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S&P Global Ratings said today that it lowered its long- and short-term issuer credit ratings on Qazaq Banki to 'CCC+/C' from 'B-/B', and national scale rating to ‘kzB-‘ from ‘kzB+’, and placed its long-term and national scale ratings on CreditWatch with negative implications.

The downgrade reflects agency’s view that Qazaq Banki’s liquidity position is facing significant pressure, with strong outflows of deposits from its customer base.

Furthermore, the bank’s overall financial position and creditworthiness has become vulnerable, and the agency believes hinges on shareholders’ support to secure stable funding sources and improve asset quality.

“The CreditWatch placement reflects our uncertainty of the bank’s ability to accumulate sufficient liquid assets over the short-term horizon of 90 days. On February 7, 2018, Qazaq Banki’s liquidity cushion was very low, at about 1.9 percent of total assets and 3.2 percent of total deposits,” S&P said in a message.

The rating action also reflects risks related to the potential additional funding outflows over the next three months.

“We incorporate this possibility in our negative CreditWatch placement. However, we understand that the NBK may extend its 25 billion tenge loan if necessary, thus somewhat mitigating the risks”.

S&P expects to resolve the CreditWatch within the next three months, once it has clarity on the planned shareholder support, and better understanding of Qazaq Banki’s ability to accumulate liquid assets, and to sustain its current deposit base over the next 12-18 months.

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