Azerbaijan, Baku, June 12 / Trend E. Kosolapova/
Standard & Poor's Ratings Services had lowered its long- and short-term counterparty credit ratings on Kazakhstan-based JSC AsiaCredit Bank to 'B-/C' from 'B/B', the agency reported. The outlook is stable.
At the same time, the agency lowered its Kazakhstan national scale rating on the bank to 'kzBB-' from 'kzBB+'.
"The rating actions reflect our view that AsiaCredit Bank's capital position is weakening. This resulted from rapid loan growth over the past two years that was not sufficiently supported by shareholder capital injections, while
earnings generation remained low," S&P said.
The postponement of a planned capital infusion in 2012 caused risk-adjusted capital (RAC) ratio for AsiaCredit Bank to decline by more than the agency had anticipated. Consequently, S&P has revised its assessment of the bank's capital and earnings to adequate from strong.
"If the bank's future capital policy, philosophy, and growth rates were to
differ from our current assumptions we could reassess our view of the bank's
solvency," S&P said.
According to the agency, AsiaCredit Bank's earnings capacity remains moderate. The agency expects the bank's net interest margins to remain depressed, due to the rising cost of attracting new customers, general market trends, onerous operating expenses because of high investments in franchise growth, and increasing provisions for the rapidly expanding credit portfolio. In S&P opinion, the bank is underprovisioned. The ratio of loan loss reserves to total loans was 1.7 percent at year-end 2012, according to International Financial Reporting Standards. This is insufficient to cover loans more than 90 days overdue (5.2 percent of total loans on Feb. 1, 2013) and restructured loans (about 5%).
"We consider that the bank would have to create significantly more provisions in 2013-2014, which would hamper its profitability and capacity to build up capital," the bank said.
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