Fitch downgrades ATFBank (Kazakhstan) ratings, Outlook “Stable”

May 8. KASE

Fitch downgrades ATFBank (Kazakhstan) ratings, Outlook "Stable"Fitch Ratings has downgraded ATF Bank JSC’s Long-term Issuer Default Ratings (IDRs) to ‘B-‘ from ‘BBB-‘. The Outlook is Stable. A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS

The downgrade reflects the removal from the ratings of potential support from UniCredit S.p.A. (‘BBB+’/Negative) following ATF’s announcement on 2 May 2013 that UniCredit had completed the sale of the bank to KazNitrogenGaz LLP (not rated). KazNitrogenGaz is a Kazakh-domiciled holding company, fully owned by local businessman Galimzhan Esenov, and also holds majority stakes in two small Kazakh insurance companies.

After the removal of support from UniCredit, ATF’s Long-term IDRs are aligned with its Viability Rating (VR). The ratings reflect the bank’s weak asset quality and  negative profitability during the past four years, as well as some uncertainty  regarding the bank’s strategy following the change of ownership and the extent  of any leverage taken on by the new shareholder as a result of the acquisition. At  the same time, the ratings are supported by ATF’s currently comfortable liquidity  and an expected improvement in performance (see “Fitch Affirms ATF Bank’s  Viability Rating at ‘b-‘, Other Ratings Unaffected” dated 18 April 2013 at  www.fitchratings.com).

RATING SENSITIVITIES

ATF’s ratings could be upgraded if the bank improves asset quality metrics and performance, related party lending remains moderate following the acquisition and shareholder leverage in Fitch’s view does not represent a significant contingent risk for the bank. A weakening of asset quality and loss absorption capacity or increase in related party exposures/shareholder risks could result in  downward pressure on the ratings.

The rating actions are as follows:

Long-term foreign and local currency IDRs: downgraded to ‘B-‘ from ‘BBB-‘, Outlook Stable, removed from Rating Watch Negative (RWN);

Short-term foreign currency IDR: downgraded to ‘B’ from ‘F3’, removed from RWN

National Long-term Rating: downgraded to ‘BB-(kaz)’ from ‘AA(kaz)’, Outlook Stable, removed from RWN

Viability Rating: affirmed at ‘b-‘

Support Rating: downgraded to ‘5’ from ‘2’, removed from RWN

Support Rating Floor: assigned at ‘No Floor’

Senior unsecured debt downgraded to ‘B-‘ from ‘BBB-‘, removed from RWN, Recovery Rating assigned at ‘RR4’

National senior unsecured debt rating downgraded to ‘BB-(kaz)’ from ‘AA(kaz)’, removed from RWN

Subordinated debt downgraded to ‘CCC’ from ‘BB+’, removed from RWN, Recovery Rating assigned at ‘RR5’

National subordinated debt rating downgraded to ‘B(kaz)’ from ‘AA-(kaz)’, removed from RWN

Perpetual subordinated notes downgraded to ‘CC’ from ‘B+’, removed from RWN, Recovery Rating assigned at ‘RR6’.

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