Moody's places ratings of 10 Kazakhstan banks on review for possible downgrade

Almaty. January 14. KazTAG - Moody's Investors Service today placed ratings and assessments of 10 banks and one holding company in Kazakhstan on review for possible downgrade, to reflect a possible sharp deterioration in the operating environment on the back of social unrest and the authorities' reaction to them that may lead to greater political instability than in the past, and recent disruptions in bank operations in the country.
Specifically, the following ratings and assessments are placed on review for possible downgrade by today's rating action:
(1) long-term ratings and assessments (global scale and national scale, as applicable) of Altyn Bank JSC, Bank CenterCredit, Bank RBK JSC, Eurasian Bank, First Heartland Jusan Bank JSC, ForteBank JSC, Halyk Savings Bank of Kazakhstan, JSC Otbasy bank, Kaspi Bank JSC and SB Sberbank JSC.
(2) short-term deposit ratings of Halyk Savings Bank of Kazakhstan and JSC Otbasy bank.
(3) short-term Counterparty Risk Ratings and assessments of Altyn Bank JSC, Halyk Savings Bank of Kazakhstan, JSC Otbasy bank and SB Sberbank JSC.
(4) debt ratings of Bank CenterCredit, Halyk Savings Bank of Kazakhstan and Kaspi Bank JSC.
(5) long-term issuer ratings (global scale and national scale) of First Heartland Securities, JSC.
Today's rating action was primarily driven by operating environment and social risk considerations, owing to social unrest and a state of emergency, which was accompanied by changes of key officials, potentially negatively affecting political stability going forward as well as banks' operations. While most of the banks' operations have been fully restored by now, prolonged disruptions can spill over into liquidity and asset-quality risks for the banks.
Security concerns due to violent street rioting in the beginning of January have led to internet blackouts, the suspension of trading on the local stock exchange, with many bank branches closures and frequent cases of looting (including bank offices and ATMs). Social unrest and the reaction to them by the authorities in Almaty, which is Kazakhstan's key financial center, hosting the largest banks' headquarters and key financial infrastructure was particularly severe. While the damage to banks amid the short period of unrest has been limited, the recent developments may reveal elevated operating risks for the banks.
Recent developments can affect the behaviour of some depositors, increasing their propensity to withdraw cash from their bank accounts, which would increase pressure on bank liquidity. Further, if prolonged, the social unrest could undermine political stability, deter foreign investment, and hinder the country's economic and institutional reform program. If these developments materially dampen economic growth, asset quality could deteriorate in the coming months. However, these risks are mitigated by the banks' strong capital and liquidity cushions, which will allow them to withstand moderate pressures.

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