Fitch points out that expansion seems likely to remain rapid, at least in the short-term, based on revised forecasts collected from rated banks. This growth will test the banks' credit risk management capabilities and any significant deterioration of asset quality could result in negative actions on banks' Individual ratings, says Fitch.
"Relatively new retail lending and loans to the potentially cyclical construction and real estate sectors are the main growth drivers, with exposures to Russian borrowers also substantial at certain banks," says Alexei Kechko, associate director in Fitch's financial institutions group. "In addition, loan books remain highly concentrated, while tenors and the share of foreign currency loans are increasing. Therefore, while asset quality is at present reasonable, lending at most banks is primarily secured and economic growth is currently strong, in Fitch's view, credit risks are substantial."
Banks are increasingly tapping international capital markets to fund their rapid growth. Several banks FinanceAsia spoke to in late May said they planned to do an IPO, typically in London, later this year, or early next year.
"Most of the large banks are heavily funded from abroad and are vulnerable to resultant foreign currency lending, refinancing and interest rate risks," says James Watson, senior director in Fitch's financial institutions group. "Medium-sized and smaller banks will likely increase their capital bases to comply with a new regulation, which ties the permitted amount of foreign funding to regulatory capital, while larger banks will not be significantly affected. As a result, Fitch does not expect the regulation to have a significant impact on foreign funding volumes or sector growth rates."
However, foreign buyers of local banks may be one way Kazakhstan banks move forward. ATF Bank is set to become the first major bank to be acquired by a foreign buyer, following the recent agreement with Italy's Unicredito. This may serve as a catalyst for other banks to be sold.
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