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S&P changes Kazakh KACC's business position assessment

Finance Materials 3 December 2018 14:32 (UTC +04:00)

Baku, Azerbaijan, Dec. 3

By Rashid Shirinov – Trend:

S&P Global Ratings has revised its business position assessment of Kazakh Agrarian Credit Corporation (KACC) to moderate from weak, reflecting that the company's strategy has evolved to become more stable and robust than that of some domestic peers.

This is stated in a message of the rating agency, where S&P Global Ratings affirms its 'BB/B' long- and short-term issuer credit ratings on KACC. The outlook is stable. The agency also affirmed the Kazakhstan national scale ratings 'kzA+' on KACC.

“The affirmation reflects our view that, despite increased banking industry risks, KACC's stand-alone credit profile (SACP) will remain 'b',” reads the statement.

S&P Global Ratings also noted that KACC still enjoys very strong capitalization mostly driven by low leverage and an expected risk-adjusted capital (RAC) ratio sustainably above 25 percent.

“KACC has adequate risk management in the context of Kazakhstan and for risks related to its focus on the cyclical and weather-dependent agricultural sector,” the rating agency added.

S&P Global Ratings believes that KACC has limited ability to diversify its funding sources, because it is not eligible to attract retail or corporate depositors, and has a very limited track record of dealing with international financial institutions, making its funding profile weaker compared to a universal bank with a well-diversified funding base.

“The company's liquidity position is moderate, reflecting the highly volatile nature of its cash buffers, which are driven by the high seasonality of credit demand in agricultural sector,” says the message.

The rating agency noted that it could raise the ratings over the next 12-18 months if KACC's role for its parent, KazAgro Group, increases, with the group divesting other financial subsidiaries and KACC becoming a major vehicle for providing financial support to the agricultural sector.

“We could take a negative rating action if we believed that KACC's role within the group was diminishing, or the group itself had become less important for the government. However, we consider this scenario unlikely within our rating horizon,” S&P Global Ratings added.

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