/CORRECTED/ S&P reviews Temirbank ratings; outlook Stable

/Standard & Poor's, Moscow, October 6, 14, heading by KASE, re-sent due to misprint committed by agency S&P when indicating bank rating on national scale/ – Standard & Poor's Ratings Services said today that it had lowered its short-term counterparty credit rating on Kazakhstan-based Temirbank JSC to 'C' from 'B'. We affirmed our 'B-' long-term counterparty credit rating. The outlook is stable. At the same time, we affirmed our 'kzBB-' Kazakhstan national scale rating on the bank. Also, we lowered our issue rating on Temirbank's nondeferrable subordinated debt to 'CCC' from 'CCC+'. We lowered the short-term rating to reflect the imminent risks (operational and transitional risks) related to Temirbank's pending merger with ForteBank and Alliance Bank. The affirmation of the long-term rating reflects our view of several key developments in the first half of 2014 and stable characteristics of bank's financial profile: - In May 2014, government fund Samruk-Kazyna sold its shares in Temirbank to Bulat Utemuratov, a local businessman who also owns 80.9% of ForteBank and 16% of currently in default Alliance Bank. As announced in August 2014, Alliance Bank's shareholders have agreed on a nonbinding term sheet with the steering committee of its creditors regarding the restructuring of approximately $1.2 billion of the bank's debt. This move will help ensure the bank's recapitalization and pave the way for its pending consolidation with Temirbank and ForteBank. - We think that the legal consolidation of the three banks is likely by the end of 2014. The restructuring process at Alliance is subject to final approval by the steering committee of creditors, and we have limited information on the financial terms of the consolidation. - Temirbank, which may cease to exist as a legal entity upon merging, improved its financial profile in the first half of 2014, with a profit of about Kazakhstani tenge (KZT) 10 billion ($55 million)--compared with losses in 2013--a stable risk-adjusted capital of roughly 7%, and adequate liquidity. Our base case accounts for Temirbank's positive stand-alone developments as well as the potential pitfalls surrounding the conditions of the merger with ForteBank and Alliance Bank. Following our assessment of these uncertainties, we think that our 'B-' long-term rating on the bank adequately reflects the possible long-term risks and our 'C' short-term rating reflects the more imminent ones (operational and transitional risks related to merger). Our stable outlook on Temirbank balances our expectations that the bank will likely maintain its stand-alone credit profile at the current level, notably with a profit in 2014 and still adequate funding and capital metrics, according to our base-case expectations, against the risks related to the likely merger with Alliance Bank and ForteBank. Because the bank's proposed merger has yet to receive final approval and there are very few details are available, we think that the impact of the transaction, if completed, on Temirbank's creditworthiness remains uncertain. We will monitor any possible impact over the next few months. In our view, there is very limited likelihood of an upgrade in the next 12 months given the execution risks of the merger. Conversely, we could take a negative rating action if the bank experienced pronounced liquidity deterioration, for example due to deposit withdrawals, or if material operational and financial risks emerge from the transaction with ForteBank and Alliance Bank and weaken Temirbank's financial profile. In addition, a sharp increase in credit costs that affect the bank's financial results, causing the risk-adjusted capital ratio to drop below 5%, could led us to lower the long-term rating. Primary Credit Analyst: Kirill Lukashuk, Moscow (495)783-4061; kirill.lukashuk@standardandpoors.com Secondary Contact: Annette Ess, CFA, Frankfurt (49) 69-33-999-157; annette.ess@standardandpoors.com Additional Contact: Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com [2014-11-12]