EXPERT INTERVIEW: problem of Kazakhstan banks` loan portfolio quality to worsen

/IRBIS, Alima Kopbaeva, Dinara Mukasheva, July 8, 2008/ - July 8 director of international rating agency Standard & Poor's (S&P) Ekaterina Trofimova announced that the "stake" of "loans, subjected to stress" makes 15-20% of total loan portfolio of Kazakhstan bank sector". S&P considers that quality assets of Kazakhstan commercial banks may worsen in case of further consumption decreasing and economic activity in the country. Majority experts, participated in specialized interview of IAFM IRBIS agreed with S&P estimation. Experts submit difficult situation in mentioned aspect. Among main factors, which influence Kazakhstan banks` quality assets, analysts single out problems on real estate market (as the main sector of Kazakhstan crediting), total decreasing of business activity and inflation growth. Experts` estimations relative to acute amount of "critic" stake of loans are different. Bakhtiyar Bakas uly, analyst of Vernyi Capital JSC expresses anxieties on further worsening of Kazakhstan banks` loan portfolio quality. According to Bakas uly the stake of assets, which, according to S&P estimation, subjected to stress for the current moment (15-20%) has increased and in future may reach 30-40%. Ruslan Bulikpaev, analyst of Centras Securities JSC also thinks that the stake of such loans is more than S&P suggests: "We not exclude that now there is unjust restructuring of loan portfolios in many banks with the aims to reduce the stake of hopeless loans". Evgeniy Popov, the director of asset management department of Almex Asset Management JSC, in its turn has difficulties in telling what stake of bank's loan portfolio "subjected to stress" at the current moment. He considers that increment of problem sin construction sector will lead to worsening situation with small and medium business subjects, which are also the considerable stake of loaners in Kazakhstan commercial banks. "At that, in case of crisis situation stability, the stake of critic assets will make not more than 15%" - he concludes. According to Danay Sarypbekov (Citibank Kazakhstan JSC), considering the fact that real estate market was growing for long time, we may expect either sharp and deep or shallow, but long term decline on this market. Mr. Sarypbekov expects that the stake of problem loans will be increasing. However, the certain part of analysts considers that the rate of problems, announced by S&P, is exaggerated. Considerable part of "critic" loans doesn't express the urgent danger for financial stability of Kazakhstan banks due to forming adequate provision volumes for covering possible loan risks. Bolatbek Moldagaliev, the head of financial market and indicators of BTA Bank forecast office is on such position; he thinks that STB has already formed the necessary provision volume for covering losses on its loan portfolio. Mr. Moldagaliev, proving its point of view, says that in accordance with Rules of assets, conditional liabilities classification and provision (reserves) creating against them, loans, classified as doubtful of 2, 4 and 5 th category this or that have overdue debt either on main debt or announced interest (16.4% from total loan portfolio). Also considering doubtful loans of 3rd category, on which there is no delinquency, but there are some negative indicators on criteria range (restructuring of loan, low quality of provision and others), the stake of such loans will make 23% from total loan portfolio. At that, Mr. Moldagaliev thinks that quality of risk-management in domestic banks and estimation of loan risks are on proper level: "We think that most of major and medium STB practice rather conservative policy while estimating loan risks and even reinsurance, forming considerable reserves for losses covering, what under current circumstances is justified. Considering that the stake of overdue loans in STB total loan portfolio became stable on one level during recent months (2%), we think that further considerable worsening of loan portfolio quality is unlikely". Information is presented within the frames of weekly expert interview on acute questions of Kazakhstan and international stock market development, made by IAFM IRBIS. Analysts of Almex Asset Management JSC, BTA Bank JSC, Vernyi Capital JSC, Centras Securities JSC, Citibank Kazakhstan JSC, VISOR Capital JSC participated in interview. IAFM IRBIS expresses its gratitude for participation in this project. For detailed information please contact us Tel.: (727) 237 53 41 [2008-07-17]