OREANDA-NEWS. July 31, 2009. Kazakhstan-Based Temirbank and BTA Ipoteka Outlook Revised To Negative; 'CC/C' Ratings Affirmed; Off CreditWatch, reported the press-centre of KASE.

- BTA Bank J.S.C. has stated that, at this stage, it is not envisaged that the liabilities of Temirbank and BTAI will be covered by the restructuring plan of BTA.

- We are affirming our ratings on Temirbank and BTAI, revising the outlooks to negative, and removing them from CreditWatch Negative.

- The negative outlook reflects continued pressure on the entities' asset quality, liquidity, capitalization, and profitability amid the sector turbulence, as well as remaining uncertainty about debt restructuring plans of the BTA Group and their effect on the liabilities of BTA's subsidiaries.

Standard & Poor's Ratings Services said today it revised its outlook on Kazakhstan-based Temirbank JSC (Temirbank) and BTA Ipoteka Mortgage Co. (BTAI) to negative. The ratings were removed from CreditWatch, where they were originally placed with negative implications on March 20, 2009. At the same time, the 'CC/C' long- and short-term counterparty ratings were affirmed.

"The rating action reflects the announcement by the banks' parent (D/--/D) that, at this stage, it is not envisaged that the liabilities of Temirbank and BTAI will be covered by BTA's restructuring plan, which is likely to be finalized in the next few weeks," said Standard & Poor's credit analyst Annette Ess. "It also reflects our remaining uncertainty about the debt-restructuring plans of the BTA Group and their effect on the liabilities of the BTA's subsidiaries, as well as the continued pressure on the entities' asset quality, liquidity, capitalization, and profitability amid the sector turbulence."

The ratings on Temirbank reflect asset quality deterioration, tight liquidity, high reliance on foreign wholesale funding, tight capitalization with an ongoing need for fresh capital, and income statement losses. These negative factors are somewhat mitigated by the bank's good domestic market position in retail lending. Temirbank is the eighth-largest bank in Kazakhstan, with a 3% market share by assets, which stood at US2.2 billion as of end-March 2009. Its market share in the system's retail loans is about 8%, given its status as a specialized retail-banking subsidiary of BTA Bank.

The ratings on BTAI reflect asset quality deterioration, barely adequate capitalization, reliance on concentrated wholesale funding, and income statement losses. Offsetting these weaknesses is its strong market position in the mortgage sector. BTAI has established and maintained a strong foothold in the mortgage market in Kazakhstan, with about a 20% market share as of year-end 2008.

The ratings on both entities also reflect the challenging operating environment in the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3, local currency BBB/Stable/A-3).

"We would lower the ratings to 'D' in the event that Temirbank and BTAI default on all or substantially all of their debt, are included in the BTA restructuring plan, or declare bankruptcy or insolvency," said Ms. Ess. "Our ratings already incorporate further deterioration of asset quality, profitability, and the challenging operating environment."