S&P revised outlook on KazInvestBank (KIB) to 'Negative'; lowered the Kazakhstan national scale rating to 'kzBB'

/Standard & Poor's, Frankfurt, June 23, 08/ - Standard & Poor's Ratings Services said today it revised its outlook on KazInvestBank (KIB) to negative from stable. At the same time, we affirmed the 'B' long-term and 'B' short- term counterparty credit ratings on the bank. The Kazakhstan national scale rating was lowered to 'kzBB' from 'kzBB+'. "The outlook revision and the Kazakhstan national scale downgrade reflect the increased pressure on the bank's asset quality, in particular, its exposure to the troubled construction sector," said Standard & Poor's credit analyst Annette Ess. The ratings reflect the challenges KIB faces in maintaining asset quality and liquidity during the ongoing banking sector turbulence in the risky operating environment of the Republic of Kazakhstan (foreign currency BBB- /Negative/A-3, local currency BBB/Negative/A-3). The bank's rapid growth, high lending concentrations, and its small domestic franchise have accentuated these difficulties. However, KIB's niche strategy, its focus on profitability, transparent and supportive shareholders, good management team, and adequate risk management partly mitigate these concerns. KIB is a small Kazakh bank with a market share of less than 1% and total assets of Kazakhstani tenge 83.9 billion ($696 million) at the end of May 2008. We have not factored in extraordinary state support into our ratings assessment because we don't regard KIB as a systemically important bank to the Kazakh economy. Although KIB benefits from business connections, capital support, and solid relationships with its shareholders (among them, a group of wealthy Kazakh businessmen, the European Bank for Reconstruction and Development, and Citi Venture Capital International), we give no rating uplift for support from the bank's owners because we are uncertain about their ability and willingness to provide support if needed. The bank's fast growth over the past four years, when loans increased tenfold from very low levels, was above the industry average. Due to its limited customer base, KIB has high individual lending concentrations. The top-20 loans accounted for a very high 310% of adjusted total equity at end- March 2008. "KIB is substantially exposed to the construction sector, which represented 13.9% of the bank's total loans at end-May 2008," said Ms. Ess. "This figure is below the market average. However, the increasing pressure on asset quality threatens the bank's credit fundamentals." For detailed information please contact to: Annette Ess, CFA, London, (44) 20-7176-7206; annette_ess@standardandpoors.com Ekaterina Trofimova, Paris, (33) 1-4420-6786; ekaterina_trofimova@standardandpoors.com [2008-06-24]