Fitch Ratings-Moscow/London-15 March 2018: This announcement corrects the version published on 14 March to amend the text of the third paragraph.
Fitch Ratings has published its Kazakh Banks Datawatch for 4Q17, 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 4Q17 report consists of data in pdf and xlsx formats, charts and Fitch commentary, and covers 29 of the country's 32 banks, comprising 99.8% of system assets.
The banking sector financial rehabilitation continued in 4Q17, with Kazkommertsbank (KKB) receiving KZT65 billion of new equity from Almex Group, the majority shareholder of Halyk Bank of Kazakhstan. In addition, Eurasian Bank, Tsesnabank, ATF Bank and Bank Centercredit each received long-term and low-cost subordinated loans from the National Bank of Kazakhstan (NBK), totalling KZT410 billion, booking as a result significant fair value gains, which were partly utilised for reserve creation.
However, in 4Q17 the smaller Bank RBK failed, defaulting on deposits. RBK's solvency and liquidity were subsequently restored through a mixture of debt restructuring and capital injections from NBK and its shareholders. Qazaq Banki reportedly delayed customer payments in 1Q18 and is considering plans to boost its solvency.
Equity injections at KKB and RBK were the primary reasons for the sector core Tier 1 capital ratio improving to 17% of risk-weighted assets at end-2017 from 15% at end-3Q17, while the fair value gains at the supported banks were partly offset by significant loan impairment charges. The total capital ratio increased more significantly, to 22% from 16%, partly due to banks including subordinated loans received from NBK into Tier 2 capital at nominal rather than fair value.
The NBK plans that supported banks will utilise new capital for additional provisions and via regulatory capital deductions by end-2022. However, Fitch believes that the capital support provided may still be insufficient to cover all of the banks' provisioning needs.
NPLs fell to 12% of sector loans at end-2017 from 16% at end-3Q17, mainly as a result of loan write-offs at KKB. Excluding KKB, NPLs fell to 8% from 12%, although banks continue to delay recognition of asset-quality problems, with potentially risky loans remaining high at many lenders.
The annualised return on average sector equity was 15% in 4Q17, compared with an annualised loss of 44% of average equity in 3Q17. Performance in 4Q17 was helped to a degree by the fair-value gains on the NBK subordinated debt injections, although these were partly offset by impairment charges.
Sector loans fell by 5% and deposits fell by 3% in 4Q17 in nominal terms. Adjusting for exchange-rate changes and non-recurring items, corporate non-repo loans grew by 5% and retail loans added a more modest 2%, supported by lower interest rates. At the same time, non-retail customer funding in adjusted terms fell by 2.5% and retail deposits grew by just 1.5%. Liquidity positions continued to strengthen at most banks as liquid assets were equal to a high 44% of sector liabilities at end-2017 (end-3Q17: 42%).
The Datawatch is available at www.fitchratings.com
or by clicking the link above.
Source: Fitch Ratings