Further rapid and weakly managed growth in retail loans growth is negative for banks in Kazakhstan. The forecast for most banking sectors in the CIS and Georgia in 2014 is “Stable”, reflecting the agency’s expectations that the operating environment does not undergo significant changes. It is reported by Kapital.kz Business Portal with the reference to the report of Fitch “CIS Bank and Georgia”: forecast for 2014″.
“At the same time, risks for macroeconomic stability have intensified in Ukraine (as indicated by the “Negative” forecast) and, to a lesser extent, in the Republic of Belarus. High growth in retail loans and restrained economic growth is difficult for Russian banks. The rapid growth of consumer credit is also observed in Kazakhstan and Azerbaijan”, analysts of rating agency said.
According to analysts, most banking systems in the region continue to have significant fundamental flaws that cause low levels of overall ratings. “Banks of Kazakhstan and Ukraine continue to bear the most severe burden on the high levels of impairment of loans and some credit institutions of Russia and Azerbaijan have significant problems in corporate portfolios from previous periods. Banks of Belarus and Uzbekistan are exposed to directed crediting and state control in the economy. Russia, Kazakhstan, Azerbaijan and Uzbekistan depend on commodity prices, and in Ukraine, Belarus and Georgia we can observe weak positions of external finances”, the report said.
Continued strong economic growth in Kazakhstan must maintain banks performance.” Servo enabling for derogation from the requirements and generally comfortable liquidity limit short-term risks for most banks. At the same time, the bad loans remain high (according to IFRS) due to a very weak financial position of most troubled borrowers. At the same time, the ability to cover losses in some large banks is still relatively moderate concerning volume of impaired loans “, the Fitch analysts noted.
The rating agency believes that the rapid growth and high debt load of households increased risks in the Russian consumer sector of crediting. “However, these risks are mitigated by the portfolio diversification in universal banks and high margin in specialized organizations in of retail crediting. In general, Fitch expects that key credit indicators in the sector, including profitability and capitalization of banks will remain stable in 2014, as economic growth continues, even if at a slow peace. Measures of the Central Bank for cleaning the banking system are favorable factor, although they may cause some liquidity risks in the short term”, the report says.
According to analysts, indicators of banks in Ukraine and Belarus in 2014 will remain highly dependent on macroeconomic events, “the asset quality, capitalization and stability of deposits are potentially vulnerable to the weakness of the exchange rate and its impact on economic activity. According to Fitch, short-term risks are higher for Ukraine, as evidenced by the “negative” outlook on the ratings, while the agency expects that Belarus would avoid financial crisis in 2014,” the Fitch stressed.
The agency believes that, Georgian banks have to experience the positive impact of growth in economic activity after the completion of the electoral cycle that will support business growth and help maintain the quality of assets. At the same time, risks remain due to the close links between the political climate, levels of investment and market confidence in the country.
“A further very fast and weakly managed retail lending crediting growth would be negative for banks, which are particularly vulnerable to this segment in Russia, Kazakhstan and Azerbaijan, while troubled corporate loans from prior periods may also put pressure on some of the ratings on these markets. “Negative” outlook for sectors of listed countries is unlikely, unless there is a drop in oil prices, which would lead to a recession of economy.
Concerted efforts on clearing balances of Kazakh banks can be a positive thing,” analysts said.
The rating agency believes that in the event of further deterioration in the external finance the negative pressure on the ratings of Ukrainian banks and change in outlook on the Belarusian sector to “Negative” may increase. According to analysts, the reduction of external pressure and stable growth may lead to a revision of the forecast of the banking sector of Ukraine to “Stable”.
Source: Kapital.kz Business Portal
