OREANDA-NEWS. July 01, 2011. Standard & Poor's Ratings Services said that it had raised its long-term counterparty credit rating on Kazakhstan-based Tsesna Bank to 'B' from 'B-' and its Kazakh national scale ratings to 'kzBB'+ from 'kzBB-' while affirming the 'C' short-term credit rating. The outlook is stable, reported the press-centre of KASE.

The rating action reflects our view that the bank's business and financial profile was resilient during the crisis and that it maintained a better financial performance than its peers. The ratings reflect moderate capitalization, and high lending and deposit concentrations. Positive rating factors are Tsesna Bank's good market position in central and northern Kazakhstan (market shares of 7% by term deposits and 12% by loans on March 31, 2011), improvements in asset quality and profitability, and adequate funding and liquidity.

Tsesna Bank is the tenth-largest bank in Kazakhstan and the only one headquartered in the capital Astana.

Tsesna Bank's asset quality, profitability, and funding indicators compare favorably with those of its domestic peers. Nonperforming loans (90 days overdue) have been declining and stood at 8.5% of gross loans on March 31, 2011, while restructured loans stood at 5.1% of gross loans on the same date. We expect further improvements over the next 12 months. Moreover, we expect the bank's net interest margin, which stood at 4.2% in the first quarter of 2011, to improve over the next 12 months due to increased loan volumes and improved funding costs. Nevertheless, sizable operating and provisioning expenses are likely to continue to weigh on net income. Tsesna Bank has a low share of foreign liabilities in its funding base (about 2%) and one of the best loan-to-deposit ratios (92.7% as of March 31, 2011) among rated Kazakh banks.

Moderate capitalization, as measured by our risk-adjusted capital (RAC) ratios of 5.1% before adjustments and 3.8% after adjustments for concentrations at year-end 2010, reduces Tsesna Bank's ability to absorb potential losses and heightens its vulnerability to high single-name concentrations. A planned capital injection of Kazakhstani tenge 4.5 billion in 2011 will not, in our view, improve the bank's RAC ratios materially given expected high loan growth.

The stable outlook reflects our expectation that Tsesna Bank's business and financial profiles will remain robust, despite accelerating loan growth.