OREANDA-NEWS. On November 07, 2007 Fitch Ratings has affirmed Kazakhstan-based Halyk Bank's (Halyk) ratings at Long-term foreign currency Issuer Default Rating (IDR) 'BB+', Short-term foreign currency IDR 'B', Long-term local currency IDR 'BBB-' (BBB minus), Short-term local currency IDR 'F3', Individual 'C/D', Support ?' and Support Rating Floor 'BB+'. The Outlooks for the Long-term foreign and local currency IDRs remain Stable, reported the press-centre of KASE.

Halyk's Long-and Short-term IDRs and Support rating reflect the moderate probability of support forthcoming, in case of need, from the Kazakhstani authorities. This is based on the bank's substantial domestic franchise, and takes into account the authorities' ability to provide support, as reflected in the sovereign's Long-term foreign currency IDR of 'BBB' and Long-term local currency IDR of 'BBB+'. Halyk's Stable Outlooks for its Long-term IDRs reflect that of the sovereign's Long-term foreign currency IDR.

The Individual rating of Halyk reflects its broad domestic franchise, strong bottom-line performance, adequate asset quality to date, reasonable liquidity and low appetite for market risk. However, the ratings also considers the risks inherent in the bank's rapid loan growth, significant loan concentrations and heightened credit risks in the current Kazakhstani operating environment.

"Halyk is less dependent on foreign funding (30% of liabilities at end-H107) than most other large Kazakhstani banks, has more moderate exposure to the higher-risk construction/real estate sector (15% of loans) and a lower proportion of foreign currency lending (45%), which are all relative positives, in Fitch's view, for the bank's credit profile," says Dmitri Angarov, Associate Director of Fitch's Financial Institutions Group in Moscow. "In addition, the bank has benefited from 39% increase of retail deposits in Q307, and has been able to continue to expand its lending franchise (by 15% in Q307), while other banks have experienced funding constraints. At present the refinancing risk is negligible, since Halyk does not face any large-ticket repayments to end-2008,"says Mr. Angarov.

Nonetheless, Halyk's construction/real estate and foreign currency lending exposures are still considerable, and the bank could be negatively impacted by any further deterioration of the credit environment. Continued rapid loan growth, while other banks are forced to slow down their expansions, could also represent an additional source of risk for Halyk relative to the rest of
the sector. In addition, the bank's capital ratios are likely decrease from the acceptable 13,5% tier 1/15,9% total ratios at end-H107 towards the declared 10%/12% target levels. .

Halyk was the third-largest bank in Kazakhstan at end-Q307 with a 12,1% share of assets, and the largest bank by retail deposits (25% market share) and branch network. The Almex Group, beneficially owned by the daughter and son-in-law of President Nazarbayev, own a majority (68,7%) stake, while institutional and individual investors held a 31,3% stake following the December 2006 IPO.

Fitch will continue to review the ratings of Kazakhstani banks during the next few weeks. At the same time, as the agency has previously stated, the IDRs of the country's seven largest banks (apart from Halyk, Kazkommertsbank, BB+'/Outlook Stable; Bank TuranAlem, 'BB+'/Outlook Stable; Alliance Bank, BB-' (BB minus)/Outlook Stable; Bank Centercredit, 'BB-' (BB minus)/Outlook Stable; ATF Bank 'BB-' (BB minus)/Rating Watch Positive; Temirbank 'BB-' (BB minus)/Outlook Stable) are underpinned by the potential for direct or indirect sovereign support. Banks' Individual ratings could come under pressure if the stand-alone financial strength of institutions deteriorates, especially if heightened credit risks start to feed through into asset quality problems.