RAM Ratings: Downgrade on Kazakhstan leads to concurrent negative rating action on DBK
RAM Ratings: Downgrade on Kazakhstan leads to concurrent negative rating action on DBK
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- 11 /14/2016 Latest Announcement (News ID : 2016111400026) Latest Announcement News ID : 2016111400026 Subject : Development Bank of Kazakhstan Development Bank of Kazakhstan Organisation Name: RAM RATING SERVICES BERHAD News Type: RATING ANNOUNCEMENT Reference Site: None Embargo Date: 14/11/2016 Embargo Time: 04:43 PM Expiry Date: 14/12/2016 Priority: Medium Summary: RAM Ratings: Downgrade on Kazakhstan leads to concurrent negative rating action on DBK Attachments: No attachment available. Disclaimer: The user, including a user who is also a FAST Participant, expressly agrees that the use of this website which is accessible at https://fast.bnm.gov.my/ is at the user's sole risk. The information contained in this FAST website is compiled by MyClear Sdn. Bhd. (MyClear) and is provided on an "as is" basis without any representations or warranties of any kind, either expressed or implied. While MyClear makes every effort to ensure that information contained in the FAST website are accurate and disseminated in a timely and efficient manner, the user acknowledges that delays, errors, omissions or inaccuracies may occur. MyClear disclaims any liability pertaining to the consequences of any delays, errors, omissions or inaccuracies arising out of or relating to the FAST website or information, including but not limited to, any decision made or action taken by a user in reliance upon such information, or for damages suffered, whether direct, consequential, special, punitive, indirect or otherwise, notwithstanding having been advised of the possibility of such damages. In the event of any dispute, the official records of MyClear shall prevail. MyClear, Bank Negara Malaysia or any of its affiliates, officers, directors, agents or any other party involved in creating, producing or delivering the FAST website, shall not be liable for any direct, consequential, special, punitive, indirect, incidental or other damages arising out of or in any way connected with the use or inability to use the FAST website or information, whether based on contract, tort, liability or otherwise, even if advised on the possibility of any such damages. Content https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016111400026&mode=DISPLAY&info=NEWS&screenId=PB010400 1/2
- 11 /14/2016 Latest Announcement (News ID : 2016111400026) RAM Ratings has downgraded the rating of Development Bank of Kazakhstan Joint Stock Company's (DBK or the Bank) RM1.5 billion Sukuk Murabahah Programme (2012/2032), from AA2/Stable to AA3/Stable. The rating action is in tandem with the downgrading of Kazakhstan's sovereign ratings on the Malaysianscale. DBK's issue rating is equated to Kazakhstan's credit standing given our expectation of a very high likelihood of support in times of need. The recent rating downgrade for the sovereign had been precipitated by persistently low oil prices and the country's increased susceptibility to external conditions amid the recent change in its monetary policy, which has affected economic growth. As a development financial institution, DBK's loan book inherently carries higher credit risk as it finances largescale, longterm infrastructure and industrial projects that include greenfield developments. This results in high levels of borrowerconcentration risk and nonperforming loans. As at endJune 2016, the Bank's gross impairedloan ratio had jumped up to 8% (endDecember 2015: 4%) amid its weak domestic economy. We expect DBK's loan quality to remain pressured this year, given that the operating environment in Kazakhstan is likely to remain tough. The weak tenge could also exert pressure on the debtservicing aptitude of DBK's borrowers as the bulk of its lending is denominated in USD. In view of the heightened credit risk as a result of the weak tenge, we view DBK's capital position to be vulnerable. As at endAugust 2016, the Bank's tier1 capital ratio slipped to 14.24% (endDecember 2014: 20.30%). While a KZT20 billion capital injection from the Government of Kazakhstan (GoK) is under way and should be completed by end2016, the Bank's tier1 capital ratio is only expected to be lifted slightly to 14.91%. Nonetheless, the GoK has been firmly backing the Bank, particularly through numerous capital infusions between 2009 and 2014, apart from ongoing funding support. DBK also has a sound liquidity position, as reflected by its average Basel III liquidity coverage ratio of 106.5% (minimum: 76%; maximum: 155%) in 2016, although it still relies heavily on wholesale borrowings. Analytical contact Media contact Chew Wei Li Padthma Subbiah (603) 7628 1025 (603) 7628 1162 weili@ram.com.my padthma@ram.com.my The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations. RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications. Similarly, the disclaimers above also apply to RAM Ratings' creditrelated analyses and commentaries, where relevant. Published by RAM Rating Services Berhad https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016111400026&mode=DISPLAY&info=NEWS&screenId=PB010400 2/2
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