to which the banks have been largely exposed) has been tepid, and cash generation even from completed properties remains so far limited.

Profitability metrics showed significant improvement in 2012, but not across the board. Six banks with returns on average assets of 1.9 percent or more accounted for three quarters of sector earnings (excluding BTA, Alliance and Temir), but only 40 percent of assets. The better performing banks were mainly those with fewer legacy loan problems and a greater focus on retail lending. Some of the largest banks have improved the quality of their earnings, narrowing the gap between interest income accrued and received in cash during 2012. However, legacy accruals on some banks' balance sheets were still sizeable, and in aggregate comprised almost 60 percent of sector equity.

The sector-wide balance sheet has been rather liquid due to moderate loan growth and increases in retail deposits. The net loans/deposits ratio has been comfortably maintained at around 100 percent, while external debt was equal to only 11 percent of liabilities at end-2012 (following the second BTA restructuring), suggesting low refinancing risks at most banks. At the same time, the quality of corporate funding was undermined by significant concentrations at the largest banks, which remain reliant on lumpy deposits from state corporations. Liquidity support from the National Bank of Kazakhstan is currently almost entirely limited to refinancing of failed banks, and a more flexible regime may be required, particularly as the state gradually reduces liquidity from the sector through bond issuance.

"The Viability Ratings of most Fitch-rated banks in Kazakhstan remain in the 'b' category, reflecting in most cases the still incomplete asset worked-outs, limited improvements in earnings generation and/or high concentrations on both sides of the balance sheets. Most ratings are currently on Stable Outlooks as Fitch does not expect a material change in the banks' credit profiles in the medium-term," Fitch said.

Exceptions are Halyk Bank ('BB-'/Rating Watch Evolving/'bb-'), which Fitch views as the strongest bank in Kazakhstan on a stand-alone basis, and BTA Bank ('CCC'/Rating Watch Positive/'ccc'/RWP) and Alliance Bank ('CCC'/'cc'), whose credit profiles continue to be undermined by large stocks of impaired loans and weak capitalisation and earnings. The near-term direction of Halyk's and BTA's ratings will depend primarily on the terms of any acquisition of BTA by Halyk, while Alliance's credit profile depends to a significant degree on whether state holding Samruk Kazyna is able to find a buyer for the bank by its end-2013 deadline.

Subscribe to Trend in Google News! Subscribe
International Court of Justice urges Armenia to take urgent measures against groups and individuals making violent calls on ethnic grounds
International Court of Justice urges Armenia to take urgent measures against groups and individuals making violent calls on ethnic grounds
Body of another Armenian serviceman found in Azerbaijan's Khojavand
Body of another Armenian serviceman found in Azerbaijan's Khojavand
Putin informs Erdogan on main results of Sochi trilateral meeting
Putin informs Erdogan on main results of Sochi trilateral meeting
Loading Bars
France reports record daily COVID-19 count
U.S. Senate backs $650 million missile sale to Saudi Arabia
Mandatory vaccination should be a last resort, says WHO Europe chief
Bolsonaro dismisses vaccination requirement for entry into Brazil
Israel announces completion of high-tech barrier around Gaza
Northern Ireland reports first Omicron cases
Police officer killed in NW Pakistan's firing
Sweden to reintroduce many COVID-19 measures as cases rise
Armenia has no choice but to open Zangazur corridor - experts
Turkey, Qatar strengthen bilateral ties with 15 new deals
Georgian parliamentary delegation visits Washington
Chinese company plans to build a technopark and solar power plant in Uzbekistan
WHO donates 260k packs of intravenous solutions to Iran
Cost of cargo transported via trains up in Azerbaijan
International Court of Justice grants Azerbaijan's request for temporary measures against Armenia
Western media shows neutral approach to Azerbaijan’s Zangazur corridor - Head of Trend News Agency’s Foreign Projects Directorate
Azerbaijan donates 100,000 doses of Sinovac vaccine against COVID-19 to Burkina Faso (PHOTO)
Information spread in Armenian media about killing of illegal militant on territory of Azerbaijan is baseless – MoD
Azerbaijani MFA comments on statement of Armenian foreign ministry
International Court of Justice urges Armenia to take urgent measures against groups and individuals making violent calls on ethnic grounds
International Court of Justice refused to secure Armenia's claim for immediate return of so-called POWs
Azerbaijan completes over half of construction of Barda-Aghdam highway
Azerbaijan building new high-speed road in Shusha city
Azerbaijan-Iran plan to build new bridge to increase traffic
Iran Securities and Exchange Organization focusing on strengthening Capital Market Stabilization Fund
Iran looks to expand agricultural ties with Romania
EIB, EBRD touch on Georgia’s economic growth
Price indexes of industrial, trade sectors at Uzbek stock exchange fall
Georgia shortens terms of COVID-19 booster vaccination
Azerbaijan shares data on 10M2021 oil exports to Vietnam
Uzbekistan shares stats on export of textile products for 10M2021
Kazakhstan's KMG talks project of new gas processing plant in Mangistau
Iran's Bahar Azadi gold coin price increases
Azerbaijan sees decrease in import of vehicles, spare parts over 10M2021
Volume of loaded/unloaded cargo in Iran’s Qeshm port up
Value of Azerbaijan's export to Turkmenistan up for 10M2021
Azerbaijan’s energy ministry opens tender to buy technical support services
Azerbaijan-Iran to take steps to increase trade turnover – Iranian ambassador
Shootout occurs on border between Azerbaijan and Iran - offender neutralized
Baku Int'l Sea Trade Port reveals details of dev’t strategy until 2035
First harvest gathered in mushroom greenhouse in Turkmenistan’s Mary region
Azerbaijan-Iran implementing agreements on joint cooperation – ambassador
Germany's next finance minister stresses price stability
SOFAZ shares estimates of budget revenues for 2022
Iran opens office for cargo barter with Pakistan
Number of legal entities restoring activity in Azerbaijan slightly increases in 11M2021
President Ilham Aliyev receives President for Exploration and Production of TotalEnergies (VIDEO)
Indian embassy in Baku holds webinar on electronic and computer hardware/software products (PHOTO)
Sport in Azerbaijan - integral part of state policy, deputy minister says
Bank of Israel bought $4 bln of FX in Nov, hits $34 bln in 2021
India's Rajnath Singh attends maiden 2+2 Dialogue with Russia
Less urgent need to rebuild stocks to weigh on coal demand
Omicron poses a major risk to global oil demand
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 1,530 more COVID-19 cases, 1,864 recoveries
Azerbaijan, Russia’s Astrakhan sign action program to develop co-op (PHOTO)
Georgia shares data on cigarettes turnover in 10M2021
President Ilham Aliyev signs order appointing new chairman of State Insurance Commerce Company
Georgia’s imports of fuel and lubricants from Kazakhstan plummet
EU health bodies recommend mix-and-match of COVID-19 vaccines
Georgian apple exports on rise
Number of taxpayers increases in Azerbaijan over 11M2021
Kazakhstan increases volume of production of crude oil and oil products
Kazakhstan shares data on coal production
Turkmenistan becomes top oil exporter to Georgia
Armenia should fulfill requirements of documents signed after Second Karabakh War – Turkish official
Google Pay begins operating in Israel
Volume of electricity production in Uzbekistan for 10M2021 unveiled
Azerbaijan records growth in cost of air cargo transport for 10M2021
Iran reveals COVID-19 data for December 7
Central Bank of Azerbaijan reveals amount of foreign currency sold via auction
Non-oil exports in Azerbaijan to reach record high – minister
Opening of Azerbaijan’s Zangazur corridor may reduce transportation time from China to Europe
Azerbaijan to auction several mineral deposits
Epsilon obtains industrial gas inflow from new well at field in Uzbekistan
bp to develop best barrels, make portfolio higher value, says CEO
Azerbaijani State Tourism Agency talks about prices for air tickets (Exclusive)
Iran’s IMPASCO aims to transfer shares of some mining complexes to private sector
bp going to invest 10 times more in low carbon by 2030 - Bernard Looney
What does gas swap deal between Azerbaijan, Turkmenistan and Iran promise?
Baku Stock Exchange talks priorities in trade turnover until 2023
Turkey, Iran trade turnover grows in October 2021
Georgia shares top importers of its hazelnuts
bp achieves increase in productivity in Azerbaijan with new agile organizational structure
Russia’s new daily coronavirus cases below 32,000 for first time since October 14
Iran pins big hopes on gas swap contract, aims for European exports in near future, says ambassador (Exclusive)
Turkmen agriculture ministry opens tender for purchase of veterinary vaccines
Iran eyes increase in flights via Rasht International Airport
Kazakh oilfield construction company opens tender to buy pipes
Kazakhstan eyes diversifying trade flows with ECO countries
Azerbaijan’s Baku Int’l Sea Trade Port expects increase in flow of goods
Georgia’s spice exports to Central Asia down
Uzbekistan reveals volume of exports and imports for 10M2021
Volume of foreign trade turnover increases in Uzbekistan
Kazakhstan sees multifold decrease in trade with South Korea
Eurostat discloses Azerbaijan’s petroleum exports to Italy
Bank of Georgia to begin offering preferential agro-credit
Georgia’s export of spices remains steady - Geostat
Azerbaijan’s oil exports to Romania for 10M2021revealed
Baku port reveals cargo shipment capability of Ro-Ro terminal
All news