OREANDA-NEWS. Fitch Ratings has published Kazakh Banks Datawatch 4Q15, consisting of key data from banks' regulatory financial statements and disclosures sourced primarily from the National Bank of Kazakhstan (NBK) and Kazakhstan Stock Exchange. The 4Q15 report consists of data in PDF and Excel formats, charts and Fitch commentary, and covers 27 of the sector's 35 banks, comprising 98% of the system assets.

In the report, Fitch notes the so far moderate direct impact on most banks' credit profiles from the continued tenge devaluation in the second consecutive quarter but predicts that economic deterioration and new regulatory challenges would likely start making negative impact on banking data over the medium term.

Capital ratios declined in 4Q15, driven mostly by the expansion of foreign currency assets as tenge weakened 26% against the US dollar. The sector aggregate Tier I ratio fell to 12.7% from 13.3% (minimum 6%) and Total capital ratio dropped to 15.6% from 15.8% (minimum 7.5%), helped by some deleveraging. A proposed new deduction from Total capital of the difference between retail deposits and 5.5x equity (to be phased in 1H16) and the introduction of 150% risk weights on some retail loans granted after end-2015 could hurt banks with significant retail operations.

While NPLs fell slightly to 10% from 11% during the quarter, loan impairment charges rose to an annualised 4% of average loans from 0.4%, which, in our view, reflected a restructuring of delinquent or potentially problematic loans by many banks.

The NBK repo rate rise to 17% from 12% in 4Q15 had a predictably limited impact on bank margins. However, core and bottom-line profitability of some banks was negatively affected by losses on swap operations as swap rates intermittently hit triple digits in 4Q15. The sector's return on average equity fell to 13% in 4Q15 from 28% in 3Q15 on annualised basis.

Liquidity cushions remained robust across the sector, mostly in the form of foreign-currency deposits with NBK, with few exceptions. Liquid assets comprised 37% of total customer deposits at end-2015. However, the overall scarcity of cheap tenge funding forced banks to refrain from new lending.