16.02.2015, 12:04
S&P affirmed ratings of Halyk Savings Bank of Kazakhstan, outlook revised to negative
OREANDA-NEWS. Standard & Poor's Ratings Services said today that it had revised its outlook on Halyk Savings Bank of Kazakhstan (Halyk Bank) to negative from stable. At the same time, we affirmed our 'BB+/B' long- and short-term counterparty credit ratings and 'kzAA-' Kazakhstan national scale rating on the bank.
The rating action reflects our view that the Kazakhstan government's financial capacity to provide extraordinary support to systemically important private sector banks might gradually weaken.
Kazakhstan's economy depends heavily on the oil sector. It accounts for an estimated 20%-30% of GDP, over 50% of revenues, and 60% of exports. We have significantly lowered our economic growth outlook for Kazakhstan to 1.5% of GDP in 2015 and 2% in 2016, from 4.3% and 4.5%, because of lower oil prices.
The growth outlook is also dampened by the expected impact on consumer demand--the key growth driver in recent years--from currency devaluation and external factors, such as the recession in Russia. We now forecast a current account deficit of more than 4% of GDP over 2015-2016. We expect the National Bank of Kazakhstan will either allow a gradual depreciation of the tenge or undertake another devaluation this year, to accommodate lower oil prices and to ease the tenge's appreciation against the ruble.
Currently the issuer credit rating on Halyk Bank is one notch higher than its stand-alone credit profile (SACP), reflecting the bank's "high" systemic importance in Kazakhstan, as the second-largest bank by assets and retail and corporate deposits, and its market share of above 20% in terms of retail deposits.
Since we assess the Kazakh government as "supportive," we believe Halyk Bank has a "high" likelihood of receiving extraordinary support from the government if needed. "High" systemic importance means that we consider that Halyk Bank's failure would likely have a highly adverse impact on Kazakhstan's financial system and the real economy.
Our rating action also acknowledges that this less-supportive economic environment in Kazakhstan is likely to put pressure on Halyk Bank's new lending and on the creditworthiness of its borrowers, especially in case of a further tenge devaluation, and therefore reduce Halyk Bank's capacity to continue accruing capital internally. Halyk Bank's 2015-2016 operating performance will likely weaken against very strong 2014 results.
The 'BB+' long-term rating on Halyk Bank remains the highest among private sector banks we rate in Kazakhstan, and reflects the superior business and financial profiles of the bank versus those of local peers, even though Halyk Bank will not be totally immune from the economic slowdown. We think the bank is well positioned to sustain such developments, thanks to sufficient capital levels.
The negative outlook on Halyk Bank reflects the negative outlook on the long-term local currency sovereign rating on Kazakhstan.
We would downgrade Halyk Bank if we lowered the long-term local currency sovereign rating. We would no longer be able to reflect extraordinary government support in the issuer credit rating on Halyk Bank because the differential between Halyk Bank's SACP and the sovereign local currency credit rating would be not wide enough to warrant such support. We could also lower the ratings on Halyk Bank if the improvements seen in its asset quality in 2014 reversed in a less supportive economic and operating environment, and therefore led to substantially higher credit losses.
We would revise the outlook on Halyk Bank to stable if we revise the outlook on the sovereign to stable and if the bank's financial profile, notably asset quality and capital, proves resilient to weaker growth prospects.
The rating action reflects our view that the Kazakhstan government's financial capacity to provide extraordinary support to systemically important private sector banks might gradually weaken.
Kazakhstan's economy depends heavily on the oil sector. It accounts for an estimated 20%-30% of GDP, over 50% of revenues, and 60% of exports. We have significantly lowered our economic growth outlook for Kazakhstan to 1.5% of GDP in 2015 and 2% in 2016, from 4.3% and 4.5%, because of lower oil prices.
The growth outlook is also dampened by the expected impact on consumer demand--the key growth driver in recent years--from currency devaluation and external factors, such as the recession in Russia. We now forecast a current account deficit of more than 4% of GDP over 2015-2016. We expect the National Bank of Kazakhstan will either allow a gradual depreciation of the tenge or undertake another devaluation this year, to accommodate lower oil prices and to ease the tenge's appreciation against the ruble.
Currently the issuer credit rating on Halyk Bank is one notch higher than its stand-alone credit profile (SACP), reflecting the bank's "high" systemic importance in Kazakhstan, as the second-largest bank by assets and retail and corporate deposits, and its market share of above 20% in terms of retail deposits.
Since we assess the Kazakh government as "supportive," we believe Halyk Bank has a "high" likelihood of receiving extraordinary support from the government if needed. "High" systemic importance means that we consider that Halyk Bank's failure would likely have a highly adverse impact on Kazakhstan's financial system and the real economy.
Our rating action also acknowledges that this less-supportive economic environment in Kazakhstan is likely to put pressure on Halyk Bank's new lending and on the creditworthiness of its borrowers, especially in case of a further tenge devaluation, and therefore reduce Halyk Bank's capacity to continue accruing capital internally. Halyk Bank's 2015-2016 operating performance will likely weaken against very strong 2014 results.
The 'BB+' long-term rating on Halyk Bank remains the highest among private sector banks we rate in Kazakhstan, and reflects the superior business and financial profiles of the bank versus those of local peers, even though Halyk Bank will not be totally immune from the economic slowdown. We think the bank is well positioned to sustain such developments, thanks to sufficient capital levels.
The negative outlook on Halyk Bank reflects the negative outlook on the long-term local currency sovereign rating on Kazakhstan.
We would downgrade Halyk Bank if we lowered the long-term local currency sovereign rating. We would no longer be able to reflect extraordinary government support in the issuer credit rating on Halyk Bank because the differential between Halyk Bank's SACP and the sovereign local currency credit rating would be not wide enough to warrant such support. We could also lower the ratings on Halyk Bank if the improvements seen in its asset quality in 2014 reversed in a less supportive economic and operating environment, and therefore led to substantially higher credit losses.
We would revise the outlook on Halyk Bank to stable if we revise the outlook on the sovereign to stable and if the bank's financial profile, notably asset quality and capital, proves resilient to weaker growth prospects.
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