BAKU, Azerbaijan, Jun. 19
By Nargiz Sadikhova - Trend:
S&P Global Ratings has affirmed its ‘B+/B’ long- and short-term issuer credit ratings and ‘kzBBB’ national scale rating on Kazakhstan’s ForteBank JSC, the outlook is stable, Trend reports with reference to S&P.
“The affirmation reflects our view that the bank’s capital and liquidity buffers will allow it to withstand the pressures from adverse operating conditions in Kazakhstan, caused by the economic downturn, the COVID-19 pandemic, and lower oil prices. We expect that this year, the bank will face additional provisioning needs that might result in elevated cost of risk (at about 4 percent as per our estimate), and decline in Return On Average Equity (ROAE) to about 10 [ercent,” the report said.
Nevertheless, S&P said it believes that ROAE will preserve its risk-adjusted capital ratio within the next 12-18 months, which S&P views as rating neutral.
“We expect that the bank will experience asset quality deterioration this year, although we believe its asset quality metrics will be broadly comparable with those of peer banks in Kazakhstan. At the same time, we believe that ForteBank’s management team has good local market knowledge and a track record of achieving recovery on problem assets in recent years. Therefore, we believe that management’s experience should help the bank to navigate through this adverse economic environment,” the report said.
S&P said it also expects ForteBank's funding base to be stable in the next 12-18 months.
“The bank has a balanced diversification between retail and corporate deposits--46 percent and 54 percent, respectively, as of year-end 2019. We also expect that deposit base will be broadly stable in the next 12-18 months. We view ForteBank's liquidity position as sound, reflecting the large amount of liquid assets on its balance sheet,” the report said.
S&P said ForteBank's stand-alone credit profile (SACP) remains at 'b'.
“We continue to consider the bank moderately systemically important in the Kazakhstan banking sector. The stable outlook reflects our expectation that in the next 12-18 months the bank’s capital and liquidity buffers will allow it to absorb the negative impact from the economic downturn related to the COVID-19 pandemic and oil price decline,” the report said.
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