S&P revised its outlook on a number of Kazakh banks to "negative"

Almaty. February 27. Silkroadnews - S&P's rating agency on February 26 has taken various rating actions on seven Kazakhstan banks.
"We revised the outlook on the ratings of JSC "Alfa-Bank" (Kazakhstan), JSC "Kaspi Bank" and JSC "PNB - Kazakhstan" from "stable" to "negative" and affirmed the long-term and short-term credit ratings of these banks", - said in a press release.
Also, Standard & Poor's revised its outlook on the ratings of JSC "Eurasian Bank" from "positive" to "stable" and affirmed the long-term and short-term credit ratings of the bank.
"We have confirmed the long-term and short-term credit rating and "stable" outlook on the ratings of JSC "Fortebank" (former name - JSC "Alliance Bank"), "Kazinvestbank" and JSC "Agrarian Credit Corporation" ", - says the document.
At the same time, S&P's downgraded the national scale rating of JSC "Alfa-Bank" from "kzBBB" to "kzBBB-", JSC "Kaspi Bank" - from "kzA-" to "kzBBB+".
The rating actions follow the downgrade of the sovereign ratings of Kazakhstan (from "BBB+" to "BBB" after the fall in oil prices, the forecast - "negative") on February 9.
"In our opinion, the slowdown in economic growth in Kazakhstan following the falling of oil prices and the further depreciation of tenge resulted in increased industry risk for Kazakh banks. As a result, according to our methodology for assessing country and industry risks of the banking sector, we are revising our assessment of trends in the development of industry risk for Kazakh banks from "stable" to "negative." This reflects our view of the deterioration of the financial profile of the banking system of Kazakhstan", - indicates the report.
The sharp decline in oil prices had a significant negative impact on the prospects for economic growth, external balance and fiscal performance of Kazakhstan, given the high dependence on the oil sector, which accounts for 20-30% of GDP (estimate), more than 50% of budget revenues and 60% of exports.
S&P's analysts believe that the National Bank of Kazakhstan (NBK) will allow a gradual depreciation of the national currency or take other steps to its devaluation this year in order to adjust to lower oil prices and a weakening of the tenge against the Russian ruble.
"However, we have confirmed the stable trend of economic risk for Kazakh banks, reflecting the already very high, in an international context, economic risks and the fact that the banking sector is subject to a low risk associated with the oil industry. We expect a decrease in demand for loans from small and medium-sized businesses and consumers (who are the main customer base of banks in lending segment) due to the slowdown in GDP growth",- said in a press release.
Analysts of Standard & Poor's expects that the credit risk in the economy of Kazakhstan will remain extremely high, considering the aggressive underwriting standards, which banks held for a long time, a weak payment culture and the low level of the rule of law. According to forecasts of S&P's, a very high proportion of bad loans in the banking system of Kazakhstan (24% at the end of 2014) will be phased out in 2015, in part due to active measures of NBK.
"We expect the reduction of the growth of deposits of legal entities and individuals in 2015 against the background of deteriorating growth prospects and possible devaluation of the tenge. We expect increased volatility of retail deposits and further dollarization of deposits due to the weakening confidence of depositors in the Kazakh economy and the national currency. Small banks will be subject to particularly high risks associated with the outflow of depositors to the banks with higher credit quality and the possible outflow of deposits caused by panic in the market. According to our estimates, the state and public companies place significant investments in Kazakhstan commercial banks - more than 25% of total deposits. We expect pressure on the base of their deposits due to lower GDP growth rates", - says the analysts to the agency.
"Our view of the increasing industry risk putting pressure on the base level of the rating "bb-", on the basis of which is assigned a credit rating of the issuer banks that operate mainly in Kazakhstan. As a result, we are revising our outlook on JSC "Alfa-Bank" (Kazakhstan), JSC "Kaspi Bank", JSC "PNB-Kazakhstan" and JSC "Eurasian Bank", suggesting that the increase in industry risks will have a negative impact on the capital stock of these banks",- the report indicates.
According to the document, increased industry risk does not have immediate impact on the characteristics of their own creditworthiness and, as a result, on the ratings of "KazInvestBank", JSC "Fortebank" and JSC "Agrarian Credit Corporation".