Fitch Ratings changes forecast of ratings of seven Kazakhstan banks to "Negative"

/Fitch Ratings, London/Moscow, December 17, 07/ - Fitch Ratings has today changed the Outlooks for the Long-term Issuer Default Ratings (IDRs) of seven Kazakhstani banks (listed below) to Negative from Stable. This action follows the change in Outlooks today on Kazakhstan's 'BBB' Long- term foreign currency IDR and 'BBB+' Long-term local currency IDR to Negative from Stable (see separate announcement on www.fitchratings.com), and reflects the fact that these entities' Long-term IDRs are driven by potential sovereign support. At the same time, Fitch has affirmed the Long-term IDRs of Temirbank (Temir) and Bank Caspian (Caspian) with Stable Outlooks (listed below). The Long-term IDRs of these banks are not directly dependent on potential sovereign support. Fitch has also reviewed, and affirmed, the Individual ratings of four banks: Alliance Bank (Alliance), ATF Bank (ATF), Bank CenterCredit (BCC) and Caspian. This follows the recent affirmations of the Individual ratings of Halyk Bank (Halyk), Kazakommertsbank (KKB), Bank TuranAlem (BTA) and Temir. These Individual ratings already factor in Fitch's expectation of some asset quality deterioration as loan books season, economic growth slows and the construction/real estate sector experiences lower liquidity and reduced real estate prices. However, if the credit environment deteriorates more markedly and loan losses are more substantial, banks' Individual ratings could be downgraded. A full list of rating actions is listed below. The Negative Outlooks on the Long-term IDRs of six of the seven banks reflect the increased likelihood of deterioration in the ability of the Kazakhstani authorities to provide support to them, as reflected in the change in Outlooks for the sovereign ratings. The Development Bank of Kazakhstan's (DBK) Long-term IDRs reflect Fitch's view of the very strong propensity of the Kazakhstani authorities to provide support to the bank in case of need, based on its status and state ownership. The Long-term IDRs of BTA, KKB and Halyk reflect Fitch's view of the strong propensity of the Kazakhstani authorities to provide support to these banks in case of need, based on their importance to the country's banking system and considerable market shares, in particular in retail deposits. The Long-term IDRs of Alliance and BCC reflect Fitch's view of the moderate propensity of the Kazakhstani authorities to provide support to these banks in case of need, based on their significant market shares. The Negative Outlook for ATF's Long-term IDR reflects the increased likelihood of a downgrade of Kazakhstan's 'BBB+' Country Ceiling, which reflects transfer and convertibility risks and caps the Long-term IDRs of entities from the country. The Stable Outlook for Temir's Long-term IDR reflects the fact that that this rating is driven by Fitch's view of the stand-alone financial strength of its majority-owner, BTA, rather than BTA's support-driven Long-term IDR. Hence, even if BTA were to be downgraded by one notch together with the sovereign, Temir's ratings would likely be affirmed. The affirmation of Caspian's ratings, as well as the Stable Outlook for the Long-term IDR, reflect the bank's robust bottom-line performance, low business concentrations and strong capitalisation. Construction exposures and foreign currency lending are also moderate by Kazakh market standards. However, the ratings also consider Caspian's high reliance on foreign funding and continuous rapid loan book growth, which gives rise to credit and operational risks, and the currently more challenging credit environment. Downside pressure on the ratings could result from asset quality deterioration or any significant customer deposit outflows. Alliance's Individual rating reflects the high credit risks associated with Alliance's recent very rapid growth, increasing loan impairment levels in H207 as the portfolio seasons (although these are so far adequately compensated by loan rates), high dependence on foreign funding, recent volatility in customer deposits and the more challenging credit environment. However, it also considers the bank's currently strong profitability, adequate capitalisation and still reasonable liquidity. A further marked deterioration in asset quality or greater funding instability would put downward pressure on Alliance's Individual rating. ATF's Individual rating reflects high borrower concentrations and exposure to the construction/real estate sector, significant reliance on foreign funding, currently moderate capitalisation, modest recent performance and the more challenging credit environment. However, it also takes into account likely improvements in risk management and funding access following the bank's recent acquisition by Unicredito Italiano (UCI, rated 'A+'/Outlook Positive) and UCI's commitment to inject some USD300m of capital in December 2007-Q108. The main potential source of downward pressure on ATF's Individual rating would be significant loan losses resulting from the high construction/real estate exposures. Upward pressure on the rating is currently limited, given the credit environment and current performance. BCC's Individual rating reflects high loan book concentrations, considerable reliance on foreign funding, modest capitalisation and the more challenging credit environment. However, it also takes account of the bank's robust profitability, reasonable liquidity and low reported loan impairment to date. Downward pressure on BCC's Individual rating could result if loan quality deteriorates, in particular should capitalisation not be supported in a timely fashion by shareholders. Upside potential for the rating is limited at present, given the credit environment and capital levels. The ratings are as follows: ATF Bank: Long-term IDR: affirmed at 'BBB+'; Outlook changed to Negative from Stable Short-term IDR: affirmed at 'F2' Support rating: affirmed at '2' Individual rating: affirmed at 'D' Development Bank of Kazakhstan (DBK): Long-term foreign currency IDR: affirmed at 'BBB'; Outlook changed to Negative from Stable Long-term local currency IDR: affirmed at 'BBB+'; Outlook changed to Negative from Stable Short-term foreign currency IDR: affirmed at 'F3' Short-term local currency IDR: affirmed at 'F2' Support rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB' Bank TuranAlem, Kazkommertsbank, Halyk Bank: Long-term foreign currency IDR: affirmed at 'BB+'; Outlook changed to Negative from Stable Long-term local currency IDR: affirmed at 'BBB-' (BBB minus); Outlook changed to Negative from Stable Short-term foreign currency IDR: affirmed at 'B' Short-term local currency IDR: affirmed at 'F3' Support rating: affirmed at '3' Individual rating: affirmed at 'C/D' Support Rating Floor: affirmed at 'BB+' Alliance Bank, Bank CenterCredit: Long-term IDR: affirmed at 'BB-' (BB minus); Outlook changed to Negative from Stable Short-term IDR: affirmed at 'B' Support rating: affirmed at '3', Individual rating: affirmed at 'D' Support Rating Floor: affirmed at 'BB-' (BB minus) Temirbank: Long-term IDR: affirmed at 'BB-' (BB minus); Outlook remains Stable Short-term IDR: affirmed at 'B' Support rating: affirmed at '3' Individual rating: affirmed at: 'D/E' Bank Caspian: Long-term IDR: affirmed at 'B+'; Outlook remains Stable Short-term IDR: affirmed at 'B' Support rating: affirmed at '5' Individual rating: affirmed at 'D' Support Rating Floor: affirmed at 'No Floor' Contacts: James Wotson, Alexey Kechko, Dmitriy Angarov, Moscow, tel.: +7 495 956 9901 Contacts for mass media: Alla Izmaylova, Moscow, tel.: + 7 495 956 9901/9903, alla.izmailova@fitchratings.com [2007-12-19]