Fitch: Higher margins for Kazakh banks

Fitch Ratings said that detailed 2007 statutory results of the Kazakh banking sector, which were published last week, have confirmed the trend to higher interest margins indicated earlier in banks' third quarter 2007 IFRS accounts.

However, the results also show higher loan impairment charges, driven both by increased numbers of non-performing loans and changes in local provisioning criteria, which have cancelled out the effect of higher margins on bottom-line results.

Fitch said increased reserves provide more of a cushion to absorb potential future increases in loan impairment, but asset quality deterioration remains the key near-term risk for Kazakh banks and will be the key driver of banks' performance in 2008.

Sector liquidity should remain manageable, the agency said, unless the current limited access to wholesale funding is compounded by a severe run on deposits, a scenario which is not regarded as likely.

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