By Rustam Botashev, Deputy Head of Research at UniCredit Securities.
Kazakhstan’s bank supervisory committee has published 6M11 banking statistics, showing accelerating loan growth on the backdrop of deteriorating asset quality. We reiterate our Buy recommendations for Halyk Bank (12M TP of USD 14.3) and Kazkommertsbank (USD 9.6).
Lending in Kazakhstan accelerated in June, with 1.3% mom growth, compared to only 0.5% mom gain a month before. Retail lending was the main growth driver, increasing by 2.6% mom, while loans to corporate customers rose 0.9% mom. Kazakhstani banks saw a strong inflow of customer funds in June: retail deposits gained 4.5% mom, while corporate accounts increased by 3.9%. This resulted in a 4.1% mom expansion of total deposits, or 8.2% YTD.
Business at the rehabilitated BTA Bank and Alliance Bank seems to be reviving: these banks demonstrated rather healthy 2.3% mom and 2.2% mom loan gains, which corresponds to roughly 41% of the June increase of total loans outstanding in the country. The industry leaders, on the other hand, are stagnating, with Halyk reporting a flat loan book (up only 0.3% mom) and KKB posting a 1.2% mom lending shrinkage.
Roughly half of the country’s 39 banks reported an increase in bad loans in June. The amount of bad loans increased by 2.6% mom or 5.5% YTD. With bad loans growing faster than total lending, NPL ratio jumped by 0.4pp mom to 33.3% – the level observed about a year ago. KKB’s bad loans grew by 3.8% mom, and along with shrinking loan book, this led to 32.4% NPL level. Halyk also experienced asset quality deterioration, albeit at slower pace – 1.4% mom growth in NPLs to 22.0% level. NPLs also continued to grow at BTA Bank increasing 3.1% mom to 66.4% while Alliance Bank enjoyed an improving asset quality with bad loans down 1.2% mom to 57.4%.
Although slightly optimistic, our forecast for lending expansion in Kazakhstan is reachable. With total loans up only 3.2% YTD we admit that our expectation of 14% yoy growth in 2011E might be rather aggressive. On the other hand, given the seasonally weak beginning of year and strong year end, as well as the acceleration of lending in June, we believe our forecast remains reasonable.
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