Fitch: Kazakhstan Mortgage BB

Fitch Ratings said it assigned Kazakhstan Mortgage Co. a BB long-term foreign-currency rating, a BB+ long-term local-currency rating and a B short-term foreign-currency rating. The outlooks for the long-term ratings are positive, and the agency said the rating action also affects the outstanding bonds of the company.

Kazakhstan Mortgage's ratings reflect the company's ownership by the government, its strategic importance in the area of social housing and hence potential government support, Fitch said. The positive outlooks reflect the sovereign rating and expected capital injection from the state.

The costs of Kazakhstan Mortgage's financing have increased considerably since 2008 due to distress in the financial markets, Fitch said. The company's average annual effective financing cost exceeded 11% in 2011, which outran the average yield on Kazakhstan Mortgage's mortgage loan portfolio of 9%, the agency said. This led to negative net interest income and KZT 6.2 billion of losses in 2011. Fitch expects that budgeted capital injections from the government will decrease financing costs and gradually revive Kazakhstan Mortgage's profitability in the medium term.

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