OREANDA-NEWS. May 28, 2009. Moody's Investors Service today placed the issuer and deposit ratings of five government-owned Kazakh financial institutions on review for possible downgrade. Four of the five affected entities are government-related issuers (GRIs - government-controlled financial companies with specific policy mandates), while the other is a bank fully owned by the government, reported the press-centre of KASE.

The rating action follows the recent default of Astana Finance, another Kazakh GRI, in which the government (through the Samruk-Kazyna sovereign fund) holds a 25.5% equity stake. The government has not provided any support to Astana-Finance to avoid a default. Consequently, on
21 May 2009, Moody's downgraded Astana Finance's issuer ratings to Ca from B3.

In the process of the ratings review, Moody's will re-examine the currently very high government support assumptions incorporated in the affected financial institutions' ratings. Factors that the rating agency will consider in its assessment of systemic support include the size of the financial system in relation to the government's resources, the level of stress in the financial system, the foreign currency obligations of the financial system relative to the government's own foreign exchange resources and changes to the government's political patterns and priorities.

The ratings review is likely to result in a closer alignment of these institutions' issuer and deposit ratings to their stand-alone financial strength, hence possibly leading to multi-notch downgrades for selected entities. Moody's expects to conclude the review over the next few weeks.

A list of the institutions affected by Moody's rating actions follows.

House Construction Savings Bank of Kazakhstan:

- Baa3 long-term local currency deposit rating and P-3 short-term local currency deposit rating placed on review for possible downgrade;

- The local currency deposit rating benefits from a very high probability of systemic support that results in a five-notch uplift from the B2 baseline credit assessment (BCA, an indicator of standalone financial strength).

Agrarian Credit Corporation:

- Baa3 long-term local and foreign currency issuer ratings and P-2 short-term local and foreign currency issuer ratings placed on review for possible downgrade;

- The issuer ratings benefit from a very high probability of systemic support that results in a five-notch uplift from the BCA of 15.

Development Bank of Kazakhstan:

- Baa2 long-term local and foreign currency issuer ratings placed on review for possible downgrade;
 
- The local currency issuer rating benefits from a very high probability of systemic support that results in a four-notch uplift from the BCA of 11-13.

Kazakhstan Mortgage Company

- Baa3 long-term local currency issuer rating placed on review for possible downgrade;

- The local currency issuer rating benefits from a very high probability of systemic support that results in a four-notch uplift from the BCA of 14.

Kazagrofinance

- Baa3 long-term local and foreign currency issuer ratings and P-3 short-term local and foreign currency issuer ratings placed on review for possible downgrade;

- The local currency issuer rating benefits from a very high probability of systemic support that results in a five-notch uplift from the BCA of 15.

Moody's previous rating action on House Construction Saving Bank of Kazakhstan was on 24 February 2009 when the bank's local currency deposit rating was downgraded to Baa3 from Baa2;

Moody's previous rating action on Agrarian Credit Corporation was on 24 February 2009 when the company's local and foreign currency issuer ratings were downgraded to Baa3 from Baa2;

Moody's previous rating action on Development Bank of Kazakhstan was on 24 February 2009 when the issuer rating was downgraded to Baa2 from Baa1;

Moody's previous rating action on Kazakhstan Mortgage Company was on 24 February 2009 when the local currency issuer rating was downgraded to Baa3 from Baa1;

Moody's previous rating action on KazAgroFinance was on 24 February 2009 when the local and foreign currency issuer ratings were downgraded to Baa3 from Baa2

The principal methodologies used in rating House Construction Savings Bank of Kazakhstan are "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology". The principal methodology used in rating the four GRIs - Agrarian Credit Corporation, Development bank of Kazakhstan, Kazakhstan Mortgage Company and KazAgroFinance - is "The Application of Joint-Default Analysis to Government Related Issuers". These documents can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies sub-directory Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory.