London, 24 February 2009 -- Moody's Investors Service downgraded the deposit and debt ratings
of 15 financial institutions in Kazakhstan. The deposit and debt
ratings of five financial institutions previously on review for downgrade
were confirmed. The deposit and debt ratings of four financial
institutions remain on review for possible further downgrade, while
the ratings of one bank are on review with direction uncertain.
The outlook on all Kazakh financial institutions' deposit and debt
ratings, except for those on review, is negative.
At the same time, the rating agency downgraded the bank financial
strength ratings (BFSRs) of six banks and confirmed the BFSRs of three
banks. The BFSRs of the remaining six Kazakh financial institutions
previously not on review were affirmed. For six banks, the
BFSR outlook is stable, and for nine, it is negative.
See rating list below for details of the affected institutions and the
rating actions carried out.
Moody's said that the rating downgrades -- which conclude
its review initiated on 12 December 2008 -- reflect the
increasingly negative impact of the global economic crisis on the Kazakh
economy and its financial institutions.
In its review, Moody's had focused on: (i) analysing
the impact of the deteriorating macroeconomic conditions on Kazakh financial
institutions' fundamentals; and (ii) re-examining the
government support incorporated into the deposit and debt ratings of banks
and government-related issuers (GRIs -- financial institutions
with significant government ownership or a special charter or public policy
mandate from the government).
The mounting asset quality and liquidity problems in Kazakh banks continue
to exert downward pressure on their financial stability. Moody's
estimates that the level of non-performing loans in Kazakh banks
accounts for about a quarter of all loans outstanding. Despite
the recent recapitalisation of the largest banks by the government,
selected institutions may face a significant weakening of their capital
positions from rising loan losses in the short term, the rating
agency concluded.
Furthermore, the inability to refinance their large foreign wholesale
debt, as well as a likely decline in customer funding, creates
notable liquidity problems for most banks. As of year-end
2008, the total foreign wholesale debt of Kazakh banks was about
USD40 billion, of which USD12 billion is payable in 2009.
"The recent devaluation of the Kazakh tenge also erodes the banks'
financial standing by increasing their foreign currency debt burdens and
by raising the default probability of their foreign currency loans,"
says Armen Dallakyan, a London-based Moody's analyst.
"All of these problems expose Kazakh financial institutions to substantial
risks that challenge the viability of their franchises and financial fundamentals,
and therefore the banks' BFSRs, which reflect these risks,
remain under pressure," Mr Dallakyan adds.
The rating agency has also re-examined the systemic support probabilities
incorporated into Kazakh banks' and GRIs' deposit and debt
ratings. The revised assumptions, which reflect Moody's
assessment of the government's willingness to actually furnish support,
are based on both the individual institution's significance to the
Kazakh economy and the potential cost of such support. Moody's
acknowledged the Kazakh authorities' commitment to supporting the
country's banking system to ensure the security of customer deposits
and credit flow to the economy. At the same time, the rating
agency cautioned that the uncertainty about the length and severity of
the current crisis and its impact on the Kazakh economy may make the government
more cautious and selective in using its resources, especially its
foreign currency reserves, to support various projects and entities.
Given these considerations, Moody's has lowered its assessment
of the systemic support probability of the six largest Kazakh banks.
On the other hand, the systemic support assumptions for the rated
GRIs remains unchanged, or have been reduced only modestly,
reflecting the relative importance of these entities' policy roles,
as well as the likely size and expense of any support needed.
The deposit and debt ratings of one bank -- BTA Bank --
remain on review, with direction uncertain. The conclusion
of Moody's review will depend on the outcome of the negotiations
to resell the bank to Russia's Sberbank following the nationalisation
of BTA Bank.
The institutions affected by Moody's rating actions are as follows.
BTA Bank
- BFSR: downgraded to E+ (mapping to a Baseline Credit
Assessment of B3) from D- (mapping to a Baseline Credit Assessment
of Ba3), negative outlook;
- Local and foreign currency deposit ratings: downgraded
to B1 from Ba1;
- Foreign currency senior unsecured debt rating: downgraded
to B1 from Ba1;
- Subordinated foreign currency debt rating: downgraded to
B2 from Ba2;
- Junior subordinated foreign currency debt rating: downgraded
to Caa1 from Ba3;
- The local currency deposit rating benefits from a moderate systemic
support probability that results in a two-notch uplift from the
Baseline Credit Assessment of B3;
- The bank's deposit and debt ratings are placed on review
with direction uncertain.
ATF Bank
- BFSR: downgraded to E+ (mapping to a Baseline Credit
Assessment of B2) from D- (mapping to a Baseline Credit Assessment
of Ba3);
- Local currency deposit rating: downgraded to Ba1 from Baa2;
- Foreign currency senior unsecured debt rating: downgraded
to Ba1 from Baa2;
- Junior subordinated foreign currency debt rating: downgraded
to Ba3 from Ba1;
- The local currency deposit rating benefits from a high probability
of support from its ultimate parent, UniCredit, and a low
systemic support probability that result in a four-notch uplift
from the Baseline Credit Assessment of B2;
- The outlook on all of the bank's ratings is negative.
Temirbank
- BFSR: unchanged at E (mapping to a Baseline Credit Assessment
of Caa1), stable outlook;
- Local and foreign currency deposit ratings: downgraded
to B3 from B2;
- Foreign currency senior unsecured debt rating: downgraded
to B3 from B2;
- Subordinated foreign currency debt rating: downgraded to
Caa1 from B3;
- The local currency deposit rating benefits from a high probability
of support from its parent, BTA Bank, that results in a one-notch
uplift from the Baseline Credit Assessment of Caa1;
- The bank's deposit and debt ratings remain on review for
possible further downgrade.
Kazkommertsbank
- BFSR: downgraded to E+ (mapping to a Baseline Credit
Assessment of B2) from D- (mapping to a Baseline Credit Assessment
of Ba3);
- Local and foreign currency deposit ratings: downgraded
to Ba3 from Ba1;
- Foreign currency senior unsecured debt rating: downgraded
to Ba3 from Ba1;
- Subordinated debt rating: downgraded to B1 from Ba2;
- Junior subordinated debt rating: downgraded to B3 from
Ba3;
- The local currency deposit rating benefits from a moderate systemic
support probability that results in a two-notch uplift from the
Baseline Credit Assessment of B2;
- The outlook on all of the bank's ratings is negative.
Bank CenterCredit
- BFSR: downgraded to E+ (mapping to a Baseline Credit
Assessment of B1) from D- (mapping to a Baseline Credit Assessment
of Ba3);
- Local and foreign currency deposit ratings: downgraded
to Ba3 from Ba1;
- Foreign currency senior unsecured debt rating: downgraded
to Ba3 from Ba1;
- Junior subordinated debt rating: downgraded to B2 from
Ba3;
- The local currency deposit rating benefits from a moderate systemic
support probability that results in a one-notch uplift from the
Baseline Credit Assessment of B1;
- The outlook on all of the bank's ratings is negative.
Halyk Savings Bank of Kazakhstan
- BFSR: downgraded to D- (mapping to a Baseline Credit
Assessment of Ba3) from D (mapping to a Baseline Credit Assessment of
Ba2);
- Local currency deposit rating: downgraded to Ba2 from Baa3;
- Foreign currency deposit rating: downgraded to Ba2 from
Ba1;
- Foreign currency senior unsecured debt rating: downgraded
to Ba2 from Baa3;
- The local currency deposit rating benefits from a moderate systemic
support probability that results in a one-notch uplift from the
Baseline Credit Assessment of Ba3;
- The outlook on all of the bank's ratings is negative.
Nurbank
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B2), stable outlook;
- Local and foreign currency deposit ratings: downgraded
to B2 from B1;
- The outlook on all of the bank's deposit ratings is negative.
Tsesna Bank
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B3 from B1);
- Local and foreign currency deposit ratings: downgraded
to B3 from B1;
- The outlook on all of the bank's ratings is negative.
Kazakhstan Mortgage Company
- Baseline Credit Assessment: lowered to 14 from the range
of 11-13;
- Local currency issuer rating: downgraded to Baa3 from Baa1;
- The local currency issuer rating benefits from a very high systemic
support probability that results in a four-notch uplift from the
Baseline Credit Assessment of 14, two notches lower than the local
currency government bond rating for Kazakhstan;
- The outlook on the rating is negative.
House Construction Savings Bank of Kazakhstan
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B2), stable outlook;
- Local currency deposit rating: downgraded to Baa3 from
Baa2;
- Local currency issuer rating benefits from a very high systemic
support probability that results in a five-notch uplift from the
Baseline Credit Assessment of B2;
- The outlook on the local currency deposit rating is negative.
Kazagrofinance
- Baseline Credit Assessment: lowered to 15 from 14;
- Local and foreign currency issuer ratings: downgraded to
Baa3 from Baa2;
- The local currency issuer rating benefits from a very high systemic
support probability that results in a five-notch uplift from the
Baseline Credit Assessment of 15, two notches lower than the local
currency government bond rating for Kazakhstan;
- The outlook on the ratings is negative.
Agrarian Credit Corporation
- Baseline Credit Assessment: unchanged at 15;
- Local and foreign currency issuer ratings: downgraded to
Baa3 from Baa2;
- The local currency issuer rating benefits from a very high systemic
support probability that results in a five-notch uplift from the
Baseline Credit Assessment of 15, two notches lower than the local
currency government bond rating for Kazakhstan;
- The outlook on the ratings is negative.
Astana Finance
- Baseline Credit Assessment: lowered to 17 from 14;
- Local and foreign currency debt ratings: downgraded to
B3 from Ba1;
- The local currency issuer rating benefits from a high systemic
support probability that results in a one-notch uplift from the
Baseline Credit Assessment of 17, eight notches lower than the local
currency government bond rating for Kazakhstan;
- The outlook on all of the company's ratings is negative.
Delta Bank
- BFSR: confirmed at E+ (mapping to a Baseline Credit
Assessment of B3);
- Local and foreign currency deposit ratings: confirmed at
B3;
- The outlook on all of the bank's ratings is negative.
Eximbank
- BFSR: confirmed at E+ (mapping to a Baseline Credit
Assessment of B3);
- Local and foreign currency deposit ratings: confirmed at
B3;
- The outlook on all of the bank's ratings is negative.
Eurasian Bank
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B1), stable outlook;
- Local and foreign currency deposit ratings: confirmed at
B1;
- The outlook on all of the bank's deposit ratings is negative.
Kaspi Bank
- BFSR: downgraded to E+ (mapping to a Baseline Credit
Assessment of B1) from D- (mapping to a Baseline Credit Assessment
of Ba3);
- Local and foreign currency deposit ratings: downgraded
to B1 from Ba3;
- The outlook on all of the bank's ratings is negative.
SB Sberbank
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B2), stable outlook;
- Local and foreign currency deposit ratings: confirmed at
Ba2;
- The local currency deposit rating benefits from a high probability
of support from its Russian parent, Sberbank, that results
in a three-notch uplift from the Baseline Credit Assessment of
B2;
- The outlook on all of the bank's deposit ratings is negative.
Alfa Bank Kazakhstan
- BFSR: unchanged at E+ (mapping to a Baseline Credit
Assessment of B1), stable outlook;
- Local and foreign currency deposit ratings: confirmed at
Ba3;
- The local currency deposit rating benefits from a high probability
of support from its Russian parent, Alfa Bank, that results
in a one-notch uplift from the Baseline Credit Assessment of B1;
- The outlook on all of the bank's deposit ratings is negative.
Development Bank of Kazakhstan
- Baseline Credit Assessment: unchanged in the range of 11-13;
- Local and foreign currency issuer ratings: downgraded to
Baa2 from Baa1;
- The local currency issuer rating benefits from a very high systemic
support probability that results in a four-notch uplift from the
Baseline Credit Assessment in the range of 11-13, one notch
lower than the local currency government bond rating for Kazakhstan;
- The outlook on all of the bank's ratings is negative.
DBK Leasing
- Baseline Credit Assessment: lowered to 16 from 15;
- Local currency issuer rating is affirmed at Ba3;
- The local currency issuer rating benefits from a high systemic
support probability that results in a three-notch uplift from the
Baseline Credit Assessment of 16, five notches lower than the local
currency government bond rating for Kazakhstan;
- The outlook on the rating is negative.
Moody's previous rating action on BTA Bank was on 12 December 2008
when the bank's D- BFSR, local currency and foreign
currency deposit ratings of Ba1, senior unsecured debt rating of
Ba1 were placed on review for possible downgrade.
Moody's previous rating action on ATF Bank was on 12 December 2008
when the bank's D- BFSR, local currency deposit rating
of Baa2, local currency deposit rating of Baa2, senior unsecured
debt rating of Baa2 were placed on review for possible downgrade.
Moody's previous rating action on Temirbank was on 9 February 2009
when the bank's E+ BFSR was downgraded to E, and long-term
bank deposit and unsecured debt ratings were downgraded to B2 from Ba3.
Moody's previous rating action on Kazkommertsbank was on 12 December
2008 when the bank's D- BFSR, local currency and foreign
currency deposit ratings of Ba1, and senior unsecured debt rating
of Ba1 were placed on review for possible downgrade.
Moody's previous rating action on Bank CenterCredit was on 12 December
2008 when the bank's D- BFSR, local currency and foreign
currency deposit ratings of Ba1, and senior unsecured debt rating
of Ba1 were placed on review for possible downgrade.
Moody's previous rating action on Halyk Savings Bank of Kazakhstan
was on 12 December 2008 when the bank's D BFSR, local currency
deposit rating of Baa3, and senior unsecured debt rating of Baa3
were placed on review for possible downgrade.
Moody's previous rating action on Nurbank was implemented on 12
December 2008 when the bank's E+ BFSR was affirmed, local
currency and foreign currency deposit ratings of B1 were placed on review
for possible downgrade.
Moody's previous rating action on Tsesna Bank was on 12 December
2008 when the E+ BFSR was affirmed, and local currency and
foreign currency deposit ratings of B1, senior unsecured debt rating
of B1 were placed on review for possible downgrade.
Moody's previous rating action on Kazakhstan Mortgage Company was
on 12 December 2008 when the Baa1 issuer rating was placed on review for
possible downgrade.
Moody's previous rating action on House Construction Saving Bank
of Kazakhstan was on 12 December 2008 when the bank's E+ BFSR
was affirmed, and the local currency deposit rating of Baa2 was
placed on review for possible downgrade.
Moody's previous rating action on KazAgroFinance was on 12 December
2008 when the Baa2 issuer rating was placed on review for possible downgrade.
Moody's previous rating action on Agrarian Credit Corporation was
on 12 December 2008 when the Baa2 issuer rating was placed on review for
possible downgrade.
Moody's previous rating action on Astana Finance was on 12 December
2008 when the Ba1 issuer rating was placed on review for possible downgrade.
Moody's previous rating action on Delta Bank JSC was on 12 December
2008 when the bank's E+ BFSR, and local currency and
foreign currency deposit ratings of B3 were placed on review for possible
downgrade.
Moody's previous rating action on Eximbank Kazakhstan was on 12
December 2008 when the bank's E+ BFSR, and local currency
and foreign currency deposit ratings of B3 were placed on review for possible
downgrade.
Moody's previous rating action on Eurasian Bank was on 12 December
2008 when the bank's E+ BFSR was affirmed, and local
currency and foreign currency deposit ratings of B1 were placed on review
for possible downgrade.
Moody's previous rating action on Kaspi Bank was on 12 December
2008 when the bank's D- BFSR, local currency and foreign
currency deposit ratings of Ba3, and senior unsecured debt rating
of Ba3 were placed on review for possible downgrade.
Moody's previous rating action on SB Sberbank JSC was on 12 December
2008 when the bank's E+ BFSR was affirmed, and local
currency and foreign currency deposit ratings of Ba2 were placed on review
for possible downgrade.
Moody's previous rating action on Alfa-Bank Kazakhstan was
on 12 December 2008 when the bank's E+ BFSR was affirmed,
and local currency and foreign currency deposit ratings of Ba3 were placed
on review for possible downgrade.
Moody's previous rating action on Development Bank of Kazakhstan
was implemented on 12 December 2008 when the issuer rating was downgraded
to Baa1 from A2, and placed on review for possible further downgrade.
Moody's previous rating action on DBK Leasing was 12 December 2008
when the Ba3/Not Prime ratings were affirmed.
The principal methodologies used in rating the 15 banks --
Alfa-Bank Kazakhstan, ATF Bank, Bank CenterCredit,
BTA Bank, Caspian Bank, Delta Bank, Eurasian Bank,
Eximbank Kazakhstan, Halyk Savings Bank of Kazakhstan, House
Construction Savings Bank of Kazakhstan, Kazkommertsbank,
Nurbank, SB Sberbank, Temirbank and Tsesna Bank --
are "Bank Financial Strength Ratings: Global Methodology"
and "Incorporation of Joint-Default Analysis into Moody's
Bank Ratings: A Refined Methodology", which can be found
at www.moodys.com in the Credit Policy & Methodologies
directory, in the Ratings Methodologies subdirectory.
The principal methodologies used in rating the six GRIs --
Agrarian Credit Corporation, Astana Finance, Development Bank
of Kazakhstan, DBK-Leasing, Kazakhstan Mortgage Company
and KazAgroFinance -- are "The Application of Joint-Default
Analysis to Government Related Issuers".
Other methodologies and factors that may have been considered in the process
of rating these entities can also be found in the Credit Policy &
Methodologies directory.
London
Reynold R. Leegerstee
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Armen L. Dallakyan
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Kazakh financial institutions; four on review for further downgrade
