Moody's reviews six Kazakh financial institutions for possible downgrade
08.04.10 17:05
The rating actions follow the earlier sovereign rating action on Kazakhstan
/Moody's Investors Service, Moscow, April 8, 10/ - Moody's Investors Service
has today placed on review for possible downgrade the ratings of six Kazakh
financial institutions, four of which are financial Government-Related Issuers
(GRIs) - namely Development Bank of Kazakhstan, Kazakhstan Mortgage Company,
and KazAgroFinance, Agrarian Credit Corporation. The two remaining institutions
are House Construction Savings Bank of Kazakhstan - a fully government-owned
bank, and DBK Leasing - a leasing company. The rating action follows the change
in outlook on Kazakhstan's sovereign rating to stable from negative and the
lowering of the country's foreign currency bond ceiling by one notch to Baa2.
The review for possible downgrade was prompted by "the uncertainty about the
authorities' support for banks as well as several government-related
institutions", which, according to Moody's sovereign press release on 5 April
2010, "justifies a more conservative stance on support assumptions".
"In the view of the government's attempts to limit large contingent sovereign
liabilities, the rating agency will reassess the level of the government support
incorporated into the ratings of four Kazakh GRIs and into the ratings of House
Construction Savings Bank of Kazakhstan, a fully government-owned bank,"
says Mr. Semyon Isakov, an Assistant Vice-President and Moody's lead analyst
for a number of Kazakh banks and GRIs. "The issuer ratings of DBK-leasing, a
100% subsidiary of the Development Bank of Kazakhstan, were also placed on
review for possible downgrade as the ratings currently benefit from a high level
of parental support," adds Mr. Isakov.
As part of the review, Moody's will also consider the importance of the policy
role that each of these institutions play within the country, as this factor can
influence the government's willingness to provide support. The agency notes that
the affected financial institutions, including financial GRIs, serve important
policy roles within the Kazakh financial sphere. However, the strategic importance
of these entities for the government may not be as vital as GRIs operating in the
oil and gas industry, which is the main engine of economic growth for the country.
The ratings of the entities affected by the review currently benefit from three-
to five- notches of support from their Baseline Credit Assessments (BCAs). Moody's
notes that while the review may lead to a reduction in the level of credit
enhancement stemming from government support, these ratings will likely
continue to benefit from significant uplift from their BCAs.
The rating actions taken by Moody's in respect of these financial institutions are
as follows:
Development Bank of Kazakhstan: The Baa2 long-term foreign currency issuer
and debt ratings were placed on review for possible downgrade; these ratings
benefit from a very high probability of government support that results in a four-
notch uplift from the bank's BCA of 11-13.
Kazakhstan Mortgage Company: The Ba2 long-term local currency issuer rating
was placed on review for possible downgrade. This rating benefits from a strong
probability of government support that results in a three-notch uplift from the
company's BCA of 15.
KazAgroFinance: The Ba1 long-term local and foreign currency issuer ratings
were placed on review for possible downgrade; these ratings benefit from a high
probability of government support that results in a four-notch uplift from the
company's BCA of 15.
Agrarian Credit Corporation: The Ba1 long-term local and foreign currency issuer
ratings were placed on review for possible downgrade; these ratings benefit from
a high probability of government support that results in a four-notch uplift from
the company's BCA of 15.
House Construction Savings Bank of Kazakhstan: The Baa3/Prime-3 long-term
and short-term local currency deposit rating were placed on review for possible
downgrade; these ratings benefit from a very high probability of government
support that results in a five-notch uplift from the company's BCA of B2. The
bank's BFSR of E+ is unchanged with a stable outlook.
DBK-Leasing: The Ba3 long-term local and foreign currency issuer ratings were
placed on review for possible downgrade; these ratings benefit from a high
probability of parental support that results in a three-notch uplift from the
company's BCA of B3.
Moody's also notes that ratings of all other Moody's-rated Kazakh financial
institutions are not affected by the sovereign rating actions as these ratings
either do not benefit from government support, or the level of the government
support incorporated in the ratings of these financial institutions is low or
moderate, and therefore the change of the outlook on the sovereign ratings has no
impact on these banks' supported ratings.
PREVIOUS RATING ACTION AND PRINCIPAL METHODOLOGIES
Moody's previous rating action on Development Bank of Kazakhstan, Kazakhstan
Mortgage Company, KazAgroFinance, Agrarian Credit Corporation and House
Construction Savings Bank of Kazakhstan was on 10 July 2009, when the rating
agency confirmed deposit rating of House Construction Savings Bank of
Kazakhstan and issuer rating of Development Bank of Kazakhstan, and
downgraded issuer ratings of Kazakhstan Mortgage Company, Agrarian Credit
Corporation and KazAgroFinance. That rating action followed the review of their
ratings that was initiated on 22 May 2009 following the default of Astana-Finance,
another Kazakh GRI.
Moody's previous rating action on DBK-leasing was on 24 Feb 2009, when the
rating agency lowered BCA to 16 from 15 and affirmed Ba3 local currency issuer
rating of the company.
The principal methodologies used in rating of Development Bank of Kazakhstan,
KazAgroFinance, Agrarian Credit Corporation and Kazakhstan Mortgage
Company are "The Application of Joint-Default Analysis to Government Related
Issuers", April 2005.
The principal methodologies used in rating House Construction Savings Bank of
Kazakhstan were "Bank Financial Strength Ratings: Global Methodology",
February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank
Ratings: A Refined Methodology", March 2007, which can be found at
www.moodys.com in the Rating Methodologies sub-directory under the Research
& Ratings tab. Other methodologies and factors that may have been considered
in the process of rating these issuers can also be found in the Rating
Methodologies sub-directory on Moody's website.
The principal methodologies used in rating of DBK-Leasing are "Analyzing the
Credit Risk of Finance Companies", October 2000, and "Incorporation of Joint-
Default Analysis into Moody's Bank Ratings: A Refined Methodology", March
2007, which can be found at www.moodys.com in the Rating Methodologies sub-
directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Moscow
Semyon Isakov
Asst Vice President - Analyst
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
London
Yves Lemay
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
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[2010-04-08]