Moody’s acts on five Kazakh banks

Moody’s Investors Service said it took rating actions on five Kazakh financial institutions, including downgrading the baseline credit assessments and long-term senior unsecured debt and deposit ratings of ATF Bank, Kazkommertsbank and Eurasian Bank.

The agency also said it downgraded the baseline credit assessment of SB Sberbank JSC, affirmed its deposit ratings and changed its outlook to negative from stable.

In addition, Moody’s affirmed and changed the outlook to negative from stable on Halyk Savings Bank of Kazakhstan’s long-term debt and deposit ratings.

The rating actions were due to the banks’ high exposure to foreign-currency lending and limited buffer to absorb the expected deterioration in their asset quality, the agency said.

Moody’s said the actions also follow the recent and pronounced depreciation of the country’s currency, the tenge.

Many of the banks have foreign-currency loans to corporations and small- and mid-sized enterprises that do not generate earnings in foreign currencies or that have not hedged their exposure, the agency said.

The currency depreciation will have an impact on the borrowers’ ability to service their foreign-currency loans, Moody’s said, and will likely affect asset quality.

The downgrades of Kazkommertsbank’s baseline credit assessment to Caa2 from Caa1, senior unsecured debt ratings to Caa2 from Caa1 and long-term deposit ratings to B3 from B2 reflect the bank’s very high level of problem assets that are only partially covered by loan loss reserves, the agency said.

The change in the outlook on Halyk Savings Bank reflects an expectation that the recent tenge depreciation and adverse market conditions may pressure Halyk’s relatively strong financial metrics, Moody’s said.

The downgrades of ATF Bank’s baseline credit assessment to Caa3 from Caa2, senior unsecured debt ratings to Caa3 from Caa2 and long-term deposit ratings to Caa2 from Caa1 reflect the bank’s high exposure to foreign-currency lending, very high level of non-performing loans and weak buffers to absorb the expected increase in loan loss reserves and risk-weighted assets, the agency said.

The change in outlook on SB Sberbank’s deposit ratings is driven by the downgrade of the bank’s standalone baseline credit assessment to B3 from B2 and current negative outlook on the ratings of the parent, Russian Sberbank, Moody’s said. The bank’s standalone credit profile is negatively pressured by adverse market conditions, including a surge in problem loans, low loan loss reserves coverage and expectations for higher credit losses, the agency said.

The downgrades of Eurasian Bank’s baseline credit assessment to Caa1 from B2, senior unsecured debt ratings to Caa1 from B2 and long-term deposit ratings to Caa1 from B2 reflect the severe and rapid deterioration of the bank’s loan book, as evidenced by the sharp rise in overdue loans to 22.1% at the end of June 2015, from 14.7% as of December 2014, Moody’s said.

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