Fitch Revises Development Bank of Kazakhstan and KazAgroFinance's Outlooks to Positive
24.11.11 17:39
/IRBIS, November 24, 2011/ - 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'.
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.
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.
As stated, 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:
- DBK
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'.
[2011-11-24]