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Tenge devaluation may hit Kazakh banks - Fitch

Tenge devaluation may hit Kazakh banks - Fitch

Fitch affirms International Bank of Azerbaijan at 'BB'/Negative; downgrades VR to 'f' (23 November 2016 18:46)

Date: 10 December 2015 18:07

Baku, Azerbaijan, Dec. 10

By Elena Kosolapova – Trend:

Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extracting sectors) and the weaker tenge, the report of Fitch international rating agency said.

Fitch expects 1 percent real GDP growth in Kazakhstan in 2015 and 2.3 percent growth in 2016, and rapid recovery is unlikely.

Large sovereign reserves (44 percent of GDP) underpin the authorities’ ability to support the economy. However, the sharp tenge devaluation (by 44 percent in third quarter of 2015) may hit banks hard due to their significant foreign-currency loan exposures, the agency said.

Fitch expects corporate loan growth to be at best in low single digits for 2016, subject to continuation/acceleration of government funding programs for banks.

Retail lending could shrink moderately as Fitch expects a rise in inflation to have an adverse impact on consumer confidence.

Problem loan exposures remain significant despite large write-offs in 2014-2015. NPLs (non-performing loans) made up 9 percent of sector gross loans at late September 2015.

Restructured loans are also in double digits at large banks, and tenge devaluation could exacerbate risks as foreign-currency exposures comprise about a half of sector net loans.

The stable rating outlook on Kazakhstan’s banking sector reflects the limited probability of ratings being downgraded in the next 18 months as their already low levels already capture significant risks to credit profiles.

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