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.

Iran reveals its COVID-19 data for October 21
Iran reveals its COVID-19 data for October 21
Sarajevo mayor underlines urban cooperation with Tehran
Sarajevo mayor underlines urban cooperation with Tehran
Iran`s President reacts to restriction of essential goods and medicine`s supply
Iran`s President reacts to restriction of essential goods and medicine`s supply
Loading Bars
Latest
Azerbaijan's victory in Karabakh conflict beneficial to all parties, Russian expert says
Azerbaijan to build power supply stations in deoccupied districts
Geostat reveals volume of ferroalloys exported by Georgia to Turkey
EAEU reveals export of Turkmen vehicles
Georgia sees increase in export of flours, meals, pellets to Turkey
Operating performance of financial institutions improves in Georgia
Georgia reduces import of medicaments from Turkey
Wood, furniture exports from Turkey to Ukraine decline
Iran reveals its COVID-19 data for October 21
We drove Armenian army out of our lands so fast that they fling up their heels - President Aliyev
Azerbaijan confirms 176 more COVID-19 recoveries
Military equipment abandoned by Armenian army on battlefield (PHOTO / VIDEO)
President Ilham Aliyev on possibility of observers introduction
At the last moment Armenian refused to return Kalbajar and Lachin, says president of Azerbaijan
Iran restarts extraction from Sulabdar oil field
Azerbaijan reaffirms position on Lachin corridor which is part of fundamental principles - President Aliyev
President Aliyev says no country helping Azerbaijan in fight with Armenia
If Armenian side says it is ready to withdraw troops from occupied territories, issue of so-called observers can be considered - President Aliyev
Azerbaijan wants peace, also territories that rightfully belong to it - President Aliyev
Full responsibility for what is happening now lies squarely with Pashinyan, says Azerbaijani president
We are offered to make concession to Armenia, unilateral concession, while nothing being offered in return - President Aliyev
Azerbaijan ready to suspend military operations, resolve issue at negotiating table - President Aliyev
Armenia’s terrorist authorities must be punished – Azerbaijani MP (VIDEO)
Georgia, UK aim to strengthen business and commercial ties
Volume of market services in Uzbekistan’s transport sector remains predominant despite decrease
Azerbaijan to issue support for children who lost parents after Armenia's Ganja attack (PHOTO)
Turkey raised wood, furniture exports to Russia - Trade Ministry
Heads of Christian religious communities of Azerbaijan protest against draft resolution submitted to US Congress
TANAP named Project of the Year by US-based PMI
Eni Turkmenistan Limited opens tender related to data transmission services
Tajikistan's import of Turkish furniture down
Demand for Azerbaijani CBA's short-term notes exceeds supply
Value of goods exported from Iran's Sistan and Baluchestan Province revealed
Turkic Council condemns Armenia's attacks on populated areas, civilians in Azerbaijan
Azerbaijani ASB Bank's 3Q2020 assets down
Turkmen company considers opening production facility in Kazakhstan
Armenian aggression against innocents in Azerbaijan - condemnable offense, says Pakistani expert
Turkey's wood, furniture exports to Pakistan edge lower
Kazakhstan increases imports from Switzerland
Azerbaijan destroys another Armenian UAV - Defense Ministry
Azerbaijan's Prosecutor General's Office warns foreign citizens (VIDEO)
Georgia announces its plan about Tskaltubo spa resort
Azerbaijan reveals data on airfreight operations for 9M2020
"Together we are POWER": ENGINET supports injured children in Ganja city (FOTO)
Precious metal prices in Azerbaijan rising
Volume of gas pumped into Serajeh gas storage facility in Iran soars
Azerbaijan's railway cargo transportation down within 9M2020
Value of wood, furniture exports from Turkey to Uzbekistan down
Hungary reiterates its support for Azerbaijan's territorial integrity
Kazakh coal extracting venture opens tender to buy electricity generating unit
Kazakhstan’s Oil Construction Company to buy pipes via tender
Tashkent Stock Exchange's trade volume increases
State Commercial Bank of Turkmenistan holds another campaign to increase cashback
Сontracted capacity of Enagas storage facilities reach 100% of available supply
Uzbekistan’s car production up within 9M2020
Volume of electricity generation up in Uzbekistan
Azerbaijani ASB Bank's net income drops
Azerbaijani FM leaves for Moscow
Iran declares number of enterprises restored in Qom Province
Azerbaijan has enough resources to quickly restore economic growth rates - CBA's chairman
SOCAR among TOP importers of gasoline to Ukraine
Azerbaijan announces latest data on civilian casualties, damages caused by Armenia's attacks
Georgia reports 1,351 new coronavirus cases
Indian Monnet company looking to launch ferrosilicon production in Kazakhstan’s Pavlodar
Azerbaijani MoD shows footage of newly-liberated Chereken village (VIDEO)
GTL may help companies increase their portfolio of higher value finished products
Turkmenistan plans to buy medical helicopters from Russia’s Tatarstan
Georgia talks about main road construction projects
Battalion of Armenian Armed Forces' 556th regiment neutralized - Azerbaijani MoD
Cotton fiber production increases in Uzbekistan
China's import of Turkish wood, furniture surges
Azerbaijani oil prices decrease
It's wrong to compare economically strong Azerbaijan with Armenia, Trend's editor-in-chief on Al Jazeera TV (VIDEO)
President's aide talks about Armenian attacks on Azerbaijani cities on Oct. 20
Gasoline production increases in Uzbekistan
Jet fuel consumption to return to 2019 demand levels in 2025
Kazakhstan to amend state budget due to COVID-19 preventive measures
Georgia talks about ongoing, future projects in construction area
Night, day artillery firings of Azerbaijani Armed Forces (VIDEO)
UK keen to support Azerbaijan to develop renewable energy sphere
Turkmenistan considers measures to prevent entering of COVID-19 into country
Investments in Kazakhstan's agriculture surge
Azerbaijani currency rates for Oct. 21
Armenia must forever forget Khudafarin, says Azerbaijani MoD
First regular international freight train departed from China to Uzbekistan
Information on shot down Azerbaijani military plane - lie, says Defense Ministry
Kazakhstan's revenue from transport via pipelines down year-on-year
EU launches new initiative to support small and medium-sized firms in Georgia
Azerbaijan's Azercosmos shows satellite images of newly-liberated Zangilan city
Major General of Azerbaijani Interior Ministry passes away
Iranian currency rates for October 21
Member of the Nizami Ganjavi International Center, former President of Ecuador publishes article in Ecuador ElTelegrafo newspaper
Number of coronavirus cases in Uzbekistan approaches 65,000
Armenian Armed Forces' artillery chief, division, batallion commanders neutralized - MoD
Turkmenistan, India intend to hold regular meetings
Incurring losses, Armenian troops forced to retreat, Azerbaijani MoD says
Azerbaijan eyes to introduce domestic products to Arab markets
New power plants construction in Azerbaijan to allow export of electricity
Oil prices slip as U.S. inventory build stokes fears of supply glut
Turkey's furniture and timber exports to Kyrgyzstan down
All news