Fitch downgraded long-term ratings of bank Caspian
02.10.02 00:00
/REUTERS, London, October 2, 02/ -International rating agency Fitch
downgraded long-term rating of bank "Caspian" (Kazakhstan) to "B-" from
"B", individual to "D/E" from "D", long-term outlook has been changed to
"stable" from "negative".
Short-term rating and Support rating have been affirmed at "B" and "5T",
correspondingly, says the agency's message.
The ratings reflect insufficient growth of the bank's capitalization that may
cause quick growth of credit portfolio, and also some worsening of assets
quality and low level of reserves in case of credits non-paying back, says the
message.
Below is the text, which was distributed by Fitch (in English):
LONDON, October 02 (Fitch) - Fitch Ratings, the international rating agency,
has today downgraded the Long-term rating of Bank Caspian to 'B-' (B
minus) from 'B' and its Individual rating to 'D/E' from 'D'. The Outlook for
the Long-term rating has been changed to Stable from Negative. Bank Caspian's
Short-term and Support ratings have been affirmed at 'B' and '5T'
respectively.
The rating action reflects insufficient growth in Bank Caspian's capitalisation
to match the rapid increase in the loan book, as well as evidence of some
deterioration in asset quality and the poor level of loan loss reserves. Fitch
says that the future trend of Bank Caspian's ratings will depend on the
success of the bank's new strategy, as proven by a sustained improvement
in performance at an acceptable level of risk. Evidence of a lack of
considerable loan quality problems would, therefore, provide additional
comfort.
Bank Caspian is expecting to raise KZT300 million of new equity and KZT4.5
billion of seven-year subordinated debt (which would qualify as Tier 2 capital)
before the end of 2002. However, in light of the very high level of fixed
assets (which severely constrains 'free' capital), the need to maintain a
sufficient level of loan loss reserves and the bank's intentions to grow apace,
capitalisation is, in Fitch's opinion, likely to remain less than adequate, at
least in the medium term.
Profitability has been weak, mainly due to a lack of scale and high loan loss
provisions. However, the agency notes that the new management team has
only been at the bank for nine months and needs time to prove itself. While it
is always likely to take some time to see any material tangible results, there
have been signs of improvement at the pre-provision operating profit level in
1H02.
Bank Caspian was established in 1991 and is a medium-sized bank in
Kazakhstan, albeit with a market share of only c.2% of banking sector
assets. Having been owned by LUKoil (Russia's largest integrated oil
company) since 1995, Bank Caspian was sold in January 2002 to a
consortium of Kazakh and Russian investors, including Bank Caspian's new
chairman, who also owns a bank and various other businesses in Siberia.
The bank mainly services domestic SMEs but, under a new management
team put in place following the change in the bank's ownership, will also look
to increase the activity of the bank in servicing trade flows between Russia
and Kazakhstan and to leverage contacts with Korean corporates operating
in Kazakhstan.
[2002-10-02]