Kazakh Bank Lending May Stall in 2011 on Write-Offs, S&P Says

Feb 15. Bloomberg

By Nariman Gizitdinov

Kazakh Bank Lending May Stall in 2011 on Write-Offs, S&P SaysKazakh bank lending may stagnate this year as write-offs offset expansion of new loans, Standard & Poor’s said.

“Growth of the loan portfolio in 2011 will be about zero,” Ekaterina Trofimova, a Paris-based S&P bank analyst, said in an interview in Almaty. “Growth of 10 percent to 20 percent of quality loans, which make up about half of the total, will be cancelled out by write-offs and repayments of problem loans.”

Kazakhstan’s 39 banks reported that loans overdue by more than 90 days reached 2.2 trillion tenge ($15 billion) last year, according to the Agency for Financial Supervision. Total assets advanced an annual 4 percent in the period to 12 trillion tenge, while total loans dropped 6 percent to 9.1 trillion tenge, the regulator said.

Banks held 2.8 trillion tenge, or 31 percent of total loans, in reserve last year, according to the agency.

“While the level of reserves in the system is phenomenal, there’s a problem of under-reserving at a number of banks,” Trofimova said in the Feb. 10 interview. “At some banks the loan portfolio is in worse condition than they show on their books.”

“Up to half of all loans in the system are bad,” Trofimova said. “This is an enormous burden. It will take at least three to five years for loan quality to reach pre-crisis levels.”

Bank Defaults

The state’s National Wellbeing Fund Samruk-Kazyna took control of BTA Bank, Kazakhstan’s largest lender at the time, and bought stakes in Kazkommertsbank and Halyk Savings Bank in early 2009 after credit markets froze and the country’s property bubble burst. Three of four defaulted lenders – BTA, Temirbank and Alliance Bank – reached restructuring deals with creditors, allowing them to write off about $11 billion debt, according to Samruk-Kazyna.

Spending on reserves will increase at a slower pace than last year at banks that didn’t restructure debt, Trofimova said. These banks will see new reserves grow by 2 to 4 percentage points, she said.