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Fitch affirms ratings of four Kazakh banks

12 April 2016 13:17 (UTC+04:00)
Fitch affirms ratings of four Kazakh banks

Fitch Ratings international ratings agency has affirmed the long-term issuer default ratings (IDRs) of JSC SB Alfa Bank Kazakhstan (ABK) at 'B+', AsiaCredit Bank JSC (ACB) at 'B', Bank of Astana JSC (BoA) at 'B' and Eximbank Kazakhstan (Exim) at 'B-', said the message from Fitch Ratings.

Meanwhile, Fitch has revised the outlooks on ACB and Exim to "Negative" from "Stable". The outlooks on ABK and BoA are "Stable".

"The affirmation of the banks' IDRs, which are driven by their viability ratings (VRs), reflects Fitch's view that the risks from the slowdown of the cyclical domestic economy have largely been factored into the banks' relatively low rating levels, which also reflect the banks' narrow franchises, high balance sheet concentrations, vulnerable asset quality and moderate capital buffers," said the message.

The Stable Outlooks on ABK and BoA reflect the so far moderate deterioration of asset quality and some resilience to potential worsening in the future due to the banks' still positive core profitability and decent capital buffers (each of these more robust at ABK).

The revision of ACB's and Exim's Outlooks to Negative reflects their more vulnerable credit profiles due to greater asset quality deterioration and weaker core profitability, while capitalization is undermined by significant volumes of risky exposures.

Upside potential is limited for ABK and BOA given the difficult operating environment, but the ratings could benefit from strengthening of franchises, while maintaining reasonable asset quality and performance. Downgrades could result from a substantial deterioration of asset quality and/or capitalisation if that is not offset by sufficient and timely equity support from the banks' shareholders.

As for the ACB and Exim, a further deterioration of asset quality and/or capital erosion/weakening will result in downgrades. However, stabilisation/improvement of asset quality and core profitability could help to stabilise ratings at the current levels.

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