INTERVEW - Stability of Kazakhstan banks` activity to come in 2010 - S&P

/REUTERS, Almaty, October 1, 08, Olzhas Auezov/ - Stability of Kazakhstan banks` activity, suffered from global liquidity crisis, will come not early than 2010, the vice-director of rating Paris office group of Standard & Poor's Ekaterina Trofimova said. "According to our estimations, stability and activation of banks` activity will come not early than 2010 and the key factor is certainly stability of foreign markets" - she said. According to Trofimova, banks` assets quality deterioration is going on, though not as actively as at the end of 2007 and beginning of 2008. "So far we see no sustainable fundamental conditions for this tendency breakdown and taking financing conditions complication into account, we expect this tendency to continue, though the rates of growth (bad loans) won't be high" - Trofimova considers. According to her, the more we pull problems in banking sector, the more problems will have actual economy. At the same time, currently the level of banks` yield before reserves forming is rather high, "what allow accumulating reserves". "However, considering deterioration of financing conditions, we expect the nearest 12 months to show downward trend on yields, what jointly with new reserves forming will exert pressure on profit" - she said. For cardinal change, according to Trofimova, we need new capital in-flow. "However we understand that it is hard to realize and expensive decision and shareholder often haven't free assets for it" - she said. NEAR-TERM OUTLOOK "Notwithstanding some positive tendencies, in particular decreasing problems with liquidity, its early to speak about stable situation in banking sphere" - Trofimova thinks. For actual market stability we need final breakdown on real estate market, resuming of business activity in sectors, not linked with raw materials production and decreasing of debt burden of the companies, what in total ill decrease burden on banks` assets quality. Besides, According to Trofimova, new wave of world financial crisis complicates banks short-term abilities of foreign debt refinancing. "We expect the further 12 months to be more difficult from the viewpoint of refinancing and forecast the more net-flow-out of capital than in the last 12 months ($5 bn.)" - she said. Kazakhstan banks refinanced the most part of its obligations on world markets, but loans became more short-term, small and expensive, the chairman of S&P commented. The second major source of funding was deposits of population and companies. "Clients` deposits will remain the major source of assets growing for banks during nearest months" - Trofimova considers. "The most evident result of new wave of world financial crisis will become the more growing value of borrowings and reducing of volumes of accessible financing" - she said. Currently, according to Trofimova, markets are so ineffective that even companies and banks of "blue chips" category have difficulties in financing. At the same time, changing of structure of banks` foreign obligations increases the burden on their short-term payments. "But we still consider that internal reserve of liquidity, especially possibility of extraordinary support of the National bank, will allow banks to manage with foreign debts payments at least during further 12 months" - Trofimova said. "We expect no bankruptcy of banks in nearest prospect because of total support of the government" she added. Kazakhstan till 2008 plans to create $6 bn. stress assets fund, which plans to direct to redemption of bad loans, at that counts to restrain government share at $1 bn. "But big flow-out of assets will limit the growth of banks` credit portfolios and business activity in economy" - Trofimova considers. MOODS "Now Kazakhstan banks and regulators actually have more confidence that situation is under control" - Trofimova said. "Experience is expensive and threatened men live long" - she added. However, the question of bad credits remains without cardinal decisions, what shifts the problem in latent condition. "There is an opinion, that Kazakhstan is inclined to Japanese model of way out in banking sector - soft way of gradual deciding of structural problems, what helps to avoid social shock, but at the same time restrain tense period in banking sector and slowdown its development" she said. [2008-10-01]