Industry risks of Kazakh banks increase

Industry risks of Kazakh banks increase

Baku, Azerbaijan, Feb. 26
By Elena Kosolapova - Trend:

Standard & Poor's Ratings Services took various rating actions on seven Kazakhstan-based financial institutions due to rising industry risk, the rating agency reported on Feb. 27.

S&P revised the outlooks to negative from stable on JSC SB Alfa-Bank, Kaspi Bank JSC, and PNB-Kazakhstan, and affirmed the long- and short-term counterparty credit ratings on these banks. The agency also revised the outlook to stable from positive on JSC Eurasian Bank and affirmed the long- and short-term counterparty credit ratings. Moreover S&P affirmed the long- and short-term counterparty credit ratings and maintained a stable outlook on ForteBank JSC (formerly known as Alliance Bank JSC), KazInvestBank, and Kazakh Agrarian Credit Corp. At the same time, the agency lowered the Kazakhstan national scale rating on JSC SB Alfa-Bank to 'kzBBB-' from 'kzBBB' and lowered the national scale rating on Kaspi Bank JSC to 'kzBBB+' from 'kzA-'.

"Today's rating actions follow our decision to downgrade Kazakhstan. In our opinion, industry risks for Kazakh banks have increased because of the slowdown of the Kazakh economy, on the back of the pronounced drop in international oil prices, and further devaluation of the Kazakhstani tenge. This reflects our opinion of the Kazakh banking system's weakening funding profile," S&P said.

The sharp decline in oil prices greatly affects the outlook for Kazakhstan's economic growth and external and fiscal imbalances, given the Kazakh economy's high dependence on oil. The Kazakh oil sector accounts for an estimated 20-30 percent of GDP, more than 50 percent of revenue, and 60 percent of exports, according to S&P. The agency expects that the National Bank of Kazakhstan will either allow a gradual depreciation of the tenge or undertake another devaluation later this year, to accommodate lower oil prices and to ease the tenge's appreciation against the Russian ruble.

"Our assessment of the economic risk trend for Kazakh banks remains stable. The stable trend reflects the already very high economic risks in a global comparison and the banking sector's only modest exposure to the oil sector. We expect reduced demand for credit from small and midsize enterprises and consumers, which tend to be the banks' core lending customer base, in view of lower GDP growth," the agency said.

S&P expects that credit risk in the economy will remain extremely high, taking into account Kazakh banks' history of aggressive underwriting standards and the country's weak payment culture and rule of law. The agency expects that the very high volume of nonperforming loans (NPLs) in the Kazakh banking system-24 percent as of year-end 2014--will continue to decline gradually in 2015, partly due to more proactive initiatives of the Kazakhstan National Bank.

The agency noted that in recent months, Kazakh banks have suffered from a lack of tenge liquidity due to the conversion of tenge deposits into foreign currency. To hedge the widening foreign currency asset and liability mismatches, Kazakh banks have had to use costly foreign currency swaps with the National Bank of Kazakhstan, which has negatively affected their cost of funds.

"We expect to see lower savings rates among corporate and retail depositors in 2015, in view of the reduced economic growth prospects and our expectation of the tenge's devaluation. We anticipate that increased retail deposit volatility and the dollarization of deposits will continue due to depositors' weakening confidence in the Kazakh economy and the tenge. Smaller banks will be particularly vulnerable to flight to quality and possible panic-driven deposit outflows. By our estimates, state-related companies are significant depositors with Kazakh commercial banks, accounting for over one-quarter of total deposits. We expect a squeeze on their deposit bases given the lower GDP growth," S&P said.

The increased industry risk puts pressure on the anchor, the starting point in assigning an issuer credit rating to a bank, which is 'bb-' for banks operating predominantly in Kazakhstan? According to S&P.

"We have consequently revised our outlooks on Alfa-Bank, Kaspi Bank, PNB Kazakhstan, and Eurasian Bank, incorporating our opinion that these banks' capital buffers are likely to be affected by the increasing industry risks," the agency said.

Meanwhile the stand-alone credit profiles for, and consequently the issuer credit ratings on, KazInvestBank, ForteBank, and Kazakh Agrarian Credit Corp are not immediately affected by the increasing industry risks.

Follow the author on Twitter: @E_Kosolapova

Azerbaijani districts to be digitalized within Smart City project
Azerbaijani districts to be digitalized within Smart City project
CISCO increases number of services to be automated in Azerbaijan
CISCO increases number of services to be automated in Azerbaijan
Payment terminals in Azerbaijan being optimized for new banknotes
Payment terminals in Azerbaijan being optimized for new banknotes
Loading Bars
Rajnath Singh meets Nepal’s Foreign Minister Pradeep Kumar Gyawali
Six Indians in top-10 of BWF world junior rankings
Bhutan PM congratulates Modi on 'landmark' Covid vaccination drive
Turkic peoples to revive liberated Azerbaijani lands in spiritual and cultural field - TURKSOY Sec-Gen
Azerbaijan discloses main principles of vaccination against COVID-19
Joint exercises of the Azerbaijani and Turkish armies to be held (PHOTO/VİDEO)
Azerbaijan confirms 845 more COVID-19 recoveries
Kazakhstan's Baikonur extends quarantine until Feb 1
Call for prayer sounded for first time at cemetery in Azerbaijan’s Kalbajar district previously occupied by Armenia (VIDEO)
Iran reveals COVID-19 data for January 17
Quake death toll at 73 as Indonesia struggles with string of disasters
We are happy with Azerbaijan’s return of its ancestral lands - Turkic Culture and Heritage Foundation (PHOTO)
Azerbaijan sends interstate statement against Armenia to European Court of Human Rights
Georgia reports 780 coronavirus cases, 1 608 recoveries, 17 deaths
COVID-19 cases continue to drop in Turkey, TRNC braces for new lockdown
Azerbaijan approves COVID-19 vaccination strategy for 2021-2022
Delegation of Turkic Council, Turkic Culture and Heritage Foundation and TURKSOY visit Aghdam (PHOTO)
Electricity supplies to Azerbaijan's liberated Shusha begin
Iran discloses number of contracts signed in industrial parks of Ardabil Province
Uzbekistan’s activity on Turkmenistan’s Commodity, Raw Materials Exchange for Dec. 2020
Guatemala cracks down on migrant caravan bound for United States
Iran has means to restore oil extraction
U.S. Diplomatic Mission in Kazakhstan launches ’30 Years Together’ campaign
Brazilian healthcare watchdog declines request for emergency use of Sputnik V vaccine
SOCAR bonds will again bring their owners $1.25 million
Turkey's investments in natural gas supply reach $3B in 18 years
EU would like new EPCA to enhance bilateral relations in Central Asia
Georgia to get first part of Covid vaccine in one month
AEOI issues statement in response to E3
Kazakhstan reports almost 1,000 new COVID-19 cases
U.S. state capitals, Washington on alert for possible pro-Trump armed protests
Argentina confirms first case of new variant of coronavirus
Frankfurt airport terminal shut down over man threatening police
Azerbaijani districts to be digitalized within Smart City project
G7 summit to take place in UK’s Cornwall in June
Volume of essential products available in Iranian ports revealed
France's COVID-19 death toll tops 70,000
Fires in central Chile consume over 3,200 hectares
2 IS militants killed, 6 arrested in Iraq
Iran's Bahar Azadi gold coin price continues to fall
Iranian Energy Exchange announces products to be on sale on January 18
President Ilham Aliyev calls President Recep Tayyip Erdogan
WHO reports over 688,000 new daily cases of COVID-19
Tunisian PM appoints new ministers in sweeping cabinet reshuffle
Azerbaijani gymnasts awarded the title of "Honorary Master of Sports"
Thousands march in Vienna against coronavirus restrictions
Uzbekistan's Bukhara oil refinery starts production of RON-95 gasoline under QuWatt brand
Iran's SPGC reveals processing data of its first refinery
Kazakhstan, Greece boost trade turnover year-on-year
Building materials price hikes may increase cost of projects in Georgia
Serbia receives 1 mln Sinopharm vaccines from China
Iran's Rasht-Caspian railway to stimulate development of production
Over 110,000 health workers receive COVID-19 vaccine shots in Istanbul
7 killed in helicopter crash in southern Philippines
New footage from Azerbaijani Aghdam district's Shelli village issued (PHOTO/VIDEO)
Azerbaijan confirms 650 more COVID-19 recoveries
Buy/sell operations at Iran Mercantile Exchange soar
Georgian plans to vaccinate 60% of its population
Turkmenistan's MFA holds briefing dedicated to commissioning of infrastructure facilities (PHOTO)
Kazakhstan reports big increase in revenues from transporting cargo by air
Preliminary cost of building pharmaceutical cluster in Tashkent revealed
Iran reveals COVID-19 data for January 16
Member of Turkey's coronavirus board assures efficacy of CoronaVac
Azerbaijan shares footage from Mirzajamally village of Fuzuli district (PHOTO/VIDEO)
Summary of Operational Headquarters' amendments to quarantine regime in Azerbaijan
Azercell’s Mobile Eye and Mobile Dental Clinics provided free medical service to the hundreds of residents in 2020! (PHOTO)
Nepal approves emergency use of Covishield vaccine manufactured in India
COVID-19 infection rate falling in Azerbaijan - TABIB
Georgia reveals number of COVID-19 cases for Jan.16
Iran's trade turnover with Turkmenistan decreases
Japan interested in creation JVs in Uzbekistan in production and services spheres
Details of agricultural products exported to Iraq via Iran's Mehran customs announced
Turkmenistan's Main State Service opens tender for equipment purchase
Participation in funeral to be permitted via Azerbaijani Interior Ministry's Call Center
Toughened quarantine in Azerbaijan turned out to be effective - President's assistant
Vaccination of people aged over 65 to begin on Feb. 1 - Azerbaijani president's assistant
Storage facilities for COVID-19 vaccines being created in Azerbaijan's Shusha (UPDATE)
Nepal requests India for early provision of COVID-19 vaccines
S Jaishankar attends sixth meeting of India-Nepal Joint Commission
At 18 million, India has largest diaspora in the world: UN
Azerbaijan to purchase vaccines via Fund for Combating COVID-19
Baku subway, public transport not to work on weekends until quarantine ends
Azerbaijan reveals volume of imported Chinese Sinovac vaccine
Azerbaijan shares footage from liberated Hajikand village of Kalbajar (PHOTO/VIDEO)
Operational Headquarters of Azerbaijan talks international, domestic flights
Prime Minister Modi Launches pan India rollout of COVID-19 vaccination drive
GM to invest C$1 billion in Canada plant to manufacture electric vans
Azerbaijan to start vaccination from COVID-19 - Operational Headquarters
Barbershops and beauty salons in Azerbaijan to start working soon
Kazakhstan sees decrease in exports to EAEU countries
Review of transactions in national currency at Turkmen exchange for Dec. 2020
Total amount of transactions on Turkmen Commodity Exchange for Dec. 2020
Iran's companies can offer technical services in Azerbaijan's Karabakh
Azerbaijan to resume activity of shopping centers, museums, barbershops
Weekly review of Azerbaijani currency market
Uzbekistan reveals its COVID-19 data for January 16
Ban on entry-exit to some cities, regions of Azerbaijan remains in force
Azerbaijan makes wearing face masks mandatory both indoor, outdoor
Public catering facilities in Azerbaijan to resume activity soon
Aftershock rocks Indonesia quake zone as search continues
All news