FITCH UPGRADES KAZAKHSTAN'S BANK CENTERCREDIT'S INDIVIDUAL RATING; AFFIRMS OTHER RATINGS

/Reuters, August 19, 04/ - Fitch Ratings, the international rating agency, has today upgraded Kazakhstan-based Bank Centercredit's ("BCC") Individual rating to 'D' from 'D/E'. Its other ratings have been affirmed at Long-term B+', Short-term 'B' and Support '4'. The Outlook is Stable. The rating action reflects BCC's improved capitalisation and profitability, and continued growth in the bank's franchise. However, the Individual rating also takes into account the potentially volatile, albeit improving, operating environment in Kazakhstan, significant concentration in the loan book and low loan loss reserves (LLR). The Long-term, Short-term and Support ratings reflect Fitch's view of the likelihood of state support being available in case of need. The bank's revenue streams are mainly driven by interest income on its SME loan portfolio. Net income rose in 2003 thanks mainly to loan growth outweighing a drop in margins, and significant growth in fee and commission income. However, the bank will face increasing pressure on margins as competition continues to grow and interest rates fall. Further improvements in cost efficiency and continued growth in non-interest income are important if the bank is to maintain a reasonable level of profitability. The loan portfolio is focused on SMEs, although lending to larger companies and to individuals is expected to become an increasingly important part of the loan book. The loan book grew substantially in 2003, but remains concentrated by customer, although not unusually so for a bank in the CIS. Asset quality did not change significantly in 2003. LLR coverage of gross loans is, in Fitch's opinion, still low, particularly given the rapid growth and the operating environment. It is expected that increased loan loss provisions will be required in the future as new lending progresses through the credit cycle. Customer balances are relatively well-diversified, but funding remains short- term. A eurobond issue, which would improve the tenor and diversification of the funding base is being considered by the bank for late-2004 at the earliest. Capitalisation improved in 2003 with a KZT2 billion capital injection and a further KZT4bn, of which KZT0.9bn was received in 1H04, is planned for 2004, reflecting the need for greater capital for the bank's long-term growth plans. BCC is the fifth largest bank in Kazakhstan, focusing primarily on SMEs and retail customers. However, in a banking sector dominated by three banks, it holds just 5% of assets in the banking system. It has a countrywide network of branches that is supplemented by asset management, leasing and pension fund subsidiaries. [2004-08-18]