Real amount of problem loans in Kazakhstan is no less than 20% of gross loans

Baku, Azerbaijan, August 22

By Nargiz Sadikhova - Trend:

The real amount of problem loans in the banking sector of Kazakhstan is at least two times higher than the non-performing loan (NPL) ratio which equaled to 11.4 percent of gross loans during 2Q2019, Trend reports with reference to the Fitch Ratings.

“We estimate the sector average Stage 3 loans ratio at 22 percent, with Stage 2 loans adding a further seven percent, according to banks' IFRS accounts at end-2018,” the report said.

As stated in the Fitch’s report, by the end of this year the National Bank of Kazakhstan plans to complete its asset-quality review (AQR), which may reveal additional problem loans.

“It is unclear how stringent this process will be, but some banks may need to increase reserve levels, while those with significant unreserved volumes of Stage 3 loans may need to raise capital, or even be resolved,” the agency said

Furthermore, as stated in the report, banks' credit metrics remained largely stable in 2Q2019. Sector average ratios remained reasonable, although there was a large divergence between banks.

“Sector return on average equity equaled a high 34 percent in 2Q2019, although the sustainability of strong profitability is undermined by potentially volatile loan impairment charges, given banks' high loan concentrations and generally weak loan quality. Despite strong performance and only moderate loan growth, sector average Tier 1 ratio decreased by 40bp due to dividend pay-outs. Liquidity buffers are generally strong, despite moderate outflows of customer funding in 1H2019,” the report said.

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Follow the author on twitter: @nargiz_sadikh

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