Baku, Azerbaijan, Dec. 29
By Ali Mustafayev – Trend:
S&P Global Ratings’ said its ratings on Kazakhstan's Qazaq Banki (B-/Watch Neg/B, kzB+/Watch Neg/) remain on CreditWatch with negative implications, where it placed them on July 21.
On December 22, 2017, Qazaq Banki received a capital injection in the form of 8 billion tenge (about $24 million) Tier 2 subordinated debt from its shareholders. This capital injection, which the bank originally expected to receive in November, will significantly affect the bank's regulatory capital adequacy ratio (K2). It stood at 10.8 percent as of mid-December 2017 just above the regulatory minimum of 10 percent and developments in this ratio are critical for the CreditWatch resolution.
“We expect to have more clarity on the subordinated debt's positive impact on the bank's regulatory capital adequacy ratio when it is publicly reported on the regulator's website in January 2018,” S&P said in a message.
As the company stated in July, it could lower the ratings if Qazaq Banki does not receive enough capital support to restore its capitalization and maintain its capital ratios sufficiently above the regulatory minimums.
"Also, rating pressure could arise if the bank's portfolio quality deteriorates substantially more than we currently expect and the additional provisioning significantly squeezes capital while additional equity inflows are not sufficient to maintain capitalization of the bank at acceptable levels," said the report.
Moreover, S&P could consider a downgrade if it sees material deterioration of the bank's liquidity position or funding stability.
“We could affirm the ratings if we see that the bank receives sufficient capital support, restoring capital adequacy ratios to substantially above the minimum required levels, and if the risks of noncompliance with regulatory requirements subside, while the bank's liquidity position remains stable,” said the report.