Baku, Azerbaijan, October 3
By Nargiz Sadikhova – Trend:
Fitch Ratings has affirmed Kazakhstan Mortgage Company's (KMC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB-' with Stable Outlook, Trend reports with reference to the report of the Fitch Agency.
According to the report, Status, Ownership and Control Assessed as Very Strong.
“The Very Strong assessment is supported by KMC's 100 percent ultimate ownership by the state, via its key development assets manager Baiterek, and its status as the government's agent implementing state policy in the housing sector,” the report said.
Support Track Record and Expectations Assessed as Strong.
"The Strong assessment is underpinned by a solid track record of state support provided to the entity for execution of the state housing programs,” the statement said.
Socio-Political Implications of Default Assessed as Strong. Financial Implications of Default Assessed as Strong.
“One of the KMC's key roles is to revive the mortgage market by introducing new mortgage programs and bond issuance, providing long-term funding to the market. This is why KMC is a regular bond issuer on the domestic market, although its market share is not large. We assess that a default of KMC could significantly impair investors' confidence in the credibility of the Kazakh quasi-government sector, as other GREs tap the same financial market and the list of domestic investors is not long. Therefore, Fitch considers that KMC's default would negatively impact investors' view of the credit quality of other GREs and consequently the cost of their funding,” the report said.
Fitch projects KMC will remain profitable over the medium term, continuing the trend of recent years. This will be supported by low-cost state-originated funding and the adequate quality of its assets. In 2018, KMC's Fitch-calculated net interest income to earning assets slightly declined to 3.68 percent from an average 4.25 percent in 2014-2017 due to a growing social rental housing portfolio with lower yield, while net operating income to total assets was almost unchanged at 2.7 percent
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