Fitch rates Kazakhstan's Bank Alliance "B+"

/REUTERS, London, April 8, 05/ - following statement was released by the rating agency. FITCH RATES KAZAKHSTAN'S BANK ALLIANCE "B+" 08 Apr 2005 7:53 AM (EDT) Fitch Ratings-London/Moscow-08 April 2005: Fitch Ratings, the international rating agency, has today assigned Kazakhstan-based Bank Alliance ("Alliance") ratings of Long-term "B+"; Short-term "B"; Individual "D"; and Support "4". The Outlook is Stable. Alliance's Long-term, Short-term and Support ratings are based on Fitch's view of the likelihood of support to the bank from the Kazakhstani authorities, in case of need. The Individual rating reflects the risks associated with Alliance's rapid growth, its modest performance and still relatively small size, as well as certain weaknesses in the operating environment. However, it also takes into account the bank's adequate capitalisation, successful business development and good liquidity. Alliance's profitability has been modest, mainly due to a relatively low net interest margin (caused by expensive funding) and significant loan loss reserve (LLR) charges, resulting primarily from rapid loan growth. Loan book concentrations are high by international standards (end-2004: exposures to top 20 borrowers were equal to 105% of equity), although moderate for a CIS bank. Asset quality has been adequate to date; however, rapid loan growth and the launch of new credit products will need to be well managed in order for this to remain so in the future. Funding is sourced mainly from corporate and individual term accounts, the former are concentrated and rather expensive. Tenor of deposits is relatively long, enabling Alliance to run a positive cumulative liquidity gap across all timebands. Capital ratios are currently strong (Tier 1 ratio of 21% at end-2004), and should remain adequate in the near to medium term, notwithstanding planned rapid growth, due to ongoing contributions from shareholders and further domestic subordinated debt issuance. Alliance was founded in 1993 in Pavlodar and in 1999 merged with another mid- sized regional bank. New shareholders acquired Alliance in 2001, and since then it has grown quickly to become one of the larger banks in Kazakhstan, ranked sixth and fifth by assets and equity, respectively, at end-2004. [2005-04-08]