AKIPRESS.COM - Moody's Investors Service has today concluded the rating review of six Kazakh financial institutions initiated on March 9, 2016, which follows the downgrade of Kazakhstan's government bond rating to Baa3 with a negative outlook on April 22, 2016.

Moody's has confirmed the ratings of the following six financial institutions: Development Bank of Kazakhstan (DBK); House Construction Savings Bank of Kazakhstan JSC; Halyk Savings Bank of Kazakhstan; Fund of Financial Support for Agriculture; DBK Leasing; and SB Sberbank JSC.

RATINGS RATIONALE

The baseline credit assessments (BCAs) of the above-mentioned financial institutions have been confirmed or left unchanged reflecting the maintenance of the "Weak" Macro Profile for Kazakhstan and Moody's view that their BCAs adequately reflect the capacity to absorb an expected level of deterioration in asset quality and slowdown in growth. Despite lower sovereign ratings, Moody's sees the operating environment as substantially unchanged, with weaker funding conditions and economic strength offset by improved institutional strength.

The confirmation of the long-term ratings reflect their relative resilience to the deterioration in the creditworthiness of the sovereign. Although Moody's sees increased contingent liability risk for the government arising from solvency risks at certain weaker Kazakh banks (not included in this rating action), the agency's assessment of the probability of government support for the above banks remains unchanged and their ratings continue to incorporate one to three notches of uplift in respect of potential government support.

Concurrently, the rating agency has also confirmed the ratings of SB Sberbank JSC (a subsidiary of Russian Sberbank) and DBK Leasing (a subsidiary of DBK). These ratings incorporate affiliate support uplift and confirmation of these institution's ratings follow the rating actions on their respective parent companies.

WHAT COULD MOVE RATINGS UP OR DOWN

The outlooks on the long-term ratings of DBK, House Construction Savings Bank of Kazakhstan, Halyk Savings Bank of Kazakhstan, Fund of Financial Support for Agriculture and SB Sberbank JSC are now negative, in line with the outlook on the sovereign rating, as a downgrade of Kazakhstan's ratings would likely lead to a downgrade in the ratings on these institutions. The outlook on DBK Leasing is stable, reflecting the expected resilience of its current standalone credit profile to more challenging economic conditions and support from its parent in case of need. Its ratings could be downgraded in the event of unexpected losses on the leasing portfolio, which could substantially impair its capitalization and/or materially weakening support from the parent.

Upgrade in the ratings for the above institutions are currently unlikely given the predominantly negative outlooks and weak operating environment.

These rating actions conclude the review for downgrade placed on these ratings on 9 March 2016.