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Rating Action:

Moody's upgrades ATF Bank's ratings, changes outlook to stable from positive

14 Nov 2019

London, 14 November 2019 -- Moody's Investors Service ("Moody's") today upgraded ATF Bank's long-term local and foreign-currency deposit ratings to B2 from B3, its Baseline Credit Assessment (BCA) and Adjusted BCA to caa1 from caa2, its long-term Counterparty Risk Assessment (CR Assessment) to B1(cr) from B2(cr) and its long-term local and foreign-currency Counterparty Risk Ratings (CRRs) to B1 from B2. The bank's junior subordinated foreign-currency debt rating was upgraded to Caa3 (hyb) from Ca (hyb), while its Not Prime short-term deposit ratings and CRRs and Not Prime(cr) short-term CR Assessment were affirmed. The outlook on the bank's long-term local and foreign-currency deposit ratings, as well as its overall issuer outlook, was changed to stable from positive.

The upgrade of ATF Bank's ratings is driven by the recent improvements in the bank's asset quality, capital adequacy and profitability, translating into an overall stronger loss absorption capacity.

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The upgrade of ATF Bank's ratings is driven by the recent improvements in the bank's asset quality, capital adequacy and profitability, translating into an overall stronger loss absorption capacity. According to ATF Bank's management, several large loans, together accounting for approximately 20% of the bank's gross problem loans reported as of year-end 2018, were redeemed in Q3 2019. At the same time, the bank's net interest margin, pre-provision income and earnings increased in the first half of 2019, so that its profit capitalization brought the ratio of tangible common equity to risk-weighted assets to 9.6% as of 30 June 2019, up from 8.0% as of year-end 2018.

Despite the recent improvements, ATF Bank's caa1 BCA reflects its still weak solvency position, with gross problem loans currently close to 100% of the sum of loan loss reserves and shareholders' equity, on Moody's estimates. In addition, the quality of the bank's earnings remains weak, with the gap between interest accrued and interest received in cash amounting to a substantial 21% in the first half of 2019. Furthermore, the bank's funding profile has recently been challenged by significant volatility of its customer deposits (a 13% outflow in the first half of 2019, partially reversed in the third quarter).

Moody's does not have any particular governance concern for ATF Bank, and does not apply any corporate behaviour adjustment to the bank.

HIGH GOVERNMENT SUPPORT

ATF Bank's B2 long-term deposit ratings benefit from: (1) two notches of uplift due to a high probability of state support, which reflects the bank's significant market share (5.2% in total banking assets and 5.0% in total customer deposits as of 1 October 2019); and (2) the government's willingness to support the bank, as demonstrated in 2017 by the National Bank of Kazakhstan including ATF Bank in its capital recovery programme.

STABLE OUTLOOK

The change of outlook on ATF Bank's ratings to stable from positive reflects Moody's expectations of no significant further strengthening of bank's overall solvency profile in next 12-18 months, based on the current trends and in the absence of external support.

WHAT COULD MOVE THE RATINGS UP/DOWN

The ratings of ATF Bank could be upgraded, if in the next 12-18 months the bank demonstrates sustainable improvements in its asset quality, core profitability and the quality of earnings, as well as further strengthens its capital position.

The ratings of ATF Bank could be downgraded, if the bank's asset quality deteriorates further and its capital buffer declines (in particular, asset quality deficiencies could be revealed by the Asset Quality Review, currently performed by the National Bank of Kazakhstan). ATF Bank's failure to achieve its targeted profitability results and improve the quality of its earnings, or a significant deposit outflow resulting in a liquidity shortage, could also exert negative pressure on the bank's ratings.

LIST OF AFFECTED RATINGS

..Issuer: ATF Bank

Upgrades:

.... Adjusted Baseline Credit Assessment, Upgraded to caa1 from caa2

.... Baseline Credit Assessment, Upgraded to caa1 from caa2

.... Long-term Counterparty Risk Assessment, Upgraded to B1(cr) from B2(cr)

.... Long-term Counterparty Risk Ratings, Upgraded to B1 from B2

.... Junior Subordinated Regular Bond/Debenture, Upgraded to Caa3 (hyb) from Ca (hyb)

.... Long-term Bank Deposit Ratings, Upgraded to B2 from B3, Outlook Changed to Stable from Positive

Affirmations:

.... Short-term Counterparty Risk Assessment, Affirmed NP(cr)

.... Short-term Counterparty Risk Ratings, Affirmed NP

.... Short-term Deposit Ratings, Affirmed NP

Outlook Action:

....Outlook Changed to Stable from Positive

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Svetlana Pavlova, CFA
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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