16.03.2016, 06:10
S&P affirms credit ratings of Eximbank Kazakhstan at B-/С, outlook stable
OREANDA-NEWS. Standard & Poor's Ratings Services affirmed its 'B-/C' long- and short-term counterparty credit ratings on Eximbank Kazakhstan JSC. The outlook is stable.
At the same time, we affirmed our 'kzBB-' Kazakhstan national scale rating on the bank.
The rating action follows the strengthening of Eximbank Kazakhstan's funding and liquidity profile to peer levels over the past 12 months. This improvement is in line with our expectations, which we previously reflected in a one-notch additional adjustment for our view that the bank was in a positive transition to diversify its revenues. As a result, we have revised our assessment of the bank's liquidity to adequate from moderate and removed the additional notch.
As per our assumptions, Eximbank Kazakhstan repaid in full and on time in July 2015 its Kazakhstani tenge (KZT) 4.5 billion ($24 million) domestic bond, which accounted for 11% of its liabilities. In addition, the bank increased its share of liquid assets at year-end 2015 in line with the system average. Cash, short-term placements with banks, and government securities accounted for 13% of total assets as of end-2015, versus only 7% as of April 1, 2015. We estimate that broad liquid assets increased to about 1.2x of short-term wholesale funding as of end-2015 from a low 0.45x at end-2014 following the bond repayment. We expect these metrics to remain at similar levels in 2016.
Eximbank Kazakhbank is one of the few Kazakh banks we rate that did not enter into foreign currency swaps with the National Bank of Kazakhstan (NBK) in 2014-2015 to receive tenge liquidity. This was due to a much lower share of deposits in foreign currency at Eximbank Kazakhstan--46% of total as of end-2015 compared with the system average of 69%. The bank hedges its small assets and liabilities mismatch (about KZT2 billion) in foreign currency through overnight interbank swaps and repo with the NBK.
We continue to base our ratings on Eximbank Kazakhstan on the bank's exclusive Kazakhstan's business, reflected in its 'bb-' anchor, which is the starting point for rating commercial banks operating in Kazakhstan. The ratings also incorporate our assessments of the bank's weak business position, due to its modest franchise in the Kazakh banking sector, and high concentration on servicing companies in the energy, real estate, and construction sectors.
We expect the bank's capital and earnings position to remain adequate. The bank's moderate risk position balances its low growth strategy and lower share of foreign-currency lending than its peers against its concentrated loan portfolio and high share of restructured loans. The issuer credit rating on the bank is at the level of the 'b-' stand-alone credit profile (SACP) because we consider the bank of low systemic importance and do not include ratings uplift for Kazakh government or shareholder support.
The stable outlook on Eximbank Kazakhstan reflects our assumption that the bank's business and financial profiles will remain balanced at the current rating level over the next 12 months.
In addition, we factor in our projection that the bank will continue to gradually diversify its franchise from the current concentrated customer base and that the financial profile will likely withstand the current economic slowdown in Kazakhstan. We also incorporate our assessment of negative trends for economic and industry risk in the Kazakh banking sector.
We could consider a negative rating action over the next 12 months if Eximbank Kazakhstan:
- Experienced a liquidity shortage, for example, due to the exit of large depositors or lack of liquidity in tenge;
- Posted a pronounced deterioration in its restructured loans portfolio, leading to its reclassification as nonperforming loans (loans more than 90 days overdue) and resulting in the creation of significant additional provisions; or
- Faced diminished loss-absorption capacity on the back of faster-than-planned credit growth or additional substantial provisioning, resulting in our forecast of a Standard & Poor's risk-adjusted capital ratio reducing to below 7%.
We do not expect a positive rating action on Eximbank Kazakhstan over the next 12 months due to our views of the negative trend in economic and industry risks in the Kazakh banking system and the bank's modest competitive position.
At the same time, we affirmed our 'kzBB-' Kazakhstan national scale rating on the bank.
The rating action follows the strengthening of Eximbank Kazakhstan's funding and liquidity profile to peer levels over the past 12 months. This improvement is in line with our expectations, which we previously reflected in a one-notch additional adjustment for our view that the bank was in a positive transition to diversify its revenues. As a result, we have revised our assessment of the bank's liquidity to adequate from moderate and removed the additional notch.
As per our assumptions, Eximbank Kazakhstan repaid in full and on time in July 2015 its Kazakhstani tenge (KZT) 4.5 billion ($24 million) domestic bond, which accounted for 11% of its liabilities. In addition, the bank increased its share of liquid assets at year-end 2015 in line with the system average. Cash, short-term placements with banks, and government securities accounted for 13% of total assets as of end-2015, versus only 7% as of April 1, 2015. We estimate that broad liquid assets increased to about 1.2x of short-term wholesale funding as of end-2015 from a low 0.45x at end-2014 following the bond repayment. We expect these metrics to remain at similar levels in 2016.
Eximbank Kazakhbank is one of the few Kazakh banks we rate that did not enter into foreign currency swaps with the National Bank of Kazakhstan (NBK) in 2014-2015 to receive tenge liquidity. This was due to a much lower share of deposits in foreign currency at Eximbank Kazakhstan--46% of total as of end-2015 compared with the system average of 69%. The bank hedges its small assets and liabilities mismatch (about KZT2 billion) in foreign currency through overnight interbank swaps and repo with the NBK.
We continue to base our ratings on Eximbank Kazakhstan on the bank's exclusive Kazakhstan's business, reflected in its 'bb-' anchor, which is the starting point for rating commercial banks operating in Kazakhstan. The ratings also incorporate our assessments of the bank's weak business position, due to its modest franchise in the Kazakh banking sector, and high concentration on servicing companies in the energy, real estate, and construction sectors.
We expect the bank's capital and earnings position to remain adequate. The bank's moderate risk position balances its low growth strategy and lower share of foreign-currency lending than its peers against its concentrated loan portfolio and high share of restructured loans. The issuer credit rating on the bank is at the level of the 'b-' stand-alone credit profile (SACP) because we consider the bank of low systemic importance and do not include ratings uplift for Kazakh government or shareholder support.
The stable outlook on Eximbank Kazakhstan reflects our assumption that the bank's business and financial profiles will remain balanced at the current rating level over the next 12 months.
In addition, we factor in our projection that the bank will continue to gradually diversify its franchise from the current concentrated customer base and that the financial profile will likely withstand the current economic slowdown in Kazakhstan. We also incorporate our assessment of negative trends for economic and industry risk in the Kazakh banking sector.
We could consider a negative rating action over the next 12 months if Eximbank Kazakhstan:
- Experienced a liquidity shortage, for example, due to the exit of large depositors or lack of liquidity in tenge;
- Posted a pronounced deterioration in its restructured loans portfolio, leading to its reclassification as nonperforming loans (loans more than 90 days overdue) and resulting in the creation of significant additional provisions; or
- Faced diminished loss-absorption capacity on the back of faster-than-planned credit growth or additional substantial provisioning, resulting in our forecast of a Standard & Poor's risk-adjusted capital ratio reducing to below 7%.
We do not expect a positive rating action on Eximbank Kazakhstan over the next 12 months due to our views of the negative trend in economic and industry risks in the Kazakh banking system and the bank's modest competitive position.
Комментарии