Baku, Azerbaijan, Nov. 15
By Rashid Shirinov – Trend:
S&P Global Ratings expects that capital ratios of Kazakh banks will be under pressure over the next two years, the rating agency said in a message.
This is due to still high provisioning needs from legacy loans, limited earnings generation capacity of Kazakh financial institutions, and the negative effect of International Financial Reporting Standard 9 (IFRS 9) in 2018.
“We now have negative outlooks assigned to around half of rated banks in the country, driven predominantly by our concerns of potential declines in capitalization, asset quality deterioration, or risks of aggressive expansion strategies that could lead to capital erosion in these banks,” S&P Global Ratings noted.
The message also says that Kazakhstan’s banking sector capitalization is fragile and could weaken over the coming 18-24 months, even though it stabilized over 2016-2017.
“The stabilization stemmed mostly from a substantial government recapitalization program aimed at larger entities, a government-led clean-up of several banks, and a substantial slowdown of lending in the system,” the rating agency said.
S&P Global Ratings expects Kazakh banking system’s credit costs still to be high, at 1.5-2 percent in 2018 and 2019, and problem loans to remain around 25 percent.
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