S&P talks results of Kazakh banking system recapitalization
Baku, Azerbaijan, Oct.11
By Nargiz Sadikhova - Trend:
The government recapitalization program and problem loan buyouts have helped to keep Kazakhstan's banking system afloat over recent years, Trend reports with reference to S&P Global Ratings report.
However, according to the agency, these measures did not fully address the issue of the accumulation of new problem loans in the sector.
“The support has helped to preserve sector’s capitalization, which has remained broadly stable and even slightly improving, both in terms of regulatory metrics and our risk-adjusted capital (RAC) ratio measure. However, capitalization for banks in Kazakhstan remains lower than for both regional and international peers,” the report said.
The agency further noted that, despite many years of clean-up efforts, loan loss provision coverage for most banks in Kazakhstan remains at low levels, with average provisioning for problematic exposures around 50 percent.
“To fully cover gross stage 3 loans, Kazakh banks will need to resolve them or to create up to 1 trillion tenge of additional provisions, an equivalent of two percent of GDP. That figure is more than twice systemwide net profit for 2018,” the report said.
According to the agency, the ongoing asset quality review might identify provisioning needs for some banks, but further steps and corrective actions remain unclear.
“We continue to view the credit quality of Kazakh banks as modest, with a median rating level of 'B'. Banks have a high level of uncovered problem assets, aggressive lending practices, and corporate governance standards that lag behind global peers,” the report said.
The agency also added, that outlooks on most banks are stable, reflecting agency’s expectations that the banks will gradually increase provisioning coverage in the next 12-18 months, either by working out the problem loans, or through additional capital injections or other external support from the shareholders or from the government.
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