Tsesnabank (Kazakhstan) says Standard & Poor’s affirmed bank’s long-term credit rating at B, increased outlook to Stable

July 12. KASE

Tsesnabank (Kazakhstan) says Standard & Poor's affirmed bank's long-term credit rating at B, increased outlook to StableOn July 9, 2012, Standard & Poor’s Ratings Services revised its outlook on Kazakhstan-based Tsesna Bank to stable from negative and affirmed its ‘B’ long-term counterparty credit rating on the bank. At the same time, we raised the short-term counterparty credit rating to ‘B’ from ‘C’ and the Kazakhstan national scale rating to ‘kzBB+’ from ‘kzBB’.

The “Stable” outlook reflects S&P’s expectations that over the next 12-24 months Tsesna Bank will display lower loan growth than in 2010 and 2011, preventing a decline in capital ratios. The agency points out that the bank’s loss track record and the composition of its corporate loan book still compare favorably with peers’, and risk management has strengthened in our view.

The agency’s analysts believe that the stable management team, introduction of modern scoring models and modernization of IT systems will allow the bank to manage the further growth without a considerable decline in the quality of assets.

The bank’s nonperforming loans (NPLs; more than 90 days overdue) represented 3.3% of the loan book, according to regulatory data as of June 1, 2012. This compares with the system average of 32%, including restructured banks. We do not anticipate that two years of rapid loan growth will lead to a material deterioration of Tsesna Bank’s asset quality over the next two years. This is owing to the less risky composition of Tsesna Bank’s large corporate loan book than the system average, Tsesna Bank’s low exposure to the construction and real estate sector (9%), lower exposure to the city of Almaty, where the country’s main real estate and credit bubble occurred. Positive factors also include the low 7% share of foreign currency loans compared with the system’s 44% at year-end 2011, prudent lending practice, Shorter loan terms than peers’ (the remaining term of 75% of loans is less than three years).