Banking sector facing slight losses

Stiff competition among the major players of the Kazakh banking sector – Halyk Bank, KazKommertsBank and BTA Bank – is likely to prevent any of them to be a clear-cut leader in terms of lending this year, experts with Troika Dialogue Kazakhstan Investment Company told Tengrinews.kz journalists. Relying on banking sector February indicators issued by the Kazakhstan’s Agency for Financial Supervision, Troika Dialogue experts point out that the sector is facing slight losses due to substantial risk provisions. In February, deductions for risk provisions stood at 3.4% of the average loan portfolio. Overdue loans kept on growing slowly (in February the indicator grew by 0.5%, reaching 21.8%). Only a few banks have seen return on capital exceeding 10% in line with Kazakhstan Standards of Accounting. Many banks struggled to avoid losses. Troika Dialogue experts believe that smaller banks may need capital injections to secure further growth in the mid run. A potential catalyst of growth may be balance sheet clean-up, analysts believe. A mechanism of dealing with bad loans (according to Halyk bank estimates, this will take place not earlier than in the H2 2011) and following reserves release may enhance the situation. Without these measures, mass improvement of assets quality is hardly possible.

Stiff competition among the major players of the Kazakh banking sector – Halyk Bank, KazKommertsBank and BTA Bank – is likely to prevent any of them to be a clear-cut leader in terms of lending this year, experts with Troika Dialogue Kazakhstan Investment Company told Tengrinews.kz journalists. Relying on banking sector February indicators issued by the Kazakhstan’s Agency for Financial Supervision, Troika Dialogue experts point out that the sector is facing slight losses due to substantial risk provisions. In February, deductions for risk provisions stood at 3.4% of the average loan portfolio. Overdue loans kept on growing slowly (in February the indicator grew by 0.5%, reaching 21.8%). Only a few banks have seen return on capital exceeding 10% in line with Kazakhstan Standards of Accounting. Many banks struggled to avoid losses. Troika Dialogue experts believe that smaller banks may need capital injections to secure further growth in the mid run. A potential catalyst of growth may be balance sheet clean-up, analysts believe. A mechanism of dealing with bad loans (according to Halyk bank estimates, this will take place not earlier than in the H2 2011) and following reserves release may enhance the situation. Without these measures, mass improvement of assets quality is hardly possible.