Kazkommertsbank’s Ability to Raise Bad-Loan Provisions Narrows

July 7. Bloomberg

By Nariman Gizitdinov

Kazkommertsbank’s Ability to Raise Bad-Loan Provisions NarrowsKazkommertsbank, Kazakhstan’s second- largest bank, has enough cash to increase its bad-loan provisions by 4.4 percentage points, the smallest margin among the country’s lenders except for BTA Bank and Alliance Bank.

Kazkommertsbank can increase money set aside to cover bad debt to 25.9 percent of its loan portfolio from 21.5 percent without raising more equity capital, according to stress tests carried out by the Agency for Financial Supervision. The bank put aside 540 billion tenge ($3.6 billion) against its 2.516 trillion-tenge loan portfolio as of June 1, the Almaty-based agency said on its Web site today.

“Kazkommertsbank assets quality may continue to deteriorate and may exceed the provisions margin,” Damir Seisebayev, director of research in the Almaty-based brokerage Asyl Invest, said by e-mail. “Kazkommertsbank may need to find additional sources for capital through a share sale or from abroad.”

Non-performing loans in Kazakhstan’s 38 lenders have almost tripled this year to 29.2 percent of their 10.2 trillion-tenge of loans as of June 1, the agency said.

State-run BTA Bank, the country’s biggest lender, and Alliance Bank, the fourth-largest, are in talks to restructure debt after defaulting on borrowings amid Kazakhstan’s first economic contraction in a decade. Astana Finance, part-owned by the state, on May 19 became the third bank to default on debt.

Halyk Savings Bank, the country’s third-biggest bank, would be able to increase its provisions to almost 24 percent of loans from 16 percent without raising more capital, the agency said. Halyk put aside 209 billion tenge against its 1.304 trillion- tenge loan portfolio as of June 1.

BTA Bank’s liabilities including funds needed to cover potential loan losses exceed its capital by 785 billion tenge after the company reported a loss of 1.413 trillion tenge in the first five months of this year, the regulator said on its Web site. Alliance Bank’s liabilities exceed capital under the same measure by 438 billion tenge after it had a loss of 595 billion tenge in the five months through May, according to agency.