Kazakh banks’ bad-loan provisions aren’t sufficient to cover the losses they’ll probably face, Moody’s Investors Service said.
Capital levels at many banks are overstated because insufficient reserves have been set aside to cover bad debts, the ratings company said today in an e-mailed statement. With reserves of 32 percent of gross loans in 2011, banks will probably have to write off most problem loans, it added.
“Asset quality and capitalization will remain weak over the outlook period, with problem loans representing around 40 percent of gross loans, the same level as in December 2011,” Moody’s said. “Reserves are unlikely to grow sufficiently to cover all expected losses since that would considerably deplete banks’ capital.”
Central Asia’s biggest energy producer tapped its oil fund for $10 billion to support banks and companies after credit markets froze and a property bubble burst in 2008. BTA Bank (BTAS), the biggest lender at the time, Alliance Bank (ASBN) and Temirbank agreed with creditors to discount and extend payments on about $20 billion of debt after they defaulted the following year.
Loans overdue by more than 90 days at Kazakhstan’s 38 banks reached 3.46 trillion tenge ($23.2 billion) as of May 1, or 32.3 percent of the total, led by BTA with 1.6 trillion tenge, central bank data show. State-owned BTA is seeking its second debt restructuring in as many years, predicting its capital shortfall will grow to $6 billion by end-2012.
Credit growth in Kazakhstan will be less than 4 percent in real terms this year, Moody’s said.
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