Fitch Ratings Affirms Kazakhstan's Halyk savings bank of Kazakhstan JSC at 'BB+'; Positive Outlook

/Fitch Ratings, January 18, 07, KASE's heading/ - Fitch Ratings has today affirmed Kazakhstan-based Halyk Bank's ("Halyk") ratings at foreign currency Issuer Default 'BB+', Short-term foreign currency 'B', local currency Issuer Default 'BBB-' (BBB minus), Short-term local currency 'F3', Individual 'C/D' and Support '3'. The Outlook on the foreign currency Issuer Default rating ("IDR") remains Positive, and that on the local currency IDR Stable. "Halyk's standalone financial strength has improved sufficiently to warrant a BB+' IDR without considering possible support from the Kazakhstani authorities," says Dmitri Angarov, Associate Director of Fitch's Financial Institutions Group in Moscow. "The improvement has been driven by the bank's continued strong profitability track record, reasonable asset quality and adequate capital adequacy levels despite continuous rapid asset growth, as well as increased capital flexibility following a recently completed IPO". Halyk's broad domestic franchise, reasonable liquidity and low market risk appetite are also positives for the bank's credit profile. However, risks are inherent in the bank's rapid credit growth, notable, albeit declining, business concentrations and certain weaknesses in the operating environment. The Positive Outlook on Halyk's IDR continues to reflect that on the IDRs of the Kazakhstan sovereign, since a sovereign upgrade would be likely to raise the support floor for the bank. Likewise, the bank's local currency IDR continues to be driven by potential support being forthcoming from the Kazakhstani authorities. Fitch in addition notes (see also announcement of 22 December 2006) that, given its current view of the authorities' propensity to provide support to Halyk, upward potential for the support floor of its IDRs is capped at 'BBB-' (BBB minus). Further profitable franchise growth, reduction in concentration levels and improvements in corporate governance could be positive for Halyk's standalone creditworthiness. Any significant deterioration in asset quality driving reductions in capitalization levels or a failure to manage the credit and operational risks associated with rapid growth, notably in retail lending, would be negatives and could give rise to downward pressure on the Individual rating. Halyk retains a leading position on the Kazakhstani market in terms of its retail customer base and deposits and branch network. At end-9M06, the bank ranked third with a 12% share of system assets; however, this is decreasing gradually due to the more aggressive growth of medium-sized players. Following the December 2006 IPO, institutional and individual investors will hold a 29% stake in the bank. Almex Group, beneficially owned by the daughter and son-in-law of President Nursultan Nazarbayev, will retain a majority (64%) stake. Contacts: Dmitri Angarov, James Watson, Moscow, Tel: +7 495 956 9901 Media Relations: Julian Dennison, London, Tel: +44 20 7862 4080; Alla Izmailova, Moscow, Tel: +7 495 956 9903 Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policaies and procedures are also available from the 'Code of Conduct' section of this site. [2007-01-18]