BISHKEK, Kyrgyzstan, May 24. Moody's Ratings (Moody's) has affirmed Kyrgyzstan’s Bakai Bank B3 long-term local and foreign currency deposit ratings, Trend reports.
According to the company, it has changed the outlook on these ratings to stable from negative.
“Moody's affirmed the bank's b3 Baseline Credit Assessment (BCA) and Adjusted BCA, Not Prime (NP) short-term local and foreign currency deposit ratings, the bank's B2/NP long-term and short-term local currency and B3/NP long-term and short-term foreign currency Counterparty Risk Ratings and the B2(cr)/NP(cr) long-term and short-term Counterparty Risk Assessments,” the company said.
The rating action on Bakai Bank comes after Moody's decision on May 17, 2024, to revise the outlook on Kyrgyzstan’s B3 rating from negative to stable.
Moody's affirmation of Bakai Bank's rating and the shift to a stable outlook indicate that the anticipated severe impact on Kyrgyzstan due to the Russia-Ukraine conflict has not materialized as expected. Robust economic activity in the country has enabled Bakai bank to uphold its creditworthiness, and this stability is expected to continue in the future.
The analytics noted that despite challenges like reduced remittances from Russia, high inflation, and geopolitical pressures affecting regional trade, problem loans to gross loans remained stable at 9 percent in both 2022 and 2023. Continued economic growth and decreasing inflation are expected to enhance borrowers' creditworthiness, helping the bank maintain asset quality.
In 2023, the bank's profitability decreased compared to the unusually high levels of 2022 because it had fewer gains from foreign exchange (FX). However, profitability was still better than usual. In 2022, the bank had a return on average assets of 13 percent, which fell to a still strong 4 percent in 2023. The bank's performance will continue to be supported by its net interest margin and significant FX gains over the next 12–18 months.
“Tangible common equity to risk weighted ratio was 19 percent in 2023, compared to 28 percent in 2022, from historically around 14 percent, but it is expected to converge gradually closer to historic levels due to the gradual growth of the loan portfolio and dividend payouts but will not decline below 15 percent during the next 12–18 months,” Moody’s noted.
Moreover, the company reports that liquidity remained strong because deposits grew 3.5 times between 2022 and 2023. At the end of 2023, 60 percent of the bank's tangible assets were liquid. Although the bank will use some of this liquidity for lending, it will stay strong over the next 12–18 months.
Moody’s expects that after a 6 percent increase in real GDP in 2023, economic growth in Kyrgyzstan will slow down to about 4 percent in 2024 and 2025, but it will still be healthy. This provides a favorable environment for Bakai Bank.