Baku, Azerbaijan, Feb. 4
By Elena Kosolapova - Trend: International Rating Agency Moody's Investors Service upgraded Kazakh BTA Bank's long-term local- and foreign-currency deposit ratings to B3 from Caa1, the agency reported on Feb. 4.
Concurrently, Moody's raised the corresponding baseline credit assessment (BCA) to caa2 from caa3. The rating agency affirmed BTA Bank's standalone E bank financial strength rating (BFSR) and Not Prime short-term ratings. Moody's current assessment of a moderate probability of systemic support results in two notches uplift above the BCA of caa2. The outlook on the bank's long-term deposit ratings was revised to positive from developing, while the outlook on the BFSR remains stable.
"Moody's rating action on BTA Bank is driven by restored capitalisation, improved pre-provision earnings, and diminished refinancing risks following the bank's recent restructuring, and its better loss absorption cushion compared to low rated peers in its domicile (Kazakhstan)," the .
The positive outlook on the long-term deposit ratings reflects the anticipated acquisition of a controlling stake in BTA Bank by Kazkommertsbank (deposits B2 stable, BFSR E/BCA caa1 stable) and their plans for a subsequent merger -- under a preliminary non-binding agreement, announced at end December 2013 -- which Moody's believes will be credit positive for BTA Bank's development.
The rating agency expects that, as a result of the transaction, BTA Bank will benefit from cost optimisation and potential improvement in profitability aided by Kazkommertsbank's stronger market position and customer franchise, lower level of problem loans and, thus, better pre-provision income generation capacity. In addition, the potential merger will not result in any changes in Moody's systemic support considerations, given the large market share of the newly combined bank in the Kazakh banking sector. Consequently, the deposit ratings carry a positive outlook.
Upwards pressure might develop on BTA Bank's standalone and deposit ratings if the bank completes the merger with Kazkommertsbank and improves its financial fundamentals by restoring recurring operating profitability at sustainable levels.
Downwards pressure might develop on BTA Bank's rating and outlook if the agreement on Kazkommertsbank acquisition of BTA Bank's stake and potential merger doesn't take place.