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S&P Global Ratings revises outlook on Kazakh ForteBank to positive

09 November 2017 [12:56] - TODAY.AZ

By  Trend


S&P Global Ratings has revised its outlook on ForteBank JSC to positive from stable and affirmed its 'B/B' long- and short-term issuer credit ratings.

At the same time, S&P Global Ratings raised its Kazakhstan national scale rating on the bank to 'kzBB+' from 'kzBB'.

"The rating actions reflect our view that ForteBank has made progress in strengthening its market share, generating new good-quality business, and recovering legacy problem loans," reads a message of the agency.

"The bank's position in the Kazakh banking system has strengthened; it is now the fifth-largest bank in terms of total assets. ForteBank also has a more balanced mix of corporate, small and midsize enterprise, and retail customers on both sides of its balance sheet compared to other medium-sized peers, and good sector and single-name diversification in its loan portfolio, which is positive for risk and returns diversification. The bank is mainly funded by customer deposits with a good balance of individuals and corporations, including government-related entities."

S&P Global Ratings further stressed that the bank's creditworthiness could be further boosted if it sustains or augments its market share, maintains a diversified customer profile, and further improves its profitability metrics over the next 12-18 months.

"We continue to view ForteBank's capital and earnings position as moderate. This assessment reflects our expectation that our risk-adjusted capital (RAC) ratio for ForteBank could decrease to about 6.3% by year-end 2018 compared to 6.5% at year-end 2016 in view of increased provisioning," reads the message.

"ForteBank's asset quality is weaker than peers', in our view, reflecting its higher level of nonperforming loans (NPLs; loans over 90 days overdue) and lower provisioning rate on both legacy and new NPLs. Overall, the bank's NPLs accounted for 25.8% of total loans at mid-2017, which is one of the highest ratios in Kazakhstan. Of NPLs, 83% related to loans disbursed before October 2014. NPLs on new loan production over the past three years were only 5.8% as of mid-2017, which compares favorably to peers. The legacy portfolio reported a provisioning coverage of NPLs of 28% at mid-2017, which is insufficient in our opinion. We note, however, that NPLs that were not covered by provisions were fully covered by collateral."

S&P Global Ratings consider ForteBank's funding to be average, reflecting the diversified profile of its funding base, strong positive dynamics of the deposit base over the past three years, and a stable funding ratio of 150% as of mid-2017.

It added that the bank's liquidity is sufficient and well-managed.

The positive outlook also reflects expectation that the bank's track record of generating new business, augmenting its market share, and recovering problem loans will continue over the next 12 months.

URL: http://www.today.az/news/regions/166652.html

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