BAKU, Azerbaijan, May 6
By Nargiz Sadikhova - Trend:
Assets of Kazakhstan’s banking sector amounted to 28.7 trillion tenge ($67.7 billion) as of Apr. 1, 2020, having increased by 7 percent compared to the beginning of 2020, Trend reports with reference to Kazakhstan’s National Bank.
“The growth in the banking sector assets is due to an increase in the loan portfolio of country’s second-tier banks by 3.5 percent to 15.3 trillion tenge ($36.1 billion), as well as an increase in balances on correspondent accounts and deposits placed with other banks and the National Bank, including through revaluation of foreign currency assets,” the report said.
The National Bank said that increase of the loans' portfolio was due to the increase of individuals loans by 3.2 percent, including increase of consumer loans by 2.8 percent and mortgage loans by 4.4 percent. At the same time, loans to legal entities increased by 4.7 percent, which was mainly due to the revaluation of foreign currency loans, and loans to small and medium enterprises (SME) increased by 2.4 percent.
The share of overdue loans over 90 days amounted to 8.9 percent in the total loans portfolio or 1.3 trillion tenge ($3.2 billion), whereas coverage of provisions for such loans was 79 percent.
In turn, Kazakh second-tier banks have a significant liquidity reserve of about 13 trillion tenge ($30.6 billion) or 44 percent of assets, of which about 10 trillion tenge ($23.5 billion) accounts for highly liquid assets. This free liquidity amount allows banks to meet their liabilities in full, the National Bank said.
The increase in deposits of the population and ventures amounted to 6.6 percent since the beginning of the year, which was mainly associated with the revaluation of deposits in foreign currency. The main source of funding for the banking sector in the liabilities structure is customer deposits, accounting for 76.9 percent of total bank liabilities.
The capital adequacy ratio amounted to 19.5 percent (the minimum is 7.5 percent, for systemically important banks is 9.5 percent), the capital adequacy ratio is 24.6 percent (the minimum level is 10 percent, for systemically important banks is 12 percent).
The return on bank assets (ROA) amounted to 4.2 percent in 1Q2020 (1.5 percent in 1Q2019), the return on capital (ROE) was 32.7 percent (12.2 percent in 1Q2019). At the same time, certain sectors of the economy and household incomes were negatively affected by external shocks in 1Q2020, such as a decrease in oil prices and the spread of the COVID-19 pandemic, the National Bank said.
“No doubt this shock that the economy is experiencing will lead to a decrease in the solvency of the population and economic entities, and this in turn will lead to a decrease in the quality of the loan portfolio and the income of banks. In these conditions, the willingness of banks to absorb additional losses arising from external shocks is systemically important,” the bank added.
Within the framework of the counter-cyclical supervisory policy for the period from March 30 to September 30, 2020, the Kazakhstan’s Agency for Regulation and Development of Financial Market introduced temporary prudential regulation measures aimed at reducing pressure on banks' capital and liquidity, which allowed releasing second-tier banks capital worth 168 billion tenge ($396.4 million) for lending to the economy.
Second-tier banks also have a conservation capital buffer worth 561 billion tenge ($1.3 billion), which, coupled with the freed up capital of banks from regulatory exemptions, can offset the negative impact of external shocks on bank balances and support lending to the economy.
The Agency, together with the National Bank, is in the process of developing measures to reduce the crisis impact on financial stability, which will be implemented as the situation in the economy develops and is aimed at maintaining the financial stability of banks in the long term.
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