Moody's improves forecast for Kazakh banks

19 April 2019 16:28 (UTC+04:00)

By Abdul Kerimkhanov

The international rating agency Moody's has changed the outlook on the banking system of Kazakhstan from "stable" to "positive", Interfax-Kazakhstan reports, citing the agency's materials.

"The change in the forecast reflects an improvement in the capitalization and asset quality of Kazakh banks along with a high level of liquidity. These trends will generally maintain the creditworthiness of Kazakhstan’s banks for 12-18 months," Moody’s said.

Vice president and senior analyst at Moody’s agency, Vladlen Kuznetsov, said that the creditworthiness of Kazakh banks will improve over the next year and a half, despite the fact that modest economic growth and high interest rates will limit demand for loans, and the creditworthiness of individual banks will remain weak.

The agency notes that credit growth will lead to a partial decline in the share of problem loans since new loans are of higher quality.

Moody's notes that after substantial financial support from the state, systemically important banks were able to carry out work to recover or write off problem loans, as well as create the necessary reserves for possible loan losses.

"The profitability of banks will increase slightly since the negative impact of lower interest margins will be offset by the growth of commission income and increased efficiency," informs Moody's.

According to the rating agency, the economy of Kazakhstan will grow at a moderate pace in 2019-2020 - by 3-4 percent per year. In this regard, as well as due to high interest rates and a limited number of creditworthy borrowers, the demand for loans will remain limited.

The growth of lending will be 10-12 percent per year over the next 12-18 months. But, when adjusted to inflation, the growth will be low and in 2019 it will be 5-7 percent, Moody’s expects.

In 2018, Kazakhstan’s GDP grew by 4.1 percent. In 2019, the government predicts GDP growth of at least 3.8 percent.

Inflation in Kazakhstan was 5.3 percent in 2018. The government of Kazakhstan forecasts inflation in the range of 4-6 percent in 2019.

The banking sector of Kazakhstan is represented by 28 banks.

Moody's Corporation, often referred to as Moody's, is an American business and financial services company. It is the holding company for Moody's Investors Service (MIS), an American credit rating agency, and Moody's Analytics (MA), an American provider of financial analysis software and services.


Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94 

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