FITCH outlook on Bank Caspian (Kazakhstan) changed to positive

/REUTERS, London, December 18, 03/ - Fitch Ratings, the international rating agency, has today changed Kazakhstan-based Bank Caspian's ("Caspian") rating Outlook to Positive from Stable. At the same time, the agency has affirmed the bank's ratings at Long-term "B-" (B minus), Short-term "B", Individual "D/E", and Support "5". Here is an original text of the announcement. FITCH OUTLOOK ON KAZAKH'S BANK CASPIAN CHANGED TO POSITIVE Fitch Ratings - London - 18 December 2003: Fitch Ratings, the international rating agency, has today changed Kazakhstan-based Bank Caspian's ("Caspian") rating Outlook to Positive from Stable. At the same time, the agency has affirmed the bank's ratings at Long-term 'B-' (B minus), Short-term 'B', Individual 'D/E', and Support '5'. The Positive rating Outlook reflects the growth of Caspian's business, its increasing profitability and operating efficiency, as well as the improving operating environment in Kazakhstan. However, the ratings remain constrained by a relatively low reserve coverage of the bank's rapidly expanding loan portfolio and its relatively small, though growing, size and market share. In addition, Caspian's ambitious expansion plans need to be supported by further external contributions to its capital, although the current level is acceptable. Caspian's performance has improved on the back of a growing Kazakhstani economy and a higher volume of lending. At the same time, tight overhead controls and closing of unprofitable offices throughout Kazakhstan have led to a slight decline in operating expenses. The customer loan portfolio grew very rapidly in 2002 and 9M03, but levels of concentration remain significant. Reserve coverage of total loans is c.3%, which Fitch considers too low for an environment as volatile as Kazakhstan. However, the strong loan growth and the already high share of provisioning in the bank's profits are likely to restrict Caspian's ability to build up its reserves to a more adequate level. As loan growth outstripped deposit growth in 2003, liquidity has tightened, although it is supported by Caspian's sizeable portfolio of government securities, which can be used for repo transactions with pension funds. In the next few months the bank plans to increase its long-term funding by placing a new issue of subordinated bonds totalling KZT7.5 billion, which has already been registered with the regulatory authorities. Capitalisation was acceptable at end-September 2003, with a Tier 1 ratio of 13%. Despite the anticipated loan portfolio growth and low level of loss reserves, the bank does not expect its Tier 1 capitalisation to decline in the short term as it has planned new share issues for 2004. At end-November 2003, Caspian was the sixth largest commercial bank in Kazakhstan by assets, with a c.3% share of the banking system's assets. Caspian has a nation-wide network of 18 branches and 44 cash offices. It is primarily a corporate bank, with its main clients from the energy, agricultural, engineering, trade and construction sectors. Since 2003 it has also begun actively penetrating the retail market. The bank is a pioneer of mass-market consumer lending in Kazakhstan. Contact: Andrei Naumenko, Vladlen Kuznetsov, Moscow, +7095 956 9901; Philip Smith, London, Tel: +44 (0)20 7417 4340 Media Relations: Campbell McIlroy +44 20 7417 4327, London [2003-12-18]