BAKU, Azerbaijan, Jun. 30
By Nargiz Sadikhova - Trend:
S&P Global Ratings has affirmed its 'BB+/B' long- and short-term foreign- and local-currency issuer credit ratings on the Development Bank of Kazakhstan (DBK), the outlook is stable, Trend reports with reference to the S&P.
S&P also affirmed the 'kzAA+' Kazakhstan national scale rating on DBK and the 'BB+' issue rating on the bank's senior unsecured bonds.
“There is an almost certain likelihood that the government of Kazakhstan would provide timely and extraordinary support to DBK in a financial stress scenario. … we expect it to remain core to the overall group strategy, which is broadly aimed at supporting Kazakhstan's economic development and diversification. We expect DBK to benefit from a considerable degree of government backing,” the S&P said.
Specifically, S&P assesses the likelihood of extraordinary government support as almost certain based on:
- DBK's integral link with the government of Kazakhstan, which fully owns and monitors DBK through Baiterek group.
- DBK's critical role as the primary institution mandated to develop Kazakhstan's production infrastructure and the processing industry.
“Our 'BB+' rating on DBK is one notch lower than the 'BBB-' local currency sovereign rating, due to our concerns that Kazakhstan's willingness to support government-related entities (GREs) is subject to transition risk,” the report said.
S&P said it considers DBK to be a core subsidiary of the Baiterek group, accounting for about 50 percent of Baiterek's assets as of year-end 2019 and fulfilling the critical role of financing large-scale industrial investment projects.
“We therefore equalize our rating on DBK with our GCP assessment on Baiterek. DBK's general mandate to contribute to the development of Kazakhstan's economy through investments in priority sectors closely aligns with the overall Baiterek group strategy. We consider a sale of DBK highly unlikely,” the report said.
The stable outlook on DBK mirrors that on Kazakhstan, the report said.
“Any rating action on the sovereign would likely result in a similar action on the bank. We could lower our rating on DBK if we saw signs of waning government support to the Baiterek group, or, more broadly, to other GREs over the next 12 months. We could raise the rating on DBK if Kazakhstan's monitoring of its GRE debt and the efficiency of its administrative mechanisms to provide extraordinary support to GREs improved,” the report said.
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