S&P Places Capital Bank Kazakhstan Ratings On CreditWatch Negative

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The international Rating Agency S&P Global Ratings placed its ‘B-/C’ long- and short-term counterparty credit ratings and its ‘kzB+’ Kazakhstan national scale rating on Kazakhstan-based Capital Bank Kazakhstan JSC on CreditWatch with negative implications, the rating agency said in a message Feb. 2.

“The CreditWatch placement reflects our concerns regarding Capital Bank’s liquidity,” S&P said.

According to the rating agency, at the beginning of January, Capital Bank experienced a material outflow of deposits from government-related entities (GREs). This occurred because of the revocation of the license of another Kazakh Bank, which negatively affected the liquidity of Capital Bank as well as of some other banks in the sector. As a result, the bank’s liquid assets reduced to about 5.5 percent of total assets (4.7 billion Kazakhstani tenge or approximately $14 million) as of Jan. 27, 2017, from its usual level of above 15 percent. This decrease led S&P to reassess the bank’s liquidity position to moderate from adequate previously.

S&P expects that the bank will meet its repayments over the next few months fully and on time without breaching the regulatory liquidity ratios. The rating agency bases this expectation on planned inflows of GRE deposits and/or potential shareholder support. S&P also noted as a positive that the bank’s liquidity position stabilized in the second half of January.

The rating agency expects to resolve the CreditWatch by the end of February 2017, when it expects to have more information on the bank’s liquidity cushion, its ability to repay its scheduled debt over the next few months, and support from the owner and/or GREs.

S&P could lower the ratings to ‘CCC’ category if liquidity further diminishes following the absence of tangible support from the owners and/or GREs; or continuation of deposits outflows.
The agency could also lower the ratings if liquidity deterioration results in the bank failing to be compliant with regulatory ratios.