21.06.2013, 16:28 3010

Fitch Rates JSC SB Alfa Bank Kazakhstan 'B+'

The Long-term IDRs and National Rating are based on the Viability Rating (VR) of 'b+'. The VR reflects the bank's small franchise, high single-name concentrations on both sides of the balance sheet, significant growth in a relatively high risk environment and some uncertainty associated with future development plans, which may at some point be impacted by potential new bank acquisitions in Kazakhstan by ABK's shareholders.

London/Moscow. June 21. Kazakhstan Today - Fitch Ratings has assigned JSC SB Alfa Bank Kazakhstan (ABK) Long-term Issuer Default Ratings (IDRs) of 'B+' with a Stable Outlook.

According to Fitch, "the Long-term IDRs and National Rating are based on the Viability Rating (VR) of 'b+'. The VR reflects the bank's small franchise, high single-name concentrations on both sides of the balance sheet, significant growth in a relatively high risk environment and some uncertainty associated with future development plans, which may at some point be impacted by potential new bank acquisitions in Kazakhstan by ABK's shareholders."

"At the same time, the ratings positively consider the solid performance helped by low average funding costs, reasonably strong reported asset quality metrics, the currently sound liquidity and funding position, and solid capitalization," the Rating agency reported.

"Loan quality benefits, in Fitch's view, from considerable management expertise in domestically-focused corporate lending as well as external oversight of the bank's operations by the ultimate parent Luxembourg-based ABH Holdings S.A. (ABHH; unrated). The non-performing (overdue by more than 90 days) loans at end-2012 were a low 0.6% of gross loans, and restructured loans made up only 0.5%," Fitch writes.

"Asset quality metrics could, however, come under pressure as the bank expands into more risky market segments, including retail. Fitch also notes a considerable volume of USD loans (27% of gross loans at end-2012) that might also be rather sensitive to any potential deterioration in the operating environment," the report says.

"Mitigating credit risk is the currently significant loss absorption capacity. ABK could have increased its loan impairment reserves to 19% of gross loans at end-2012 before its regulatory Tier I capital ratio would fall to the minimum 5%," according to the report.

"The liquidity position is comfortable given the solid buffer of liquid assets that, net of potential cash requirements for 2013, covered total deposits at end-2012 by 31%. Refinancing risks could, however, arise on potential drawdowns by the largest depositors, as the largest 20 names comprised a material 45% of total liabilities at end-2012. Refinancing opportunities with group banks are a potential further mitigant," Fitch says.

"The Fitch Core Capital/weighted risks ratio was a solid 19% at end-2012 after a USD30m equity contribution in 2012 and the strong internal capital generation in recent years. Fitch's view of capitalisation takes account of a bank-envisaged USD40m injection in 2014, as well as the possibility of additional contributions depending on growth opportunities," the agency reports.

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