TODAY.AZ / World news

Fitch: Kazakh bank will have to incur additional impairment losses

26 July 2018 [17:54] - TODAY.AZ

By  Trend


Fitch Ratings has assigned Kazakhstan's ForteBank JSC (FB) the Long-Term Issuer Default Ratings (IDRs) of 'B' with a Stable Outlook.

The ratings of FB are driven by its intrinsic strength as expressed by its Viability Rating (VR) of 'b', said a message from Fitch.

The ratings reflect FB's exposure to the cyclical Kazakh economic environment and a substantial amount of legacy problem loans, which may require additional provisioning. The ratings also capture FB's reasonable domestic franchise, particularly in retail business, its adequate performance and capital position as well as a solid funding and liquidity profile.

Fitch estimates that at end-2017 the total amount of FB's high-risk exposures, net of loan loss allowances, equaled to 265 billion tenges or 1.4x Fitch core capital (FCC). This included: NPLs (non-performing loans, 90 days overdue), of 125 billion tenges or 68 percent of FCC. These are predominantly foreign-currency (FC)-denominated retail loans secured with real estate (hence moderate recoveries are possible); Restructured loans of 72 billion tenges, or 39 percent of FCC; and Non-core assets (mostly foreclosed real estate) of 68 billion tenges, or 37 percent of FCC.

Fitch believes that FB will have to incur additional impairment losses related to at least some of these assets. Most of the NPLs and other problem exposure were originated before October 2014; since then FB's asset quality has been gradually improving as suggested by net recovery of NPLs (adjusted for write-offs) of 2 percent and 3 percent of average performing loans in 2017 and 2016, respectively. Further moderate recoveries are likely, particularly in light of FB's plans to participate in the sector-wide FC-mortgage refinancing program launched by the National Bank of Kazakhstan.

FB is mainly customer-funded (78 percent of total liabilities at end-2017), although typically for the market, the deposit concentrations are quite high, with the 20-largest customers accounting for 39 percent of total liabilities. Three out of the four-largest account balances (26% of total liabilities) relate to state and quasi-state entities, including large 267 billion Samruk Kazyna (BBB/Stable) deposits, most of which was placed as part of the bank's recapitalisation during a merger with Alliance Bank and Temirbank in late 2014. Repayments of FB's wholesale funding (21 percent of total liabilities) are limited until 2022. FB has a solid liquidity buffer, at around 40 percent of total liabilities at end-2017.

URL: http://www.today.az/news/regions/172309.html

Print version

Views: 966

Connect with us. Get latest news and updates.

Recommend news to friend

  • Your name:
  • Your e-mail:
  • Friend's name:
  • Friend's e-mail: