Fitch affirms ratings of Development Bank of Kazakhstan and KazAgroFinance, revises outlook from Stable to Positive
24.11.11 10:15
/Fitch Ratings, London-Moscow, November 23, 11, heading by KASE/ - Fitch Ratings
has revised the Outlooks on Development Bank of Kazakhstan (DBK) and
KazAgroFinance's (KAF) Long-term Issuer Default Ratings (IDRs) to Positive
from Stable. At the same time, the agency has affirmed DBK's Long-term foreign
currency IDR at 'BBB-' and Long-term local currency IDR at 'BBB', and affirmed
KAF's Long-term IDR at 'BB'. A summary of the rating actions is at the end of
this commentary.
The rating actions follow the agency's upgrade of Kazakhstan's Long-term foreign
and local-currency IDRs to 'BBB' from 'BBB-' and to 'BBB+' from 'BBB',
respectively, on 21 November 2011. The Outlooks on Kazakhstan's IDRs are
Positive (for further information, see "Fitch Upgrades Kazakhstan to 'BBB';
Outlook Positive", at www.fitchratings.com.)
DBK's ratings reflect Fitch's view of the very strong propensity of the Kazakh
authorities to provide support in case of need. This view is based on DBK's
ultimate sovereign ownership, its important policy role as a development
institution, the close association with the government and a solid track record
of capital support.
At the same time, Fitch believes that DBK's increasingly leveraged balance sheet
and the now more material volumes of the bank's wholesale debt warrant a minimum
one-notch difference between the ratings of the sovereign and the bank, in
particular at higher rating levels, where successive notches on the rating scale
capture ever smaller differences in default probability. DBK's wholesale debt
had risen to USD4.3bn at end-H111, which is significant compared to gross
government external debt (end-2011 forecast:USD5.3bn), but still less than 3%
of GDP.
KAF's ratings reflect Fitch's view of the strong propensity of the Kazakh
authorities to provide support in case of need. This takes into account the
company's full (albeit indirect) government ownership, its policy role in the
agricultural sector, its small size (and hence low cost of any support
required), the track record of government assistance to date and the low
leverage with which the company operates.
However, the lower level of KAF's ratings relative to DBK reflects the somewhat
greater uncertainty about the provision of government support due to its less
prominent policy role, lower importance for the country's economy and financial
system, less close association with the Kazakh authorities, the indirect nature
of government ownership and the possibility for other government-controlled
entities to take over KAF's functions, in case of need.
DBK was founded to foster the growth of non-extracting industries in Kazakhstan.
Its owner, the National Welfare Fund Samruk-Kazyna, is wholly owned by the
state. DBK's Basel I tier I capital ratio fell to 17% at end-H111 as a result of
losses and business expansion, a level which is at best adequate given the
bank's unseasoned, concentrated and high-risk credit exposures, and its plans
for further growth .
KAF is a non-banking financial institution providing loans and finance leases
mainly to the domestic agricultural industry. KAF is a subsidiary company of the
state-owned JSC National Holding Kazagro. The company's equity/assets ratio
stood at a high 55% at end-2010. Fitch expects credit growth to be moderate in
the near term, although currently high levels of non-performing and restructured
credit exposures could result in partial capital erosion.
The rating actions are as follows:
Development Bank of Kazakhstan
Long-term foreign currency IDR affirmed at 'BBB-';
Outlook revised to Positive from Stable
Short-term foreign currency IDR affirmed at 'F3'
Long-term local currency IDR affirmed at 'BBB';
Outlook revised to Positive from Stable
Short-term local currency IDR affirmed at 'F3'
Support Rating affirmed at '2'
Support Rating Floor affirmed at 'BBB-'
Senior unsecured Long-term rating affirmed at 'BBB-'
KazAgroFinance
Long-term foreign currency IDR affirmed at 'BB';
Outlook revised to Positive from Stable
Short-term foreign currency IDR affirmed at 'B'
Long-term local currency IDR affirmed at 'BB';
Outlook revised to Positive from Stable
National Long-term rating affirmed at 'A(kaz)';
Outlook Stable Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB'
Contacts:
Primary analyst, Roman Kornev (DBK and KAF), Analyst +7 495 956 7016
Secondary analyst (DBK), Aslan Tavitov, Junior director +7 495 956 7065
Secondary analyst (KAF), Anton Naberukin, Junior director +7 495 956 9981
Committee chairman, James Watson, Managing director +7 495 956 6657
Media contacts:
Anna Bykova, Moscow, tel.:+ 7 495 956 9903/9901,
anna.bykova@fitchratings.com
[2011-11-24]