OREANDA-NEWS. On October 05, 2007 Moody's Investors Service has placed under review for possible downgrade the following ratings of Kazkommertsbank (KKB) of Kazakhstan: D bank financial strength rating (BFSR); Baa2/P-2 global local currency deposit rating and senior unsecured debt foreign currency rating; Baa3 foreign currency-backed subordinated debt rating and Ba1 foreign currency-backed junior subordinated debt rating. Moody's has at the same time affirmed KKB's foreign currency deposit ratings at Ba1/NP with a stable outlook, reported the press-centre of KASE.

This rating action primarily reflects Moody's concerns with regard to KKB's rapid growth over the last few years, as well as the suitability of the bank's business model in light of the recent turbulence in the international capital markets. Until recently, KKB has been focused on very rapid lending expansion financed to large extent by substantial borrowings from abroad. Its total assets have increased by 363% over the thirty-month period covering 2005-1H2007, while the bank's loan portfolio has more than quadrupled during this period. Furthermore, market borrowings, mainly Eurobonds and syndicated bank loans, comprised about 60% of KKB's total liabilities as at mid-2007.

In Moody's view, the recent market turbulence and consequent liquidity crisis have substantially reduced KKB's capacity to attract market funding, increasing its exposure to refinancing risk and testing its business model. Another negative rating driver is the significant possibility of a material deterioration of the bank's loan portfolio quality due to the rapid growth in lending and the high concentration of construction and real estate exposure (about 25% of gross loans or 200% of equity at mid-2007). Moodys' believes that some of the bank's borrowers from this sector could be adversely affected by the current credit crunch.

Moody's rating review will focus on the bank's ability to modify its business model to the changing market conditions and the external environment. Particular attention will be paid to KKB's liquidity position and its efforts to refinance cross-border liabilities maturing in the next six months. As part of the review, Moody's will also closely monitor KKB's loan portfolio quality.

The date of the previous rating action was 22 June 2007 when the following ratings of KKB were downgraded: senior unsecured debt in foreign currency to Baa2/P-2 from Baa1/P-2; foreign currency-backed subordinated debt to Baa3 from Baa2; and foreign currency-backed junior subordinated debt to Ba1 from Baa3. KKB's bank financial strength rating (BFSR) was confirmed at D, while the outlook on the BFSR and on all debt ratings was changed to negative.

Headquartered in Almaty, Kazakhstan, KKB reported consolidated total assets of KZT 3,043 billion (USD25.0 billion) and shareholders' equity of KZT293 billion (USD2.4 billion) under IFRS as at 30 June 2007.