In May, banking industry of Kazakhstan continued to demonstrate stagnation. At present, banking sector practically does not participate in development of economy that finds its corollary in absence of growth in lending. Economic actors do not consider that banking industry are reliable and effective mechanism of saving that is corroborated by absence of deposits growth in banks despite the common grow in economy.
The volume of withdrawn liquidity by the National Bank for May did not change and accounted for Т4.5tn that made up 34% of total loan portfolio of banking industry. In such a manner, the banks proceed to keep a significant volume of resources in liquid assets that limiting increase in the credit activity. Gradual decrease of the NBK’s notes profitability induces banks to alter the means of earning to retail lending thereby chasing the aim of maintenance of its profitability margin. Under the conditions of preservation of structural problems in economy and absence of growth in private business segment, as well as accumulated problems in corporate loan portfolios of banks, the sole accessible and profitable banking segment tends to be the consumer lending.
As a result of obtaining preferential funds within the framework of the state program to support banks and the alleged strengthening of the NBK's supervisory policy, currently banks are carrying out significant write-offs of bad debts (NPL). These write-offs are reflected only in the reduction of the gross loan portfolio of banks but do not affect changes in the volume of provisions and recognized bad debts. Hence, banks can conduct procedures on clearing the loan portfolio from NPL, without exceeding the NBK’s limit in the maximum share of NPL90+ (10%) of the total loan portfolio. In addition, the National Bank of Kazakhstan implicitly supports schemes for transferring bad debts to special financial companies for dealing with dubious assets, whose effectiveness and transparency cannot be tracked.
In addition to further deterioration of the financial situation, in three problematic banks (Astana Bank, Qazaq Banki, Eximbank) recurrently noting a violation of prudential norms of liquidity, currency position, and maximum risk per borrower. The share of liquid assets in Eximbank, Qazaq Bank without taking into consideration borrowings within repo transactions constitutes less than 1%. Whereas Eximbank, in addition to violations of the standards, defaulted on its obligations amounting to T13bn. These bonds are fully placed in the portfolio of the UAPF.
Since the public disclosure of problems with these banks and the subsequent outflow of deposits, these financial institutions have imposed restrictions on withdrawals and transfers of funds. Given the inability to service their obligations, technically these banks should apply for bankruptcy, however, so far this has not happened. The NBK does not take measures to enforce bankruptcy of these banks, conducting negotiations with shareholders on a possible settlement of the stalemate. Until a final decision on the further activity is made, they formally continue to maintain operations, but are in fact incapable of servicing their obligations and carrying out credit actions. Without an official decision on the bankruptcy of these banks, it is impossible to launch mechanism of the deposit insurance program, and also to begin compulsory sale of bank assets to reimburse the remaining liabilities. Nevertheless, these banks do not represent a systemic significance, the cumulative share of their assets from the assets of the banking system is 2.4%. Given banks do not present a system importance, aggregate share of their assets from the assets of banking industry accounts for 2.4%, a share of deposits from total the deposits of banking industry accounts for 2.2%.
In May, the tenge rate against the US dollar continued to decrease by 2.95 tenge, but this weakening did not affect the growth of trading volumes, the currency market, and the increase in monthly inflation.
There was a slight increase in lending by 0.12% (+0.08% since the beginning of the year). Loans of legal entities decreased by 0.9% mom (-2.4% since the beginning of the year). In the retail lending sector there was an increase of 1.9% mom (+4.5% from the beginning of the year). Thus, consumer lending continues to surge, in May the increase was 2.4% mom (+6.4% since the beginning of the year).
The quality of loans in the banking system has slightly deteriorated: the share of loans with overdue debts over 90 days increased by 0.1pp per month and amounted to 9.1% (-0.3pp from the beginning of the year). The level of provision volume decreased by 0.14pp and amounted to 14.5% in May (-1.1pp from the beginning of the year).
In May, overall deposits decreased by 0.9% (-1.6% since the beginning of the year). Deposits of legal entities decreased by 1.6% mom (-3.2% from the beginning of the year), deposits of individuals decreased by 0.1% mom (+0.2% since the beginning of the year). Also, there was an adjustment to increase the amount of monthly corporate deposits by an average of KZT320mn in the NBK’s data on deposits of the statistical bulletin. That led the amount of annual outflow of deposits to decrease and spurred the dollarization of corporate deposits upwards.
Despite some weakening of the national currency, deposits are being de-dollarized. Consequently in May, the dollarization of deposits of the population decreased by 1.64pp to 47.8%, dollarization of deposits of legal entities decreased by 0.1pp to 43.6%. The total dollarization of deposits for the month was 45.6% (-0.8pp per month). It should be noted that the de-dollarization is mostly observed in the deposits of private individuals. At the same time, there is also a reduction in the purchase by the population of US dollars in exchange offices. Most likely, this trend is supported by the maintenance of high real rates for tenge deposits and low incentives to keep up with dollar deposits.
Indicators of NIM and NIS in May showed a multidirectional dynamics: NIM 5.42% (+0.02pp), NIS 4.29% (-0.02pp).
In May, the banking sector recorded a profit of T44.2bn (T328.1bn since the beginning of the year). This outcome for five months of 2018 is 86% more than the figures of the same period in 2017. At the same time, the profit for May 2018 is 25% less than the profit received in May 2017. The profit of the previous months contained a significant amount of one-off income on account of other unrelated operations. In May results, these temporary inflows are practically not reflected.
- 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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