Given the relatively high growth of the economy, Kazakhstan's banking sector also had to demonstrate a significant increase, but at the moment it does not happen. The reasons for why the growth of the economy does not affect the development of the banking sector and, primarily, the growth of deposits raise questions. At the same time, banks have sufficient resources for a significant increase in lending. Thus, the volume of liquidity withdrawn by the National Bank is 34% of the total loan portfolio of the banking sector.

As a result of the strengthening of sanctions imposed in April against the Russian Federation, the ruble against the dollar significantly weakened. Tenge following the ruble also weakened against the dollar, but on a much smaller scale. As a result, the tenge strengthened against the ruble by 5% from 5.56 to 5.28 tenge per ruble over the month. These events provoked a short-term leap in volatility in the money market. Despite this, in April the National Bank again lowered the interest rate by 0.25pp, explaining this by lowering inflation expectations.

If we do not take into account the effect of the weakening of the tenge, the banking sector continues to demonstrate stagnation in April. At the same time, high-yield unsecured consumer lending continues to grow. Despite the statement of the Chairman of the National Bank during the April parliamentary hearings that the real level of problem loans in the system is 23.6%, banks continue to demonstrate a decline in the level of officially recognized problem loans and the amount of provisions.

The outflow of corporate deposits from three problem banks (Qazaq Bank, Bank of Astana, Eximbank) in April amounted to T51.9bn. The outflow of corporate deposits from three Russian subsidiary banks was Т107.6bn, most likely this decrease is connected with the fear of imposing new sanctions against the Russian Federation. The outflow did not have a serious negative effect on the banking system as a whole, proceeding from the final decrease in deposits in banks (-37.4bn), it can be assumed that most of the withdrawn deposits were placed in other banks.

As a result of the outflow of deposits and the poor quality of assets in general, the financial difficulties of Qazaq Bank, Bank of Astana, Eximbank increased. Thus, starting from April, these banks cannot fully service their obligations. The total share of these banks in total assets of the banking sector is 3%. The share of deposits is 2.3% of the total deposits of the sector. UAPF have placed his funds at these banks T18bn as deposits and T13bn as investments in bonds. At the moment, the management of these banks is discussing with the NBK further ways of development.

In April, there was a growth in lending (+1.07%), but if this increase was corrected for the growth of the dollar, the growth was only 0.4%. Loans of legal entities increased by 0.7% mom (-1.4% ytd). In the retail lending sector, there was an increase of 1.8% mom (+2.5% ytd). Consumer lending continues to show growth, since in April the increase was 1.9% mom (+3.8% since the beginning of the year).

The quality of loans in the system has improved slightly: the share of loans with overdue debts over 90 days has decreased over the month by 1pp. and amounted to 9% (-0.3pp ytd). The level of provisioning in April decreased by 1.5pp and amounted to 14.7% (-1pp ytd).

The growth of deposits in April was 1.4% (-2.6% ytd), excluding weakening of tenge the growth was 0.2%. Deposits of legal entities increased by 0.9% mom (-5.2% ytd), deposits of individuals increased by 1.9% mom (+0.4% ytd). Without taking into account the weakening of tenge, corporate deposits decreased by 0.2%, deposits of the population grew by 0.6%.

By the results of the month, dollarization slightly increased and amounted to 45.4% (for comparison, in March - 45.0%), growth by 0.4pp. The growth of dollarization was influenced by an increase in foreign currency deposits of legal entities by 3.4%, while foreign currency deposits of individuals decreased. It should be noted that the weakening of the tenge primarily affects the dollarization of corporate sector deposits, while the population reacts more inertly to the volatility of the tenge.

The profitability of the banking sector in April continues to show growth. Net interest margin increased by 0.08pp, spread +0.04p. The increase in these indicators is explained by the growth of rates for consumer lending with a gradual decrease in interest expenses on deposits.

In April, the banking sector recorded a profit of T69.6 billion. (T283.9 billion from the beginning of the year). This result for the three months of 2018 is 142% more than the result of the same period of 2017. Such a high profit can be explained by the significant influence of one-time factors such as significant write-off of provisions by a number of banks in the framework of clearing their loan portfolios from problem debts and recognizing the profits of the RBK by the bank from previously received state financial assistance.

  • Monetary policy and FX market;
  • Assets of the banking sector, deposits of the banking sector;
  • Loans of the banking sector and credit to economy;
  • Banking sector's liquidity;
  • Banking sector's profitability;
  • Top 10 banks major changes.

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