Bloomberg News

IMF Urges ‘Realistic’ Kazakh Loan Estimate to Gauge Capital Need

October 31, 2011

Oct. 31 (Bloomberg) -- Kazakhstan’s banks need to make a “more realistic assessment” of their problematic loans to determine possible recapitalization needs, an International Monetary Fund official said.

Lenders may raise funds from shareholders or the government, where needed, Dmitriy Rozhkov, senior economist of the IMF’s Middle East and Central Asia department, told reporters in Almaty today. Kazakh non-performing loans account for more than 28 percent of total lending, compared with a 26 percent share last year, according to the IMF.

Central Asia’s biggest energy producer used $10 billion from its oil fund to support banks and companies after credit markets froze and a property bubble burst two years ago. BTA Bank, the biggest lender at the time, Alliance Bank and Temirbank agreed with creditors’ on discount and extension of payments on about $20 billion of debt after they defaulted in 2009.

“The ongoing vulnerabilities in Kazakhstan’s banking system are a cause for concern,” the IMF said in an Oct. 28 statement published on its website following meetings with the country’s regulators and government officials the previous week.

Asset quality has continued to worsen even after the foreign-debt restructuring and injection of state funds, requiring “further critical efforts” to solidify the banking system, the Washington-based lender said. A high share of restructured loans and low profitability are among risks to capital adequacy ratios, the fund said.

“As a first priority, forceful action should be taken to ensure proper loan valuation and provisioning in all banks,” the IMF said. “In addition, concrete actions should be taken to reduce bad loans and to replenish bank capital.”

--Editors: Paul Abelsky, Andrew Langley

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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