Link to Fitch Ratings' Report: Kazakh Banks Datawatch 3Q16
Fitch Ratings-Moscow/London-05 December 2016: Fitch Ratings has published its Kazakh Banks Datawatch report for 3Q16, consisting of key data from banks' regulatory financial statements and disclosures sourced primarily from the National Bank of Kazakhstan (NBK) and the Kazakhstan Stock Exchange. The 3Q16 report consists of data in pdf and xlsx formats, charts and Fitch commentary, and covers 28 of the sector's 34 banks, comprising 99% of system assets.
The NBK has been absorbing substantial liquidity inflows to the sector through issuance of notes on terms attractive for banks. Total deposits grew by 5% in 3Q16 and the volume of outstanding NBK notes reached KZT2.6trn, 10% of sector assets, at end-3Q16.
However, the liquidity surplus has not been eliminated entirely, leaving some space for loan growth: gross loans grew by 2% in 3Q16. Non-performing loans fell to 9.8% at end-3Q16 from 10.2% at end-2Q16 due to new loan originations and write-offs. Regulatory forbearance with respect to restructured/distressed and foreign-currency loans also remains in place, as NBK postponed the planned review of sector asset quality until late 2017.
Performance remained stable despite the inflows of more expensive tenge deposits. Annualised return on average equity of 17.2% in 3Q16, little changed from 17.5% in 2Q16. The net interest margin contracted to 4.8% from 5.3% while earnings on NBK notes have prevented a more significant margin contraction.
Regulatory capitalisation metrics slightly improved due to earnings retention and limited loan growth. The sector Tier I capital ratio improved to 13.7% and the total ratio to 16.2% at end-3Q16. However, the planned increase in regulatory capital ratios and buffers from 2017 may be challenging for Kazkommertsbank (KKB), Bank RBK and Qazaq banki.
Liquidity cushions continued to build up, with a few exceptions, helped by deposit growth and the expiration of NBK swap contracts. Sector liquid assets were equal to 35% of liabilities at end-3Q16, up from 33% at end-2Q16, and KKB improved its liquidity position to 20% of liabilities from 13% due to a reversal of deposit flows in 3Q16.
Fitch understands that a potential merger between Halyk Bank and KKB has not been discussed at management level. However, Fitch views continued consolidation of the Kazakh banking sector as possible. Fitch also believes that state support to privately owned banks in Kazakhstan that would avert losses for senior creditors in case of bank failures remains unreliable despite recent statements by senior country officials.
The 3Q16 report is available at www.fitchratings.com
or by clicking the link above.
Source: Fitch Ratings