Fitch upgrades Alfa Bank Kazakhstan's ratings

BAKU. KAZINFORM The International Rating Agency Fitch Ratings has upgraded Alfa Bank Kazakhstan's (ABK) Long-Term Issuer Default Ratings (IDRs) to 'BB-' from 'B+', the rating agency said in a message. The Outlook is Stable.    

“The upgrade of ABK's IDRs reflects the extended record of good financial performance supported by relatively low funding costs and reasonable asset quality, considerable capital buffer and ample liquidity,” Fitch said.

At the same time, ABK's ratings factor in its currently small franchise.

According to Fitch, ABK's loan book is relatively small (35 percent of total assets at end-2016), reflecting deleveraging (by 25 percent in 2016) in favor of investments into National Bank of Kazakhstan low risk notes (36 percent of total assets). Loan quality is adequate, with non-performing loans (NPLs, 90 days overdue) comprising a moderate 7 percent of the end-2016 book. NPLs were comfortably (94 percent) covered by reserves. About 13 percent of loans were restructured but reportedly performing.

Loan concentrations are high, with the 25 largest exposures making 69 percent of corporate loans at end-2016. However, more than half of these are composed of low to moderate risk working-capital loans to cash-generative clients. Also positively, ABK's foreign currency lending was moderate, at 18 percent of gross loans at end-2016, which limits asset-quality risks.

Capitalization is strong, reflected by a high Fitch Core Capital (FCC) ratio of 18 percent at end-2016, up from 14 percent at end-2015.

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